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Federal Transit Billions Are Coming, but There’s a Catch

Local governments and transit agencies are going to have to come up with matching funds, and to boost revenues, they’ll need to find ways to bring riders back. That will require some bold decisions.

One of San Antonio's VIA transit buses on a downtown street. The city invested more than $14 million into providing more frequent service on 18 selected routes and saw ridership on those routes jump more than 20 percent in a year.
The Infrastructure Investment and Jobs Act (IIJA), a sprawling $1.2 trillion spending bill that includes nearly $40 billion in additional money for local public transit, is about to force transit agencies and local governments to find new revenues to match the beefed-up federal grant dollars. Difficult choices will need to be made now — think new tax increment financing districts, congestion pricing or repurposing of existing public funds — or IIJA grant dollars will be left on the table.

Mandates on how IIJA dollars can be spent only increase pressure placed on local governments and transit agencies. Unlike the COVID-19 relief bills, which included funding to support operational expenses, much of the IIJA’s public transit funds must be spent on capital projects.

Take the Capital Investment Grants program, which the Federal Transit Administration has long used to fund capital projects. As a baseline, Congress provided $2.2 billion for the program in its omnibus spending package that passed in March. The IIJA layers on $1.6 billion in additional Capital Investment Grant dollars this fiscal year. All told, the program has been enlarged by 91 percent from Fiscal Year 2021 funding levels.

This boost of the Capital Investment Grants program, however, can only aid local agencies in completing a capital program. It is not designed to fund the entirety of a new bus rapid transit service, an expansion of a train line or purchases of new vehicles. And even if the federal government did pick up 100 percent of capital spending, new transit services would require more drivers, more vehicle maintenance and a host of additional operating expenses.

These choices could not have come at a worse time. Ridership levels remain well below pre-COVID-19 levels without a full recovery projected in the near future, raising questions about whether investing money in transit is throwing good money after bad. The New York Metropolitan Transportation Authority, for example, expects to see subway ridership as much as 20 percent below pre-COVID levels through 2024.

For IIJA to revive and sustain public transit, local governments and transit agencies need to make an effective push to recover lost revenue, then act on a bold vision of post-COVID-19 cities.

First, they need to get riders back. In the near term, agencies rightly appear focused on recruiting new drivers and establishing frequent, reliable service. Swiftly, a San Francisco-based transit technology company, surveyed 123 transit professionals in late 2021, finding that 73 percent of respondents identified service reliability as the most important challenge in restoring pre-COVID ridership levels.

Evidence from San Antonio suggests they’re right. In 2018, VIA Metropolitan Transit poured more than $14 million into providing more frequent service on 18 selected routes and saw ridership on those routes jump more than 20 percent in a year. “At the national level, we need general revenue targeted for transit operating subsidies,” said Kate Lowe, an associate professor of urban policy and planning at the University of Illinois Chicago. This is a widely held view in public transit, if not so much in Washington.

Swiftly also quizzed transit professionals both on how they plan to spend IIJA funds and how they would like to spend IIJA funds. The two notably diverged: 60 percent told Swiftly they planned on investing in new capital projects, but only 44 percent said they would like to spend IIJA funding in those projects — 16 percent of respondents effectively saying they are being coerced by the IIJA into new capital spending.

Without more federal supplemental funding for operations, sustaining transit could require that local governments and transit agencies do nothing less than remake their cities. Perhaps that’s a good thing.

Transit-oriented development, long a fascination among urban planners, may now provide a solution for mayors who have seen the lifeblood sucked out of downtowns as professional service workers continue to work from home. By building housing closer to transit, protecting low-income residents and public housing, increasing urban density and providing easier access to downtown civic amenities, cities could strengthen the magnetic pull of urban centers even if work-from-home trends continue.

But only with courageous decisions to incentivize riding transit. “There’s a 20-minute commute difference between auto and bus, on average,” Lowe said. “The time tax for using transit is still far too high, relative to the time and cost of car use. We have to address those incentives to drive. Of course, we need to do so carefully.”

After a congestion charge was implemented in London in 2003, public transit ridership dramatically increased, and few residents have called for its repeal. As the COVID-19 pandemic forced closures of indoor public spaces in 2020, New York City closed about 100 miles of city streets to vehicular traffic, and many of those streets, including parts of Broadway, are staying that way. And for two years San Francisco has banned privately owned vehicles from Market Street, a major downtown thoroughfare; few residents have objected.

Courage has been rewarded before.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
Thomas Day is a senior consultant with Intueor Consulting and an adjunct lecturer at the University of Chicago. He can be reached at
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