A Biden administration proposal aimed at providing relief for transit agencies struggling with anemic ridership would benefit large agencies but could pressure smaller ones, local transit officials told a Senate panel Wednesday.

President Joe Biden’s fiscal year 2024 budget, unveiled last week, would free up $6.7 billion in so-called 5307 urbanized area grant formula grants from the Federal Transit Administration to be used for operations by transit agencies that serve populations of at least 200,000. The policy would apply to fiscal year 2024 only.

Systems that serve under 200,000 are already allowed to use the funds for operating expenses.

Congress would need to authorize the move, and lawmakers signaled they are mulling the possibility during a Senate Banking, Housing and Urban Affairs hearing Wednesday.

“There may be some things we need to rethink in terms of restraints” on the 5307 funds, Sen. Thom Tillis, R-N.C. said, asking the local officials for their views on the move.

The money is a “lifeblood” for smaller agencies that already enjoy the flexibility, said James Keel, director of public transportation in Greenlink, South Carolina.

“If that were to disappear, our agency would no longer be serving anybody,” Keel said.

“Personally, I am concerned about the potential restructuring of 5307 funds,” Keel said in his testimony. “If large agencies are allowed to utilize 5307 funds for operations, I fear that this will not only increase competition for discretionary capital funding but push smaller transit agencies out.”

For the Greater Cleveland Regional Transit Authority, the move would be positive, CEO and general manager India Birdsong Terry told senators.

“The flexibility between capital and operating is definitely important if not essential to Greater Cleveland, particularly in light of we can’t predict the sales tax” that supports the system, Terry said. “Being able to flex that funding back and forth allows us to be able to stay above water, and we definitely support” the move, she said.

The Amalgamated Transit Union also supports the policy change, said the union’s president Michael McMillan.

“It’s hard to bounce back” from slowed ridership, McMillan said. “If we can use that funding for operating costs, service cuts won’t have to happen.”

The hearing comes as the FTA continues to implement the record $39 billion funding from the 2021 Infrastructure and Investment Jobs Act said committee chair Sen. Sherrod Brown, D-Ohio.

“We have an opportunity in this Congress to listen to local voices,” Brown said. “We begin that work today.”

In a statement, the American Securities Association weighed in on the hearing by urging Congress to keep in mind the muni market, which finances many transit infrastructure projects.

“We strongly encourage Congress to do no harm to the municipal bond tax exemption so state and local governments can continue to use this important tool to invest in infrastructure projects that will support the local economy and bolster job creation,” ASA CEO Chris Iacovella said. “Private activity bonds, direct pay bonds, bank-qualified bonds, and tax-exempt advance refunding bonds (prior to their elimination in the 2017 Tax Cuts and Jobs Act) are just a few of the tried-and-true tools used by state and local governments to modernize local communities.”

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