- The Consolidated Appropriations Act, 2021 includes $2 billion dollars of federal grants for the relief of transportation service providers.
- There are a variety of stipulations to qualify for these grants, and grant money must be spent on eligible expenses.
- Although details are to come regarding the application process, loan sizing, and tax consequences, you can act now to prepare.
Could a transportation grant help you?
While the COVID-19 pandemic has resulted in varying degrees of financial impact for segments of the transportation industry, arguably the most impacted were passenger/people transit companies. Fortunately, on December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law.
$2 billion dollars of federal grants for the relief of transportation service providers were included in the massive $2.3 trillion spending bill. These grants are intended to provide some economic relief to an industry that has been devastated by the COVID-19 pandemic.
Who is eligible for these transportation grants?
As with many of the COVID relief programs implemented in the last nine months, there are a variety of stipulations to qualify for these grants. Transportation providers must:
- Provide services for the following types of vehicles: passenger vessels, motorcoaches, school buses, or other passenger transportation services companies subject to DOT regulations
- Have experienced a revenue loss of 25% or more on an annual basis as a direct or indirect result of COVID
- Have had 500 or fewer full-time, part-time, or temporary employees (when considering affiliations) as of March 1, 2020 or have had more than 500 full-time, part-time, or temporary employees and has not received assistance from Section 4003(b) from the CARES Act ($500 billion of federal loans specific to the transportation industry).
How will this process work?
As with most of these programs, there are more questions than answers at this point. However, there are some indications as to what the process may look like given what is written in the law.
- The Secretary of the Treasury will administer the program with the assistance of the Department of Transportation.
- Qualified transportation companies will need to apply for these grants and certify that they experienced a revenue loss of at least 25% on an annual basis as a result of COVID-19.
- The amount of the grants will likely be dependent upon each company’s set of facts and circumstances. Factors that will be considered when determining the grant amount include the amount of debt owed, other sources of federal assistance used (including PPP loan amounts), and other information the Secretary deems necessary.
- These grant awards, when combined with any other federal assistance, will be capped at the amount of 2019 revenues earned.
What are the eligible expenses?
As a condition of receipt, the eligible transportation service providers will agree to use the funds on a priority basis.
Payroll is the main priority. At least 60% of the grant amount will need to be used on payroll, excluding reductions in pay rate, involuntary furloughs, or funds to rehire laid off employees.
The acquisition of services, equipment (including personal protective equipment), and other measures to protect workers and customers from COVID are allowable expenses as part of the grants.
Eligible providers are also able to utilize the grants to continue operations and maintenance of existing capital equipment and facilities including rent, leases, insurance, and interest on debt. It does not include the principal payments on debt or a prepayment of debt. At this point it is unclear what expenses could be considered continued operations and maintenance, such as fuel, property taxes, and licenses and permits.
Waiting on guidance
At this time we are still waiting on information regarding many of the administrative details such as what the grant application will look like, how the sizing of the grants will be determined, and tax consequences of such a grant.
Key things to keep in mind
Applying for federal grants may be something new to you. As you go through the process, know that they typically come with some strings attached (for example, those noted above). It’s critical to keep good documentation on how your grant money is spent on eligible expenses. You may also need to document the justification as to why some expenditures were necessary as part of continued operations and maintenance.
Since each federal award has limited funding resources, you may first be required to exhaust other funding options such as a second draw on a Paycheck Protection Program (PPP) loan. And, be careful not to double dip for costs used from PPP funds.
How we can help
Our team of experienced professionals can help you understand the transportation relief grant program, navigate the grant application process, or develop effective strategies to implement grant management policies and procedures.
We can help you through the process now — and as you look to a future beyond COVID-19.