APTA Rail Conference - San Francisco, CA


06-02-08

REMARKS FOR
JAMES S. SIMPSON
ADMINISTRATOR
FEDERAL TRANSIT ADMINISTRATION

APTA RAIL CONFERENCE
SAN FRANCISCO, CA
JUNE 2, 2008
 
On behalf of President Bush and Transportation Secretary Peters, I want to congratulate APTA and its members for all the fine work they do to provide transit options for Americans, to keep our citizens mobile and our economy moving forward. 

It’s great to be back in one of America’s greatest cities.
 
The San Francisco Bay Area is an amazing laboratory for transit—a vibrant metropolis where virtually every option is available found. . . rail, bus, ferry, trolley, and the historic streetcar.

Transit is woven into the fabric of life here. It’s impossible to imagine the city growing and thriving without these assets. . .

I particularly want to thank James McCray, Nathaniel Ford, and all the folks at the San Francisco Municipal Transportation Agency for their success in running the nation’s seventh largest public transit system.

And I applaud Muni officials for collaborating with the City of San Francisco on the Transit Effectiveness Project—the first comprehensive review of the Bay Area’s transit systems in 25 years.

We’re also pleased to have San Francisco partner with the Department of Transportation on innovative approaches to congestion management. . .     Not only will this plan mean cleaner air and less crowded streets,   it will also generate hundreds of millions of dollars for much-needed transit and transportation projects.

This is exactly the right moment for everyone who has the power to affect the transit industry  --   local operators, state and local governments, Congress, and we at FTA  —  to take stock of where we are, and where we need to go  —  financially, operationally, environmentally, and politically.

We’ve reached a critical juncture. . . Surging gas prices, traffic gridlock, and environmental concerns are encouraging more and more people to look to transit as an affordable, reliable means of travel.

I’m sure those of you seeing more passengers crowd your rail cars are doing everything you can to meet rising demand.

But if we’re truly committed to building and maintaining a first-class transit infrastructure in this country. . .   and if we really intend to boost service capacity. . .  then we’ve got to get a handle on the deep, structural funding challenges we’re facing right now.

We can’t postpone dealing with this. . . . We can’t ignore it or push it onto the next management team or the next generation. . . .

I know you’re all aware of the projected $3 billion shortfall in the Highway Trust Fund account  --  our long-time source for transportation and transit projects  --  and the implications for the future funding of our transportation infrastructure . . .

We at FTA are committed to working with Congress, with state and local governments, transit operators, and the private sector to tackle these challenges.

But even as we look for ways to add to our current capacity, we must remember to include sufficient resources to ensure that our public transit systems are brought to, and kept in, a state-of-good repair. . .

I cannot stress enough, how important it is for us to get a handle on the state-of-good-repair issue. It’s one of my top priorities while I’m at FTA. . . .

We must ensure that both our aging legacy rail and bus systems. . .  and all the new light rail, rapid bus, and other assets going into operation. . . can be well cared for. . . and that we can afford to retool, repair, and upgrade them on a regular basis.

It is simply not good policy for the federal government, or anyone else, to make significant investments in new transit capacity if there is no assurance that these assets can be well-maintained over the long haul.

Let me give you a prime example.

As many of you know, under our New Starts program, FTA recently approved entry into Final Design for the first phase of a proposed 23-mile extension of the D.C. Metro out to Dulles Airport in Northern Virginia. This would enlarge the whole system by more than 20 percent.  But Metro’s operator, WMATA, faces a $500 million shortfall in the funds needed to make immediate, system-wide repairs on the current legacy system . . . .

The governments of D.C., Maryland, and Virginia are moving toward a plan to ensure WMATA has the necessary resources. . . but this will not be easy to accomplish, and we will be watching closely.

The necessity of recapitalizing aging assets isn’t only about money . . . it is also very much about rail safety.

In recent hearings and reports, the National Transportation Safety Board has stated, very publicly, its concern that, at all levels, the rail transit industry is not providing adequate safety to protect its workers, passengers, and infrastructure.

Clearly, aging infrastructure is taking its toll.

Later this summer, I will convene a Safety Summit with the CEOs of the rail transit agencies. We will have the opportunity to hear from the NTSB, to learn how several CEOs have developed new programs to address safety concerns, and to discuss the challenges and opportunities available to improve our industry’s safety culture. 

We must work together to help the transit industry find the resources to strike the right balance --  to ensure the safety and soundness of legacy systems. . . while also enabling these systems to grow as demand requires.

I urge you to partner with us  --  and to participate actively as we ask for your attendance at workshops, for your training materials and rulebooks, and for your insights, your challenges, and your lessons learned. 

I also encourage you to meet regularly with both your Safety and Maintenance Directors to get an honest assessment of where things stand at your agencies. Perhaps there are ways, small and large, that improvements can be made, lives can be saved, and critical infrastructure can be kept in better repair.

Now let me “zoom out” and put this challenge into a broader perspective.

The consulting firm Booz Allen analyzed for us the condition and reinvestment needs of the largest 15 heavy rail agencies in the U.S.

I want to share some highlights:
• Roughly one-third of the agencies’ heavy rail and bus assets are rated in substandard or poor condition.
• Heavy rail assets worth about $30 billion should be replaced immediately.
• Roughly $39 billion is required to bring all of these agencies’ assets to a state of good repair. This includes $8.8 billion in deferred rehabilitations for older subway stations and tunnels.
• Over a 20-year period, roughly $7 billion needs to be invested annually to both eliminate the backlog and achieve a state of good repair.
• In 2006, there was nearly a $2 billion gap between this annual investment level and the amount actually spent by federal, state, and local governments and the transit agencies in recent years. The federal government funds about half the annual investments in rehab and replacement needed to attain a state of good repair – but that excludes the existing backlog. State and local government and transit system generated funds cover the other half.
• And finally – not surprisingly  -- the heavy rail investment backlog will increase over time at current funding levels .

I think the data speaks for itself. . . .  We have to get a handle on this problem. . .

It appears that relatively few transit agencies conduct detailed studies on state-of-good repair, on a regular basis – like every one or two years. . .

We also think that transit agencies are behind highway system managers in doing comprehensive asset management planning.

That’s why we’re enhancing data collection on capital assets through the National Transit Database. . .  looking for best practices on asset management. . .   and commissioning a rail system capacity improvement study.

We’re also hoping, later this year, to bring some transit operators and industry experts together, to meet with us and share perspectives and solutions on the recapitalization and asset management issue.

We’re not prejudging the outcome here  --  we genuinely want to build a braintrust on this. . . . FTA certainly doesn’t have all the answers. . .

In addition, we're taking a hard look at recapitalization under New Starts. . . .

All current and prospective grantees should be aware that we recently issued proposed guidance, letting them know that we intend to pay extra attention to how they demonstrate that sufficient local resources are available to preserve the quantity and quality of existing transit service.

We’re looking for assurances that our grantees’ existing transit systems are in a state of good repair  -- and are likely to remain so, whether or not new investments are made. 

What’s more, if a grantee’s capital plan seeks to use formula or mod funds for a New Starts project, then rest assured we’re going to scrutinize the estimated costs of recapitalization to ensure that the plan provides sufficient funds to meet those costs from sources other than FTA formula funds.

We expect to have more information to share with you on recapitalization in the fall. . . and hope to see this issue addressed in our upcoming reauthorization.

Speaking of New Starts. . . In addition to moving the Dulles project forward, I want to share some other good news. . .
Utah Transit Authority’s 10-mile extension on the Mid-Jordan Light Rail Transit system has been approved for entry into Final Design.

This is a great project connecting Salt Lake City’s central business district with the state university. Congratulations to UTA.

In April, we awarded nearly $19 million to keep The Tide -- Norfolk, Virginia’s light rail line  --  moving forward. This award restored funds that had been cut in the federal budget. Norfolk’s FFGA was signed last year.  

And we’re optimistic about signing two more Full Funding Grant Agreements later this year on projects in two fast-growing parts of the country  --  Seattle’s University Link Light Rail extension, and Denver’s West Corridor Light Rail.

When you consider the projects we have recommended for funding on a cost-per-mile basis this year, we think we’re putting tax dollars where they will move the greatest number of people  -- in other words, provide the best return on investment.
 
Now let me remind you that we have about $1 billion in available commitment authority remaining before SAFETEA-LU expires. . . A number of projects are competing for those remaining funds, and we’re going to have to make some hard calls.

Obviously, recapitalization is a key factor in our evaluation. . .

So too is the ability of transit agencies and their partners to manage and deliver complex transit projects on time and on budget.

That’s why managing risk better is also a priority for us. 

In the current environment, this is a big challenge for transit agencies. . . 

Not only is competition for funding pretty tough. . . but escalating costs  --  for commodities like steel, aluminum, and concrete  --  compound the risk on complex capital transit projects. . .

Our experience across hundreds of major transit projects shows that planners routinely over-estimate the benefits of mega-projects, and under-estimate the costs. 
 
We’ve got to get a handle on this if we expect these mega-projects  --  like the Second Avenue Subway extension in New York, or the new Seattle Light Rail Line --  to deliver the promised benefits.

So we have developed new cost forecasting models that help us make more accurate predictions about a project’s actual costs versus the estimates.

In his book on megaprojects and risk, Brent Flyvbjerg wrote that:

 “We must find ways of institutionally embedding risk and accountability in the decision making process for mega-projects.” 

That’s exactly where we’re headed.

We’ve gotten much better at stripping away the hype and the guesswork, and looking ahead to the real costs of a project  --  relative to the benefits.

We can make a better business case to our grantees about what reasonable contingency planning looks like. . . And we’re able to balance risks across our entire portfolio of transit projects.

We’re also getting a better handle on cost and ridership projections.

Here, too, agencies systematically over-estimate ridership forecasts, and under-estimate project costs.

Until recently, we simply hadn’t done enough detailed analysis to determine the reasons for this gap. And if FTA is not sure whether grantees are making accurate forecasts, then it’s difficult to know whether the right investment decisions are being made.

Now we’ve finally got some good predicted-vs-actual data from 2003 and 2007. . .

The industry’s ability to accurately predict ridership is almost twice as good now as it was in 1990. . . and cost estimates are getting better, too. . .

Still, forecast accuracy didn’t improve much between the 2003 and 2007 studies.  . . . and estimates aren’t always on-target. . . .

Clearly, we must keep working at this  . . .  We can’t afford to fly blind  — and neither can you. . .
FTA has become much more sophisticated about risk. . .  but the federal role has limits. . . .

That’s why transit agencies must look to public-private partnerships as a means of shifting project risk away from the public sector  --  while tapping into alternative financing.      

We need to do a better job of leveraging our public funds and taking advantage of the upwards of $400 billion in capital the private sector has available to invest in infrastructure.   

Pilot public-private partnerships have been established to fund transit projects in a couple of cities, including Oakland  --  and we hope to see this idea catch fire.

There’s much we can learn about this from Europe. . .

For example, London refinanced the northern extension of the Underground  --   a  $1.2 billion project  --  through a public-private partnership . . . Italy and Belgium have also funded major rail projects this way. . .

This is the wave of the future.  We simply cannot continue to do business as usual in the U.S. . .

We cannot expect fuel taxes and earmarks to keep up with the mounting costs of new rail construction and the recapitalization of aging assets. . .

I’ve often said that transportation is the circulatory system of our economy. We cannot afford to let it fail  --  and we should not settle for a public rail system that is second-best behind other nations.

Now more than ever, we need leaders willing to make tough and courageous decisions about what it will really take to build and sustain a world-class transportation infrastructure, to keep our economy moving.

We need market-based solutions as well as government leadership.

And we need a mindset that is receptive to new ways of paying for  -- and using  -- our transportation networks.

So let us all pledge that we’re going to work together  --  government, transit agencies, private partners  --  to find ways to make our rail systems better. . . make them sustainable. . . and ensure that we can deliver to Americans the affordable mobility they need and deserve.

 I want to leave you a wonderful and inspiring Greek proverb:

A society grows great when old men plant trees whose shade they know they shall never sit in.

I truly believe that all the hard work we’re doing today to make America’s transportation infrastructure great, will pay off for our children, our grandchildren, and future generations.

 Thank you.