Rail

Popularity of New Starts Outgrows Available Funding

Posted on June 1, 2003 by Cliff Henke, North American Bus Industries

The irresistible force of local demand for more rapid transit is crashing up against a currently immovable object: limited funding at all levels of government. Although the past two decades have produced the most generous public-sector transit investment in U.S. history, the gap between the project pipeline and annual funding levels is widening. This paradox is even more ironic as Congress and the Bush Administration look to reauthorize the Transportation Equity Act for the 21st Century (TEA 21) at record levels of funding, again. How did public transportation get into the paradox of a greater funding shortfall despite unprecedented spending? And short of canceling worthy projects, what can the industry do about it? This article will attempt to answer those questions. Too much interest? The Federal Transit Administration’s (FTA) new starts program is a victim of its own success. So successful has been the reawakened interest in new rail starts in the past two decades — and the overwhelming majority of new starts still involve rail — that the demand has simply outstripped funding for these projects, which is called the Major Capital Investments Program. As FTA Administrator Jenna Dorn has noted, there are now 52 projects in her agency’s new starts “pipeline” (those in preliminary engineering or final design). The list of these projects indicates that the rail renaissance is clearly a nationwide phenomenon. The current project list alone represents 28 states and Puerto Rico, in both big and little cities. If all these systems were built, they would need more than $40 billion in funding, and half of that sum would be provided by Uncle Sam. Few if any of these projects can be called local pipe dreams — the increasing competition and FTA evaluation criteria have taken care of much of that (more about that later). All are legitimate enough to warrant federal assistance to further their planning and preliminary engineering. Moreover, the average local match being put up now exceeds 50%, well above the 20% minimum required by law and far above any typical highway counterpart. Add to that the number of cities looking at bus rapid transit (BRT) — at last count comprising more than 150 projects, many of which will seek new starts money — and you get an idea of the mounting problem. Funding needs to double Although TEA 21 dramatically increased the federal new starts program above the record levels of money given out in the early 1990s, the program needs to double again over the next decade to keep pace with the demand. According to the American Association of State Highway and Transportation Officials’ (AASHTO) Bottom Line Report, an annual capital investment of $44 billion is required to improve the current physical condition and service performance of the nation’s transit systems. That is if ridership continues to grow at 3.5% and if a decision is made to improve conditions and service quality for all assets and services. The public clearly gets it. A recent poll by Wirthlin Worldwide showed that 72% of Americans support increased investment in public transportation. Even a poll jointly sponsored by the American Public Transportation Association (APTA) and the American Automobile Association (AAA) found that 92% of respondents believe it is either very important (71%) or somewhat important (21%) for their community to have both good roads and viable alternatives to driving. “This is not an either-or debate. This is about providing the mobility Americans cherish,” said Robert L. Darbelnet, AAA president and CEO, upon the poll’s April release. Proposals draw ire Thus far, the news from the Bush Administration has not been encouraging. It proposed that the entire federal transit program grow at a flat $45.7 billion over the next six years, of which only $37.6 billion would be guaranteed as it had been under TEA 21. Further, the administration proposes to eliminate rail modernization and bus capital assistance from the Major Capital Investments Program, instead combining rail modernization funding with the Formula Grants program and eliminating bus discretionary capital funding altogether. The Major Capital Investment Program would then become purely for new starts, funded at $9.5 billion over the next six years. At a hearing held by the U.S. Senate Committee on Banking, Housing and Urban Affairs in June, Sen. John Corzine (D-NJ) pointed out that the amount in the administration proposal, adjusted for inflation, would actually be 1.2% below TEA 21. In fact, guaranteed public transit funding would be 8% less in 2009 than in 2003. Another part of the administration’s new starts-related reauthorization proposal is to fund the new starts program almost completely out of general revenues rather than the Mass Transit Account of the Highway Trust Fund (under TEA 21, 80% of all FTA programs are funded from the trust fund). “The proposal is a move in the wrong direction for transportation investment policy,” says APTA President Bill Millar. “If adopted, it would mean a return to the past, when funds authorized for public transportation investment frequently were not appropriated, making funding unpredictable and driving away private-sector investments.” At the same hearing, California Department of Transportation Director Jeff Morales criticized another administration proposal: that the minimum local match be increased to 50% for new starts. Morales, who is currently AASHTO’s chair of its public transportation committee, argued that state and local officials need to have highway and transit programs’ local match requirements on a par so officials can make balanced decisions between highway and transit projects. Reading between lines The administration’s handling of the existing program has also come under fire. Two years ago, the FTA revised its complex regulation governing how it evaluates new starts projects that seek discretionary capital funding. While the criteria themselves were written into TEA 21 — such as the level of local financial and political support and the degree to which a project alleviates congestion and improves air quality — the administration has been criticized for how these criteria are used. Seeking to address ongoing questions about how to submit the required information, the agency continues to refine its interpretation — which only raises more questions or is criticized again for apparent inconsistencies. No better example of this situation is the evolution of so-called “mobility improvements measures” used to quantify the “user benefit” that a proposed project might accrue. Last June, the FTA issued new reporting instructions for these criteria. For one of the measures, known as “annual travel time savings,” it even issued new software, called SUMMIT, to help analyze how a project would affect travel demand. However, in order to use SUMMIT properly, the FTA advised that project sponsors would need to ensure that their travel data, which are typically taken from their metropolitan planning organizations’ transportation forecasting models, are compatible with SUMMIT. “The problem is that some travel forecasts that attributed certain commute pattern changes to, say, a new highway cannot assume that some number of people might also travel by a new BRT or rail line,” says Jeff Boothe, a partner at the Washington office of Holland and Knight and leader of the New Starts Working Group, a coalition of cities seeking federal rail and BRT project funding. “Some of these regional models assume that you have to assign changes in travel to one mode or another, not a mix of both.” “To be honest, I sometimes think FTA officials are making [new guidance on user benefit evaluation] as they go,” adds a frustrated sponsor of a new start in planning stages. Will Congress, states act? In response to the growing demand and disappointing administration proposal for new starts funding, the Senate in March passed an amendment to the fiscal year 2004 budget resolution to grow the federal highway and transit programs. Under the amended resolution, the transit program will be funded at $56.5 billion over the next six years. Meanwhile, the House is working on an even larger bill. Its Transportation and Infrastructure Committee has formally adopted a recommendation for a six-year authorization funding level of $375 billion for highways and transit. That would come close to the APTA-recommended proposal of $65.7 billion for the entire transit program, $11.7 billion of which is designated for new starts. Unfortunately, current estimates are that the Highway Trust Fund will only support a program of $36 billion per year for highways and public transportation — less than a third of the need. Which is the major reason why Rep. Don Young (R-AK), chairman of the House Transportation & Infrastructure Committee, is leading a quiet effort to at least index increases of the federal gasoline tax for inflation. However, the House Majority Leader, Rep. Tom DeLay (R-TX), is adamantly opposed to raising the gas tax, and the White House does not display much enthusiasm for Young’s proposal. The current fiscal crisis in state government also appears unable to sustain a huge increase in current new starts funding. According to a report of the National Conference of State Legislatures, 41 states face a cumulative budget gap of $78.4 billion for fiscal year 2003-04 (which begins July 1, 2003). Thirty-seven of those states reported a gap in excess of 5% of their general fund, while 19 of these face deficits that exceed 10%. Virtually all states must show a balanced budget, which means the tough decisions about cutting programs or raising revenues through extra taxes or bonding cannot be put off for another day. Two paths to success That leaves only two solutions for funding the growing list of new rail and bus fixed-guideway projects: raise local taxes or look to the private sector for more help. To the former, the success rate for local transit referenda (usually resulting in a small sales or property tax increase to pay for projects) is a less-than-sterling one in four tries over the past 15 years. The latter solution, however, has only begun to be tapped. An ambitious example of such private-sector know-how is the Las Vegas monorail project. Nevada’s Clark County government granted a tax-exempt nonprofit corporation, the Las Vegas Monorail Co. (LVMC), a 50-year franchise to upgrade and extend to a total of four miles an existing Bombardier monorail system serving one of the casino complexes there. The $650 million project is financed by revenue-backed bonds supplemented with money anted up by the casinos served by the system. Bombardier is building and later will operate under a 15-year turnkey contract. (Bombardier and the casinos are part of the LVMC consortium.) The result, when it is opened for service next year, will be the first urban fixed-guideway in America that is totally financed, designed, constructed and operated by the private sector in a very long time. A move back to the future?

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