COVID-19

Federal Stimulus Funds for Transit

On March 27, 2020, Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748), providing economic relief to various sectors in the American economy affected by the coronavirus disease 2019 (COVID-19) pandemic. Among other things, this legislation provides $25 billion to transit agencies that will be distributed by the Federal Transit Administration (FTA). In this post, we discuss the additional transit funding for California.

Transit Agencies Face Decreased Revenues and Increased Costs. Transit agencies receive funds from a combination of sources. In California, about 80 percent of transit revenue comes from fares and fees, locally generated sources (especially sales taxes), and state grants. Each of these revenue sources are likely to be negatively impacted by the COVID-19 pandemic, which has necessitated many people traveling less than they otherwise would. The pandemic has resulted in decreased transit ridership and fare revenues. For example, Bay Area Rapid Transit reported recent ridership declines of more than 90 percent compared to its previous projections. Transit agencies across California, as well as in other states, have experienced very high declines in ridership.

In addition, transit agencies expect that decreased economic and driving activity during the pandemic will result in a loss in local and state revenues that are used to benefit transit (as well as other transportation programs). In California, 25 “self-help” counties have passed local sales tax measures for transportation, a portion of which goes to transit. Also, State Transit Assistance is the state’s largest funding program for transit and is funded by the sales tax on diesel. The magnitude of the decline in these tax revenues is uncertain, but any significant decline may be consequential for many transit agencies that rely on this fund source.

Transit agencies are also facing increased costs associated with the pandemic, such as for sanitizing vehicles and facilities, as well as providing protective equipment to workers. To cut costs, transit agencies have been reducing some services, such as by decreasing the number of buses and routes. However, these measures are not expected to be sufficient to make up the revenue losses transit providers are facing due to the pandemic.

CARES Act Provides California Transit Agencies $3.7 Billion. The CARES Act includes $25 billion to provide economic relief to transit agencies facing decreased revenues and increased costs due to the pandemic. As shown in Figure 1, FTA has allocated $3.7 billion to California transit agencies. This amount represents a substantial increase in federal funding for transit, with California transit agencies receiving $1.5 billion from the federal government in federal fiscal year (FFY) 2020. The funding provided in the CARES Act will be allocated to transit agencies using existing federal funding formulas based on the population, as well as the size of the transit system in the areas served. These funds generally are for operational expenses. However, transit agencies have some flexibility to use the funds for certain capital expenses (such as new buses) as long as the expenses are eligible under the existing federal funding formulas.

(We note that an additional $1 billion is allocated to Amtrak nationally, though it is unclear how much of this total will go to support the three state-supported intercity rail lines in California: Capitol Corridor, San Joaquin, and Surfliner.)

Impacts of COVID-19 on Transit Are Unclear. In FFY 2018, California transit agencies reported total revenues of about $12 billion. The funds provided through the CARES Act would allow transit agencies to make up losses of up to about one-third of total revenues. However, at this time it is unclear whether this amount will be sufficient to fully offset the loss in revenues transit agencies will ultimately incur due to declines in ridership and sales activity. Instead, actual revenue declines could be greater or less than the amount provided in the CARES Act depending on the length of the current public health emergency. Moreover, the loss in revenues could vary across transit agencies, affecting some more significantly than others. For example, transit agencies that mainly serve more affluent commuters might be more impacted than those that serve the urban core because these workers are more likely to have the option of working from home or have access to a private vehicle that can be used as an alternative mode of transportation. If the losses in revenues are greater than the amount the CARES Act provides transit agencies, transit agencies might have to make significant reductions in costs, such as delaying capital projects and permanently closing certain routes, stations, and services.

In addition, some transit agencies have speculated that the pandemic might have longer term negative impacts on the overall use of transit. In particular, while transit ridership should be expected to rebound after the shelter-in-place orders are lifted, ridership levels might be significantly lower than before the pandemic if ongoing fears of the virus make the public reluctant to use transit or transportation patterns change for other reasons. To the extent that declines in transit ridership occur, this might result in other transportation and environmental consequences. If individuals shift from transit to private vehicles, for example, that would result in net increases in congestion, as well as greenhouse gas emissions.