Subd. 1. Establishment; purpose.

A public transit participation program is established to carry out the objectives stated in section 174.21 by providing financial assistance from the state, including the greater Minnesota transit fund established in section 16A.88, to eligible recipients outside of the metropolitan area.

Subd. 2. Eligibility; application.

Any legislatively established public transit commission or authority, any county or statutory or home rule charter city providing financial assistance to or operating public transit, any private operator of public transit, or any combination thereof is eligible to receive financial assistance through the public transit participation program. Eligible recipients must be located outside of the metropolitan area.

Subd. 2a. Eligible activities.

Activities eligible for assistance under the program include but are not limited to:

1. (1) planning and engineering design for transit services and facilities;
2. (2) capital assistance to purchase or refurbish transit vehicles and other capital expenditures necessary to provide a transit service;
3. (3) operating assistance as provided under subdivision 3b; and
4. (4) other assistance for public transit services that furthers the purposes of section 174.21.

Subd. 3. Financial assistance.

Payment of financial assistance shall be by contract between the commissioner and an eligible recipient.

Subd. 3a.

Repealed, 1984 c 654 art 3 s 153 subd 1

Subd. 3b. Operating assistance; recipient classifications.

1. (a) The commissioner shall determine the total operating cost of any public transit system receiving or applying for assistance in accordance with generally accepted accounting principles. To be eligible for financial assistance, an applicant or recipient shall provide to the commissioner all financial records and other information and shall permit any inspection reasonably necessary to determine total operating cost and correspondingly the amount of assistance that may be paid to the applicant or recipient. Where more than one county or municipality contributes assistance to the operation of a public transit system, the commissioner shall identify one as lead agency for the purpose of receiving money under this section.
2. (b) Prior to distributing operating assistance to eligible recipients for any contract period, the commissioner shall place all recipients into one of the following classifications: urbanized area service, small urban area service, rural area service, and elderly and handicapped service. The commissioner shall distribute funds under this section so that the percentage of total operating cost paid by any recipient from local sources will not exceed the percentage for that recipient's classification, except as provided in an undue hardship case. The percentages must be: for urbanized area service and small urban area service, 20 percent; for rural area service, 15 percent; and for elderly and handicapped service, 15 percent. The remainder of the total operating cost will be paid from state funds less any assistance received by the recipient from any federal source. For purposes of this subdivision, "local sources" means all local sources of funds and includes all operating revenue, tax levies, and contributions from public funds, except that the commissioner may exclude from the total assistance contract revenues derived from operations the cost of which is excluded from the computation of total operating cost. Total operating costs of the Duluth transit authority or a successor agency does not include costs related to the Superior, Wisconsin service contract and the Independent School District No. 709 service contract. For calendar years 2004 and 2005, to enable public transit systems to meet the provisions of this section, the commissioner may adjust payments of financial assistance to recipients that were under a contract with the department on January 1, 2003. Payments to such a recipient in calendar years 2004 and 2005 from the greater Minnesota transit fund may not be less than the payment to the recipient from that fund in calendar year 2003, except for reductions made necessary by reductions in base funding for those years.
3. (c) If a recipient informs the commissioner in writing after the establishment of these percentages but prior to the distribution of financial assistance for any year that paying its designated percentage of total operating cost from local sources will cause undue hardship, the commissioner may reduce the percentage to be paid from local sources by the recipient and increase the percentage to be paid from local sources by one or more other recipients inside or outside the classification. However, the commissioner may not reduce or increase any recipient's percentage under this paragraph for more than two years successively. If for any year the funds appropriated to the commissioner to carry out the purposes of this section are insufficient to allow the commissioner to pay the state share of total operating cost as provided in this paragraph, the commissioner shall reduce the state share in each classification to the extent necessary.

Subd. 3c. Nonoperating assistance.

The commissioner shall determine the total cost of any planning and engineering design, capital assistance, other capital expenditures, and other assistance for public transit services that furthers the purposes of section 174.21 for any public transit system receiving or applying for the assistance in accordance with generally accepted accounting principles. To be eligible for non-operating-cost financial assistance, an applicant or recipient shall provide to the commissioner all financial records and other information and shall permit any inspection reasonably necessary to determine total cost and the amount of assistance that may be paid to the applicant or recipient. When more than one county or municipality contributes assistance to the operation of a public transit system, the commissioner shall identify one as a lead agency for the purpose of receiving money under this section. The commissioner has the sole discretion to determine the amount of state funds distributed to any recipient for non-operating-cost assistance.

Subd. 4.

Repealed, 1984 c 654 art 3 s 153 subd 1

Subd. 5. Method of payment, operating assistance.

Payments for operating assistance under this section must be made in the following manner:

1. (a) For payments made from the general fund:

   1. (1) 50 percent of the total contract amount in the first month of operation;
   2. (2) 40 percent of the total contract amount in the seventh month of operation;
   3. (3) 9 percent of the total contract amount in the 12th month of operation; and
   4. (4) 1 percent of the total contract amount after the final audit.

2. (b) For payments made from the greater Minnesota transit fund:

   1. (1) 50 percent of the total contract amount in the seventh month of operation; and
   2. (2) 50 percent of the total contract amount in the 11th month of operation.

Subd. 5a. Method of payment, nonoperating assistance.

Payments for planning and engineering design, eligible capital assistance, and other eligible assistance for public transit services furthering the purposes of section 174.21, excluding operating assistance, shall be made in an appropriate manner as determined by the commissioner.

Subd. 6. Service contract.

1. (a) Any legislatively established public transit commission or authority, county, or statutory or home rule charter city that (1) is located outside the metropolitan area, and (2) provides financial assistance to or operates public transit, may provide paratransit as a complement to fixed route service as required in United States Code, title 42, section 12143, as amended through December 31, 1994, outside its jurisdictional boundaries.

2. (b) Service described in paragraph (a) may be provided only if (1) the commission, authority, county, or city enters into a contract for the service with a political subdivision, individual, or private entity for the service, and (2) the contract requires full or partial payment to the commission, authority, county, or city for the cost of the service.

   * NOTE: Subdivision 3b was also amended by Laws 2001, First *Special Session chapter 5, article 3, section 9, to read as *follows:

   * "Subd. 3b. Operating assistance. (a) The *commissioner shall determine the total operating cost of any *public transit system receiving or applying for assistance in *accordance with generally accepted accounting principles. To be *eligible for financial assistance, an applicant or recipient *shall provide to the commissioner all financial records and *other information and shall permit any inspection reasonably *necessary to determine total operating cost and correspondingly *the amount of assistance which may be paid to the applicant or *recipient. Where more than one county or municipality *contributes assistance to the operation of a public transit *system, the commissioner shall identify one as lead agency for *the purpose of receiving money under this section.

   * (b) Prior to distributing operating assistance to eligible *recipients for any contract period, the commissioner shall place *all recipients into one of the following classifications: *urbanized area service, small urban area service, rural area *service, and elderly and handicapped service. The commissioner *shall distribute funds under this section so that the percentage *of total operating cost paid by any recipient from local sources *will not exceed the percentage for that recipient's *classification, except as provided in an undue hardship case. *The percentages must be: for urbanized area service and small *urban area service, 40 percent; for rural area service, 35 *percent; and for elderly and handicapped service, 35 percent. *The remainder of the total operating cost will be paid from *state funds less any assistance received by the recipient from *any federal source. For purposes of this subdivision "local *sources" means payments under section 174.242 plus all local *sources of funds and includes all operating revenue, tax levies, *and contributions from public funds, except that the *commissioner may exclude from the total assistance contract *revenues derived from operations the cost of which is excluded *from the computation of total operating cost. Total operating *costs for the Duluth Transit Authority or a successor agency *shall not include costs related to the Superior, Wisconsin *service contract and the Independent School District No. 709 *service contract.

   * (c) If a recipient informs the commissioner in writing *after the establishment of these percentages but prior to the *distribution of financial assistance for any year that paying *its designated percentage of total operating cost from local *sources will cause undue hardship, the commissioner may reduce *the percentage to be paid from local sources by the recipient *and increase the percentage to be paid from local sources by one *or more other recipients inside or outside the classification, *provided that no recipient shall have its percentage thus *reduced or increased for more than two years successively. If *for any year the funds appropriated to the commissioner to carry *out the purposes of this section are insufficient to allow the *commissioner to pay the state share of total operating cost as *provided in this paragraph, the commissioner shall reduce the *state share in each classification to the extent necessary."