Funding for public transit, as well as the services of community action/services agencies and many of the specialized providers, is provided by a combination of federal, state, and local sources. Much of Michigan’s transit framework has its basis in federal funding which is routed through the Michigan Department of Transportation (MDOT). The main federal/state funding sources applicable to the region are as follows:
Section 5310: Non-Profit Transit for Elderly Individuals and Individuals with Disabilities (capital only)
Section 5311: Formula Grants for Other than Urban Areas (capital, operating, and support services)
Section 5316: Job Access and Reverse Commute (employment for low income persons; capital/operating)
Section 5317: New Freedom (improved services for individuals with disabilities; capital/operating)
Public transit providers rely heavily on both Section 5311 and 5310 funding. (However, 5310 funding may be used by public agencies only if nonprofits do not sufficiently meet needs.) In most cases fare box receipts (money paid by individuals for rides) account for less than ten percent of the budget of each agency. Local subsidies are also necessary to make the services viable. Section 5316 and 5317 funding have not yet been utilized in the region due to increased complexity and special requirements, but those are options that could provide for expanded levels of service from public transit providers.
Most transit services in the region are operated directly as part of the local governments where they reside. Gogebic County Transity Authority is the only transit authority in the region. Established by the authority of state law, a transit authority is a special government district which covers one or more local governments (in this case one county) and has the notable authority to levy a millage (local tax) if authorized by voters. GCTA has long had a history of strong public support in the county, with millages passing roughly 80 percent in favor. On-Tran also has a high level of public support but is subsidized directly by county government funding.
Nonprofit agencies such as community action agencies often receive Section 5310 funding if public transit services in their areas are insufficient to meet demand. However, this funding may only be used for capital expenses of up to two vehicles including one bus. Operations are funded by fares, general agency millages, donations, and other sources.
Nonprofit organizations and agencies transporting through the use of personal vehicles are not eligible for Section 5310 funding, so donations and volunteers play a critical role. One mechanism to help serve this need is the Retired Senior Volunteer Program, which supplies volunteer drivers to other organizations such as the Michigan Department of Human Services. Agencies providing non-emergency medical transportation may receive public operations (driver reimbursement) funding through other mechanisms.
Most private transit providers finance operations entirely through customer fares, which is why taxis are so expensive for long distance transportation and usually lack significant discounts for disadvantaged groups. For this reason, those populations that are eligible for reduced fares are often better served by public transit where available. (The notable exception to private operations being financed entirely by fares is Indian Trails, which receives state subsidies for intercity service in the Upper Peninsula.)