**Central Subway**

**San Francisco, California**

(November 2006)

The San Francisco Municipal Railway (Muni) and the San Francisco County
Transportation Authority (SFCTA) are planning the Central Subway
project, a 1.7-mile extension of the Third Street light rail transit
(LRT) line (currently under construction) from its termini at Fourth and
King Streets, north under Market Street and into Chinatown in the San
Francisco central business district (CBD). Three new stations would be
constructed along the Central Subway alignment and four light rail
vehicles would be purchased to augment the existing fleet. When
completed, the combined Third Street LRT / Central Subway project would
provide a continuous 7-mile light rail system connecting the heavily
transit-dependent communities of Bayshore in the south with Chinatown in
the north, restoring a continuous transportation link that was lost when
the Embarcadero Freeway was destroyed by the Loma Preita earthquake in
1989.

The Financial District, Union Square, and Chinatown have a very high
level of existing transit service. Bus routes that serve the project
corridor operate on two-minute headways during peak hours and typically
carry passenger loads which are at or above capacity. Currently,
commuter rail passengers from the south must board these crowded buses
operating on congested roadways or walk over a mile from the CalTrain
Station to reach the CBD. The Central Subway project would provide a
high-capacity rapid transit link between these areas. Implementation of
the Central Subway project is further expected to help carry large
crowds attending events at the Moscone Center and SBC Park (home of the
San Francisco Giants) and support redevelopment opportunities in the
South of Market area (SOMA).

+------------------------------------+---------------------------------+
| **Summary Description**            |                                 |
+------------------------------------+---------------------------------+
| **Proposed Project:**              | Light Rail Transit              |
+------------------------------------+---------------------------------+
| ** **                              | 1.7 Miles                       |
|                                    |                                 |
|                                    | 3 Stations                      |
+------------------------------------+---------------------------------+
| **Total Capital Cost (\$YOE):**    | \$1,410.75 Million (includes    |
|                                    | \$152.5 million in finance      |
|                                    | charges)                        |
+------------------------------------+---------------------------------+
| **Section 5309 New Starts Share    | \$762.20 Million (54.0%)        |
| (\$YOE):**                         |                                 |
+------------------------------------+---------------------------------+
| **Annual Forecast Year Operating   | Not Available                   |
| Cost:**                            |                                 |
+------------------------------------+---------------------------------+
| **Ridership Forecast (2030):**     | 44,700 Average Weekday          |
|                                    | Boardings                       |
+------------------------------------+---------------------------------+
| ** **                              | 21,500 Daily New Riders         |
+------------------------------------+---------------------------------+
| **FY 2008 Local Financial          | # Medium                        |
| Commitment Rating:**               |                                 |
+------------------------------------+---------------------------------+
| **FY 2008 Project Justification    | **Medium-High**                 |
| Rating:**                          |                                 |
+------------------------------------+---------------------------------+
| **FY 2008 Overall Project          | **Medium**                      |
| Rating:**                          |                                 |
+------------------------------------+---------------------------------+

Division H of the Consolidated Appropriations Act, 2005, includes
language directing FTA to permit Muni to use local funding expended for
the construction of the Third Street LRT project as match for the
Central Subway. This action reduces the overall New Starts share from 54
percent for the Central Subway project alone to less than 38 percent of
the cost of the combined projects.

The project has been in preliminary engineering (PE) for over four
years. The project's opening year has slipped by nearly the same amount
of time, while significant uncertainties regarding the project's scope
and financial plan remain. Muni must identify an implementable project
scope and realistic schedule for completing PE and securing necessary
local funding commitments, and further clarify the operations and
maintenance (O&M) cost assumptions used to calculate project cost
effectiveness, by September 30, 2007 or be removed from PE status. 

**Project Development History and Current Status**

In October 1996, Muni began preparation of a Draft Environmental Impact
Statement (EIS) for the Third Street/Central Subway light rail line.
Because of their phased implementation, the two segments are considered
separate projects, and FTA issued a Record of Decision on the Third
Street alignment in 1998. FTA approved the Central Subway project into
PE in July 2002. Since then, Muni has modified the project alignment and
examined alternative tunneling scenarios. Muni is currently undertaking
a value engineering study to examine ways to lower the project's total
capital cost, which is likely to result in further scope changes that
are not reflected in this evaluation. NEPA work had been suspended, but
a Supplemental Draft EIS is expected to be initiated in late 2006, with
completion anticipated by mid-2008.

**Significant Changes Since FY 2007 Evaluation** (**November 2005**)

Muni revised the project's capital cost estimate to reflect increased
finance costs; a revised construction schedule; added contingencies; a
higher inflation rate; and a more comprehensive construction cost
estimate.  Muni further changed the operating plans for the project and
its baseline alternative to reflect anticipated operation of the Third
Street LRT opening in 2007. The systemwide O&M cost estimate used in
calculating project cost effectiveness and operating efficiencies has
changed significantly as a result of the new operating plans, and has
not been fully justified. Muni also used updated 2030 regional land use
forecast to support the project's travel forecast.

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

The project is rated *Medium-High* based on a *Medium-Low* rating for
cost effectiveness and a *High* rating for transit-supportive land use.

####### *Cost Effectiveness Rating: Medium-Low* 

The *Medium-Low* cost effectiveness rating reflects the level of
travel-time benefits (7,800 hours each weekday) relative to the
project's annualized costs. Given the uncertainty of the project scope
and the assumed systemwide O&M costs, this estimate of project cost
effectiveness carries considerable risk.

+------------------------------------------+---------------------------+
| **Cost Effectiveness**                   |                           |
+------------------------------------------+---------------------------+
| Cost per Hour of Transportation System   | **[New Start vs.          |
| User Benefit                             | Baseline]{.underline}**   |
|                                          |                           |
| Incremental Cost per Incremental Trip    | \$25.12\*                 |
|                                          |                           |
|                                          | \$9.78                    |
+------------------------------------------+---------------------------+

####### \* Indicates that measure is a component of Cost Effectiveness rating.

The Central Subway provides a new direct transit link between the San
Francisco CBD and southeastern San Francisco, and provides an improved
connection between these areas and CalTrain and other commuter services
from the region's South Bay area. Without the Central Subway, commuters
from Mission Bay, Bayview, and the South Bay destined for Chinatown and
Union Square must travel along the circuitous Embarcadero alignment to
reach Market Street on the far eastern end of the CBD, or transfer to
local bus service at King Street. The proposed project provides a more
direct connection to downtown and eliminates transfers for riders
originating within the City; fully one-third of work trip benefits are
attributable to this market. The project also generates a significant
level of travel time benefits for reverse commute trips to industrial
areas in the Third Street corridor. Approximately 85 percent of forecast
benefits are attributable to San Francisco residents; the remainder of
benefits accrue to residents from other jurisdictions in the region
taking advantage of improved LRT connections to CalTrain and BART. Over
40 percent of benefits accrue to low-income households.

####### 

The current capital cost estimate is considered reliable and includes
sufficient contingencies provided that identified cost reduction
measures are realized. These measures are expected, however, to result
in significant scope changes and the need for additional environmental
review.

####### *Transit-Supportive Land Use Rating: High*

The *High* land use rating is based upon the *High* ratings assigned to
existing land use and performance of land use policies, and the
*Medium-High* rating for transit-supportive land use plans and policies.

**Existing Land Use: High**

-   Population density is approximately 53,600 people per square mile in
    the corridor, and total employment in project station areas is
    approximately 217,600 jobs.

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-   The San Francisco CBD is the densest and most transit accessible
    downtown on the west coast. Union Square is the primary retail
    district in the city with dense pedestrian and transit-oriented
    development. Chinatown has extremely dense concentrations of
    residential units, retail, and some office and small-scale
    industrial uses.

-   Available parking in the corridor is generally on-street, with some
    off-street parking for commuters and city-owned parking garages for
    commuters and shoppers. The daily cost to park in city-owned lots in
    the corridor is high, ranging from \$20 to \$30 per day.

**Transit-Supportive Plans and Policies: Medium-High**

-   While the city and entire Bay Area have a number of physical
    constraints to growth such as topographical limitations, it does not
    have a unified or enforceable growth management policy.

-   San Francisco's *General Plan* has long encouraged higher-density
    and transit-oriented development. The city is undertaking additional
    planning initiatives to focus higher-intensity growth in transit
    corridors. The city is considering zoning changes that would require
    residential community-oriented retail development near transit
    nodes.

-   The city's zoning regulations are intended to maintain a medium to
    high-density profile and scale, with a mixture of land uses in many
    areas. The city's plan generally supports transit-supportive
    densities. There are no minimum parking requirements or off-street
    parking provisions in the CBD and other major employment areas.

-   The City of San Francisco Redevelopment Agency employs a number of
    special tools to help implement land use policies contained in the
    city's *General Plan* such as tax increment financing, special land
    acquisition rules, and special land assembly abilities.

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-   San Francisco's existing land use pattern includes the densest
    development along its major transportation corridors. The objective
    of the City Planning Department and directing codes and ordinances
    is to reinforce this pattern of development along corridors that
    have high transit capacity such as the Central Subway corridor.
    Thus, land use planning in the Central Subway corridor is focused
    more on the corridor and neighborhood level than around individual
    stations or stops.

**Performance and Impacts of Policies:** **High**

-   The existing high-density development and pedestrian accessibility
    in the City of San Francisco demonstrates the strength of city
    policies and market forces at achieving transit-oriented intensities
    and urban design. The number of jobs in the San Francisco CBD has
    doubled since the 1970s with no increase in the volume of traffic
    entering the area.

-   The South of Market area within the New Central Subway corridor is
    expected to experience strong growth over the next two decades, with
    high density residential, high-tech office, and a variety of retail
    uses continuing to fill in sites formerly occupied by industrial
    uses.

#### 

####  

####### Other Project Justification Criteria 

+------------------------------------------+--------------+------------+
| **Mobility Improvements Rating:          |              |            |
| Medium-High**                            |              |            |
+------------------------------------------+--------------+------------+
| **[Within ½-mile radius of boarding      | 217,600      |            |
| areas]{.underline}:**                    |              |            |
|                                          | 350,500      |            |
| Existing Employment                      |              |            |
|                                          | 6,400 (19%)  |            |
| Projected Employment (2030)              |              |            |
|                                          | 72,500\*     |            |
| Low Income Households (% of total HH)    |              |            |
|                                          | 2,100\*      |            |
| **[Average Per Station]{.underline}:**   |              |            |
|                                          | **[New Start |            |
| Employment                               | vs.          |            |
|                                          | Baseline]{.  |            |
| Low Income Households                    | underline}** |            |
|                                          |              |            |
| **Transportation System User Benefit Per | 2.68\*       |            |
| Project Passenger Mile (Minutes)**       |              |            |
+------------------------------------------+--------------+------------+
| **Environmental Benefits Rating: High**  |              |            |
+------------------------------------------+--------------+------------+
| **[Criteria Pollutant (Reduction in      | **[New Start |            |
| tons)]{.underline}**                     | vs.          |            |
|                                          | Baseline]{.  |            |
| > Carbon Monoxide (CO)                   | underline}** |            |
| >                                        |              |            |
| > Nitrogen Oxide (NO~x~)                 | 1            |            |
| >                                        |              |            |
| > Volatile Organic Compounds (VOC)       | 9            |            |
| >                                        |              |            |
| > Particulate Matter (PM~10~)            | 3            |            |
| >                                        |              |            |
| > Carbon Dioxide (CO~2~)                 | 0            |            |
|                                          |              |            |
| **[Criteria Pollutant                    | 429          |            |
| Status]{.underline}**                    |              |            |
|                                          | **[EPA       |            |
| > Carbon Monoxide (CO)                   | De           |            |
| >                                        | signation]{. |            |
| > 8-Hour Ozone (O~3~)                    | underline}** |            |
|                                          |              |            |
| **Annual Energy Savings (million British | Maintenance  |            |
| Thermal Units)**                         | Area\*       |            |
|                                          |              |            |
|                                          | Marginal     |            |
|                                          | No           |            |
|                                          | n-Attainment |            |
|                                          | Area\*       |            |
|                                          |              |            |
|                                          | 4,079        |            |
+------------------------------------------+--------------+------------+
| **Operating Efficiencies Rating:         |              |            |
| Medium**                                 |              |            |
+------------------------------------------+--------------+------------+
| **System Operating Cost per**            | > **         | **[New     |
|                                          | [Baseline]{. | Start]{.un |
| **Passenger Mile (current year           | underline}** | derline}** |
| dollars)**                               | >            |            |
|                                          | > \$0.773\*  | \$0.773\*  |
+------------------------------------------+--------------+------------+

\* Indicates that measure is a component of rating for each criterion.

N/A indicates information was not available for this entry.

# [Local Financial Commitment Rating: Medium]{.underline} 

The *Medium* local financial commitment rating is based on the *Medium*
rating for the capital finance plan and the *Medium* ratings for the New
Starts share of project costs and the operating finance plan.

####### *Section 5309 New Starts Share of Total Project Costs: 54%* 

####### *Rating: Medium*

Division H of the Consolidated Appropriations Act, 2005, permits Muni to
use non-New Starts funds expended for the Third Street LRT project as
match to the Central Subway. While the New Starts share rating reflects
the Central Subway project alone (\$1,410.7 million), the legislative
language lowers the New Starts share to approximately 38 percent of the
total costs of the combined Third Street/Central Subway project
(\$2,010.7 million).

+-------------------------+-----------------------+--------------------+
| **Locally Proposed      |                       |                    |
| Financial Plan**        |                       |                    |
+-------------------------+-----------------------+--------------------+
| **[Source of            | **[Total Funds        | **[Percent of      |
| Funds]{.underline}**    | (\$mi                 | To                 |
|                         | llion)]{.underline}** | tal]{.underline}** |
+-------------------------+-----------------------+--------------------+
| **Federal:**            | \$762.20              | 54.0%              |
|                         |                       |                    |
| Section 5309 New Starts | \$92.20               | 6.5%               |
|                         |                       |                    |
| STIP Funds              |                       |                    |
+-------------------------+-----------------------+--------------------+
| **State:**              | \$14.00               | 1.0%               |
|                         |                       |                    |
| Traffic Congestion      |                       |                    |
| Relief Plan             |                       |                    |
+-------------------------+-----------------------+--------------------+
| **Local:**              | \$126.00              | 8.9%               |
|                         |                       |                    |
| Proposition B/K Sales   | \$416.35              | 29.5%              |
| Tax Funds               |                       |                    |
|                         |                       |                    |
| Other Local Sources     |                       |                    |
+-------------------------+-----------------------+--------------------+
| **Total:**              | **\$1,410.75**        | 100.0%             |
+-------------------------+-----------------------+--------------------+

**NOTE**: The financial plan reflected in this table has been developed
by the project sponsor and does not reflect a commitment by DOT or FTA.
The sum of the figures may differ from the total as listed due to
rounding.

\*STIP funds are state-administered Federal flexible funds augmented by
state gas tax and other revenues. These funds are passed from the state
to local transportation agencies as STIP funds, but all Federal
requirements apply.

# 

# *Capital Finance Plan Rating: Medium* 

The capital finance plan is rated *Medium* based upon the average of the
subfactor ratings. The commitment of capital funds subfactor was rated
*High*; the capital condition was rated *Medium-High*; the completeness
subfactor was rated *Medium*; and the capital funding capacity subfactor
was rated *Low* and the capital cost estimates and planning assumptions
was rated *Medium-Low*.

#### Agency Capital Condition: Medium-High

-   The average age of Muni's bus fleet is 5.4 years, which is younger
    than the industry average.

-   Muni's good bond ratings, which were issued in June 2005, are as
    follows: Moody's Investors Service Aa3, Standard & Poor's
    Corporation AA, and Fitch AA-.

#### Completeness of Capital Plan: Medium

-   The capital plan was reasonably complete and included a 20-year cash
    flow statement, a fleet management plan, five years of historical
    data, and a sensitivity analysis. However, the capital plan omitted
    some explanatory details such as identification of a funding source
    for \$418 million of the non-New Starts share of project costs.

#### Commitment of Capital Funds: High

-   Over 50 percent of the Non-Section 5309 New Starts funds (Muni Third
    Street Light Rail and New Central Subway) have been committed and
    budgeted. Sources of funds include state transportation improvement
    program funding, traffic congestion relief funding and proposition B
    and K sales tax revenues.

#### Capital Funding Capacity: Low

-   The project's financial plan does not specify how Muni intends to
    pay for the \$416.4 million local funding shortfall and, therefore,
    does not provide for any additional funding capacity to cover
    additional cost increases or funding shortfalls.

#### Capital Cost Estimate and Planning Assumptions: Medium-Low

### Several revenue assumptions are considered optimistic compared to historical data including Federal Section 5307, Section 5309 fixed guideway modernization, and CMAQ funds.  Proposition K revenue assumptions are shown inconsistently throughout the plan, sometimes as YOE dollars and sometimes as current year dollars.  

### Assumptions regarding project financing were lacking detail. The availability of recently-passed statewide bonding revenues for the project was not substantiated with supporting documentation.

### Despite the project being in preliminary engineering for over four years, there remains substantial uncertainties regarding the project's scope. 

#### *Operating Finance Plan Rating: Medium*

The operating finance plan is rated *Medium*, based upon the averaged
ratings of the five subfactors listed below. The commitment of operating
funds subfactor was rated *High;* completeness of the operating plan
rated *Medium-High;* operating condition was rated *Medium*; the
operating cost estimates and planning assumptions subfactor was rated
*Medium-Low*; operating funding capacity was rated *Low*.

#### Agency Operating Condition: Medium

-   Muni's current ratio of assets to liabilities as reported in its
    most recent audited financial statement is 1.55.

-   Muni is undergoing experienced some service cuts in 2005 and 2006.

#### Completeness of Operating Plan: Medium-High

-   The operating plan was complete and included a 20-year cash flow
    statement, more than five years of historical data, identification
    of key assumptions, a moderate level of detail, and a sensitivity
    analysis.

#### Commitment of Operating Funds: High

-   Over 75 percent of operating funding is committed. The main revenue
    sources are fares, parking fees, General Fund contributions, and
    sales tax and fuel assistance revenues.

#### Operating Funding Capacity: Low

-   The project's financial plan does not show projected reserve
    accounts and/or access to credit that could help fund operating
    funding shortfalls. The plan projects operating deficits in years
    2011 to 2025.

#### Operating Cost Estimates and Planning Assumptions: Medium-Low

-   The operating plan assumes that the systemwide operating cost will
    decrease with the implementation of the project, and this has not
    been substantiated. The operating plan assumes frequent fare
    increases that differ from history. However, the project has only a
    minimal impact on overall system-wide operating costs.

-   Other assumptions are generally in line with historical experience.

#### 

Map

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