Proposed Guidance on New Starts/Small Starts Policies and Procedures

February 5, 2007

Prepared by:

Federal Transit Administration

Office of Planning and Environment

US Department of Transportation

[http://www.fta.dot.gov](http://www.fta.dot.gov/)

Table of Contents

[Purpose 1](#purpose)

[Summary of Proposed Changes 2](#summary-of-proposed-changes)

[Proposed Changes 2](#proposed-changes)

[1. Information Required of Grantees
2](#information-required-of-grantees)

[2. FTA Review of Key Documents 5](#fta-review-of-key-documents)

[3. Travel Forecasts 6](#travel-forecasts)

[4. Evaluation Criteria 10](#evaluation-criteria)

[Reporting Instructions 18](#reporting-instructions)

# Purpose

Section 3011 (d)(6) of the new transportation statute, [Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for
Users](http://www.fta.dot.gov/documents/SAFETEA-LU_Title_III_-_Final_Bill.pdf)
(SAFETEA-LU), requires that the Federal Transit Administration (FTA)
publish for comment and response, "Policy Guidance" regarding the new
fixed guideway capital project (New Starts) review and evaluation
process and criteria at the following times: (1) 120 days after the
enactment of SAFETEA-LU, (2) each time significant changes are made to
the process and criteria, and (3) at least every two years. This
document is FTA's response to the second of these requirements. FTA will
revise this guidance to incorporate any changes made in response to
comments when the Final Guidance on New Starts/Small Starts Policies and
Procedures and Reporting Instructions are published in the spring of
2007.

Interested parties may submit written comments to the Dockets Management
System, U.S. Department of Transportation, Room PL-401, 400 Seventh
Street, S.W., Washington, D.C. 20590-0001. Please submit comments
identified by the docket number (FTA-2007-27172) by any of the following
methods:

-   Federal eRulemaking Portal: http://www.regulations.gov. Follow the
    on-line instructions for submitting comments.

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

-   Fax: 1-202-493-2478.

-   Mail: Docket Management System; U.S. Department of Transportation,
    400 Seventh Street, SW., Nassif Building, Room PL-401, Washington,
    DC 20590-001.

-   Hand Delivery: To the Docket Management System; Room PL-402 on the
    plaza level of the Nassif Building, 400 Seventh Street, SW,
    Washington, DC between 9:00 am and 5:00 pm, Monday through Friday,
    except Federal Holidays.

All submissions must include the agency name and docket number for this
notice. Note that all comments received will be posted without change to
http://dms.dot.gov including any personal information provided. For
access to the docket and to read background documents or comments
received, go to http://dms.dot.gov at any time or to the Docket
Management System.

FTA also plans to publish a new regulation for the New and Small Starts
programs to implement changes specified in SAFETEA-LU to the methods,
criteria and procedures used to evaluate and rate projects proposed for
funding under these programs. These provisions of SAFETEA-LU may lead to
some changes in the way that FTA determines eligibility for funding, the
framework for evaluating and rating projects, and the procedures used to
plan and develop new transit capital projects that seek funding from
these programs.

The latest Guidance on New Starts Policies and Procedures was announced
in the *Federal Register* Notice on May 22, 2006, and became effective
on that date. In the *Federal Register* dated August 8, 2006, FTA
announced the availability of the Interim Guidance and Instructions for
Small Starts, which described the informational requirements for
sponsors of projects seeking Small Starts funding and the rating and
evaluation process to be used for those projects.

# Summary of Proposed Changes

FTA does not propose to change the current framework and methodology for
evaluating and rating New Starts projects before issuing a new
regulation for FTA's New Starts and Small Starts programs. All of the
measures and their weights for developing New Starts ratings and
recommendations will remain consistent with the process spelled out in
the [2000 Final
Rule](http://www.access.gpo.gov/nara/cfr/waisidx_03/49cfr611_03.html)
(codified at 49 CFR part 611), the Reporting Instructions for the
Section 5309 New Starts Criteria, issued in May 2006, and the Proposed
Interim Guidance and Reporting Instructions for Small Starts, issued in
August 2006.

While the evaluation and rating framework will not change, FTA proposes
minor changes in the ratings used for a project's overall rating, the
sub-factors used for the capital and operating components of the
financial rating, consideration of overmatch for Small Starts, the
measures used for mobility, and consideration of innovative contractual
agreements, the congestion management strategy and the "make-the-case"
document. In addition, FTA proposes procedural changes as well as
improvements to the estimation of transportation benefits. These
proposed improvements are presented in detail below.

FTA welcomes comments from interested parties on these proposed changes.
Any adopted changes will be included in the Final Guidance on New
Starts/Small Starts Policies and Procedures and be reflected in the
accompanying Reporting Instructions, anticipated to become effective in
the spring of 2007.

Consistent with these proposed changes, the amendments made by
SAFETEA-LU to 49 U.S.C. 5309(d) continue to require that FTA determine
that projects proposed for New Starts funds meet a variety of criteria,
including that they are the result of an alternatives analysis; are
included in an approved transportation plan; that the applicant has the
legal, financial, and technical capability to carry out the project;
that the project is justified based on a review of the criteria
specified in law; and that the project is likely to continue to meet
those requirements in the future, before projects are allowed to begin
preliminary engineering or final design. FTA's current approach to
advancing projects through planning and project development is found at
<http://www.fta.dot.gov/index_5221.html>.

# Proposed Changes 

## 1. Information Required of Grantees

[FTA proposes to no longer require the submission by both New Starts
project sponsors of information on FTA's measures for operating
efficiencies and environmental benefits.]{.underline}

Based upon prior experience in evaluating New Starts projects, FTA has
found that locally-generated and reported information in support of the
operating efficiencies and environmental benefits criteria does not
distinguish, in any meaningful way, the differences between competing
major transit capital investments. Indeed, FTA has not factored the
ratings assigned to these two criteria into a project's "project
justification" rating for several years. Acknowledging the deficiencies
in these measures, FTA requested, in its January 2006 *Proposed
Guidance* *on New Starts Policies and Procedures*, industry comment on
alternative approaches for capturing meaningful information regarding
these two criteria. FTA received very few responses to this request, but
will present a modified approach to addressing these two statutory
criteria for further comment through the rulemaking process for 49 CFR
part 611.

Until rulemaking is completed, however, FTA proposes an interim
modification (and reduction) to the current New Starts reporting and
evaluation processes related to these criteria. In the case of operating
efficiencies, FTA would no longer rate this measure for the purposes of
approving project entry into preliminary engineering or final design,
nor rate and report it in the *Annual Report on Funding Recommendations*
(*"Annual Report"*). For environmental benefits, FTA will simply consult
the Environmental Protection Agency's current air quality designation
for the area in which a New Starts project is proposed and assign
ratings consistent with the decision rule documented in FTA's New Starts
*Reporting Instructions*. Information on a project's estimated pollutant
emissions reductions, which was previously required but not used in the
rating for environmental benefits, would no longer be required and thus
no longer reported in the *Annual Report on Funding Recommendations*.

[FTA proposes that the resubmission of information on transit supportive
land use patterns and policies for the purposes of the *Annual Report on
Funding Recommendations* be optional for both New Starts and Small
Starts.]{.underline}

FTA intends to clarify in the *Reporting Instructions for the Section
5309 New Starts Criteria* for the FY 2009 evaluation cycle that
information on transit supportive land use patterns and policies is no
longer required to be submitted for proposed projects once this
information has been evaluated and rated for the purposes of preliminary
engineering or project development approval. Submittal of any additional
information would be entirely voluntary for purposes of the annual
rating. FTA has found that while most projects demonstrate some progress
in the enactment of transit supportive land use plans and policies,
overall land use ratings seldom change over the course of project
development. This does not rule out the possibility of improving the
rating, though; indeed, over the years FTA has recognized, through
improved project ratings, a few metropolitan areas that have taken
extraordinary local actions towards enhancing the transit supportiveness
of existing and anticipated development around proposed transit nodes.
FTA continues to encourage such land use planning activities as part of
the project development process, but wants to clarify that it is at the
discretion of project sponsors whether they want to submit new
information at subsequent evaluation points. In the absence of such
information, FTA will continue to assign to the project the transit
supportive land use rating it received at the time of the preliminary
engineering or project development approval. Where information is not
provided on an annual basis, FTA would expect project sponsors to report
on any progress in implementing new land use plans and policies over the
duration of preliminary engineering at the time a project is evaluated
for the purposes of FTA approval of final design. This would be
particularly true if the preliminary engineering rating was predicated
upon formal adoption of new land use plans and policies. In addition,
this would be the appropriate time to identify any new development that
has occurred or for which an agreement has been executed.

[FTA proposes to no longer require New Starts and Small Starts project
sponsors to submit information for evaluation for the *Annual Report on
Funding Recommendations* if their project is not likely to be ready for
a funding recommendation.]{.underline}

Each summer, sponsors of New Starts projects in preliminary engineering
and final design and Small Starts projects in project development
prepare and submit to FTA information for a complete re-evaluation of
the project for inclusion in the *Annual Report*. FTA understands and
appreciates the amount of time necessary to prepare such information,
and has proposed a few modest reductions to the annual reporting
requirements, as summarized in the previous proposal. Subsequent to
receiving the information, FTA commits significant staff time and
consultant resources to its evaluation and to the documentation of this
evaluation in the *Annual Report*. The extensive time it takes to
prepare the *Annual Report* competes with the time that FTA would prefer
to spend on technical assistance towards the advancement of major
transit capital projects.

To the extent that the *Annual Report* is primarily a budget document,
FTA believes that *new* ratings are most meaningful for projects that
are candidates for funding recommendations -- that is, projects in final
design or in the latest stages of preliminary engineering or project
development. While past practice has been to re-evaluate and re-rate all
projects in the "pipeline" (projects in preliminary engineering, final
design, and, beginning with this year's report, Small Starts "project
development"), FTA is proposing, beginning with the FY 2009 *Annual
Report*, to limit the requirement for submittal of information for
evaluation only to those projects that are candidates for funding in the
FY 2009 annual budget.

In recent years, the criteria for determining funding candidates
(outside of the actual rating, which, as specified by SAFETEA-LU, must
be at least "medium") is an expectation that the project will be in
final design midway through the calendar year in which the *Annual
Report* is published. FTA is seeking comment on whether these
"readiness" criteria are appropriate and sufficient or whether there are
any other criteria that it should consider.

Projects that are not funding candidates will continue to be reported in
Appendix B of the *Annual Report*. Such projects would be required to
submit a narrative indicating where they are in the project development
process, and why their current rating is still valid. However, the
information on the project included in the *Annual Report* will be
limited to its rating at the time of its preliminary engineering or
project development approval; a description of the scope of the project,
its transportation and other benefits, and project development history;
its locally proposed capital financial plan; and FTA commentary on its
current status. Projects that may not be funding candidates but have
encountered significant changes to their scope, cost, or financial plan,
or any other factor that affects the rating, may need to be
re-evaluated. FTA will make such determinations on a case-by-case basis,
and in sufficient time for the project sponsor to prepare and submit the
information in time for evaluation in the *Annual Report*.

FTA believes that the elimination of formal New Starts and Small Starts
reporting for projects that are not funding candidates in a given fiscal
year will greatly reduce the reporting burden for sponsors of such
projects, without any adverse effect to either the project's or FTA's
budget process. The implementation of this proposal will allow FTA to
concentrate its focus and accompanying resources on projects for which a
budget decision rests, while reducing FTA's overall burden of preparing
the *Annual Report*. Moreover, it continues to ensure an appropriate
level of reporting to Congress on the status of all projects in the New
and Small Starts pipeline. FTA seeks comment on whether this approach
will reduce the burden on project sponsors and whether the report will
still reflect adequate information.

## 2. FTA Review of Key Documents 

[FTA proposes a requirement that potential project sponsors in
alternatives analysis provide a timely opportunity for FTA comment on
documents describing the alternatives at their conceptual, detailed, and
final stages of development.]{.underline}

FTA must ensure that alternatives are developed to satisfy the
requirements of both the National Environmental Policy Act (NEPA) and
SAFETEA-LU. NEPA requires that all reasonable alternatives be considered
when using Federal funds. If NEPA is being conducted as part of the
alternatives analysis process, identification of reasonable alternatives
is usually addressed as part of scoping. Even when the scoping meeting
is held after completing alternatives analysis and selecting the locally
preferred alternative, the scoping process must be able to justify what
alternatives have been considered and removed from consideration. In
both cases, the goal is for FTA to review the alternatives and reach
agreement with the sponsoring agency prior to their presentation at a
scoping meeting. This allows for the public and other interested parties
to understand and comment on alternatives that are considered reasonable
by FTA, the sponsoring agency, and other study participants.

SAFETEA-LU requires FTA to evaluate project benefits and costs using
several criteria. To accomplish this during alternatives analysis
studies, it is critical that the detailed definition of each alternative
be developed so that the incremental costs incurred is representative of
the incremental benefits gained from the additional infrastructure. FTA
has developed guidance, workshops, and courses that describe the
principles necessary to develop alternatives so that a fair comparison
can be made on their costs, benefits, and impacts. To ensure a timely
review, FTA and the project sponsor should reach agreement on the
detailed definition of alternatives prior to substantive effort being
expended on the travel forecasts and project design. This will allow for
the travel forecasting effort to be focused on optimization of the
performance of each alternative within the context of consistent
policies, as is required by FTA guidance.

Finally, to ensure that final estimates of each alternative's benefits
and costs are reliable and reflect proper equilibration, it is important
that FTA review the final definition of alternatives. This description
of alternatives varies from the detailed definition of alternatives as a
result of using the travel forecasts to evaluate the performance of each
alternative, making refinements to improve its performance, and finally
making adjustments to the frequency of service to meet the demand
(commonly termed "equilibration"). Several such refinements are usually
necessary before each alternative's operating plan is considered final.
As these estimates are the final estimates from the forecasts, they
should be reviewed by FTA once the forecasts have been produced and
adequate quality control performed so that project sponsors as well as
FTA are comfortable with the results.

It is FTA's desire to work closely with New and Small Starts project
sponsors during the alternatives analysis stage to ensure that it
results in the development of reliable information to support both the
local decision on selection of a preferred alternative and FTA's
decision to advance the preferred alternative into preliminary
engineering or project development. To better support that outcome and
reduced times for approval of Preliminary Engineering/Project
Development (PE/PD) requests, FTA is also considering a requirement that
project sponsors provide a timely opportunity for FTA comment on the
following alternatives analysis documents:

-   Scope of Work

-   Problem Statement, Goals, and Objectives

-   Documentation of Study Assumptions and Methodologies

-   Documentation of Study Results, particularly in terms of the
    estimated costs and benefits of the preferred alternative

Timely submission of the documents to FTA means that they would be given
to FTA sufficiently in advance so that FTA's comments would be received
before the project sponsor's work has started for the area of concern.
This would minimize the need for project sponsors to update or report
work that has been completed in response to FTA concerns. FTA is seeking
comments on this proposal that would be implemented sometime after the
other changes proposed in this document.

## 3. Travel Forecasts

[FTA proposes -- for implementation at a later date -- that travel
forecasts for both New and Small Starts submitted in support of a
request to enter PE or PD be based on travel models that have been
validated against data on current ridership patterns collected no more
than five years prior to the PE or PD request.]{.underline}

While this requirement, if implemented, would not go into effect until
the spring of 2009, the nature of the survey process means that project
sponsors should begin thinking about what is involved in conducting such
surveys and the impact on model validation now if they are to be able to
meet the proposed requirement if it is implemented in the future.

Ridership patterns on the current transit system play two key roles in
the development of New Starts (and in the future Small Starts) projects.
First, these patterns represent the function of transit in a
metropolitan area today -- the geographic markets it serves, the
socioeconomic characteristics of the riders it carries, the different
access modes (e.g., walk and park/ride) it relies on, and so forth.
Therefore, data on current ridership patterns inform the description of
current transportation problems, the current role of transit in
addressing those problems, the identification of reasonable
alternatives, and other essential foundations for a solidly made case
for a proposed project. Second, current ridership patterns are the basis
for checking the accuracy of the travel forecasting methods that will be
used to predict future travel times, ridership, and other key evaluation
measures. Therefore, data on current ridership patterns are essential to
the development of reliable forecasts for transit alternatives.

It is critical that the surveys be conducted so that they capture key
information for travel forecasts that is representative of all transit
riders. This means that attention should be given to development of
survey questions, sampling strategies, distribution, use of secondary
data sources, and expansion of survey responses. Unfortunately, many
surveys conducted in the past have experienced problems that have
impaired their usefulness. This is a consequence of working in a
challenging environment that includes a variety of transit services by
time of day, a diverse group of respondents, less than ideal conditions
for respondents to answer, and travel questions that are not always
interpreted in the same manner. To support improvement of transit
surveys for travel models, FTA intends to publish guidance in the near
future that addresses the latest findings on survey methods for transit
riders. In the meantime, FTA staff are available to share recent
insights on successful survey techniques.

Validation of travel models using transit surveys should be conducted at
a level of detail that supports reliable forecasts of transit ridership.
This means that the validation should be sufficiently disaggregated to
allow for analysis of trip purpose, mode-of-access, geographic
distribution of trips, transfers, and any other aspect of the transit
market deemed important in the local corridor of interest. To support
improved validation of transit forecasts, FTA intends to issue guidance
in the near future that addresses the kind of analysis that is useful.
In the meantime, FTA staff are available to share recent insights on
approaches that have proven to be useful in other areas.

[FTA proposes to allow project sponsors that seek to introduce a new
transit mode to an area to claim credit for the user benefits caused by
attributes of that mode beyond the travel time and cost measures
currently available in the local travel model.]{.underline}

FTA has long been aware of a technical issue related to the handling of
unmeasured attributes of various transit modes in the mode-choice
components of travel forecasting models that results in effectively
disadvantaging projects in areas where the proposed New Starts project
is (locally) a new mode. In response to this problem, FTA has been
considering ways to improve forecasting of guideway ridership, new
transit riders, and user benefits to help ensure fairness for projects
competing across the country. This issue was initially addressed in the
both the [March
9](http://www.fta.dot.gov/legal/guidance/dear_colleague/2004/16301_16455_ENG_HTML.htm),
2005, and [April
29](http://www.fta.dot.gov/legal/guidance/dear_colleague/2004/16301_16573_ENG_HTML.htm),
2005, FTA "Dear Colleague" Letters as well as Part 1 of the Proposed
Guidance on New Starts Policies and Procedures dated January 11, 2006.

Without exception, urban travel forecasting procedures in the United
States characterize the service quality of alternative transit modes
only in terms of travel times (for walking, waiting, riding, and
transferring), travel costs (fares and park-ride fees), and a very
limited number of other measurable service characteristics (the number
of transfers, for example). Other service attributes of a particular
transit mode (e.g., its visibility, reliability, span of service hours,
comfort, protection from the weather, the chances of finding a seat, and
passenger amenities) are, in theory, lumped together into a
"transit-mode-specific constant" estimated as part of the development of
ridership forecasting models. In models that explicitly represent
alternative transit modes (bus, light rail, commuter rail, Bus Rapid
Transit (BRT)), the differences between the transit-mode-specific
constants represent the net differences in service quality caused by all
of the unmeasured attributes. A transit improvement that replaces a slow
bus option with a higher-speed guideway facility would make transit more
attractive both because of improved travel times and because of the more
attractive bundle of unmeasured attributes associated with the guideway.
Guideway riders, new transit riders, and user benefits would result from
both sources.

Unfortunately, transit-mode-specific constants play a second role in
travel models: as correction factors. Models are "calibrated" with data
on current transit ridership in preparation for forecasting future
transit ridership. Calibration is achieved through adjustments to the
transit-mode-specific constants so that, when the model is used to
"predict" current ridership, it produces the correct numbers. The
difficulty is that the calibrated constants also act quite literally as
correction factors for any errors made in other components of the travel
model. If the errors are large, then the corrections must be large and
the resulting mode-specific constants have nothing to do with the value
of the unmeasured attributes of individual modes -- they are simply
correction factors for unrelated problems with the travel model. So in
those cases, differences between the bus and guideway constants
[cannot]{.underline} be used to estimate the ridership changes or user
benefits caused by changes in the unmeasured attributes of transit
services.

The role of transit-mode-specific constants as correction factors with
little relation to the actual attributes of transit has proved to be
common in model sets used in urban areas with existing rail systems (or
BRT facilities in a few cases). Over the past two years, FTA has not
accepted forecasts for New Starts proposals when the local travel models
have exhibited symptoms of these problems. In response, local travel
forecasters have been scrubbing the model sets and recalibrating models.
In a growing number of cases, the recalibrated mode-choice models have
suggested that the constant for rail is equivalent to somewhere between
10 and 15 minutes of in-vehicle time per transit trip. Questions remain,
however, including whether 15 minutes is the correct upper bound and
whether the same upper bound ought to apply to the different bundles of
unmeasured attributes typical of the various guideway modes -- heavy
rail, light rail, BRT, commuter rail, and others.

While more careful development of forecasting models appears to be
helpful in areas considering additions to existing guideway systems, a
potentially significant challenge remains in areas considering entirely
new guideway modes: local conditions provide no basis on which to
calibrate transit-mode-specific constants to represent the unmeasured
attributes of the new guideways. FTA's long-standing position in these
cases has been to evaluate projects with forecasts that ignore the
effects of the unmeasured attributes -- in essence, to assume that the
unmeasured attributes of new guideway modes and their constants are the
same as those of current bus services in the area. Given the growing
body of evidence from existing guideway systems that constants are not
the same for guideways and conventional bus service, FTA's position has
changed.

FTA proposes to credit projects that introduce a transit mode to an
urban area with additional transportation benefits, the magnitude of
which will depend on the characteristics of the proposed project and the
number of transit trips predicted to use the project. The additional
benefits will occur in three forms: (1) a relatively large positive
constant for trips using the project via park/ride access and no
dependence on local buses; (2) a smaller positive constant for all other
trips on the project; and (3) a less onerous weight applied to the time
spent riding on the new facility compared to the weight applied to time
on all other modes. The large constant will not be applied to walk trips
to the proposed project because of the inability of current travel
models to distinguish the walk-to-guideway-only market from all other
walk-to-transit markets, a limitation that would produce a gross
over-estimation of the size of that market.

FTA will determine the values of the constants and travel-time weight
based on three types of project characteristics that are not recognized
in current methods for ridership forecasting:

[Guideway-like Characteristics]{.underline}

-   Reliability of vehicle arrival (up to four minutes for trips using
    park/ride access with no dependence on local bus, and up to two
    minutes for all other trips using the proposed project): depending
    on the extent that the vehicle right-of-way is grade-separated and
    the extent of traffic signal priority or pre-emption along portions
    of the alignment that are controlled by traffic signals;

-   Branding/visibility/learnability (two minutes, one minute):
    depending on the extent that stations, vehicles, and right-of-way
    are distinctive, and the system is easy to use;

-   Schedule-free service (two minutes, zero minutes): depending on the
    extent to which service headways are less than 10 minutes in the
    peak period and less than 15 minutes during the off-peak;

    [Span of Good Service]{.underline}

-   Hours of frequent service (three minutes, zero minutes): depending
    on the extent to which weekday service extends beyond the peak
    period with headways that are less than 30 minutes;

    [Passenger Amenities]{.underline}

-   Stations/stops (three minutes, two minutes): depending on the extent
    to which these have passenger amenities that relate to safety and
    security features, protection from the weather, retail activities,
    comfort, and other features valued by users;

-   Dynamic schedule information (one minute, one minute): depending on
    the provision of real time information on vehicle arrivals at
    stations; and

-   Vehicle amenities (discount on the weight applied to time spent on
    the transit vehicle of up to 20 percent): depending factors such as
    comfort, and the probability of getting a seat of the proposed
    service.

    Because the values listed above are the maximum possible credit for
    each characteristic, the specific values assigned to each project
    will depend on specific characteristics of the project. For example,
    a project running at grade through intersections without traffic
    signal priority or pre-emption would have a significantly lower
    value for reliability compared to a project in a tunnel, on an
    aerial structure, or on other dedicated right-of-way for which
    travel is uninterupted by cross traffic.

    FTA proposes that the additional benefits associated with these
    project characteristics will be computed using forecasts of guideway
    ridership prepared without these effects. This approach will give a
    project credit for the user benefits caused by the un-included
    attributes but will not increase the predicted volume of riders
    using the guideway.

FTA's reluctance to permit project sponsors to use the constant and
time-discount to produce higher forecasts of guideway ridership reflects
the conclusions of an FTA analysis of actual ridership outcomes compared
to forecasts for 19 New Starts projects completed in the 1990s and early
2000s. Of the 19 forecasts, 11 were within 30 percent of actual
outcomes. Of those 11 reasonably good forecasts, only two were for an
initial guideway project in a metropolitan area. The other nine were for
expansions of systems that had earlier completed at least one new
guideway facility. Clearly, substantial risk already exists in ridership
forecasts for initial guideway projects. A prudent strategy in response
is one that provides a realistic credit for un-included guideway
benefits without inflating the guideway ridership forecast itself.

FTA also proposes that this approach will be applied to guideway-like
services included in baseline alternatives. An arterial BRT project in a
baseline alternative, for example, would be credited with the same
constants and travel-time discount -- scaled to its specific
characteristics -- in exactly the same way that it would be assigned
those same credits if it were the proposed alternative. This approach is
a consistent application of the concepts underlying the credits and is
necessary to the consistent treatment of projects proposed for New
Starts funding.

For sponsors of guideway-expansion projects that have calibrated
mode-specific constants, FTA will continue to work closely with them to
ensure that they are using constants that are generally consistent with
the methods and values permitted for sponsors of "new" New Starts
projects.

FTA has developed this proposed approach over the past year through
discussions with experts in ridership forecasting for major transit
projects and comments received on the concept at a national workshop on
travel forecasting for New Starts projects. FTA requests comment on this
proposed change in policy, which is proposed for implementation some
time in the future.

## 4. Evaluation Criteria

[To calculate the overall rating, FTA proposes to replace the current
three-tier rating of "low, medium, and high" with a five-tier rating
scale.]{.underline}

SAFETEA-LU requires that projects be given an overall rating based on a
five-tier scale of "high," "medium-high," "medium," "medium-low," and
"low." To transition to these new ratings in the FY 2007 and 2008
*Annual Report* for New Starts, but not create major changes without
notifying the transit industry, FTA implemented a three-tier scale
rating of "high, medium, and low," which replaced the previous ratings
of "highly recommended, recommended, and not recommended" required by
the Transportation Equity Act for the 21st Century (TEA-21).

In the past, FTA has implemented the three-tier structure by rounding up
when calculating the overall rating, but included a single decision rule
that a "medium" overall rating required a rating of at least "medium"
for both project justification and local financial commitment. By going
to a five-tier structure, FTA has more flexibility to accurately reflect
the overall rating of the project. For instance, for a project with a
"medium-high" rating for both project justification and local financial
commitment, the proposed rating would be "medium-high," not "high" as is
currently the case. However, for a project with a "medium-high" for
project justification and a "high" for local financial commitment, its
proposed rating would continue to be "high" to reflect that it is a
better overall project than the one where both project justification and
local financial commitment are rated "medium-high." Conversely, in order
to better distinguish on the low end, a project that has a "medium-low"
rating for both project justification and local financial commitment
would be rated "medium-low," but if it had a rating of "medium-low" for
project justification and "low" for finance it would be rated "low" to
reflect that project was not as good as a project that has a
"medium-low" rating for both. In both cases, we are better able to
distinguish between projects at both extremes of the ratings spectrum.

Therefore, FTA is proposing to implement a five-tiered overall rating
where we would retain the rule that we round up, but we would apply the
following decision rules:

-   A "medium" overall rating requires a rating of at least "medium" for
    both project justification and local financial commitment.

-   A "medium-low" overall rating requires a rating of at least
    "medium-low" for both project justification and local financial
    commitment.

[FTA proposes to add a decision rule that Small Starts and Very Small
Starts projects that meet the conditions for a simplified financial
rating, whereby projects requesting no more than a 50% Small Starts
share be given a "high" rating, and those requesting between 50% to 80%
share receive no less than a "medium" rating.]{.underline}

Currently agencies receive a simplified financial rating of a "medium"
if they can demonstrate they have a reasonable plan to secure funding
for the local share of capital costs; that the additional operating and
maintenance costs of the project are less than five percent of the
agency's operating budget; and the agency is in good operating
condition. The proposal would increase that rating to "high" when a
project proposes no higher than 50% of the capital costs from the Small
Starts program, and would not affect the rating for projects seeking
more than 50% funding.

For many years FTA has encouraged projects seeking New Starts funding to
pursue no more than 50% of the total project costs using New Starts
funds. This is because the demand for New Starts funding has
historically been far in excess of the funding available. This is even
more relevant now given the size of New Starts projects. FTA is able to
fund a greater number of meritorious projects when project sponsors seek
no more than 50% in New Starts funding. These same considerations apply
to funding from the Small Starts program, which is expected to have
demands far in excess of the authorized funding. Since there is
considerably less money available for this program, even though the
individual projects are less expensive, the potential demand is likely
to be high as more communities are able to compete for the funds. This
provision may provide a significant incentive to project sponsors to
keep their request from the Small Starts program at or below 50% of the
total project cost.

[FTA proposes to replace the current measure of mobility benefits for
transit dependents with three easily computed measures: (1) the share of
user benefits that accrue to transit dependents; (2) user benefits per
project passenger mile for transit dependents; and (3) the number of
project riders who are transit dependent.]{.underline}

The current measure -- low income population and employment within one
half-mile of stations -- has proven to be unsatisfactory for
distinguishing between projects. The measure focuses on the
socio-economic characteristics of the station areas without determining
whether or not the proposed service actually improves the mobility of
transit dependent riders. Examples of cases where the existing measure
could provide misleading results are:

1)  If the proposed project is in an area with very few transit
    dependents, but provides access to major employment centers and
    connects with existing lines that serve transit dependents, then the
    rating of this measure would be misleading. The existing measure
    would show very few transit dependents living near the proposed
    project, but transit dependents may benefit greatly from the
    project.

2)  If a proposed project is in an area with many transit dependents,
    but actually leads to degradated service, the existing measure would
    suggest such a project actually benefited transit dependents.

The examples illustrate the pitfalls of using a measure that does not
directly represent the actual impact that is supposed to be measured.

Fortunately, all travel forecasts are stratified by income or auto
ownership, which enables FTA's Summit reporting tool to calculate
transportation system user benefits just for the lowest socio-economic
stratum in the travel forecast. As such, FTA intends to specify
households in the lowest income strata or zero-car households, as
"transit dependents." FTA will be able to implement this measure with no
additional burden on project sponsors because almost all of the
information is already calculated and reported to FTA as part of the
Summit output reports. In fact, because project sponsors no longer need
to calculate low income population and employment within one half-mile
of stations, the proposed change will likely reduce the reporting burden
for this evaluation measure.

FTA proposes to use three different measures: (1) the number of transit
dependent riders using the project, (2) their user benefits per
passenger mile on the project, and (3) the share of user benefits
received by transit dependents compared to the share of transit
dependents in the region. The first two replicate the general mobility
benefits measures but only for transit dependents. The evaluation of
mobility tries to determine to what degree the proposed New or Small
Starts project provides substantial benefits for a large number of
people -- in this case focused on transit dependents. Towards that end,
FTA proposes the specific measures for mobility benefits to be:

-   Project transit dependent ridership to indicate whether the project
    provides benefits for a large number of transit dependent people,
    and

-   User benefits for transit dependents per passenger mile on the
    project to indicate whether the New or Small Start is projected to
    result in significant benefits for the average transit dependent
    passenger. Some projects can result in very large total benefits,
    but, spread over very large numbers of people, the benefits may not
    be significant for the individual user. This measure seeks to
    determine whether a transit dependent passenger is likely to have
    noticeably better service after the project is implemented.

The final proposed measure is the share of the project's user benefits
for transit dependents normalized by the share of the metro area's
populations found in that lowest stratum. Metropolitan areas may differ
widely in the number and share of the population that is transit
dependent. This measure seeks to determine whether or not a project is
in a relatively transit dependent corridor for the particular
metropolitan area. FTA seeks comment on whether this measure is
appropriate.

On the one hand, some might argue against using this measure because
they believe that the intent of the legislation is to target resources
to projects that provide the most benefits to transit dependent
populations as an explicit consideration of social equity from a
national perspective. On the other hand, those that believe that the
intent of the legislation is not to specifically target resources to
corridors with the most economic need, but to provide an incentive for
each metropolitan area to target resources towards those projects that
benefit the most transit dependents within their region, will support
this measure. Concerned parties are encouraged to comment on the merits
of using this measure as an indicator of mobility benefits for transit
dependent populations.

FTA is also considering whether it should take into account in its
evaluation the extent to which past projects in a particular
metropolitan area were targeted towards transit dependent populations.
The issue is whether each project is judged separately, or whether
metropolitan areas that have already built transit lines that have
provided large benefits to transit dependent populations should be given
credit for that effort for subsequent projects that provide far fewer
benefits to transit dependents. In other words, in the case where the
transit dependent mobility problem has largely been addressed, FTA is
considering whether to either exempt the project from the transit
dependent mobility criterion or at least temper that calculation with an
assessment of overall past performance. The counter-argument is that the
performance of previous projects in a region is irrelevant to the
evaluation of proposed projects -- that each individual project should
be evaluated solely on its own merits relative to the evaluation
criteria established in law. FTA seeks comments regarding whether past
performance of other projects should be considered in the evaluation
process.

[FTA proposes three changes to the evaluation and rating of local
financial commitment for both New and Small Starts, all of which are
related to the sub-factors used to develop the ratings for the stability
and reliability of the capital and operating finance plans: (1)
eliminate the completeness of the capital and operating plan
sub-factors; (2) merge the existing capacity and cost estimates and
planning assumptions sub-factors together; and (3) re-weight the
remaining sub-factors.]{.underline}

FTA proposes to maintain the three existing measures used to determine
local financial commitment and their weights, which are: (1) the share
of non-New Starts funding (20%); (2) the stability and reliability of
the capital finance plan (50%); and (3) the stability and reliability of
the operating finance plan (30%). All FTA decision rules would remain in
place as well.

In the past, FTA has used five sub-factors to determine the capital
funding plan rating and five sub-factors to determine the operating
funding plan rating. These five sub-factors include: current capital or
operating condition, completeness of the capital or operating funding
plan, commitment of capital or operating funds, capital or operating
funding capacity, and capital or operating planning assumptions and cost
estimates. FTA proposes to eliminate the completeness sub-factors
altogether and merge the capacity sub-factors with the planning
assumptions and cost estimates sub-factors. Hence, there would be three
sub-factors instead of five for rating the capital and operating finance
plans (condition, commitment, and capacity/estimates/assumptions). 
Rather than weighting the sub-factors equally as was done in the past to
arrive at the summary capital or summary operating rating, FTA proposes
to weight the remaining three sub-factors as follows:

-   25% for condition,

-   25% for commitment, and

-   50% for capacity/estimates/assumptions.

The assumptions used in the financial plan are critical to determining
whether the project sponsor can construct and operate the proposed
project while continuing to operate and maintain the existing system,
which is required by SAFETEA-LU. The previous set of five sub-factors
for capital and five sub-factors for operating, and more importantly,
their equal weighting, lessened the importance of using sound
assumptions when developing the financial plan. A project sponsor could
include very optimistic assumptions in the financial plan that would
show the agency having sufficient financial capacity. Without those
optimistic assumptions, the financial plan would paint a very different
picture. Consequently, FTA is proposing the above mentioned changes to
acknowledge the importance of using sound assumptions in the financial
plan.

[FTA proposes that the degree to which a project employs innovative
contractual agreements will be considered in the evaluation and rating
of the operating finance plan for both New and Small
Starts.]{.underline}

To encourage project sponsors to examine innovative operating
arrangements that might result in cost savings, FTA is proposing to
provide a bonus that will increase the operating finance plan rating one
level from "medium" to "medium-high" or from "medium-high" to "high," if
the project sponsor can demonstrate it has provided the opportunity for
the operation and maintenance of the project to be contracted out. FTA
will not apply the bonus if the operating finance plan is rated below
"medium."

[FTA proposes that alternatives analysis (AA) final reports and AA/Draft
Environmental Impact Statements (Draft EISs) must present -- for all
alternatives -- the information used by FTA to assign New or Small
Starts ratings if that information has been vetted by FTA. If the
information has not been vetted with FTA, then the absence of the
information must be highlighted in the document]{.underline}.

FTA intends to work closely with project sponsors to report such
information in these important decision-making documents for all
alternatives that include transit.

In FTA's May 2006 Final Guidance on New Starts Policies and Procedures,
FTA began requiring that "the Final EIS shall present the New Starts
evaluation of the preferred alternative as part of the NEPA evaluation
of the alternatives." As conveyed in the guidance, FTA believes that
including such information is entirely consistent with Council of
Environmental Quality regulations (40 CFR 1502.23), which require that
"an environmental impact statement should at least indicate those
considerations, including factors not related to environmental quality,
which are likely to be relevant and important to a decision." For New
Starts projects, the New Starts rating information qualifies as
"relevant and important to a decision."

The May 2006 policy guidance was less clear on FTA's requirements for
inclusion of New Starts information in other decision-making documents,
such as Draft EISs and alternative analysis reports where the AA was
undertaken prior to the initiation of NEPA. The guidance first states
that "for a Draft EIS or Environmental Assessment, the New Starts
evaluation information may not be available when the draft NEPA document
is published, but, if available, it must be included." It is later
stated within the guidance that "for NEPA documents prepared during
alternatives analysis and before a project has been approved for entry
into New Starts PE, FTA will require that information relating to the
New Starts criteria be presented with a brief description of how the
information is used for FTA's ratings."

FTA's current policy proposal falls somewhere in between the two
statements. It recognizes that it is within the very process of
evaluating alternatives -- with the goal of selecting one to advance for
New or Small Starts funding while discarding the rest -- where
information on the competitiveness of alternatives in terms of New or
Small Starts is most critical. It further acknowledges that this
information is important whether or not the study is undertaken as an AA
or an AA/Draft EIS. But it also recognizes the resource constraints in
achieving this important objective, and therefore provides for a
disclosure in such documents of the absence of the information when it
is not included, and of the necessary steps to be taken during
subsequent project development before FTA can rate and, ultimately,
recommend funding for the preferred alternative.

If implemented, this policy supports FTA's long-standing objective of
promoting full disclosure of all information relevant to a local
decision to select and advance a preferred alternative into the New or
Small Starts project development process, *whether or not* the
decision-making document is covered under NEPA. In other words, the
inclusion of such information in AA studies performed prior to
initiation of NEPA -- in addition to AA/Draft EISs or EAs - ought, to
the extent possible, include this information for all *transit
alternatives*, as it may weigh on the local decision to select one
alternative over others. Such disclosure simply fulfills the objectives
of any planning study, which is to provide the best information possible
to decision-makers so that they can make informed decisions.

For projects pursuing New Starts funding, information on the
competitiveness of studied alternatives should be a key factor in the
selection of a preferred alternative. But the information needs to be
reliable; that is, consistent with the information that FTA will use to
evaluate a preferred alternative as part of its decision to allow it
into New Starts preliminary engineering or project development for Small
Starts. Consequently, the best way to ensure the reliability of such
information is through its proper development and review by FTA.

That said, FTA recognizes the significant effort -- in terms of both
local and FTA staff, time, and monetary resources -- to meet this
objective. It is not FTA's intent to prescribe or require the analysis
necessary to develop the New or Small Starts criteria for all
alternatives, only to emphasize the merit of performing such an
evaluation. Nor does FTA intend to hold up the publication and
circulation of AA or AA/Draft EIS studies which do not include the New
or Small Starts criteria. However, FTA pledges to provide timely
technical assistance in the preparation and documentation of such
information for study sponsors who agree that such information is
important. Moreover, for AA studies (performed either within or prior to
NEPA) that do not include the New or Small Starts criteria, FTA will
require that the studies acknowledge their absence, and present within
the document a description of the New Starts project development and
evaluation processes that must be followed if any preferred alternative
which emerges from the study is assumed to be implemented with New or
Small Starts funding. Similar to the "template" that FTA developed for
the inclusion of New Starts information in Final EISs, FTA will develop
standard language for alternatives analysis studies and AA/Draft EISs
which convey the subsequent New Starts processes. The inclusion of
either fully vetted New or Small Starts criteria or the aforementioned
disclosure of its absence in the alternatives analysis will be required
for all New Starts projects requesting entry into preliminary
engineering.

[FTA proposes to incorporate under "other factors" two specific
considerations. First, if a proposed New or Small Starts project is a
principle element of a congestion management strategy, in general, and a
pricing strategy, in particular, the project justification rating will
be increased if near a breakpoint. Second, FTA proposes to rate the
degree to which a New or Small Starts project addresses significant
transportation problems or opportunities in a corridor and the
appropriateness of the preferred alternative as a response by reviewing
the contents of the "make-the-case document" as a standard criterion
under "other factors." In cases where a project's overall rating is near
a breakpoint, a "high" make-the-case rating will increase the project's
overall rating and a "low" make-the-case rating will decrease the
overall rating. FTA further continues to encourage the reporting, under
"other factors," of information on a project's economic development
impacts. Particularly compelling information may be used by FTA to
increase a project's "project justification" rating.]{.underline}

The first part of this proposal re-affirms the metropolitan planning
requirement (49 U.S.C. 5303(k)(3)) that metropolitan planning
organizations serving Transportation Management areas undertake a
Congestion Management Process. It also supports the congestion
initiative of the Secretary of Transportation, which is to promote
strategies that reduce highway congestion. Pricing strategies have been
shown to reduce congestion and support higher transit ridership. Because
the magnitude of the effect is not well captured by travel forecasts,
consideration of pricing strategies under "other factors" allows FTA to
account for the expected increase in transportation benefits, even if
they are not readily verifiable.

For several years, FTA has required a make-the-case document that
marshals the best available arguments for the merits of a proposed New
Starts project. The make-the-case document is intended to provide to FTA
and other stakeholders a coherent, succinct narrative that identifies
the motivations and expectations that have led to the proposed project.
While required, it has not been formally used in the New Starts
evaluation process. The second part of this proposal for other factors
would provide for an FTA rating of the making-the-case document, and its
incorporation, as an "other factor" into the overall project
justification rating.

When based on analytical results of planning and project development,
the make-the-case narrative provides a powerful justification for the
need for and expected performance of the project that FTA can use in
presentation of the project to various Federal participants in the New
or Small Starts programs. A strong case for a proposed project will:

-   Identify the nature, extent, and timing of the problem(s) being
    addressed, including:

    -   Roadway congestion, including the specific travel markets
        contributing to and affected by congestion;

    -   The effects of roadway congestion on transit service,
        performance, and competitiveness;

    -   Limitations on transit capacity and their effects;

    -   The impacts of congestion and other accessibility problems on
        specific economic-development plans; and

    -   The extent to which these problems already exist or are
        projections of emerging difficulties.

-   Present the specific ways that the proposed project is effective in
    addressing the problem, including:

    -   Improvements in the quality of transit service in terms of
        reduced travel and wait times, and improved reliability, comfort
        and convenience;

    -   Projected ridership response to these improvements; and

    -   Expected economic-development impacts.

-   Outline the merits of the proposed project as a candidate for New or
    Small Starts funding, including:

    -   The benefits and costs of the project compared to the baseline
        alternative; and

    -   The benefits and costs of the project compared to lower-cost
        "build" alternatives.

FTA will assign a rating of "high," "medium," or "low" to the strength
of the arguments contained in the make-the-case document. A "high"
rating will be assigned to projects that effectively address severe
near-term transportation or economic-development problems. A "low"
rating will be assigned to projects that are ineffective investments in
corridors with minor transportation or economic development problems.
All other projects will be assigned a "medium" rating. FTA will use
make-the-case ratings of "high" and "low" to determine the overall
rating of projects that are at the margin between two overall rating
outcomes.

Consistent with SAFETEA-LU, and as provided for in the May 2006
*Reporting Instructions for the Section 5309 New Starts Criteria*, FTA
intends to continue to view economic development as an "other factor" of
particular significance. Through its ongoing rulemaking process, FTA
hopes to define specific measures for evaluating the economic
development impacts of candidate New or Small Starts projects. Until
such measures are defined and subject to industry comment, FTA
encourages project sponsors to submit information that they feel best
justifies the anticipated economic development impacts of their proposed
New or Small Starts investments. FTA is particularly interested in
quantifiable economic development benefits that can be clearly
distinguished from (a) the transportation system user benefits that
comprise one variable of FTA's measure for cost effectiveness, and (b)
land use impacts that are reported and evaluated in support of the
transit supportive land use plans and policies criteria. Specifically,
FTA desires to avoid both the double-counting of benefits *and* the
crediting of benefits to projects that may be more appropriately
attributable to supporting economic development policies, initiatives,
and incentives by isolating the specific impacts resulting from the
presence of fixed guideway transit in a given corridor.

# Reporting Instructions

Based upon public comment, FTA proposes to incorporate these changes
into the FY 2009 Reporting Instructions, the Rating and Evaluation
Criteria and the Interim Guidance and Instructions for Small Starts.

In addition, FTA is considering several changes to the Reporting
Instructions that do not rise to the level of policy guidance. These
include items such as: clarifying that financing charges, even if not
incurred by the project sponsor, must be included in the project capital
cost estimate; reaffirming that all essential elements must be included
in the baseline cost estimate for purposes of determining cost
effectiveness (i.e., sufficient vehicles to operate to the design year)
even if these costs are not ultimately included in the Full Funding
Grant Agreement; and, that FTA will review a request to enter into
preliminary engineering or final design and advise the project sponsor
if it is not complete. FTA commits to completing its review of such a
request within 30 days for preliminary engineering and 120 days for
final design once the application is complete.

The Reporting Instructions will be published in conjunction with the
publication of the Final Guidance on New Starts/Small Starts Policies
and Procedures, expected in spring of 2007. FTA will publish a notice in
the [Federal Register announcing the availability of these
documents]{.underline}.