DOT Finance

For 2011, FTA Shifts Focus Away from Project Cost-Effectiveness Index and Towards Local Financing Commitment

» 2011 Report On Funding Recommendations highlights grants for projects across the country, brings bad news for some cities.

In the federal grants appropriations process, there are clear winners and losers, and the New Starts transit capital program is no exception. The President’s proposed fiscal year 2011 budget included major commitments to funding new rail projects in Denver, Honolulu, Minneapolis, and San Francisco, as well as a new busway in Hartford. But it didn’t provide detailed information about how those projects were chosen, nor which cities lost out in the process.

Fortunately, the Federal Transit Administration released its Annual Report on Funding Recommendations yesterday, replete with evaluations of all of the country’s big public transportation schemes. The FTA’s scores for projects being submitted for federal funding illustrate a change in the way the agency will move forward in choosing which programs will be funded: Instead of focusing on an index of the hours saved by projected passengers to whittle down the number of performing projects, the Department of Transportation has shifted its sights towards rewarding local transit authorities that are well-funded and that commit to sponsoring a larger percentage of a project’s cost.

The overall effect is that the FTA will now be able to fund rail and bus lines that would have been automatically eliminated last year under the cost-effectiveness index, based on travel-time savings, and it will be able to fund a larger number of projects overall because of increasing local contributions.

Yet some cities are in trouble: Sacramento’s second phase of its South Line light rail may not be funded because of a lack of adequate local commitment to public transportation, even though it scores adequately on the cost-effectiveness front.

The report’s introduction in February came unexpectedly early considering the FTA submitted the 2009 version for consideration in May of last year.

Cities that have received a full-funding grant agreement (FFGA), which ensures a stable federal financing source throughout a project’s construction period, scored well on most evaluation points, including local financial commitment and project justification ratings. For the first time since 2005, however, projects that received less than a “medium” score on the cost-effectiveness index moved forward as well. This is a consequence of a policy change announced last month by Secretary of Transportation Ray LaHood that encourages the implementation of transit programs that do more than reduce travel time — as the cost-effectiveness index emphasizes — but also encourage livability through associated development and general lifestyle choices.

Funding for high-expense projects, including Honolulu’s $5.3 billion rail line and the $2.2 billion BART Silicon Valley line, was made possible because of an FTA policy that rewards agencies that agree to finance a high percentage of project costs; the New Starts program will only be asked to pay 29% and 35.9% of costs, respectively, for the lines. It is unclear whether the projects would be moved forward in the process if they were to increase their demand for federal aid. The FTA has the legislative authority to fund up to 80% of costs, but it is limited by a roughly $2 billion annual pot for capital projects.

Orlando’s SunRail system, which first approved approval from the FTA last year, will move forward under the New Starts process with an FFGA despite its medium-low cost-effectiveness rating; the agency changed policy just in time to allow this project to begin construction this year. The extension of BART into Silicon Valley and the Draper light rail line in Salt Lake City similarly received such medium-low cost-effectiveness scores, but each is moving forward into preliminary engineering with FTA support because of higher scores in other categories.

Projects with an expected federal contribution of more than $25 million must receive an overall rating of medium — based on an average of all scores — to move forward with guaranteed money from Washington. Programs with a lower aid demand, such as the Tucson Streetcar and the Stamford Urban Transitway, are exempt from such ratings.

Based on their current scores and their place in the FTA New Starts process timeline, five projects are likely to be awarded FFGAs in next year’s report: Charlotte’s Northeast Corridor light rail, Houston’s University Corridor light rail, the BART Silicon Valley extension, and Portland’s Milwaukie and Columbia River Crossing light rail projects.

Last year, Boston and Miami received major warnings from the FTA because neither city had provided sufficient support for their public transportation networks to guarantee that they would be able to operate new transit capacity effectively. Each received similar warnings this year, and the Miami Orange Line Phase II North Corridor and the Boston Silver Line Phase III will be eliminated from consideration in September unless the agencies produce evidence that they will be able to support the capital costs and operating costs of existing and future transit. Both Miami’s MDT and Boston’s MBTA have been affected by major funding problems in recent years.

But Sacramento’s ambitions for the extension of its South Corridor light rail line have been most severely hit, since the project was moved forward to FFGA status in last year’s report. However, the financial status of the Sacramento Regional Transit District has been degraded significantly in the eyes of the FTA, making the new light rail project unjustifiable. The agency has yet to commit 55% of local capital funds (mostly because of a reduction in aid from the State of California), and the capital plans for the project are optimistic, according to the federal government. The FTA is also concerned about the city’s ability to operate the new line once it is put into operation: with a 6:5 ratio between assets and liabilities, the agency is on shaky grounds, especially since only 68% of operating funds are committed or budgeted for the line and the agency has made optimistic assumptions about projected revenues and operating costs. The fact that it has reduced bus service for three consecutive years certainly doesn’t help matters.

For transit agencies hoping to get a share of federal transit funds, the message is clear: only with a stable, committed financial plan for both capital and operating budgets will the FTA move forward with a New Starts application. Justifiably, the federal government doesn’t want to get into a situation where it is paying to build a project that cannot be operated to its maximum potential.

The growing expectation that localities increase their share of project budgets is unfair, at least compared to the highway program, in which up to 80% of project costs are sponsored by the federal government and no advantage is given to cities that agree to fund less or more locally. But the situation betrays a fundamental fact about transit funding in the United States: there simply is not enough of it. The FTA has a limited amount of money to work with and it can do more by spreading its aid more widely.

There will be no remedy for this scarcity of funds until there is a commitment to increasing the amount of money dedicated to major transit projects in the next transportation bill. That may not be approved until 2011, two years late, because of a Congressional reluctance to move forward with a new revenue source for the program.

Evaluations of and Funding for Projects by U.S. Federal Transit Administration
CityProjectStatusCost (m$ YOE)New Starts Share %Overall RatingCEI
TucsonModern StreetcarFinal Design182.514ExemptExempt
Oakland Oakland Airport ConnectorFinal Design484.15ExemptExempt
San FranciscoCentral SubwayFinal Design1578.360Medium-HighMedium
HartfordHartford-New Britain BuswayFinal Design560.748MediumMedium
StamfordUrban Transitway Phase IIFinal Design48.351ExemptExempt
WilmingtonWilmington-Newark CR ImprovementsFinal Design78.432ExemptExempt
OrlandoSunRailFinal Design356.350MediumMedium-Low
New York CityAccess to the Region's CoreFinal Design870034Medium-HighMedium
ProvidenceSouth County CRFinal Design49.251ExemptExempt
HoustonNorth Corridor LRTFinal Design710.260MediumMedium-High
HoustonSoutheast Corridor LRTFinal Design822.955MediumMedium
SacramentoSouth Corridor Phase 2Preliminary Engineering27050Medium-LowMedium
San JoseSilicon Valley BARTPreliminary Engineering2203.436MediumMedium-Low
DenverEast CorridorPreliminary Engineering171948MediumMedium
DenverGold LinePreliminary Engineering627.625MediumMedium
MiamiOrange Line Phase 2Preliminary Engineering1340.947Medium-LowMedium
HonoluluRail ProjectPreliminary Engineering5057.429MediumMedium
BostonAssembly Sq StationPreliminary Engineering47.752ExemptExempt
BostonSilver Line Phase IIIPreliminary Engineering1696.160Medium-LowMedium
MinneapolisCentral Corridor LRTPreliminary Engineering923.450Medium-HighMedium
CharlotteNortheast Corridor LRTPreliminary Engineering1139.250MediumMedium
PortlandMilwaukie LRTPreliminary Engineering1214.650Medium-HighMedium
HoustonUniversity Corridor LRTPreliminary Engineering1326.750MediumMedium
Salt Lake CityDraper LRTPreliminary Engineering192.980MediumMedium-Low
PortlandColumbia River Crossing LRTPreliminary Engineering829.879MediumMedium
OaklandEast Bay BRTProject Development234.632HighHigh
RiversidePerris Valley CRProject Development232.732Medium-HighMedium
San BernardinoE St sbX BRTProject Development186.739Medium-HighHigh
San FranciscoVan Ness Ave BRTProject Development118.663Medium-HighHigh
Fort CollinsMason Corridor BRTProject Development8280MediumMedium
Roaring ForkValley BRTProject Development4457Medium-HighMedium
Grand RapidsDivision Ave BRTProject Development35.780MediumMedium
New York CityNostrand Ave BRTProject Development39.271Medium-HighHigh
AustinMetroRapid BRTProject Development4780MediumMedium
SeattleWest Seattle BRTProject Development28.475MediumMedium
DenverWest Corridor LRTFFGA709.843
New York CityLIRR East Side AccessFFGA738636
New York City2nd Ave SubwayFFGA4866.627
DallasGreen Line LRTFFGA1406.250
Salt Lake CityMid-Jordan LRTFFGA535.480
Salt Lake CityFrontRunner SouthFFGA611.780
WashingtonSilver LineFFGA3142.529
SeattleUniversity Link LRTFFGA1947.742

Image above: Sacramento South Line Phase II as part of overall network, from Sacramento Regional Transit District

7 replies on “For 2011, FTA Shifts Focus Away from Project Cost-Effectiveness Index and Towards Local Financing Commitment”

Imagine all the new transit projects we’d have under construction right now if Congress would give more money to transit and less to highways. Such a shame…

This is good politics for the Obama administration, but not the best policy. By funding projects with high local matches, the FTA is able to help build more projects and larger systems than if it were to match funds at 80%. However, the amount of money is still the same.

This will help cities and regions able to raise the millions needed to more than match federal funds, but some of the most needed transit projects may be left out due to lack of local funding ability. In the long run, certain cities and regions may be unfairly left out.

The best solution would be to greatly increase the annual budget for transit capital projects. Lets take away funding from military weapons programs and highway projects, and give it to transit. Imagine if every cost-effective transit project got 80% funding from the feds. I know Los Angeles has plenty of plans in the future which could be funded NOW if that sort of match was available.

I do agree with the previous letter that we need to not only shift funding away from things as the military and new roads but also create a new funding source to the tune $8-9 billion a year to help the transit agencies from being forced to raise fares and cut service. Otherwise I fear we coud see a repeat episode of what happened to the passenger train/urban rail transit industry in the 1930’s-’60’s when they were privatly owned and funded and had to compete against automobiles and busses that ran on government subsidised road infrastructure. Also I feel that there should be a national law prohibiting siphoning off funds intended for public transit, passenger trains, public services, the arts, homeless programs,etc., for purposes they were not intended including paying off state’s deficits.

The increased emphasis on local support could, of course, be a positive. It will tend to benefit bigger, denser cities whose lines are likely to have higher patronage.

I’m not sure I understand why I’m supposed to be sad about Sacramento. I have nothing against Sacramento in particular, but extending a rail line a bit deeper into its sprawl belt could legitimately not stack up against more urban projects, in Sacramento and elsewhere, where land use and local support are more favorable.

“a rail line a bit deeper into its sprawl belt”

Point of order #1: The area that Phase II services has been built up since the 1970s, and is located entirely within the city limits of Sacramento. It also isn’t area that would be considered well-off economically. The actual sprawl belt would not be served until Phase III.

“more urban projects…where land use and local support are more favorable”

I’ll avoid commenting on local support, but you wouldn’t like any of the other proposals in terms of land use. The other major proposal, the Green/DNA Line, has about the same number of planned trips per day, into an area that was the product of very recent sprawl. The same point applies to the (already funded in part) West Sacramento streetcars. Even in the most optimistic plan, the only proposal that is deeply “urban” is for streetcars in East Sacramento.

Focusing on sustainable local finance seems like a wise choice. The cost-effectiveness index encourages agencies to play games with ridership forecasts, and the new focus on “livability” and “economic development” is essentially unmeasurable by any objective standard (or certainly any that I’ve ever seen).

I’m also happy to see an emphasis placed on whether there is sustainable long term financing for operations – Washington’s metro is an excellent example of a high quality capital asset with absolutely deplorable maintenance and operations.

The Indian government simply funds 50% of the cost of new urban rail projects (or has committed to do so). The logic seems clear – if the city state is willing to fund 50% of a large project, there must be sufficient merit to it. A simple standard like this would also save the nightmarish amount of time required to secure a FFGA.

One question is whether there are enough instruments to provide a sustainable financing. A sustainable financing requires that, once the instruments are in place, they won’t be overturned “just because some dude does not like them”. And that means a strong political will.

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