Project Evaluation and Rating Process

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Section 5309(e) requires FTA to evaluate each proposed New Starts project according to a series of criteria for project justification and local financial commitment. As proposed projects proceed through the stages of the planning and project development process, they are evaluated against the full range of statutory criteria. Based on the results of this evaluation and consistent with §5309(e)(6), summary ratings of “highly recommended,” “recommended,” or “not recommended” are assigned to each proposed project. The results of these evaluations are used as the basis for decisions regarding approval for entry into preliminary engineering and final design, to execute an FFGA, and to make annual funding recommendations to Congress. FTA relies on a multiple-measure approach to assign these ratings, which are updated throughout the preliminary engineering and final design processes as information concerning costs, benefits, and impacts is refined. The data used to evaluate and rate proposed projects are normally developed during the project development process, and are collected annually for the production of this report, as well as when individual projects request approval to enter preliminary engineering or final design, and as part of the FFGA process. The New Starts project evaluation criteria are in addition to the general grant eligibility requirements that apply to all FTA funding programs.

The Criteria

The criteria under which proposed New Starts projects must be evaluated are established by statute and contained in §5309(e), which specifies that the Secretary of Transportation may approve a grant or loan under the §5309 New Starts program only for projects that are:

a) based on the results of alternatives analysis and preliminary engineering;
b) justified based on a comprehensive review of [their] mobility improvements, environmental benefits, cost effectiveness, and operating efficiencies; and
c) supported by an acceptable degree of local financial commitment, including evidence of stable and dependable financing sources to construct, maintain, and operate the system or extension.

On December 7, 2000, FTA issued its Final Rule on New Starts project evaluation and rating, published in the Federal Register at 65 FR 76864. This regulation is required by §5309(e)(5), and governs how FTA evaluates and rates new fixed-guideway transit systems and extensions under these criteria. The regulation became effective on April 6, 2001[1], and was used in the evaluation and rating of proposed New Starts projects contained in this report.

This regulation retains the familiar “multiple-measure method” of project evaluation used by FTA to evaluate proposed New Starts since 1994. It describes how each of the statutory project evaluation criterion will be evaluated; defines the overall project ratings of “highly recommended,” “recommended,” and “not recommended;” and defines how these ratings will be used to approve entry into the preliminary engineering and final design stages of project development. It is important to note that the purpose of this Rule is to regulate how FTA will evaluate and rate proposed projects for purposes of the §5309 New Starts program; it does not regulate the transit industry or other sponsors of New Starts projects, though it may affect the type of information FTA requests for evaluation purposes. As in the past, FTA will continue to issue guidance and work with project sponsors as the necessary data for project evaluation are collected.

Project Justification

The criteria for evaluating project justification are largely unchanged from past FTA policy and prior authorizing legislation. As in the past, projects will continue to be evaluated according to the following:

  • Mobility improvements
  • Environmental benefits
  • Operating efficiencies
  • Cost effectiveness
  • Transit-supportive existing land use, policies and future patterns
  • Other factors

The first four criteria above are taken directly from statute. While land use factors are not specifically included among the project justification criteria established by §5309(e)(1)(B), they are referenced repeatedly among the “considerations” which §5309(e)(3) directs FTA to take into account when evaluating project justification. Because of this emphasis, found in both TEA-21 and the earlier Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), FTA has established criteria for evaluating transit-supportive existing land use, policies and future patterns. Consistent with §5309(e)(3)(H), FTA also includes a variety of “other factors” when evaluating project justification, including a) the degree to which the policies and programs (local transportation planning, programming and parking policies, etc.) are in place as assumed in the forecasts, b) project management capability, and c) additional factors relevant to local and national priorities and relevant to the success of the project.

Financial Criteria

Section 5309(e)(1)(C) requires that proposed projects also be supported by an acceptable degree of local financial commitment, including evidence of stable and dependable financing sources to construct, maintain and operate the system or extension. The criteria for evaluation of the local financial commitment to a proposed project are:

  • The proposed share of total project costs from sources other than the New Starts section of §5309, including Federal formula and flexible funds, the local match required by Federal law, and any additional capital funding ("overmatch");
  • The stability and reliability of the proposed capital financing plan; and
  • The ability of the sponsoring agency to fund operation and maintenance of the entire system as planned, including existing service, once the guideway project is built.
The Evaluations

As noted above, FTA evaluates proposed New Starts projects against the full range of criteria for both project justification and local financial commitment, using a multiple-measure method. Project evaluation is an ongoing process; as proposed New Starts proceed through the project development process, information concerning costs, benefits, and impacts is refined, and the ratings are updated to reflect new information. The ratings reported in this document were used as part of the development of the President’s FY 2003 budget request, and, like all information contained in this report, are current for that purpose.

For each of the project justification criteria, the proposed New Start is evaluated against a “baseline alternative.” The baseline alternative is best described as improvements to the transit system that are relatively low in cost, and the “best that can be done” to improve transit service in the corridor without major capital investment for new infrastructure. For purposes of project evaluation and rating, project sponsors and FTA must agree on the definition of the baseline alternative for each proposed New Starts project prior to approval to enter preliminary engineering. For projects already in preliminary engineering and final design before implementation of the New Starts Final Rule, project sponsors and FTA agreed on the definition of the New Starts baseline for rating and reporting purposes.

In evaluating the project justification criteria, FTA gives primary consideration to the measures for transit supportive land use, cost effectiveness, and mobility improvements, though all criteria are an integral part of the process. FTA attempts to reflect the unique characteristics and objectives of each New Starts project in consideration of the project justification criteria and other factors.

For local financial commitment, the measures for the proposed local share of capital costs and the strength of the capital and operating financing plans are the primary factors. The evaluations are based upon the status of the funding proposed in the project’s financial plans, the completeness of the financial plan, and the financial capacity of the project sponsor to undertake the major capital investment. FTA designates the funds proposed in each financial plan as existing, committed, budgeted, planned, uncertain or unspecified for the proposed major capital investment and ongoing operations and maintenance costs of the system.

The Ratings

For each of the project justification criteria, the proposed New Start is evaluated against the baseline alternative. For each proposed project, FTA assigns one of five descriptive ratings (“high,” “medium-high,” “medium,” “low-medium,” or “low”) for each of the five criterion, with “other factors” considered as appropriate. The same is true for the three factors used to evaluate local financial commitment. These individual ratings are then combined into overall “finance” and “justification” ratings, which in turn are combined to produce summary ratings of “highly recommended,” “ recommended,” or “not recommended.”

For a proposed project to be rated as "recommended," it must be rated at least "medium" in terms of both finance and justification. To be "highly recommended," a proposed project must be rated higher than "medium" for both finance and justification. Proposed projects not rated at least "medium" in both finance and justification will be rated as "not recommended."

If a proposed project is rated as “not recommended,” FTA will indicate the area or areas that must be improved in order to improve the rating: “J” for justification, “O” for the operating funding plan, or “C” for the capital funding plan. Thus, a proposed project that was found in need of improvement to its capital plan would be rated “not recommended (C).” A project requiring attention in all three areas would be rated “not recommended (JOC).” This will provide project sponsors, state, local and federal decision-makers, and the public at large with a simple means to identify the basis for the rating.

The rating process also accounts for a proposed project’s stage of development. Recognizing that it is not possible to expect the same level of detail or degree of certainty in the data submitted for evaluation for projects in the early stages of preliminary engineering as for those nearing the end of final design and contemplating an FFGA, FTA applies different rating standards at different stages of project development. Thus, a project in final design is expected to have all local funds committed and available to fund the project in order to achieve a “high” rating for its capital financing plan. In contrast, a project in preliminary engineering could be rated “high” if all funds have been identified and committed, but some of those funds are not yet available to the project. As projects move through the development process, FTA expects increasing certainty with regard to all project evaluation criteria, and the degree of difficulty in obtaining a “high” rating increases.

These ratings are used both to approve entry into preliminary engineering and final design, as required under §5309(e)(6), and to recommend proposed projects for Federal funding commitments. A proposed project must receive a rating of at least “recommended” in order to be approved for any of these purposes.

It is important to note that a rating of "recommended" does not translate directly into a funding recommendation in any given fiscal year. Rather, the overall project ratings are intended to reflect overall project merit. Proposed projects that are rated "recommended" or "highly recommended," will be eligible for multiyear funding recommendations in the Administration's proposed budget if other project readiness requirements have been met.

Due to the competitive nature of the New Starts program, FTA is continuing to encourage project sponsors to lower the requested Federal share of New Starts funding as projects move through the development process. The Conference Report that accompanied the FY 2002 Department of Transportation Appropriations Act requests “FTA not to sign any new full funding grant agreements after September 30, 2002 that have a maximum federal share of higher than 60 percent.” Further, the Administration has proposed that the maximum New Starts share of projects in FY 2004 and beyond be 50 percent. Thus, financial plans should include a maximum Federal share of 50 percent by FY 2004 to remain competitive with other projects in the New Starts pipeline and to meet lower Federal share requirements proposed for the reauthorization of the Transportation Equity Act for the 21st Century (TEA –21).

The results of the project evaluation process for this report are reported in Table 1. Ratings are established for proposed projects that are in preliminary engineering and final design only; projects undergoing alternatives analysis typically have not developed sufficient information for meaningful evaluation, and local decisions regarding the preferred alternative and scope of the project are still pending. Also not listed are projects for which FFGAs have already been issued, as the decision to commit to a project represents the final determination of project justification.

Appendix A provides a more detailed profile for each project for which an FFGA has been issued, as well as for projects in final design and preliminary engineering. Profiles for projects with FFGAs include a description, status, list of funding sources and map. Profiles for projects in final design and preliminary engineering include a description, status, list of funding sources, map, and a presentation of the project evaluation criteria and ratings. Each of these profiles includes a summary description that highlights the overall project ratings and presents key descriptive, cost and ridership data for each proposed New Starts project compared to the baseline alternative. Appendix B provides a brief description and status for other planning studies and projects which were authorized in Section 3030 of TEA-21, but which have not yet entered preliminary engineering.

As noted above, project evaluation is an ongoing process. The ratings contained in this report are based on project information available through November 2001. As proposed New Starts proceed through the project development process, the estimates of costs, benefits, and impacts are refined. The FTA ratings and recommendations will be updated annually for purposes of this report, as well as at the time a request is made to enter preliminary engineering or final design, or to enter into an FFGA. It must be stressed, however, that the ratings reported in this document are final for purposes of the President’s budget request to Congress. Updated project information and ratings will be reviewed as part of the budget development process for the next fiscal year.

Exemptions

Under §5309(e)(8)(A), proposed projects for which less than $25 million in §5309 New Starts funding is sought are exempt from the project evaluation and rating process described above. Where the sponsoring agency believes that a proposed project meets this requirement, submission of project justification and financial commitment information to FTA is not required. However, exempt projects must still meet all planning, environmental, project management, and other requirements that demonstrate their readiness to advance into preliminary engineering. In addition, without information to support the justification of and local financial commitment to a proposed project, FTA will find it difficult to support a Federal funding recommendation for such a project. Submitting the project evaluation data will also maintain a proposed project’s eligibility for an FFGA should it later be determined that costs will exceed $25 million. §5309(e)(7) requires New Starts projects to be carried out through an FFGA, and requires decisions concerning the execution of an FFGA to be based on the results of the evaluation and rating process. Thus, a proposed project that is not evaluated will not be eligible for an FFGA. Therefore, sponsors of exempt projects are strongly encouraged to submit information on project justification and financial commitment.

 

[1] In accordance with the memorandum of January 20, 2001 from the Assistant to the President and Chief of Staff, entitled “Regulatory Review Plan,” published in the Federal Register on January 24, 2001, FTA delayed the effective date of this Rule until April 6, 2001. A Notice to this effect was published in the Federal Register on February 9, 2001, at 66 FR 9677. The original effective date was February 5, 2001.