DOT Finance

Standardizing Transit Funding

Transit capital projects should receive federal funds proportional to their merit.

There’s been a lot of talk in transportation circles recently about ensuring that the federal commitment to transit projects is as strong as that to the national highway program. Such a policy change would require a sea change in Washington, principally because it would necessitate a radical transformation of the transportation legislation, which defines how funding is distributed. In addition to more funding allocated to new corridors in general, the federal government must reform the manner in which it determines its share of total construction costs.

Highway funds are distributed with an 80% federal share of construction costs on new roads projects. Gas tax revenues go to the states based on a number of factors including population and road network length; states are required to write up five-year transportation improvement plans to quantify how that money will be spent. In truth, though, states have the ability to invest more in highways than is guaranteed through than 80% share. States have their own gas taxes from which they cull money to use on individual projects, and tolling is used by a number of agencies to raise independent funds for road maintenance and construction. It is a generalization, in other words, to say that the 80% number defines all federal roads expenditures, because there simply isn’t enough money going around to pay for all possible transportation needs.

Most transit funding from Washington comes in the form of standardized “formula” grants that go to cities largely based on population and transit usage. Yet these “capital” funds are rarely used to pay for new transit corridors; rather, most of the money goes towards expenses such as new vehicles, maintenance facilities, or replacement track. Rather, the competitive New Starts grant program — at about $1.5 billion allocated a year — represents the major federal contribution for new transit lines.

Though the transportation legislation officially allows transit agencies to apply for New Starts funds that cover up to 80% of construction costs, the same legislation also points out that the federal government looks favorably on agencies that demand less of Washington. Of the dozens of corridors being built today in the United States, only two — the Mid-Jordan LRT line and the Weber County commuter rail line, both in Salt Lake City — have such strong federal support. Every other project has a federal commitment of 60% or less, depending on the involvement of local governments and agencies.

The problem with this system isn’t necessarily the fact that most transit lines require at least a 50% local funding commitment to be built. Rather, the fundamental trouble is that the federal government pays varying amounts for similar projects in different cities: the relative value of a project has no role in determining the federal government’s share of funding. There is also an unsaid rule enforced by DOT that requires more expensive projects, no matter their benefits, to receive a lower relative federal share of costs. The argument goes that Washington needs to distribute funds throughout the country, and therefore it shouldn’t have to commit too much to any single city’s project.

As a result, projects like Seattle’s $1.9 billion University Link LRT only had a 43% construction cost commitment from Washington, D.C., while Salt Lake City’s $535 million Mid-Jordan LRT had an 80% federal funding share. The former is expected to serve 40,200 daily riders by 2030 ($47,000 total/rider); the latter, 9,500 ($56,000 total/rider). There is no DOT rule explaining why the national government should pay $45,000 per rider in Salt Lake but only $20,000 per rider in Seattle.

Cities with transit systems supported by more politically powerful legislators can often expect a higher federal share of costs, even if their projects are less worthy of funds. Some cities, benefiting from a larger share of federal funds, can spread their own tax revenues across a larger number of projects, while other regions, spending a higher percentage of project costs, are unable to invest in multiple corridors. This mess needs to be cleared up.

Below, I compare the five projects recommended for New Starts funding in FY 2010. Together, the federal government has committed a total of $4 billion to these projects, with $3 billion going to the ARC tunnel between Northern New Jersey and Manhattan alone. These funds will be distributed throughout the projects’ respective construction periods. The share of costs paid by the federal government is based on arbitrary decisions by local authorities, in cooperation with the DOT.

I’ve compared these expenditures with three potential alternatives, based on more objective criteria:

  • Qualified projects funded at 80% federal share: If a project meets the required (“Medium”) New Start ratings, the federal government simply chips in 80% of the construction cost. This formula doesn’t account for relative differences between proposed projects and rewards any project that meets basic requirements. This would cost Washington $8.6 billion for the projects approved for New Starts funding in FY 2010.
  • Qualified projects funded at $25,000 federal dollars per projected future daily boarding: This formula would reward projects that serve the most people per project cost. It doesn’t account for travel time benefits, new riders, environmental impact, or development around lines. This would cost Washington $8.2 billion for these projects.
  • Qualified projects funded at $60,000 federal dollars per projected daily travel time benefit hour: This formula would reward projects that do most to reduce commute times, and by extension measures riders (and new riders) per route mile and cost. (If the ARC Tunnel has a 104,000-hour travel time benefit, that means that once the tunnel opens, its users will collectively save 104,000 hours every weekday on their commutes compared to today.) This system doesn’t account for environmental impact or development around lines. This would cost Washington $7.7 billion for these projects.


New Starts – Recommended for FFGA in FY 2010
Project (riders/wkdy travel time benefits (TTB))
Total Cost Existing Fed Share*
Proposed Fed Share: 80%
Proposed Fed Share: $25k/rider
Proposed Fed Share: $60k/TTB h
Orlando, FL – Central Florida CR (7.4 k/5.1 kh) $356 m $178 m
$285 m $185 m
$306 m
NYC, NY – ARC CR (254.2 k/104 kh) $8.7 b $3.0 b
$7.0 b $6.4 b
$6.2 b
Sacramento, CA – South LRT II (10 k/2.3 kh) $270 m $135 m
$216 m $250 m
$138 m
Houston, TX – North LRT (29 k/11.1 kh) $677 m $332 m
$542 m $677 b**
$666 m
Houston, TX – Southeast LRT (28.7 k/7 kh) $681 m $334 m
$545 m $681 m**
$420 m
Totals $4.0 b
$8.6 b
$8.2 b
$7.7 b

* This refers to the New Starts share; excludes highway transfer flexible funds and other federal transportation dollars that states may use to fund transit expansion.
** Federal share goes over projected cost, so Washington would cover entire cost.


Reflexively, a blanket 80% federal share for new transit projects, as long as they meet New Starts requirements, may seem acceptable because that’s the way highway projects are currently funded. But the problem with that system is that it provides little incentive for local authorities to improve a project’s design once it has met federal guidelines. It funds projects — some very important, others marginally necessary — unselectively, and that’s problematic if we want our national transportation system to be improved for the purpose of achieving specific outcomes. Specifically, we want to move more people via public transportation and encourage transit-oriented development.

On the other hand, funding projects based on their anticipated ridership and travel time savings would be more effective. I’ve highlighted potential rates above — at $25,000 per anticipated rider (in 2030), or at $60,000 per weekday travel time benefit hour. I chose these rates with an interest in roughly doubling transit funding overall, but there’s no reason, for instance, that the DOT couldn’t choose to fund projects at a rate of $30,000 per rider or $40,000 per travel time benefit hour. These guidelines could be adjusted up or down depending on the amount of funds made available for transit expansion by the Congress.

Some combination of the travel time benefit calculation and additional points gained based on environmental impact and transit-oriented development should be used to determine the federal share of a new transit construction project. Both small and large projects should be judged based on these criteria, with an eye towards associating federal funding shares with objective measures of project desirability. The rather indiscriminate manner in which some cities pay more than others for similar projects needs to come to an end.


For further information, the following table provides similar information about all the other projects currently receiving New Starts funding and demonstrates the funding commitment that would have been necessary from the federal government if another system by which to award funds had been used. I could not find all of the relevant information about travel time benefits for older projects, so that information is not complete below. If implemented, increasing the federal share to a blanket 80% or paying out $25,000 per rider would have roughly doubled New Starts expenditures, from $11.4 billion to $23.5 or $21 billion, respectively, over the construction period of these projects.


New Starts – Currently Receiving FFGA
Project (riders/wkdy travel time benefits) *** Total Cost Existing Fed Share*
Proposed Fed Share: 80% Proposed Fed Share: $25k/rider Proposed Fed Share: $60k/TTB h
Phoenix, AZ – Central LRT (49.9 k/15.3 kh) $1.4 b $587 m
$1.1 b $1.2 b
$918 m
L.A., CA – Gold LRT (23 k) $899 m $491 m
$719 m $575 m
Denver, CO – Southeast LRT (38.1 k) $879 m $525 m
$703 m $879 m**
Denver, CO – West LRT (29.7 k/5.7 kh) $710 m $309 m
$568 m $710 m**
$342 m
DC – Largo Metro (20 k) $607 m $364 m
$486 m $500 m
Minneapolis, MN – Northstar CR (5.9 k) $317 m $157 m
$254 m $148 m
NJ – Hudson-Bergen LRT (38.2 k) $1.2 b $500 m
$960 m $955 m
NYC, NY – LIRR East Side (167.3 k/139.6 kh) $7.4 b $2.6 b
$5.9 b $4.2 b
$7.4 b**
NYC, NY – 2nd Ave Subway (202 k/63.6 kh) $4.9 b $1.3 b
$3.9 b $4.9 b**
$3.8 b
Portland, OR – Green LRT (46.5 k/7.7 kh) $576 m $345 m
$461 m $576 m** (100%) $462 m (80%)
Pittsburgh, PA – North LRT (14.3 k/4.2 kh) $435 m $236 m
$348 m $358 m
$252 m
Dallas, TX – NW/SE LRT (45.9 k/13.2 kh) $1.4 b $700 m
$1.1 b $1.1 b
$792 m
SLC, UT – Mid-Jordan LRT (9.5 k) $535 m $428 m
$428 m $238 m
SLC, UT – Weber CR (11.8 k/6.4 kh) $612 m $489 m
$489 m $295 m
$384 m
Norfolk, VA – LRT (7.1 k) $232 m $128 m
$186 m $178 m
DC – Dulles Metro (85.7 k) $3.1 b $900 m
$2.5 b $2.1 b
Seattle, WA – Central LRT (42.5 k) $2.4 b $500 m
$1.9 b $1.1 b (46%)
Seattle, WA – University LRT (40.2 k/14.5 kh) $1.9 b $813 m
$1.5 b $1 b
$870 m
Totals $11.4 b
$23.5 b
$21 b

* This refers to the New Starts share; excludes highway transfer flexible funds, etc.
** Cost goes over, so feds would cover entire cost
*** Did not include Ravenswood Line Extension project in Chicago because a large percentage of its funding comes from fixed guideway modernization funds, and it would be hard to argue that it’s a comparable “new” corridor.

11 replies on “Standardizing Transit Funding”

Excellent summary of the problem. I’d like to see more commentary on how the different criteria you mention should be weighted. Ridership estimation, in particular, is so speculative, and so frequently wrong, that I wonder if we’d do better to focus more on travel time savings and other directly measurable benefits of the project.

Weighting TOD potential is also sensible, although this makes explicit the political reality that rail transit is built mostly for new residents, not existing ones. We may want be be careful about creating a situation where entirely built-out very dense corridors (Second Avenue Subway, NYC; Geary Corridor, San Francisco) would suffer just because they lack many developable parcels.

Simply removing the de facto cap on big projects would restore much fairness to the distribution of funds.

Let me give an explicit, partisan, and historical rewrite of Yonah’s prose above. Since 1980 and the election of the Reagan Republicans, continuing under Clinton when the House was controlled by the Gingrich Republicans, and especially for the past 8 years under the Bushies, our national transportation policy has been controlled by ideologues who hate cities. They hate the people who live in big cities (disproportionately, cities are home to gays, Jews, blacks, Hispanics, Asians, immigrants, highly educated professionals, and Democrats). And they hate the notion of government doing good things for the people.

As a result, the funding formulas have been skewed. And to the extent that subjective factors may have come into play, big cities — and perhaps big Democratic states — have been passed over.

As I understand it, until a recent change, ridership projections had to be ‘stand alone’ on any given route, with no credit for connectivity to a larger system. So a city with a couple of routes to downtown, say, and the big hospital on one route and the junior college campus on the other, when applying for grant for a new line passing the university and museum could not calculate any benefit coming added traffic on the hospital line or the junior college line for riders expected to use them to travel to the university or the museum. In this way, cities trying to build systems were at best no better off than newbies wanting their first lone route to serve downtown.

Real justice would be to go back and ‘uncap’ every project, and give credit to future projects for the ones that had been penalized. So that L.A., for example, would get the federal funds it should have received for the Gold Line extension to be used on the next such project. But I know. We are supposed to look forward, and ignore the crimes of the recent past. That does not mean we must forget them.

There is just so much to say about this subject. Because big projects are ‘capped,’ they are under great pressure to cut costs. Inevitably, this means they are less useful than if the funding had been fair.

Jersey Transit’s new Hudson River Tunnel is designed knowing that the feds will only pay $3 billion. Whether it connects to other lines now or in the future is not compelling. The cap determines how much will be spent and what it will get us, or not get.

So the cap means that most really big projects in the biggest cities will not be very good, or as good as if fair share funding had been possible.

In this way, the cities are penalized, and the projects are disappointing. They thus serve as examples to ‘prove’ the ideological claim that government can’t do anything right and that transit spending is always prone to major and wasteful mistakes.

Up to 80% per project:
* up to 40% based on ridership
* up to 40% based on congestion relief
* up to 40% based on petroleum savings

Individual pools of funds. Half of the funds go to 40% funding the top ranked projects, the other half to funding the next in line at 20%. A project that would qualify for over 80% gets “its” funding from the pools that it ranks most highly for, and in the other categories, projects shift up to suit.

Many good points here – it is a complex (and therefor political) task to determine what the best project is.

Also to be considered is not simply ridership, but passenger miles. A rider taking a 100 mile commuter train is not the same as a half a mile on a streetcar. And of course both have very different sprawl implications.

Another consideration is projects that will improve the financial efficiency of the system. For instance if we fund automatic train control on New York City subways, it won’t have any effect on ridership, but will improve the financial performance of the system considerably (perhaps allowing for additional service, with *will* have an effect on ridership). Double-deck commuter cars are another example of a cost savings from a capital investment and bus rapid transit may be too, if busses run faster (ie, it takes less of them and less drivers to transport the same ridership).

Woody makes a great comment in “post 3”, regarding the aspect of keeping projects cheaper, because they are getting less federal funding and in the end getting short changed and once again showing the dysfunctionality of government.

A perfect example, is the proposed Urban Ring in Boston. Phase II is BRT and the MBTA and EOT has already stopped mentioning Phase III (heavy rail). This line clearly needs to be heavy rail, due to the immense congestion in the central tunnels, but because the boring process etc… for a heavy rail line is so expensive, the cheaper and worse alternative is being pushed (BRT), because the funding isn’t there; not to mention the EOT/MBTA obsession with BRT.

Building the proper, more efficient and larger long-term benefit infrastructure/transit project in a dense urban area will always cost more, but because of the outdated funding mechanism, cheaper alternatives will continue to be pushed and in the end, be a waste of money.

I also have a problem with development based funding. Another Boston example, is the completely falsified development assessments created by the EOT/MBTA regarding construction along the Silver Line. These figures are open to a large degree of falsification and exaggeration. Silver Line Phase I, is nothing more than a bus running on streets, in already dense urban areas, yet there is supposedly millions of dollars of development taking place because of the Silver Line Phase I. Just because something is built near a bus line, doesn’t mean it’s transit based development, especially when the area is already very dense.

Because of falsifications in facts like these, that is why I am extremely wary of funding based on potential development-based funding.

It’s hard to quantify the number of hours saved. People choose where to live and where to work in part based on the commute. Ironically, improving transit can actually increase commute length, since it’ll induce people to drive less and take more transit. Transit commute times are consistently about twice those of cars, presumably because driving is more taxing than sitting in a train. By this logic the best way of reducing commute length is to tear out all infrastructure for mechanized transportation: because walking is physically exerting, most people will quickly rearrange their commutes to be under 10-15 minutes…

Travel time savings works better for high speed rail but would not work for streetcar projects. Streetcars go slowly through very dense areas so the time “saved” by the Portland streetcar could actually be negative. In contrast, putting a BRT system along a freeway HOT lane could “save” more time, but is likely to have negligable effect on development patterns.

Considering the New Starts funding formula already takes into account development, travel time savings, new riders and other factors, a blended formula seems like it would work the best. It may be better to try to optimize the formula than to rely on a single number that may exclude some very worthy projects.

Streetcars can produce time-savings with low-floor platforms in a transit-dependent neighborhood with lots of disabled persons. Even low-floor hybrid buses take time to load passengers, but if trolleys, with designated, though frequent stations, have the proper platforms to quickly load passengers, they can certainly save time.

What about standardizing and modularizing the rail right-of-way, vehicles, stations and other components into something mass-produceable??!!

It seems outrageous to me that every city I travel to has custom rolling stock, stations, signage and platforms. Some even have custom gauges (BART). What ever happened to the lessons learned from the venerable PCC streetcar? Make the same vehicle and rail that every metropolitan are can share, thus reducing costs dramatically!

While at it, modularize and standardize station components as well.

One common standard for Long Range HSR (Maglev?), another for commuter rail (NJ Transit Overhead Catenary?/ Diesel Electric), and if needed another for inner-city transit (Streetcar or High Platform NY-Subway Style).

Then the major industrial vehicle builders (Bombardier, GM, Breda…) could compete on the same basic design standards and mass-produce for multiple customers. In addition, a shrinking system could sell cars to a growing one.

Why is this not done?


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