Section 5309 (Section 3(j)) FTA New Starts Criteria

DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

Section 5309 (Section 3(j)) FTA New Starts Criteria

AGENCY: Federal Transit Administration (FTA), DOT

ACTION: Notice.

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SUMMARY: The Federal Transit Administration (FTA) is issuing this

Notice describing the criteria it will use to evaluate candidate

projects for discretionary New Starts funding under Title 49 United

States Code (U.S.C.) Section 5309 (formerly Section 3 of the Federal

Transit Act (FT Act)). These criteria replace those which have been in

force since the May 18, 1984, Statement of Policy on Major Urban Mass

Transportation Capital Investments. The new criteria, together with the

FTA/Federal Highway Administration (FHWA) planning regulations (23 CFR

Part 450), implement the requirements of Title 49 U.S.C. Section

5309(e) (formerly Section 3(i) of the FT Act), which was modified by

the Intermodal Surface Transportation Efficiency Act of 1991. This

section requires a project to be (``A) based on the results of an

alternatives analysis and preliminary engineering, (B) justified based

on a comprehensive review of its 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 financial sources to

construct, maintain, and operate the [project].'' This Notice sets

forth the approach FTA will use to evaluate candidate projects in terms

of their justification and local financial commitment. These criteria

will be used to evaluate projects in order to make recommendations for

funding these projects in the annual report to Congress required by 49

U.S.C. 5309(m)(3) (formerly Section 3(j) of the FT Act).

EFFECTIVE DATES: This Notice will be used to evaluate projects for

discretionary new start funding recommendations for the 1999 Fiscal

Year.

FOR FURTHER INFORMATION CONTACT: Richard Steinmann, Office of Policy

Development, FTA, Washington, DC. 20590, (202) 366-4060.

SUPPLEMENTARY INFORMATION:

I. Background

Since the early 1970's, the Federal government has provided a large

share of the Nation's capital investment in urban mass transportation,

particularly for ``New Starts'' (major new fixed guideway transit

systems or extensions to existing fixed guideway systems). By the mid-

1970's, because of the magnitude of the New Start commitments being

proposed, the Department found it useful to publish a statement of

Federal policy to ensure that the available resources would be used in

the most prudent and effective manner. The first such statement was

issued in 1976. It introduced a process-oriented approach with the

requirement that New Start projects be subjected to an analysis of

alternatives, including a Transportation System Management alternative

which used no-capital and low-capital measures to make the best use of

the existing transportation system. The Statement also required

projects to be ``cost-effective.''

This policy was supplemented in 1978 by a ``Policy on Rail

Transit.'' This Statement reiterated the requirement for Alternatives

Analysis, established requirements for local financial commitments to

the project, established the concept of a contract providing for a

multi-year commitment of Federal funds, with a maximum limit of Federal

participation (the Full Funding Grant Agreement--FFGA), and required

that local governments undertake supporting local land use actions.

This was supplemented by a 1980 policy statement which linked the

Alternatives Analysis requirement to the Environmental Impact Statement

development process.

These principles were reiterated and refined in a May 19, 1984,

Statement of Policy on Major Urban Mass Transportation Capital

Investments. The major feature of this Policy Statement was

introduction of an approach for making comparisons between competing

projects. To do so, a rating system was established under which

projects were evaluated in terms of a cost effectiveness index of

forecast incremental cost per incremental rider for the build

alternative, compared with the TSM alternative as the base. Further,

index threshold values were established which projects had to pass in

order to be considered for funding. In addition, the criteria to be

used to judge local financial commitment were spelled out.

The principles of the 1984 policy statement were later incorporated

into law with enactment by Congress of the Surface Transportation and

Uniform Relocation Assistance Act of 1987 (STURAA). This act added a

new Section 5309(e) (formerly Section 3(i) of the Federal Transit Act),

establishing in law a set of criteria which New Starts projects must

meet in order to be eligible for Federal discretionary grants.

Specifically, projects had to be ``cost-effective'' and ``supported by

an adequate degree of local financial commitment.'' STURAA also added a

new Section 5309(m)(3) (formerly Section 3(j)), requiring an annual

report to Congress laying out the Department's recommendations for

discretionary funding for New Starts for the subsequent fiscal year.

To implement the requirements set forth in STURAA, on April 25,

1989 FTA (then the Urban Mass Transportation Administration) issued a

Notice of Proposed Rulemaking. The Proposed Rule would have codified

the requirements of the 1984 Policy Statement and proposed making the

``Cost Per New Rider'' Index and

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threshold values regulatory. However, in the FY 1990 and FY 1991

Appropriations Acts, Congress directed that this rulemaking not be

advanced (See the Department of Transportation and Related Agencies

Appropriations Act, 1990 (Pub. L. 101-164) and Department of

Transportation and Related Agencies Appropriations Act, 1991 (Pub. L.

101-516)). On February 3, 1993, this rulemaking was withdrawn.

The Intermodal Surface Transportation Efficiency Act of 1991

(ISTEA) made substantial changes to the legislative basis for the

criteria which the Department is to use with respect to candidate

projects for Section 5309 (formerly Section 3) New Starts funds.

Specifically, the original requirement in Section 5309(e)(2) (formerly

Section 3(i)(1)) that a project be ``cost-effective'' was expanded by

the requirement that the project be ``justified, based on a

comprehensive review of its mobility improvements, environmental

benefits, cost-effectiveness, and operating efficiencies.'' In

addition, 49 U.S.C. 5301 et seq. now also includes certain

``considerations'' in Section 5309(e)(3) (formerly Section 3(i)(2)) and

``guidelines'' in Section 5309(3)(4) (formerly Section 3(i)(3)) to be

taken into account in determining how well the project meets the

criteria set forth in Section 5309(e)(2) (formerly Section 3(i)(1)).

In addition, ISTEA modified the requirements for metropolitan and

statewide transportation planning. These changes were then reflected in

the modifications to the joint Federal Highway Administration (FHWA)/

FTA planning regulations made on October 28, 1993. The most significant

change under these regulations in the context of New Starts funding is

the requirement that all major transit and highway capacity expansions

be subjected to a Major Investment Study (MIS) before a specific major

investment project is included in local transportation plans or

Transportation Improvement Programs. While not a direct product of

statutory mandate, the MIS process reflects the general policy

direction of ISTEA. This change integrates the requirement for an

alternatives analysis of major transit investments contained in Section

5309(e) (formerly Section 3(i)) into the ongoing transportation

planning process. In addition, it requires that Major Investment

Studies be conducted on a multimodal basis.

Executive Order 12893, signed by President Clinton on January 26,

1994, describes the principles which Federal agencies are to apply in

determining how to invest in all forms of infrastructure, including

transportation. The Order requires a systematic analysis of the costs

and benefits of proposed investments, and sets out the parameters for

such analysis. The Order calls for efficient management of

infrastructure, including a focus on the operation and maintenance of

facilities, as well as the use of pricing to manage demand. Private

sector participation in investment and management of infrastructure is

encouraged. Federal agencies are also to encourage State and local

governments to implement planning and management approaches which

support these principles. The Executive Order calls for comparison of a

comprehensive set of options and consideration of quantifiable and

qualitative measures of benefits for all programs.

Each year FTA submits to Congress a report on the level and

allocation of funding to be made available under the New Starts

program, as required by Section 5309(m)(3) (formerly Section 3(j)). In

an attempt to broaden the information provided in a manner that was

consistent with the revised allocation criteria of ISTEA, the FY 1994,

1995 and 1996 reports included several indices for each proposed

project, where they were available. Thus, rather than relying only on a

single measure with a specific threshold, FTA has relied on a

combination of a variety of factors to determine project merit,

consistent with ISTEA:

For cost-effectiveness, the ``cost per new transit trip''

measure;

A rating of the level of mobility improvement afforded by

the project, based on the projected total number of hours of travel

time saved per day by the project, when compared with the baseline

alternative [10,000 or more hours saved was rated ``high,'' fewer than

10,000 hours saved was rated ``medium,'' and projects anticipated to

increase total travel time were rated ``low''];

For environmental benefits, the U.S. Environmental

Protection Agency classification of the city for ozone [``extreme,''

``severe,'' ``serious,'' ``moderate,'' ``marginal,'' ``sub-marginal,''

``transitional,'' and ``attainment''] and for carbon monoxide

[``serious,'' ``moderate,'' ``not classified,'' and ``attainment''], as

an indication of the severity of the region's air quality problem

(these classifications do not indicate the extent to which the proposed

project might impact local air quality but they are relevant to whether

or not the project might be exempt under Section 5309(e)(6) from

justifications that would otherwise be required); and

For operating efficiencies, the estimated reduction in

systemwide operating cost per passenger, [a 5 percent or higher

reduction was rated ``high,'' a smaller reduction was rated ``medium,''

while an increase in per passenger costs was rated ``low''].

In addition, FTA has given significant weight in these reports to

the readiness of projects to progress and the local financial

commitment to the projects in determining which projects to recommend

for funding.

FTA's evaluation of the local financial commitment to a proposed

project focuses on the proposed local share of project costs, the

strength of the proposed capital financing plan, and the stability and

reliability of sources of operating deficit funding. Local share refers

to the percentage of capital costs to be met with non-discretionary

funding, and includes both the local match required by Federal law and

any capital ``overmatch.'' Overmatch is accounted for in the rating

process because it reduces the required Federal commitment, thus

leveraging limited Federal funds, and because it indicates a strong

local commitment to the project.

The evaluation of each project's proposed capital financing plan

takes two principal forms. First, the plan is reviewed to determine the

stability and reliability of each proposed source of local match. This

includes a review of inter-governmental grants, tax sources, and debt

obligations. Each revenue source is reviewed for availability within

the project timetable. Second, the financing plan is evaluated to

determine if adequate provisions have been made to cover unanticipated

cost overruns. The strength of the capital finance plan is rated high,

medium, or low.

The third component of the financial rating is an assessment of the

ability of the local transit agency to fund operation of the system as

planned once the guideway project is built. This rating focuses on the

operating revenue base and its ability to expand to meet the

incremental operating costs associated with a new fixed guideway

investment and any other new services and facilities.

II. Policy Discussion Paper

In order to generate comment from the public on the best approach

FTA could take to implement the changes required by ISTEA in the

context of the Executive Order, on September 28, 1994, FTA issued a

Policy Paper entitled ``Revised Measures for Assessing Major

Investments: A Discussion Draft.'' The paper was circulated to a broad

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audience, including State and local governments, transit agencies,

Metropolitan Planning Organizations (MPOs), consultants, and other

interested parties. Comments were requested on the paper and all

aspects of the issue, due November 1, 1994, although FTA continued to

accept comments received through December 15, 1994. The following

summarizes the discussion paper.

The paper laid out FTA's objectives for developing new criteria and

procedures for appraising candidate new start projects, responsive to

the ISTEA mandate. In sum, FTA believed that its appraisal procedures

should seek to be comprehensive, effective, efficient, objective, and

comprehensible.

The paper noted that the key issue in deciding on an appraisal

approach is balancing ``comprehensiveness'' and ``simplicity.''

Three approaches were described: (1) A full Social Cost Benefit

Analysis (SCBA), where an attempt is made to identify all costs and

benefits and reduce them to dollar terms; (2) scoring methods in which

projects are rated against a set of criteria, scores for each are

assigned, weights for each are established, and composite scores

calculated; and (3) a multiple measure method in which projects are

evaluated against several criteria, results are displayed, but no

effort is made to develop a single composite score.

The paper indicated FTA's preference to use a strategy based on the

concepts of SCBA, but which uses a multiple measure method to evaluate

the costs and benefits identified. In this way, the merits of each

candidate project can be weighed explicitly against the full range of

criteria called out in ISTEA. In addition, both market and nonmarket

benefits would be weighed equally. All of the four major elements

mentioned in ISTEA--mobility improvements, cost-effectiveness,

operating efficiencies, and environmental benefits--would be fully

considered. In addition, the approach would take into account the

``considerations'' included in Section 5309(e)(3) (formerly Section

3(i)(2)), particularly land use policies and patterns.

Based on a detailed review of a wide range of candidate measures,

the paper suggested use of the following measures as a means of

assessing how well candidate New Starts projects are ``justified'':

1. For ``cost-effectiveness''--the total incremental cost per

incremental transit passenger-trip (or possibly, per incremental

passenger-mile in certain cases), where the projected streams of

capital and net operating costs and passenger-trips have been (in the

case of the costs) expressed in constant dollar terms, and (in all

cases) both cost and ridership have been discounted at the social

discount rate, compared to the Transportation System Management (TSM)

alternative.

2. For ``mobility improvements''--(1) the projected aggregate value

of travel time savings per year (forecast year) anticipated from the

new investment compared to the TSM alternative. This aggregate includes

the travel time impacts on people using competitive modes, along with

those on the trips made by transit (both new and former transit

riders). It is a net figure in the sense that travel time increases

should be explicitly considered and used to offset the time savings of

those people who experience savings. It would be expressed in absolute

and regional percentage change terms. It would be valued using a set

percentage of the average wage rate in the urbanized area. (2) the

absolute number of zero-car households (or alternatively, the people

resident in those households) located within \1/2\ mile of boarding

points for the proposed system increment, compared to the TSM

alternative.

3. For ``operating efficiencies''--(1) the forecast change in

operating cost per vehicle service-hour (or service-mile), for that

part of the system that will be directly affected by the proposed new

investment, expressed in absolute and regional percentage change terms,

compared to the TSM alternative. (2) the forecast change in passengers

per vehicle service-hour (or service-mile), calculated on the same

basis, also expressed in absolute and regional percentage change terms,

compared to the TSM alternative. (3) the forecast change in passenger

miles per vehicle service-hour (or service-mile), calculated on the

same basis, also expressed in absolute and regional percentage change

terms, compared to the TSM alternative.

4. For ``environmental benefits''--(1) the value of the forecast

change in criteria pollutant emissions and in greenhouse gas emissions,

ascribable to the proposed new investment, discounted and levelized,

expressed in absolute and regional percentage change terms, compared to

the TSM alternative.

The value of the emissions would be calculated based on

standardized assumptions about the unit value of each emission. (2) the

forecast change in the consumption of fuels of different types,

ascribable to the proposed new investment, discounted and levelized,

expressed in absolute and regional percentage change terms, compared to

the TSM alternative.

5.For ``transit supportive existing land use policies and future

patterns''--the degree to which local land use policies are likely to

foster transit supportive land use, measured in terms of the kinds of

policies in place, and the commitment to these policies.

The paper indicated FTA's view that this set of indicators best

addresses the most significant issues related to project justification

identified in the revised language of Section 5309(e) (formerly Section

3(i)). The paper noted that FTA intended to continue using the present

approach to assess local financial commitment issues (as required by

Section 5309(e)(2)(C) (formerly Section 3(i)(1)(c)). In addition, the

paper noted that the proposed set of indicators provides for an

assessment which fully considers major benefits, including those which

cannot easily be quantified or monetized. Moreover, while there were

some obvious interrelationships among the indices, ``double-counting''

was minimized by keeping them relatively independent.

It is important to note that the paper proposed a different

approach to measuring ``cost-effectiveness'' than the ``cost-per-new-

rider'' measure (really incremental cost per new transit ride)

previously used by FTA. That measure included not only cost and

ridership projections, but also attempted to account for mobility

effects by using monetized time savings as an offset to costs.

Additionally, the threshold values specified for that measure

implicitly made generous allowances for the inclusion of environmental

and safety issues on a comparable basis. The proposed measure defined

``costs'' more narrowly, comprising only the monetary value of

construction, operations, and maintenance. This is because the mobility

and environmental considerations were addressed explicitly by other

proposed measures.

The paper indicated that another major difference in the proposed

new cost-effectiveness measure was that it included annualized,

levelized costs and ridership differences calculated over the analysis

period, rather than costs and ridership differences calculated based on

a single forecast year. While past practice has included estimates of

costs on a year-by-year basis over the analysis period, accurate

assessment of the ridership impacts could require multiple ridership

forecasts (for example, the year of opening, the forecast year, and the

year at the end of the analysis period). The paper also acknowledged

that it may be possible to synthesize forecasts of the year of opening

and year at the end of the forecast period using forecast year

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results and well known factors relating typical trends in ridership for

new transit investments. The paper asked for views on how much

additional effort would be required to calculate estimated ridership

impacts for multiple forecast years. It also asked for views on how

much accuracy would be gained by such multiple forecasts, compared with

reliance on synthesized forecasts based on typical trends in ridership

growth.

The paper noted that FTA was considering a change in the approach

for valuing travel time savings from past practice. In the past, FTA

specified the use of $4.80 per hour of travel time savings for work

trips and $2.40 per hour of travel time savings for non-work trip, for

use in calculating the offset to costs. This value was based on a

factor of 40 percent of the national average wage rate for work travel,

and one-half this amount for non-work travel. The paper cited recent

analysis of the valuation of time in other programs of the Department

of Transportation and elsewhere in government that suggested that this

value is inconsistent with these other practices. For example, analysis

of models used by the Federal Highway Administration indicates use of a

much higher factor of wage rates for travel time savings. Accordingly,

FTA is participating with other elements of the Department to develop

consistent approaches for valuing travel time savings. The paper stated

that, in the interim, FTA expected to use a factor of 80 percent of the

local wage rate for calculating the value of travel time savings.

The paper noted also that, in the past, FTA did not attempt to

value the environmental benefits of transit investments. The benefits

of emission reductions can take a variety of forms, such as improved

visibility, crop yields, and public health. The Environmental

Protection Agency (EPA) is currently developing, pursuant to Section

812 of the Clean Air Act, standard monetary values of such benefits.

The paper stated that the results of this analysis were expected to be

available in 1995, and may be used to evaluate the environmental

benefits of transit.

Absent standard values of the benefits from emission reductions,

the paper noted that ``avoided cost'' is an inferior, but potentially

useful approach. The avoided cost approach, which generally is only

applicable to nonattainment and maintenance areas, uses standard unit

costs of pursuing alternative means of achieving emission reductions as

a proxy for the benefits of such emission reductions. Some EPA analyses

have, in the past, used the avoided cost approach.

Pending further analysis by EPA and additional work by FTA with

other agencies within and outside the Department of Transportation, the

paper stated that FTA intended to use values based on avoided cost as

an interim proxy for the benefits of emission reductions in the

relevant nonattainment/maintenance areas.

The paper noted that the standard unit values proposed were based

on nationwide averages and, therefore, did not reflect the fact that

the cost of achieving emission reductions by alternative means varies

depending on project location. The paper stated that if the

environmental impacts of a proposed transit project are significant,

additional analysis to develop an avoided cost relevant to that

specific nonattainment/maintenance area would be appropriate.

The paper indicated that the set of measures recommended was

selected to be mindful of the need for multimodal project appraisal

measures. While the measures included in FTA's revised New Starts

Criteria will be used primarily by FTA to make informed decisions about

project ratings in the annual Report on Funding Levels and Allocations

of Funds, required by 49 U.S.C. 5309(m)(3) (formerly Section 3(j) of

the FT Act), an effort had been made to make some of the measures

applicable at the local level when multimodal studies are conducted.

The paper indicated that an examination of nine prototypical

Alternatives Analysis/Draft Environmental Impact Studies (AA/DEIS)

suggested that the new indices should be calculable in the major

investment study phase of planning without significant extra work on

the part of local project sponsors.

The paper indicated FTA's intention to apply the proposed measures

to projects which have not yet completed the Alternatives Analysis

process. Projects which were in Preliminary Engineering would not have

been required to undergo the additional analysis. These projects would

have been evaluated based on existing data.

The paper stated that the criteria proposed were intended to be

interim measures. As noted earlier, SCBA forms a useful tool for

analyzing the worthiness of public investments. However, the key to

successful SCBA is the proper accounting for and monetizing of the full

range of the benefits of a proposed investment. The paper stated that

it is FTA's belief that while it is possible to quantify and monetize

many of the benefits of transit investments, as evidenced by the

approach proposed, ascribing a monetary value to many of the benefits

is particularly difficult.

This is particularly true in the absence of Government-wide

standard values for some of the benefits which may be ascribed to

transit projects. In addition, there was an absence of general

agreement on even the valuation of certain other benefits, such as

those related to the land use effects of transit investments.

This lack of Government-wide standard values or generally agreed

valuation was given as the key reason why FTA would be unable to use

SCBA as the sole recommended approach at this time. In the paper, FTA

indicated its intention to conduct research into the valuation and

monetization of the benefits of transit investments in order to develop

an accepted approach. As this research proceeds, FTA intends to apply

it to the quantified benefits of the investments being considered, in

order to move closer to a complete SCBA approach. This research should

permit FTA to begin to construct partial indices of costs and benefits

as part of its evaluation of project worthiness. With time, more

complete indices can be constructed, ultimately resulting in a full-

fledged SCBA approach.

In addition to requesting comments on the specifics of the criteria

proposed, FTA also asked that the following questions be specifically

addressed in replies:

1. Are there other ways FTA could manage the ``New Starts'' program

and still comply with statute (e.g. , industry standards and

measurements which FTA accepts and utilizes for the Section 3(j)

Report)?

2. What are the key issues in monetizing transit's benefits? What

information is now available? What are the most fruitful areas for

research?

3. What approaches are available for valuing travel time savings?

How should the value of travel time savings be set? Is a value based on

average wage rates appropriate? Is 80 percent appropriate? Is it

appropriate to use different values by trip purpose? By mode? By type

of time saved (e.g. wait time versus in-vehicle time)?

4. What approaches are available for valuing emission reductions?

How should the values of unit emission reductions be set? Are the

values suggested by EPA based on cost-avoidance appropriate?

5. Is the overall appraisal strategy (i.e., use of the multiple

measure method) appropriate? Can the use of this strategy be made

workable without explicitly specifying how FTA will trade off between

the criteria? Should FTA, instead, specify that it will explicitly

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weight one or more of the criteria more heavily? If so, which one(s),

why and how?

6. Are the particular measures proposed for each of the ISTEA

justification criteria appropriate? Do the proposed measures adequately

represent the criteria called out in Section 5309(e) (formerly Section

3(i))? Are the proposed measures workable? Can data be developed for

the measures as part of the normal process of evaluating major

investments? Are the measures likely to be able to distinguish between

projects of varying merit?

7. How can FTA assure the quality of the data submitted in support

of proposed projects in terms of the measures proposed when Major

Investment Analyses are to be conducted as part of the Metropolitan

Planning Process, as called for in the Final Rule on planning, issued

October 28, 1993? How can FTA assure consistency among cities in terms

of modeling input assumptions (e.g., gasoline prices, inflation rates,

or modeling methods)? Must it?

8. Is this approach sufficiently quantifiable to allow for the

Secretarial findings and determinations for funding required by the

Federal Transit Act, and for FTA ranking among candidate projects?

9. How much additional effort is involved in calculating the

proposed annualized, levelized cost-effectiveness index using multiple

forecasts of ridership impacts? How many different year forecasts are

needed to accurately portray the stream of ridership impact benefits?

Which years are most appropriate to forecast (year of opening, forecast

year, last year of analysis period, other years)? How much additional

accuracy is gained compared to synthesizing the stream of ridership

impacts using a single forecast year and known trends in ridership

growth for new investments?

III. Summary of Comments on Discussion Paper

At the close of the comment period, a total of 31 responses had

been received. Comments were received from 13 transit operators, nine

Metropolitan Planning Organizations (MPO's), three State DOT's, two

Councils of Government, one county government, one city government, one

university, and one major organization representing the interests of

the transit industry (on behalf of 13 transit operators, two MPO's, 12

consultants, and two local governments).

Four central issues emerged from these comments. First, there was

considerable confusion regarding the relationship between the proposed

policy revisions and the Major Investment Study (MIS) process required

under the joint FTA/FHWA planning regulations. Specifically, 16

responses (including the transit industry group's) spoke to this issue,

either directly or by noting that the criteria should apply to both FTA

and FHWA projects.

The MIS process requires an evaluation of alternatives using

criteria such as cost effectiveness; mobility improvements; social,

economic, and environmental effects; safety; operating efficiencies;

land use and economic development; financing; and energy consumption.

The information generated through this process will be used as the

primary source of information for the purposes of 49 U.S.C. 5309(e)

(formerly Section 3(i) of the FT Act).

This Notice clarifies the intent of the revised FTA criteria,

making it clear that the intermodal decisionmaking process is carried

out on the local level as part of the MIS and affirming that FTA will

use the criteria only for purposes of allocating discretionary New

Starts funds. Accordingly, the name has been changed from ``Major

Investments Criteria'' to ``Section 5309 (Section 3) FTA New Starts

Criteria'' to reflect the true role of the policy in evaluating

projects for the purposes of recommending discretionary Federal funding

allocations. It also notes that the criteria are interim until a fully-

defined multimodal cost-benefit method is developed. Finally, it

reiterates that local MIS decisions are based on local criteria and

policies, and that the FTA criteria are to be used for Federal funding

recommendations in the annual Report on Funding Levels and Allocations

of Funds.

However, this Notice does not (and cannot) address immediate

concerns that highway projects are not required to undergo similar

evaluation at the Federal level. There is a fundamental difference

between FTA and FHWA capital investment programs. The FTA New Starts

program is discretionary in nature, and requires a determination by the

Secretary of Transportation that a project meets the statutory

justification criteria. The measures described in this notice will be

used to determine whether those criteria have been met, and to make

comparisons among projects for funding purposes. FHWA funds highway

projects through a formula program; once the planning process has

identified a highway project as the best alternative, it is funded out

of the formula funds apportioned to that State. There is no requirement

for a separate determination of project justification at the Federal

level.

It is important to note, however, that the same local evaluation

process should apply to both highway and transit alternatives being

considered in an MIS. It is only after the MIS process has resulted in

the selection of a project at the local level, and funding is sought

from FHWA or FTA, that the programmatic differences in Federal capital

investment programs become an issue.

The second central issue involved the use of the Transportation

System Management (TSM) alternative as the base for evaluating the

benefits of the proposed New Start project. The transit industry group

commented that the distinction between the TSM and no-build (or ``do-

nothing'') alternatives was becoming blurred as regions implement

Congestion Management Systems under the planning regulations. Seven

other comments raised the same issue.

The argument in favor of the TSM basis has been that it provides a

level playing field for evaluation of projects on a nationwide basis.

Use of the no-build scenario as the baseline, the argument goes, would

introduce a bias against cities with an already-significant commitment

to transit; the incremental benefits of a new start would appear

smaller than for cities with less existing transit.

The transit industry group argued that requiring a separate TSM

alternative is no longer realistic, given requirements for regions to

develop Congestion Management Systems (CMS) under the joint planning

regulations. These cities will be required to take some steps to

improve congestion, whether or not a new transit system is built. In

essence, the argument goes, the no-build alternative becomes the TSM

alternative. However, CMS strategies are only candidates for inclusion

in long-range plans, and do not necessarily fit the definition of a no-

build alternative which includes existing and committed projects and

policies. The TSM alternative allows the comparison of more costly new

start projects against lower-cost alternatives in order to determine

the extent to which travel benefits may be generated at less cost; to

focus on doing more with less.

FTA is not persuaded that the transportation strategies developed

in response to CMS requirements completely eliminate the need for

studying system management-related alternatives to a new start.

However, the argument has merit. In response to these comments, the

final policy statement calls for evaluation of the new start

alternative against both the TSM

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alternative and the no-build case. This will provide a better

assessment of the relative benefits of each than would a comparison

between build and TSM scenarios, and TSM and no-build.

The third issue concerned the proposed use of multiple forecast

years for evaluating costs and benefits, to account for the fact that

the benefits from transit accrue over time. The comments almost

universally indicated that the effort involved in calculating benefits

for multiple forecast years would far outweigh the small gains in

accuracy. This point was made by 12 of the commenting entities, though

two supported the proposal.

The discussion draft proposed the use of three forecast years:

system opening, forecast year, and the end of the forecast period

(years 7, 15, and 30). The intent was to increase the accuracy of

ridership impact assessments, which accrue over time. However, the

consensus of the comments received on this issue was that the

additional cost and effort involved in using multiple forecast years

far outweighed any gains in accuracy over single-year forecasts.

In response to these comments, the final policy statement adopts a

single forecast year methodology, using year 20 of the analysis period.

Opening year forecasts performed by project planners would be used for

financial analysis and to verify the likelihood of ridership forecasts.

This is consistent with current industry practice under existing FTA

evaluation methodology, and does not increase the local planning

burden. It is also consistent with requirements for a 20-year planning

horizon for the transportation plans required by the joint FTA/FHWA

planning regulations.

The final central issue involved the need to ensure the accuracy of

the data and modeling inputs (such as gasoline prices and inflation

rates) used for project evaluation. Fifteen comments were received to

the specific question posed for this issue; the responses indicated a

need to consider local conditions and policies in project evaluations,

but also were strongly in favor of applying consistent standards to all

projects. However, opinion was divided as to whether national standards

or local policies and criteria should take precedence. The transit

industry group suggested a peer review process to set consistent

standards for project evaluation.

In order to balance the need for consistent national standards with

the industry desire for input into standard modeling assumptions, the

final policy statement calls for FTA to develop and issue advisory

guidance to be provided through training, documented case studies, and

preparation of manuals of best practice. Industry peer groups will

review specific projects to determine the degree of consistency of

modeling inputs and their relative success. This meets both the need

for consistent national standards and the desire of the transit

industry to have input into the standard modeling assumptions. It also

retains FTA involvement in assuring data quality while avoiding the

impression of mandated Federal standards.

These central themes emerged from comments to the nine questions

posed in the discussion draft. These questions and a summary of the

responses are outlined below:

Question 1: ``New Starts'' Program Management

The discussion draft solicited comments as to whether there might

be other ways FTA could manage the ``New Starts'' program and still

comply with statute.

Comments: The responses to this question generally indicated that

the proposed policy represents an improvement over the existing

process. The transit industry group commented that, under a narrow

interpretation, the statute does not require comparisons among

projects. They would prefer that FTA rely on MIS results to justify a

project, and simply report this information in the annual Report on

Funding Levels and Allocations of Funds. Other responses noted an

apparent disconnect between the major investment policy and the MIS

process required under the FTA/FHWA planning regulations.

Question 2: Monetizing Transit Benefits

Comments were solicited concerning the key issues in monetizing

transit's benefits; specifically, what information is now available,

and what are the most fruitful areas for research.

Comments: The most frequent response was that local needs and

priorities vary to the extent that monetizing benefits may not be

relevant for national comparisons. Other benefits, such as reduced wait

times, fewer transfers, and better reliability are not so easily

monetized.

Suggested areas for research included the exploration of ``shadow

pricing'' to account for factors such as the ability to forgo a second

car or the benefit to the region of having a ``backup'' transportation

mode; the marginal cost of transportation alternatives; and

quantification of the ``cost avoidance'' benefits of transit, such as

social and economic costs and long-term energy and environmental

benefits.

Question 3: Value of Travel Time Savings

Comments were solicited regarding available approaches for valuing

travel time savings; methods for setting the value of travel time

savings; use of values based on average wage rates; and use of

different values by trip purpose, mode, and time saved.

Comments: Nearly a third of the responses to this question

addressed the need to account for regional variations in prevailing

wage rates; otherwise, this measure would be biased in favor of larger

areas with higher costs of living.

Comments from the transit industry group indicated that its members

could not reach consensus as to whether local or national wage rates

were more appropriate. As an alternative, it suggested that time is a

limited resource that should be conserved, and the measure should be

expressed as a percentage of time saved due to a major investment.

Opinion was split as to whether different values by mode or trip

purpose were appropriate.

Question 4: Value of Emissions Reductions

The discussion draft solicited comments on available approaches for

valuing emission reductions, setting values for emissions reductions,

and the use of EPA cost-avoidance values.

Comments: There was general agreement among those who responded to

this question that the cost-avoidance method is acceptable, though some

cautioned that this approach undervalues the true cost of emissions.

One transit operator in a western state suggested that market values be

permitted in areas where programs exist for buying/selling emissions

credits.

There was some concern that the use of a single national standard

would not reflect regional air quality situations. Others cited the

need for a measure that was meaningful to the average citizen, such as

``pollution per mile.''

Question 5: Use of Multiple Measures

Comments were solicited on the appropriateness of the overall

strategy (i.e., use of the multiple measure method). Specifically,

input was sought on whether this strategy can be made workable without

explicitly specifying how FTA will trade off between the criteria, or

whether FTA should, instead, specify that it will explicitly weigh one

or more of the criteria more heavily.

Comments: The respondents generally agreed that the multiple

measure method proposed is appropriate. Opinion was split as to how (or

[[Page 67099]]

whether) the criteria should be weighted. Some favored no weighting,

others asked that FTA specify which criteria would be more heavily

weighted, and others said that the weights should be determined

locally. The transit industry group supported an unweighted system as

being more consistent with an emphasis on local goals and values.

There was also general agreement among the commenters that the

criteria should be multimodal; i.e., developed jointly by FTA and FHWA

and apply to both highway and transit projects. Many asked how this

process related to the MIS.

Question 6: Proposed Justification Measures

Comments were sought on the appropriateness of the proposed

measures for each of the ISTEA justification measures, whether the

proposed measures adequately represent the criteria called out in

Section 5309(e) (formerly Section 3(i)), whether they are workable,

whether data can be developed for the measures as part of the normal

process of evaluating major investments, and whether the measures are

likely to be able to show a distinction between projects of varying

merit.

Comment: The use of zero-car households as a basis for evaluating

mobility improvements generated substantial comment. Most comments

indicated that this measure did not adequately capture the basic

mobility function of transit. Suggested alternatives included

automobiles per capita, the number of low-income households within \1/

2\-mile of boarding points, and a measure accounting for relative time

savings from areas of high transit dependence to critical destinations.

Opinion was scattered regarding measures for operating

efficiencies. Among the comments that specifically addressed the

measures proposed, there was some consensus that passenger-based

measures were preferable to vehicle-based measures.

Most comments on the criteria for transit-supportive land use

concerned the difficulties involved in determining what to measure.

Problems cited included the difficulty of obtaining regional land-use

commitments before a project has been approved, the subjectivity of

this measure, and the difficulty in making comparisons from region to

region.

Question 7: Quality and Consistency of Data

The discussion draft specifically requested comment on how FTA can

assure the quality of the data submitted in support of proposed

projects in terms of the measures proposed, and how to assure

consistency among cities in terms of modeling input assumptions.

Comments: Responses to this question generally supported the need

to ensure quality and consistency of data through fair and consistent

inputs. The transit industry group spoke to the need to ensure

consistency with respect to basic modeling inputs, and recommended a

peer review within the industry to accomplish this.

Other suggested methods included relying on FTA-established

standards and guidelines and relying on the results of the MIS process.

Question 8: Quantifiability of Approach

Comments were solicited concerning whether this approach is

sufficiently quantifiable to allow for the Secretarial findings and

determinations for funding required by the Federal Transit Act, and for

FTA ranking among candidate projects.

Comments: There was general support for the multiple-measure

approach, tempered with concern of a return to the use of a single

number for comparison purposes. The transit industry group expressed

support for greater use of qualitative methods and a descriptive

ranking of projects.

Two responses commented that the overall approach favors extensions

to existing systems over new systems.

Question 9: Additional Effort for Multiple Ridership Forecasts

The discussion draft solicited comments regarding the additional

effort involved in calculating the proposed annualized, levelized cost-

effectiveness index using multiple forecasts of ridership impacts, and

how much additional accuracy is gained.

Comments: Almost all of the responses to this question indicated

that the additional effort required for multiple forecast years far

outweighs any gains in forecast accuracy, and that such an effort was

tremendously burdensome when compared to requirements for highway

projects.

FTA also received substantial comment on the specific measures

proposed for the individual project justification criteria that were

incorporated into the multiple measure method. Specifically, projects

would be evaluated according to the following five criteria: cost

effectiveness, mobility improvements, operating efficiencies,

environmental benefits, and transit-supportive land use policies. These

criteria are specified in 49 U.S.C. 5309(e) (formerly Section 3(i) of

the FT Act). The transit industry group recommended a sixth evaluation

criterion for ``system development and performance,'' which would

measure the historical and projected level of commitment a region must

have in order to have a successful high-capacity transit project.

Criteria: Cost Effectiveness

The proposed measure for cost effectiveness was the total

incremental cost per incremental passenger-trip (or -mile), where the

projected streams of capital and net operating costs and passenger

trips have been expressed in constant dollar terms and both cost and

ridership have been discounted at the social discount rate. This was a

departure from the current ``cost per new rider'' method, which assigns

costs and benefits to passengers assumed to have been diverted from

private vehicles.

Comments: Most of the comments received objected to a measure based

on costs per ``new rider,'' contending that it is confusing to the

public and decisionmakers, and that it does not account for the many

intangible benefits of transit. Some (including the transit industry

group) supported a modified Social Cost Benefit Analysis (SCBA), even

though the discussion draft outlined several pitfalls with applying

this type of analysis to transit projects.

The transit industry group proposed that, if a ``modified'' SCBA

approach could not be used, a ``descriptive'' approach would be the

next best alternative. FTA would classify each project, based on a

comprehensive review of the other measures, as ``Cost-Effective,''

``Marginal,'' or ``Not Cost-Effective.''

Response: After much consideration, FTA has retained the use of a

single ``cost-per-incremental-rider'' index. While not a perfect

measure, it has the advantage of retaining the only ``hard'' number in

the evaluation process. It is also more easily understood than abstract

ratings of ``high,'' ``medium,'' or ``low.'' Further, dropping the

index would appear to be a step back from a true cost-benefit analysis,

when FTA is in fact moving toward a more complete assessment.

The new cost-per-incremental-rider measure has been revised from

the traditional index, which subtracted the value of travel time

savings from annualized incremental costs. The index will now be

calculated using only the

[[Page 67100]]

projected change in annual transit ridership and total (Federal and

local) capital investment and operating cost. Because travel time

savings are now reported separately in assessing mobility improvements,

this measure will focus exclusively on incremental ridership. The

aggregate change in systemwide annual ridership will also be reported.

Criteria: Mobility Improvements

The proposed measures for mobility improvements included (1) the

projected aggregate value of time savings per year (forecast year)

anticipated from the new investment, compared to the TSM alternative,

valued as a percentage of the average wage rate in an urbanized area;

and (2) the absolute number of zero-car households (or residents of

those households) located within \1/2\-mile of boarding points for the

proposed system increment.

Comments: Most of the comments received on this measure addressed

the need to account for regional variations in prevailing wage rates;

otherwise, commenters said, this measure would be biased in favor of

larger areas with higher costs of living.

The transit industry group indicated that its members could not

reach consensus as to whether local or national wage rates were more

appropriate. As an alternative, it suggested that time is a limited

resource that should be conserved, and the measure should be expressed

as a percentage of time saved due to a major investment.

Nearly all comments objected to the use of zero-car households as a

basis for measuring basic mobility. The transit industry group

suggested that low-income households be used instead of zero-car

households, and recommended an additional measure of mobility including

the number of jobs within 30-45 minutes transit travel time and the

number of low-income households within 30-45 minutes travel time of

jobs. This group's comments also suggested that travel time savings

should be ``net'' across all modes (highway and transit) and exclude

those who shift to transit and incur longer travel times by choice

(arguing that for these people, other intangible benefits outweigh the

extra travel time). Including projected changes in highway travel times

associated with the proposed transit project, the comment suggested,

would account for the overall effect on mobility in the corridor.

Response: FTA recognizes the need to consider that people who

switch to transit can incur longer travel times but are gaining other

benefits (such as reduced travel under congested conditions, improved

ride quality, reduced overall commuting costs, etc.). Therefore, any

such travel time increase should not be counted against overall travel

time improvements for new riders. FTA has therefore adopted a consumer

surplus approach in the final policy statement, which will account for

the aggregate value of travel time savings and other travel benefits

for new riders. Travel time savings and other travel benefits for

existing transit riders and remaining highway users would be included

in the overall measure. Values would be expressed in terms of the

dollar value of the projected travel benefits for the project study

area. The value of travel time would be set at 80 percent of the

average wage rate in the urbanized area. This approach provides a

better picture of overall mobility improvements associated with a

proposed major investment.

FTA is also persuaded that the use of zero-car households as a

measure for basic mobility is much more problematic than using low-

income households. Therefore, the final policy statement uses the

absolute number of low-income households located within \1/2\-mile of

boarding points associated with the proposed system. This measure is

not limited to stations that are part of the proposed project, and

includes boarding points that will feed into the new system.

Criteria: Operating Efficiencies

The discussion draft proposed that the measure for operating

efficiencies be based on (1) the forecast change in operating cost per

vehicle service-hour (or -mile) for the part of the system affected by

the new investment, expressed in absolute and regional percentage

terms, (2) the forecast change in passengers per vehicle service-hour

(or -mile), and (3) the forecast change in passenger-miles per vehicle

service-hour (or -mile).

Comments: The transit industry group suggested that the measures

for operating cost and passengers per vehicle service-hour or -mile

would be more meaningful if a common base were used when comparing

projects. They recommended a ``bus equivalent'' capacity measure based

on the standard 40-foot transit bus, which is similar to the passenger-

car equivalent measure used for highway performance in the Highway

Capacity Manual issued by the Transportation Research Board. Standard

industry capacity measures such as place-miles or seat-miles are not

easily understood by the public, and the use of revenue vehicle-miles

without accounting for the vast differences in capacity of the various

transit modes is misleading. Use of the bus equivalent provides for a

more accurate view of efficiency, considering the larger capacity of

rail cars, and makes rail alternatives look (correctly) better than if

unweighted vehicle miles are used.

The industry group's comments also suggested that the measure for

the forecast change in passenger-miles per vehicle service-hour (or -

mile) be dropped. This measure would be helpful in true multimodal

comparisons, such as comparing fixed-guideway transit projects to High-

Occupancy Vehicle projects and/or highway improvements, but would tend

to be equal for alternatives of similar length and therefore of limited

use.

Response: While FTA agrees that the bus-equivalent capacity measure

will perhaps be more easily understood by the public than seat-miles or

place-miles, especially when comparing among bus and rail modes, such

measures may actually be more confusing to local and Federal

decisionmakers accustomed to traditional measures of capacity. In

addition, a ``bus-equivalent vehicle-mile'' measure would impart an

additional analysis and reporting requirement on project sponsors. In

order to avoid adding burdensome additional requirements to the local

project development process, FTA has adopted for this measure the

forecast change in operating cost per passenger-mile, for that part of

the system that will be directly affected by the proposed new

investment, expressed in terms of absolute dollar value. This will

focus attention on the overall change in costs to produce a unit of

service for the customer. Further, it avoids the problems inherent in

making comparisons across modes which use vehicles with substantially

different capacities.

Criteria: Environmental Benefits

Comments: The most frequent comments on the measures for

environmental benefits addressed the issue of placing a value on

emissions reductions. The transit industry group and a transit operator

in a western state both supported the use of market-based values where

they are documented and available, at local option. Otherwise, standard

national values should be used.

Response: FTA recognizes the importance of avoiding the ``one-size-

fits-all'' approach to program management. However, the use of

``national standards'' lends a degree of simplicity to the evaluation

process,

[[Page 67101]]

reducing the reporting and data-collection burden on project sponsors.

Use of consistent standards also permits greater comparability of

projects among cities, which is consistent with the purpose of these

criteria and the statute from which they are derived. Therefore, this

measure will be based on standardized national assumptions about the

unit value of each emission.

Criteria: Transit-Supportive Land Use

Comments: Most of the comments on the criteria for evaluating

transit-supportive land use policies concerned the difficulties

involved in determining what to measure. Problems cited included the

difficulty of obtaining regional land-use commitments before a project

has been approved, the subjectivity of this measure, and the difficulty

in making comparisons from region to region.

The transit industry group suggested the use of a descriptive

rating of projects according to factors such as existing land use,

containment of sprawl, transit-supportive corridor policies, supportive

zoning regulations near transit stations, tools to implement land use

policies, and performance of those policies. Alternatively, a

``multiple criteria ordinal ranking'' approach could be used, where the

project would be given a rating of ``high,'' ``medium,'' or ``low''

according to the same factors.

Response: The final policy statement implements a combined rating

for important land use factors consisting of both ``high,'' ``medium,''

and ``low'' ratings and corresponding descriptive indicators. Projects

will be rated according to existing land use, containment of sprawl,

transit-supportive corridor policies, supportive zoning regulations

near transit stations, tools to implement land use policies, and the

performance of land use policies. The one-word rating acts as a summary

for the evaluation of each respective factor, while the description

acts as the definition of that rating. Ratings for transit supportive

land use will be developed in the same manner as that currently used by

FTA to assess financial capacity, and expressed in a single rating

based on the ratings for each factor.

In addition to these five criteria, the transit industry group

suggested a sixth that would measure the historical and projected level

of commitment a region must exhibit in order to have a successful high-

capacity transit project (i.e., a new start). This criterion would

address a number of factors which would otherwise be overlooked by the

other measures. These would include (1) local efforts to adopt and

enforce transit-supportive parking policies, (2) efforts to coordinate

highway and transit project development (for example, withdrawing a

highway improvement project in favor of the proposed transit

investment), and (3) an ``implementation capability'' measure to judge

the likelihood that forecast costs will be accurate. This last factor

would focus on the ability of a region to successfully implement a

major transit investment, based on its record of experience with such

projects. Descriptive ratings were recommended for each of these

factors; alternatively, a ``multiple criteria ordinal ranking''

approach could be used, where the project would be given a rating of

``high,'' ``medium,'' or ``low'' according to the same factors.

FTA recognizes that there are often additional factors which may

contribute to the overall success of the project. Thus, in response to

this recommendation, FTA has adopted a sixth project justification

criterion for ``other relevant factors.'' This criterion will evaluate

the degree to which the institutions (local transportation planning,

programming and parking policies, etc.) assumed in the forecasts are in

place, the capability of project sponsors to manage a project of the

planned scope, and such other factors as may be relevant to the

successful implementation of the project and/or local and national

priorities. This provides an added assessment of the likelihood of a

successful transit investment, measured against regional

considerations. The measure combines both the ``high,'' ``medium,'' and

``low'' ratings with the descriptive ratings, as appropriate, in order

to provide both a ``summary'' rating for each factor and its

definition.

This comment also recommended that factors for successful

implementation of transit-supportive land use plans be included in this

measure. However, this would largely duplicate the information

collected under the evaluation criteria for ``Transit Supportive Land

Use Policies.'' While it may be possible to combine these two criteria,

the use of a separate measure for land use is more consistent with

statute.

IV. Explanation of Policy

Statement of Federal Transit Administration Policy--Criteria for

Discretionary New Starts Funding

Section 5309(e)(2)-(7) of Title 49, United States Code (U.S.C.)

(formerly Section 3(i) of the Federal Transit Act [FT Act]), requires

the Secretary to make certain findings before new transit fixed

guideway and extension projects are eligible for assistance under 49

U.S.C. Section 5309 (formerly Section 3). Specifically, a project must

be ``(1) based on the results of an alternatives analysis and

preliminary engineering, (2) justified based on a comprehensive review

of its mobility improvements, environmental benefits, cost

effectiveness, and operating efficiencies, and (3) supported by an

acceptable degree of local financial commitment, including evidence of

stable and dependable funding sources to construct, maintain, and

operate the system or extension.''

In addition, Section 5309(m)(3) (formerly Section 3(j)) requires

the Secretary annually prepare a report to Congress outlining ``a

proposal of the allocation of the funds to be made available to finance

grants and loans for construction of new fixed guideway systems and

extensions to fixed guideway systems among applicants for such

assistance.'' This annual Report on Funding Levels and Allocations of

Funds (the ``Section 3(j) Report'') is submitted annually as a

collateral document to the President's budget.

This Statement of Federal Transit Administration (FTA) Policy

describes the criteria FTA will use to make the statutory determination

required under Section 5309(e)(2)-(7) (formerly Section 3(i)) and to

determine the recommendations included in the annual report to Congress

required by Section 5309(m)(3) (formerly Section 3(j)). These criteria

apply only to projects seeking Federal discretionary funds for new

transit fixed guideway and extension projects (``new starts'') under

Section 5309 (formerly Section 3).

Title III of ISTEA exempted a number of specific projects from the

New Starts criteria described in Section 5309(e)(2)-(7) (formerly

Section 3(i)). Additionally, Section 5309(e)(6)(A) (formerly Section

3(i)(5)(A)) exempts projects if: (1) they are located in an extreme or

severe nonattainment area and are a transportation control measure (as

defined by the Clean Air Act) required to carry out an approved State

Implementation Plan; or (2) the total amount of funding to be provided

under Section 5309 (formerly Section 3) is less than $25,000,000, or

less than one-third of the total cost of the project or program of

projects as defined by the Secretary. However, FTA may still rate such

projects for informational purposes only, to the extent relevant

information is available.

I. Planning and Project Development Procedures

New start projects, like all transportation investments in

[[Page 67102]]

metropolitan areas, must emerge from the transportation planning

process in order to be eligible for Federal funding. In addition,

Section 5309(e)(2) specifies that discretionary grants or loans for new

starts may only be approved if a proposed project is based on the

results of alternatives analysis and preliminary engineering, and that

certain project justification and financial criteria have been met.

This section outlines the procedural requirements for planning and

project development that apply to new starts. Figure 1 depicts the FTA

new start planning and development process.

BILLING CODE 4910-57-P

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[GRAPHIC] [TIFF OMITTED] TN19DE96.006

BILLING CODE 4910-57-C

[[Page 67104]]

Planning: Sections 1024, 1025 and 3012 of ISTEA implemented a

continuing, cooperative, and comprehensive transportation planning

process which is to be conducted in each metropolitan area in the

United States. This planning process leads to the adoption, by the

designated metropolitan planning organization, of a metropolitan

transportation plan (``plan'') and a transportation improvement program

(TIP). The plan and TIP provide for the development and operation of an

integrated transportation system that facilitates the efficient

movement of people and goods. Projects proposed for FTA assistance must

be consistent with the adopted plan and TIP. FTA and FHWA regulations

on the metropolitan transportation planning process are found in 23 CFR

Part 450.

The planning process includes the development of a financial

strategy for the construction and operation of planned facilities and

services. The cost of the plan is constrained to the revenues

reasonably expected to be available.

The metropolitan planning regulations provide for a Major

Investment Study (MIS) where the planning process identifies

transportation problems that lend themselves to a high cost, high

impact solution. An MIS is a corridor level analysis which evaluates

all reasonable alternatives for addressing a transportation problem.

(Each major corridor is considered separately to determine the

facilities and services that will best meet its projected

requirements.) The MIS develops information on the benefits, costs, and

impacts of alternative strategies, leading to the selection of a

locally preferred alternative or strategy. The selected strategy is

then included in the metropolitan transportation plan and

transportation improvement program. It is expected that most new start

proposals will result from an MIS. All projects proposed for Section

5309 funding assistance must emerge from the metropolitan planning

process, including an MIS where applicable (an MIS is only required in

cases where Federal funds are potentially involved in the financing of

the selected alternative).

The FTA/FHWA planning regulations found in 23 CFR Part 450 merged

the alternatives analysis requirement into the metropolitan planning

process. Thus, the completion of an MIS in accordance with 23 CFR Part

450 satisfies the statutory requirement for an alternatives analysis.

The alternatives analysis requirement does not apply to certain new

start projects that, by statute, are exempted from the new start

criteria. Under 49 U.S.C. Section 5309(e)(6)(A), projects are exempt

from these requirements if: (a) The project is located within an

extreme or severe nonattainment area and is a transportation control

measure, as defined by the Clean Air Act, that is required to carry out

an approved State Implementation Plan; (b) the amount of Section 5309

assistance being sought for the project is less than $25 million; (c)

the amount of Section 5309 assistance being sought is less than \1/3\

of the total cost of the project; or (d) the amount of Section 5309

assistance being sought is less than \1/3\ of the total cost of a

program of projects as determined by the Secretary.

An MIS may be appropriate even though an alternatives analysis is

not required by statute. Since FTA intends that an MIS be performed

before local decisions are reached on the strategy for solving a

corridor's transportation problems, it is likely that most exempt

projects would emerge as a preferred solution only after an MIS is

completed. In addition, the cost estimates and funding arrangements

that are needed to determine if a project is exempt may not be

available until an MIS has been completed. Even where it is clear that

a new start alternative is exempt from the alternatives analysis

requirement, an MIS may be an appropriate means to evaluate that

alternative in the context of other strategies being considered for the

corridor.

Situations may also arise where the MIS requirements do not apply

but an alternatives analysis is still required by statute. This could

occur, for example, where the total cost of the project is not

significant in regional planning terms but the Section 5309 share

exceeds $25 million and \2/3\ of the project cost. In such cases, FTA

will work with the local participating agencies to determine the

appropriate scope for an alternatives analysis.

Federal financial support for the planning process is derived from

a number of sources, including the FTA Planning and Research Program

under 49 U.S.C. Section 5314, and planning programs administered by the

Federal Highway Administration. FTA Urbanized Area Formula funds under

Section 5307 and flexible funds under the Surface Transportation (STP)

Program and the Congestion Mitigation and Air Quality (CMAQ) Program

may also be used to support planning. Given the significant demands

placed on the Section 5309 new start program, FTA does not support the

use of new start funds for planning.

Preliminary Engineering: The preliminary engineering stage of

project development follows the completion of the planning process, as

evidenced by the adoption of a locally preferred alternative in the

metropolitan area's adopted transportation plan and TIP. Under 49

U.S.C. 5309(e)(5), a proposed new start project may advance from

alternatives analysis into preliminary engineering only if the

Secretary makes certain findings with regard to the completion of

alternatives analysis, project justification, and the degree of local

financial commitment. The Secretarial finding is not required for

exempt projects as defined above.

When the sponsoring agency for a new start project desires to

initiate the preliminary engineering phase of project development, it

should submit a request to the FTA regional office identifying the

project. The request should provide information on the planning process

that led to the selection of the project, including the inclusion of

the project in the metropolitan transportation plan and TIP. The

request should also address the project justification and local

financial commitment criteria outlined below. (This information would

normally be developed as part of the MIS process that led to the

selection of the project.) Where the sponsoring agency believes that a

proposed project is exempt from the new start criteria, the agency need

not provide project justification and financial commitment information,

but would request FTA concurrence that the project is exempt from the

criteria. FTA approval to initiate preliminary engineering is not a

commitment to fund final design or construction.

During the preliminary engineering phase, local project sponsors

refine the design of the proposal, taking into consideration all

reasonable design alternatives. The PE process results in estimates of

project costs and impacts in which there is a high degree of

confidence. In addition, environmental requirements are completed (for

new starts, this will normally entail the completion of an

environmental impact statement), project management concepts are

finalized, and any required funding sources are put in place.

Information on project justification and the degree of local financial

commitment will be continually updated as appropriate.

Localities are encouraged to incorporate into their preliminary

engineering activities, and to implement, a program of supportive

policies and actions designed to

[[Page 67105]]

enhance the benefits of the project and its financial feasibility. Such

policies and actions might include:

Zoning policies and development incentives to stimulate

high density and mixed use development around transit stations.

Land use plans that support or reinforce the development

impact and shaping influence of the transit system.

Coordinated bus and/or paratransit feeder services.

Pricing, regulatory, or traffic control measures aimed at

managing peak period auto use and increasing the speed of transit

vehicles (e.g., higher parking fees and tolls, traffic metering,

priority treatment and signal preemption for transit).

Financing mechanisms which make use of taxes and/or fees

paid by developers and property owners benefiting from the transit

system.

Preliminary engineering is typically financed with Section 5307

funds, local revenues, and flexible funds under the Surface

Transportation (STP) Program and the Congestion Mitigation and Air

Quality (CMAQ) Program. Given the significant demands placed on the

Section 5309 new start program, FTA does not support the use of new

start funds for preliminary engineering except in the case of unusually

large and costly projects.

Final Design: This is the last phase of project development and

includes right-of-way acquisition, utility relocation, and the

preparation of final construction plans (including construction

management plans), detailed specifications, construction cost

estimates, and bid documents. The final design stage cannot be

initiated until environmental requirements have been satisfied, as

evidenced by a Record of Decision (ROD) or a Finding of No Significant

Impact (FONSI). Final design is typically financed with Section 5309

new start funds.

FTA Ratings and Funding Commitments: Each year, FTA will rate the

projects which are performing or have completed the preliminary

engineering phase. Pursuant to 49 U.S.C. Section 5309(m)(3), FTA will

then recommend an allocation of new start funds among projects for the

succeeding fiscal year. The rating will be assigned based on the

project justification and financial commitment criteria contained in

this statement. Funding commitments will be given ultimately to those

projects which are most highly rated and which are ready to utilize the

funds consistent with available program authorization.

During preliminary engineering or final design, FTA may issue a

Letter of Intent to signal its intention to participate in the cost of

a new start project. The Letter of Intent is a formal pledge but is not

a Federal obligation or administrative commitment.

When FTA has decided to participate in a project with new start

funds, FTA and the grantee will negotiate, during final design, a full

funding grant agreement (FFGA). The FFGA will specify a fixed ceiling

on the Federal contribution. The grantee will be required to complete

construction of the project, as defined, to the point of initiation of

revenue operations, and to absorb any additional costs incurred, except

under certain specified extraordinary circumstances. The FFGA will

include a mutually agreeable schedule for anticipating Federal

contributions during the final design and construction period. Specific

annual contributions under the FFGA will be subject to the availability

of budget authority and the ability of the grantee to use the funds

effectively.

The total amount of Federal obligations under full funding grant

agreements and potential obligations under Letters of Intent will not

exceed the amount authorized for Section 5309 new starts. FTA may also

make ``contingent commitments,'' which are contingent upon future

congressional authorizations, beyond the amount authorized for section

5309 new starts.

II. Criteria for Grants and Loans for Fixed Guideway Systems

In order to approve a grant or loan under Section 5309 (formerly

Section 3), the Secretary of Transportation must find that the proposed

project is justified as described in Section 5309 (e)(2)(B) (formerly

Section 3(i)(1)(B)), and supported by an acceptable degree of local

financial commitment, as described in Section 5309(e)(2)(C) (formerly

Section 3(i)(1)(C)).

a. Project Justification Criteria

To make the statutory approval required for a project to enter

preliminary engineering, as required by Section 5309(e)(2)-(7)

(formerly Section 3(i)), FTA will evaluate information developed in

Major Investment Studies. The method used to make this determination

will be a Multiple Measure approach in which the merits of candidate

projects will be evaluated against a set of measures. These measures

will also be used to determine which projects to recommend for funding

in the report required by Section 5309(m)(3) (formerly Section 3(j)).

The ratings for each measure will be updated throughout the preliminary

engineering and final design processes, as costs, benefits and impacts

are more precisely defined. As a candidate project proceeds through the

stages of the development process, a greater degree of certainty is

expected with respect to these measures. The measures are as follows:

1. For ``mobility improvements''--(1) The projected value of

aggregate travel time savings per year (forecast year \1\) anticipated

from the new investment, compared to both the no-build and TSM

alternatives \2\. This aggregate includes the travel time savings of

people using competitive modes, along with those on the trips made by

transit (both new and existing transit riders). It is a net figure in

the sense that travel time increases should be explicitly considered

and used to offset the time savings of those people who experience

savings. Travel time savings for those switching from highways to

transit will be calculated using a consumer surplus approach, taking

one-half of the total travel time savings for existing riders. The net

figure will be expressed in terms of the dollar value of the projected

travel time savings for the study area. Total travel time savings will

be valued at 80 percent of the average wage rate in the urbanized area.

(2) The absolute number of low income households (households below the

poverty level) located within \1/2\ mile of boarding points associated

with the proposed system increment.

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\1\ For the purposes of this analysis, the forecast year will be

year 20 of the analysis period. An opening year forecast will be

used for financial analysis and as a check on initial ridership

projections.

\2\ In all cases, the no-build case will be based on committed

elements of the region's transportation plan, except for the

proposed fixed guideway or extension. As areas are required to

develop Congestion Management Systems, and give priority to the

strategies included in the CMS in developing long range

transportation plans and programs, it is expected that the base case

will include substantial system management elements designed to

reduce congestion by improving the operation of the transportation

system. The TSM alternative is the no-build case plus low-cost

transportation improvements such as traffic engineering, transit

operational changes, and modest capital improvements that improve

transportation performance.

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2. For ``environmental benefits''--(1) the value per year (forecast

year) of the forecast change in criteria pollutant emissions and in

greenhouse gas emissions, ascribable to the proposed new investment,

calculated according to standardized national assumptions about the

unit value of each emission; (2) the forecast net change per year

(forecast year) in the regional consumption of energy, ascribable to

the proposed new investment, expressed in British Thermal Units (BTU);

and (3) current Environmental Protection Agency designations for the

region's

[[Page 67106]]

compliance with National Ambient Air Quality Standards. The new start

alternative will be compared to both the no-build and TSM alternatives.

3. For ``operating efficiencies''--the forecast change in operating

cost per passenger-mile (forecast year), for that part of the system

that will be directly affected by the proposed new investment,

expressed in terms of absolute dollar value. The new start will be

compared to both the TSM and no-build alternatives.

4.For ``cost-effectiveness''--the incremental change in total

capital and operating cost per incremental passenger, based on the

forecast change in annual transit ridership (forecast year) and the

annualized total (Federal and local) capital investment and operating

cost, compared to the no-build and TSM alternatives.

5. For ``transit supportive existing land use policies and future

patterns''--the degree to which local land use policies are likely to

foster transit supportive land use, measured in terms of the kinds of

policies in place, and the commitment to these policies. A combined

rating consisting of both ``high,'' ``medium,'' and ``low'' ratings and

corresponding descriptive indicators will be used to assess each of the

following six factors: (1) existing land use; (2) containment of

sprawl; (3) transit-supportive corridor policies; (4) supportive zoning

regulations near transit stations; (5) tools to implement land use

policies; and (6) the performance of land use policies. The ratings for

each factor will then be combined into a single ordinal rating for

transit supportive land use.

6. For ``other factors''--(1) the degree to which the institutions

(local transportation planning, programming and parking policies, etc.)

are in place as assumed in the forecasts, (2) project management

capability, and (3) additional factors relevant to local and national

priorities and relevant to the success of the project. Ratings will be

expressed as appropriate in ordinal ratings and descriptive statements.

b. Local Financial Commitment

The local financial commitment to a proposed project will continue

to be evaluated according to the following measures:

1. The proposed local share of project costs, defined as the

percentage of capital costs to be met using funds from sources other

than Section 5309, including both the local match required by Federal

law and any additional capital funding (``overmatch''). Consideration

will be given to the use of (1) innovative financing techniques, as

described in the May 9, 1995 Federal Register notice on FTA's

Innovative Financing Initiative; and (2) ``flexible funds'' as provided

under the Congestion Mitigation and Air Quality Improvement Program

(CMAQ) and the Surface Transportation Program (STP) under ISTEA.

2. The strength of the proposed capital financing plan, according

to (1) the stability and reliability of each proposed source of local

match, including inter-governmental grants, tax sources, and debt

obligations, with an emphasis on availability within the project

timetable; (2) whether adequate provisions have been made to cover

unanticipated cost overruns. The strength of the capital finance plan

will be rated high, medium, or low.

3. The ability of the local transit agency to fund operation of the

system as planned once the guideway project is built, according to (1)

an evaluation of the operating revenue base and (2) its ability to

expand to meet the incremental operating costs associated with a new

fixed guideway investment and any other new services and facilities.

Ratings of high, medium, and low will be used to describe stability and

reliability of operating revenue.

Issue Date: December 16, 1996.

Gordon J. Linton,

Administrator.

[FR Doc. 96-32199 Filed 12-18-96; 8:45 am]

BILLING CODE 4910-57-P