Obama Administration May Loosen or Eliminate Cost-Effectiveness Index for New Start Projects; Twin Cities are hopeful that money will flow a bit more easily for the Central Corridor
SAFETEA-LU (The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users), the national transportation law, will expire on September 30th, four years after it was put into effect. As a result, the U.S. Congress will spend much of the next few months debating and rewriting the transportation bill in order to pay for highway and transit projects around the country. The new law will be in effect until 2013, so congressional decisions on the issue – especially in determining the percentage of funds dedicated by transportation mode – matter quite a bit.
SAFETEA-LU was a $284 billion law; its replacement is likely to be far bigger because of inflation and today’s widespread desire to improve the nation’s infrastructure, a goal of Republicans and Democrats alike. Under transit-friendly Democratic control, Congress and President Obama may choose to take advantage of the renewal of this legislation to decrease highways’ relative share of the bill, and increase that of rail and transit. A full discussion of SAFETEA-LU and the implications of the renewal of the transportation legislation will be here on the transport politic in the coming days.
But a story by Minnesota Public Radio last week describes one issue that is likely to change, perhaps even before the transportation law is renewed: the ease of receiving funds from the New Start program, which distributes funds to transit agencies for the construction of new fixed-guideway rail or bus lines.
There is increasing evidence that James Oberstar (D-MN), the chair of the House Transportation and Infrastructure committee (which will be shepherding the new bill through one side of Congress) will be attempting to reduce the current cost-effectiveness measures that act as an obstruction to building new transit projects in the United States. Currently, the Federal Transit Administration uses a set metric – mostly based on expected ridership increases and project costs – to determine which transit projects deserve a federal contribution. Basically, transit agencies have to meet a target of $24.41 in capital costs for every new projected rider for a specific project if they want federal funding.
There are a couple problems with this system: one, it doesn’t take into much account other issues such as economic development, preference for rail over existing bus services, and environmental improvements; and two, highways do not have to go through this tough standards process at all. Yet, the cost-effectiveness formula allows the FTA to weed out lower-performing projects and provides it a relatively objective measure by which to decide how to distribute its relatively limited funds. So it plays a not-negligible role.
In the MPR story, Mr. Oberstar is quoted in reference to the cost-effectiveness index, which is currently limiting the full development of the Central Corridor, which is a proposed light rail line from Minneapolis to St. Paul (map shown below):
“As soon as there is a Federal Transit Administrator I will encourage that person to, by executive order, erase it from the books. And if they don’t we’ll do that in legislation.”
The limitations of the cost-effectiveness index have been known for years; it did a lot to hold up the development of the Dulles Metrorail project, whose tunnel element through Tysons Corner was slashed once the FTA decided that it was too expensive to merit being built. The rather obvious improvements – notably in the form of pedestrian-friendly urbanism – that would have come to the areas around stations were they built underground, rather than on an elevated guideway as is now planned, were not considered by the FTA because of its single-minded obsession with “cost-effectiveness.”
The cost-effectiveness metric is not defined in the transportation law, but its use could be altered by the renewed legislation.
Mr. Oberstar’s seemingly persistent desire to remove the cost-effectiveness guidelines makes some sense, but only in the context of vastly increased funding for transit overall. For the most part, highway funds are distributed using a population-based formula to states, and then states decide how to allocate the funding to specific projects. Because most transit agencies operate apart from state budgets, this couldn’t be the solution for resolving how New Start transit projects are funded.
A new system would have to be put into place to arbitrate between the huge demand for funds for new transit systems and the limited resources of the federal government. If the FTA were to no longer make decisions based on cost-effectiveness, how would it determine what systems to fund? Mr. Oberstar should think this over thoroughly before he unilaterally eliminates the cost-effectiveness formula.
Image above: Central Corridor route, from Metropolitan Council
9 replies on “Clues on the Next Transportation Bill – from the Twin Cities”
The flip side of the New Starts problem is the failure of the Federal Government to provide operating funds for existing systems. If existing systems that earn an above average return of operating expenses from the fairbox cannot get operating funds from the Federal Government, as they could before the Gingrich “revolution” why is it that new starts in the sun belt and the sprawl belt can get federal money to initiate new services that won’t recover remotely the same ratio of fare box to operating cost for a few decade?
It seems to me the fact that highway funds are distributed using a population-based formula to states is quite simplistic. Other factors taking into account existing conditions should be taken into consideration.
I am looking forward to reading your discussion of the SAFETEA-LU.
I don’t support eliminating C/C altogether, but two general suggestions could tilt the balance of power to transit vs. freeways:
1.) Force freeway projects to pass a similarly rigorous C/E test (if not eliminate new freeway construction altogether, which is what I’d like to see)
2.) Allow infill/TOD potential to be factored into the existing C/E calculus.
**C/E, not C/C
The problem with throwing money at capital grants is that transit systems have no protection against recessions. Why not (either in addition to or as a substitute for subsidies) grant a tax credit for transit passes, so that transit agencies can finance everything through fares without having to worry about federal approval?
First off, being an Angelino, allz I just want is municipalities to be allowed the choice to spend highway funds on transit projects.
Regarding your post, good job pointing out the controversy at Tysons Corner. It has become the poster-child for the flawed C/E New Starts evaluation. But the New Starts standard pales in comparison to the political hurdles that exist in Northern Virginia.
Simply, any calculation that solely considers capital cost in evaluating the worthiness of 75-100 year transit projects is by definition flawed. A first year Wharton student wouldn’t be able to offer such an analysis as an appropriate way to evaluate a potential investment, yet it is “the Gold Standard” for the federal government. Go figure.
The problem with completely eliminating it all together is that there are plenty of transit agencies and politicians whose pockets are greased with dollars from contractors/developers making most of these decisions. So some standard needs to exist to prevent billion dollar boondoggles.
In the New Starts process there is an evaluation for development potential/projected growth that is factored into the overall evaluation and ultimate FTA ranking. It’s simply not as strongly weighted as C/E.
A multi-dimensional approach would be to fund 40% of a transit project on a competitive basis based on energy savings per dollar invested, 40% on a competitive basis based on transit congestion improvement per dollar invested, and 40% based on state nomination as a priority improvement, and allow any one project to dip into two of the three pots of money.
So, IOW, maintain New Starts funding, at a 40% match level, establish a parallel Energy Independent Transport fund with a 40% match, and a parallel State Strategic Transport priorities fund, with a 40% match. Projects that jump over one bar get 40% funding, projects that jump over two bars get 80% funding.
Michael, transit passes are already tax-free up to $120 per month. This hasn’t helped the New York City Subway, whose monthly transit pass costs $81/month, surpass a farebox recovery ratio of 0.67.
“There are a couple problems with this system: one, it doesn’t take into much account other issues such as economic development, preference for rail over existing bus services, and environmental improvements; and two, highways do not have to go through this tough standards process at all.”
You’re missing the point. The point of the formula has nothing to do with highways. It’s about allocating transit resources. Highways vs transit is a higher level issue. This is about how to allocate the Federal funds in the budget that are for transit projects.
Also, preference for rail over bus is taken into account in the form of ridership.
As for economic development, how would that be measured?
Like I said, overall it’s about prioritizing funds allocated for transit to the projects that will result in the most use. In any given year a limited number of dollars is available. It makes sense to use them on projects that will result in the most trips. Otherwise it’ll become nothing more than a game of ear marks based on political connections giving Fairbanks Alaska a better chance of getting a light rail line funded than Austin or Phoenix.