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March 13, 2021
Blog

Transit Matters: A Funding Story

Bisi Ibrahim

For the next few weeks, we’ll be sharing the ins and outs of public transit by taking you behind the scenes of SolTrans.

Today, we’ll be talking about funding matters. As you probably know, SolTrans provides local and SolanoExpress fixed route bus services, complementary ADA paratransit service, and subsidized Taxi and Lyft programs for the cities of Benicia and Vallejo. These programs result in what are known as operational costs (i.e. service planning, operator and staff hours, etc.) and capital costs (i.e. bus purchases, electric infrastructure, upgrades to transit centers and stops, and other modernization projects). Basically, operations costs are for our day-to-day, while capital costs are for making sure we are prepared for the future.

Both cost types are funded by one, or a combination, of the following 3 sources:

  1. Government Subsidies – funds from government entities at any level, that typically have qualifications and use-limitations
  2. Farebox Revenue – money collected from passengers
  3. Other Locally Generated Revenue – funds not otherwise categorized as a government subsidy or farebox revenue

GOVERNMENT SUBSIDIES

Annually, government subsidies account for the largest portion of SolTrans funding. Government subsidies come in all different shapes and sizes, or more appropriately, come with varying rules and requirements.

For example, SolTrans receives subsidies from the federal government from the Federal Transportation Administration’s (FTA) through various grant programs. Section 5307 are a type of grant called formula grants. Formula grants, a type of noncompetitive grant, are funds that every agency gets a share of depending on—you guessed it—a predetermined formula. This formula is typically dependent on demographic information or other quantifiable information, and that information often dictates how the funds can be used. In this case, the rules for 5307 funds are based on the size of a given community an agency serves. Because SolTrans serves communities that are considered “small urbanized areas”—as opposed to “large urbanized areas”— we can use these 5307 funds to cover our operational and capital costs (agencies serving large urbanized areas can only use these funds for capital costs).

Meanwhile, the competitive Section 5339 grants and many of the competitive state grants that we put in substantial effort in writing quality grant applications for, have very specific rules as to how an agency can qualify for them, how they can be used and when you have to use them by. As a result, they are typically used for capital costs because competitive grants choose winners based on the exemplary projects that they propose to keep transit moving towards the immediate future. In short, if SolTrans wins a competitive grant, we can only spend the funds on the specific project that qualified us for the grant to begin with and we have a set deadline to complete that project. It’s kind of a Catch-22.

Grants aren’t the only subsidies SolTrans receives. If you remember nothing else, remember that government subsidies come in all shapes and sizes. SolTrans receives non-grant, government subsidies from:

FARE REVENUE

Fare Revenue isn’t our largest funding source but is arguably our most important. While the money we collect from our passengers only accounts for 20% of our operational costs – yes, you read that correctly – SolTrans nonetheless aims to consistently hit this percent.

Now, I’m sure right about now you’re wondering:

How do we continue to keep our services funded if passenger fares don’t recoup more of our costs? And how is this the most important category?! And why are pleased with ourselves and not more panicked!?!

All great questions.

This 20% threshold qualifies us for large portions of state subsidies, such as the TDA funds mentioned above. TDA funds, in particular, are a boon for us because they are unrestricted funds, that we can use for operations or capital costs, or reserve them for future years as we see fit. Therein, we are happy to hit that 20%, so much so that SolTrans has exceeded this threshold every year since its inception.

OTHER LOCALLY GENERATED REVENUE

SolTrans not only goes after every dollar that we can possibly qualify for, and consistently exceeds minimum thresholds, but we, too, have side hustles. SolTrans generates additional funds to cover costs from:

  • parking revenue;
  • fare subsidy payments from agencies/businesses;
  • income from investments and advertising;
  • rebates; and
  • auctioning off retired buses.

Amid the ongoing global pandemic, where the most essential of workers still need public transit, SolTrans has made every effort to maintain its funding at all costs. It helps that with the new government administration, Congress is poised to support billions of dollars in COVID emergency funding for public transit. These dollars will help transit agencies like ourselves continue to provide public transportation to the communities we love to serve. But until we get the bank alert for those funds, SolTrans is ready and committed to doing everything it can to keep going. This is our thanks to those who keep supporting and riding with us each and every day.

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