# Major Capital Investment Projects

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URL: https://www.frixlaw.com/law-library/documents/fr%3AE7-14285

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** August 3, 2007
- **Citation:** 72 FR 43328

## Text

DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
49 CFR Part 611
[Docket No. FTA-2006-25737]
RIN 2132-AA81
Major Capital Investment Projects

AGENCY:

Federal Transit Administration (FTA), DOT.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This Notice of Proposed Rulemaking (NPRM) provides interested parties with the opportunity to comment on proposed changes to the Federal Transit Administration's (FTA's) New Starts program and a new proposed Small Starts program category. The new Small Starts program category is a discretionary grant program category for public transportation capital projects that run along a dedicated corridor or a fixed guideway, have a total project cost of less than $250 million, and are seeking less than $75 million in Small Starts program funding. This NPRM addresses comments on the Advanced Notice of Proposed Rulemaking (ANPRM) on Small Starts issued on January 30, 2006 and the draft Guidance on New Starts Policy and Procedures issued on January 19, 2006, and makes proposals for the New Starts and Small Starts programs which take into account these comments. FTA is concurrently issuing policy guidance for comment that describes the factors and measures used in its evaluation process, which are not described in the NPRM.

DATES:

Comments must be received by November 1, 2007.

ADDRESSES:

Written Comments:
Submit written comments to the Docket Management System, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Ave., SE., Washington, DC 20590.

Comments.
You may submit comments identified by the docket number (FTA-2006-25737) by any of the following methods:

•
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments.

•
Web Site: http://dms.dot.gov.
Follow the instructions for submitting comments on the DOT electronic docket site.

•
Fax:
1-202-493-2251.

•
Mail:
U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Ave., SE., Washington, DC 20590.

•
Hand Delivery:
To the Docket Management System; U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Ave., SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal Holidays.

Instructions:
All submissions must include the agency name and docket number or Regulatory Identification Number (RIN) for this notice. For detailed instructions on submitting comments and additional information on the rulemaking process, see the Public Participation heading of the
Supplementary Information
section of this document. Note that all comments received will be posted without change to
http://dms.dot.gov
including any personal information provided. Please see the Privacy Act heading under
Supplementary Information.

Docket:
For access to the docket to read background documents or comments received, go to
http://dms.dot.gov
at any time or to the Docket Management System (see
ADDRESSES
).

FOR FURTHER INFORMATION CONTACT:

Ron Fisher, Office of Planning and Environment, telephone (202) 366-4033. FTA is located at 1200 New Jersey Ave., SE., East Building, Washington, DC 20590. Office hours are from 9 a.m. to 5:30 p.m., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

I. Background

On August 10, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU). Section 3011 of SAFETEA-LU made a number of changes to 49 U.S.C. 5309, which authorizes the Federal Transit Administration's (FTA's) fixed guideway capital investment grant program known as “New Starts.” This Notice of Proposed Rulemaking (NPRM) implements those changes and proposes a number of other changes that FTA believes will improve the New Starts program.

In addition to the changes made to the New Starts program, SAFETEA-LU amended 49 U.S.C. 5309 to add a new capital investment program category for projects requesting less than $75 million in Section 5309 Capital Investment funds and having a total project cost of less than $250 million. That new capital investment program, which will be referred to as the “Small Starts” program, is the other subject of this NPRM. Based on comments received on this NPRM, FTA plans to issue a final rule in the future that will finalize the proposed changes to the existing New Starts program, as well as proposed rules for the Small Starts program.

This NPRM is the culmination of two public involvement initiatives for the New Starts and Small Starts programs—the Small Starts Advance Notice of Proposed Rulemaking (ANPRM) (71 FR 4864, Jan. 30, 2006) and the Guidance on New Starts Policies and Procedures (Notice of availability and request for comments, 71 FR 3149, Jan. 19, 2006). These separate pre-rule public involvement processes are being consolidated into this one rulemaking so that issues of overlap and coordination between these two aspects of FTA's discretionary capital investment program may be addressed. This NPRM closes the dockets for both of these pre-rule activities and creates a new docket for comments on the NPRM.

FTA provided further opportunity for public involvement by holding a number of listening sessions throughout the country. Those listening sessions were held at the following dates and locations:

—San Francisco, CA—February 15-16, 2006, Hyatt Regency San Francisco.

—Ft. Worth, TX—March 1-2, 2006, Radisson Plaza Hotel Fort Worth.

—Washington, DC—March 9-10, 2006, Wardman Park Marriott Hotel.

FTA is planning to conduct similar outreach activities on both this NPRM and the policy guidance that FTA is issuing concurrently. Details on these activities will be announced in a
Federal Register
notice at a later date and on FTA's Web site.

The Response to Comments section of this notice summarizes and responds to comments received on each of the questions raised in the Small Starts ANPRM and the Guidance on New Starts Policies and Procedures. It begins by restating each question, then summarizes the comments received on that question, as well as our response to the comments and concludes with FTA's proposal for addressing those comments in our proposed regulatory language. The Response to Comments portion of the Preamble is broken down by the following subjects: Eligibility, Evaluation and Ratings, and Procedures for Planning and Project Development, first with respect to the Guidance on New Starts Policies and Procedures and then with respect to the APRM on Small Starts and concludes with a section entitled “Additional Discussion Items for Comment” where FTA specifically seeks feedback on several new issues that it would like to address in the final rule. The Section-by-Section Analysis in this notice explains our rationale for the

language proposed for the regulation, as well as suggesting alternative proposals to some provisions.

In order to make the regulation more understandable, FTA is proposing to divide it into four subparts that will cover General Provisions, “New Starts,” “Small Starts,” and “Very Small Starts.” Subpart A would include General Provisions that apply to all projects seeking Section 5309 Capital Investment funds. Subpart B would include those provisions that apply to New Starts (projects of $250 million or more in total cost
or
requesting $75 million or more in New Starts funds). Subpart C would cover Small Starts projects (projects of less than $250 million in total cost
and
requesting less than $75 million in Small Starts funds but not qualifying as a Very Small Start). Subpart D would cover Very Small Starts (a subset of Small Starts projects which are less than $50 million in total cost and $3 million per mile (excluding vehicles) and which meet other specified characteristics). FTA has chosen this approach, even though there is a lot of similarity in the requirements of each subpart, in order to assist a project sponsor in finding all of the applicable procedures and evaluation criteria in a single subpart, depending on the size and nature of the proposed project.

II. Response to Comments

The following is a summary of the comments received in response to our questions raised in Part 2 of the Guidance on New Starts Policies and Procedures and in the Small Starts ANPRM, our response to the comments received and our proposal for addressing the issue raised by the questions in the proposed NPRM.

Guidance on New Starts Policies and Procedures

Eligibility

1. How might FTA determine whether a Bus Rapid Transit (BRT) project is a “fixed guideway” project?

Comment:
Nine comments were received in answer to this question. The range of BRT eligibility requirements suggested in the comments highlights the inherent difficulty in determining whether a BRT project is a “fixed guideway” project. Some commenters suggested that eligible BRT projects should operate in an exclusive right-of-way (ROW) or that certain percentages of project length should be in an exclusive ROW. Others stated that eligibility should be based on percentage of length subject to certain features or “intensity” of usage, such as ridership or vehicles per unit of time. Finally, some thought that eligibility should be determined on a case-by-case basis.

Response:
There is no statutory requirement that a fixed guideway project must operate in its entirety in a separate or exclusive ROW. The varied responses indicate the difficulty in strictly defining the parameters that should apply to BRT when it does not include a fixed guideway for its full length. FTA has previously made eligibility determinations on a case-by-case basis and has allowed eligibility for projects that include a significant fixed guideway portion,
e.g.
, a dedicated busway, but also include some mixed-traffic sections.

Proposal:
FTA proposes to define a BRT project as a “fixed guideway” if the project operates on a fixed guideway that is dedicated to transit or high occupancy vehicle use for at least 50 percent of its length during the peak period, or when congestion inhibits transit system performance. In making this determination it is not necessary that the 50 percent of its length be contiguous as long as the 50 percent that is dedicated is designed to provide significant travel times savings.

In addition, for the purposes of funding design and construction of New Starts and Small Starts, FTA proposes to revise the definition of a “fixed guideway” to include projects meeting certain other conditions. FTA is asking for specific comment, under a section entitled “Additional Discussion Items for Comment” on this revised definition that would include a transportation facility that, by means of pricing and other enhancements, replicates the benefits of “free-flow” conditions for transit users historically achieved by a physically separated right-of-way available solely for transit and high-occupancy vehicles. To make such projects eligible for New Starts or Small Starts funding, FTA proposes to incorporate into the regulatory definition of “fixed guideway system” a provision that deems such a facility, subject to certain limitations, to be “a separate right-of-way reserved for the exclusive use of public transportation.” The operation of the new provision would be limited strictly to defining eligibility for discretionary funding under New Starts (49 U.S.C. 5309(d)) and Small Starts (49 U.S.C. 5309(e)), and would not alter the definition of “fixed guideway mile” for purposes of calculating the distribution of funds under formula programs administered by FTA.

The practical effect of amending the definition of “fixed guideway” in this way is that it would allow FTA to fund a portion of the construction of high occupancy toll (HOT) lanes, on which transit vehicles would run, with money from the Section 5309 Capital Investment program. This has the advantage of providing more flexibility to project sponsors with creative ideas for potentially building cost effective transit projects.

Specifically, FTA proposes to revise the definition of “fixed guideway system” to include the following clause at the end of the definition:

“Additionally, a transportation facility shall be deemed a fixed guideway system solely for the purposes of funding eligibility under New Starts (49 U.S.C. 5309(3) if the project is designed so that in any given month (i) transit vehicles utilize the transportation facility on a barrier-separated right-of-way; and (ii) by means of tolling or other enhancements, 95 percent of the transit vehicles using the facility will be able to maintain an average speed of not less than 5 miles per hour below the posted speed limit for the time they are on the facility.”

In applying this definition FTA intends to limit the amount of New Starts and Small Starts funds that can be used for constructing the facility to that portion which benefits transit. FTA could calculate the “total project cost” of a fixed guideway made eligible under this proviso as follows: (i) The total project cost of the fixed guideway in its entirety, multiplied by (ii) a ratio, (a) the numerator of which would be the expected peak transit vehicle-miles traveled on the fixed guideway and (b) the denominator of which would be the expected total peak vehicle-miles traveled on the fixed guideway. The product of the calculation would be deemed the total project cost attributable to a transit project eligible for funding under New Starts or Small Starts. Eligible fixed guideway costs, in other words, would be proportionate to the transit use of the facility. Alternatively, FTA and the applicant may designate a mutually agreeable amount as the total project cost. In either case, the Federal share, if any, contributed toward such project costs would be made available subject to full compliance with the standard rating criteria for New Starts (or Small Starts) projects, as provided by applicable statutes, regulations, and FTA guidance.

2. Should FTA fund HOV projects to the degree that they provide benefits to public transit riders?

Comment:
Sixteen comments were received in answer to this question. Responses to this issue were equally mixed, with similar numbers of commenters supporting and opposing the concept. Those who favored support for HOV projects cited minimum service

levels and ridership as necessary conditions. Those opposed were concerned that the already limited FTA funding for New Starts projects would be further reduced by those funds being diverted to projects traditionally funded by the FHWA.

Response and Proposal:
FTA has not participated in HOV projects through the New Starts program for the last decade and FTA does not propose to change that policy. However, as stated in the response above, FTA is considering revising the definition of a fixed guideway system, to allow for funding a portion of a new HOT facility that meets certain conditions.

Project Evaluation and Ratings

3. How might the New Starts evaluation framework be changed to better support informed decision-making? Is there a preference for Option 1, Option 2, or something different?

Note:

Option 1 was described as an extension of the current framework with the two new criteria in SAFETEA-LU, economic development and reliability of the forecast of costs and ridership, added to the project justification criteria currently used. The project justification rating would result from weights applied to the ratings for each of the component criteria. The project justification rating described in Option 2 relied on ratings of the problem or opportunity that the New Start was intended to address, the effectiveness of the project as a response, and the project's cost effectiveness. The rating for effectiveness would be based on ratings for mobility for all users, mobility for transit dependents, environmental benefits, and economic development. The rating for reliability would be used to raise or lower ratings for project justification and local financial commitment.

Comment:
Seventeen comments were received in answer to this question. Of those commenters who chose between Options 1 and 2, the majority favored the Option 2 framework, stating that it allows FTA to more fully understand and appreciate the merits of a particular project. However, these commenters suggested some slight modifications to Option 2, specifically with regard to the treatment of land use. The commenters stated that the treatment of land use solely as a risk/uncertainty measure rather than as a benefit measure under project effectiveness is inconsistent with the intent of SAFETEA-LU.

Those commenters favoring Option 1 stated that it has the benefit of continuity and keeps the rating process stable for project sponsors. One of these commenters wrote that because Option 2 involves the simultaneous introduction of numerous complex factors and includes subjective appraisals by FTA or its contractors for some of the proposed measures, it is less desirable than Option 1. Several of the commenters favoring Option 1 stated that Option 2 overemphasized the role of reliability in the evaluation of projects relative to what was intended by SAFETEA-LU.

A number of commenters suggested that neither Option 1 nor Option 2 is preferred, but rather a new framework should be developed in consultation with the transit industry. However, few commenters provided specifics on how the framework could be structured. Most stated that analytical perfection should not be the goal, and that an overemphasis on quantification of measures misses the need for judgment about some factors that are important yet inherently subjective. One commenter suggested a point system be developed, similar to the one proposed in the Transit Cooperative Research Program Quick Response Project J-06 on the Small Starts program.

Response:
FTA has striven to make its evaluations understandable, consistent, and fair, and has emphasized that quantifiable measures best achieve these goals. Nevertheless, qualitative measures have been used when sufficient quantitative measures cannot be identified. Each option relies on a combination of quantitative and qualitative measures.

Given the myriad of benefits associated with New Starts projects, it is difficult to create a New Starts evaluation process to effectively capture all of them. Further, it is not necessary to evaluate all the benefits in order to distinguish the merits of projects. Option 2 allows for a more complete organization of the key project evaluation factors that address different perspectives of a project's merits. These include the nature of the problem/opportunity in the area where the project has been proposed, the project's effectiveness as a response, the degree to which the project generates benefits commensurate with its costs (cost effectiveness), the strength of the local financial commitment, and the uncertainty in the evaluation measures. This organization facilitates a more coherent description of the worthiness of a project for New Starts funding in language that is more understandable to decision makers. In addition, SAFETEA-LU emphasizes the need for more reliable ridership and cost information, adding “the reliability of forecasting methods” as a new evaluation consideration, codifying the “before and after” study requirement, and requiring FTA to produce an annual report on contractor performance in the development of ridership forecasts and cost estimates. Option 2 responds to SAFETEA-LU by directly incorporating an evaluation of the reliability of the forecasts when FTA evaluates and rates proposed projects.

Proposal:
FTA proposes to advance the framework described in Option 2 into the NPRM with one exception that is discussed more fully in the next set of questions. Instead of the nature of the problem or opportunity being evaluated as one of the primary factors of project justification, along with effectiveness and cost effectiveness, FTA proposes that it will be rated and evaluated under “other factors”. The effect of this change is that the “nature of the problem/opportunity” rather than being included as a separate factor, will be considered as an “other” factor that can either raise or lower the overall rating for project justification.

4. In what ways could FTA improve the evaluation process to highlight the “case” for a proposed New Starts project rather than focus on numerical ratings?

5. Are there any other measures that might indicate and characterize the nature and extent of the problem or opportunity addressed by a proposed New Starts project?

6. How should FTA evaluate or rate projects that address significant transportation problems compared to projects that take advantage of opportunities to improve service?

Comment:
Question 4 received 4 comments, question 5 received 7 comments, and question 6 received 6 comments. Questions 4, 5, and 6 addressed FTA's proposal to include in the evaluation of project merit an examination of the nature or extent of the problem or opportunity in a corridor. FTA suggested some measures that might be used to quantify the problem or opportunity in the corridor, including current bus travel speeds, current highway speeds, vacancy rates, value of land, and others.

The majority of commenters wrote that each project may have unique strengths or may be structured to meet specific local objectives. Rather than FTA dictating standard measures that might indicate and characterize the nature and extent of the problem or opportunity, these commenters felt that each sponsoring agency should be left to define the specific measures appropriate to their project. A few commenters provided specific suggestions for measures that might be included in defining the problem or opportunity such as congestion/crowding relief and maintenance of existing mode share.

The majority of commenters were opposed to giving more weight to projects that seek to address

demonstrated transportation problems than those projects that take advantage of opportunities.

Response:
At the heart of any planning, environmental, or transportation study is an adequate description of the nature and magnitude of the needs that are driving consideration of projects that could require significant funding and/or have significant impacts on the communities in which they are built. Because of the diversity of regional conditions in which New Starts projects are implemented, local areas are in the best position to describe the nature of the needs that a project is intended to address. It is undeniable that projects that address problems that are already severe have more benefits over the long term than those that address problems that are less severe now, but which are forecast to be worse over time. However, the New Starts process, which measures project benefits for forecast periods that are 20 to 25 years into the future, based on annualized costs and benefits, does not account for the year in which the benefits occur. The conventional approach that properly accounts for costs and benefits over time would be to determine them for each year into the future and perform a net present worth computation to today. However, to account for each year of project costs and benefits would pose a significant burden on project sponsors due to the considerable effort required for interim year forecasts of travel and transit system capital and operating and maintenance costs. Therefore, projects designed to take advantage of an opportunity to improve transportation and economic development, while serving areas that have less severe transportation problems compared to what is predicted in the future, are currently advantaged in the New Starts evaluation process compared to areas with current severe problems. Consideration of higher ratings for projects with severe problems currently can reduce this unfair advantage.

Proposal:
FTA proposes to use the current “make the case” document under “other factors” as the basis for evaluating the severity of the transportation or economic development problem that the New Starts project is to address. This document is currently part of the evaluative information that FTA requests of sponsors of New Starts projects. While FTA will not dictate specific measures to describe the nature and extent of the problem or opportunity addressed by the proposed New Start project, it will consider the nature of the problem and opportunity in the overall project justification rating. While actual rating measures will be described in policy guidance, one way to do this is to use a three-tiered rating with the highest rating given to projects with severe transportation or economic problems; the next highest rating to projects with less severe transportation or economic problems; and the lowest rating for projects which are opportunities to improve transportation or economic development. Projects in areas with demonstrable existing problems will be rated more highly than projects in areas where problems are only predicted to develop over the next 20 to 25 years, all else being equal. As congestion is one of the Nation's most daunting transportation challenges, one measure that FTA intends to consider under “other factors” is the degree to which a project is a part of an effective congestion reduction strategy. FTA will evaluate projects that are a principal element of an effective congestion reduction strategy, in general and a pricing strategy, in particular, more highly. FTA seeks comment on how it might better measure congestion in the future.

FTA will also consider as an “other factor” any benefit of the project not covered under the project justification criteria or other factors that the Secretary determines to be appropriate to carry out the evaluation. The rating for “other factors” will be compared to the combined rating for effectiveness and cost effectiveness and can be used to raise or lower the overall project justification rating.

7. Is there a preference for analyzing regional economic benefits or station area economic development benefits? Could FTA utilize both perspectives in evaluating expected economic development impacts?

8. How might FTA evaluate economic development and land use as distinct and separate measures?

9. Are there any additional methods available to predict economic development impacts? If so, how might these other measures be used to evaluate proposed New Starts projects?

Comment:
Question 7 received 7 comments, question 8 received 11 comments, and question 9 received 16 comments. Four commenters expressed a preference for analyzing station area economic development benefits rather than regional economic development benefits. Reasons given for the preference included agreement with FTA's stated opinion that projections of regional benefits would be time-consuming and expensive and that a project's influence on a regional basis would be greatly diluted by other regional economic factors.

Three commenters supported an evaluation of both regional and station area economic impacts. One of these commenters stated that regional forecast models tend to be more reliable than those for smaller station areas.

Commenters generally supported the evaluation of both land use and economic development as distinct and separate measures, though few comments articulated a clear difference between these two measures. Many comments characterized economic development and land use factors interchangeably or stated that land use factors were a component or indicator of economic development potential. One industry association supported characterizing land use impacts as “buildings and density” while economic development would be characterized as “jobs and sales.”

As a means of predicting economic development impacts, several commenters suggested that FTA focus on existing developer agreements and partnerships and the existence of local development incentives.

Response:
FTA agrees that both station area economic development and regional economic impacts are useful and valid measures of project benefits. At the current time, however, the analytical tools used to develop regional economic analyses appear to be overly costly and burdensome to impose on every project sponsor. FTA intends to continue research efforts and case studies of both the station area impacts and regional economic impacts to develop tools that can be applied to measure the economic development impacts of New Starts projects. The regulation is structured to allow new measures to be added through policy guidance, following public review and comment.

Whether for land use or economic development, a common theme of the majority of respondent suggestions was to use indicators of the likelihood of increased development in areas near projects. Past research confirms that this increased development is not added to the region but that the effect of transit investments is to attract development around stations that would locate elsewhere if not for the project, in effect redistributing development within a region. Existing land use conditions, existing and planned transit-oriented plans and policies, and projections of increases in employment and revenues are all factors that help to determine whether or not a transit project is likely to have an impact on development. Indeed, it is not possible to ascertain the

likelihood of a project's effect on surrounding development unless a number of factors relating to both land use and economic development are considered in combination. Land use considerations provide information about the potential for development or redevelopment and whether that development can occur in a transit-oriented way. Although these are necessary conditions, they are not in themselves sufficient to ensure that the proposed project spurs development, as the local development climate must be robust enough to provide the engine needed for development; the project must be perceived as permanent to entice developer interest; and the project must increase accessibility to the area. Because all these factors must be viewed in combination, it is critical that land use and economic evaluation criteria be combined into a single criterion.

Proposal:
Until additional research is completed, FTA proposes to implement an evaluation measure for land use and economic development impacts that focuses on the potential for station-area development impacts of the proposed projects. The best available measures of likely land use and economic development benefits can be derived from the circumstances in which the projects would be implemented rather than from actual forecasts of development. This approach is necessary because forecasts of additional development due to New Starts projects require considerable resources and contain considerable uncertainty.

FTA proposes to use a single criterion to ascertain the likelihood of increased transit-oriented development resulting from a New Starts project. Given the important role that land use plays in increasing development, in developing specific measures for this criterion, FTA will draw upon many of the same factors used in its current evaluation of land use. These will be augmented with indicators that provide further incentives to development. A survey of available research on the development impacts of transit suggests two primary transit-related drivers of development (1) increased accessibility and (2) permanence of the transit investment. While the actual FTA proposes to evaluate whether or not the conditions necessary to support economic development exist in the project corridor by using the following specific measures: (1) Current land-use conditions, (2) development and land-use plans and policies, (3) the economic development climate in the corridor and region, (4) the project-related change in transit accessibility for developable areas in the corridor; and (5) the economic lifespan of new transit facilities proximate to those developable areas. FTA seeks comment on how it might better measure land use/economic development in the future.

10. Are there any other measures of mobility benefits that could be used to evaluate New Starts projects?

Comment:
Ten comments were received in answer to this question. Commenters suggested that FTA should examine ways to better capture the following in the mobility benefits measure: benefits to highway users; benefits resulting from special events trips; benefits resulting from non-home-based trips; and benefits generated by automobile trips not taken due to enhanced pedestrian activity in the corridor.

Response:
FTA is committed to incorporating highway benefits into its mobility and cost effectiveness rating in every way feasible. In fact, the “SUMMIT” software used by FTA to calculate user benefits already has the ability to capture benefits to all transportation system users (including highway users). Further, the definition of user benefits included in the current regulation includes benefits to highway users. However, this function of the SUMMIT software cannot currently be used because FTA has found that most travel models around the country do not accurately predict changes in highway speeds resulting from transit improvements. This is a problem with travel models nationally. FTA does not have the resources on its own to correct the deficiencies but is working with the Federal Highway Administration to address this issue. The rule is structured in a way that once reliable forecasts of such benefits can be produced, they can easily be incorporated into the measures of mobility and cost effectiveness through the policy guidance. In addition, FTA proposes to adopt other measures on a temporary basis that would provide an indication of the congestion relief benefits to highway users. Such measures would be based on measures of current congestion in the project corridor. FTA seeks comment on how it might better measure congestion in the future.

Likewise, the SUMMIT software used by FTA already captures the benefits resulting from non-home based trips to the extent they are accurately estimated in the local travel model. Typically, few areas of the country have good data on the non-home-based trip market, which affects the ability of the local model to develop accurate forecasts. If a local area is willing to put resources into a data collection effort to improve the forecasts for this market, the Summit software used by FTA to calculate user benefits will automatically capture any additional benefits that may accrue.

FTA has always worked individually with various project sponsors to better capture the benefits resulting from special events markets. Local travel models are not generally structured to capture ridership/benefits for this market. Consequently, FTA has helped project sponsors in the past to include “off-model” calculations to capture these benefits and will continue to do so in the future.

FTA acknowledges the value of the trip not taken in terms of reducing congestion but has not yet been able to develop methodologies capable of making reliable estimates of this benefit.

Proposal:
FTA is proposing to adopt a definition of user benefits that explicitly includes congestion relief benefits to highway users and pedestrians. FTA is supporting the Office of the Secretary of Transportation and the Federal Highway Administration to improve travel forecasts so that the transportation system user benefits to highway users can be calculated reliably and be included in the cost effectiveness calculation. The Department of Transportation expects to release a Request for Proposals/Work Statement for model improvements in Fall 2007. In the interim, as discussed below under item 4 of “Additional Discussion Items for Comment,” FTA will explore the use of surrogate measures which can assess the degree to which a proposed New Start results in congestion relief. These measures could include the current level of service, delay compared to free flow speed, or the average daily VMT on any highway facility in the project corridor.

Absent any specific suggestions for other measures of mobility benefits, FTA will use its policy guidance to set specific measures for mobility. Two measures that FTA considers to have merit are user benefits per passenger mile for those using the New Starts project, and the absolute number of passengers using the project. The first would measure the magnitude of the user benefits for each traveler and whether the savings are significant, while the second would measure the number of travelers affected.

11. Does the proposed (low-income mobility) measure entail implementation difficulties for measurement, reporting, or comparison between projects?

12. Are there any other measures that FTA should consider when evaluating

the benefits that accrue to transit dependent populations?

Comment:
Question 11 received 3 comments and question 12 received 6 comments. In the Guidance on New Starts Policies and Procedures, FTA proposed using a new measure for determining mobility for transit dependents—the share of user benefits accruing to passengers in the lowest income stratum or to the lowest auto ownership stratum (depending on which is used in the local travel model) compared to the regional share of the lowest income stratum or lowest auto ownership stratum. All commenters to Question 11 noted that the proposed measure may result in some inconsistencies among projects because of this difference in how local models stratify trip takers. An additional comment noted that in densely developed urban areas, transit dependency does not correlate with either income or car ownership.

The comments included the following suggested alternative populations to include when calculating the benefits to transit dependent populations, but did not identify a specific way to measure the benefits to these populations: Elderly persons, persons with disabilities, and university students. One commenter suggested that FTA should include in the measure how well the overall transit system serves job centers, but there was no specific discussion of how this might be measured.

Response:
FTA acknowledges that examining the benefits that accrue to the lowest income stratum or the lowest auto ownership stratum from the local travel forecasting models is only a surrogate for determining the benefits to transit dependents. But this information is already available from all local travel models and does not require development of additional data by project sponsors. Furthermore, since the measurement relies on the change in service for that stratum in a given city, it is not necessary for every city to use the same stratum in order for the measure to allow for comparisons between cities.

FTA believes that whatever measure is used, it should have a way of identifying how the project serves transit dependents rather than simply characterizing the project corridor demographics. Unfortunately, local travel models do not usually stratify trips by some of the suggested categories—elderly persons, persons with disabilities, and university students. Consequently, the benefits accruing to these populations cannot be calculated.

Proposal:
The regulation simply states that FTA will measure Mobility Benefits. The actual measures will be listed in policy guidance. One approach that FTA is considering is to utilize the share of user benefits accruing to passengers in the lowest income stratum or to the lowest auto ownership stratum (depending on which is used in the local travel model) compared to the regional share of the lowest income stratum or lowest auto ownership stratum for the region for evaluating mobility for transit dependents.

13. How could FTA improve the current method of evaluating environmental benefits to produce a more useful measure?

Comment:
Three comments were received in answer to this question. FTA currently measures environmental benefits from proposed New Starts projects by examining the projected change in regional vehicle miles traveled (VMT), various types of vehicle emissions, and energy consumption. All comments received indicated support for continuing the current measures given that other replacement measures are not readily available. One commenter expressed concern that the current measures are biased in favor of projects that help reduce highway congestion and against those projects that help relieve transit congestion. Since a project that is meant to reduce existing congestion on a transit system does not reduce VMT, no environmental benefits would be shown under the current method. The commenter stated that the rating process should make accommodations for this situation, but acknowledged that no other measures of environmental benefits are readily available to address this problem.

Response:
The current measure is limited to capturing reduced emissions, projecting the change in VMT and energy consumption as a result of automobiles being taken off the road when travelers use transit instead of driving. However, even in that case, the change is usually very small compared to emissions region wide, limiting the usefulness of the measure.

Proposal:
FTA proposes to continue to evaluate environmental impacts, with the actual measures identified in policy guidance. FTA is currently conducting research to try to develop other measures that better distinguish the environmental merits of projects.

14. Should FTA rely on the cost effectiveness evaluation to address the operating efficiency criterion?

15. If not, in what way could agency operating cost information be used to compare New Starts projects to each other?

Comment:
Question 14 received 6 comments and question 15 received 11 comments. Four comments received were in favor of eliminating the operating efficiency criterion because of the inability of the measure to distinguish in a meaningful way between projects. However, two commenters disagreed with the proposal, stating that operating efficiency can be a significant factor in comparing a single new rail line with the transit system as a whole.

Response:
In the past, FTA has used the projected system-wide change in operating cost per passenger mile to measure the impact of proposed New Starts projects on operating efficiency. However, this measure has not proven to be a meaningful way of distinguishing among proposed projects. On the other hand, FTA's evaluation of cost effectiveness has always included the annual system-wide operating and maintenance expense as a component of annualized cost. Therefore, the impact of the project on operating and maintenance costs is already captured in the calculation of cost effectiveness.

Proposal:
FTA proposes to remove the operating efficiency factor as a separate evaluation criterion, relying instead on the evaluation of cost effectiveness to address this statutory criterion. Project sponsors may still calculate operating efficiency if they find it useful for their own comparisons.

16. Is it desirable for FTA to attempt to incorporate other measures of effectiveness besides mobility when evaluating cost effectiveness?

17. If so, what measures might be incorporated and how?

18. How could FTA combine transportation system user benefits measures with economic development measures into a valid measure of cost effectiveness?

Comment:
Question 16 received 2 comments, question 17 received 1 comment, and question 18 received 8 comments. For all three of the questions, comments received were opposed to incorporating other measures of effectiveness in the evaluation of cost effectiveness. Reasons for the opposition included the potential for “double-counting” benefits and the increased complexity that would result from adding other measures.

Response:
FTA sees value in acknowledging additional benefits of transit projects when comparing benefits to costs. There are two major components of these additional benefits that are distinct from those currently calculated: Travel time saved by users of the highway system who experience less

congestion as a result of fewer vehicles on the highway; and transportation benefits from more compact development patterns. For the first, FTA has discovered that current highway assignment models do not reliably predict the reductions in travel time for highway users. Research and development of improved travel models are needed to ensure that highway travel time benefits are reliable. For the second, additional development would have to be forecast with and without the New Starts project and travel models employed to ascertain the user benefits that result. The analytical analysis required to accomplish this is beyond the capabilities of the current demand forecasting models in virtually every urban area in the nation. As a result, at this time there is no analytical approach that can be implemented to determine the additional economic development benefits that should be added to those currently predicted for travel time savings. However, FTA has identified a surrogate for including economic benefits to the travel time savings calculation. The breakpoint for cost effectiveness already includes an assumption that the non-transportation benefits, including economic development, are approximately equal to the value of the travel time savings for a project. Therefore every city is given the same credit for other benefits.

Proposal:
Because of the difficulty of incorporating additional measures into its evaluation of project cost effectiveness, FTA is proposing to maintain its current cost effectiveness measure of annualized cost per hour of user benefits at this time.

19. Are there any ways that FTA could improve the evaluation of financial capability?

Comment:
Five comments were received in response to this question. Two comments were received with specific suggestions for improvements or changes to the financial evaluation process. The first comment stated FTA should consider the degree to which private sector resources are leveraged to assist with project financing (public-private initiatives) as well as the degree to which synergies between Federal funding sources are leveraged to build and operate the project. The second comment stated that FTA should consider a broader set of indicators to rate the current capital condition of an agency rather than just the average age of the fleet and the agency's bond ratings. The commenter stated that capital condition should be evaluated in the context of the project sponsor's full fleet management plan, including replacement cycles, miles between breakdowns, and budgeted purchases.

Three additional comments concerned with the current evaluation methodology were received, but the commenters did not suggest ways to improve the evaluation methodology. Other points noted in the five comments indicated the policy guidance was not clear with regards to who will assess financial capability. One commenter stated that the current process examines the reliability of capital, operating, and maintenance cost estimates under both the project justification evaluation and the financial capability evaluation and requested more detail from FTA on exactly how financial capability is currently evaluated. Lastly, one commenter stated that the requirements for operating and maintenance plans are more detailed than necessary for systems with a long history of consistent performance.

Response:
Although not specifically accounted for in the financial capability evaluation process, FTA does consider the degree to which private sector resources are utilized to assist with project financing when making funding recommendations. In addition, FTA has recently initiated the Public Private Partnership Pilot Program outlined in SAFETEA-LU as a means to distinguish projects that are supported by private sector resources.

Section 3011(c) of SAFETEA-LU authorizes the Secretary of Transportation to establish and implement the Pilot Program to demonstrate the advantages and disadvantages of public-private partnerships (PPPs) for certain new fixed guideway capital projects. In particular, the Pilot Program is intended to study whether, in comparison to conventional procurements, innovative contracting arrangements, known as PPPs, better reduce and allocate risks associated with new construction of such projects, accelerate their delivery, enhance their operating performance once they are constructed and improve the reliability of projections of project costs and benefits. This Pilot Program will evaluate this view as applied to the procurement and operation of eligible projects, which may include projects funded under the Section 5309 Capital Investment program.

On March 22, 2006, FTA issued a notice in the
Federal Register
(71 FR 14568), soliciting comments and requesting preliminary expressions of interest in sponsoring a project under the Pilot Program. Five potential project sponsors submitted expressions of interest. On January 19, 2007, FTA issued a notice in the
Federal Register
(72 FR 2583) establishing the Pilot Program's operating criteria and soliciting formal applications.

FTA believes that the process of establishing Public-Private Partnerships, which include innovative arrangements for operating New Starts projects, can result in contractual arrangements that can reduce and/or improve the reliability of forecasts of operating costs on New Starts systems. Arrangements under which private sector interests take responsibility for the design, construction, operations, finance, and maintenance of projects can result in transferring much of the long term risk of project capital and operating costs to the private partner. Alternatively, the process of procuring such arrangements can identify changes that can produce significant improvements in the efficiency of publicly provided services through innovative contractual arrangements. As a result, projects which utilize such approaches are likely to be rated better, because operating costs will be lower (producing better ratings of cost effectiveness), and the reliability of the estimates of such costs will be higher (producing higher ratings of reliability). FTA asks for specific comments on this approach under question 5 under the section “Additional Discussion Items for Comment.”

FTA has tried whenever possible to base the financial ratings on readily available information that all project sponsors consistently calculate and report. Of the additional items mentioned by one commenter for inclusion in the capital condition subfactor rating, FTA believes that two—replacement cycles and budgeted purchases—are already captured in the average fleet age calculation. Clearly the average fleet age will change from year to year as replacement vehicles are purchased and older vehicles retired. This is true for all grantees. The other item mentioned by the commenter—miles between breakdowns—is not always routinely prepared by all transit agencies or prepared with a consistent methodology. For example, different operators may classify breakdowns in a different way. Therefore, FTA feels this would not be a good measure to use. FTA believes the existing measures for capital condition are fair, easily reported, and consistently applied to all grantees.

In response to the comment that more detail is needed from FTA on exactly how financial capability is evaluated, FTA would like to point out that each year as part of the New Starts Reporting Instructions and again as an appendix to the Annual Report on New Starts, FTA

includes a detailed description of the entire rating process, including a discussion of the financial capability evaluation and rating process. Included in this appendix are two matrices that outline specifically what is required in the financial plan to receive each level of rating (from low to high) for each and every financial subfactor used in the evaluation. In addition, FTA has posted on its Web site the guidance that it provides to its financial contractors who help develop the financial capability ratings. This provides the industry with additional insight into exactly how the ratings are determined for those areas of the evaluation that are more subjective than quantitative. FTA feels the process is very well described, standardized, and completely transparent.

Proposal:
FTA proposes to keep the current financial capability evaluation and rating process since the requirements were not changed by SAFETEA-LU, the current process has proven to be useful for distinguishing among projects, and the process is thoroughly documented and transparent. However, FTA will continue to issue the specific measures for each factor for review and comment in its policy guidance. In addition, the proposed regulation would provide for an assessment of the degree to which project proposals include innovative contractual arrangements which produce significant reductions in operating expenses, or which improve the reliability of forecasts of operating costs.

20. Should the existing weighting factors used to develop the financial ratings be changed?

Comment:
Seven comments were received in answer to this question. Of the comments received, approximately half were in favor of maintaining the existing weights used to develop the financial ratings, and half were opposed, stating that the current weights are awkward, provide little insight, and should be changed. Of those opposed to the existing weighting scheme, one commenter proposed a simple pass/fail approach for evaluating the capital financial plan as well as a much less rigorous review of the operating financial plan. Other comments received concerned retaining the credit given on the New Starts share rating when higher local shares are proposed.

Response:
Not only does SAFETEA-LU require FTA to rate projects on both project justification and local financial commitment on a five tier scale from low to high, but also FTA sees merit in showing gradations in financial plan ratings versus employing a simple pass/fail approach, particularly with regard to making tough funding recommendation decisions. A less rigorous evaluation of the operating and maintenance financial plan, as suggested by one commenter, is inconsistent with the requirement added by SAFETEA-LU that FTA must ensure local funding is available to operate, maintain, and re-capitalize the proposed project as well as the rest of the transit system without a reduction in existing services or levels of service. The change in SAFETEA-LU to this criterion was clearly intended to strengthen, not weaken, FTA's review of the operating and maintenance financial plan. FTA believes the current financial capability evaluation methodology meets the requirements of the law.

FTA agrees that project sponsors should be given credit when higher local shares are proposed. FTA proposes to maintain the non-New Starts funding share as one of the financial capability evaluation criterion. FTA proposes to continue the practice of giving project sponsors a higher rating based on a higher non-New Starts share and will set the measures for this in its policy guidance. In addition, FTA may consider the non-New Starts share during the decision to recommend a project for a Full Funding Grant Agreement (FFGA). However, consistent with SAFETEA-LU, FTA will also consider the project sponsor ability to provide only a 20 percent match and will not rate the project's local financial commitment at less than Medium, solely on the basis of a 20 percent match, so long as the project sponsor can demonstrate that the 20 percent match is based on the limited fiscal capacity of State and local governments. In this way, FTA can address the SAFETEA-LU requirement that FTA consider State and local fiscal capacity at the same time that it addresses the SAFETEA-LU requirement that it gives priority to financing projects with a higher-than-required non-New Starts/Small Starts share.

Proposal:
The NPRM proposes that the local financial commitment rating consist of equally weighting the ratings of the capital and the operating financial plan.

21. How might the FTA incorporate measures of reliability into project evaluation?

Comment:
Four comments were received in answer to this question. All comments received were opposed to incorporating measures of reliability into project evaluation, stating that the New Starts process already includes a number of mechanisms to evaluate the reliability of forecasts so that additional reviews are unnecessary. In addition, one commenter stated that peer projects are difficult, if not impossible, to identify.

Response:
Although the New Starts process certainly includes mechanisms intended to improve the quality of forecasts, reliability can vary considerably for a variety of reasons that relate to (1) transit-orientation of existing and future land uses and land-use plans and policies, based on the degree to which project effectiveness depends upon projected changes in future land use patterns and the likelihood of those changes occurring;

(2) Project sponsor experience with implementing previous projects; (3) Industry experience with the proposed project type; (4) The reliability of forecasting methods used to prepare those estimates, as well as the reliability of the information provided to FTA for its evaluation of the project; (5) How the opening year project ridership compares to that estimated for the 20 to 25 year planning horizon; (6) Enhanced reliability of operating cost forecasts due to use of innovative contractual arrangements; and (7) Mitigation actions the project sponsor takes to help improve the reliability of the information submitted in support of a proposed project. For example, travel forecasts made for downtown circulator projects are by their very nature less reliable than those for projects intended to attract a predominately commuter-oriented travel market. This is because travel models have traditionally been better able to predict the travel behavior of commuters, and historically have been poor predictors of travel involving the type of discretionary trips that a downtown circulator is intended to attract. Other travel markets that can be problematic to predict include suburban-to-suburban travel and park-and-ride travel in areas with few existing park-and-ride lots. In addition, capital cost estimates historically have been problematic for tunnels and elevated structures. Moreover, recent construction experience has shown that commodity prices can be volatile and that the bidding environment plays a much larger role in cost estimates compared to the past.

Project sponsors of new transit projects commonly ask for peer reviews to help them assess the quality of their cost and ridership forecasts. While FTA acknowledges that no two projects are identical, drawing on past experience from a similar type of project has proven invaluable to improving the cost and ridership forecasts of the newer project because these projects often have enough features in common to gain

insights that result in improved forecasts.

Proposal:
SAFETEA-LU specifically requires FTA to evaluate projects based on the reliability of their forecasts. Furthermore, FTA's experience over the past three decades indicates that there is a considerable range of reliability in forecasts based on the factors discussed above. FTA proposes to consider reliability of the costs and ridership forecasts in its evaluation and to adjust, either upward or downward, the ratings of the individual criteria that rely on these forecasts. The measures for reliability will be identified in policy guidance but are likely to be designed to address the issues addressed above, such as transit-orientation of existing and future land use plans and policies; project sponsor experience with implementing previous projects; industry experience with the proposed project type; the reliability of the forecasting methods; a comparison of the opening year ridership to that estimated for the planning horizon covering no less than 20 years; use of innovative contractual arrangements which improve the reliability of cost estimates; and mitigation actions taken by the project sponsor.

22. How should information on the reliability of forecasts be modified or updated as a proposed project advances through project development?

Comment:
Six comments were received in answer to this question. One comment was received stating that FTA and the project sponsor should work to improve reliability of forecasts as projects advance through project development. The remaining respondents addressed the unrelated topic of how and when to solidify funding sources.

Response:
FTA agrees that with more detailed information generated as the project progresses through project development the reliability of forecasts should improve over time. However, FTA's experience also shows that even with this updated information, forecasts are by their very nature predictive and that it is only through actual completion of the project that true costs and ridership are known.

Proposal:
FTA acknowledges that it is impossible to totally remove uncertainty from any stage of the process. However, the measures prescribed by FTA are written broadly enough to allow FTA to tailor its assessment of reliability to reflect the stage that the project is in. Therefore, FTA will use these measures to assess the reliability of forecasts as a proposed project advances through project development and use the most recent information available in making its assessment of reliability.

23. How should FTA help to ensure that contingencies adequately reflect the uncertainties in project design, prices, and quantities at each stage of project development?

Comment:
Three comments were received in response to this question. Four themes or suggestions emerged from the comments that relate to the treatment of uncertainties, project costs, and project contingencies. In the first theme, dealing with project uncertainties, many commenters stated that FTA's project management oversight (PMO) program and risk assessment processes constitute a worthwhile and sufficient approach. In addition, one commenter stressed the value of peer review for cost estimates. Many commenters suggested that uncertainties could be reduced through simplification of FTA's process, specifically through implementation of policies to screen out unworthy projects earlier (i.e., at entry to preliminary engineering (PE)) and to execute FFGAs within six months of final design entry.

A second theme, calling for greater collaboration between project sponsors and FTA, was seen throughout the comments. Collaborative relationships and “shirt-sleeve” working sessions were suggested as a way of establishing appropriate contingency amounts after risk assessment, improving project reviews “through a series of intense partnering sessions,” achieving greater accountability for project success, and assisting new project sponsors or sponsors with previous difficulties.

The third suggestion was that FTA should use an index other than the GDP deflator to adjust cost effectiveness breakpoints given that supporting studies show that construction costs over the past five years have risen at rates up to17 percent faster than costs reflected in the GDP deflator.

The fourth theme is a corollary to the third and pertains to cost management procedures. Rather than requiring project sponsors to carry extraordinarily large contingencies that may jeopardize a cost effectiveness rating, many commenters suggested an incentive approach to cost control, specifically allowing sponsors to retain remaining funds at construction completion. In addition, commenters stated that project sponsors should be allowed to incur costs, even if they exceed the FFGA amount by more than 5 percent, as long as the project sponsor is responsible for paying for the cost increases out of its own funds. The commenters did feel, however, that FTA should provide New Starts funding flexibility when a project experiences cost increases due to sudden market shifts beyond the project sponsor's control.

Response:
Although SAFETEA-LU calls for projects to include adequate contingency funds “to cover unanticipated cost increases,” the amount of contingency required depends on the amount and nature of uncertainties. FTA agrees that reducing uncertainties earlier in the process benefits everyone. FTA intends to pursue this through earlier use of its risk assessment and project management oversight programs, as well as peer reviews of cost estimates. The amount of contingency at various points can be guided by industry standard percentages but should be established for a specific project through collaboration between FTA and the project sponsor after reviews have been conducted. FTA will further study the commenters' suggestions regarding early screening of projects, rapid execution of the FFGA, institution of more collaborative processes, the makeup of the cost effectiveness breakpoints, and cost management. Nothing in the proposed regulation would preclude FTA from making changes in these areas through its policy guidance.

Proposal:
FTA proposes to add a requirement, taken directly from SAFETEA-LU, as part of the criterion on the stability of capital funding plan that takes into account the availability of contingency amounts that the Secretary determines to be reasonable to cover unanticipated cost increases. FTA will collaborate with project sponsors to ensure that project contingencies are appropriate to the specific uncertainties related to the proposed project and to the level of design. For the purpose of rating a project to address the reliability of the cost estimate, FTA will rely in large part on evaluations by its project management oversight contractors.

24. What weights should FTA apply to each measure?

Comment:
Six comments were received in answer to this question. FTA proposed to continue the equal weighting of the local financial commitment and project justification ratings when determining the overall project rating. Of the comments received on this question, there was no clear majority of opinion. One commenter agreed with FTA's equal weighting of local financial commitment and project justification. One commenter stated that local financial commitment and project justification should not be combined to arrive at an overall project rating. This commenter stated that the local financial commitment rating should merely be pass/fail, and that the project

justification rating would prevail for the overall project rating if local financial commitment were found to be worthy of a passing grade. Another commenter suggested an entirely new weighting scheme: 20 percent weight each to mobility improvements, cost effectiveness, and financial capability; 15 percent weight each to land use and economic development; and, 10 percent weight to the remaining measures. The remainder of the comments focused solely on how the project justification rating is derived, stating that cost effectiveness should not be weighted greater than one third of project justification and should not be used as a project veto if it does not meet FTA's specified threshold.

Response:
SAFETEA-LU places equal emphasis on project justification (referred to as “project merit” in the January 19, 2006 Guidance on News Starts Policies and Procedures) and local financial commitment (referred to as “financial capability” in the January 19, 2006 proposed Guidance on New Starts Policies and Procedures). As stated previously, FTA feels there is merit in showing gradations in financial plan ratings (low to high) versus employing a simple pass/fail approach, particularly with regard to making tough funding recommendation decisions. Furthermore, FTA believes that moving to a pass/fail rating approach for financial commitment as suggested by one commenter would diminish its importance relative to project justification, going against the apparent intention of SAFETEA-LU.

Regarding the new weighting scheme proposed by another commenter, FTA has stated previously the general difficultly in measuring economic development benefits and the concern of “double-counting” when rating and evaluating economic development versus land use. Consequently, until such time as better measures are developed for these areas, the proposed weighting scheme would be very difficult to implement. With regards to not using a cost effectiveness to veto a project, in the past there has been considerable support by the Administration to establish a minimum standard for a project's cost effectiveness in order for the project to advance through project development.

Proposal:
FTA proposes to give equal weight to both project justification and local financial commitment in calculating the project's overall rating. Within the Project Justification rating, cost effectiveness and effectiveness are proposed to be weighted equally at 50 percent. Further, the NPRM proposes that the effectiveness rating be comprised of the following criteria and weights: 40 percent to land use, 40 percent to mobility for the general population, 10 percent to environmental benefits, and 10 percent to transit dependent mobility. Finally, under the proposed regulatory text, a project would not be eligible for a funding recommendation unless it achieves a medium or better rating on cost effectiveness.

25. How can the reliability of forecast measures be used to adjust New Starts project ratings?

Comment:
Four comments were received in answer to this question. Three of these comments stated opposition to FTA's proposal to add uncertainty and risk of the forecasts as evaluation criteria or stated that additional guidance and clarification is needed before implementation. The primary reason given for opposing the proposal was that determining the uncertainties in the forecasts would require lengthy reviews that would ultimately add cost to the project. The commenters also stated that the additional analyses would not eliminate risk and uncertainty in the forecasts.

The one commenter supportive of the proposal agreed with FTA's simple strategy for incorporating the uncertainty measures into the ratings process. That is, the uncertainty ratings should be used to decide the outcome for ratings at breakpoint between two ratings.

Response:
FTA is not proposing to eliminate risk and uncertainty from forecasts, which is impossible, but for project sponsors to report the nature of the uncertainty as a result of their analysis. This will allow both the project sponsor and FTA to use that information as they make decisions on whether to advance the project.

More explicit representation of uncertainties is required by SAFETEA-LU because reliability of forecasts is now one of the listed criterions for project justification. An explicit representation of uncertainties is also essential if the project sponsor and FTA are to meet other requirements in SAFETEA-LU. For instance, an early discussion of uncertainties is essential if the project sponsor is to understand and explain the reasons that forecasts may change between entry into PE, entry into final design, and after opening the project to revenue operations as required for before/after studies, as well as for FTA to accurately assess contractor performance. An understanding of uncertainties also provides information to FTA as it implements SAFTETEA-LU's cost incentive provision, which allows FTA to provide more New Starts funding if project costs are no more than 110 percent, and ridership no less than 90 percent, of the estimates made when the project was admitted into PE.

Current FTA guidance on capital cost estimation and travel forecasting discusses the role of uncertainty in forecasts and describes how these uncertainties could be reported. However, to ensure that uncertainties are being reported consistently by all grantees, FTA intends to issue more explicit guidance of what factors should be included in this discussion.

Proposal:
FTA believes a requirement to adjust ratings based on the reliability of the data should be included to satisfy several SAFETEA-LU requirements. Understanding uncertainty will allow FTA to better recommend funding among projects with similar costs and benefits, but with significant differences in uncertainties. A better understanding of uncertainties will facilitate a better understanding of why costs and ridership vary from predictions so that better approaches to forecasts can be developed for future projects. Additionally, because a major purpose of planning and project development studies is to disclose information for decision-making, a more explicit representation of uncertainties better informs decision-makers by providing richer information about the likelihood of achieving the project benefits and costs. FTA will consider the reliability of operating costs certainties by looking at whether there are any innovative contractual arrangements which produce significant reductions in operating expenses, or which improve the reliability of forecasts of operating costs.

Project Development Procedures

26. Does the proposed requirement to have local endorsement of the financial plan address FTA's desire to enhance the degree of confidence in the likelihood of proposed funding sources to materialize?

27. Do project sponsors foresee any potential problems securing these local endorsements?

Comment:
Question 26 received 3 comments and question 27 received 7 comments. FTA proposed a requirement that all proposed sources of funding be specified in the financial plan and that each sponsoring agency provide a letter endorsing the proposed financial strategies and funding amounts. The proposal was meant to increase FTA's confidence level earlier in the project development process (prior to entry into PE) that the project has the support of the proposed funding partners. Almost

all commenters misunderstood the proposal to mean that letters of commitment of local funding would be required earlier in the project development process. As a result, of the 3 comments received in response to this question, only one (an MPO) thought the proposed requirement had merit and would enhance the degree of confidence in the likelihood of funding sources materializing. The MPO also stated that the inability of a project sponsor to get the required endorsement would be most telling. All other commenters stated that requiring letters of endorsement (which they interpreted as letters of commitment) from local agencies on the financial plan early in the project development process was premature. They indicated it would be difficult to get financial commitments from local governments without a corresponding commitment at the same time from FTA. Others stated that FHWA does not require a similar endorsement from State and local governments for highway projects.

Response:
The requirement to obtain a letter of endorsement of a financial plan is not intended to be as stringent as having to obtain a firm letter of commitment of funding. FTA believes that this requirement, so clarified, should not be that difficult to address, so long as the project sponsor has worked closely with the proposed funding partners, and these partners have actually developed an understanding of their proposed roles. FTA acknowledges that, as with many of the New Starts requirements, there is not a similar requirement for highway projects. However, the great majority of Federal aid highway projects are funded through FHWA formula grants, and the selection of projects is the prerogative of the States, in cooperation with the metropolitan planning organization designated for the area per 23 U.S.C. 134 (j)(5) and (k)(4), and 49 U.S.C. 5303 (j)(5) and (k)(4); conversely, major transit capital investments are funded through the Section 5309 Capital Investment discretionary program, and projects are selected for funding on a competitive, nationwide basis.

Proposal:
FTA is proposing to require letters of endorsement for any non-grantee controlled or non-committed source of funding specified in the financial plan prior to entry into PE and with each annual New Starts submission. In the letter of endorsement, each sponsoring agency would need to give their support to pursuing whatever steps are necessary for them to ultimately commit the proposed financial strategies and funding amounts.

28. Are there any other policies or requirements that could enhance FTA's confidence in the funding plans for proposed New Starts projects?

Comment:
Four comments were received in answer to this question. Three comments were received that suggested other policies or requirements FTA might use. Two transit agencies discussed including a timeline for obtaining funding commitments in a project development agreement (PDA). The fourth comment suggested that FTA consider the degree to which the project sponsor has expended funds on the project at its own risk as an indication of the agency's commitment to the project.

Response:
FTA agrees that a PDA could be used to lay out timelines for receipt of funding commitments, but this would not provide FTA with any added confidence that the funding would actually materialize. FTA also agrees that the degree to which a project sponsor has expended funds on a project is an indication of the project sponsor's commitment to the project. However, FTA does not agree that this in and of itself reflects local political support from other potential funding partners. Too often, project sponsors have been unable to obtain sufficient local funding from outside sources, even though they have expended a considerable amount of their own resources to undertake alternatives analysis and PE.

Proposal:
Lacking any other suggestions, FTA will rely on the requirement that all proposed sources of funding be specified in the financial plan and that each sponsoring agency provide a letter endorsing the proposed financial strategies and funding amounts. Again, such a letter would not constitute a commitment on the part of a proposed funding partner, but only an indication that the funding partner understands and is willing to proceed with further development of its proposed role in funding the project. In addition, FTA would continue to require that funding commitments be provided as the project moves through the process, with 50 percent of the commitments in place as a condition of entry into final design, and 100 percent of the commitments in place prior to execution of a FFGA.

29. In what ways could FTA describe the baseline alternative more clearly?

Comment:
Twelve comments were received in answer to this question. Two commenters said the no-build should be the baseline. One commenter stated that the use of a baseline that is different than the no-build puts it in conflict with the National Environmental Policy Act (NEPA). Others stated that it should be the Transportation System Management (TSM) alternative, defined succinctly as the best than can be done without construction of a new fixed guideway, and that it should be identified as such. Other concerns included changes to the baseline late in the project development process and the opinion that too much emphasis is placed on the baseline alternative given that in most circumstances it would not be built.

Response:
FTA believes that a properly-defined TSM constitutes an appropriate baseline for the purpose of estimating New Starts project justification criteria and that, because there are only limited circumstances in which the use of a no-build alternative is justified, referring to the baseline by its “intended” name—the TSM alternative—makes sense. FTA does not support using the no-build as the baseline because a consistently defined TSM alternative is required to ensure a level playing field when comparing projects across the country. FTA has not required that the TSM alternative be carried forward in NEPA documents when the project sponsor has adequately described its reason in the NEPA document for not carrying the alternative forward for detailed analysis. Both FTA's oversight of the technical work supporting alternatives analyses and the project sponsor's performance of the tests identified in the policy guidance prior to FTA approval of the baseline alternative are intended to obviate the need for review and adjustment of the baseline during subsequent project development stages. The fact that SAFETEA-LU establishes a Small Starts program that provides a source of capital funding for low-cost major transit investments undermines the argument that TSM-level improvements cannot be built. This undercuts the argument that it is not fair to evaluate the merits of a New Start against an “academic” TSM, because the TSM is now a viable alternative, which could receive funding through the Small Starts program category.

Proposal:
FTA is already in the process of enhancing its guidance on the development of the New Starts baseline alternative. Because FTA is only clarifying, rather than changing, its existing guidance, such clarification can be addressed as technical guidance, without affecting any of the higher-level principles articulated in the existing regulation and carried forward in the NPRM. The guidance will clarify FTA's expectations that the New Starts baseline will be identical to the TSM alternative in all but very rare cases, and will use that terminology to describe the

attributes of the baseline. Since in most cases the baseline will be the TSM alternative, the guidance will describe the process for developing the TSM alternative, the appropriate tests for optimizing the TSM alternative, and the rationale for these tests. The guidance will further provide examples for the development of appropriate TSM alternatives in specific environments.

30. Should there be a way to report project benefits of the proposed New Starts project compared to the no-build alternative outside the cost effectiveness evaluation?

Comment:
Two comments were received in answer to this question. Both commenters answered in the affirmative, although neither provided suggestions on how to report benefits.

Response:
In response to comments submitted by the transit industry and in recognition of the desire to simplify the New Starts process, the December 2000 New Starts Final Rule eliminated the requirement for an evaluation comparing the New Starts criteria for the build alternative against both the no-build and the TSM alternative. Instead, the regulation promulgated the current requirement that projects be evaluated against a single “baseline” alternative, typically the TSM alternative. Permitting an alternative presentation of project benefits (build vs. no-build) would result in additional work for project sponsors and could lead to confusion over the true representation of project benefits. Nevertheless, FTA has always allowed project sponsors to use criteria and measures in their studies that depart from those used by FTA, but which address local concerns.

Proposal:
FTA will maintain the requirement as stated in the current regulation that cost effectiveness will be based solely on a comparison between the proposed project and the baseline alternative, while clarifying that the baseline in almost all cases is the TSM alternative and providing enhanced guidance on the development of the TSM alternative.

31. How recent should on-board surveys be to ensure that the information is still valid?

32. Are there cases where an on-board survey less than 5 years old could be out of date? If so, how might FTA be sure of the usefulness of on-board survey information?

Comment:
Question 31 received 5 comments and question 32 received 3 comments. One commenter believed that on-board surveys were not needed, stating that other data sources would suffice. Four commenters suggested surveys be conducted within the past 5 to 10 years.

Response:
Given the critical role that the information gleaned from on-board surveys plays in understanding the nature of the transit riding market and in ensuring that travel models can replicate current conditions, it is essential that the data on ridership patterns be as current as possible. To the extent that the data used to validate the model varies from current ridership patterns because of significant changes in population, service, or other factors, the usefulness of the data is diminished. In fact, it may be necessary to update all or a portion of the survey more frequently than every five years if an area has experienced dramatic changes in service, population, and employment or other factors during that time. For example, if the survey was taken when little park-and-ride service existed, and considerable park-and-ride service was implemented after the survey, a new survey would be necessary to understand park-and-ride behavior if the New Start project relied in large part on the park-and-ride market to generate ridership.

Proposal:
FTA proposes that, for project sponsors using traditional four-step travel forecasting procedures to estimate transportation system user benefits, the procedures be rigorously validated using an on-board survey of transit riders completed no more than five years prior to entry into PE. FTA will determine if changes in service, demographics, or other factors are significant enough to require a more recent survey to validate the model.

33. Would a clearer definition of the preliminary engineering phase for New Starts projects help project sponsors target resources expended on preliminary engineering in ways that better support the decision-making process for New Starts?

Comment:
Three comments were received in answer to this question. Two comments were received in support of this proposal, and one provided an alternative. Commenters stated that significant resources would need to be shifted from final design to preliminary engineering (PE). Commenters also stated concern about potential increases in costs. One commenter stated that an explanation of how PE relates to the NEPA process would be helpful. Another stated that all NEPA requirements should be met during PE and that a Record of Decision (ROD) and FFGA should be issued simultaneously prior to final design. Another respondent inquired about the purpose of final design if PE is expanded to include capping of funds. That agency suggested that FTA should have clear criteria for entrance into PE.

Response:
The goal of PE is to finalize the project scope, cost estimate, and financial plan. Project scope must be defined such that all environmental impacts are identified and adequate provisions made for their mitigation in accordance with NEPA. FTA will not complete the NEPA process until a project has been approved for entry into PE. In addition, although the level of scope development may vary from project to project, it must, at a minimum, be advanced to the point where design issues are fully addressed and no significant unknown impacts to cost may result. FTA intends that the cost estimate produced at the end of PE be used as the baseline cost estimate for determining the share of Section 5309 Capital Investment funds to be awarded in the full funding grant agreement. Similarly, FTA expects that the project financial plan produced during PE (and submitted to FTA as part of its statutory evaluation to approve project entrance into final design) will demonstrate adequate financial capacity and provide support for the local financial commitment necessary before FTA can execute the FFGA.

In its May 2006 New Starts Policy Guidance, FTA adopted a policy requiring that NEPA scoping be performed prior to entry into PE. Scoping prior to PE fosters informed decision-making in the New Starts process and allows for resolution of issues regarding the alternatives to be considered in the NEPA review to be made during the planning process instead of discovering them during PE and having to do additional planning analyses to address them. NEPA completion during PE facilitates performing the requisite engineering and analysis to define the project scope, cost, and financial plan, which are documented in a ROD.

Final design is a statutorily prescribed phase of the New Starts project development process following PE and preceding construction. Technically, final design is the phase of project development in which the project sponsor prepares for project construction. During final design, the engineering and design products of PE are refined for the development and solicitation of construction contract packages, as well as the development and/or updating of various project management plans and risk mitigation strategies. It is, however, expected that under the definition of New Starts PE adopted in the May 2006 New Starts Policy Guidance, the duration of final design will be considerably shortened as PE would result in developing sufficient engineering and design to arrive at an

accurate and reliable cost estimate. Thus, it is expected that the time between entrance into final design and negotiations on an FFGA will be reduced.

Proposal:
FTA has defined the conditions that must be met at the completion of New Starts PE. FTA believes that these conditions will help in clarifying when a New Starts project is ready to move from one step to the next.

34. How might the Project Management Oversight (PMOC) process be designed to support the higher expectation regarding the results of preliminary engineering?

Comment:
Only one comment was received, and it favored enhanced PMOC assistance. The respondent stated that although nearly all the information needed to make a final decision on project funding should be complete at the end of PE, completion of engineering should not be a criterion for exiting PE. Design refinements and subsequent cost adjustments should be expected through the final design phase. The earlier in the process that the PMOC understands the unique challenges the project faces in terms of engineering and cost estimating, the more likely the PMOC will be able to assist in determining whether or not the contingencies are appropriate.

Response:
FTA has a number of activities underway to strengthen its project management oversight activities during PE. These include cost validation, independent cost estimates, and risk analysis and management. The PMOC reviews grantee data and corresponding engineering analysis throughout PE to determine the completeness and mechanical correctness of the baseline cost estimate. Project cost reviews are an iterative review process, whereby costs are assessed for consistency with the project scope adopted in the ROD (as amended and/or updated to the selected alignment), as well as consistency with relevant, identifiable industry or engineering practices. In this manner, FTA can determine that the project scope and costs are sufficiently complete to support the level and quality of revenue service expected. Using these tools during project development allows the grantee, with Federal oversight, to identify opportunities to improve the operation and cost effectiveness of its project. Whereas design refinements are expected during final design, significant cost adjustments should not occur. The scope and cost reviews that FTA incorporates in its risk analysis conducted during PE are intended to identify those project elements that are likely to require cost adjustments so that these potential cost adjustment may be accounted for in the resulting baseline cost estimate, as part of the contingency calculation, at the completion of PE.

Proposal:
FTA is currently reviewing its PMOC regulations and guidance with the goal of providing greater program effectiveness in New Starts project development and delivery. These changes will be discussed under a separate rulemaking to amend the Project Management Oversight regulation and are not reflected in this NPRM.

35. Does this approach significantly increase the cost of preliminary engineering? If so, is that problematic if costs are just shifted from final design?

Comment:
Two comments were received in response to this question, both generally agreeing that the cost of PE would increase. One commenter stated that the proposed requirement would result in an extended PE phase and blur the line between PE and final design. Specifically, the commenter noted that a shift in consultants between phases could result in increased costs due to the need to redesign project elements and that increased costs should not eliminate projects from the New Starts pipeline. The other stated that asking project sponsors to front load their design costs may prove to be an onerous burden.

Response:
It is not clear that costs for PE will increase in order to meet FTA's requirement for a more reliable cost estimate. This is because the nature of work performed in PE and in final design has never been well defined, and as a result the level of engineering performed varies widely among projects. Expenditures for PE in the past have not always been focused on a reliable cost estimate, but have addressed a variety of concerns, many of which did not necessarily enhance the soundness of the cost estimate. In addition, many candidate New Starts project sponsors have already undertaken “continuing/extended PE” prior to entry into final design in order to identify and resolve engineering and/or design issues. In those instances, the project's sponsors have generally been able to complete final design in a shorter timeframe. From an accounting standpoint, requiring this effort by all project sponsors may increase costs incurred during the designated PE phase but decrease costs during final design.

Proposal:
The proposed regulation clearly identifies the products of both PE and final design. With FTA clearly defining each phase of New Starts project planning and development, along with prescribed exit criteria, project sponsors can assess their resource needs and plan for them accordingly.

36. Does the proposed policy of MPO reaffirmation of the proposed project address FTA's goal of ensuring local support for implementing and financing proposed New Starts projects?

37. If FTA implements the previously mentioned local endorsement of the Financial Plan, does this separate action become redundant?

Comment:
FTA received 8 comments on question 36 and 1 comment on question 37. Five commenters noted opposition to the proposal mentioned in question 36. Those opposed who wrote this proposal would add an unnecessary step to the process that would delay final design approval and thereby add to the cost of project development. In addition, they wrote this would not help to address FTA's concern of ensuring local support for financing of the project. Lastly, commenters suggested this would create a disconnect with requirements placed on highway projects. Three comments were received stating no objection to the proposal, but also not stating strong support of it. These commenters wrote it was reasonable and in line with current local planning process requirements, but would not help address FTA's concern. Only one comment was received on whether the proposal was redundant should FTA implement its other proposal for local endorsement of financial plans. That commenter wrote it was not redundant and that it is important for the MPO as a regional entity to formally state that it supports the project in its final configuration.

Response:
FTA does not believe this proposal would add significant time or cost to the project development process. The FTA/FHWA metropolitan and statewide planning regulations require that before Federal funds may be spent on a project, it must be adopted into the MPO's financially constrained metropolitan transportation plan and transportation improvement program. FTA's proposal would ensure that the latest information on the project's cost estimate and impacts is incorporated into the region's transportation plan.

Proposal:
To verify that New Starts projects, with their final scope and costs, are supported by regional planning partners, FTA proposes to require that MPOs reaffirm their commitment to implementing and financing projects, prior to those projects advancing into final design, if significant changes have occurred in the project definition or cost.

38. Section 5309(h)(3) as amended by SAFETEA-LU accords FTA the discretion to provide a higher percentage of New Starts funding than that requested by the project sponsor as an incentive to producing reliable ridership forecasts and cost estimates. How could FTA implement this provision of SAFETEA-LU?

Comment:
Eight comments were received in total, but very few included specific ideas on how the incentive could be implemented. Two commenters were opposed to the incentive idea. Four transit agencies and one MPO were supportive of the idea. One transit agency expressed neither support nor opposition, but rather concerns with what projections would be evaluated to determine eligibility, suggesting that the proposal may result in less accurate cost and ridership forecasts. The two commenters opposed to the idea, and one of the transit agencies in support of the idea, suggested that rather than allowing grantees to reduce the local share if New Starts funding is increased under the incentive, project sponsors should instead be required to use the additional funding for betterments to the project. One transit agency suggested that incentives are acceptable only if they are kept small (2-3 percent increase) while another transit agency suggested that FTA should work with the project sponsor to determine an incentive amount that would be meaningful. Another comment stated that an FFGA should be amended before it is fully paid out to increase the New Starts share if ridership and cost estimates prove reliable over the course of the first year of operation.

Response:
Regarding the accuracy of forecasts, the concern of the commenting agency that this proposal could result in less accurate cost and ridership forecasts may be unfounded. Presumably the commenter is suggesting that grantees would overstate costs and understate ridership during project development so as to come in under budget after completion of the project and with higher ridership to be eligible for an incentive. The very nature of the New Starts rating and evaluation process would prevent this from happening, because overstating costs and understating ridership would significantly impact a project's cost effectiveness. Furthermore, FTA examines both cost and ridership projections closely throughout project development and would not accept obvious misrepresentation of costs and ridership.

Proposal:
FTA proposes to implement a new feature of FFGAs, consistent with changes made by SAFETEA-LU, that would include an incentive clause that would allow for an amendment to either increase the Federal funding contribution or allow for the addition of scope, when actual opening year ridership is no less than 90 percent of that forecast and actual capital costs, adjusted for inflation, are not more than 110 percent of that estimated, at the time the project entered PE. This standard is slightly more stringent than the wording in SAFETEA-LU, as FTA is proposing to amend the FFGA only after the project is complete and operating, rather than assessing whether forecasts have stayed within these limits prior to execution of the FFGA. FTA believes that the incentive should only be provided for actual performance not for projected performance. However, as suggested by the commenters, FTA is allowing the incentive to be used either to increase the Federal share or to add scope to the system.

ANPRM on Small Starts

Small Starts Eligibility

SAFETEA-LU constrains eligibility of projects for Small Starts funding by imposing limits of less than $75 million in Section 5309 Capital Investment funds and less than $250 million for total project cost. However, it broadens eligibility in terms of project definition by relaxing the existing requirement that the project include a fixed guideway. With this change, a project that would not meet the fixed-guideway criterion is now eligible if it (1) includes a substantial portion that is in a separate right-of-way, or (2) represents a substantial investment in specific kinds of transit improvements in a defined corridor.

The eligibility provisions of the statute raise several issues: (1) How to define “substantial portion in a separate right-of-way;”; (2) how to define “substantial investment”; (3) the possibility that project sponsors could divide traditional New Starts projects into two or more Small Starts projects; and (4) the possibility that a Small Starts project might be proposed as the initial transit service in a corridor. The ANPRM provided a discussion of the challenges and merits of various approaches to addressing these issues, and readers of this NPRM are encouraged to refer to it for more information. The ANPRM further posed several questions related to the eligibility of Small Starts projects with the goal of facilitating a discussion of this important topic. These questions, a summary of industry reaction to the questions, and FTA's response and proposal for the NPRM follows:

1. What portion of the project should be in a separate right-of-way to qualify for funding under the Small Starts eligibility criteria? Should this determination be based on length or on performance?

2. How might FTA interpret the requirements that a project represent a “substantial investment?”

3. How might we ensure that a Small Starts project is in a “defined corridor?”

Comments:
Questions 1 and 2 received 20 comments each, and question 3 received 11 comments.

Comments were generally split on the first question of eligibility. Of the 12 comments that noted the need for a separate right-of-way for Small Starts projects, there was a consensus that 25-50 percent of the length of the project should be in exclusive right-of-way to be eligible for Small Starts funding. Reasons cited for a minimum guideway threshold included the ability to show a permanence of investment, which would better support the land use and economic development objectives of proposed transit investments, and to ensure travel time savings. But 4 of the 8 commenters not in favor of requiring a dedicated right-of-way noted similar gains in performance may be made through the use of ITS technology such as signal prioritization, queue jumping, and other operational treatments. Indeed, slightly more than half of the commenters on this question favored a performance-based determination of eligibility, with travel time savings the most commonly suggested performance criteria.

All 20 of the commenters favored the inclusion in the NPRM of a definition of “substantial investment.” However, 2 comments stressed the need for flexibility and opposed either a dollar value or a specific list of criteria elements that needed to be met, as proposed in the ANPRM. Twelve comments requested that a portion of the right-of-way be dedicated, although 7 of these stated that FTA should not mandate that a separate right-of-way be an element of every Small Start. More specific comments noted that a substantial investment should be defined in terms of infrastructure investment. Fifteen commenters recommended that FTA define substantial investment as a “package” of investments listed in 49 U.S.C. 5309(e)(10), as amended by SAFETEA-LU, including hardware such as signal pre-emption, off-board fare collection, level boarding, station investment, and special vehicles. Due to the large number of potential variables associated

with a “substantial investment,” 7 comments noted the need for clear, non-regulatory based guidance that should cover the majority of projects.

Suggestions to the question on “defined corridor” were wide ranging. Three commenters noted that a traditional view of an arterial street or a transportation corridor may be too rigid of a definition and suggested that FTA take a flexible approach to the definition of a “corridor” for Small Starts purposes. One commenter recommended, for example, that a corridor could be defined as a combination of parallel streets, as a downtown shopping area, or as a central business district. To further define the corridor, local policies on economic development and land use should be examined and matched to the corresponding area of interest. Seven commenters suggested that a more narrow definition be used, for the reason that the modest costs of Small Starts tend to lend themselves to improvements to existing travel corridors rather than creation of more expensive new services. Two commenters expressed concern that any definition must be able to distinguish Small Starts from improvements that could be funded under the Section 5309 bus or FTA formula programs.

Two commenters cited additional concerns on consideration of a Small Starts project that would cross multiple jurisdictions. To proceed on a project spanning jurisdictions, it was recommended that a number of construction and planning phases be allowed if that type of implementation approach facilitated project delivery.

Response:
FTA believes that there is significant merit to using a performance-based approach to determine whether or not the separate right-of-way is “significant.” Because all fixed guideway projects (rail projects and those with catenary, i.e., electric trolley-bus service using overhead wires for power supply) are automatically eligible for New Starts and Small Starts, the following is relevant to bus projects only. Generally, the purpose of a separate right-of-way for bus projects is to remove transit vehicles from general-purpose traffic, thereby speeding up service. Therefore, a performance-based determination would ensure that the portion of the project in a separate right-of-way actually had the intended effect of better operating performance. However, FTA has never applied a performance standard to fixed-guideway projects. Thus, in the interest of consistency among potential Section 5309 Capital Investment projects, FTA believes that using a criterion based on physical characteristics is more appropriate.

Likewise, FTA believes that it is necessary to define a minimum level of transportation investment sufficient to justify the project for discretionary Small Starts funding. Otherwise, Small Starts projects would be competing for funding with many capital investments (
e.g.
buses) that should be funded with FTA formula, bus discretionary, or Title 23 flexible funds. Thus, FTA is proposing a number of specific project components that would comprise a “substantial investment” to improve the level of transit service, yet not require a specific threshold or dollar value of improvements.

It is very difficult to prescribe the dimensions of a “defined corridor” given the diversity of project contexts. Nevertheless, the principles guiding the definition should be that the project addresses a single travel shed that consists of a concentration of trip origins and destinations. While there is no rigid definition of travel corridor, routes with significant geographic separation would be considered to serve different corridor travel markets.

Proposal:
FTA proposes in this NPRM that to qualify for funding, Small Starts bus projects must either (a) provide a dedicated right-of-way for at least 50 percent of the total project length in the peak period or when congestion inhibits transit system performance, or (b) be a corridor-based bus project with the following minimum elements:

• Substantial transit stations

• Traffic signal priority/pre-emption, provided that there are traffic signals on the corridor,

• Low-floor buses or level boarding,

• Branding of the proposed service, and

• 10-minute peak/15-minute off peak headways or better while operating at least 14 hours per weekday

The first three bullets are taken directly from the statute; the fourth is a low-cost strategy for achieving a sense of the uniqueness and permanence of transit service and is thus consistent with SAFETEA-LU's requirement that a corridor-based bus capital project include “features that support long-term corridor investment.” The fifth bullet embodies the underlying concept that, to be successful transportation investments, Small Starts projects must provide for a significant level of transit service. Experience in major transit corridors across the United States suggests that 10-minute peak frequencies, in addition to representing a high level of service, is the minimum headway at which passengers' decision to take transit is not based upon route schedule information.

While other project features such as park-and-ride lots and off-board fare collection are also eligible expenses under the program, they are not required elements. The regulation simply states that the project must be a corridor bus project; however, FTA intends to review proposed projects on a case-by-case basis to determine whether they are located in a “defined corridor.” A key consideration for this review will be whether the project is located in a single travel shed.

4. Should we try to prevent traditional New Starts projects from being divided into two or more Small Starts projects? If so, in what ways might we prevent this from happening?

Comments:
Twenty comments were received in answer to this question. Only three of the commenters indicated they were in favor of allowing traditional New Starts projects to be divided into two or more Small Starts projects. The main reason cited to permit this division was that any phased implementation would result in faster implementation of at least some portions of a larger proposed investment, and that any “stand-alone” segment/project should be considered by FTA so long as it is deemed worthy when evaluated against the Small Starts criteria. The remaining 17 commenters noted that the division of large New Starts projects into two or more Small Starts projects is contrary to the intent of the Small Starts program. However, 14 commenters noted that the funding of projects in the same region but on adjacent or unrelated corridors should be allowed and even encouraged. In addition, other more specific comments included limiting the amount of funding over a given time period or justifying funding on the basis of how corridor improvements are included in a region's metropolitan transportation plan.

Response:
The purpose of the simplified evaluation and project development process for Small Starts is to scale the analysis and procedures according to the complexity of the projects. Projects that are very large investments in fixed guideway transit facilities demand the full due diligence regarding the benefits, costs, and the project sponsor's capability and readiness in order to ensure that public resources are allocated to their best use. These larger projects should not be able to evade due diligence simply because they are divided into phases which individually meet the cost limits for Small Starts.

Proposal:
FTA proposes that all potential Small Starts projects (i.e.,

portions of a larger investment) planned in a corridor will be evaluated as a single project. If the combined cost or total requested funding amount, both expressed in year-of-expenditure dollars, is over the Small Starts limits, the project will be evaluated as traditional New Starts project.

5. Should we establish a minimum ridership requirement to ensure that Small Starts projects are used to improve the quality of service for existing transit markets rather than represent the first transit service offered to potentially new transit markets? If not, how can a project demonstrate need for an investment?

Comments:
Twenty-seven comments were received in answer to this question. Approximately two-thirds of commenters opposed the idea of instituting a minimum ridership requirement for Small Starts, citing that this would penalize communities that are in the initial stages of land development and thus currently do not have a demand for transit or communities that are trying to open up new markets to transit. The 9 commenters in favor of the minimum ridership requirements indicated that such a threshold would allow Small Starts funds to be provided only to those areas that have a demonstrated need for improved transit. It was further suggested by 8 of these 9 commenters that in these existing cases, there would be substantially less risk to a project's achievement of success because of this demonstrated need.

Response:
FTA recognizes that the implementation of high quality transit service in areas where such service does not exist today can, when combined with aggressive corridor land use development initiatives, contribute to future use of service.

Proposal:
In the interim guidance for Small Starts, FTA required, as one criterion for qualifying as a Very Small Start, that sponsors of such projects provide evidence of current corridor ridership that would benefit from the project of no less than 3,000 average weekday passengers. FTA proposes to maintain this eligibility requirement for Very Small Starts since it is an intrinsic element of FTA's ability to warrant the project as being cost effective. For all other projects, FTA proposes not to require a minimum ridership threshold. However, FTA notes that it would seem unlikely that Small Starts projects proposed in corridors with a small or non-existent transit market would be able to generate immediate transportation benefits, as required by SAFETEA-LU in its requirement that cost effectiveness be calculated for an opening, rather than design, year. In considering the reliability of ridership estimates, FTA will closely examine the justification for the ridership and travel time benefits of such projects. Consequently, sponsors of such projects must make an extremely compelling case that there is sufficient planned development to result in conditions that support a strong transit travel market.

Small Starts Evaluation and Ratings

As amended by SAFETEA-LU, 49 U.S.C. 5309(e)(2) allows the Secretary of Transportation to provide funding assistance to a proposed project under this new Small Starts category only if the Secretary finds that the project is:

(A) Based on the results of planning and alternatives analysis;

(B) Justified based on a review of its public transportation supportive land use policies, cost effectiveness, and effect on local economic development; and

(C) Supported by an acceptable degree of local financial commitment.

The statute expands on the justification required in paragraph (B), requiring that the Secretary make the following determinations:

• The degree to which the project is consistent with local land use policies and is likely to achieve local development goals;

• The cost effectiveness of the project at the time of the initiation of revenue service;

• The degree to which a project will have a positive effect on land use and local economic development;

• The reliability of the forecasting methods used to estimate costs and ridership associated with the project; and

• Any other factors that the Secretary determines appropriate to make funding decisions.

The statutory provisions for the evaluation of proposed Small Starts projects raise several issues. These include the framework for the evaluation; the specific measures used in the evaluation; and scaling of the evaluation approach for Small Starts projects of different size, cost, and complexity. The ANPRM provided a discussion of the challenges and merits of various approaches to addressing these issues. Most notably, FTA proposed two potential options for organizing the Small Starts project criteria into a coherent evaluation framework. This is the same framework that is discussed in Question 3 under the Guidance on New Starts Policy and Procedures. The ANPRM further posed several specific questions related to the evaluation and rating of Small Starts projects. These questions, a summary of industry comments, and FTA's response and proposal for this NPRM follow:

6. How should the evaluation framework for New Starts be changed or adapted for Small Starts projects?

Comments:
Twenty-four comments were received in response to this question. Several commenters addressed not only the overall evaluation framework but also measures for local financial commitment and FTA's proposal that the nature of the problem or opportunity in the Small Starts project corridor be included in FTA's evaluation of Small Starts. Comments on these specific measures were addressed in our response to questions that specifically addresses these two issues. Of the two evaluation framework options presented in the ANPRM, Option 2 generated the most support, although 3 commenters strongly indicated that land use should be elevated to a benefit rather than used as a risk factor. Four commenters objected to both Options 1 and 2, and proposed an alternative approach—a “point-system” developed in a Transit Cooperative Research Program (TCRP) quick study report.

In terms of local financial commitment, 1 commenter noted that FTA should not penalize smaller Small Starts project sponsors who may not be able to generate more than a 20 percent local funding match, although another commenter hoped that FTA would continue to encourage local overmatch through its evaluation of local financial commitment. Two commenters suggested that State and local governments or private investors are unwilling to commit project revenues until they receive assurances of Federal funding, and that FTA needs to consider prior history in obtaining non-Federal commitments as a surrogate for actual commitments.

There was little comment on the proposal that projects be evaluated in terms of the problems they solve or the opportunity they take advantage of. One respondent was concerned that the ANPRM couches “problems” as only being mobility related.

Response:
Based upon the comments received, FTA intends to advance the framework described in Option 2 into the NPRM with one exception that is discussed more fully in the question 3 under the Guidance on New Starts Policy and Procedures. FTA has reviewed the TCRP proposal for evaluating Small Starts projects and notes that the approach entails double counting and difficulties determining the proper weights. FTA understands the positive and negative aspects of

encouraging local overmatch to Federal discretionary funding, but notes that SAFETEA-LU permits FTA to consider the degree to which the project financial plan depends upon non-New Starts funding, and FTA therefore intends to reward overmatch for Small Starts just as it does New Starts. Further it would be poor program management for FTA to make Federal funding commitments in advance of local commitments. Equally importantly, FTA expects that the demand for Small Starts funding will be great enough among projects that can demonstrate such commitments that it would be counterproductive for FTA to commit its funds in advance of local funding commitments. FTA strongly encourages project sponsors to provide an overmatch under the Small Starts program as it is likely to be as highly competitive, if not more so, as the New Starts program.

Proposal:
The NPRM advances for further review and comment the Option 2 evaluation framework first proposed in the ANPRM. However, Option 2 has been modified in three important ways. F

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3AE7-14285. Public record. Not legal advice.