For most cities, growth is viewed as a good thing. For some transit agencies it could cause serious problems.

Transit agencies in small- and medium-sized cities are lobbying federal lawmakers to change a quirk in the law that puts greater restrictions on how they can use federal grants if they grow too large.

Agencies that are part of “urbanized areas” of fewer than 200,000 people have great latitude as to how they use their federal transit dollars. But when the population rises above the 200,000 threshold, the agencies will no longer area able to use it for operating costs; instead, it can only be used for capital costs.

Opponents of the policy, mainly a group of transit agencies known as the 100 Bus Coalition, say it’s an arbitrary cap, and those restrictions will force some communities to reduce service by 15 to 30 percent. “It has nothing to do with the size of your system, the number of buses you run, or even what your service area is,” says Dave Kilmer, executive director of the Red Rose Transit Authority in Lancaster, Pa. and a leader of the coalition. “The line we always use is that we can buy buses. We just can’t operate them.”

Following the 2010 Census, an estimated 72 transit systems crossed the threshold, Kilmer said. They'll be caught in a tough position: Some of the money previously used for operational costs can be shifted to preventive maintenance – technically a capital cost -- but most have too few buses to use up their federal money that way. The rest would be left on the table.

The implications are big. One study by five affected communities in Texas -- Brownsville, Killeen, Laredo, Lubbock and McAllen – found they'll lose an estimated $13.6 million in federal funds annually if the policy isn't changed.

The issue has been a perennial one for transit officials. Following the 2000 Census, 52 transit agencies crossed the 200,000 threshold, but an exemption was carved for them in the most recent highway and transit authorization, known as SAFETEA-LU. That legislation expired two years ago but has remained in effect – along with the exemption – due to extensions.

Lawmakers are currently working on a new highway and transit bill. Kilmer and his colleagues are hoping for another exemption to protect transit agencies affected by both the 2000 and 2010 Census numbers. It's not a given: a previous iteration of the policy caused 80 transit systems to lose their flexibility in 1996.

Supporters of the caps say it's necessary to ensure that localities learn to fund their own transit programs as they grow. But Kilmer insists many of the affected localities aren’t actually growing as rapidly as it appears: The formula relies on the population of the “urbanized area” where an agency operations, as opposed to its service area, which may actually be much smaller.

The transit agency in Annapolis, Md., for example, is affected by the policy, even though the city has a population below 40,000. That’s because in the 2000 Census, Annapolis was included in the same "urbanized area" of Baltimore, nearly 40 miles away.

Kilmer estimates that members of his coalition – relatively small operations with fewer than 100 buses going at peak hours -- have average operational budgets of $6 million. Annually, they receive about $3.3 million in federal aid to be spend on capital and operating costs.

Last week, Rep. Joseph Pitts (R-Penn.) introduced bipartisan legislation a bill that would offer something of a compromise: tiered caps on how much a transit agency can spend on operations once it crosses the 200,000 threshold. Those with the fewest buses could spend more, while those with more than 100 buses at peak times couldn't spend any federal funds on operations.

“We’re not asking for more money,” says Kilmer, who backs the bill. “We’re asking for the flexibility to use what we get.”