The federal government has launched a special review of Niagara Frontier Transportation Authority finances, expressing concern about its “continuing economic challenges.”

NFTA Executive Director Kimberley A. Minkel said she welcomes the review, sounding a renewed warning that the authority will continue to financially founder without major changes in state funding formulas that she calls unequal and outdated.

“Perhaps we’re crying the most because we feel the impact the most,” she said, pointing to disparities in funding formulas she contends shortchange the NFTA compared with far smaller transit agencies in Rochester, Syracuse and Albany.

The Metropolitan Transportation Authority received a 7.2 percent funding increase last year, while the Westchester County bus system saw its operating assistance rise by 9 percent, according to Deborah C. Leous, the NFTA’s chief financial officer. “We got zero,” she said. “When you compare funding in systems comparable to us, it’s an interesting scenario.”

For the last several years, the NFTA has complained about little or no growth in state transit operating assistance funds compared with the giant MTA downstate and smaller transit agencies upstate.

The Federal Transit Administration study expected to be completed in July seems to underscore the NFTA’s projection of more budget problems.

“FTA is concerned that the continuing economic challenges facing NFTA may imperil NFTA’s ability to match FTA program funds, to cover cost overruns on current projects, to cover operating deficits, and to maintain and operate federally funded facilities and equipment,” Marilyn G. Shazor, regional administrator for the federal agency, said in a recent letter to the authority.

Now the local transit agency says that Albany needs to revise its funding formula or expect major fiscal problems in the future, and that the federal review raises concerns.

“They believe the current model is unsustainable,” Minkel said. “And the issue is lack of funding.”

NFTA officials emphasize that the state fails to recognize that the local transit agency also operates two airports and a subway in addition to upstate’s largest bus fleet. Rochester, Syracuse and Albany, they say, only run buses.

Minkel argues that about $45 million in state transit operating assistance (46 percent of Metro’s state and federal operating assistance) is calculated on passenger numbers and another measurement called “revenue miles.” And she says Metro Bus and Rail are faring worse than any other upstate transit agencies, despite the NFTA’s significantly larger operation.

While the Buffalo/Niagara Falls transit system last year received $1.56 in state aid per trip and $3.34 per revenue mile, those figures fall far below the smaller upstate systems.

Rochester for example, receives $1.77 in state aid per trip and $4.50 per revenue mile. Albany gets $2.11 and $3.51, respectively, while Syracuse receives $2.20 and $5.76.

“Obviously, they need to take a look at the formula,” Minkel said.

While the MTA relies on commuter taxes to fund the nation’s largest transit system, upstate authorities gain their revenue from taxes on petroleum and telephone lines. The irony, Minke said, is that when fuel prices rise, people buy less fuel, and the petroleum tax revenue declines.

Further, motorists often turn to public transit when gasoline prices soar. And while the local mortgage recording tax has remained fairly strong, the “long lines” tax on telephone usage dedicated to upstate transit is declining.

“How many people maintain their land lines with cellphones?” she said.

Downstate commuter taxes provide for continued increases, Minkel said, while the upstate formula maintains the status quo in the face of increased operating costs.

Minkel said that while the initial investment in Metro Rail was significant, its operational efficiencies do not offset the cost of running buses. And authority officials insist they have initiated major retrenchments over the last few years to cut costs at a time when record numbers of passengers are being served.

“We’re running more efficiently, carrying more passengers and getting less money per rider,” Leous said.

State officials earlier this spring announced with much fanfare a $3 million capital grant to the NFTA, mostly to rebuild all 27 Metro Rail cars. Capital money used to flow from Albany every year, but before this year, the last time it arrived was in 2007.

“We’re most anxious about that because of our flagship project on the rail car rebuild,” Leous said.

During a visit with the Editorial Board of The Buffalo News in early April, state Budget Director Robert L. Megna said Albany officials recognize that the revenue sources dedicated to upstate transit are not growing as fast as in New York City or as they have in the past – hence, the awarding of the capital grant.

“We saw an opportunity on the capital side to make the investment … and take pressure off the operating budget,” he said.

Budget Division officials in Albany did not return a call seeking comment.

The federal government will also consider state and local funding sources as part of its continuing study about extending Metro Rail or somehow enhancing service to Amherst.

“You get higher scoring if the region contributes more and the ability to pay,” Minkel said.

For now, the NFTA is pushing its Albany lobbyists to make the case for more operating assistance in the next budget session. But Minkel said that more work lies ahead in educating legislators and pressing for changes in the funding formula – especially in light of the federal government’s new warning signals.

“This has been an education process, but it’s complicated – educating the Western New York delegation and Albany,” she said. “I think we need to continue that.”