In so many ways, both the FTA and the transit industry are struggling to cope with the success of a federal program that far exceeded the imagination of its architects.
The transportation bill has joined military programs as the highest profile targets of critics complaining about runaway federal “pork barrel” spending. Their definition of pork is an earmark, and the explosive growth of this legislative device has been breathtaking. According to the public interest group Taxpayers for Common Sense, Congress last year appropriated more than $35 billion on nearly 16,000 earmarks; only eight years ago, the number was 2,000 earmarks worth less than one-third of the amount. The same has gone for transportation earmarks, particularly for new starts. No longer are they the province of a select few cities such as San Francisco, Portland and Atlanta. In the 1990s, interest spread to places like Denver, Salt Lake City and Minneapolis. Now, smaller communities like Spokane, Wash; Birmingham, Ala.; and Memphis are seeking federal assistance along with those in large metropolitan regions like Glendale and Pomona in southern California and Elk Grove Village, outside Chicago. Victim of its own success
“The new starts program is victimized by its own success,” notes Jeff Boothe, a partner at Holland and Knight LLC and the head of both the New Starts Working Group and the Streetcar Coalition. The FTA puts it another way: It faces more than a $16 billion shortfall between what it expects cities will be asking from the program in the coming years and what it estimates it will have available — even at the record levels of funding in SAFETEA-LU. As a reaction to the intensifying competition, Congress and the FTA have recently revised the program’s evaluation guidelines. In doing so, several major changes were made. First, the rating scale was changed from a three-tiered scale (Highly Recommended, Recommended and Not Recommended) to a five-level one (High, Medium-High, Medium, Medium-Low and Low). Second, the new law puts limits on how much the FTA can specifically require a non-federal financial commitment for a project that is more than the 20% minimum share required in the law (although it can continue to evaluate those with higher local match percentages more favorably). Third, Congress created a new “Small Starts” program and required new implementing regulations (more about this later). Finally, the FTA must publish and update every two years a New Starts Policy Guidance document through the notice-and-comment process that governs federal regulations. The first of these came out in the spring. These changes build on some already important changes that have made the evaluation process more rigorous. These include a mandate that a more thorough ridership model called SUMMIT be used to calculate user benefits. In addition, just prior to SAFETEA-LU’s enactment, project justification and financial responsibility were also made tougher with a review of the financial plan after preliminary engineering and before the issuance of a Full Funding Grant Agreement (FFGA). Finally, the agency toughened project risk assessment rules to help it evaluate how well a project can stay on budget and on schedule. The FTA’s latest New Starts program guidance finalized in May requires that all New Starts project submittals received thereafter will be evaluated with this revised policy guidance until a new regulation is finalized in early 2008. As the FTA explained in the Federal Register, “These provisions of SAFETEA-LU may lead to some changes in the way that FTA determines eligibility for funding, the framework for evaluating and rating projects and the procedures used to plan and develop new transit capital projects that seek New Starts funds.” The May guidance document was thus the first step toward an even tougher new evaluation era — but in many ways it represents only the latest chapter in a much older story. How we got here
To help understand the pressures of the program now and into the future, it helps to know a little history. Although a smaller portion of the total federal transit assistance package than, say, formula grants, the Major Capital Investment Program and the New Starts portion of it specifically were always the locomotive that pulled the rest of the train through the halls of Congress each year, notes Alan Wulkan, an industry consultant and one of APTA’s “big five” legislative strategy leaders that spearheaded the organization’s advocacy during the past two reauthorization cycles. In other words, political support was built around New Starts, because money for these new systems came from the growing metropolitan regions in the West and the Sunbelt — places where many powerful Republicans and moderate Democrats came from. As a testament to the effectiveness of this strategy, when the Republicans came to power during the mid-’90s, they looked to eliminate federal transit assistance as a separate program from highways. By 1998, just a few years later, Congress enacted even larger increases in the transit program than what the Democrats had marshaled through in 1991. Although these revenues allowed lawmakers to continue to enact record levels of federal spending on transit for the past two decades, their growth has not kept pace with the demand for more investment — or the pace at which local and state governments have expanded transit systems. As a result, according to FTA data, today only 40% of all capital spending for transit is provided by the federal government, and most observers believe this share will continue to decline as local spending and support for transit continues to outpace that at the federal level. This is why the FTA has increasingly placed so much emphasis on evaluating new project cost-effectiveness and local financial commitment during the past decade, agree Boothe and others. Tougher evaluation standards
To help implement changes required by last year’s reauthorization but also to help cope with the growing federal competition for available New Starts dollars, the FTA toughened the evaluation process even further in the May policy guidance. First, it has indexed the cost-effectiveness breakpoints for inflation, implementing its New Starts cost-effectiveness evaluation changes that the agency rolled out in the spring of 2005. Second, the FTA eliminated the Not Rated designation for projects with unreliable or incorrect data; these projects will now receive a Low rating — which could jeopardize their ability to go further in the federal process. Perhaps the most visible policy changes in the May interim guidelines are those that begin to interpret the new so-called “Small Starts” program created by SAFETEA-LU. With it, the FTA intended to streamline the New Starts evaluation process for projects costing less than $250 million and seeking less than $75 million from the New Starts program. However, this year’s budget for the Major Capital Investment Program will likely not include any money for Small Starts because its rules will not be final until early 2008. In creating this new category of investments, Congress directed the FTA to come up with rules that make the process for receiving those funds easier by lessening the burdens for demonstrating project cost-effectiveness and financial responsibility. (How it does so, and the impact it has on smaller rail projects versus BRT investments, is the subject of the “Between the Rails” column on pg. 22 of this issue.) Meanwhile, 23 “big starts” projects have progressed toward revenue opening dates, 16 of which are under construction. Two others, including New York’s $7.8 billion Long Island Rail Road East Side Access Project and Pittsburgh’s $393 million North Shore Connector light rail extension, have received their FFGAs and have recently broken ground. These have been marginally affected by the tougher process in recent years, although their federal share averages well less than 50% between them; in the East Side’s case the project will only receive one-third of its funding from the New Starts program. Ten other projects, however, have been caught up in the tougher changes. Half, though, are expected to receive full funding commitments from the FTA this year or next. They include Portland’s South Corridor light rail extension, Denver’s West Corridor light rail line, Salt Lake City’s commuter rail project to Ogden north of the city, Dallas’ Northwest/Southeast light rail project and Portland’s commuter rail project to Beaverton and Wilsonville. These projects average a somewhat higher federal match, 57%, but that is skewed higher by the Salt Lake City commuter rail project, the only one asking for a maximum 80% share in New Starts funding. Five other projects are expected to be in final design and receive $102 million during the next fiscal year toward an FFGA later in the decade. They include a new member expected to join the light rail club — Norfolk, Va. — as well as a much-needed mega-project in the nation’s most transit-dependent city, New York City Transit’s $4.9 billion Second Avenue Subway project. Seattle’s light rail extension to the University of Washington — the only project to receive a high rating in recent years — as well as a congressionally exempt project for 52 new railcars for Washington Metropolitan Area Transit Authority (WMATA), are expected to receive New Starts funding. The fifth is also in the Washington, D.C., area, an extension in the increasingly congested Dulles Airport corridor that was to be a BRT project convertible to future rail but was revised into a shorter extension that will immediately be heavy rail, bypassing the BRT stage. Some projects red-lighted
The impact of these changes is already being felt. The FY 2006 New Starts Annual Report issued last winter did not contain 12 projects in preliminary engineering or final design that were mentioned in the previous year’s report. Among them, half have either discontinued development or are no longer seeking New Starts funds. They include a starter light rail line in El Paso; Tampa Bay’s regional rail system; and South Wasilla, Alaska’s, track realignment project, all of which are being re-thought at the local level. Two others, Orange County, Calif.’s, CenterLine LRT and the Las Vegas Resort Corridor Downtown Monorail, have been rescoped to become BRT projects. In Los Angeles, the Exposition light rail line will be funded without federal money. Another five projects are suspended in the preliminary engineering phase until local issues — usually involving local match funding — can be addressed. This category includes Boston’s Silver Line Phase III BRT; Fort Collins, Colo.’s, Mason Transportation Corridor BRT; New Orleans’ Desire Streetcar line restoration; and San Jose’s, Silicon Valley light rail corridor. Another was completed and entered revenue service last year without New Starts funding: Kansas City’s Southtown BRT. Forgoing federal funds
Boothe believes that this latter category is a harbinger of things to come. His firm was recently asked by APTA to conduct an analysis of the New Starts funding pipeline since 1991. He found that the approval process has steadily lengthened while the number of projects entering the pipeline has declined since peaking in 2004. Part of it may be a way for the FTA to provide enough funding to pay for projects costing a billion dollars or more in the next several years. What about after 2010, though, when these projects are largely paid for? The shrinking pipeline and freed-up contingent authority should ease fiscal pressures, Boothe says. Yet the evaluation process —more than 100 months now — shows only signs of lengthening further. Plenty of projects, as illustrated by the hundreds of earmarks, can be made available, of course — if the FTA lets them keep going.
Partly the result of growing local desires to improve cities’ livability and partly enabled by technology that has lowered the average cost and time it takes to build a new transit project, competition for New Start dollars has never been hotter — and shows no signs of letting up.
The trend is further complicated by changing political dynamics that put local pressure on national leaders to deliver back home. Thus, for those seeking more funding to build a rail or bus rapid transit (BRT) project, politics are not all local anymore.
In the SAFETEA-LU transportation legislation enacted last summer, more than 5,500 transit, highway and other projects were “earmarked” in the bill, more than one-fifth of them for transit. Most of these were projects in the “New Starts pipeline,” the process Congress and the FTA created to evaluate fixed-guideway investments.
Riding the pork barrel
The transportation bill has joined military programs as the highest profile targets of critics complaining about runaway federal “pork barrel” spending. Their definition of pork is an earmark, and the explosive growth of this legislative device has been breathtaking. According to the public interest group Taxpayers for Common Sense, Congress last year appropriated more than $35 billion on nearly 16,000 earmarks; only eight years ago, the number was 2,000 earmarks worth less than one-third of the amount. The same has gone for transportation earmarks, particularly for new starts. No longer are they the province of a select few cities such as San Francisco, Portland and Atlanta. In the 1990s, interest spread to places like Denver, Salt Lake City and Minneapolis. Now, smaller communities like Spokane, Wash; Birmingham, Ala.; and Memphis are seeking federal assistance along with those in large metropolitan regions like Glendale and Pomona in southern California and Elk Grove Village, outside Chicago. Victim of its own success
“The new starts program is victimized by its own success,” notes Jeff Boothe, a partner at Holland and Knight LLC and the head of both the New Starts Working Group and the Streetcar Coalition. The FTA puts it another way: It faces more than a $16 billion shortfall between what it expects cities will be asking from the program in the coming years and what it estimates it will have available — even at the record levels of funding in SAFETEA-LU. As a reaction to the intensifying competition, Congress and the FTA have recently revised the program’s evaluation guidelines. In doing so, several major changes were made. First, the rating scale was changed from a three-tiered scale (Highly Recommended, Recommended and Not Recommended) to a five-level one (High, Medium-High, Medium, Medium-Low and Low). Second, the new law puts limits on how much the FTA can specifically require a non-federal financial commitment for a project that is more than the 20% minimum share required in the law (although it can continue to evaluate those with higher local match percentages more favorably). Third, Congress created a new “Small Starts” program and required new implementing regulations (more about this later). Finally, the FTA must publish and update every two years a New Starts Policy Guidance document through the notice-and-comment process that governs federal regulations. The first of these came out in the spring. These changes build on some already important changes that have made the evaluation process more rigorous. These include a mandate that a more thorough ridership model called SUMMIT be used to calculate user benefits. In addition, just prior to SAFETEA-LU’s enactment, project justification and financial responsibility were also made tougher with a review of the financial plan after preliminary engineering and before the issuance of a Full Funding Grant Agreement (FFGA). Finally, the agency toughened project risk assessment rules to help it evaluate how well a project can stay on budget and on schedule. The FTA’s latest New Starts program guidance finalized in May requires that all New Starts project submittals received thereafter will be evaluated with this revised policy guidance until a new regulation is finalized in early 2008. As the FTA explained in the Federal Register, “These provisions of SAFETEA-LU may lead to some changes in the way that FTA determines eligibility for funding, the framework for evaluating and rating projects and the procedures used to plan and develop new transit capital projects that seek New Starts funds.” The May guidance document was thus the first step toward an even tougher new evaluation era — but in many ways it represents only the latest chapter in a much older story. How we got here
To help understand the pressures of the program now and into the future, it helps to know a little history. Although a smaller portion of the total federal transit assistance package than, say, formula grants, the Major Capital Investment Program and the New Starts portion of it specifically were always the locomotive that pulled the rest of the train through the halls of Congress each year, notes Alan Wulkan, an industry consultant and one of APTA’s “big five” legislative strategy leaders that spearheaded the organization’s advocacy during the past two reauthorization cycles. In other words, political support was built around New Starts, because money for these new systems came from the growing metropolitan regions in the West and the Sunbelt — places where many powerful Republicans and moderate Democrats came from. As a testament to the effectiveness of this strategy, when the Republicans came to power during the mid-’90s, they looked to eliminate federal transit assistance as a separate program from highways. By 1998, just a few years later, Congress enacted even larger increases in the transit program than what the Democrats had marshaled through in 1991. Although these revenues allowed lawmakers to continue to enact record levels of federal spending on transit for the past two decades, their growth has not kept pace with the demand for more investment — or the pace at which local and state governments have expanded transit systems. As a result, according to FTA data, today only 40% of all capital spending for transit is provided by the federal government, and most observers believe this share will continue to decline as local spending and support for transit continues to outpace that at the federal level. This is why the FTA has increasingly placed so much emphasis on evaluating new project cost-effectiveness and local financial commitment during the past decade, agree Boothe and others. Tougher evaluation standards
To help implement changes required by last year’s reauthorization but also to help cope with the growing federal competition for available New Starts dollars, the FTA toughened the evaluation process even further in the May policy guidance. First, it has indexed the cost-effectiveness breakpoints for inflation, implementing its New Starts cost-effectiveness evaluation changes that the agency rolled out in the spring of 2005. Second, the FTA eliminated the Not Rated designation for projects with unreliable or incorrect data; these projects will now receive a Low rating — which could jeopardize their ability to go further in the federal process. Perhaps the most visible policy changes in the May interim guidelines are those that begin to interpret the new so-called “Small Starts” program created by SAFETEA-LU. With it, the FTA intended to streamline the New Starts evaluation process for projects costing less than $250 million and seeking less than $75 million from the New Starts program. However, this year’s budget for the Major Capital Investment Program will likely not include any money for Small Starts because its rules will not be final until early 2008. In creating this new category of investments, Congress directed the FTA to come up with rules that make the process for receiving those funds easier by lessening the burdens for demonstrating project cost-effectiveness and financial responsibility. (How it does so, and the impact it has on smaller rail projects versus BRT investments, is the subject of the “Between the Rails” column on pg. 22 of this issue.) Meanwhile, 23 “big starts” projects have progressed toward revenue opening dates, 16 of which are under construction. Two others, including New York’s $7.8 billion Long Island Rail Road East Side Access Project and Pittsburgh’s $393 million North Shore Connector light rail extension, have received their FFGAs and have recently broken ground. These have been marginally affected by the tougher process in recent years, although their federal share averages well less than 50% between them; in the East Side’s case the project will only receive one-third of its funding from the New Starts program. Ten other projects, however, have been caught up in the tougher changes. Half, though, are expected to receive full funding commitments from the FTA this year or next. They include Portland’s South Corridor light rail extension, Denver’s West Corridor light rail line, Salt Lake City’s commuter rail project to Ogden north of the city, Dallas’ Northwest/Southeast light rail project and Portland’s commuter rail project to Beaverton and Wilsonville. These projects average a somewhat higher federal match, 57%, but that is skewed higher by the Salt Lake City commuter rail project, the only one asking for a maximum 80% share in New Starts funding. Five other projects are expected to be in final design and receive $102 million during the next fiscal year toward an FFGA later in the decade. They include a new member expected to join the light rail club — Norfolk, Va. — as well as a much-needed mega-project in the nation’s most transit-dependent city, New York City Transit’s $4.9 billion Second Avenue Subway project. Seattle’s light rail extension to the University of Washington — the only project to receive a high rating in recent years — as well as a congressionally exempt project for 52 new railcars for Washington Metropolitan Area Transit Authority (WMATA), are expected to receive New Starts funding. The fifth is also in the Washington, D.C., area, an extension in the increasingly congested Dulles Airport corridor that was to be a BRT project convertible to future rail but was revised into a shorter extension that will immediately be heavy rail, bypassing the BRT stage. Some projects red-lighted
The impact of these changes is already being felt. The FY 2006 New Starts Annual Report issued last winter did not contain 12 projects in preliminary engineering or final design that were mentioned in the previous year’s report. Among them, half have either discontinued development or are no longer seeking New Starts funds. They include a starter light rail line in El Paso; Tampa Bay’s regional rail system; and South Wasilla, Alaska’s, track realignment project, all of which are being re-thought at the local level. Two others, Orange County, Calif.’s, CenterLine LRT and the Las Vegas Resort Corridor Downtown Monorail, have been rescoped to become BRT projects. In Los Angeles, the Exposition light rail line will be funded without federal money. Another five projects are suspended in the preliminary engineering phase until local issues — usually involving local match funding — can be addressed. This category includes Boston’s Silver Line Phase III BRT; Fort Collins, Colo.’s, Mason Transportation Corridor BRT; New Orleans’ Desire Streetcar line restoration; and San Jose’s, Silicon Valley light rail corridor. Another was completed and entered revenue service last year without New Starts funding: Kansas City’s Southtown BRT. Forgoing federal funds
Boothe believes that this latter category is a harbinger of things to come. His firm was recently asked by APTA to conduct an analysis of the New Starts funding pipeline since 1991. He found that the approval process has steadily lengthened while the number of projects entering the pipeline has declined since peaking in 2004. Part of it may be a way for the FTA to provide enough funding to pay for projects costing a billion dollars or more in the next several years. What about after 2010, though, when these projects are largely paid for? The shrinking pipeline and freed-up contingent authority should ease fiscal pressures, Boothe says. Yet the evaluation process —more than 100 months now — shows only signs of lengthening further. Plenty of projects, as illustrated by the hundreds of earmarks, can be made available, of course — if the FTA lets them keep going.
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