Funding Overview – Urbanized Area Formula

Under the Urbanized Area Formula Funding program (49 U.S.C. 5307 and 5340) the Federal Transit Administration makes federal resources available to urbanized areas and to governors for transit capital and operating assistance in those urbanized areas and for transportation-related planning. An urbanized area is an incorporated area with a population of 50,000 or higher that is designated as such by the U.S. Census Bureau.

History

After data reporting was required by Congress in 1974, the Federal Transit Administration’s National Transit Database was set up to be the repository of data about the financial, operating and asset conditions of American transit systems.

• Up to 1999, only Metro Transit reported information to the database and received formula funds.
• Starting in 2000, Transportation and Transit Development (now Metropolitan Transportation Services) submitted data on all other providers. As a result, in 2000, the region received about $5.9 million of additional 5307 urban formula funds, above what the regional transit system would have received alone from Metro Transit reporting.
• The Met Council developed principles to distribute area formula funds in 2001 through Business Item 2001-49. Those principles remain in place today.

2001 funding distribution principles

• Funds generated by Metro Transit reporting would be distributed to Metro Transit.
• Funds generated by Transportation and Transit Development (Metropolitan Transportation Services) reporting would be distributed proportionately to:
  • Suburban transit providers in replacement service communities (local governments that have opted out of the regional transit system), eligible to receive federal funds
  • Metro Mobility
  • Other regional providers
• Providers eligible to receive urbanized formula funds will submit a list of projects. Eligible grant activities will be consistent with Federal Transit Administration guidelines.
• Funds generated by regular route and rural/small urban providers will be distributed to the general Transportation and Transit Development (Metropolitan Transportation Services) pool of capital funds. Transportation and Transit Development (Metropolitan Transportation Services) will come forward annually with a list of recommended projects, consistent with the Transportation Policy Plan and the 2020 Regional Transit Master Plan.
• Federal funds not spent two years after the award of the funds will be reallocated to the general Transportation and Transit Development (Metropolitan Transportation Services) pool of capital funds to ensure they are spent before authorization lapses.

Current status

• The 2001 principles remain in place.
• Two adjustments have been made to practice. Both adjustments were made for the benefit of providers for replacement service communities.
  • Federal formula earnings for providers in replacement service communities are defederalized with regional transit capital for capital eligible projects, or motor vehicle sales tax for projects not eligible for regional transit capital funds.
  • Replacement service community providers have not been held to the two-year timeline for reallocation of funds. Providers have been allowed to keep those funds.
• The Met Council sets priorities for the capital program.
  • Metro Transit programs federal formula earnings to the Metro Transit family of services, which includes bus, light rail, and commuter rail.
  • Metropolitan Transportation Services programs federal formula earnings to the Metropolitan Transportation Services family of services, which includes Metro Mobility, Transit Link and contracted bus; and the regional fleet, which includes the providers for replacement service communities.
• Replacement service community providers program earnings based on local board priorities. Those funds are passed through from the Met Council to system replacement service community providers through subrecipient grant agreements.
• The Metropolitan Council manages disbursement of these funds as the designated Metropolitan Planning Organization and the governor’s designated recipient for these funds. In 2025, the region received $80.1 million in formula funds.

New proposal to modernize allocation of formula funds

For replacement service municipalities (Suburban Transit Providers), the Metropolitan Council is proposing to allocate urbanized area formula funds according to the same formula the federal government uses to distribute funds to our region — based on service levels, ridership, and population factors. This approach helps ensure fair, data-driven funding. Current distribution is based on service levels only.

Since 2001, other funds have been pooled and used to fund certain capital costs. Under the proposed approach, funds would no longer be pooled, and providers would be responsible for these costs from increased funding allocations. This will allow providers to prioritize these funds between eligible operating costs, system preservation investments, and expansion initiatives.

The University of Minnesota operates a transit system connecting its Twin Cities campus locations, supplementing the Metro Transit system and services from other transit providers. This provider would continue to receive federal formula funds according to the transit infrastructure and service it provides, at levels established by federal formulas. For this provider, the proposed approach continues a practice in place for many years.

Within the Metropolitan Council’s allocation, a share of funds is generated by Metro Mobility and Metro Move services. These funds would be restricted to these programs’ purposes, with remaining funds from the State of Minnesota per state law (473.386).

The table below shows estimated 2026 shares under current and proposed approaches. Actual distributions would depend on federal appropriations and providers’ federally reported service levels:
 

Approx. $16 million of Met Council share dedicated to Metro Mobility and Metro Move program purposes.

Provider	Current	Proposed	Change
Maple Grove	$600,000	$1 million	+$400,000
MVTA	$3.1 million	$5.3 million	+$2.2 million
Plymouth	$500,000	$1 million	+$500,000
SW Transit	$1.4 million	$2.2 million	+$800,000
U of M	$800,000	$800,000	$0
Met Council	$76.1 million	$72.2 million	-$3.9 million
Regional Total	$82.5 million	$82.5 million	$0