Date: Wed, 18 Aug 2004 11:40:36 -0400
Innovation Brief on FTA's New Starts Program
Ken Orski, Editor, Innovation Briefs
The New Starts Program Receives Low Marks from the House Appropriations Committee
Expressing dissatisfaction with the Federal Transit Administration's existing rating and evaluation process, the House Appropriations Committee has tightened its oversight of the New Starts program. In its report accompanying the Fiscal Year 2005 transportation appropriation, the Committee prescribes a number of new requirements intended to introduce a more disciplined approach to managing the New Starts process. Specifically, the Committee:
Managing Scarce Resources
"The number of potential New Starts projects continues to expand rapidly, outpacing realistic federal funding capabilities," warns the Committee in its report. There are currently 27 projects with existing full funding grant agreements and another 38 projects in preliminary engineering, final design or otherwise proposed for funding. Collectively, the projects are seeking $24.3 billion in federal funding. In addition, FTA is tracking some 140 transit capital investment studies. The funds available for New Starts projects over the next six years can support only a small fraction of these projects. For example, the House-passed authorization bill designates a total of $9.5 billion for New Starts for FY 2004 through 2009. Of this amount, the bill provides $3.1 billion for the 27 transit projects with existing FFGAs. This leaves $6.4 billion to fund other projects over the six-year reauthorization period. Of this amount, $4.0 billion is proposed for the six projects FTA has recommended for FFGAs in its latest annual New Starts report. If these projects are approved, only $2.4 billion would be left to fund the $17.2 billion in estimated costs for the 32 projects remaining in the New Starts pipeline. (The Dulles Corridor rail project alone, which the Committee supports, would account for close to $2 billion in federal support).
New Funding Criteria
The funding situation has obliged the Committee to adopt stricter funding criteria:
The Committee has appropriated a total of $1.189 billion for New Starts in Fiscal Year 2005 (including $158 million in deobligated funds), $343 million less than the administration's budget request of $1.532 billion. Among the projects the Committee has declined to fund are the Charlotte light rail line(seeking a total of $193 million in New Starts funding) and the Raleigh regional rail system ($413.5 million in New Starts funding). FTA had recommended funding those projects outside the FFGA process, describing them as "meritorious and worthy of funding." However, funding projects outside of FFGAs was questioned by the General Accounting Office in its recent report to Congress (FTA Needs to Better Define and Assess Impact of Certain Policies on New Starts Program, GAO-04-748, June 2004). The Committee also refused to fund two proposed FFGA projects: Cleveland Euclid Corridor BRT (seeking a total of $82.2 million in New Starts funding) and Pittsburgh North Shore LRT ($217.7 million in New Starts funding). Both projects received "low" ratings for cost effectiveness in the 2004 Annual New Starts report, but those ratings were subsequently raised to "recommended" in the 2005 New Starts report. While the Committee did not give reasons for turning down those two projects, the sudden elevation of their ratings from one year to the next clearly raised questions in the Committee's minds.
Congestion Reduction as a Selection Criterion
Reducing congestion must be one of the most critical elements for justification of building a new rail system or extending an existing one, in the Committee's view. The Inspector General's audit has found that reduction of highway congestion is largely missing from FTA's evaluation process. "This is unacceptable" states the Committee report, directing FTA to undertake jointly with FHWA an evaluation "showing how congestion relief could be implemented as an evaluation and rating procedure in the New Starts process." "This should be a critical departmental initiative in the next year" the Committee added, instructing FTA to submit monthly progress reports on the status of its analysis and a final report by June 2005.
Cost-Effectiveness and Land Use Effects
"In evaluating projects, the direct transportation benefits need to be the most significant measurements... Positive secondary benefits of a new rail line should not be able to change the measurement of its cost-effectiveness" the Committee has stated. However, this is not how FTA looks at the matter. In FTA's rating and evaluation process, cost-effectiveness accounts for only 50 percent of the project justification rating, while the remaining 50 percent is attributed to land use effects. Thus, a "low" cost-effectiveness rating can be offset by a "high" land use rating. This appears to be the case for the majority of projects proposed for full funding grant agreements in FY 2005, according to the previously cited General Accounting Office analysis (Table 2: "Cost-Effectiveness and Land Use Ratings for Projects Proposed for Funding"). Five of the seven projects proposed for funding received a "low-medium" cost-effectiveness rating , but the project's land use ratings raised their combined project justification ratings to "medium" thus making them eligible for full funding grant agreements. Expressing concern about this outcome (also noted by the Inspector General in his testimony before the Committee), the Committee has directed FTA to report by December 2004 on how the rating and evaluation process should be modified to better reflect the balance between direct vs indirect benefits. The report is to examine the effect of the land use and cost-effectiveness ratings on the overall rating of each project in the New Starts pipeline.
In their report, Chairman Istook (R-OK) and members of the Appropriations Committee make no pretense of being satisfied with the manner in which the New Starts program is currently managed. "Many cities have built or are building systems that are overpriced or underutilized" the Committee stated. "A better process... for the New Starts program and a more aggressive management of the existing process by FTA may prevent wasteful spending.... FTA needs to be more adept at weeding out projects that do not relieve the most congestion, move the most people and have the greatest cost-benefit ratio... The Committee continues to direct FTA to develop a New Starts process that better emphasizes cost-effectiveness and congestion relief."
The agency should take the Committee's instructions to heart. Only a more conservative and rigorous rating and evaluation process will restore the programs' credibility in the eyes of its congressional overseers and engender congressional support for higher levels of funding.
C. Kenneth Orski
korski@erols.com
tel: 301.299.1996
fax: 301.299.4425
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