[Federal Register Volume 73, Number 154 (Friday, August 8, 2008)]
[Notices]
[Pages 46352-46358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18315]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

[Docket Number: FTA-2008-0020]


Final Guidance on New Starts/Small Starts Policies and Procedures

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of Availability of Final Guidance on New Starts/Small 
Starts Policies and Procedures.

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SUMMARY: This notice conveys the Federal Transit Administration's (FTA) 
Final Guidance on New Starts/Small Starts Policies and Procedures.

DATES: Effective Date: These policies and procedures will take effect 
on August 8, 2008.

FOR FURTHER INFORMATION CONTACT: Ron Fisher, Office of Planning and 
Environment, telephone (202) 366-4033, Federal Transit Administration, 
U.S. Department of Transportation, 1200 New Jersey Avenue, SE., East 
Building, Washington, DC 20590 or <a href="/cdn-cgi/l/email-protection#0a5865646b666e244c6379626f784a6e657e246d657c"><span class="__cf_email__" data-cfemail="b5e7dadbd4d9d19bf3dcc6ddd0c7f5d1dac19bd2dac3">[email protected]</span></a>.

Availability of Comments Considered in the Development of This Guidance

    A copy of the notice of availability of the proposed Guidance, 
issued on April 18, 2008, and comments and material received from the 
public as a part of its review of the proposed Guidance, are part of 
docket FTA-2008-0020 and are available for inspection or copying at the 
Docket Management Facility, U.S. Department of Transportation, West 
Building, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 
20590 between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays. You may retrieve the comments online at: http://www.regulations.gov. Enter docket number FTA-2008-0020 in the search 
field. In the ``Narrow Results'' section on the left side of the 
screen, click on ``Rules.'' The Web site is available 24 hours each 
day, 365 days each year. Electronic submission and retrieval help and 
guidelines are available under the help section of the Web site. An 
electronic copy of this document may also be downloaded by using a 
computer, modem and suitable communications software from the 
Government Printing Office's Electronic Bulletin Board Service at (202) 
512-1661. Internet users may also reach the Office of the Federal 
Register's home page at: http://www.nara.gov/fedreg and the Government 
Printing Office's Web page at: http://www.gpoaccess.gov/fr/index.html.

Response to Comments and New and Small Starts Program Changes

    The purpose of this notice is to convey the Final Guidance on New 
Starts/Small Starts Policies and Procedures, reflecting the changes 
implemented as a result of comments received on the April 18, 2008 
Notice of Availability (73 FR 21170). FTA finds that there is good 
cause to make this guidance effective upon publication of this notice 
in order to assist grantees to enter or complete development of 
proposed projects.

 1. Initiation Package

    FTA adopts as final its proposal to require that project sponsors 
beginning an alternatives analysis prepare and provide to FTA a package 
of information on: (1) The problems that motivate consideration of 
major transit alternatives in a corridor; (2) the alternatives that 
have been identified for consideration; and (3) the information that 
will be prepared to support decisions on the alternatives along with 
the identification of the general approach to development of that 
information.
    Preparing the package at the beginning of an alternative analysis 
allows FTA and other stakeholders to better understand the key 
considerations for an alternatives analysis. We anticipate that this 
will result in a more streamlined process.
    Comments: A significant number of respondents supported this 
measure as a way to discuss potential road blocks that may occur in the 
project development process. Several commenters opposed this proposal 
indicating the scope of the proposal is best suited for a rulemaking 
process and is beyond the level of change appropriate for annual policy 
guidance.
    Response: The proposal is a small change in FTA requirements that 
is properly implemented through policy guidance.

[[Page 46353]]

    Comments: A few commenters suggested that the proposal should not 
require approval or delay an alternatives analysis study and that FTA 
should provide guidance on the initiation package to aid the project 
sponsor in the planning process.
    Response: FTA does not intend to formally approve these documents, 
but will instead comment on them. If FTA expresses significant concerns 
with the description of problems in the study corridor, the nature of 
the alternatives, or the methodology, this could delay study progress. 
Because FTA must eventually agree to both the alternatives studied and 
the methodological approach as it affects development of information 
used for FTA evaluation, addressing these issues early in a study with 
possible delays means that technical work will not have to be redone 
later, which would likely result in more significant study delays. FTA 
has encouraged study sponsors to produce this kind of document for 
several years and provides guidance for what the document should 
contain on its Web site (http://www.fta.dot.gov/planning/newstarts/planning_environment_2589.html).
    Comments: A few other respondents requested that care be taken so 
that the Federal perspective will not hamper the local project 
development process.
    Response: We agree. FTA's responsibility is to ensure that a 
reasonable range of alternatives is considered to fulfill its 
responsibilities under the National Environmental Policy Act (NEPA) and 
the alternatives analysis requirement in 49 U.S.C. 5309. It is also 
FTA's responsibility to ensure that the information developed for its 
evaluations is consistent with good planning practice and FTA guidance. 
FTA does not dictate what kind of information should be developed to 
serve local decision-making needs.
    Comment: One commenter stated that FTA should be aware that even 
with the most thorough planning efforts, new alternatives may arise 
after the initiation package is complete due to circumstances beyond 
the project sponsor's control.
    Response: It is FTA's aspiration to minimize changes to 
alternatives being studied by vetting them early with all interested 
parties. FTA understands that new alternatives could arise later in the 
study as a result of study findings.

 2. Small Starts Eligibility

    a. FTA adopts as final the modification of the Small Starts 
eligibility requirements for proposed projects that do not include an 
actual fixed guideway but meet the definition of being a corridor-based 
bus project. FTA eliminates the requirement that all four project 
elements (low-floor buses, traffic signal priority/pre-emption, 
significant stations, and branding) must be part of the project, and 
instead allows a project to be eligible if it includes at least three 
of the four elements.
    Heretofore, non-fixed guideway projects were not eligible for Small 
Starts funding if any of the four elements listed above already existed 
in the corridor. Our experience has shown that minor improvements 
already made in a corridor, such as the existence of one of the 
elements, prevents worthy projects from being eligible for Small Starts 
funding. Our intent for the Small Starts program has been to 
differentiate the Small Starts program from the Section 5309 Bus 
Program by funding significant corridor improvements. By revising the 
policy to allow projects in corridors with one of the existing elements 
to apply for Small Starts funding, FTA has attempted to strike a 
balance between being too restrictive so that many worthy projects are 
excluded from eligibility, and being too flexible thus allowing 
eligibility for projects that are not significant corridor improvements 
but rather incremental improvements better funded under another 
program.
    Comments: A few commenters opposed the measure, stating that no 
project should be eligible for funding under 49 U.S.C. 5309 unless it 
is an actual fixed guideway that includes rails or the exclusive use of 
right-of-way.
    Response: The Safe, Accountable, Flexible, Efficient Transportation 
Equity Act--A Legacy for Users (SAFETEA-LU) amended 49 U.S.C. 5309 to 
make non-fixed guideway projects eligible for Small Starts funding.
    Comments: A significant number of respondents supported the 
elimination of the low-floor bus requirement for Small Starts projects.
    A few commenters supported and expanded on the measure by stating 
that if one or more Small Starts elements are already present in a 
corridor that they should not preclude a project from Small Starts 
funds.
    One respondent encouraged FTA to allow some level of existing BRT 
components, but suggested that FTA clarify that it will not fund 
installation or replacement of existing components. One commenter 
suggested that FTA allow a project to qualify if it contains four of 
the following six elements : (1) Low floor buses/level boarding; (2) 
significant stations; (3) high frequency service; (4) branding; (5) 
traffic signal priority/pre-emption; and (6) real-time customer 
information. One respondent supported the use of a minimum threshold 
for Small Starts projects.
    Response: While the proposal was to eliminate only the low-floor 
requirement, we have modified that in response to comments asking for 
more flexibility. FTA has tried to be more flexible in its eligibility 
requirements while still ensuring that the improvements are substantial 
enough to differentiate the Small Starts program from the Section 5309 
Bus Program. In order to keep the program as simple as possible, we 
have not required a large number of elements, instead settling on a few 
that we think are necessary for premium transit services that will 
result in significant improvements in service. Should a proposed 
corridor already include one of the four required elements and request 
that, as part of the proposed project, this element be replaced or 
upgraded, FTA considers these an eligible capital expense in the Small 
Starts Program. In addition, FTA considers installation an eligible 
capital expense. Should, however, a project involve repair to an 
existing element, this item would need to be considered on a case-by-
case basis. As for a minimum threshold, FTA assumes that this is a 
reference to a minimum project cost or Federal funding threshold. FTA 
declines to adopt a minimum threshold, however, as any such threshold 
could discourage low-cost transit solutions.
    b. FTA adopts as final the removal of the current prohibition of 
dividing a Small Starts project envisioned for a corridor into multiple 
Very Small Starts projects.
    The intent is to allow smaller projects to qualify as Very Small 
Starts, since the eligibility provisions for Very Small Starts 
guarantee that the projects will have acceptable ratings for project 
justification regardless of whether they will eventually be part of a 
larger project or not.
    Comments: In the same comment, several respondents both supported 
the proposal to divide Small Starts into Very Small Starts projects and 
also noted that the Very Small Starts program is not authorized in 
SAFETEA-LU. In addition, these respondents stated that the project 
requirements for Very Small Starts are inherently mode-biased.
    Response: The Federal Transit Administrator may impose any terms 
and conditions on a grant award under 49 U.S.C. 5309 as he ``determines 
to be necessary or appropriate'' to carry out the purposes of the 
Section 5309 capital programs FTA is mindful, of course, that in 
enacting SAFETEA-LU, the Congress expected the agency to develop 
criteria and procedures for

[[Page 46354]]

certain types of projects that would be simpler, and quicker, than 
those applicable to New Starts, to meet travel demands in discrete 
corridors that are growing, but do not yet necessitate the cost or 
careful development of a traditional New Starts fixed guideway. The 
Very Small Starts program is an exercise of the Administrator's 
inherent, discretionary authorities to make grants under Section 5309 
and to meet the growing demand across the Nation for projects that do 
not require the time or expense of larger Small Starts projects--which, 
in many instances, resemble those of traditional New Starts projects.
    Any project seeking funding, regardless of mode, must have an 
acceptable project justification rating. The eligibility requirements 
for Very Small Starts were set to guarantee that a project has an 
acceptable project justification rating. To meet an acceptable cost 
effectiveness rating, the costs for eligibility were constrained so 
that the user benefits resulting from the travel time and non-travel 
time benefits assure an acceptable cost effectiveness rating.
    Due to the generally higher cost and other variables of a fixed 
guideway, it is not possible to automatically assure that such a 
project can be cost-effective unless it meets the requirements put in 
place for Very Small Start projects.
    Comments: A few commenters opposed the proposal to allow for the 
subdivision of Small Starts projects into Very Small Starts projects 
because the project sponsor may potentially circumvent cost 
effectiveness, the National Environmental Policy Act (NEPA) process, 
and public input.
    Response: The eligibility requirements for Very Small Starts ensure 
that a project will have an acceptable cost effectiveness rating. There 
is nothing in the Very Small Starts program that allows a project to 
either circumvent NEPA or avoid public input.
    Comments: A few respondents opposed the measure, arguing that Very 
Small Starts projects do not guarantee a high quality transit project 
that is permanent enough to help a region move to a sustainable 
transportation system.
    Response: The Very Small Starts eligibility requirements were 
developed to ensure that premium transit service is provided. FTA 
requires in its grant agreements that the federally funded assets stay 
in public transportation service for their entire useful lives, 
otherwise FTA must be reimbursed its share of the fair market value of 
the assets. This provision gives some permanence to Very Small Start 
projects.
    Comments: Several respondents also encouraged FTA to allow New 
Starts projects to be subdivided into Small Starts projects.
    Response: FTA does not allow New Starts projects to be subdivided 
into multiple Small Starts projects because we believe it violates the 
intent of the Small Starts program, eliminates the need for the more 
intense scrutiny required for larger projects, and stretches FTA 
oversight resources too far. The Small Starts program is authorized at 
only $200 million per year, which would be used up very quickly were 
FTA to allow New Starts projects to be divided into multiple Small 
Starts projects.
    Comments: A few commenters responded to the category of Small 
Starts eligibility by suggesting that if FTA notices an increase in the 
number of Small Starts project development applications, FTA should 
request a greater amount of funding for this program.
    Response: The President's annual budget request of Congress is 
based on an evaluation of the many competing priorities for public 
transportation across the Nation, not simply the demand for funding for 
Small Starts projects.

3. Documentation of Uncertainties in Predictions of Capital Cost and 
Ridership

    FTA adopts as final its proposal to require that predictions of 
capital costs and project ridership for the locally preferred 
alternative (LPA) be expressed as ranges with accompanying explanations 
of the contributing sources of uncertainty that bracket the range. This 
requirement would apply to predictions submitted to FTA in support of 
requests to advance the LPA into preliminary engineering or, for Small 
Starts projects, project development, to all subsequent environmental 
documents, and to requests for entry into final design. The requirement 
does not apply to Very Small Starts. The requirement will go into 
effect six months after FTA issues separate guidance concerning this 
provision, expected before the end of calendar year 2008. Three months 
after guidance is issued, project sponsors are required to consult with 
FTA on the approach for the analysis to ensure that it meets FTA 
expectations.
    The intent of this requirement is to comply with a number of 
SAFETEA-LU provisions that relate to project uncertainties. An analysis 
of project uncertainties provides the underpinnings for the 
reasonability of key information that FTA must confirm to assure that 
its evaluations and ratings are sufficient for Federal funding 
decisions. As a result, the time required for FTA technical reviews 
will be shortened because uncertainties will be disclosed, reducing FTA 
questions and requests for follow-up analysis and the attendant impacts 
on review times.
    The requirement will support more effective FTA compliance with 
SAFETEA-LU provisions relating to reliability of forecasting methods, 
the Before and After Study, the Contractor Performance Incentive 
Report, incentive awards when forecasts of costs and ridership are 
close to those achieved, and grantee consideration of the Contractor 
Performance Assessment Report (all found on http://www.fta.dot.gov). 
This is because FTA will be able to better understand the context of 
forecasts when comparing outcomes to forecasts, in contrast to having 
single estimate forecasts with no explanation of variances as a result 
of other causal factors.
    Comments: A significant number of respondents stated that the 
measure would add to the burden of the New and Small Starts project 
development process by delaying planning and increasing costs for very 
little additional information. Several respondents opposed the measure 
noting that expressing forecasts in terms of a range is unreasonable 
and does not add to the utility of the project's forecast.
    Response: FTA believes that any additional overall level of effort 
and time impacts for documentation of cost and ridership uncertainties 
will be modest if good planning practices are followed. For costs, the 
documentation of scope-related uncertainties relies on information that 
is surfaced in the routine course of the development of alternatives. 
The representation of these uncertainties can be captured in the 
existing spreadsheet framework of FTA's standard cost categories 
(SCCs). For ridership, the basis of the analysis is easily generated by 
rerunning models with minor changes in the inputs, thus significantly 
reducing the level of analysis necessary to understand the 
reasonableness of forecasts.
    FTA believes that expressing forecasts in terms of ranges 
acknowledges the uncertainties that are endemic to any profession that 
makes forecasts of the future. That the actual capital costs and 
ridership of major transit projects have varied significantly from 
previous forecasts is evidence of the uncertainties that exist in 
forecasts for transit projects.
    Comments: Several commenters stated that this measure is more

[[Page 46355]]

appropriately considered in a rulemaking process, not an annual policy 
guidance document. A few commenters suggested that if FTA were to 
accept this proposal as final that FTA should conduct research to 
establish the efficacy of the methodology and subject the research to a 
formal rulemaking process.
    Response: FTA finds that this policy addresses good practice for 
planning and project development at a level of detail not usually 
addressed in rulemaking, which is intended for establishing the 
framework for project eligibility and evaluation. FTA intends to use 
the results of the uncertainty analysis in its research related to 
``before and after'' studies.
    Comments: A few commenters expressed concern that FTA is seeking to 
impose this requirement three months after publishing guidance without 
consideration for project status and without providing training to 
project sponsors.
    Response: FTA has extended the time for the requirement to go into 
effect from three months in the proposal to six months after FTA 
publishes guidance on the uncertainty analysis, which should provide 
ample time for project sponsors to develop the analysis. Projects 
already approved into final design prior to the eventual effective date 
of this requirement will not be subject to this requirement.
    Comments: A few respondents stated that the project development 
process is intended to reduce uncertainty and develop a more accurate 
cost as the project progresses toward final design; not to provide a 
detailed assessment.
    Response: We agree that current practice reduces the uncertainty in 
the capital cost estimate as project development progresses, but an 
analysis of those uncertainties is not usually described in public 
documents. Travel forecasts are rarely refined in project development, 
so that analysis of uncertainties would not be expected to change 
significantly.
    Comments: A few respondents stated that FTA has not given existing 
improvements to its process that are already in place enough time to 
work and that this requirement would add extra work to an already 
cumbersome process.
    Response: We believe that the improvements already in place should 
facilitate the analysis of uncertainties and reporting of ranges, 
which, at this time, are rarely described for the LPA and in 
environmental documents.
    Comments: A few commenters stated that changing input variables 
would not indicate the accuracy of the travel model, but would only 
demonstrate sensitivity which is already documented in the methodology 
and demonstrated to be accurate based on actual behavior and the model 
calibration process.
    Response: Changing input variables provides the sensitivity of 
ridership to those variables. Having a sense of the reliability of 
those variables, and interpreting how the forecasts are affected, 
provides insights into the uncertainties of the travel forecasts, 
rather than mechanically producing results as implied in the comment.
    Comments: One respondent said that this measure would present a 
conflict to other FTA processes, noting that FTA's Office of Program 
Management requests the risk assessment process to begin when 
Preliminary Engineering is 20-50% complete.
    Response: The uncertainty analysis should draw upon the best 
available information at the time the estimates of cost and ridership 
are developed.
    Comment: One respondent stated that project sponsors depending on a 
Metropolitan Planning Organization (MPO) with a large number of member 
agencies will have great difficulty coming to a consensus on a high and 
low set of forecasts.
    Response: It is not clear that they will have responsibility for 
facilitating a consensus on a range of forecasts, but if they do, one 
of the key missions of MPOs is to facilitate decisions on 
transportation issues.
    Comment: One respondent stated that it was unfair to impose this 
requirement on New Starts and Small Starts projects when other 
Federally funded transit projects are not subject to the same scrutiny.
    Response: The New and Small Starts programs have a number of 
special requirements spelled out in 49 U.S.C. 5309 that do not apply to 
other federally funded transit projects, for reasons of policy 
enunciated by the statute; we note, moreover, the New and Small Starts 
programs are discretionary, whereas most other program funding under 49 
U.S.C. Chapter 53 is distributed by formulae.
    Comment: One respondent noted that while qualitative concerns such 
as political or financial conditions may be described in text, the 
respondent questioned the value of using staff or consultant time to 
attempt to value such components.
    Response: It is the responsibility of the project sponsor to decide 
which factors are important in performing the uncertainty analysis and 
how they should be interpreted.
    Comments: A few commenters suggested that the best way to improve 
models is to encourage existing activities such as peer reviews, 
surveys, research, calibration, best practices, and before and after 
studies.
    Response: FTA agrees that these actions can reduce the uncertainty 
inherent in forecasts.
    Comments: A few commenters suggested FTA place greater emphasis on 
reducing trips and trip lengths by rewarding density in project 
corridors and at stations, rather than retaining a focus on travel 
time.
    Response: This proposal addressed reporting of uncertainties, not 
evaluation of land use. FTA currently gives credit for transit-oriented 
development and densities in its ratings for the land use criterion.
    Comments: A few respondents suggested that FTA identify 
uncertainties and allow project sponsors to respond with a short 
explanatory document that acknowledges the uncertainties that may 
affect the project's capital costs or ridership.
    Response: Prior to this proposal, FTA has collaborated with project 
sponsors to refine ridership forecasts and estimates for capital costs. 
We expect that collaboration will be useful in the determination of the 
uncertainty analysis. The results of any analysis of uncertainties must 
be summarized in submittals to FTA in support of requests to advance 
the LPA into preliminary engineering or, for larger Small Starts 
projects, project development, in all subsequent environmental 
documents, and in requests for entry into final design.
    Comments: A few respondents stated that this proposal should only 
be applied to those elements that are a direct component of a Section 
5309 funded project, and not to ``concurrent non-project activities'' 
that are beyond the control of the project sponsor.
    Response: It is FTA's intent to focus the uncertainty analysis on 
those project elements that relate to the transit project.
    Comment: One comment suggested FTA reduce this requirement to allow 
project sponsors to report every other year or only at key milestones. 
In addition, the commenter noted that this requirement should not apply 
to Very Small Starts projects as it would make the simplified process 
too cumbersome.
    Response: The requirement applies to key milestones only and does 
not apply to Very Small Starts.
    Comments: Several respondents asked how cost effectiveness would be 
determined if cost and ridership are reported using ranges.
    Response: FTA will use the best estimate of costs and ridership to

[[Page 46356]]

quantify the evaluation measures related to mobility impacts and cost 
effectiveness. The project sponsor, in collaboration with FTA, will 
determine what constitutes the best estimate.
    Comment: One commenter stated that FTA has not clearly stated how 
the production of this information will result in an improved project.
    Response: The reporting of uncertainties will help FTA in 
determining project merit. In addition, proper reporting of 
uncertainties could reduce review times by FTA, which in turn should 
result in shorter project development times and reduced costs.
    Comment: One respondent requested clarification on what was meant 
by ``* * * FTA will give credit, perhaps approaching full credit for 
useful presentations of forecasts.''
    Response: The quoted language means that during project development 
FTA would take into consideration an insightful uncertainty analysis 
when establishing the reliability rating discussed under item 4 of this 
paper. FTA would also use the uncertainty analysis when preparing the 
Before and After Study Report and the Contractor Performance Assessment 
Report. FTA would take into consideration an insightful uncertainty 
analysis if the predicted or actual costs and ridership varied from the 
best estimate and the reasons for the variance were discussed in the 
uncertainty analysis as possibilities. In contrast, if the predicted or 
actual costs and ridership varied in the same way from the best 
estimate and the uncertainty analysis provided no insights into the 
reasons for the actual variance, FTA would view the outcomes more 
negatively in its assessments.
    Comment: One commenter sought clarification on the following 
questions: (1) To what extent will FTA hold up a project's advancement 
in relation to this requirement; (2) will FTA question the breadth of 
this range; and (3) what happens if a project sponsor submits a best 
estimate that is closer to the low end than the high end?
    Response: FTA will treat this requirement consistent with how it 
treats other evaluation and rating requirements. Under rare 
circumstances, FTA may hold up a project's advancement if FTA believes 
there are good reasons for doing so. As stated in the proposal, FTA 
will work with project sponsors to establish the best estimate and 
allow project sponsors to establish the high and low ends of range. The 
choice of the range is made by the project sponsor. If the project 
sponsor thinks the best estimate is closer to the low end of the range 
for the ridership forecasts or cost estimate than the high end, the 
sponsor's accompanying explanation would describe why there is a low 
probability that actual ridership or cost would reach the higher end of 
the range.

4. Reliability Rating

    FTA adopts as final the proposal to develop ratings of the 
reliability of capital cost estimates and ridership forecasts beginning 
in January 2009, and to consider these ratings in the determination of 
the project justification rating for proposed projects beginning in 
August 2009. The rating will be included under ``Other Factors'' for 
project justification. This requirement would apply to ratings made for 
requests to advance the LPA into preliminary engineering or, for larger 
Small Starts projects, project development, and to requests for entry 
into final design and prior to an FFGA. This requirement does not apply 
to Very Small Starts.
    FTA is implementing this rating to better differentiate the 
worthiness of projects for funding recommendations and to minimize the 
likelihood for project scope reductions when projects have ratings near 
acceptable breakpoints. Projects seeking New Starts and Small Starts 
funding vary considerably in the risks inherent in their cost and 
ridership forecasts as evidenced in the variance between actual results 
compared to the estimates made during planning and project development. 
Capturing reliability within FTA's evaluation allows funding to be 
directed to projects that have the greatest likelihood of achieving 
their forecasts, which are the source of much of the information used 
for project ratings. Additionally, incorporating reliability into FTA's 
ratings will minimize changes to ratings (or project scope to maintain 
a rating) that can occur after a project advances into preliminary 
engineering or into final design. This allows FTA to better comply with 
the 49 U.S.C. 5309 mandate that a proposed New Starts or Small Starts 
project shall not advance through the project development process 
unless the Secretary determines that there is a reasonable likelihood 
that the project will continue to meet the evaluation requirements.
    Comments: A significant number of respondents opposed this 
requirement stating that this should have been included in a rulemaking 
process, not annual policy guidance. Several commenters questioned why 
FTA singled out this factor versus others listed in SAFETEA-LU that are 
not currently included in the project justification rating.
    Response: FTA does not believe adding reliability as an ``other 
factor'' rises to the level of rulemaking. In the past we have added 
several considerations under ``other factors'' without rulemaking. A 
number of the ``other factors'' listed in SAFETEA-LU are either 
incorporated into existing measures or are so difficult to compute that 
using them in our evaluations would be cumbersome and not add to the 
information we have on the merits of the project.
    Comments: Several respondents stated that the sub-criteria for 
reliability are subjective. A few commenters said that reliability is 
already being addressed in FTA's risk assessment process. Other 
commenters stated that FTA works closely with all grantees to approve 
their transit demand models, so reliability of forecasting methods 
should already be accounted for.
    Response: Assessing reliability of forecasts is largely a 
subjective process given there are few analytical tools that cover many 
of the factors that contribute to risk. FTA's risk assessment process 
deals with much of the assessment of required risk, but omits some of 
the factors described in the proposed policy guidance. FTA's oversight 
of travel forecasts results in a reasonable estimate of ridership and 
user benefits. However, the reliability of model results depends on a 
number of factors relating to the uncertainty of the input variables 
and the ability of the models to forecast certain travel markets. These 
and other factors are captured in FTA's rating of reliability.
    Comments: A few commenters stated that FTA should identify specific 
project uncertainties and project sponsors would then respond to FTA's 
assessment.
    Response: Prior to this proposal, FTA has collaborated with project 
sponsors to refine ridership forecasts and estimates for capital costs. 
We expect that collaboration will be useful in the determination of the 
reliability rating.
    Comments: A few respondents recommended FTA implement this 
requirement with procedures that are consistent with Congressional 
intent for the Small Starts program (i.e., commensurate with the level 
of investment). A few respondents encouraged FTA to help project 
sponsors who are having trouble with the modeling process rather than 
penalizing them through the application of a subjective rating factor.
    Response: FTA will continue to provide technical assistance to 
project sponsors undertaking cost and ridership forecasts and encourage 
the analysis to

[[Page 46357]]

be commensurate with level of investment.
    Comments: A few commenters suggested that the following be added to 
the list of uncertainties: change of development patterns due to 
demographic changes, housing preferences for units close to transit, 
housing and transportation expense, and the growing concern over 
greenhouse gases.
    Response: FTA intends to use the factors listed in the proposal as 
we believe we can discern reliability from them. Change in development 
patterns is one of the proposed factors, but the others listed in the 
comment are not. The other factors cannot easily be used to assess 
reliability because travel models do not include them; our 
understanding of the link between them and ridership is very weak; and 
they are difficult to forecast.
    Comment: One commenter stated that the experience of the project 
sponsor or contractor is more appropriately used to determine the 
extent of the oversight needed.
    Response: FTA believes that experience of the project sponsor is a 
key variable in determining the reliability of the estimates. FTA 
already considers the project sponsor's experience and technical 
capacity when making a decision to advance a project and when assigning 
oversight resources.
    Comment: A few respondents requested clarification on how the 
reliability assessment will be made and a rating assigned.
    Response: Given the multitude of factors that contribute to 
reliability, FTA believes that each project will have a variety of 
factors that will inform the rating, so a description of a rigid rating 
framework is not effective. The factors include: completeness of the 
documentation of uncertainties, the quality of efforts to collect 
appropriate data and test travel forecasting procedures, actions taken 
by the project sponsor to minimize uncertainties, FTA findings, the 
track record of the project sponsor for forecasts of previous projects, 
the national track record of forecasts for similar projects, and the 
extent to which the ridership forecasts depend on conditions in the 
corridor that are substantially different from today. The rating will 
be considered along with other considerations under ``Other factors'' 
and a decision made as to whether the project justification rating 
should be changed.

5. Local Financial Commitment for Recapitalization of the Existing 
Transit System

    In rating potential New and Small Starts projects for local 
financial commitment, FTA adopts as final its proposal to give 
additional scrutiny to the adequacy of the local financial commitment 
for ongoing recapitalization of the existing transit system.
    SAFETEA-LU included provisions that underscore the need for transit 
systems to first ensure they have sufficient funding for their 
recapitalization needs before spending additional resources for new 
projects that could exacerbate funding problems for recapitalization. 
This policy is intended to assure that transit agencies considering new 
projects have adequate resources to recapitalize their systems.
    Comments: Several respondents sought clarification on what was 
meant by ``additional attention will be given to local financial 
commitment for ongoing recapitalization.'' A few commenters were not 
clear on the proposal or how it was different from current practice.
    Response: FTA intends to review the estimates of recapitalization 
costs and revenues with greater scrutiny than it has done in the past. 
While FTA has always included an examination of these needs in its 
evaluation, project ratings have seldom been impacted. This policy 
merely describes the greater emphasis FTA will be placing on the 
recapitalization estimates.
    Comments: A few commenters supported the proposal, stating that 
funding for maintenance and recapitalization are appropriate 
considerations in financial planning and FTA's project ratings. Several 
respondents stated that it is not clear why a financial plan that 
includes section 5307 and 5309 fixed guideway modernization funds 
should be rated less favorably, given that maintaining the existing 
system is an eligible use of these funds.
    Response: The proposal stated that FTA would apply extra scrutiny 
to ensure the recapitalization needs of the existing system were 
covered with sufficient funds if a project sponsor proposed diverting 
Section 5307 and Section 5309 fixed guideway funds from 
recapitalization needs to help fund the capital cost of the New or 
Small Starts project. If FTA determines that insufficient funds are 
identified for recapitalization needs or that recapitalization cost 
estimates are significantly understated in the financial plan, then the 
financial rating for the ``capital cost estimates, planning 
assumptions, and financial capacity'' subfactor may be downgraded.
    Comments: A few commenters stated that even if Congress had ``the 
state of good repair'' as its intent, that this is not applicable to 
Small Starts projects that only have to prove ``each proposed local 
source of capital and operating financing is stable, reliable, and 
available within the proposed project's timeline.''
    Response: Section 5309(c)(1)(B) of Title 49, U.S. Code, requires 
that the grantee have the ``legal, technical, and financial capacity to 
carry out the project, including safety and security aspects of the 
project.'' FTA must have evidence that a transit agency has adequate 
resources to maintain and recapitalize the system before we can confirm 
that the project sponsor has the financial capacity to carry out the 
proposed project.
    Comments: A few commenters stated that Congress did not intend to 
impose a state of good repair with this provision, but rather to ensure 
transit agencies not cut existing service in favor of the New Starts 
project.
    Response: The plain language of 49 U.S.C. 5309(d)(4)(A)(iii) 
requires that ``local resources [be] available to recapitalize * * * 
the overall public transit system. * * *'' This language is clearly 
focused not only on reducing existing service, but rather on the 
overall system.
    Comments: A few commenters stated that the triennial and planning 
certification reviews are more appropriate venues to assess maintenance 
and recapitalization funding than the New Starts project development 
process.
    Response: While the triennial and planning certification reviews 
may touch on financial capacity and financial planning, FTA feels that 
the large number of topics addressed in those reviews does not allow 
for the level of scrutiny necessary to assure that project sponsors 
will be able to adequately recapitalize their systems.
    Comment: One respondent stated that FTA should continue to review 
capital plans for continued maintenance of the base system, but did not 
support giving the proposed requirement more weight than other aspects 
of a project's financial plan.
    Response: The adopted policy does not give more weight to this 
factor than others when evaluating and rating local financial 
commitment. The weights for the subfactors for rating local financial 
commitment are unchanged. Rather, the policy merely puts project 
sponsors on notice that additional scrutiny will be

[[Page 46358]]

applied to their projections of recapitalization costs and revenues.
    Comments: Several respondents suggested that adjustments to capital 
costs should be considered for extraordinary cost increases or 
inflation; cost effectiveness break points should also be adjusted due 
to these cost escalations.
    Response: FTA currently allows cost increases related to unforeseen 
commodities escalation or inflation. Per FTA's April 2005 Dear 
Colleague letter, the cost-effectiveness breakpoints are adjusted 
annually using the increase in the Gross National Product deflator.

6. Contractor Review of Information for the Before and After Study

    FTA adopts as final its proposal that contractors involved in a 
project's capital cost estimation and travel forecasting be given an 
opportunity to review and comment each time the project sponsor is 
required to submit information for the ``before and after'' study. The 
contractor's comments, if any, must be included in the information 
submitted to FTA.
    The intent of this provision is to facilitate communication between 
project sponsors and contractors on the responsibilities of contractors 
for variances between forecasts at the three milestones before a 
project opens and actual results two years after the project opens for 
revenue service. If this communication does not result in a common 
understanding that can be documented in the submittal of information 
from the ``before and after'' study to FTA, the contractor's comments 
would have to be included in the submittal by the project sponsor.
    Comments: There was significant support for and no opposition to 
this requirement.

    Issued in Washington, DC this 4th day of August, 2008.
James S. Simpson,
Administrator.
[FR Doc. E8-18315 Filed 8-7-08; 8:45 am]
BILLING CODE 4910-57-P


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