The San Francisco Municipal Transportation Agency received federal approval of an agreement dedicating $942.2 million in federal funds to the Central Subway Project.

The agreement finalizes the financing for extending Muni Metro’s T Third Line through South of Market, Union Square and Chinatown and is the latest in a series of federal, state and local approvals.

U.S. Secretary of Transportation Ray LaHood, Democratic Leader Nancy Pelosi, U.S. Senator Dianne Feinstein, Congresswoman Jackie Speier, Federal Transit Administration (FTA) Administrator Peter Rogoff, Board of Supervisors President David Chiu and other federal, state and local officials joined San Francisco Mayor Edwin Lee at a ceremony at the future site of the Central Subway’s Union Square/Market Street Station to announce the approval of the New Starts funds.

“This historic investment in San Francisco’s modern public transportation system will not only connect our city’s diverse neighborhoods and create thousands of jobs today, but it will vastly improve our transit system for our city’s growing population and workforce,” said Mayor Lee.

“By extending the T Third Line through SoMa, Union Square and Chinatown, we will connect major job, retail and cultural centers to rapid transit and speed up transportation through two of the city’s most congested corridors,” said Board President Chiu. “The Central Subway is an essential addition to our local transit network. We look forward to realizing the decades-long vision of bringing fast, efficient transit to the 4th and Stockton corridors.”

The Central Subway’s Full Funding Grant Agreement (FFGA) was approved by FTA Administrator Peter Rogoff on October 11. The investment will help fund construction of the subway tunnels, subway stations, surface-level station, train tracks and operating systems that make up this critical transit extension. New light-rail vehicles, utility relocation and project design, planning and administration are also included in the total project cost, to be financed in large part by New Starts.

New Starts contributed $92.4 million to the Central Subway Project to date. The remaining $849.9 million will be distributed in annual allocations as the project progresses. The second phase of the two-phase Third Street Light Rail Project, the Central Subway is expected to cost about $1.6 billion, with the federal government contributing close to $1 billion and state and local funding sources providing the remaining amount. Combined, the SFMTA will receive 50 percent of the funding for Phases 1 and 2 of the Third Street Light Rail Project from federal sources

The new T-Third Light Rail extension, part of the San Francisco Municipal Transportation Agency’s (MTA) Central Subway project, will run from the downtown business district north to Chinatown along one of the city’s most heavily-traveled corridors. Once completed, it will improve transit options between the Financial District and Union Square, while connecting Chinatown with existing Bay Area Rapid Transit (BART) rail service, Caltrain and other transportation services. According to the MTA, project construction is expected to create about 1,000 jobs by the end of this year, with many more jobs to follow as tunnel construction gets under way in 2013.

Federal funding for the project is provided to the San Francisco MTA through FTA’s Capital Investment Program (New Starts). The $1.6 billion project will extend Muni light rail service by 1.7 miles of the T-Third line from the 4th Street Caltrain Station to Chinatown and includes construction of four new stations, three of them underground. The first phase of the T-Third Street light rail line went into service in 2007. Once the extension opens, the projected ridership along the entire 6.8-mile T-Third line is estimated to be 43,700 daily boardings per weekday, the highest ridership in the system.