US Government Plans Overhaul of New Start Funding Guidelines, Reducing Importance of Cost-Effectiveness

» Federal Transit Administration intends to expand consideration of economic development and ecological benefits.

After years of criticism from politicians, transportation experts, and local officials, the federal government has reversed course: it will eliminate a policy-making rule that gives projects’ “cost-effectiveness” primacy when choosing how to distribute transit funds. Once the shift has undergone an internal review and been submitted to public comment, the Department of Transportation will give equal weight to livability issues.

It’s a valuable change, but one that won’t do anything to solve the funding woes of transportation agencies around the country.

In 2005, the Bush Administration decided to bar funding for any New Start major transit capital project that did not meet the “medium” rating (currently $24) on the cost-effectiveness index, which measures how much a project will cost per total hours saved daily by the estimated number of riders. As I put it a few months ago when discussing the planned Southwest Minneapolis Transitway,

The cost-benefit analysis is heavily biased towards the number of annual hours commuters will save by using the new transit system. This means that people who already have longer commutes are seen as more valuable for the FTA than those who choose to live in in-town locations with shorter distances between their residences and workplaces. As a result, transit networks are encouraged to extend out into the suburbs, rather than be densified and reinforced downtown.

In retrospect, this argument gets it about half right. Urban corridors with very high densities and reliance on existing transit services do just fine on the cost-effectiveness index, as demonstrated by high marks given to New York’s Second Avenue Subway, San Francisco’s Central Subway, and Seattle’s University Link, whatever their individual merits. Each of these projects would come at a huge cost, but the FTA sees them as worthwhile because they’re replacing slow overloaded bus trips or, in the case of New York, massively reducing congestion on another rail line.

Where the cost-effectiveness index goes really wrong is in medium-density cities hoping to cash in on transit as a tool for increasing density and developing a transit-friendly environment. As demonstrated by the Minneapolis example, the index basically forces transit authorities responsible for choosing routes to pick less useful corridors within the inner-city in order to speed commutes from the suburbs. It also requires agencies to reduce spending on lines in order to meet the arbitrary limit imposed by the index, no matter the willingness of local taxpayers to contribute a higher percentage of a project’s construction costs.

House Transportation and Infrastructure Chairman James Oberstar (D-MN) threatened a year ago that he would force a change into the law to reflect his concerns about the Minneapolis projects, among others, if Secretary of Transportation Ray LaHood didn’t change his department’s policy. Hence, today’s action, announced by Mr. LaHood at the annual meeting of the Transportation Research Board, wasn’t surprising.

Indeed, the decision to reduce the influence of the cost-effectiveness index has been a long time coming; the recognition of livability issues such as economic development and environmental improvement is also a continuation of a theme that President Obama’s Departments of Transportation and Housing and Urban Development have been discussing since March of last year. These livability issues are already evaluated by the New Starts process, but their influence in the process is relatively minor.

The rule change is an important one that heralds more thoughtful consideration by the government about how it wants to distribute its money. Nevertheless, the transformation in policy is no panacea and does nothing to resolve the relative dearth of money for U.S. transit in general, as indicated by the large number of projects lining up for both New Start and fixed-guideway modernization funds, most of which ultimately won’t be satisfied with grants.

In her story on Mr. LaHood’s announcement today, Elana Schor quotes Representative Earl Blumenauer (D-OR), who argues that “Rescinding this Bush administration restriction will unleash funding for important transportation projects across the nation… This means quicker and better funding for streetcars, light rail, and bus projects.”

The problem is that the change does nothing of the sort. The cost-effectiveness guidelines do prevent some projects from being built — and, more problematically, reduce the quality of those that are constructed — but they are not the primary culprits in the prevention of a massive investment in new transit systems. Rather, there is simply not enough money going around to pay for all of the bus and rail lines cities would like to build, a disappointment that won’t be cured with this policy. This problem means that some projects that would have been accepted for funding under the cost-effectiveness rules may well now lose their status and be replaced by other projects that are considered more livable. In some ways, this is a worthwhile change, but many American communities are still going to be short shifted.

42 Comments | Leave a Reply »
  • Yonah,
    Sure we need more investment in transit. That is related but sepate issue. This legislation is important because will force regions seriously consider how they can maximize the return on their transit investment in terms of TOD and livability.

  • Kyle

    Maybe people will stop using the cost-effectiveness excuse to push BRT projects, instead of real rapid transit.

  • jon

    what specific transit projects were killed/downscaled because of this rule?

  • Jon –

    The North Carolina Triangle’s planned Regional Rail system was stuck on the chopping block; so was Miami’s north MetroRail corridor and Hartford’s busway to New Britain. (One might argue that they all needed significantly more local support, but officially they died because of the cost-effectiveness index.) Several of the commenters in the previous post implied that the quality of Chicago’s Brown Line reconstruction declined significantly because of the need to adhere to the original budget — this is not a “direct” result of the cost-effectiveness problem, but a side-effect.

  • Winston

    It seems that unless congress is willing to vote for more transit funding or unless another metric is introduced that an objective (if flawed) measure will be replaced by giving money to the projects that have the most powerful representation in congress. Should be good news for transit in West Virginia.

  • Gordy

    You can fiddle around with the proximate causes (funding formulas, etc.) all you like, but the ultimate reason why transit has withered away to such a small component of our transportation system and is never likely to recover is that it just isn’t consistent with the kind of lifestyle most Americans prefer and are able to afford.

  • AndyDuncan

    @Gordy: Have you been to Los Angeles? We are the 12 million person sprawling suburban hell that is the logical extension of your line of thinking. The growing pains that LA is experiencing, and will continue to experience, are a direct result of this sort of abusive love affair with the automobile. Reconciling 60 years of auto-focused growth with the inevitable productivity-sucking congestion is truly daunting. Please, look upon us as a cautionary tale. If you don’t want your city to look like Los Angeles, fund transit, encourage density, and quit subsidizing exurban sprawl in the name of The American Dream.

  • Gordy

    AndyDuncan,

    I’d much rather live in Los Angeles than New York. But my point isn’t about my personal lifestyle preferences or yours, but about the lifestyle preferences of Americans in general. And those preferences have for a long time overwhelmingly favored sprawly land-use and car-based transportation over dense land-use and transit-based transportation.

  • Winston

    Andy,

    I have to point out here that L.A. is actually very dense. The problem that L.A. faces is that it is too dense for an auto based transportation system to work well but until recently much of the city was too sprawling for transit to work well.

  • You’re absolutely correct about the funding issue Yonah. By last count early last year, there were some $250B worth of new transit projects in the planning and idea stage while only ~$8B was available in the 6 year transpo bill.

    http://www.reconnectingamerica.org/public/reports/375

  • Okay, so more projects will be considered, but just how much funding is available in total for mass transit anyways?

  • jon

    thanks yonah, i recall hearing of projects that ran into this hurdle, but couldnt think of any off hand.

  • the ultimate reason why transit has withered away to such a small component of our transportation system and is never likely to recover is that it just isn’t consistent with the kind of lifestyle most Americans prefer and are able to afford.

    Surely redlining, the federal-aid highway system, and the taxes on and regulations of railroads have played a role…

    I mean, I can just see what Reason is going to say 50 years from now, when the US has an expansive, all-encompassing, overbuilt public transit system. It’s going to wax poetic about how light rail to the suburbs and HSR to the sticks was exactly what Americans wanted and when you look the right way it’s making money and any other idea about what to do is communism.

  • Where the cost-effectiveness index goes really wrong is…

    …that, like all other commute time indices, it doesn’t capture non-commute time. On average, all groups of people in the world travel 60-90 minutes per day (see review article). Urban transit users spend the bulk of those 60-90 minutes commuting to work – non-work trips they do on foot, traveling very short periods of time. Suburban drivers spend 40-60 minutes commuting to work and the rest driving to the mall.

    At any rate, the fact that 150 years of transportation improvements have not changed travel time suggests that outside a few exceptional cases, such as certain LA exurbs and Staten Island, transportation improvements are unlikely to save people much time in the future.

    More cynically, I suspect one of the reasons for using commute times as a metric instead of the number of passengers is that it gets around popular debate. People can tell if ridership exceeds expectations or falls short, and can compare per-passenger costs around the world with just a few minutes of Googling. They can’t so easily tell if the amount of time saved meets expectations or compare it with the performance of other projects.

  • Adam P

    Even though the funding isn’t there right now, I believe this will still help. When NYC first built the subway, many spots were beings built into low density that would have never passed the cost effectiveness that was in place

  • When NYC first built the subway, its population was growing at a breakneck pace. For example, when the city started building the els through the Queens farmland, Queens was already doubling its population every decade. There was every reason to believe the city would catch up with the subway, which it did.

    You’re also forgetting the els, which were criticized for being too slow. The subway served the need for faster north-south transportation.

  • Yonah, your post suggests that rail transit options from the city to the suburbs are not worthwhile, while such projects give those commuters a CHOICE and thus reducing traffic for all. Is that REALLY what you want to say?

  • I will remain puzzled about this until I see how FTA plans to quantify the new livability measures. They are certainly intrinsically hard to quantify and may turn on very speculative promises about what kinds of development will result.

    More thoughtful negative views from my first few commenters here:

    http://www.humantransit.org/2010/01/big-news-on-us-federal-transit-funding.html

  • Kyle

    The Miami Metro North corridor was dropped because of its unfavourable ratings with the FTA. What are the chances that this line could be rekindled, and brought back as a legitimate project with the new overhauls?

  • Anders

    It’s just a shame it’s too late for Minneapolis. We’ll be feeling the effects of LRT bypassing the Uptown area for decades to come. Prioritizing suburban commuters over urban residents only encourages more sprawl and leaves city-dwellers disproportionately burdened with difficult commutes and limited mobility.

  • Andy K

    In a perfect world, the federal govt. would get out of funding local transport. Why we send $.19/gallon of gas to D. C. only to have it sent back to states is beyond me. This might have made sense to build the interstate system, but now, I’m not so sure.

    Let the locals tax themselves as they see fit to build and fund what they want.

  • AndyDuncan

    But my point isn’t about my personal lifestyle preferences or yours, but about the lifestyle preferences of Americans in general. And those preferences have for a long time overwhelmingly favored sprawly land-use and car-based transportation over dense land-use and transit-based transportation.

    Which is precisely my point. That’s why LA looks like it does today. Los Angeles is the inevitable destination of sprawl-based planning. And the options aren’t LA or NY, visit europe some time, there are plenty of wonderful, dense little towns with populations under 100k.

  • AndyDuncan

    I have to point out here that L.A. is actually very dense. The problem that L.A. faces is that it is too dense for an auto based transportation system to work well but until recently much of the city was too sprawling for transit to work well.

    That’s exactly the “growing pains” I’m referring to. LA is dense on average, but peak density is still relatively low. Instead of growing in specific, transit-serviceable areas, LA is densifying through 2-3 story infill development spread throughout a wide area with nothing other than a (relatively serviceable) bus system to move that many people around. It’s going to get much worse before it gets better. Best case scenario for LA is massive transit investment, relaxed building density codes in specific areas, and a Tokyo-like conglomeration of multiple downtowns.

  • Yonah, none of those projects killed by the cost effectiveness ratings were any good – that kind of proves the other side’s point. Speculative transit lines in areas with little demonstrated ability to generate TOD on other transit lines (Miami); or completely sprawling employment patterns (RTP); or a dead/dying NE city (Hartford) *deserved* to die in favor of better investments like Seattle LRT and others.

    The fact that the formulas apparently favored BRT is due more to bogus research on how many choice commuters will really accept lame BRT service than anything else – it’s not an inherent fault of the idea that we ought to consider the return on investment.

  • Andy Guthrie

    Good post, particularly as regards bad decisions on projects that do get built. Nicollet Ave was always the right routing for the SouthWest Transitway, but was sacrificed on the CEI. I wonder if it’s still possible to revisit the decision. Maybe not, though a Nicollet Ave streetcar continuing to an LRT connection via the Midtown Greenway might be a good local service alternative, and might be a little easier under Small Starts.

    Definitely true about much greater funding needs, though this change may actually free up some money; the transit account of the highway trust actually ran a surplus in several recent years in part due to the CEI’s obstacles in the way of spending even the limited amount of money New Starts gets. In addition, don’t you think better alignment/design/service plan decisions for projects that do get built might help build support for increased funding by way of more unqualified success stories?

    Also, Froggle, I don’t think that’s really what he is saying, just that current practices put too much emphasis on suburb to CBD speed, and very little on urban neighborhood mobility. You can serve both, you just have to plan for some more balance.

  • Allen

    “Yonah, your post suggests that rail transit options from the city to the suburbs are not worthwhile, while such projects give those commuters a CHOICE and thus reducing traffic for all. Is that REALLY what you want to say?”

    @Froggie, LRT project from the city center to a distant burb do not reduce congestion. What they do is shift transit riders from bus to a train. Most riders don’t start making other trips for other things. They can’t. The line doesn’t serve their house and the grocery store. They already have to drive just to get to the train. And at that, as traffic engineers know, the easiest trip to handle is the 20 mile one. You’re not reducing congestion but taking the easiest trip and shifting it to another mode.

    The trick is handling lots of trips in a small local area. That’s something that’s most likely to occur in a dense area. If I understand Yonah’s argument correctly, he’s saying this shift has the potential to encourage more service in these dense areas since it doesn’t have to worry so much about hours / trip.

  • Allen: experience with the Hiawatha LRT line suggests otherwise, that LRT from the city to the burbs does not just shift riders from a bus to a train, but generates new transit riders.

  • eldondre

    Andy K you’re 100% on the money. It makes sense for the federal highway system, it may make sense to pay for intercity rail, but it makes little sense for building transit systems. In the days when Philly, NY, Boston built theirs cities were the main taxing authorities…it’s why they built beautiful bridges, subways, parks, etc. now all the money is funneled through DC which has totally botched the job.

  • Chris Stefan

    An indication of how screwy the CEI metric ends up being is to look at the University Link project in Seattle. With the alignment being built it received one of the highest ratings from the FTA ever. However add in the First Hill station and the project risks not even getting a “Medium” rating.

    True the First Hill station would have added cost and a lot of risk due to being a deep mined station however it would have added a lot of riders too.

    For those who care the SEIS is at: http://www.soundtransit.org/x3009.xml

  • DBX

    They have got to go back and revisit the Minneapolis light rail decision, or it will be an operational millstone around Metro Transit’s neck. Running express buses on Excelsior Boulevard is cheap. Being stuck with bus service through Uptown is going to be an unnecessary headache, especially when you look at how many riders this will cost them. It’s not even good for the suburbs, whose access to the Uptown area and to southwest Minneapolis in general, and vice versa (from the standpoint of a labor pool) is compromised by this decision. It’s perfectly easy to drive between Eden Prairie and downtown Minneapolis along the currently proposed rail route. Not so on the Uptown route where the rail would solve some big problems.

  • Thad

    As someone who lives in Miami and knows where the North Corridor would run, I can say that it was put on hold because of the cost-effectiveness. It would have run along 27th Avenue in a dense area and relieve the busiest bus route (27). It would also connect the stadium, Miami Dade College North Campus (one of the largest), and would run to the county line where Broward County Buses could feed into. It was the original alignment for the metrorail in the first place, but politics changed the routing at the last minute to serve Hialeah. There are alot of transit dependent people living along the corridor and it is a critical area.

    Building elevated concrete rail viaducts in a heavily built-up area is going to be expensive if you want it to be effective.

  • Yonah, your post suggests that rail transit options from the city to the suburbs are not worthwhile, while such projects give those commuters a CHOICE and thus reducing traffic for all.

    Such projects reduce traffic by a little bit. Urban projects, which can get several times as many riders per dollar of construction cost, reduce traffic by much more.

    There’s a stereotype in the US that people in the cities don’t drive. This is only true in the ghetto and in a few gentrified areas like Manhattan. Inner-city projects can and do reduce traffic – see successes in Calgary and to a lesser extent Phoenix, the LA Blue Line, and Charlotte.

  • Nathanael

    Can’t find a single thing to disagree with in this post. Nice summary of the situation.

  • I’ve sat on multiple in on New Start review groups, and I actually don’t think there is anything new in these criteria. Proposers have been using these rationales to justify transit for a really long time, and cost-effectiveness criteria have long included the very factors that LaHood talked about. I don’t see any reason why this move will necessarily pry more money out of transit overall at the Federal level–it may change how money is allocated in transit, in a way that, as Tim Gunn would say, concerns me. I know LaHood is a transit guy, but he’s still got rural legislators to deal with, and I doubt he’s going to win money based on the argument that transit makes cities livable with them. Rather than blither on here, I’ll blither on on my own blog.

  • DBX

    Talking on the point that people in cities drive, here in Chicago I live five blocks from the Lake in a neighborhood whose population density is about 40,000 to the square mile, and it is much faster for me to drive to work than to take transit even though my commute follows the main transit routes. That’s simply a ridiculous situation. But when the Red Line averages about 15 miles per hour and Lake Shore Drive rarely backs up except during the worst of the rush, that’s the situation we’re in.

    We’ve never had the funding to upgrade the existing system to the extent needed, and the people in charge of the CTA simply don’t seem to have ever seen the need for speed, punting on things such as straightening out the double curve at Sheridan and the 10mph curve on the Montrose Avenue bridge, or closing stations that are two blocks from the next station. Transit use and viability in low-rise and lower-density Washington DC is now arguably better than Chicago in large part because the speed competes directly with driving.

    And the only zoning department that really got it with regard to urban density and getting people to live closer in lieu of faster transit was Daley senior’s, which made all the changes in the early 1970s that enabled the near north and neat south high rise condo booms.

  • M1EK January 14th, 2010 at 13:00

    … Speculative transit lines in areas with little demonstrated ability to generate TOD on other transit lines …

    The fact that the formulas apparently favored BRT is due more to bogus research on how many choice commuters will really accept lame BRT service than anything else – it’s not an inherent fault of the idea that we ought to consider the return on investment.

    That is a bizarre framing of the issue. The question is why total saving of commute time is considered an especially valuable return on investment, and development, energy efficiency, or emissions reductions only merit consideration if that first priority of saving commute time is met.

  • Bruce, because transportation dollars should be spent on transportation – and this is not a radical idea. When urban drivers’ dollars are spent subsidizing suburban sprawl via highways that mainly stimulate development, it’s a bad thing – just as it’s a bad thing when transit dollars are spent to stimulate development instead of improving mobility.

  • @Kyle & @Thad

    Same thing happened in San Juan. The unfinished system is a disaster when it comes to ridership!

  • Erik H.

    In Portland “livability” decisions has resulted in shifting regional transportation dollars away from the region, and placed it all on local Portland circulator streetcar systems that benefit developers. The losers have been regional bus riders who see their service disinvested in, and service cut. 1/3rd of Portland’s bus fleet is at or near 20 years old – Portland simply turns down federal funding for new buses so we can have nice streetcars that serve very few people – and most of whom hardly need a fare free ride.

    The bus system is overloaded and overworked; the bus route that runs into Southwest Portland and its suburbs is crowded even during off-hours and weekeneds; the express bus is even more crowded when it runs (weekday rushhours). Yet we have a shiny new “commuter rail” line that is empty during the few rush hours that it runs.

  • Rodrigo

    In Miami, I think it’d the west Metrorail line to Florida International University (FIU) is more important than the North line because the west line goes through some very dense western suburban areas, and the terminus would be FIU, one of the country’s largest universities.

  • […] money for everything from light rail to subways to bus rapid transit. Both StreetsblogDC and The Transport Politic go into this in a lot more […]

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