Tennessee Leverages State Transit Program for Maximum Impact

By: Kaitlyn McClanahan, Transit Programs & Policy Manager, Office of Public Transportation, Tennessee DOT

While Tennessee is most known for its contributions to the music industry and the beautiful Smoky Mountains, in the public transit industry, the state is recognized for prioritizing access to public transportation for its nearly 9 million residents and millions of annual visitors.

Each of the state’s 95 counties has public transportation services, provided by 26 transit agencies. In addition to matching every federal formula capital dollar that comes to Tennessee transit agencies from the Federal Transit Administration (FTA), the Tennessee Department of Transportation (TDOT) boasts six state-funded programs: two for commuter services, three for operational support, and one for capital investment known as the IMPROVE Act Transit Investment Grant.

Legislation & Program Development

The Tennessee Legislature in 2016 passed the Improving Manufacturing, Public Roads, and Opportunities for a Vibrant Economy Act (IMPROVE Act). The law provided the largest tax cut in the state’s history, cutting sales taxes on groceries and reducing business taxes on manufacturers. At the same time, the bill increased fuel taxes for the first time in nearly 30 years, providing a dedicated stream of revenue for TDOT to fund a backlog of projects. The law also enables county governments to call local referendums to create dedicated revenue for public transit operations.

Dedicated transportation funding in the IMPROVE Act resulted in a set-aside competitive program for transit capital investments. In the first year of the program, TDOT’s Office of Public Transportation issued $13 million in transit projects, ranging from intelligent transportation system investments for Pigeon Forge Mass Transit System and coach buses for the Middle Tennessee Regional Transportation Authority to a rural transit administration and maintenance facility in Martin, TN and locomotive overhauls for the WeGo Star commuter train in Nashville. In the second year of the program, TDOT awarded $17 million in projects and increased the program budget to $21 million for the third year and all years going forward.

When it first launched in 2018, the IMPROVE Act Transit Investment Grant featured a 75 percent state and 25 percent local match level. In 2022, TDOT increased the state share of the match requirement to 80 percent on all projects, with an option for 90 percent state funding on infrastructure and facility projects located in at-risk, distressed counties or opportunity zones.

Leveraging State Funds for Maximum Impact

A budget of $21 million and an annual competitive source of funding for transit agencies to access capital investment is unique on its own, but as Congress and the FTA increased investment in national transit capital programs, TDOT saw an opportunity to turn $21 million into even more.

In addition to the annual competitive call for projects, TDOT created a rolling process through which the State, or large transit agencies, applying to these federal discretionary programs could tap into the IMPROVE Act funding to match a federal project. The leveraged funds are eligible to match at either the typical capital level or at a non-traditional capital match that reduces either the local and/or federal shares.

A few examples of TDOT’s success using IMPROVE Act funds to leverage federal funds were in the Bus and Bus Facilities Discretionary program. Across three applications to the 5339(b) Program, TDOT committed a total of just $11.4 million IMPROVE funds and brought in an additional $34.2 million in federal funds. These three awards resulted in significant replacement fleet investments for 16 of the state’s transit agencies, including the 9 rural regional providers that cover all 95 counties of the state.

As a state-only source of funding, the IMPROVE Act Transit Investment Grant can also be braided into projects already funded by FTA formula programs and other USDOT Programs, such as the Capital Investment Grant and FHWA’s Congestion Mitigation & Air Quality Program.

• The Innovation Corridor Bus Rapid Transit in Memphis is a $130 million project that secured $74 million in 5309 Capital Investment Grant funds and is reinforced by an IMPROVE investment of $7.8 million.
• A new transit center in Murfreesboro, Tennessee received $9 million in IMPROVE funding over 3 fiscal years, leveraging $3.3 million in federal 5307 formula funds, which TDOT also matched directly at 10 percent.
• WeGo Public Transit in Nashville has two neighborhood transit center projects that leveraged IMPROVE Act funds, CMAQ, 5339b, 5307, and Surface Transportation Block Grant funds.
• The North Nashville Transit Center, a new $17 million facility on one of the city’s highest-ridership corridors is nearly complete and will open in Spring of 2024. This project includes $5.4 million in IMPROVE Act funds.
• The Antioch Transit Center, a new $19 million facility is part of a larger revitalization project in another high-ridership corridor. This project, which is in the design phase, won a 5339b Discretionary award in 2023 and includes $5 million in IMPROVE Act funds.

TDOT has supported transit agencies in building new transit centers, enhancing passenger amenities at existing transit facilities, improving bus stop infrastructure, launching micro-mobility service, replacing aging maintenance equipment, building park-and-ride lots, purchasing hybrid and electric vehicles, as well as investing in transit technology such as digital fareboxes, mobile apps, real-time bus tracking and trip scheduling software.

Nearly every transit agency in Tennessee has directly benefitted from the IMPROVE Act Transit Investment Grant. TDOT continues to work closely with providers to identify innovative ways to maximize the impact of federal, local, and state public transit funds.