Public Transportation: New Starts Program Is in a Period of Transition
Published: 2006-08-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) authorized about $7.9 billion in commitment authority, through fiscal year 2009, for the Federal Transit Administration's (FTA) New Starts program, which is used to select fixed guideway transit projects, such as rail and trolley projects, and to award full funding grant agreements (FFGAs). The New Starts program serves as an important source of federal funding for the design and construction of transit projects throughout the country. SAFETEA-LU requires GAO to report each year on FTA's New Starts process. As such, GAO examined (1) the number of projects that were evaluated, rated, and proposed for FFGAs for the fiscal year 2007 evaluation cycle and the proposed funding commitments for the fiscal year 2007 budget; (2) procedural changes that FTA proposed for the New Starts program beginning with the fiscal year 2008 evaluation cycle; and (3) changes SAFETEA-LU made to the New Starts program and FTA's implementation of these changes. GAO reviewed New Starts documents and interviewed FTA officials and project sponsors, among other things, as part of its review. GAO is not making recommendations in this report. In commenting on a draft of this report, FTA provided technical clarifications, which we incorporated as appropriate.
section_title: What GAO Found
paragraphs: For the fiscal year 2007 evaluation cycle, FTA evaluated and rated 20 projects, recommended 5 projects for new FFGAs and 2 projects with pending FFGAs. FTA also identified 5 other projects that may be eligible for funding outside of FFGAs. The administration's fiscal year 2007 budget proposal requests $1.47 billion for the New Starts program, which is about $200 million more than the amount received last year. FTA proposed nine procedural, or nonregulatory, changes for the New Starts program beginning with the fiscal year 2008 evaluation cycle that were generally intended to improve the management of the New Starts process. These changes include linking the New Starts and National Environmental Policy Act planning requirements and processes and capping New Starts funding when projects enter the final design phase. As required by SAFETEA-LU, FTA published these proposals in policy guidance and sought public input. Members of the transit community supported changes that they thought would make the New Starts process more efficient, but many commenters expressed strong opposition to other changes, citing, for example, the time and resources required to analyze ridership and cost uncertainties. Consequently, FTA implemented only 4 of the proposed procedural changes, but indicated that a final decision on the other 5 proposed changes would be made through the rulemaking process. SAFETEA-LU introduced eight statutory changes to the New Starts program that include establishing the Small Starts program and identifying new evaluation criteria. FTA has taken some initial steps to implement these changes, including issuing an Advanced Notice of Proposed Rulemaking (ANPRM) for the Small Starts program and proposed policy guidance for the New Starts program, both in January 2006. The Small Starts program is a new component of the New Starts program and is intended to offer an expedited and streamlined application and review process for small projects. The transit community, however, questioned whether the Small Starts program, as outlined in the ANPRM, would provide such a process. In July 2006, FTA introduced a new eligibility category called Very Small Starts, which is for the simplest and least costly projects. Very Small Starts projects will qualify for an even simpler and more expedited evaluation process. FTA also identified and sought public input on possible changes to the New Starts program that would have an impact on traditional New Starts projects, such as revising the evaluation process to incorporate the new evaluation criteria identified by SAFETEA-LU. According to FTA, a potential challenge in moving forward is incorporating both land use and economic development as separate criteria in the evaluation process, including developing appropriate measures for the criteria and avoiding duplication in counting benefits.

section_title: Letter
paragraphs: Fixed guideway systems use and occupy a separate right-of-way for the exclusive use of  public transportation services. These systems include fixed rail, exclusive lanes for buses  and other high-occupancy vehicles, and other systems.
This is the amount appropriated through fiscal year 2006, according to FTA.
Commitment authority is the amount of funding Congress has authorized FTA to commit  to New Starts projects for a given period of time.
Competition for New Starts funds continues to grow: According to FTA,  SAFETEA-LU identified over 300 projects as eligible to compete for New  Starts funding, compared with 190 such projects identified by the previous  authorization legislation, the Transportation Equity Act for the 21st  Century (TEA-21). For that reason, SAFETEA-LU, like TEA-21, directs FTA  to continue to prioritize projects for funding by evaluating, rating, and  recommending potential projects on the basis of specific financial and  project justification criteria including mobility improvements, cost- effectiveness, environmental benefits, and operating efficiencies.  However, SAFETEA-LU made several changes to the New Starts  evaluation and rating process, including identifying a new eligibility  category for smaller fixed guideway projects and establishing new  evaluation criteria. FTA is currently implementing these changes.
SAFETEA-LU also requires us to report each year on FTA’s processes and  procedures for evaluating, rating, and recommending New Starts projects  for funding and on FTA’s implementation of these processes and  procedures. This report discusses (1) the number of projects that were  evaluated, rated, and proposed for FFGAs for the fiscal year 2007  evaluation cycle and the proposed funding commitments for the fiscal  year 2007 budget; (2) procedural changes that FTA proposed for the New  Starts program beginning with the fiscal year 2008 evaluation cycle; and  (3) changes SAFETEA-LU made to the New Starts program and FTA’s  implementation of these changes. To address these objectives, we  reviewed SAFETEA-LU; FTA guidance and regulations governing the New  Starts program; and other relevant FTA documents, including the annual  New Starts report. We also interviewed FTA officials, project sponsors  from five projects in preliminary engineering and final design that were  rated in the fiscal year 2007 evaluation cycle, and representatives from the  American Public Transportation Association and the New Starts Working  Group. In addition, we reviewed comments to FTA’s docket on New Starts  and Small Starts and the Advanced Notice of Proposed Rulemaking  (ANPRM) for Small Starts. Finally, we attended one of FTA’s three  meetings with project sponsors—the New Starts/Small Starts Seminar and  Listening Sessions—in March 2006. We conducted our work from  February 2006 through August 2006 in accordance with generally accepted  government auditing standards. (See app. I for more information on our  scope and methodology.)
subsections: section_title: Background
paragraphs: SAFETEA-LU authorized a total of $45.3 billion for a variety of transit  programs, including financial assistance to states and localities to develop,  operate, and maintain transit systems from fiscal year 2005 through fiscal  year 2009. Under one program, New Starts, FTA identifies and selects  fixed guideway transit projects for funding—including heavy, light, and  commuter rail; ferry; and certain bus projects (such as bus rapid transit).  The New Starts program serves as an important source of federal funding  for the design and construction of transit projects throughout the country.  FTA generally funds New Starts projects through FFGAs, which establish  the terms and conditions for federal participation in a New Starts project  and also define a project’s scope, including the length of the system and  the number of stations; its schedule, including the date when the system is  expected to open for service; and its cost.
For a project to obtain an FFGA, it must progress through a local or  regional review of alternatives and meet a number of federal requirements,  including requirements for information used in the New Starts evaluation  and rating process (see fig. 1). As required by SAFETEA-LU, New Starts  projects must emerge from a regional, multimodal transportation planning  process. The first two phases of the New Starts process—systems  planning and alternatives analysis—address this requirement. The systems  planning phase identifies the transportation needs of a region, while the  alternatives analysis phase provides information on the benefits, costs,  and impacts of different corridor-level options, such as rail lines or bus  routes. The alternatives analysis phase results in the selection of a locally  preferred alternative—which is intended to be the New Starts project that  FTA evaluates for funding, as required by statute. After a locally preferred  alternative is selected, project sponsors submit a request to FTA for entry  into the preliminary engineering phase. Following completion of  preliminary engineering and federal environmental requirements, the  project may be approved by FTA to advance into final design, after which  the project may be approved by FTA for an FFGA and proceed to  construction, as provided for in statute. FTA oversees grantee  management of projects from the preliminary engineering phase through  construction and evaluates the projects for advancement into each phase  of the process, as well as annually for the New Starts report to Congress.
To help inform administration and congressional decisions about which  projects should receive federal funds, FTA assigns ratings on the basis of  various financial and project justification criteria, and then assigns an  overall rating. For the fiscal year 2007 evaluation cycle, FTA primarily  used the financial and project justification criteria identified in TEA-21.  These criteria reflect a broad range of benefits and effects of the proposed  project, such as cost-effectiveness, as well as the ability of the project  sponsor to fund the project and finance the continued operation of its  transit system (see fig. 2). Projects are rated at several points during the  New Starts process—as part of the evaluation for entry into preliminary  engineering and final design, and yearly for inclusion in the New Starts  annual report.
FTA assigns the proposed project a rating for each criterion and then  assigns a summary rating for local financial commitment and project  justification. Finally, FTA develops an overall project rating. The  exceptions to this process are statutorily “exempt” projects, which are  those with requests for less than $25 million in New Starts funding. These  projects do not have requirements for submitting project justification  information—although FTA encourages their sponsors to do so—do not  receive ratings from FTA and are not eligible for FFGAs; thus, the number  of projects in preliminary engineering or final design may be greater than  the number of projects evaluated and rated by FTA.
As required by statute, the administration uses the FTA evaluation and  rating process, along with the stage of development of New Starts  projects, to decide which projects to recommend to Congress for  funding. Although many projects receive a summary rating that would  make them eligible for FFGAs, only a few are proposed for FFGAs in a  given fiscal year. FTA proposes projects for FFGAs when it believes that  the projects will be able to meet certain conditions during the fiscal year  for which funding is proposed. These conditions include the following:    All non-New Starts funding must be committed and available for the  project.
The project must be in the final design phase and have progressed to the  point where uncertainties about costs, benefits, and impacts (e.g.,  environmental or financial) are minimized.
The project must meet FTA’s tests for readiness and technical capacity,  which confirm that there are no cost, project scope, or local financial  commitment issues remaining.
section_title: FTA Proposed Five New Projects for FFGAs and Requested $1.47 Billion for the New Starts Program in Fiscal Year 2007
paragraphs: FTA’s Annual Report on New Starts: Proposed Allocations of Funds for  Fiscal Year 2007 (annual report) identified 24 projects in preliminary  engineering and final design (see fig. 3). FTA evaluated and rated 20 of  these projects, and 4 projects were statutorily exempt from being rated  because their sponsors requested less than $25 million in New Starts  funding. FTA evaluated and rated fewer projects during the fiscal year  2007 cycle than in fiscal year 2006. According to FTA, this decrease  occurred because 12 proposed projects are no longer in preliminary  engineering or final design. FTA stated in its annual report that the  sponsors of these projects have either (1) fully implemented the project;  (2) received the total New Starts funding requested to implement the  project; (3) terminated or suspended project development activities; (4)  withdrawn from the New Starts process while they address outstanding  issues; or (5) decided not to pursue New Starts funding.
Of the 20 projects that were rated in the fiscal year 2007 evaluation cycle, 1  was rated as “high,” 17 were rated as “medium,” and 2 were rated as “low.”  Under TEA-21, during fiscal years 2000 through 2006, FTA designated  projects as highly recommended, recommended, or not recommended,  based on the results of FTA’s evaluation of each of the criteria for project  justification and local financial commitment. SAFETEA-LU replaced this  rating scale with a 5-point scale of high, medium-high, medium, medium- low, and low. To help transition to the new rating scale, FTA used a   3-point scale of high, medium, and low for the fiscal year 2007 evaluation  cycle, but used the same decision rules to determine overall project ratings  as it did in previous years (see table 1). According to FTA officials, FTA  intends to work closely with the industry to implement the SAFETEA-LU  provisions so that they can be applied in subsequent annual project  evaluation cycles. In addition, FTA’s current schedule anticipates that the  final rule will be completed in time to use the 5-point scale for the fiscal  year 2010 evaluation cycle.
FTA’s evaluation process informed the administration’s recommendation  to fund 12 projects. FTA recommended five projects for new FFGAs. The  total capital cost of these five projects is estimated to be $3.3 billion, of  which the total federal New Starts share is expected to be $1.9 billion. In  addition, FTA recommended funding for two projects with pending  FFGAs. The total capital cost of these two projects is estimated to be $8.2  billion, of which the total federal New Starts share is expected to be $2.8  billion. FTA also recommended reserving $101.9 million in New Starts  funding for five “other projects.” In its annual report, FTA stated that four  of the five other projects (1) were in or nearing final design, (2) received  overall medium or higher ratings, and (3) had medium or better cost- effectiveness ratings, or (4) were exempt from the requirement to achieve  a medium cost-effectiveness rating. According to FTA, no other project in  preliminary engineering or final design met these criteria. The fifth  project—Washington, D.C., Largo Metrorail Extension—did not meet  these criteria but was congressionally designated for funding in SAFETEA- LU. Similar to last year, FTA did not specify funding levels for the five  other projects because it wanted to ensure that the projects were moving  forward as anticipated before making specific funding recommendations  to Congress. FTA also notes in its annual report that some projects may  encounter unexpected obstacles that slow their progress. For example,  FTA stated that some of the projects must still complete the  environmental planning process and address FTA-identified concerns  related to capital costs or project scope. Reserving funds for these projects  without specifying a particular amount for any given project will allow the  administration to make “real time” funding recommendations when  Congress is making appropriations decisions. FTA does not expect that all  five other projects will be recommended for funding in fiscal year 2007.  (See table 2 for more information about the 12 projects recommended for  funding.)
The administration’s fiscal year 2007 budget proposal requests that $1.47  billion be made available for the New Starts program. This total includes  funding for 16 projects already under an FFGA. Figure 4 illustrates the  planned uses of the administration’s proposed fiscal year 2007 budget for  New Starts, including the following:    $571.9 million would be shared among the 16 projects with existing    $355 million would be shared between the 2 projects with pending FFGAs,    $302.6 million would be shared by the 5 projects proposed for new FFGAs,    $101.9 million would be shared by as many as 5 “other” projects to  continue their development, and   $100 million would be used for new Small Starts projects.
section_title: FTA Proposed Nine Procedural Changes to the New Starts Program and Adopted Four after Considering Comments from the Transit Community
paragraphs: In January 2006, FTA proposed nine procedural changes for the New  Starts program beginning with the fiscal year 2008 evaluation cycle. These  changes include linking the New Starts and NEPA planning requirements  and processes and capping New Starts funding when projects enter the  final design phase. FTA’s guidance states that these procedural changes  are generally intended to improve the management of the New Starts  process and to ensure the accuracy and consistency of the information  submitted to the agency as part of the New Starts evaluation and rating  process. According to FTA, these procedural changes do not alter the New  Starts evaluation and rating framework, and they are not subject to the  formal rule-making process. Table 3 summarizes the proposed procedural  changes and FTA’s rationale for proposing these changes.
As we have previously recommended and SAFETEA-LU now requires,  FTA published its proposed procedural changes in policy guidance and  sought public comments on them. FTA obtained comments on its  proposals by asking sponsors to submit comments to the docket for up to  60 days. In addition, FTA held three New Starts/Small Starts Seminar and  Listening Sessions (“listening sessions”) across the country. The listening  sessions were intended to solicit comments from attendees on the  implementation of New Starts and Small Starts provisions of SAFETEA- LU, as well as to share information about planning and project  development activities for projects seeking New Starts funding. FTA  received 41 written comments in response to these changes, including  submissions from 33 transit agencies and government entities and 8  consultants, associations, and organizations. Most of the project sponsors  and industry representatives we interviewed told us that they appreciated  FTA’s efforts to obtain their input and to encourage an open discussion  about the proposed changes. Similarly, FTA officials said that they were  pleased with the volume of written comments they received from the  docket and the strong attendance at the three listening sessions conducted  in February and March 2006.
Although the project sponsors and industry representatives were  supportive of some proposals that they thought would improve the New  Starts program, they also expressed a number of concerns about all of the  changes. (See table 4 for a summary of these concerns.) For example, the  commenters were generally supportive of FTA’s proposal to require  sponsors to keep and update the information produced during alternatives  analysis prior to each phase of project development until the FFGA is  awarded, since this information is necessary for the before-and-after  study. In contrast, most project sponsors and transit industry groups  opposed FTA’s proposed certification of technical methods, planning  assumptions, and project development procedures, citing concerns that  such a certification would raise questions about professional liability and  lead to potential federal prosecution, and noting that a single individual is  typically not responsible for producing all the underlying assumptions  used to develop cost estimates and ridership forecasts. On the basis of the  comments received, FTA adopted four proposals, including the mandatory  completion of NEPA scoping before entry into preliminary engineering  (PE), the presentation of the New Starts information in the NEPA  documents, the preservation of information for the before and after study,  and the capping of New Starts funds upon approval into final design. For  two of the four adopted proposals, FTA slightly revised its original  proposals on the basis of the comments received. FTA did not adopt five  proposals; however, FTA noted that it may revisit these proposed changes  in the future.
More recently, FTA hired a consulting firm to conduct an assessment of  the New Starts project development process. According to FTA’s Deputy  Administrator, the impetus for the review is to streamline the project  development process while still ensuring that projects recommended for  funding are delivered in a timely manner and stay within budget. We have  previously reported that project sponsors have raised concerns about the  number of changes FTA has made to the New Starts process, such as  requiring project sponsors to prepare risk assessments, and the time and  cost associated with implementing these changes. According to FTA, the  results of the review may help inform the development of the Notice of  Proposed Rulemaking (NPRM) for the New Starts program.
section_title: SAFETEA-LU’s Changes to the New Starts Program Include Identifying New Evaluation Criteria to Establishing the Small Starts Program
paragraphs: SAFETEA-LU made a number of changes to the New Starts program,  including establishing a new eligibility category, the Small Starts program,  and identifying new evaluation criteria. The Small Starts program is  intended to expedite and streamline the application and review process  for small projects, but the transit community has questioned whether FTA  would implement the program in a way that would do so. FTA has also  proposed and sought public input on the new evaluation criteria and other  possible changes to the New Starts program that would affect traditional  New Starts projects. In addition, FTA identified possible implementation  challenges, including how to distinguish between land use and economic  development criteria in the evaluation framework.
subsections: section_title: FTA Has Started to Implement SAFETEA-LU Changes and Will Continue to Do So through the Rule- making Process
paragraphs: SAFETEA-LU introduced eight changes to the New Starts program,  codified an existing practice, and clarified federal funding requirements.  The changes include the creation of the Small Starts program and the  introduction of new evaluation criteria, such as economic development. In  addition, SAFETEA-LU codified FTA’s requirement that project sponsors  conduct before and after studies for all completed projects. SAFETEA-LU  also clarified the federal share requirements for New Starts projects.  Specifically, SAFETEA-LU continues to require that the federal share for a  New Starts project may be up to 80 percent of the project’s net capital  project cost, unless the project sponsor requests a lower amount, and  prohibits the Secretary of Transportation from requiring a nonfederal  share of more than 20 percent of the project’s total net capital cost. This  language changes FTA’s policy of rating a project as low if it seeks a  federal New Starts share of more than 60 percent of the total cost. FTA  had instituted this policy beginning with the fiscal year 2004 evaluation  cycle in response to language contained in appropriation committee  reports. Table 5 describes SAFETEA-LU provisions for the New Starts  program and compares them with TEA-21’s requirements.
FTA has taken some initial steps in implementing SAFETEA-LU changes.  For example, in January 2006, FTA published the proposed New Starts  policy guidance and, as will be discussed later in this report, the ANPRM  for the Small Starts program. In addition, in the final policy guidance  published in May 2006, FTA took steps to support its use of incentives for  accurate cost and ridership forecasts and assessing contractors’  performance by requiring that projects requesting entry into PE submit  information on the variables and assumptions used to prepare forecasts  and the parties responsible for developing the different elements of the  forecasts. FTA will continue to implement the changes outlined in  SAFETEA-LU through the rule-making process over the next 1½ years.  Specifically, in response to SAFETEA-LU changes, FTA is developing the  NPRM for the New Starts and Small Starts programs. FTA plans to issue  the NPRM in January 2007, with the goal of implementing the final rule in  January 2008. Figure 5 shows a time line of FTA’s actual and planned  implementation of SAFETEA-LU changes.
section_title: Small Starts Program Is Intended to Offer a Streamlined Process, but Transit Community Members Question Whether It Will Do So
paragraphs: The creation of the Small Starts program was a significant change made by  SAFETEA-LU. The Small Starts program is a discretionary grant program  for public transportation capital projects that (1) have a total cost of less  than $250 million and (2) are seeking less than $75 million in federal Small  Starts program funding. The Small Starts program is a component of the  existing New Starts program that, according to the conference reports  accompanying SAFETEA-LU, is intended to provide project sponsors with  an expedited and streamlined evaluation and ratings process. Table 6  compares New Starts and Small Starts program statutory requirements.
In January 2006, FTA published an ANPRM to give interested parties an  opportunity to comment on the characteristics of and requirements for the  Small Starts program. In its ANPRM, FTA suggested that the planning and  project development process for proposed Small Starts projects could be  simplified by allowing analyses of fewer alternatives for small projects,  allowing the development of evaluation measures for mobility and cost- effectiveness without the use of complicated travel demand modeling  procedures in some cases, and possibly defining some classes of  preapproved low-cost improvements as effective and cost-effective in  certain contexts. FTA also sought the transit community’s input on three  key issues in its ANPRM, including eligibility, the rating and evaluation  process, and the project development process. For each of these issues,  FTA outlined different options for how to proceed and then posed  questions for public comment.
FTA’s ANPRM for Small Starts generated a significant volume of public  comment. Members of the transit community were supportive of some  proposals for the Small Starts program, but also had a number of  concerns. In particular, the transit community questioned whether FTA’s  proposals would, as intended, provide smaller projects with a more  streamlined evaluation and rating process. As a result, some commenters  recommended that FTA simplify some of its original proposals in the  NPRM to reflect the smaller scope of these projects. For example, several  project sponsors and industry representatives thought that FTA should  redefine the baseline alternative as the “no-build” option and make the  before-and-after study optional for Small Starts projects to limit the time  and cost of their development. In addition, others were concerned that  FTA’s proposals minimized the importance of the new land use and  economic development evaluation criteria introduced by SAFETEA-LU,  and they recommended that the measures for land use and economic  development be revised.
Since FTA does not plan to issue its final rule for the New Starts and Small  Starts programs until early 2008, FTA issued final interim guidance for the  Small Starts program in July 2006 to ensure that project sponsors would  have an opportunity to apply for Small Starts funding and proposed  projects could be evaluated in the upcoming cycle (i.e., the fiscal year 2008  evaluation cycle). The final interim guidance describes the process that  FTA plans to evaluate proposed Small Starts projects to support (1) the  decision to approve or disapprove their advancement to project  development and (2) decisions on project construction grant agreements,  including whether proposed projects are part of a broader strategy to  reduce congestion. In addition, FTA introduced a separate eligibility  category within the Small Starts program for “Very Small Starts” projects  in the final interim guidance. Small Starts projects that qualify as Very  Small Starts are projects that have all of the following elements:    have substantial transit stations;  include traffic signal priority and preemption, where appropriate;   provide low-floor vehicles or level boarding;  include branding of the proposed service;   offer 10 minute peak and 15 minute off-peak headways or better while  operating at least 14 hours per weekday;   are in corridors with existing riders who will benefit from the proposed  project and number more than 3,000 on an average weekday; and   have a total capital cost of less than $50 million (including all project  elements) and less than $3 million per mile (excluding rolling stock).
According to the final interim guidance, FTA intends to scale the planning  and project development process to the size and complexity of the  proposed projects. Therefore, Very Small Starts projects will undergo a  very simple and streamlined evaluation and rating process. For instance,  according to the guidance, Very Small Starts projects are cost-effective  and produce land use and economic development benefits commensurate  with their costs; thus, if a project meets the Very Small Starts eligibility  criteria, it will automatically receive “medium” ratings for land use and  cost-effectiveness. Small Starts projects that do not meet all of the criteria  for Very Small Starts projects will be evaluated and rated using a  framework similar to that used for traditional New Starts projects, with  the exception that fewer measures are required and their development is  simplified. In particular, FTA’s evaluation and rating process for Small  Starts will diverge from the traditional New Starts process in several ways.  For example,  the project’s cost-effectiveness will be rated based on a shorter time frame  (i.e., opening year);   other technically acceptable ridership forecasting procedures, besides  traditional “four-step” travel demand models can be used; the opening year’s estimate of user benefits will be adjusted upward when  determining a project’s cost-effectiveness; the financial and land use reporting requirements have been simplified;  and the project’s economic development benefits and inclusion in a congestion  reduction strategy will be considered an “other factor” in the evaluation  process.
section_title: FTA Also Identified Possible Changes to the New Starts Program in Response to SAFETEA-LU as Well as Implementation Challenges
paragraphs: In response to SAFETEA-LU, FTA identified possible changes to the New  Starts program that would affect traditional New Starts projects in its  January 2006 guidance. According to FTA, some SAFETEA-LU provisions  could lead to changes in the definition of eligibility, the evaluation and  rating process, and the project development process. (See app. II for a  description of the different changes FTA is considering.) In the guidance,  FTA outlined changes it is considering and solicited public input, through  a series of questions, on the potential changes. For example, FTA  identified two options for revising the evaluation and rating process to  reflect SAFETEA-LU’s changes to the evaluation criteria. The first option  would extend the current process to include economic development  impacts and the reliability of cost and ridership forecasts. (See fig. 6.)
Specifically, FTA suggested that economic development impacts and the  reliability of forecasts simply be added to the list of criteria considered in  developing the project justification rating. The second option would be to  develop a broader process to include the evaluation criteria identified by  SAFETEA-LU and to organize the measures to support a more analytical  discussion of the project and its merits. (See fig. 7.) According to FTA, the  second option would broaden the evaluation process beyond a  computation of overall ratings based on individual evaluation measures  and develop better insights into the merit of a project than are possible  from using the quantified evaluation measures alone. In addition, the  second option would also consider the major uncertainties associated with  any of the information used to evaluate the project, such as ridership  forecasts, cost estimates, projected land use, and other assumptions.  According to FTA, understanding a project’s uncertainties is needed for  informed decision making.
In its guidance, FTA also identified potential challenges in implementing  some SAFETEA-LU changes. In particular, FTA described the challenges  of incorporating and distinguishing between two measures of indirect  benefits in the New Starts evaluation process—land use and economic  development impacts. For example, FTA noted that its current land-use  measures (e.g., land-use plans and policies) indicate the transit- friendliness of a project corridor both now and in the future, but do not  measure the benefits generated by the proposed project. Rather, the  measures describe the degree to which the project corridor provides an  environment in which the proposed project can succeed. According to  FTA’s guidance, FTA’s evaluation of land use does not include economic  development benefits because FTA has not been able to find reliable  methods of predicting these benefits. FTA further stated that because  SAFETEA-LU introduces a separate economic development criterion, the  potential role for land use as a measure of development benefits becomes  even less clear, given its potential overlap with the economic development  criterion. In addition, FTA noted that many economic development  benefits result from direct benefits (e.g., travel time savings), and  therefore including them in the evaluation could lead to double counting  the benefits FTA already measures and uses to evaluate projects.  Furthermore, FTA noted that some economic development impacts may  represent transfers between regions rather than a net benefit for the  nation, raising questions of whether these impacts are useful for a  national comparison of projects. To address some of the challenges, FTA  suggested that an appropriate strategy might be combining land use and  economic development into a single measure.
In our January 2005 report on the costs and benefits of highway and transit  investments, we identified many of the same challenges of measuring and  forecasting indirect benefits, such as economic development and land-use  impacts. For example, we noted that it is challenging to predict changes  in land use because current transportation demand models are unable to  predict the effect of a transportation investment on land-use patterns and  development, since these models use land-use forecasts as inputs into the  model. In addition, we noted that certain benefits are often double  counted when evaluating transportation projects. In particular, indirect  benefits, such as economic development, may be more correctly  considered transfers of direct user benefits or economic activity from one  area to another. Therefore, estimating and adding such benefits to direct  benefits could constitute double counting and lead to overestimating a  project’s benefits. Despite these challenges, experts told us that evaluating  land use and economic development impacts is important since they often  drive local transportation investment choices. To help overcome some of  the challenges, experts suggested several potential solutions, including  using qualitative information about the benefits rather than relying strictly  on quantitative information and expanding the use of risk assessment or  probability analysis in conjunction with economic analysis. For example,  weather forecasters talk about the probability of rain rather than  suggesting that they can accurately predict what will happen. This  approach could illustrate that projects with similar rates of return have  very different risk profiles and different probabilities of success. FTA’s  second option for revising the New Starts evaluation process, which would  consider qualitative information about the project and the project’s  uncertainties, appear to be in line with these suggestions.
FTA received a large number of written comments on its online docket in  response to its proposed changes. (See app. II for common comments  submitted for each proposed change.) While members of the transit  community were supportive of some proposals, they expressed concerns  about a number of FTA’s proposed changes. For example, a number of  commenters expressed concerns about FTA’s options for revising the  evaluation process, noting that both proposals deemphasized the  importance of economic development and land use. For example, as  described in FTA’s January 2006 guidance, land use would receive less  weight in calculating the overall project rating in both proposals than it  receives in the current process. Some commenters also noted that land use  and economic development should not be combined into a single measure  and that they should receive the same weight as cost-effectiveness in the  evaluation and rating process. These commenters argued that combining  land use and economic development into a single measure or assigning  them less weight than cost-effectiveness serves to deemphasize these  benefits.
section_title: Concluding Observations
paragraphs: FTA’s New Starts program is in a period of transition. SAFETEA-LU made  a number of significant changes to the program, and FTA is off to a good  start in implementing these changes. Tough decisions and implementation  challenges remain, however. For example, FTA must determine how to  incorporate economic development into the evaluation process and  implement the Small Starts program in the upcoming evaluation cycle.  Through the issuance of the final interim guidance on the Small Starts  program, FTA has acted to provide a streamlined evaluation process for  small projects by simplifying the evaluation measures and introducing the  Very Small Starts eligibility category. As the Small Starts program is  implemented in the upcoming cycle, FTA officials will have the  opportunity to determine whether the Small Starts program is sufficiently  streamlined and whether the streamlined evaluation process provides  adequate information to differentiate among projects for funding  purposes. FTA will also have the opportunity to make necessary  modifications to the Small Starts program as it learns through its  experience in implementing the program and working to develop the final  rule. Thus, the coming months will be a critical period for the New Starts  program, as FTA works through these remaining decisions and  implementation challenges to fully incorporate SAFETEA-LU changes.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Department of Transportation,  including FTA, for review and comment.  FTA officials provided technical  clarifications, which we incorporated as appropriate.
We are sending copies of this report to the congressional committees with  responsibilities for transit issues; the Secretary of Transportation; the  Administrator, Federal Transit Administration; and the Director, Office of  Management and Budget. We also will make copies available to others  upon request. In addition, this report will be available at no charge on  GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions on matters discussed in this report,  please contact me on (202) 512-2834 or at siggerudk@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 were Nikki Clowers, Assistant Director, Vidhya  Ananthakrishnan, and Daniel Hoy.
section_title: Appendix I: Scope and Methodology
paragraphs: To address our objectives, we reviewed the administration’s fiscal year  2007 budget request, the Federal Transit Administration’s (FTA) annual  New Starts report, FTA’s New Starts policy guidance and Small Starts  Advanced Notice of Proposed Rulemaking (ANPRM), public comments  received on FTA’s docket on New Starts and Small Starts, FTA’s fiscal year  2008 reporting instructions for the New Starts program, federal statutes  pertaining to the New Starts program, and previous GAO reports. We also  interviewed FTA officials and representatives from the American Public  Transportation Association and the New Starts Working Group. In  addition, we attended FTA’s New Starts/Small Starts Seminar and  Listening Session with project sponsors in Washington, D.C., in March  2006.
We also conducted semistructured interviews with the sponsors of five  projects that were evaluated and rated in the fiscal year 2007 evaluation  cycle, including Raleigh, Regional Rail System; Dallas,  Northwest/Southeast Light Rail Transit MOS; Minneapolis, Northstar  Corridor Rail; Philadelphia, Schuylkill Valley Metrorail; and Seattle,  University Link Light Rail Transit Extension. We selected these projects  because they represent different phases of project development  (preliminary engineering and final design), received different overall  project justification and finance ratings, varied in size based on the  project’s total capital cost, received different levels of New Starts funding,  and are geographically diverse. We obtained this information from FTA’s  annual New Starts report for fiscal year 2007. Our interviews were  designed to gain project sponsors’ perspectives on three main topics,  including the impact of FTA’s proposed changes to the New Starts  application and project development process during the fiscal year 2008  evaluation cycle, FTA’s implementation of the newly established Small  Starts program, and FTA’s plans to align and revise its evaluation and  ratings process with the changes required by the Safe, Accountable,  Flexible, Efficient Transportation Equity Act: A Legacy for Users  (SAFETEA-LU). Specifically, we asked for their opinions on how FTA  plans to measure and weight new criteria in its evaluation framework. We  provided all project sponsors with a list of topics and questions prior to  our interviews, and we reviewed the comments they submitted to FTA’s  docket. Because the five projects were selected as part of a nonprobability  sample, the results cannot be generalized to all projects.
In addition to our interviews, we analyzed the content of the comments  submitted to FTA’s docket on the New Starts policy guidance and the  Small Starts ANPRM to systematically determine the project sponsors’  views on key issues and identify common themes in their responses to  different questions. We received from FTA a summary of all the written  comments submitted to the docket on both the Small Starts ANPRM and  the New Starts guidance on policies and procedures. These comments  were organized by topic. To verify the accuracy of the summaries, we  checked 20 percent of the comments against the original source  documents. Two analysts reached consensus on the coding of the  responses, and a third analyst was consulted in case of disagreement to  ensure that our codes were reliable.
To ensure the reliability of the information presented in this report, we  interviewed FTA officials about FTA’s policies and procedures for  compiling the New Starts annual reports, including FTA’s data collection  and verification practices for New Starts information. Specifically, we  asked the officials whether their policies and procedures had changed  significantly since we reviewed them for our 2005 report on New Starts.  FTA officials told us that there were no significant changes in their data  collection and verification policies and procedures for New Starts  information. Therefore, we concluded that the FTA information presented  is sufficiently reliable for the purposes of this report.
We conducted our work from February 2006 through August 2006 in  accordance with generally accepted auditing standards, including  standards for data reliability.
section_title: Appendix II: FTA’s Proposed Changes to the New Starts Program
paragraphs: In its January 2006 guidance, FTA identified possible long-term changes to  the New Starts program. According to FTA, some of these changes were  driven by SAFETEA-LU, while others were designed to improve the New  Starts program or correct past problems. Table 7 summarizes FTA’s  proposed changes to the definition of eligibility, the evaluation and rating  process, and the project development process as well as FTA’s rationale  for the proposed changes and the transit community’s response to the  proposed changes.