As Consumers Focus On Electric Vehicles, Municipalities Look to Electrify Their Bus Systems

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Foley & Lardner LLPNote: We'd like to thank Anna Cumming, summer associate, for her contributions to this alert.

The demand for electric vehicles is increasing rapidly. President Joe Biden’s recent infrastructure proposal included a $174 billion initiative to fund the EV market and shift away from gas-powered cars in a push to reduce domestic greenhouse gas emissions. Car companies are responding to the call—General Motors recently announced plans to end its sale of gasoline-powered passenger vehicles by 2035 and expand its EV offerings to include thirty new electric vehicles by 2035. These developments ensure that the EV market will be full of electric cars and trucks. But what about buses? Many Americans rely on public transit to get to work, get groceries, and visit family members. Though out of the main headlines, recent news shows that cities and school districts are also heeding the environmental call by converting their fleets to electric.

The Milwaukee County Transit system recently announced an expansion of its bus routes in order to combat transportation problems in congested city centers. Eleven Battery Electric Buses (BEB) will run on this line as part of the county’s goal to achieve carbon neutrality by 2050. In early June, Hawaii’s Public Utilities Commission approved the “eBus Make-Ready Infrastructure Pilot Project.” With the goal of achieving zero carbon emissions by 2045, the project will help bus operators reduce the upfront costs of installing charging equipment by paying for and managing construction of equipment. Municipalities and their transit authorities will be responsible for installing and maintaining charging stations, electricity costs, and purchasing the electric buses. After President Biden called for twenty percent of school buses nationwide to be electric, the School District of Philadelphia purchased five electric buses to add to its fleet.

The ongoing COVID-19 pandemic created a new challenge for electric bus rollouts. Due to a decline in public transit usage during the pandemic, many public transit systems are facing extreme revenue losses. Social distancing and stay-at-home mandates impacted public transit usage. According to the American Public Transportation Association (APTA), public transit ridership dropped by nearly 80% in April 2020 and remained more than 60% below 2019 ridership levels through the rest of 2020. The APTA expects ridership to remain low in the near and medium term due to unemployment and increased remote work. Ultimately, public transit agencies face a projected shortfall of $39.3 billion through the end of 2023. Additionally, the drop in public transit did not affect all areas equally. Coastal cities experienced a greater drop in transit usage, as more people were able to work remotely. Midwest and Southern cities experienced a less severe drop, due in part to job type and who utilized public transportation prior to the pandemic. Several studies found that essential workers are the core users of public transit.

Declining revenues may influence conversion to electric buses, as one of the major hurdles of converting to electric is the cost. An electric bus costs approximately double the price of a diesel bus, but saves money over its lifetime. Many cities turn to federal funding to assist their efforts to go green. The Low-or-No Emission (Low-No) Grant program, funds the deployment of buses and infrastructure to purchase or lease zero and low-emission buses. In June 2020, forty-one projects in forty states and D.C. received a portion of the $130 million provided by the grant program. The School District of Philadelphia secured funding for its buses through the federal Diesel Emissions Reduction Act (DERA) grant. The DERA program funds grants and rebates that “protect human health and improve air quality by reducing harmful emissions from diesel engines.” In the wake of COVID-19, the Biden Administration announced the American Rescue Plan, which allocates funds to help “hard-hit public transit agencies avoid layoffs and service reductions, which disproportionately harm workers who are more likely to be dependent on public transportation.” Several states received funding through this initiative, including Florida which received $35 million for transit projects. The St. Petersburg Transit Authority received $3.3 million of this funding and plans to invest it into its growing fleet of battery-powered, zero-emission buses.

While the full impact of COVID-19 on public transit remains to be seen, it is clear that cities and school districts across the country will continue to shift to green public transit systems. Not only does this bode well for the environment, it also allows greater mobility for those that do not have access to a car. Green buses will help people go to work, visit family, travel, and get to school, all while limiting the carbon footprint.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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