Transit agencies are increasingly looking beyond traditional public funding sources to pay for new capital projects. This is in part because competition for federal funding is extremely tight, with many more projects seeking funding than FTA can support. It also reflects frustration with what many transit agencies feel is a lengthy, burdensome application and evaluation process for Section 5309 funding.
While many cities have successfully used tax referenda or bond issues to secure local public funds, some innovative private funding tools are gaining more attention. Such tools include:
Tax increment financing (TIF) districts
Under this mechanism, cities designate an area for development or improvements. At the launch of this TIF district, property values are assessed. As the district develops and property values rise, the increased tax revenue is dedicated to addtional district improvements, which may include transit investments. To date, there are no US BRT projects using this mechanism.
Benefits assessment districts
Similar to the TIF concept, a benefit assessment district charges properties a fixed fee or special tax to pay for district improvements. The amount charged is directly related to the benefit provided by the improvements. Denver's 16th Street Mall is an example. The Mall is a pedestrian and transit-only area served by a free shuttle bus service. There are approximately 370 private commercial property owners in the 120-block Business Improvement District. Owners pay an annual assessment based on a formula that calculates the value to the property owner of proximity to the Mall. The assessment ranges from 15 to 39 cents per square foot. The funds support system maintenance, however, and not construction.
New Starts
Small Starts
FY'08 Funding Updates
Other Federal Funding Options
State and Local Funding
Private Funding
Joint development:
Transit agencies often form partnerships with private developers or businesses surrounding a transit corridor. These joint development projects both supply a steady stream of transit funding and promote transit-oriented development. To date, there are few examples of joint development along BRT or busway corridors. In Oregon, the Lane Transit District (LTD) established a joint development partnership at the Springfield Station, the terminus of the EmX Franklin Corridor BRT. LTD owns the property, and businesses in the station pay the agency rent.
Toll Road Financing
This is an interesting possibility being explored in a few regions. Essentially, a toll road is constructed using private financing, usually bonds. The road is managed as a high occupancy toll ("HOT") lane, with tolls set depending on the level of congestion. If congestion increases, tolls are increased to ensure that traffic remains free-flowing. The bonds are repaid through toll revenue, and the toll road is open to BRT vehicles. Thus, a congestion-free right of way can be constructed for a BRT system without relying exclusively on public tax dollars. Also, toll revenues are used to offset BRT operational costs, providing a low cost option to paying tolls, which can be in the range of $1 per mile. Innovative financing like this is not applicable to rail, because the rail right-of-way is available only to the transit vehicle.
More information on these financing mechanisms can be found in the excellent BRT resource, TCRP Report 90 on Bus Rapid Transit Implementation.