Commuter Rail: Potential Impacts and Cost Estimates for the Cancelled Hudson River Tunnel Project
Published: 2012-03-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Studies have estimated that transit travel demand between New Jersey and Manhattan will increase by 38 percent by 2030. The Access to the Regions Core commuter rail project was designed to help meet that rising demand. In October 2010, the governor of New Jersey, citing potential cost growth and the states fiscal condition, withdrew state support and cancelled the project. The New Jersey Transit (NJT) was the lead agency for the project, supported by the Port Authority of New York and New Jersey (Port Authority). The project was to be partially funded under the Federal Transit Administrations (FTA) New Starts program.
GAO was asked to examine (1) what would have been the mobility, economic, and environmental benefits of the project according to major planning studies; (2) the project cost estimates over time; and (3) how, if at all, documents prepared as part of the New Starts process addressed potential cost growth for the project.
GAO reviewed the literature and major project planning studies, FTA reports, and economic and cost estimates by NJT and other planning organizations. GAO interviewed officials from FTA, state and local transit agencies, and local planning organizations. GAO is making no recommendations in this report.
The Department of Transportation provided technical comments, which GAO incorporated in the report.
section_title: What GAO Found
paragraphs: Studies estimated that the Access to the Regions Core commuter rail project would have provided mobility benefits, but other benefits would either have been limited or are difficult to measure. According to various studies:
The project would have helped meet the projected increase in travel demand and improved mobility by doubling the number of daily peak period trains, and significantly increasing daily trips between New Jersey and Manhattanfrom about 174,000 without the project to 254,000 with the project by 2030while reducing transfers and station crowding and improving reliability of service.
The project potentially would have generated economic activity in the region in the form of jobs and income, business activity, and increased home values, but many economic effects were hard to predict with certainty. For example, the extent to which the project would shift the location of economic activity, versus providing additional net economic activity, is uncertain.
The project was estimated to have created limited but mostly positive environmental effectsin particular, improved air qualityand included measures to mitigate negative effects such as noise and storm water runoff.
Over time, the cost estimates for the project increased from an initial estimate of $7.4 billion in 2006. In 2008 and 2010, FTA performed risk assessments and revised the cost estimate. FTA and NJT agreed upon a baseline cost estimate of $8.7 billion in 2009. After considering comments from NJT, which projected lower costs than FTA, FTA revised its estimate and issued a cost estimate of $9.8 billion to $12.4 billion in October 2010. As of April 2010, federal sources were expected to fund about half the cost, with the remainder divided between New Jersey Turnpike funds and the Port Authority.
Because the project was terminated before FTA and NJT entered into a full funding grant agreement, there was no final agreement by all the parties on the issue of responsibility for project cost growth. While the Secretary of Transportation and the governor of New Jersey held discussions on additional funding options, planning documents did not address the source of funding of potential cost growth for the project.

section_title: Letter
paragraphs: The Access to the Region’s Core (ARC) project was a planned commuter  rail project designed to help address the problem of increasing travel  demand between New Jersey and New York City. Current tunnel, bridge,  and rail infrastructure serving this corridor is already at or near capacity;  this increase in travel demand, fueled by population growth in the region  west of Manhattan and employment within Manhattan, could result in  more congestion and greater delays for commuters. The planned project  was to connect existing rail lines, build two tunnels under the Hudson  River, and expand New York Penn Station. However, on October 27,  2010, the governor of New Jersey, citing potential cost growth and the  state’s financial condition, withdrew state support and cancelled the  project.
The New Jersey Transit (NJT) and other project sponsors began planning  for the project in 1995, and in 2003, completed the first major planning  study, which assessed numerous alternative solutions to the problem of  constrained capacity and possible routes under and across the Hudson  River. The project was further developed through the federal  environmental impact review process, completed in 2009. In addition,  both NJT and local planning organizations conducted various studies of  the expected transportation and economic impacts of the project. Cost  estimates were developed throughout the planning process, but the final  estimate and funding commitments were still under discussion between  New Jersey and the Federal Transit Administration (FTA) when the  project was cancelled.
As requested, this report addresses the following questions: (1) What did  major planning studies find would have been the estimated mobility,  economic, and environmental impacts of the ARC project? (2) What have  been the ARC project cost estimates over time, who developed those  estimates, and what sources of funding were identified? (3) How, if at all,  did documents prepared as part of FTA’s New Starts funding process  address potential cost growth for the ARC project?
To address these questions, we reviewed all major planning studies   We also  prepared for the project and FTA reports about the project.reviewed planning and economic analyses of the project done by NJT  and outside organizations. We examined the methodologies used by the  studies and determined that the studies were sufficiently reliable for the  purposes of our report. We reviewed documents from NJT and FTA that  provided or discussed various project cost estimates. We interviewed  officials from federal, state, and local agencies; private planning  organizations; and academia; specifically, FTA, Amtrak, Office of the  Governor of New Jersey, Office of the Attorney General of New Jersey,  NJT, the Port Authority of New York and New Jersey (Port Authority),  New York Metropolitan Transportation Council, North Jersey  Transportation Planning Authority, Regional Plan Association, Tri-State  Transportation Campaign, and Rutgers University. In addition, to  determine how potential cost growth was addressed, we reviewed various  declarations submitted in connection with NJT’s response to FTA’s  demand for repayment of expended project funds, the general project  agreement between NJT and the Port Authority, and FTA’s financial  assessment of NJT’s financial plan that was submitted as part of the  application to advance the project to its final design.
We conducted this performance audit from February 2011 through March  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 objectives. During our review, we  suspended our work for about 6 weeks until the resolution of a dispute  between the Department of Transportation and New Jersey concerning  the repayment of federal funds already spent on planning the project.
subsections: section_title: Background
subsections: section_title: Reason for the ARC Project
paragraphs: Commuter demand and congestion between New Jersey and New York  City across the Hudson River is projected to increase as the limited  passenger rail infrastructure continues to age, highlighting the need for  improvements to the trans-Hudson commuter rail system into Manhattan.  Planning agencies have forecasted that, fueled by population growth in  regions west of the Hudson River and employment within Manhattan,  demand for mass transit service crossing the Hudson River between New  Jersey and nearby counties in New York and midtown Manhattan will  grow by about 38 percent by 2030. This could result in more congestion  and longer delays on existing roads, bridges, passenger rail, and other  public transportation modes crossing the Hudson River. At the same time,  the aging passenger rail infrastructure—comprising two single-track  tunnels under the Hudson River leading to New York Penn Station—limits  commuter rail capacity into Manhattan. The 100-year-old tunnels cannot  meet the access and mobility demands of the future, given the projected  growth in the region.
In 1995, the three major local transit agencies—NJT, the Port Authority,  and the Metropolitan Transportation Authority—jointly conducted a major  investment study to consider ways to improve access between midtown  Manhattan and the growing population west of the Hudson River. They  evaluated more than 100 alternatives, including commuter railroad, bus,  light rail, subway, automobile, and ferry. The study, completed in 2003,  recommended three alternatives for advancement to the federal  environment impact process. While these alternatives would have  provided more train capacity and were expected to meet projected  demand, they did not share all of the elements of the final ARC project. In  the draft environmental impact statement, published in 2007, NJT  identified the alternative that became the final ARC project. Project  development and refinements continued until completion of the  environmental review process and entry of the project into final design in  2009. Figure 1 shows the new tracks, tunnel, and station that the project  would have built. In addition, the project would have added a yard in New  Jersey for storing trains that are not in service during the middle of the  day, five station entrances at the New York Penn Station Expansion, and  three elevator entrances that met the Americans with Disabilities Act  requirements.
NJT applied for federal funding for a portion of ARC costs through FTA’s  New Starts program.agencies on a largely competitive basis primarily for the construction of  new fixed-guideway transit systems and the expansion of existing fixed- guideway systems. Federal funding for the construction of New Starts  projects is committed in a full funding grant agreement, which is a   Under this program, funding is directed to public  multiyear funding agreement between the federal government and a  public agency. Although the ARC project was cancelled prior to obtaining  a full funding grant agreement, FTA provided some federal funding for  preliminary engineering, final design, and a portion of construction costs  for the project. The construction funding was provided through an early  system work agreement. Appendix I provides an overview of the New  Starts process.
While NJT sponsored the project and would have been the prime  operator of services on the completed project, state and local funding for  ARC would have come from the New Jersey Turnpike Authority and the  Port Authority. As part of the federal planning process for transportation,  the region’s two metropolitan planning organizations—the North Jersey  Transportation Planning Authority and the New York Metropolitan  Transportation Council—adopted the project into their metropolitan  transportation improvement plans, as required for federal funding.
section_title: Termination of the Project
paragraphs: While the New Jersey governor had affirmed support for the ARC project  in an April 6, 2010, letter to the Secretary of Transportation, on October  27, 2010, the governor announced the cancellation of the project, citing  potential cost growth and the state’s fiscal condition. At the time of  cancellation, NJT had completed most of the requirements needed to  obtain additional federal funding. In particular, NJT had completed an in- depth environmental review and received FTA’s commitment of $601  million in New Starts funds to pay for initial construction activities. At the  time of cancellation, NJT was negotiating the final cost estimate of the  project with FTA in order to obtain the full funding grant agreement. This  agreement would have provided the commitment for the full federal share  of funds for the project.
section_title: Anticipated Benefits of ARC Project
subsections: section_title: Regional Travel Demand and Mobility
paragraphs: According to the studies we reviewed, the ARC project would have  provided a significant increase in rail capacity for moving commuters  between New Jersey and New York. NJT and other planning organization  officials said that increases in capacity were a key mobility benefit of the  project. The tunnel would have added two train tracks under the Hudson  River, and as a result:
The number of trans-Hudson peak hour trains (from 7:30 a.m. to 8:30  a.m.) would have more than doubled—from 23 to 48 trains per hour.
The peak hour use of passenger capacity would have decreased from  a near-capacity 95 percent to 60 percent at completion, providing  additional capacity to accommodate future passenger growth.
The benefits of other planned NJT rail expansions would have been  enhanced.
With this increase in capacity, projections made as part of the project’s  environmental study showed an anticipated increase in transit ridership  as follows:
Daily trips between New Jersey and New York Penn Station would  have increased from about 174,000 without the project to about  254,000 (a 46 percent increase) with the project by 2030.
Considering the effects on other transit facilities, the project would  have generated about 32,500 new daily transit trips across the  Hudson by 2030.
The ARC project would have reduced the need for passengers to transfer  between trains, meaning many riders could commute on only one train.
Passenger transfers lengthen commuting times and avoiding transfers  provides a benefit to riders. As a result of the ARC project, it was  estimated that:
Five existing NJT lines would have no longer required passengers to  transfer trains to get to Manhattan.
Daily passenger transfers would have declined from about 32,100  without the project to 1,000 with the project, a 97 percent reduction,  as estimated in the environmental study.
Riders travelling between New Jersey and Manhattan would have  experienced an average of 23 minutes of travel time savings per trip.
By building a second rail tunnel between New Jersey and Manhattan, the  ARC project would have increased the overall reliability of rail service and  added flexibility during service disruptions. A disruption of service in the  existing NJT tunnel for any reason can result in major delays. Currently,  one 15-minute train disruption in the existing tunnel can delay as many as  15 other NJT and Amtrak trains. The ARC project would have provided:
Flexibility to reroute trains from one tunnel to the other, if necessary.
Continuous weekend service as new tunnels could remain open  during tunnel maintenance. (Currently, with only one tunnel, traffic  must be limited to perform necessary maintenance.)
Better reliability, allowing for faster transit. Average scheduled time  from Newark, New Jersey, to Manhattan would decrease by 5 minutes  during peak times and 3.5 minutes off-peak.
Even with the added trans-Hudson commuters, the environmental study  found that the new station would have reduced crowding at the adjacent  New York Penn Station:
Average passenger egress time from New York Penn Station would  have decreased from 80 to 60 seconds (a 25 percent decrease).
The new station would have resulted in a projected decrease in peak  hour ridership at New York Penn Station of 37 percent—from about  27,800 passengers without the project to 17,200 with the project in  2030—thus alleviating crowding.
Additionally, the environmental study estimated that, in general, the  increased rail capacity across the Hudson River would have reduced the  amount of travel by automobile that would otherwise occur. Port Authority  officials told us that this increased rail capacity would help ease road  congestion for trans-Hudson commutes. Specifically, the study projected  that by 2030:
Daily trans-Hudson automobile trips would be reduced by about  22,100 trips, or 4.9 percent, compared to the number of automobile  trips without the project.
Daily automobile vehicle miles traveled would have been reduced by  about 590,000 miles compared to vehicle miles traveled without the  project.
Daily automobile vehicle hours traveled would have been reduced by  about 22,000 hours compared to vehicle hours traveled without the  project.
According to the environmental study, mobility may further deteriorate  without the ARC project. The New York City region faces serious mobility  issues and, as we have mentioned previously in this report, travel  demand is projected to increase significantly. Environmental study  forecasts estimated that trans-Hudson transit travel demand would rise  from about 550,000 riders in 2005 to about 760,000 in 2030, an increase  of about 38 percent. Without the tunnel, the environmental study  projected that demand would not be met, and congestion and delays  would increase. All the major trans-Hudson crossings—NJT, the Port  Authority Trans-Hudson (PATH), and vehicular tunnels and bridges—are  at or near capacity. According to the environmental study, the increased  demand would stress the entire transportation network, including  roadway, bus, ferry, and commuter rail systems.
However, it is difficult to precisely determine the long-term effects of not  building the tunnel because various other agencies are building, planning,  or exploring the possibility of transportation improvements that could  affect overall mobility in the region. Local transportation officials cited a  number of projects that could affect congestion and commutes in the  region, although some are at the conceptual phase, and may or may not  be built. Possible projects include the extension of a subway line from  New York City to New Jersey, Amtrak’s proposal to add a train line from  New Jersey into New York City, bridge and transit tunnel improvements, a  new bus terminal, and improvements to help freight flows into New York.  Thus, the overall effect of canceling the ARC project must be understood  in the regional context, and the effect is dependent on what transpires  with these other projects.
section_title: Economic Activity
paragraphs: Studies estimated the ARC project would have generated economic  activity in the region that would have affected jobs and personal income,  business activity, and home values, among other things. Most of the  economic effects were expected during the building phase of the project.  The studies we reviewed used regional economic models to measure the  economic effects. However, the results of these models depend on larger  economic conditions, such as the level of unemployment. The results  cannot be regarded as certain in all economic conditions. The studies  addressed several aspects of economic activity as follows:  Jobs and personal income. The environmental study estimated that  during construction the ARC project would have provided about  59,900 jobs directly onsite and total additional employment in the  region of about 98,300 jobs. The environmental study also  suggested that over the longer term, the rail line would have required  an estimated 410 jobs directly in transportation. Another study  estimated that the project would generate about 5,700 construction- related jobs each year during the 9-year construction.years after completion of the project, the same study estimated the  region would gain 44,000 new jobs as a result of improved access,  which would make the region more competitive compared to other   In addition, 10   The same study estimated that 10 years after completion,  regions.the project would have added almost $4 billion in personal income to  the region, in 2006 dollars.
Business activity. The ARC environmental study estimated the project  would have produced an additional $9 billion in business activity  during construction and $120 million per year in business activity over  the long term.
Home values. Another study estimated that houses in New Jersey  communities served by the ARC project would see an average  increase in home value of $19,000, or 4.2 percent, resulting from  more efficient local travel and improved access to high paying jobs in  New York City.
Tax revenues. Studies also indicated that increased tax revenues  would have resulted from the increases in economic activity from the  ARC project. The environmental study estimated that during  construction, $1.5 billion in federal, state, and local taxes would have  been generated, as well as an additional $16 million annually after the  project was completed. Another study estimated that the project would  result in an additional $375 million each year in property taxes  generated by local governments.
Ibid. growth may simply shift to another part of the region or nation. Third, the  project’s economic impact also depends on how it was financed. Deficit  financing—borrowing—provides an increase in the total amount of  spending, which will have economic effects. In contrast, financing the  project through taxes means that existing government and household  spending to some extent is simply directed a certain way, rather than  increasing the total amount of such spending. Analyzing the impact of the  project in the context of these variables—the unemployment rate when  the project is being built and project financing—was beyond the scope of  the studies we reviewed.
The net impact on housing prices is also difficult to assess. First, the  analyses—done several years ago—may not fully capture the effects of  recent declines in the housing market. Second, impacts on the housing  market throughout the metropolitan area would, to some extent, reflect  population shifts—some house prices may go up as a consequence of  improved access to transit, while prices in other less desirable locations  may go down. However, shifting the location of households and business  activity does not necessarily expand the overall economy. Also, benefits  to homeowners and commuters from the project would significantly  overlap, since they are to some extent the same people; that is, the  change in a homeowner’s real estate value is the result of the  improvement in travel time.
Finally, even though the project was cancelled, all of the anticipated  economic activity was not necessarily lost. For example, according to Port  Authority officials, the Port Authority redirected funds it had allocated to  the ARC project to other projects in the region, which could increase  employment and economic activity tied to those projects. Likewise, funds  that New Jersey planned to allocate to the ARC project were reallocated  to the state’s highway trust fund, which would then support economic  activity related to highway projects. However, these highway projects  would not necessarily be in the New York City region.
section_title: Environmental Effects
paragraphs: The ARC environmental study estimated the project would have created  limited, but mostly positive environmental effects. (See fig. 2.)
The primary positive effect would have been a long-term reduction in air  pollution, although it is difficult to predict how much this reduction in  pollutants would affect the entire New York City region. Air quality effects  are of particular relevance in the development of transit projects. FTA,  pursuant to law, includes whether a project is in an area that has not  attained air quality standards required by the Clean Air Act as a factor in  selecting projects for the New Starts program. According to the  Environmental Protection Agency, the entire New York City region is out  of compliance with certain ambient air quality standards that are designed  to protect public health. The project would reduce automobile trips and  thereby decrease emissions that contribute to existing air quality  problems in the region and related public health problems. According to  the Environmental Protection Agency, adverse health effects associated  with air pollutants include increased respiratory symptoms, hospitalization  for heart or lung disease, and premature death. Local transportation  agency officials told us that air quality factors were important when  considering the potential environmental effects of the ARC project. Over  the long term, air quality would have been positively affected due to an  estimated overall daily decrease of about 590,000 in vehicle miles  traveled in the region and about 22,100 fewer trans-Hudson vehicle trips.  While longterm air quality effects were generally positive in nature, the  results of these changes would be dispersed over the entire metropolitan  area, and were too difficult to estimate for the New York region, as noted  in the environmental study.
According to the environmental study, other adverse environmental  effects would have been short term and mitigated. Among the  environmental effects were negative effects on air quality, mainly related  to dust created by excavation and construction and exhaust emissions  from equipment, noise, potential storm water runoff, vibration, potential  soil erosion, and potential disturbance of various contaminated sites. FTA  determined that these short-term negative effects were adequately  addressed by mitigation plans.
section_title: Project Cost Estimates Increased Over Time and about Half the Planned Funding Was from Federal Sources
paragraphs: In 2003, the first cost estimates for the concept of a new commuter rail  tunnel between New Jersey and New York—developed by NJT and other  local agencies in the major investment study—ranged from $2.9 billion to  $3.6 billion (in year 2000 dollars). These estimates were for a project  that was largely conceptual and did not rely on significant engineering  design work.  Further, not all project costs and elements were included in  these estimates.
In 2006, after the sponsoring agencies selected a locally preferred  alternative, FTA accepted $7.4 billion as the first cost estimate for the  project. This estimate included an expanded New York Penn Station as  well as construction, engineering, oversight, and management costs;  operational systems; rolling stock; real estate; startup cost; and  environmental mitigation. ARC project cost estimates increased over time  as shown in table 1.
In general, changes in cost estimates throughout the process of planning  and designing a transportation project are normal and may happen for a  number of reasons.paper to final design and construction, a more accurate understanding of  what a project entails may evolve. The change in cost estimates may  reflect a more accurate understanding of what actually constitutes the   First, as a project progresses from a concept on  project. For example, according to Port Authority officials, early in the  project they learned that there were no existing surveys of New York  Penn Station, and they had to survey the station before detailed designs  could be developed. As shown in figure 3, cost estimates are more  uncertain at the beginning of a project (the range is wide), because less is  known about its detailed design and construction requirements, and  therefore the opportunity for change is greater.
Second, costs can appear to change if they are not expressed in a  consistent manner, that is, in constant year dollars (to eliminate any  inflationary effects) versus year of expenditure dollars (that may mask any  changes in real terms because of inflation). Third, project cost estimates  are sensitive to factors such as changes to the scope of the project. In  some cases, a sponsor may reduce the scope or add more features to  the project as the design progresses. Uncertainty of the costs is reduced,  as the project scope is better defined, but costs also may increase.  Fourth, cost estimates can change as risks are assessed and reassessed  throughout project development, resulting in the amount FTA requires  project sponsors to set aside for project contingency to increase or  decrease. For example, FTA officials said risk factors could include  changes in real estate costs, new information involving surface or  subsurface ground conditions and materials, or the degree of competition  among contractors. According to FTA officials, risks like these can affect  the cost of a project, and sponsors may never adequately address all of  them, but at a minimum both the sponsor and FTA must be aware of what  those risks are.
The ARC project cost estimates increased from the $7.4 billion estimate  in 2006 for a number of reasons:  In 2008, FTA’s cost estimates ranged from $9.5 billion to $12.4 billion,  based on potential scenarios in its 2008 Risk Assessment, which not  only assumed different levels of risk but also included $1.7 billion set  aside for contingency. After discussions, FTA and NJT agreed upon  a baseline cost estimate of $8.7 billion in 2009.
FTA’s 2010 Risk Assessment contained the next estimated cost—as  high as $13.7 billion—as the engineers developed a more accurate  understanding of what the project entailed. However, NJT did not see  costs rising to this level and projected a lower expected cost range,  including a maximum $10 billion final cost. After considering  comments from NJT, FTA revised the cost range to $9.8 billion to  $12.4 billion. This estimate included a more refined cost estimate of  potentially higher construction and other work costs. In addition, the  contingency amount was increased due to reassessment of risks  related to delays in awarding project contracts.
subsections: section_title: Federal, State, and Local Funding Sources
paragraphs: Federal, state, and local sources would have funded the ARC project, as  shown in table 2. As of April 2010, about half the estimated cost of about  $8.7 billion would have come from federal sources with the remainder  divided at the local and state levels between the Port Authority and the  New Jersey Turnpike Authority. In addition to New Starts funds, New  Jersey was planning to use certain federal highway funds that may be  used for transit capital purposes. New Jersey planned to use part of its  federal Congestion Mitigation and Air Quality Improvement and National  Highway System funding for the ARC project. State and local funds  included $3 billion from the Port Authority, which formally approved this  funding commitment. The state of New Jersey planned to add $1.25  billion that was to have come from increased tolls on the New Jersey  Turnpike.
In August 2009, FTA entered into an early system work agreement with  NJT. This agreement, which FTA and NJT amended in 2010, made  available about $910.3 million for certain project activities, such as tunnel  construction contracts, property and easement acquisitions in New York,  professional services related to the project’s final design, construction  permits, insurance, and a contingency reserve.expended about $271 million of the $910.3 million. When the project was  cancelled, the Department of Transportation claimed that the $271 million  in expended federal funds should be recovered by the federal  government, and New Jersey disputed this claim. On September 30,   As of 2010, NJT  2011, the Department of Transportation and New Jersey agreed that New  Jersey would return $95 million, which included $51 million in New Starts  funds and $44 million in American Recovery and Reinvestment Act funds.  In addition, New Jersey agreed to spend about $128 million in Congestion  Mitigation and Air Quality Improvement funds on transit projects approved  by the Department of Transportation. Because the project was terminated  before FTA and NJT entered into a full funding grant agreement, there  was no final commitment by all the parties to fully fund the project.
section_title: Planning Documents Did Not Determine the Source of Funding of Potential Cost Growth
paragraphs: The general project agreement, which was a document prepared as part  of the New Starts process and signed by NJT and the Port Authority in  2009, addressed potential cost growth. According to the agreement, if  costs exceeded $8.766 billion (or if less than $3 billion was provided by  FTA), both parties agreed to work together to obtain additional funding  sources. According to Port Authority officials, although both parties signed  the agreement, there was no commitment of assistance from the Port  Authority in the event that the project experienced cost increases. Port  Authority officials told us that the agency’s existing $3 billion commitment  was the maximum the agency could provide to the project, given the  constraints of their overall capital program. In the weeks preceding the  project’s cancellation, the Secretary of Transportation and the governor of  New Jersey held discussions on additional funding sources for the ARC  project or a reduction in project scope. The additional funding options  discussed included increased funding by the federal government, New  Jersey, and the Port Authority; a federal railroad loan; or a public-private    Because the project was terminated before a  partnership contribution.full funding grant agreement was entered into between FTA and NJT,  there was no final agreement by all the parties on the issue of  responsibility for ARC cost growth.
section_title: Agency Comments
paragraphs: The Department of Transportation reviewed a draft of this report and  provided technical comments, which we incorporated in the report.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies to interested congressional  committees, the Secretary of Transportation, and the Administrator of the  Federal Transit Administration. In addition, this report will be available at  no charge on GAO’s website at http://www.gao.gov.
If you or your staff have any questions or would like to discuss this work,  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. Individuals making key contributions  to this report are listed in appendix II.
section_title: Appendix I: Federal Transit Administration’s New Starts Process
paragraphs: The Federal Transit Administration (FTA) provided federal funding for a  portion of the Access to the Region’s Core costs through its New Starts  program. Under this program, funding is directed to public agencies on a  largely competitive basis primarily for the construction of new fixed- guideway transit systems and the expansion of existing fixed-guideway  systems. Federal funding for construction of New Starts projects is  committed in a document that is called a full funding grant agreement—a  multi-year agreement between the federal government and a public  agency that is subject to the availability of appropriations. The  agreement establishes the terms and conditions for federal financial  participation, including the maximum amount of New Starts funding being  committed. To obtain this grant agreement, a project must be approved  by FTA for final design and construction and have gone through a series  of steps that make up the New Starts approval process. Among the  phases of the New Starts planning and development process are:  systems planning, alternatives analysis, preliminary engineering, and final  design.
Systems planning. Systems planning involves the continuing regional  transportation planning process carried out by metropolitan planning  organizations in urban areas throughout the United States. This  process produces long-range transportation plans and shorter-range  transportation improvement programs, along with environmental and  other analyses.
Alternatives analysis. The analysis of alternatives examines the  benefits and costs of different options, such as light rail or bus rapid  transit, in a specific transportation corridor or in a regional sub-area. It  concludes with the selection of a locally preferred alternative and  adoption of that alternative into a fiscally constrained long-range  transportation plan. The project sponsor submits the proposed project  to FTA for evaluation so as to gain approval to enter preliminary  engineering, the next phase of development. FTA evaluation does  not include a full cost-benefit analysis, but does consider cost- effectiveness and other benefits of the proposed project.
Preliminary engineering. Preliminary engineering involves the project  sponsor refining the project by examining the costs, benefits, and  impacts of different design alternatives, and completing an analysis of  environmental impacts as required by the National Environmental  Policy Act of 1969. Once preliminary engineering is complete, FTA  evaluates and rates the project to determine whether it can be  approved into final design.
Final design.  In the project’s final design phase, the project sponsor  prepares final construction plans and cost estimates, and, if needed,  includes right-of-way acquisition and relocation of utilities.
After final design is complete, FTA may approve the project for a full  funding grant agreement, at which point the project may move into the  construction phase. In some cases, FTA may obligate some of the  funding expected to be provided in the full funding grant agreement  through an early system work agreement. Although not a guarantee of full  funding, an early system work agreement provides funding so that work  can begin before full funding is awarded.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Teresa Spisak (Assistant  Director), Robert Ciszewski, Alexander Lawrence, David Hooper, Hannah  Laufe, Joshua Ormond, Amy Rosewarne, and Max Sawicky made key  contributions to this report.