On Tuesday, the San Francisco Municipal Transportation Agency (SFMTA) board of directors, which oversees all surface transportation in San Francisco, including the Municipal Railway (Muni), approved the financial plan of the Central Subway, Phase 2 of the SFMTA's Third Street Light Rail Project.

The board’s approval is an advisory step in anticipation of submitting the plan as part of the Federal Transit Administration’s (FTA) New Starts Program in February. The SFMTA is on an active path to achieve a Full Funding Grant Agreement (FFGA) from the FTA by the end of this year.

The funding plan illustrates the SFMTA’s best means for closing the remaining $137 million funding gap. It is comprised of federal, state and local fund sources, including committing state bond proceeds from two transportation funding sources. These state bond funds will be directed to the SFMTA by formula.

To ensure that the funds flow as needed to keep the project moving forward, the SFMTA will continue its ongoing coordination with funding partners: the San Francisco County Transportation Authority, the Metropolitan Transportation Commission, the leadership in Sacramento and the FTA. This collaboration will leverage state and local funds to secure $942.2 million in federal New Starts funding for this project that would otherwise be unavailable to San Francisco for any other project.

The FFGA is the formal action embodying the federal government’s financial commitment to the project, currently projected to be $942.2 million. A key milestone in the application for the FFGA is the submission of an updated financial plan that identifies all funds that will be committed to the $1.578 billion project. The SFMTA must present a funding plan that identifies the sources of funding and the amount of funds available for the Project from each source. The SFMTA must provide this to the FTA by February.

As of spring 2010, the project faced a remaining shortfall of $137 million in local funding that needed to be addressed. SFMTA convened a group of stakeholders (San Francisco County Transportation Authority; Metropolitan Transportation Commission; the San Francisco Mayor’s Office; Board of Supervisors; and the San Francisco Planning + Urban Research Association) to explore funding options. Both the near-term needs of the Central Subway and longer-term capital needs of the Agency were considered as various fund sources were discussed.