**Second Avenue Subway**

**New York, New York**

(November 2003)

# Description

The New York Metropolitan Transportation Authority/New York City Transit
Authority (MTA/NYCT) is proposing to construct a new subway line
extending the length of Manhattan's East Side from 125^th^ Street in
East Harlem to Hanover Square in the Financial District. The Second
Avenue Subway (SAS) would reduce excessive overcrowding conditions that
currently occur on Manhattan's only full north-south (and North
America's busiest passenger rail) line (the Lexington Avenue Line
(LAL)), and improve transit access for East Side residents, workers, and
visitors. The SAS would relieve congestion and improve the reliability
of the LAL by diverting approximately 200,000 average weekday riders
from the LAL to the SAS.

Implementation of the SAS would provide two subway services. The first
would be a full-length route operating between 125th Street and Hanover
Square. The second service would operate along Second Avenue from 125th
Street to 63rd Street, travel west along the existing 63rd Street Line,
join the existing Broadway Line via an existing connection, and serve
express stations along 7th Avenue and Broadway before crossing the
Manhattan Bridge to Brooklyn. The shift in passengers from the LAL to
the SAS would result in a substantial reduction in passenger loads on
the Lexington Avenue express and local lines; a reduction in station
dwell and travel times; and an increase in the number of peak hour
trains serving the LAL. Due largely to these systemwide impacts, the SAS
project is estimated to yield 146,600 hours of travel-time benefits in
2025.

  ------------------------------------- ---------------------------------
  **Summary Description**               

  **Proposed Project:**                 Heavy Rail

  ** **                                 8.5 Miles, 16 Stations

  **Total Capital Cost (\$YOE):**       \$16,808.5 Million

  **Section 5309 New Starts Share       \$8,404.3 Million (50%)
  (\$YOE):**                            

  **Annual Operating Cost (2022):**     \$80.8 Million

  **Ridership Forecast (2025):**        560,000 Average Weekday Boardings

  ** **                                 11,400 Daily New Riders

  **Opening Year Ridership Forecast     Not Available
  (2022):**                             

  **FY 2005 Finance Rating:**           **Medium**

  **FY 2005 Project Justification       **Medium-High**
  Rating:**                             

  **FY 2005 Overall Project Rating:**   **Recommended**
  ------------------------------------- ---------------------------------

The ***Recommended*** rating is primarily attributable to the
exceptionally strong transit-supportive land use along the corridor and
throughout the metropolitan area and the project's adequate financial
plan at this stage of development. The overall project rating applies to
this *Annual Report on New Starts* and reflects conditions as of
November 2003. Project cost estimates and proposed New Starts share are
developed by local project sponsors and are not FTA assumptions. Project
evaluation is an ongoing process. As New Starts projects proceed through
development, estimates of costs, benefits, schedules and impacts are
refined. FTA's ratings and recommendation will be updated annually to
reflect new information, changing conditions and refined financing
plans.

# Status

The SAS project was approved into preliminary engineering in December
2001. MTA completed a Supplemental Draft Environmental Impact Statement
(EIS) in April 2003. A NEPA Record of Decision is anticipated in mid
2004. In July 2003, the MTA board created a new public benefit
corporation -- the Capital Construction Company (CCC) -- to plan,
design, and construct current and future major system expansion
projects. The CCC has initiated a complete organizational and program
review of the SAS project, including schedule, scope, and cost.

NYCT is currently evaluating environmental mitigation measures,
tunneling methods, and construction sequencing options to verify the
most efficient strategy to award a design-build contract in late 2004 -
the centennial of the initiation of New York City subway service.
However, FTA is concerned that this schedule may not sufficiently
consider property acquisition, construction procurements, and the
finalization of all applicable organizational agreements.

Given the SAS project's total capital cost and requested New Starts
share, FTA notified MTA that a minimum operable segment (MOS) will be
required before the project is permitted to advance into final design.
The MOS must be fully operable, with access to maintenance and storage
facilities, so that it offers transportation benefits even if no further
Federal investment in the larger project is made. MTA is currently in
the process of identifying an appropriate MOS.

TEA-21 Section 3030(b)(39) authorized the Second Avenue Subway for final
design and construction. Through FY 2003, Congress has appropriated
\$6.95 million in Section 5309 New Starts funds for the SAS project.

# Evaluation

The following criteria have been estimated in conformance with FTA's
*Reporting Instructions*

*for the Section 5309 New Starts Criteria*, updated in June 2003. The
project will be re-evaluated

when it is ready to advance into final design and for next year's
*Annual Report on New Starts*.

# Project Justification

**[Rating: Medium-High]{.underline}**

The *Medium-High* project justification rating reflects the corridor's
exceptionally strong transit-supportive land use environment and
adequate cost effectiveness. Based on 2000 Census data, there are
approximately 45,989 low-income households (or 14 percent of the total
households) within a ½-mile radius of proposed station areas. There are
also over 1.2 million jobs located within a ½-mile radius of station
areas. New York City is designated as a severe non-attainment area for
ozone and moderate non-attainment area for carbon monoxide. The SAS
project has an incremental cost per incremental trip value of
\$277.80.\*

+---------------------------------------+---------------+--------------+
| **Project Justification Quantitative  |               |              |
| Criteria**                            |               |              |
+---------------------------------------+---------------+--------------+
| **Mobility Improvements Rating:       |               |              |
| Medium-High**                         |               |              |
+---------------------------------------+---------------+--------------+
| **Average Employment Per Station**    | **[New Start  |              |
|                                       | vs.           |              |
| **Average Low Income Households Per   | Baseline]{    |              |
| Station**                             | .underline}** |              |
|                                       |               |              |
| **Transportation System User Benefit  | 75,561        |              |
| Per Project Passenger Mile            |               |              |
| (Minutes)**                           | 2,874         |              |
|                                       |               |              |
|                                       | 3.08          |              |
+---------------------------------------+---------------+--------------+
| **Environmental Benefits Rating:      |               |              |
| High**                                |               |              |
+---------------------------------------+---------------+--------------+
| **[Criteria Pollutant                 | **[New Start  |              |
| Reduced]{.underline} (tons)**         | vs.           |              |
|                                       | Baseline]{    |              |
| **Carbon Monoxide (CO)**              | .underline}** |              |
|                                       |               |              |
| **Nitrogen Oxide (NO~x~)**            | 275           |              |
|                                       |               |              |
| **Volatile Organic Compounds**        | 4             |              |
|                                       |               |              |
| **Particulate Matter (PM~10~)**       | 9             |              |
|                                       |               |              |
| **Carbon Dioxide (CO~2~)**            | 39            |              |
|                                       |               |              |
| **[Annual Energy Savings]{.underline} | 547           |              |
| (millions of BTU)**                   |               |              |
|                                       | 32,440        |              |
+---------------------------------------+---------------+--------------+
| **Cost Effectiveness Rating:          |               |              |
| Low-Medium**                          |               |              |
+---------------------------------------+---------------+--------------+
| **Cost per Transportation System User | **[New Start  |              |
| Benefit**                             | vs.           |              |
|                                       | Baseline]{    |              |
| **(current year dollars/hour)**       | .underline}** |              |
|                                       |               |              |
|                                       | \$21.50       |              |
+---------------------------------------+---------------+--------------+
| **Operating Efficiencies Rating:      |               |              |
| Medium**                              |               |              |
+---------------------------------------+---------------+--------------+
| **System Operating Cost per**         | >             | **[New       |
|                                       | **[Baseline]{ | Start]{.     |
| **Passenger Mile (current year        | .underline}** | underline}** |
| dollars)**                            | >             |              |
|                                       | > \$0.29      | \$0.29       |
+---------------------------------------+---------------+--------------+

\*The SAS' incremental cost per incremental trip value is exceptionally
high due to the project's high estimated capital cost and the difficulty
of attracting new transit riders in a market where the majority of
commuters already use transit. The primary purpose of the SAS project is
to provide faster travel time for current transit riders and relieve
severe overcrowding conditions that currently occur on the existing
Lexington Avenue subway line, as reported by the project's transit user
benefits measure.

# Existing Land Use, Transit-Supportive Land Use Policies and Future Patterns 

# [Rating: High]{.underline}

The *High* rating reflects existing land use conditions that are highly
transit-supportive, with high-density, pedestrian-oriented development
prevailing throughout the corridor. Strong policies and measures such as
zoning, parking restrictions, and public infrastructure investments,
which have been highly effective in producing existing land use
patterns, will reinforce the compact, urban development patterns that
generate high rates of pedestrian activity and transit ridership.

**Existing Conditions:** The project would serve an area of
high-intensity development, covering most of eastern Manhattan, from
East Harlem in the north to Lower Manhattan in the south. Within
proposed station areas, residential neighborhoods encompass over 649,700
people (69,865 persons per square mile) and over 1.2 million jobs
(130,000 jobs per square mile). The character of the corridor's land
use, which incorporates mixed uses, compact development patterns and
sidewalks on all streets, is highly supportive of pedestrian activity
and transit use. Transit ridership throughout Manhattan, including the
Second Avenue corridor, is the highest in the nation. Some sections of
the corridor such as East Midtown, which includes a section of the
city's high-rise commercial center, are nearly fully developed. Other
areas such as West Midtown and East Harlem provide opportunities for
continued development at very high urban densities.

**Future Plans, Policies and Performance:** By 2025, an additional
52,900 residents (eight percent increase) are projected within station
areas and employment is estimated to increase by 155,000 (13 percent).
While the corridor is already developed with high-density land uses,
policies and tools are in place that will support transit-supportive
development in areas that can accommodate growth. Chief among these
tools is New York City's *Comprehensive Zoning Resolution*, which
contains a Special Transit Land Use District along the corridor. The
resolution also includes requirements for sidewalks and other
pedestrian-friendly amenities, as well as parking restrictions and
disincentives, including an 18 percent parking tax. Several projects
planned for Lower Manhattan will improve transit linkages to other
sections of the city and region, while simultaneously reinforcing the
area's pedestrian-friendly character.

The project is anticipated to have a beneficial impact on regional land
use by increasing transit system capacity and promoting economic
development in the core of the New York metropolitan area. Overcrowding
on the existing Lexington Avenue subway line, coupled with congestion on
area roadways, increasingly act as constraints on growth and
redevelopment within the city's center. A large number of new
residential and commercial development projects have been proposed or
are currently under development in the corridor, requiring the
improvement and expansion of transit service that could be provided by
the SAS project.

######## 

# Local Financial Commitment 

# [Rating: Medium]{.underline} 

The *Medium* local financial commitment rating was determined by the
stability of MTA's revenue sources and operating condition, tempered by
recent sluggish economic conditions which have resulted in some budget
constraints for the agency.

# Proposed Non-Section 5309 New Starts Share of Total Project Costs: 50% 

# [Rating: Medium]{.underline} 

The financial plan for the Second Avenue Subway proposes that 50 percent
of project costs be funded under the Section 5309 New Starts programs,
with the other half of capital costs funded with MTA's dedicated State
and local dedicated revenues.

+-----------------------+-----------------------+-----------------------+
| **Locally Proposed    |                       |                       |
| Financial Plan**      |                       |                       |
+-----------------------+-----------------------+-----------------------+
| **[Proposed Source of | **[Total Funding      | **[Percent of         |
| Funds]{.underline}**  | (\$mi                 | Total]{.underline}**  |
|                       | llion)]{.underline}** |                       |
+-----------------------+-----------------------+-----------------------+
| **Federal:**          | \$8,404.3             | 50.0 %                |
|                       |                       |                       |
| Section 5309 New      |                       |                       |
| Starts                |                       |                       |
+-----------------------+-----------------------+-----------------------+
| **Local:**            | \$8,404.3             | 50.0 %                |
|                       |                       |                       |
| MTA Dedicated Sources |                       |                       |
+-----------------------+-----------------------+-----------------------+
| **Total:**            | **\$16,808.5**        | 100.0 %               |
+-----------------------+-----------------------+-----------------------+

**NOTE:** Funding statements reflected in this table have been made by
project sponsors and are not DOT or FTA assumptions. Sum of figures may
differ from total as listed due to rounding.

# Stability and Reliability of Capital Financing Plan

# [Rating: Medium]{.underline} 

The *Medium* rating reflects the stability and availability of MTA's
funding sources, including debt-refinancing and bonding capacity.
However, New York City and State support has declined recently due to
sluggish economic conditions that have resulted in budget constraints
within MTA. The rating also acknowledges the uncertain ability of MTA's
current cash flow to absorb any potential cost increases that could
occur on both the SAS or the LIRR East Side Access projects.

**Agency Capital Financial Condition:** MTA's capital financial
condition is stable. The agency's bonds are rated in the medium to upper
grade level. The average age of MTA's bus fleet is 5.4 years, which is
good. MTA has completed a \$14 billion restructuring of the agency's
debt obligations, resulting in the consolidation of 13 out of 16
existing credits into four new credits. This action is estimated to
yield \$4.5 billion in additional capital funds without increasing
existing maximum annual debt service.

######## 

**Capital Cost Estimate and Contingencies:** The current total capital
cost estimate includes \$607 million of unallocated contingency. Even
though the overall estimate is currently considered reasonable, given
the size of the total budget including the requested New Starts share,
FTA has informed MTA that an initial MOS must be identified before the
project can advance into final design. In addition, there is a real
likelihood that the current total capital cost estimate for the LIRR ESA
project will increase. In the event that unforeseen cost overruns also
occur on the SAS project, it is unclear whether MTA would be able to
effectively cover them simultaneously.

**Existing and Committed Funding:** Approximately 12.6 percent (\$1.06
billion) of the total non-Section 5309 New Starts share of the SAS'
total estimated capital cost has been committed in MTA's current capital
program. MTA would commit the remaining 87.4 percent (\$7.34 billion) of
the non-New Starts share in future capital programs.

**New and Proposed Funding Sources:** No new funding sources are
proposed for the construction of the SAS project. However, the level of
New Starts funding that MTA is projecting to receive from FTA for the
SAS project on an annual basis greatly exceeds the funding level that
has historically been granted by FTA. As a result, MTA is planning to
utilize short-term financing methods, such as Grant Anticipation Notes,
to close the projected funding gap.

# Stability and Reliability of Operating Finance Plan 

**[Rating: Medium]{.underline}**

The *Medium* rating acknowledges MTA's stable operating condition.
Revenues, including farebox receipts and other dedicated sources, are
considered adequate. However, the rating also acknowledges MTA's
anticipated operating deficit for the agency's 2005-2007 budgetary
cycle.

######## 

**Agency Operating Financial Condition:** MTA's audited financial
statements indicate that the agency is currently operating within a
sound financial framework. MTA's farebox recovery rate for the past 10
years has ranged between 45 percent and 58 percent. However, MTA is
currently projecting an operating deficit ranging between \$840 million
to \$1.45 billion for the agency's 2005-2007 budgetary cycle. The
operating deficit is attributable to a downturn in the regional economy,
increased labor costs, and a reduction in State and city financial
contributions. MTA is actively exploring a series of cost saving
measures to address the projected deficit. In May 2003, MTA increased
fares and tolls on the agency's transit and roadway (bridges and
tunnels) facilities by an average of 33 percent.

######## 

**Operating Cost Estimates and Contingencies:** Annual operating and
maintenance costs for the SAS are currently estimated at \$80.8 million
in year of expenditure dollars, inflated over a 22 year period to 2025.
This is significantly higher than last year's estimate, which reflected
constant year (2002) dollars. MTA's total operating and maintenance
costs for the years 2003-2022 are estimated at \$83 billion.

######## 

#### Existing and Committed Funding: All proposed operating funding sources exist. MTA has budgeted approximately \$159 million for the SAS' operating cost as part of the agency's 20-year cash flow analysis (2003-2022). Unlike capital funds, which are committed in the agency's Capital Program, operating funds are approved on an annual basis. Therefore, the projected operating subsidy for the project would be approved on an annual basis along with MTA's overall transportation network. 

#### New and Proposed Funding Sources: No new funding sources for operating revenue are proposed for the SAS project. 

MAP