Overview of Funding and Financing at USDOT
Federal investment can be drawn from several sources. Congress appropriates funding to USDOT and authorizes transportation programs based on national priorities. USDOT and its operating administrations provide funding for these programs to invest in transportation infrastructure, safety, and innovation across the country. This toolkit focuses on USDOT’s discretionary grant funding programs. However, a variety of potential funding and financing options should be considered to support transportation needs.
|Discretionary Grant Funding Programs
USDOT administers competitive discretionary grant programs through its operating administrations (OAs) and OST. Each program office solicits applications and selects projects based on program eligibility, evaluation criteria, and Departmental or program priorities. This toolkit focuses on discretionary grant programs, providing an overview of the competitive grant funding process, consolidating program information and resources across the Department, and introducing the USDOT discretionary funding matrix.
|Formula Grant Funding Programs
Formula grant programs allocate funding to recipients based on formulas set by Congress. USDOT distributes these funds to States, Federally-recognized tribal recipients, and transit agencies. The funds may be further allocated to localities at State, tribal, or agency discretion. Formula-based grant programs include the Formula Funds for Rural Areas (Section 5311) and Buses and Bus Facilities formula grants (Section 5339). Contact your State DOT for more information about available formula grant funding programs.
|Loan Financing Programs
Credit assistance programs leverage Federal funds to attract private and other non-Federal co-investment for transportation projects. This can take the form of secured (direct) loans, loan guarantees, and lines of credit. The Build America Bureau manages USDOT’s financing programs. The FHWA Center for Innovative Finance Support also houses helpful resources related to USDOT’s financing options. More information can be found in the “USDOT Financing Resources” section.
Public-Private Partnerships (P3s)
Understanding Funding and Financing Options
Consider the following when discussing whether discretionary grant funding or loan financing are viable options for your project.
Discretionary Grant Funding Programs
Discretionary grant programs award funding to support projects addressing specific program purposes. Discretionary grants are often distributed through a competitive selection process targeted to interested and eligible applicants, including State and local governments, transit providers, universities, research institutions, law enforcement agencies, non-profit organizations, and others.
Advantages of grant funding:
- Grant agreements are generally non-repayable once awarded, and project sponsors thus avoid incurring debt or interest expenses if completed successfully
- In some cases, grants may be a lower-risk means of obtaining needed investment compared to loan financing, without potentially impacting credit ratings and assets
Loan Financing Programs
Loan financing refers to capital provided to an organization with the expectation of repayment. Borrowers are held liable to repay the capital amount with a certain percentage of interest.
Advantages of loan financing:
- Dependent on the agreement, some loans may offer more investment opportunities and allow more flexibility to obtain investment at any time, as there are a limited number of grant awards available
- Loans do not have an investment ceiling, in some cases allowing borrowers to obtain as much as credit as repayment abilities allow
- Loans may provide increased opportunities to undertake larger and longer-term capital investment over time than would otherwise be possible for certain projects
Additional Investment Resources: Formula Grant Funding for Rural Projects
Formula Grants for Rural Areas (Section 5311) provides capital, planning, and operating assistance to States and Federally-recognized Tribes to support public transportation in rural areas. Residents in these areas often rely on public transit to reach their destinations. FTA Section 5311 funds are provided to States based on a formula set by law accounting for land area, total population, revenue vehicle miles, and portion of low-income individuals in rural areas. Per the FTA Circular 9040.1G, this program defines ‘rural’ as an area encompassing a population of less than 50,000 people that has not been designated in the most recent decennial census as an “urbanized area.”
This program also provides funding for State and national training and technical assistance through the Rural Transportation Assistance Program (RTAP). More information about national RTAP resources can be found here at https://www.nationalrtap.org/Home.