Infrastructure or Operations? Agencies are Ready for Flexible Funds

In 2023, state policymakers committed to send $5.1 billion to transit agencies for much-needed capital projects and operations. With the anticipated budget shortfall in 2024, agencies are explaining why those projects are critical to keep transit available and equitable.

By Arianna Smith
Managing Editor
Transit California

The philosophy of "flexibility with transparency" guides transit agencies' planned use of the SB 125 Transit Program state budget funds.

As central negotiators on the 2023 transportation budget bills, the Association helped secure $5.1 billion for to use on transit capital projects, operations, and zero-emissions transition activities.

The California State Transportation Agency (CalSTA) will allocate $4 billion to agencies using a population-based formula through the existing Transit and Intercity Rail Capital Program (TIRCP); under the fund use flexibility provided by SB 125, some agencies will apply these funds for capital projects, while others will fund operations or a combination of both. To be eligible for the use of these funds, agencies must demonstrate that the capital projects they would use the funds for will reduce greenhouse gas emissions and increase ridership.

CalSTA will allocate the remaining $1.1 billion to agencies using both a population-based formula and a revenue-based formula through the newly created Zero-Emission Transit Capital Program (ZETCP); agencies will use these funds to purchase new equipment and fund operations.

Those who followed the 2023 budget discussions regarding transit will remember policymakers' focus on returning transit ridership to pre-pandemic levels, serving riders' post-pandemic transit needs, addressing state climate goals, and staving off the "fiscal cliff" crisis. Along with acknowledging transit agencies' need for flexible funding to best serve the needs of riders, California policymakers and the Association agreed to an "accountability framework" to help agencies provide transparent information about the use of those funds. As a result, agencies applying for SB 125 funds must submit a regional short-term financial plan to CalSTA. They must also post online a summary of monthly ridership data from 2022 through 2028 to provide the public with trends in ridership and service level changes over time.

During fall 2023, with input from the Association and member transit agencies, CalSTA developed program guidelines for SB 125's fund disbursement. Agencies applied for program funds through an initial allocation package submittal during winter 2023. CalSTA has indicated that the committed funds will be allocated to agencies no later than April 30, 2024, with the initial round of fund approvals expected in early April 2024. Although agencies were required to submit their short-term financial plans by the end of 2023, they may update their plans on a rolling basis throughout the period covered by SB 125.

The Types of Projects to be Funded

Agencies have many options for using the funds to meet the needs of their riders.

Under TIRCP, CalSTA indicated that agencies could apply for SB 125 funds to serve a variety of rail capital projects. This could include expanding or enhancing systems that would connect to other agency rail systems and the future high-speed rail system. Agencies may also use the funds for the operations of their rail services that would "increase service levels, improve reliability, or decrease travel times" according to the final guidelines.

Integrating services will also be a primary eligible use of these funds, with a focus on making it easier for riders to go back and forth between transit systems and modes provided by multiple agencies. Eligible agencies may use the funds for integrated ticketing, including contactless payment; scheduling system integration amongst systems and other multimodal service integration; and projects that promote shared-use corridors amongst both multi-operator passenger-only corridors and passenger-freight corridors.

Agencies may use the funds to support other non-rail operations that increase ridership and reduce greenhouse gas emissions, and which transit effectiveness studies have found to improve service. This includes investments in ferry transit, bus transit, vanpool, microtransit, and first mile/last mile solutions to help riders who have lengthy first or last legs of their journeys that are not on fixed transit routes.

Under the new ZETCP, agencies will be able to apply the funds to the replacement of aging fleets with zero-emissions vehicles and the updating of fueling and charging infrastructure, as well as Zero-Emission Mobility Programs.

Eligible agencies may use both TIRCP and ZETCP funds to fund transit operating expenses to prevent service cuts and increase ridership, including activities that would be necessary for "ensuring safety and state of good repair of the vehicles and infrastructure necessary to operate service, as well as those that pay for free and reduced fare programs" according to the final guidelines.

How Association Member Transit Agencies are Making the Most of Planned SB 125 Funds

Eligible Association members across California are already planning to maximize their anticipated SB 125 funds.

For the Los Angeles County Metropolitan Transportation Authority (LA Metro), SB 125 dollars will enable leveraging of local and federal funds, increasing the total amount of funding for capital investments. LA Metro is committed to using all its SB 125 funding to support and expand service to equity focused communities. Equity focused communities are designated by LA Metro to help identify the greatest transportation needs in its service areas; to be designated as such, the community has a concentration of low-income households, Black, Indigenous, and other People of Color (BIPOC) residents, and households with no access to a car.

According to LA Metro's Equity and Race initiative, "Transportation is an essential lever for increasing access to opportunity. . .Transportation infrastructure, programs, and service investments must be targeted toward those with the greatest mobility needs first, in order to improve access to opportunity for all." SB 125 funding will provide an expansion of transportation to these designated areas with significant transit needs.

Some smaller operators report using SB 125 funds to accelerate their transition away from fossil fueled vehicles to zero-emissions vehicles. "Moving our fleet to zero-emission from CNG [compressed natural gas] will take a lot of capital," said Gregory Barfield, Director of Transportation for Fresno Area Transit. "Most of this will be used for the purchase of fuel cell buses and infrastructure. SB 125 also allows us to move into the hydrogen space." He acknowledged that the Central Valley, where Fresno is located, has some of the worst air quality in the nation, making such upgrades to fleet and refueling/recharging infrastructure especially important: "The SB 125 funds help us attain what CARB and the state want in reducing GHG [greenhouse gas] levels to make the community a better place to live in."

Some operators note the ongoing need to address shortfalls to avoid service cuts. The Bay Area's Metropolitan Transportation Commission (MTC), which serves as the transportation planning agency for the nine-county region and includes 27 transit agencies, indicated in a November 2023 presentation that "existing resources, operator contributions or new funding will need to be marshaled to help close the funding gap and cover the costs of completed and planned service restoration."

Because of the need to address the funding shortfall, MTC-affiliated agencies are exemplifying operator efforts to remain transparent and accountable with state funds that will be used for customer service improvements and efficiency enhancements, with a longer-term goal of increasing ridership. All MTC operators are participating in several initiatives to improve rider experience, including transit fare and integration pilots, mapping and wayfinding regional standards development, ADA paratransit service support, and schedule coordination to improve connections. All operators are also participating in a General Transit Feed Specification format for public transportation schedules, which will be audited to identify how it is being used and how successfully it is being delivered.

For many operators, SB 125 will provide the funds needed for expansions, upgrades, and improvements to a mix of services, infrastructure, and operations. San Diego Metropolitan Transit System (MTS) expects to use $284 million over the next four fiscal years building battery electric bus charging infrastructure, expanding security coverage, improving light rail service and state of good repair, increasing trolley frequency, and bus service enhancements and restoration from cuts due to driver shortages.

According to Mark Olson, MTS Director of Marketing & Communications, the agency launched "a supportive marketing campaign for SB 125 funding called Now Better Transit to help raise awareness with the general public and riders about all the improvements MTS is making to the system" with the funding. He added, "We've heard from riders through a customer satisfaction survey and focus groups that adding more security - and more visible security - was a top priority, so we wanted to ensure this issue is front and center with Now Better Transit." The next phase of this project will focus on service enhancements set to be implemented later in 2024 through a similar project, Now Faster Transit.

What's Next with SB 125 Funds?

The 2024-25 state budget negotiations are underway in the State Capitol, with an anticipated revenue shortfall somewhere between the Governor's estimated $38 billion and the Legislative Analyst Office's much dire $73 billion prediction Association advocates and members are deeply involved in discussions to ensure that the funds that the legislature committed to provide agencies in SB 125 move forward. To be a part of this effort, agency staff can register to attend the Association's Spring Legislative Conference and participate in the afternoon legislative lobbying meetings with state policymakers.

As SB 125 funding distribution and implementation gets underway, Fresno's Gregory Barfield sums it up: "We're public transit, right? We've got the right kind of attitude that we're here to serve."

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