PUBLIC TRANSIT

Funding for New 

Starts and Small Starts 

Projects, October 2004 

through June 2012

Report to Congressional Committees

November 2012

GAO-13-40

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-40, a report to 

congressional committees

November 2012

PUBLIC TRANSIT

Funding for New Starts and Small Starts Projects, 

October 2004 through June 2012

Why GAO Did This Study

FTA, through the Capital Investment 

Grant program, which includes the 

New Starts and Small Starts programs, 

provides funds to transit project 

sponsors to build new or expanded 

fixed-guideway transit systems. Small 

Starts also includes projects known as

Very Small Starts projects. These three 

categories—New, Small, and Very 

Small projects—vary by total project 

cost and amount of the Capital 

Investment Grant program contribution 

to the cost. For New Starts, total 

estimated project costs exceed $250 

million; for Small Starts, they are less 

than $250 million, and for Very Small 

Starts they are less than $50 million. 

For New Starts the federal contribution 

is at least $75 million, for Small Starts 

it is less than $75 million. 

The Safe, Accountable, Flexible, 

Efficient Transportation Equity Act: A 

Legacy for Users directed GAO to 

annually review FTA’s New Starts 

program. This report discusses the 

extent to which project sponsors use 

non-New Starts funding to help 

construct New Starts, Small Starts and 

Very Small Starts projects. GAO 

reviewed financial information for all of

the 25 New Starts and 32 Small Starts 

and Very Small Starts projects FTA 

identified as receiving construction 

funding from October 1, 2004, through 

June 2012. GAO interviewed FTA 

officials regarding program data and 

officials from 8 project sponsors to get 

their views on funding sources. GAO 

also reviewed relevant federal laws 

and other documentation. DOT officials 

reviewed a draft of this report and 

provided technical comments, which 

GAO incorporated as appropriate.

What GAO Found

Local funding exceeded total federal funding contributions for the 25 New Starts

projects, accounting for $16.3 billion, or almost half, of $33.8 billion of total 

project funding (see figure below) from October 2004 through June 2012. This 

outcome reflects the Federal Transit Administration’s (FTA) policy to encourage 

project sponsors to seek less than 60 percent of the project’s costs from New 

Start funds—less than the allowable 80-percent New Starts-share maximum. 

Local agencies used a wide variety of sources, but most commonly used sales 

taxes for their contributions to the projects; sales taxes were used for 13 of the 

25 projects. Federal funds from all sources for New Starts projects totaled about 

$15.2 billion. The New Starts program alone provided about $14 billion, or 92 

percent of the federal funds during this period. Federal-aid highway funding that 

was “flexed,” or transferred, to transit was the second largest source of federal 

funds, providing about $720 million. Finally, states provided about $2.3 billion, or 

about 7 percent of total funding, to 13 of the 25 projects. States obtained most of 

this funding from bonds or other debt mechanisms. 

Conversely, total federal funding was the largest source of funding for the 32 

Small and Very Small Starts projects, constituting about $1.4 billion, or two-thirds

of $2.1 billion in project funding (see figure below). Most federal funds, about 

$1.1 billion of the $1.4 billion, came from the Small Starts and Very Small Starts 

programs. Flexed federal highway funds again were the second largest federal 

funding source and provided about $195 million. Local agencies provided about 

$513 million or about 24 percent of total project funding. Local sales taxes, the 

primary source of local funding, were used on about half of the projects and 

provided 55 percent of local funding. States again provided the smallest share, 

about $188 million or almost 9 percent of total funding, and 17 of the 32 projects 

received state funding. States obtained most of the funding from bonds and other 

forms of debt.

View GAO-13-40. For more information, 

contact David Wise (202) 512-2834 or 

wised@gao.gov.
Page i GAO-13-40 New Starts Funding

Letter 1 

Background 3

Local Funding Was the Largest Share of Total Funding for New 

Starts Projects and Comes from a Wide Variety of Sources 8

Federal Funding Was the Largest Share of Total Funding for Small 

Starts and Very Small Starts Projects 14

Agency Comments 19

Appendix I: GAO Contact and Staff Acknowledgments 22

Table

Table 1: Select Categories of Transit Capital-Investment Grant 

Projects, by Total Cost and Federal Contribution 4

Figures

Figure 1: Total Number of New Starts, Small Starts, and Very Small 

Starts Projects by Transit Mode, October 2004 through 

June 2012 7

Figure 2: Federal, State, and Local Funding Shares of New Starts 

Projects, October 2004 through June 2012 9

Figure 3: Sources of Federal Funding for New Starts Projects, 

October 2004 through June 2012 11

Figure 4: Sources of State Funding for New Starts Projects, 

October 2004 through June 2012 13

Figure 5: Sources of Local Funding for New Starts Projects, 

October 2004 through June 2012 14

Figure 6: Federal, State, and Local Funding for Small and Very 

Small Start Projects, October 2004 through June 2012 15

Figure 7: Sources of Federal Funds for Small Starts and Very Small 

Starts Projects, October 2004 through June 2012 16

Figure 8: Sources of State Funds for Small Starts and Very Small 

Starts Projects, October 2004 through June 2012 17

Figure 9: Sources of Local Funds for Small Starts and Very Small 

Starts Projects, October 2004, through June 2012 18

Contents
Page ii GAO-13-40 New Starts Funding

Abbreviations

BRT bus rapid transit

CMAQ Congestion Management and Air Quality Improvement Program

DOT Department of Transportation

FTA Federal Transit Administration

SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Equity Act— 

A Legacy for Users

MAP-21 Moving Ahead for Progress in the 21st Century Act 

STP Surface Transportation Program 

TIFIA Transportation Infrastructure Finance and Innovation Act

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Page 1 GAO-13-40 New Starts Funding

United States Government Accountability Office

Washington, DC 20548

November 14, 2012

Congressional Committees

The Federal Transit Administration (FTA), through its Capital Investment 

Grant program,1 provided about $15.1 billion to New Starts, Small Starts, 

and Very Small Starts projects over the past 8 fiscal years.2

In addition to New Starts’ funding, project sponsors use a variety of other 

federal, state, and local funding to construct these projects. Assembling 

these funding sources to pay for New Starts’ projects is challenging. 

While the New Starts program allows FTA to pay as much as 80 percent 

of a project’s net capital cost, the actual New Starts’ share of funding for a 

project is typically much lower. FTA’s policy is to encourage project 

sponsors to seek less than 60 percent of the project’s capital cost from 

New Starts’ funds. Additionally, while states may transfer or “flex” certain 

federal-aid highway program funds to use for transit projects, the source 

of these funds—the Highway Trust Fund—is on our high-risk list because 

revenues from motor fuel and other highway-use taxes to support the 

Transit 

systems, provide billions of passenger trips nationwide annually and help 

meet the increased demand for transit services. The Safe, Accountable, 

Flexible, Efficient Transportation Equity Act—A Legacy for Users 

(SAFETEA-LU) created Small Starts for lower-cost New Starts projects. 

FTA created the Very Small Starts category for very low cost projects.

 

1

Under the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for 

Users (SAFETEA-LU) Pub. L. No. 109-59, 119 Stat. 1144, 1573-1589 (2005) the 49 

U.S.C. 5309 Capital Investment Grant program comprised three FTA funding programs: 

Major Capital Investment (New Starts and Small Starts), Fixed Guideway Modernization, 

and Buses and Bus-Related Equipment and Facilities. Given that this report utilizes 

program data during the time period of October 1, 2004, through June 30, 2012, 

discussion of programs in this report primarily reflect statutory provisions in place during 

that time and do not focus on various amendments made subsequently in July 2012 by 

the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Pub. L. No. 112-141, 

126 Stat. 405 (2012).

2

SAFETEA-LU created Small Starts to streamline the project development process and 

evaluation and rating criteria that apply to larger-dollar New Starts projects. FTA created 

an even more streamlined evaluation process for Very Small Starts. See table 1 for more 

information.

 
 

Page 2 GAO-13-40 New Starts Funding

Highway Trust Fund are eroding.3

SAFETEA-LU required that we report annually on FTA’s New Starts 

program.

Further, states and localities have 

faced reduced revenues, and there are many demands on the remaining 

revenues.

4

To provide this information, we focused on New Starts, Small Starts, and 

Very Small Starts projects that FTA identified as receiving construction 

funding from the Capital Investment Grant program during the time period 

October 1, 2004 (fiscal year 2005), through June 30, 2012. We excluded 

“exempt” projects, which are not subject to FTA evaluation and rating 

requirements.

This report responds to this mandate and describes the extent 

to which New Starts’ and Small Starts’ project sponsors use sources of 

funds other than the Capital Investment Grant program, such as local 

funding, private funding, state funding, or other federal funding to 

construct New Starts and Small Starts projects.

5

• Analyzed and summarized project data, including cost, mode of 

transit, and funding sources, from the Annual Report on Funding 

Recommendations for fiscal years 2005 through 2013, for all 25 New 

Starts and 32 Small Starts and Very Small Starts projects FTA 

identified. We considered Very Small Starts to be a subset of the 

We reviewed SAFETEA-LU; FTA guidance related to 

project funding for New Starts, Small Starts, Very Small Starts; and other 

relevant FTA and Department of Transportation (DOT) documents. To 

obtain information on project funding sources, we:

 

3

Congress has transferred $34 billion from general revenues to supplement Highway 

Trust Fund revenues from fiscal year 2008 to fiscal year 2010, and in 2012 appropriated 

an additional $18.8 billion in general revenues for fiscal years 2013 and 2014 to replenish 

the trust fund balance. See GAO, Highway Trust Fund: All States Received More Funding 

Than They Contributed in Highway Taxes From 2005 to 2009, GAO-11-918 (Washington, 

D.C.: Sept. 8, 2011).

4

Pub. L. No. 109-59, 119 Stat. 1144, 1585 (2005). MAP-21, enacted into law in July 2012, 

changed this GAO annual reporting requirement to a biennial reporting requirement. Pub. 

L. No. 112-141, 126 Stat. 405 (2012).

5

Exempt projects are projects in which the federal New Starts contribution is under $25 

million, regardless of total project cost. Pursuant to SAFETEA-LU, the exempt category is 

to expire upon the effective date of the FTA final regulation pertaining to an evaluation and 

rating process for Small Starts as SAFETEA-LU required. FTA issued a Notice of 

Proposed Rulemaking in January 2012 (77 Fed. Reg. 3848 (Jan. 25, 2012)); however, as 

of October 1, 2012, a final rule has not been published. 
 

Page 3 GAO-13-40 New Starts Funding

Small Starts program, and therefore combined the results of these two 

groups of projects. We obtained additional project-funding data from 

FTA to update project financial information and obtained additional 

information from project sponsors to clarify information when needed. 

We reviewed source documentation and interviewed agency officials 

to determine the reliability of the project data collected. We 

determined that the data were sufficiently reliable for the purposes of 

this report. We present the data and resulting findings as of June 30, 

2012; however, transit project costs and financing may change over 

time.

• Selected eight transit sponsors to interview and obtain more detailed

information about why they used the funding sources they used for 

their projects. We selected projects to obtain a mixture of projects 

along several criteria, including size of project, such as New Starts or 

Small Starts; transit mode, such as light rail or commuter rail; and 

geographic location.6

We conducted this performance audit from February 2012 through 

November 2012 in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objective.

The information from these examples cannot be 

used to make inferences about the population because in a 

nonprobability sample some elements of the population have no 

chance of being selected.

Under SAFETEA-LU, FTA’s primary funding for new or extensions to 

existing fixed-guideway transit systems7

 

6

We selected the following projects: Central Corridor Light Rail Transit, Minneapolis-St. 

Paul MN; Central Florida Commuter Rail, Orlando, FL; RapidRide F Line, King County 

WA; Mid-Jordan LRT, Salt Lake City, UT; Dyer Corridor BRT, El Paso, TX; Perris Valley 

CR Line, Riverside County, CA; Dulles Metrorail HR, Northern VA; East Bay BRT, 

Oakland, CA.

was the Major Capital 

Investment component of the Capital Investment Grant program, which 

was a discretionary program funded from annual appropriations rather 

7

A fixed guideway is a separate right-of-way for the exclusive use of public transportation 

services, such as a fixed rail line or exclusive lanes for buses and other high-occupancy 

vehicles. 

Background 
 

Page 4 GAO-13-40 New Starts Funding

than the Highway Trust Fund. The Major Capital Investment Grant 

program includes New Starts, Small Starts, and a subcategory of Small 

Starts known as Very Small Starts. These categories have different 

funding requirements. (See table 1.) 

Table 1: Select Categories of Transit Capital-Investment Grant Projects, by Total 

Cost and Federal Contribution 

New Starts Total estimated project cost is $250 million or more or federal 

contribution is $75 million or more

Small Starts

Very Small 

Starts 

Total estimated project cost is under $250 million and federal 

contribution is under $75 million

Total estimated project cost is under $50 million

Source: GAO analysis of FTA documents.

Notes: Federal contribution here refers to 49 U.S.C. § 5309 Major Capital Investment funds only.

Projects may have other sources of federal funds, such as the American Recovery and Reinvestment 

Act of 2009 (Pub. L. No. 111-5, 123 Stat. 115 (2009)), Federal Highway Administration Congestion 

Mitigation and Air Quality Improvement, or other FTA program funds. 

Table excludes “exempt,” Fixed Guideway Modernization, and Buses and Bus-Related Equipment 

and Facilities projects.

New Starts project sponsors also have drawn on other sources of federal 

funding—transportation formula grants, Fixed Guideway Modernization 

grants, Buses and Bus-Related Equipment and Facilities grants, and 

flexible funding from the federal highway program. The Urbanized Area 

Formula Grant program made federal resources available to urbanized 

areas for transit capital assistance, as well as for operating assistance in 

smaller urbanized areas, and for transportation related planning.8 Fixed 

Guideway Modernization grants9

 

8

Amendments by MAP-21 maintain the basic structure and criteria of the Urbanized Area 

Formula grants but, among other things, broadened eligibility to include job access and 

reverse commute projects. 

were also distributed by formula and 

helped ensure the proper renovation of the nation’s older rail transit 

9

Under MAP-21 amendments, the Fixed Guideway Modernization program was repealed. 

MAP-21 establishes a new grant program to maintain public transportation systems in a 

state of good repair, as well as projects to replace and rehabilitate transit. State-of-goodrepair funding is limited to fixed-guideway systems including rail, bus rapid transit, and 

passenger ferries. State of Good Repair projects are to be funded under one of two 

formulas—either a high-intensity fixed-guideway formula or a high-intensity motorbus 

formula (high-intensity motorbus refers to buses operating in high-occupancy vehicle 

(HOV) lanes). 
 

Page 5 GAO-13-40 New Starts Funding

systems. The Buses and Bus Related Equipment and Facilities10 program 

provided capital assistance for new and replacement buses, related 

equipment, and facilities. Flexible highway funds are formula funds from 

the Highway Trust Fund that may be transferred to FTA and used for 

transit projects. Such funds include Surface Transportation Program 

(STP) and the Congestion Mitigation and Air Quality Improvement 

Program (CMAQ) funds.11

To receive FTA New Starts funding, project sponsors go through a 

number of project development phases in accordance with federal 

requirements. Then FTA may recommend a New Starts project for 

funding. If Congress appropriates funds for a project, FTA provides funds 

to construct New Starts projects through multiyear Full Funding Grant 

Agreements. FTA provides funds to Small and Very Small Starts projects 

through multiyear Project Construction Grant Agreements or 1-year 

Capital Grants.

Recovery Act funds have also been used for 

New Starts Projects.

12

Any transit project that fits the broader definition of a new fixed-guideway 

capital project or extension project is eligible to compete for funding under 

either the New or Small Starts programs.13

 

10MAP-21 repealed this discretionary grant program and replaced it with a formula-based 

grant program.

These include:

11The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) (Pub.L.No. 102-

240, 105 Stat. 1914) and subsequent reauthorization acts gave states and urbanized 

areas greater flexibility in selecting transportation projects to be funded with federal-aid 

highway formula funds. The Surface Transportation Program (STP) and the Congestion 

Mitigation and Air Quality Improvement (CMAQ) Program are referred to as “flexible 

funding” programs because they may be used on a range of projects, including transit and 

highways, and funds made available for transit may be transferred to and administered by 

FTA.

12FTA may use a 1-year grant for projects whose total funding request is less than $25 

million and whose request can be met with a single year or existing appropriations. 

13The term “new fixed-guideway capital project” means a minimum operable segment of a 

capital project for a new fixed-guideway system or extension to an existing fixed-guideway 

system. Under MAP-21, “new fixed guideway capital project” means (1) a new fixedguideway project that is a minimum operable segment or extension to an existing fixedguideway system; or (2) a fixed-guideway bus rapid transit project that is a minimum 

operable segment or an extension to an existing bus rapid transit system. 49 U.S.C. § 

5309(a)(5).
 

Page 6 GAO-13-40 New Starts Funding

• Commuter rail—systems that operate along electric or dieselpropelled railways and provide train service for local, short distance 

trips between a central city and adjacent suburbs.

• Heavy rail—systems that operate on electric railways with highvolume traffic capacity and are characterized by separated rights-ofway, sophisticated signaling, high platform loading, and high-speed, 

rapid-acceleration rail cars operating singly or in multi-car trains on 

fixed rails.

• Light rail—systems that operate on electric railways with light-volume 

traffic capacity and are characterized by shared or exclusive rights-of 

way, or low or high platform loading, single or double car trains, and 

overhead electric lines that power rail vehicles.

• Streetcars—systems that are similar to light rail, but distinguishable 

because they are usually smaller and designed for shorter routes, 

more frequent stops, and lower travel speeds.

• Bus rapid transit (BRT)—bus systems that vary in design, but 

generally including service enhancements to attract riders and provide 

similar transit-related benefits as rail transit, characterized by 

improvements such as dedicated running ways, improved stations, 

improved vehicles, intelligent transportation systems to speed service 

and provide information, off-vehicle fare collection, special branding of 

the service, and frequent service.14

See figure 1 for the modes of the 57 transit projects FTA identified as 

approved transit projects under the Capital Investment Grant program 

from October 2004 through June 2012. Of these, 23 of 25 New Starts 

projects were for rail projects of various types, while 28 of 32 Small Starts 

and Very Small Starts projects were BRT projects.15

 

14Under MAP-21, the New Starts Program may fund fixed-guideway bus rapid transit 

projects defined in part as a bus capital project in which a majority of the project operates 

on a separated right-of-way dedicated for public transportation during peak periods, 

represents a substantial investment in a single route in a corridor, and includes features 

that emulate the services provided by rail fixed guideway systems. In addition, the Small 

Starts Program may fund corridor-based bus rapid transit projects defined, in part, as bus 

projects that represent a substantial investment in a defined corridor, as demonstrated by 

features that emulate the services provided by rail fixed-guideway systems, but the 

majority of which does not operate in a separated right-of-way dedicated for public 

transportation during peak hours.

15For more information on BRT project sizes and costs see GAO, Bus Rapid Transit: 

Projects Improve Transit Service and Can Contribute to Economic Development, 

GAO-12-811 (Washington, D.C.: July 25, 2012).
 

Page 7 GAO-13-40 New Starts Funding

Figure 1: Total Number of New Starts, Small Starts, and Very Small Starts Projects 

by Transit Mode, October 2004 through June 2012

Project sponsors use revenues, such as the federal grants discussed 

above, sales taxes, fees, concessions, etc., to pay the project’s costs.16

 

16Note that fare-box revenues are not included in this list. Fare-box operating revenues 

generally do not recover the operating costs of transit systems. On average, from 2004 

through 2008, transit systems recovered about 34.6 percent of their operating costs 

through fares. Fare-box recovery as a percentage of total transit system operating costs 

also varies by transit mode. The most recent available national data shows that from 2004 

through 2008, heavy rail systems recovered 59.4 percent, commuter rail systems 

recovered 48.7 percent, light rail systems recovered 27.0 percent, and bus systems 

recovered 27.0 percent.

In 

some cases, such revenues are not available when the project costs 

need to be paid. Thus, financing mechanisms entail borrowing money, 

either through bonds, loans, or other mechanisms, to pay these projects 

costs as they come due. These financing mechanisms require a 
 

Page 8 GAO-13-40 New Starts Funding

repayment source. In many instances, using project financing requires 

developing and imposing new revenue streams to repay loans or bonds 

issued to support the investment. Tax exempt bonds, which government 

entities can use to finance capital projects, reduce federal tax revenue; 

however, they provide a less expensive source of financing to project 

sponsors.17

From October 1, 2004, to June 30, 2012, local funding exceeded total 

federal funding18 for the larger New Starts transit projects and accounted 

for about half of all project funds. Of the total $33.82 billion in funds for 

New Starts projects from all sources, local agencies contributed about 

$16.25 billion, states contributed about $2.34 billion, and the federal 

government from all sources contributed about $15.23 billion (see fig. 2). 

This outcome reflects the emphasis FTA has placed on local agencies 

providing a larger matching share of projects’ costs than the allowable 

minimum-matching amount of 20 percent.

 

17Interest earned on most bonds issued by state and local governments is tax-exempt. 

This means that the interest paid to bondholders is generally not included in their gross 

income for federal income tax purposes, and the federal government forgoes tax revenue 

on tax-exempt bonds—we projected foregone federal tax revenues of about $37 billion in 

2007. The federal tax exemption lowers the bond issuer’s borrowing costs and may 

provide equivalent or higher after-tax yields to investors than alternative investments that 

are not tax-exempt. See GAO, Tax Policy: Tax-Exempt Status of Certain Bonds Merits 

Reconsideration, and Apparent Noncompliance with Issuance Cost Limitations Should Be 

Addressed, GAO-08-364 (Washington, D.C.: February 15, 2008) for further information on 

the impact of tax-exempt bonds.

18For the purposes of this report, total federal funding includes federal funding from the 

Capital Investment Grant program as well as any other sources of federal funding.

Local Funding Was 

the Largest Share of 

Total Funding for 

New Starts Projects 

and Comes from a 

Wide Variety of 

Sources 
 

Page 9 GAO-13-40 New Starts Funding

Figure 2: Federal, State, and Local Funding Shares of New Starts Projects, October 

2004 through June 2012

This distribution mirrors the most recent U.S. Department of 

Transportation’s Conditions and Performance report findings, which 

shows that in 2008, federal funding from all sources for all transit capital 

expenditures was about $6.4 billion, while local capital funding was about 

$7.7 billion.19

Individual New Starts projects varied in complexity of funding 

arrangements as indicated, in part, by the number of different federal, 

state, local government, and private-funding sources that were used for 

each project. New Starts projects had from 2 to 11 funding sources. For 

From 2005 to 2008, local funding for all transit capital 

expenditures, not just New Starts projects, exceeded total federal funding 

for 3 of the 4 years.

 

19Capital expenditures in the Conditions and Performance report include both the design 

and construction of new transit system and extensions of existing transit systems (New 

Starts) and the modernization and replacement of existing assets. Therefore, capital 

spending other than New Starts is included in the analysis. U.S. Department of 

Transportation, 2010 Status of the Nation’s Highways, Bridges and Transit: Conditions 

and Performance (Washington, D.C.: March, 2012).
 

Page 10 GAO-13-40 New Starts Funding

the 25 projects, 6 had 2 or 3 sources, 11 had 4 to 6 sources, and 8 had 7 

sources or more. The median number of funding sources was five.

Total federal funding applied to New Starts projects came overwhelmingly 

from the New Starts program itself. Of about $15.23 billion in total federal 

funding for New Starts projects, about $13.98 billion came from the New 

Starts program and about $1.25 billion from other federal programs. (See 

fig. 3 below.) New Starts funding made up the largest part of total federal 

funding for all New Starts projects and covered about 39 percent of total 

estimated project costs across all 25 projects. At the individual project 

level, while New Starts funding made up the 80-percent-allowable share 

of total estimated project costs in one case, the total project cost funded 

by New Starts ranged from 25 percent to 63 percent for the other 24 

projects.

Flexible federal-aid highway funds were the second largest category of 

total federal funding, providing $720 million in funds, or almost 5 percent 

of the federal total across all projects.20

Funds from other FTA programs provided about $185 million, or about 1 

percent of total federal funding. A total of 9 of the 25 New Starts projects 

used non-New Starts FTA funding, either from the Urbanized Area 

Formula program, the Fixed Guideway Modernization formula program, or 

Buses and Bus Related Equipment and Facilities discretionary program. 

In addition, one project used a $280 million Transportation Infrastructure 

In all, 15 New Starts projects 

used flexible highway funds for New Starts transit projects. However, 

these highway funds tended to be relatively small proportions of the total 

project cost. CMAQ funds provided most of the flexible highway program 

funds, and were used on 10 projects. A project sponsor we interviewed 

indicated that CMAQ funding was the most flexible of the highway-funding 

options because it could be used for many different construction 

purposes. One project sponsor we spoke with explained that the state 

highway funds the project had for its BRT project could be used only on 

state roads. However, the project sponsor was able to use federal flexible

funds on other non-state roadway alignments.

 

20Ongoing work shows that more than half of all flexible funding transferred to FTA from 

2007 through 2011 was used to purchase vehicles—both rail cars and buses—or for 

transit infrastructure construction. 

Federal Funding Sources 

for New Starts Projects
 

Page 11 GAO-13-40 New Starts Funding

Finance and Innovation Act (TIFIA) loan to help finance the project.21

Figure 3: Sources of Federal Funding for New Starts Projects, October 2004 

through June 2012

One 

project sponsor with whom we spoke indicated that at the time, the TIFIA 

program provided a less-expensive way to finance the project. Another 

project sponsor that specifically considered, but did not use TIFIA, 

indicated that when putting the funding together for the project, TIFIA was 

not cost-effective for the sponsor, and the sponsor believed the loan 

process would have taken longer than it wanted.

 

21The Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) program 

(23 U.S.C. §§ 601-610) provides credit assistance for qualified projects of regional and 

national significance through loans, loan guarantees and standby lines of credit. Certain 

large-scale surface transportation projects, including transit projects, are eligible for 

assistance. See GAO, Surface Transportation: Financing Program Could Benefit from 

Increased Performance Focus and Better Communication, GAO-12-641 (Washington, 

D.C.: June 21, 2012) for more information on TIFIA.
 

Page 12 GAO-13-40 New Starts Funding

State funds were used on 13 of 25 New Starts Projects, and as noted 

above, state contributions to New Starts Projects have been much less 

than either federal or local funding. Lesser state involvement is not 

surprising, as historically the federal government has partnered with local 

agencies to construct transit capital projects. When state funding was 

applied to projects, it was most frequently through bonding, which was

used in 8 of 25 projects.22

 

22Bonding is a form of borrowing in which a borrower issues bonds which are purchased 

by investors. The bond issuance provides cash immediately in the form of bond proceeds. 

Over time, the borrower makes interest and principle payments to investors to retire the 

debt obligation. 

Generally, financing through mechanisms such 

as bonds was the source of about $1.68 billion or about 72 percent of the 

all-state contributions (see fig. 4). For two New Starts projects, states 

provided a total of about $303 million, about 13 percent of state 

contributions to the projects, from their general revenues. Two of the New 

Starts projects benefited from a total of about $202 million in funding from 

dedicated state mass-transit funds. Officials from one of these two 

projects pointed out the considerable advantage of having a state fund 

specifically dedicated to supporting New Starts projects in simplifying the 

task of assembling project funding.

State Funding Sources for 

New Starts Projects
 

Page 13 GAO-13-40 New Starts Funding

Figure 4: Sources of State Funding for New Starts Projects, October 2004 through 

June 2012

Local support for New Starts projects is characterized by a diversity of 

funding sources, with sales taxes and municipal-county funds being the 

most frequently used. Local sales taxes were used for 13 of 25 New 

Starts projects and county or municipal funds were used for 9 of these 

projects. The dollar distribution of local funds is somewhat complicated by 

two projects in New York City, which comingle the sources of local funds. 

These projects account for about one-third of the total $16.25 billion in 

local funding provided to the 25 projects (see fig. 5). For local funding 

sources that we can directly trace, local sales taxes of about $4.5 billion 

were the largest single source, constituting about 28 percent of all local 

funds. While highway tolls and transit agency funds each constituted 

about one-tenth of local funding, only the Dulles rail extension is using 

highway tolls to help pay for the transit project.

Local Funding Sources for 

New Starts Projects
 

Page 14 GAO-13-40 New Starts Funding

Figure 5: Sources of Local Funding for New Starts Projects, October 2004 through 

June 2012

Small Starts and Very Small Starts projects were more dependent on total 

federal funding than New Starts projects. For the 32 Small and Very 

Small Starts projects FTA identified as receiving construction funds from 

the Capital Investment Grant program from October 2004 through June 

2012, about $1.43 billion of about $2.13 billion in total project funding 

came from the federal government—about two-thirds of the total 

estimated projects costs (see fig. 6). States provided about $188 million, 

while local agencies provided about $513 million. While local agencies 

provided about half the funding for New Starts projects, they provided 

about one-fourth the funding for Small and Very Small Starts projects.

Federal Funding Was 

the Largest Share of 

Total Funding for 

Small Starts and Very 

Small Starts Projects
 

Page 15 GAO-13-40 New Starts Funding

Figure 6: Federal, State, and Local Funding for Small and Very Small Start Projects, 

October 2004 through June 2012

The number of separate funding sources for Small and Very Small Starts 

projects varied from 2 to 10 sources. For 13 projects there were two 

funding sources—the federal Small Starts or Very Small Starts funding 

and one other state or local source. Of these 13 projects, 5 used state 

funds and 8 used local funds as the second source. However, even with 

the lower costs of these projects compared to New Starts, 5 projects still 

had relatively complex funding arrangements, using 6 to 10 funding 

sources.

Similar to New Starts projects, FTA’s Small and Very Small Starts funds 

provide most of the federal funds for these Small and Very Small Starts 

projects. Of the roughly $1.43 billion in total federal funds, about $1.14 

billion came directly though the Small and Very Small Starts program (see 

fig. 7). Officials from two of the eight project sponsors we interviewed 

cited the recent economic downturn and local funding uncertainty as 

reasons to pursue federal Small Starts funding. One of the sponsors also 

considered the level of competition from large cities for Small Starts 

funding to be lower—the level of competition was a factor in the decision 

to apply.

Also similar to New Starts, flexed federal-aid highway funds totaling about 

$195 million were the second largest source of federal funds for Small 

Federal Funding Sources 

for Small Starts and Very 

Small Starts Projects
 

Page 16 GAO-13-40 New Starts Funding

and Very Small Starts projects, and exceeded the approximately $95 

million from other FTA programs applied to Small Starts and Very Small

Starts projects. Flexed federal-aid highway funds came primarily from 

CMAQ and STP funds. One of the sponsors we spoke with said the main 

advantage with using CMAQ funds was that they can be used for 

intelligent-transportation system features such as bus cameras, smart 

card readers, and real time arrival signs as well as other passenger 

amenities.

Figure 7: Sources of Federal Funds for Small Starts and Very Small Starts Projects, 

October 2004 through June 2012

States contributed a total of about $188.4 million to 17 of 32 Small Starts 

and Very Small Starts projects from October 2004 through June 2012.

(See fig. 8.) The other (15 of 32) Small and Very Small Starts projects 

received no state funding. As was the case with New Starts, a large 

majority of state contributions, about $129.5 million of the $188.4 million, 

came from bonds or other forms of debt. State funds from lottery 

proceeds were used for 3 projects and provided about $26.1 million, or 

about 14 percent of all state funds. 

State Funding Sources for 

Small and Very Small 

Starts Projects
 

Page 17 GAO-13-40 New Starts Funding

Figure 8: Sources of State Funds for Small Starts and Very Small Starts Projects, 

October 2004 through June 2012

Many sources of local funds were used by project sponsors for Small and 

Very Small Starts projects, and local agencies contributed about $513.3 

million in all (see fig. 9). Local agencies relied heavily on traditional 

funding sources. For example, sales taxes were used by about half, 15 of 

32 projects, and provided most of the local funds, $286.7 million of the 

$513.3 million. Municipal and county funds were used on 8 projects, and 

provided the second highest total, $54.0 million, just over one-tenth of all 

local funds. Bridge tolls provided $48.4 million, all for one project, just 

under one-tenth of all local funds. The fact that Small and Very Small 

Start projects cost less did not always result in simpler funding streams 

with fewer funding sources. Ten of the 32 projects used 5 or more 

different funding sources, and one project had 10 funding sources.

Local Funding for Small 

and Very Small Starts 

Projects
 

Page 18 GAO-13-40 New Starts Funding

Figure 9: Sources of Local Funds for Small Starts and Very Small Starts Projects, 

October 2004, through June 2012

At a time when local funding has become crucial for building New Starts 

and Small Starts projects, many local governments are facing financial 

pressure from the lingering effects of the financial crisis and economic 

downturn. Unless sales tax rates are raised, the reduced economic 

activity of the recession necessarily reduces the growth and possibly 

amount of sales tax receipts, which provided most of the local funding for 

the Small and Very Small Starts projects we studied. Under these 

circumstances local governments may have difficulty providing the level 

of funding they have in the past, and may need to look for more 

innovative ways to fund projects. For example, one program sponsor we 

spoke to explained that one of the funding sources came through a 

collaborative of private philanthropic foundations. The collaborative’s goal 

in this case is to help strengthen the regional economy and improve the 

quality of life in neighborhoods near the light rail line. Newer, more 
 

Page 19 GAO-13-40 New Starts Funding

innovative ways to finance transit projects, such as tax increment 

financing districts,23 impact fees,

24 and private capital, were used on four

of the Small Starts and Very Small Starts projects, and provided less than 

one-tenth of the local funding. This could be a result of the specific time 

frame we examined and the long lead time required to get a large capital 

construction project to the construction phase.

We provided a draft of this report to the Secretary of Transportation for 

review and comment. DOT officials provided us with clarifying and 

technical comments, which we incorporated throughout the report as 

appropriate

We are sending copies of this report to the Secretary of Transportation, 

the Administrator of the Federal Transit Administration, and appropriate 

congressional committees. This report is also available at no charge on 

the GAO Web site at http://www.gao.gov. 

 

23Tax increment financing is a public financing technique used by local entities to 

encourage economic development, among other things. Typically, a public-sector agency 

issues a special bond to finance infrastructure, e.g., public transit, necessary to support 

new development and then uses the incremental increase in property value within a 

formally designated district to repay the bonds. GAO, Public Transportation: Federal Role 

in Value Capture Strategies for Transit is Limited, but Additional Guidance Could Help 

Clarify Policies, GAO-10-781 (Washington, D.C.: July 29, 2012).

24Impact fees are generally defined as a charge or assessment imposed by a municipality 

or a county on a new development in order to generate revenue for funding or recouping 

the costs of capital improvements or facility expansions necessitated by and attributed to 

new development. 

Agency Comments
 

Page 20 GAO-13-40 New Starts Funding

If you have any questions about this report, please contact me at (202) 

512-2834 or wised@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Major contributors to this report are listed in appendix I.

David J. Wise

Director, Physical Infrastructure Issues
 

Page 21 GAO-13-40 New Starts Funding

List of Committees

The Honorable Tim Johnson

Chairman

The Honorable Richard C. Shelby

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable John L. Mica

Chairman

The Honorable Nick J. Rahall, II

Ranking Member

Committee on Transportation and Infrastructure

House of Representatives

The Honorable Patty Murray

Chairman

The Honorable Susan Collins

Ranking Member

Subcommittee on Transportation, Housing and Urban Development, 

and Related Agencies

Committee on Appropriations

United States Senate

The Honorable Tom Latham

Chairman

The Honorable John W. Olver

Ranking Member

Subcommittee on Transportation, Housing and Urban Development, 

and Related Agencies

Committee on Appropriations

House of Representatives
Appendix I: GAO Contact and Staff 

Acknowledgments

Page 22 GAO-13-40 New Starts Funding

David J. Wise, (202) 512-2834 or wised@gao.gov

In addition to the contact named above, Catherine Colwell (Assistant 

Director), Robert Ciszewski, Geoffrey Hamilton, Alexander Lawrence, 

Amanda Miller, Joshua Ormond and Marilynn Sergent, made key 

contributions to this report.

Appendix I: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(542201)
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