Section 5307: the urban transit grant that pays for contracted paratransit, and the rules it passes to you

What Section 5307 is

Section 5307 is the Federal Transit Administration’s Urbanized Area Formula Grants program, set out in 49 U.S.C. 5307. An urbanized area is one with at least 50,000 people, as designated in the latest census (49 U.S.C. 5302). The grant goes to a public recipient, usually a transit agency, which decides how to spend it. A private ride company is paid under a service contract with that agency. Working as an ADA paratransit contractor covers what that work involves, and government NEMT contracts covers how public buyers award ride work.

FTA’s guidance for the program is Circular C 9050.1A, in effect since November 1, 2024. It replaced three earlier circulars, including C 9030.1 (Federal Register notice). Guidance that still cites C 9030.1 is out of date.

What the money pays for

The grant pays for capital projects, planning, job access and reverse commute projects, and operating costs within limits.

• Eligible costs. Capital projects, planning, job access and reverse commute projects, and operating costs. In areas under 200,000 people, operating costs are eligible. In larger areas, operating aid goes only to systems with 75 or fewer buses (up to 75 percent of their share of the apportionment) or 76 to 100 buses (up to 50 percent), counting peak buses in fixed route and demand response service but not ADA complementary paratransit.
• Federal share. 80 percent of net capital project cost, and no more than 50 percent of net project cost for operating. The rest comes from local sources, which can include payments the transit agency receives under a service agreement with a state or local social service agency, or with a private social service organization.
• ADA paratransit. Nonfixed route paratransit required by the ADA can count as a capital project, up to 10 percent of the recipient’s yearly Section 5307 and 5311 apportionment, or 20 percent if the recipient meets two of three conditions: a fixed route travel training program, biennial operator safety and disability awareness training, and agreements with employers and the American Job Center.

Where a private ride company fits

A private ride company is not a recipient. It is paid under a contract with the public agency that is. The statute defines a designated recipient as an entity named by the governor, local officials and publicly owned transit operators to receive funds for areas of 200,000 or more, or a state or regional authority that provides public transportation. FTA said in its response to comments on C 9050.1A that Chapter II covers contracted service arrangements with private for-profit operators, and added that these arrangements are not limited to taxi companies and transportation network companies.

The program of projects is where you can be heard. Each recipient must develop it in consultation with interested parties, including private transportation providers, publish it for comment, offer a public hearing and consider the comments it receives, especially those of private transportation providers (49 U.S.C. 5307(b)).

Rules that reach a contractor

The agency’s contract passes down federal rules on drug and alcohol testing, procurement, nondiscrimination, Buy America and reporting.

• Drug and alcohol testing. 49 CFR Part 655 applies to recipients of Section 5307, 5309 or 5311 money and to any contractor of a recipient. Safety-sensitive work includes operating a revenue service vehicle, even when it is not in service, and controlling dispatch or vehicle movement. The details are in working as an ADA paratransit contractor.
• Competition and responsible contractors. The recipient certifies that it will follow 49 U.S.C. 5323 and 5325 in its procurements. Section 5325 requires full and open competition and awards only to responsible contractors, weighing integrity, compliance with public policy, past performance, and financial and technical resources.
• Federal procurement standards. Local agencies spending federal money follow 2 CFR 200.318 through 200.327, which cover items such as a time-and-materials ceiling and who settles a bid protest.
• Nondiscrimination and DBE assurances. Each DOT-assisted contract must include the assurance in 49 CFR 26.13(b), under which the contractor carries out applicable DBE requirements, and a failure is a material breach. See DBE certification for transportation companies.
• Buy America. Steel, iron and manufactured goods used in a project must be produced in the United States unless waived (49 U.S.C. 5323(j)). Ask the agency whether any vehicle or equipment purchase under your contract is subject to it.
• National Transit Database reporting. FTA may award a Section 5307 grant only if the applicant and any person who benefits directly from it are subject to reporting (49 U.S.C. 5335(b)). The agency reports the service, and NTD reporting for transportation contractors explains what that means for your records.

Section 5307, 5310 and 5311

Section 5307 serves urbanized areas. Section 5311 is the rural program: it makes grants to states and tribes and can pay for the acquisition of public transportation services, including service agreements with private providers. Section 5310 funds projects for seniors and people with disabilities, and Section 5310 grants covers how private companies take part in it.

How current is the funding?

The program is running on a short extension: Division C of Public Law 119-103, signed September 2, 2026, continues the programs in chapter 53 of title 49 from October 1 through December 11, 2026. It authorizes fiscal year 2027 funding at the share of the fiscal year 2026 amounts that matches the length of the extension.

Money already apportioned stays available to the recipient for five years after the fiscal year it is apportioned, so fiscal year 2026 funds can be obligated through September 30, 2031 (49 U.S.C. 5336(g)). When you bid on a multi-year paratransit contract, ask which funds pay for it and what happens to service if funding changes.