Introduction

This report provides the U.S. Department of Transportation's recommendations to Congress for allocation of funds to be made available under 49 U.S.C. §5309 for construction of new fixed guideway systems and extensions (major capital investments or “new starts”) for Fiscal Year 2002.  Section 5309(o)(1) requires an annual report to Congress “that includes a proposal on the allocation of amounts to be made available to finance grants and loans for capital projects for new fixed guideway systems and extensions to existing fixed guideway systems among applicants for those amounts.”

The Annual Report on New Starts is a collateral document to the President's annual budget submission to Congress.  It is meant to be a constructive element in the administration of the Federal transit assistance program, enriching the information exchange between the Executive and Legislative branches at the beginning of an appropriations cycle for the next Fiscal Year.

The President's budget for FY 2002 proposes that $1,136.40 million be made available for the §5309 major capital investment program.  After setting aside one percent of these funds for oversight activities as proposed in the President’s budget, and funding for ferry capital projects in Alaska or Hawaii as required by §5309(m)(5)(A), $1,114.74 million is available for project grants.  This report recommends funding for 31 projects in FY 2002; of these, 24 have existing Federal funding commitments in the form of Full Funding Grant Agreements (FFGAs); funding commitments are pending for two; and five are expected to be ready for funding commitments before the end of FY 2002 (i.e., September 30, 2002).

The New Starts Project Evaluation Regulation

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 Section 3009 of TEA-21, and governs how FTA will evaluate and rate new fixed-guideway transit systems and extensions that are proposed for §5309 new starts funding.  It replaces the procedures set forth in the December 19, 1996 policy statement [61 FR 67093], as amended on November 12, 1997 [62 FR 60756].  The regulation became effective on April 6, 2001[1].

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 criteria 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 we request for evaluation purposes.  As in the past, FTA will continue to issue guidance and work with project sponsors as we implement this Rule.

FTA published a notice of Proposed Rulemaking (NPRM) for this regulation in the Federal Register on April 7, 1999.  The docket was open for public comment through July 6, 1999, though late-filed comments were accepted through July 19.  Comments were received from a total of 41 individuals and organizations (not counting duplicates). FTA also held three public outreach workshops during the comment period to solicit comment on the proposed rule.  All comments in the docket are matters of public record, and are available for inspection at the United States Department of Transportation Central Dockets Office (docket # FTA-99-5474).[2]  The docket is also available online through DOT’s Docket Management System (DMS), at: http://regulations.gov/.[3]

In response to public comment, the Final Rule incorporates a number of changes from the NPRM. The most significant changes involve the measure for cost effectiveness and the Transportation System Management (TSM) alternative. The NPRM retained the existing incremental cost per incremental rider measure for cost effectiveness, often described as “cost per new rider.” Of the 41 individuals and organizations that submitted comments to the NPRM, 32 addressed this issue.  All were unanimous in their assertion that the cost effectiveness measure should “roll up” additional benefits beyond incremental cost per incremental rider.  The consensus was that focusing on new riders alone ignores benefits to other riders, and thus biases the measure against older cities with “mature” transit systems where the focus of a proposed new start would be on improving service, not attracting new riders.

In response, the Final Rule replaces the “cost per new rider” measure of cost effectiveness with a new measure of “transportation system user benefits” to more accurately address the criteria for cost effectiveness.  This measure is based on the basic goals of any major transportation investment, which are to reduce the amount of travel time and out-of-pocket costs that people incur for taking a trip; i.e., the cost of mobility.  The new Transportation System User Benefits measure of cost effectiveness measures the change in these costs, and accounts for changes to transit, highway, and other modes of travel.  This approach de-emphasizes new riders and measures not only the benefits to people who change modes, but also accounts for benefits within modes (i.e., benefits to existing riders and highway users).

The retention of the TSM alternative in the NPRM was also the subject of substantial public comment.  A total of 13 comments were submitted on this issue, all of them opposed.  Most of the commenters felt that it was unnecessarily burdensome to maintain a TSM alternative for purposes of FTA’s project evaluations under §5309(e), noting that certain incremental system improvements will occur whether the new start is constructed or not; i.e., it is no longer appropriate to view the no-build alternative as a “do nothing” scenario.  The TSM alternative has been used as a consistent baseline to ensure a fair evaluation of proposed new starts projects, nationwide.  However, the realities of modern urban and suburban planning, transportation, and economic development make it virtually impossible to assume that no improvements will occur if a proposed new start is not implemented.  Therefore, the requirement that proposed new starts be evaluated against both a no-build and a TSM alternative has been eliminated in the Final Rule.  Instead, proposed projects will be rated against a single “baseline alternative” agreed upon by project sponsors and FTA.  The baseline alternative is best described as transit improvements lower in cost than the proposed new start, which result in a better ratio of measures of transit mobility compared to cost than the no build alternative; the ``best you can do'' without the new start investment.[4]  The purpose of the baseline comparison is to isolate the costs and benefits of the proposed major transit investment.

The NPRM also indicated FTA’s intent to develop performance measures to evaluate the new starts program for purposes of the Government Performance and Results Act of 1993 (GPRA).  The NPRM invited specific comment on how FTA’s management of the program could be evaluated and the performance of Federal new starts investments could be measured; of the 41 comments received, three addressed these issues.  While the issue of GPRA measures did not generate significant comment, the need for them still exists.  Toward that end, the Final Rule incorporates a two-step data collection process to determine the degree to which projects remain on schedule and on budget once a commitment to fund the project has been made (i.e., an FFGA has been executed), and to measure the success of new starts projects once they are in operation.  For those new starts that are put under FFGAs, FTA will combine before-and-after data with planning projections to evaluate the project in terms of six areas of interest:  project scope, capital costs, operating costs, system utilization (including ridership levels, user characteristics, trip purposes, demographics, etc.), service levels, and external factors relevant to the project.  These data collection activities will be considered an eligible part of the project for funding purposes.

The NPRM also generated significant comment on the overall project ratings of “highly recommended,” “recommended,” and “not recommended” that were established by TEA-21.  Most commenters expressed discomfort with the terms, particularly the term, "not recommended."  The most common concern was that a meritorious project would be rated "not recommended" simply because it had not been sufficiently developed to be rated, and many suggested that new terms be adopted in the Final Rule.  The terms used for the overall project ratings – "highly recommended," "recommended" and "not recommended" – are established in law by TEA-21, and FTA is not at liberty to change them.   However, in response to comments on this issue, the Final Rule adds one-letter indicators to the “not recommended” rating that will indicate where improvement is needed: “J” for project justification, “O” for the operating funding plan, and “C” for the capital funding plan.  Thus, a proposed new start that was found to need improvement in the capital plan would be rated “not recommended (C).”  This will provide project sponsors, State, local, and Federal decisionmakers, and the public at large with a simple means to identify the basis for the project rating.

Finally, public comment on the NPRM recommended that the measure for mobility improvements be refined in the Final Rule.  Specifically, a new factor for destinations has been added for jobs within ½-mile of boarding points on the new system, to complement the existing factor for low-income households within ½-mile of boarding points.

It is important to note that the project evaluation and rating process for the FY 2002 budget request was undertaken before the effective date of the Final Rule; therefore, the information contained in this Report reflects the interim approach used by FTA to evaluate proposed projects under TEA-21 in the absence of this Rule.  This interim approach was based on the existing project evaluation process as published in the Federal Register on December 19, 1996 (and amended on November 12, 1997), modified to account for the increased emphasis on land use by TEA-21 and the prohibition against placing a dollar value on mobility improvements.  Proposed projects will be evaluated under the procedures set forth in the FTA regulation for the FY 2003 budget recommendations, and reported in the 2002 edition of this report.

[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.

[2] The docket is available for inspection from 10:00 a.m. to 5:00 p.m., Monday through Friday (except Federal holidays), at the U.S. Department of Transportation, Central Dockets Office, PL-401, 400 7th Street SW, Washington, DC, 20590.

[3] Once you have accessed the DMS, follow the instructions and perform a search on docket no. 5474 to view the docket for this NPRM. Please note that the DMS requires the use of a “plug-in” to view the individual comments.

[4] In cases where the no-build alternative is found to satisfy the requirements for a baseline alternative, a separate baseline alternative may not be required.