Public Transportation: Future Demand Is Likely for New Starts and Small Starts Programs, but Improvements Needed to the Small Starts Application Process
Released: 2007-07-27T00:00:00

Letter

Background

SAFETEA-LU authorized over $45 billion for federal transit programs, including $8 billion for the New Starts program, from fiscal years 2005 through 2009. Under the New Starts program, FTA identifies and recommends fixed-guideway transit projects for funding—including heavy, light, and commuter rail; ferry; and certain bus projects (such as bus rapid transit). SAFETEA-LU also made changes to the New Starts program, including changes to its evaluation and rating process. FTA already has implemented some of these changes and has undertaken efforts to address the remaining changes.

FTA generally funds New Starts projects through FFGAs, which establish the terms and conditions for federal participation in a New Starts project. FFGAs 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 federal statute, 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 options, such as rail lines or bus routes, in a specific corridor versus in a region. 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, the project sponsor submits an application to FTA for the project to enter the preliminary engineering phase. When this phase is completed and federal environmental requirements are satisfied, FTA may approve the project’s advancement into final design, after which FTA may approve the project for an FFGA and proceed to construction, as provided for in statute. FTA oversees grantees’ management of projects from the preliminary engineering phase through the construction phase and evaluates the projects for advancement into each phase of the process. FTA also evaluates the projects 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 statutorily defined evaluation criteria—including both local financial commitment and project justification criteria—and then assigns an overall rating (see fig. 2). These evaluation 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. FTA assigns the proposed project a rating for each criterion and then assigns a summary rating for local financial commitment and project justification. Lastly, FTA develops an overall project rating. Projects are rated at several points during the New Starts process—as part of the evaluation for entry into the preliminary engineering and the final design phases, and yearly for inclusion in the New Starts annual report to Congress.

As required by statute, the administration uses the FTA evaluation and rating process, along with the phase 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 an FFGA, only a few are proposed for an FFGA in a given fiscal year. FTA proposes a project for an FFGA when it believes that the project will be able to meet the following conditions during the fiscal year for which funding is proposed: All nonfederal project funding must be committed and available for the project.

The project must be in the final design phase and have progressed far enough for uncertainties about costs, benefits, and impacts (i.e., environmental or financial) to be minimized.

The project must meet FTA’s tests for readiness and technical capacity, which confirm that there are no remaining cost, project scope, or local financial commitment issues.

SAFETEA-LU introduced a number of changes to the New Starts program, including some that affect the evaluation and rating process that we have previously described in figure 1. For example, SAFETEA-LU added economic development to the list of evaluation criteria that FTA must use in evaluating and rating New Starts projects and required FTA to issue notice and guidance each time significant changes are made to the program. SAFETEA-LU also established the Small Starts program, a new capital investment grant program, simplifying the requirements imposed for those seeking funding for lower-cost projects, such as bus rapid transit, streetcar, and commuter rail projects. This program is intended to advance smaller-scale projects through an expedited and streamlined evaluation and rating process. Small Starts projects require less than $75 million in federal funding and have a total cost of less than $250 million. According to FTA’s guidance, Small Starts projects must also (1) meet the definition of a fixed guideway for at least 50 percent of the project length in the peak period or (2) be a corridor-based bus project with the following minimum elements: traffic signal priority/preemption, to the extent, if any, that there are traffic signals on the corridor; low-floor vehicles or level boarding; branding of the proposed service; and 10-minute peak/15-minute off-peak running times (i.e., headways) or better while operating at least 14 hours per weekday.

FTA has also subsequently introduced a separate eligibility category within the Small Starts program for “Very Small Starts” projects. Small Starts projects that qualify as Very Small Starts are simple, low-cost projects that FTA has determined qualify for a simplified evaluation and rating process. These projects must meet the same eligibility requirements as Small Starts projects and be located in corridors with more than 3,000 existing riders per average weekday who will benefit from the proposed project. In addition, the projects must have a total capital cost of less than $50 million (for all project elements) and a per-mile cost of less than $3 million, excluding rolling stock (e.g., train cars).

FTA evaluates Small Starts and Very Small Starts projects using various financial and project justification criteria, including cost-effectiveness and land use. For Small Starts and Very Small Starts, SAFETEA-LU condensed the New Starts processes used for large projects. Preliminary engineering and final design are combined into one phase, referred to as “project development.” FTA may recommend proposed Small Starts and Very Small Starts for funding after such projects have been approved to enter into project development, are “ready” to implement their proposed project, and continue to be rated at least “medium” for both project justification and local financial commitment. FTA intends to provide funding for Small Starts and Very Small Starts projects through project construction grant agreements (PCGA), which are similar to FFGAs (see fig. 3).

FTA Recommended 14 Projects for Fiscal Year 2008 Funding; SAFETEA-LU Changes to Evaluation and Rating Process Remain

FTA evaluated and rated 18 New Starts, Small Starts, and Very Small Starts projects for funding during the fiscal year 2008 evaluation cycle. Of the 14 New Starts projects that FTA evaluated and rated, FTA recommended to Congress funding for 10 projects, including 2 new projects, 2 pending projects, and 6 “other” projects. FTA also evaluated and rated 4 Small Starts and Very Small Starts applications, and recommended all of these projects for funding. The fiscal year 2008 President’s budget requests $1.40 billion in New Starts funding, including $100 million for the Small Starts program. Although SAFETEA-LU authorized $200 million each year for the Small Starts program, no funds have yet been allocated to the program, due, in part, to its newness.

FTA Evaluated and Rated 14 New Starts Projects, and Recommended Funding for 10 Projects

FTA’s Annual Report on New Starts: Proposed Allocations of Funds for Fiscal Year 2008 (annual report) identified 19 New Starts projects in preliminary engineering and final design. FTA evaluated and rated 14 of these projects, rating 2 as “high,” 12 as “medium,” and none as “low.” Five additional projects were statutorily exempt from being rated because their sponsors requested less than $25 million in federal funding.

FTA recommended 10 New Starts projects for funding. Specifically, FTA recommended 2 New Starts projects for proposed FFGAs. The total capital cost of these 2 projects is estimated to be $6.30 billion, with the total federal New Starts share expected to about one-third of this total. In addition, FTA recommended funding for 2 projects with pending FFGAs. The total capital cost of these 2 projects is estimated to be $1.13 billion, and the total federal New Starts share is expected to be about one-half of the total cost. FTA also recommended reserving $72.08 million in New Starts funding for 6 “other” projects. FTA selected these “other” projects using the decision rules that the projects have a “medium” or higher rating; have a “medium” or higher cost-effectiveness rating; and is expected to advance to final design as of June 2008. According to FTA, no other project in preliminary engineering or final design met these decision rules. Similar to last year, FTA did not specify how much would be set aside for the 6 “other” New Starts projects because it wanted to ensure that the projects were moving forward as anticipated before making specific funding recommendations to Congress. 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 6 “other” projects will be recommended for funding in fiscal year 2008 (see table 1).

FTA Evaluated and Rated 4 Small Starts and Very Small Starts Projects, and Recommended Funding for All 4 Projects

In the fall of 2006, FTA received 12 Small Starts and Very Small Starts requests to enter project development for the fiscal year 2008 evaluation cycle. A majority of these Small Starts and Very Small Starts requests to enter project development were from project sponsors in the western and southern regions of the country and all but 2 were for bus rapid transit projects. FTA determined that only 1 Small Starts project and 3 Very Small Starts projects were complete, ready, and eligible to be approved into project development. FTA subsequently proposed these projects for a PCGA. We found that the reasons for ineligible projects and incomplete applications ranged from unclear program guidance to inconsistent information provided by FTA. (See table 2 for more information on the Small Starts and Very Small Starts projects for fiscal year 2008.)

FTA evaluated and rated the 4 Small Starts and Very Small Starts projects that were eligible and had complete applications. All 4 of these projects received a “medium” rating. FTA approved the 4 Small Starts and Very Small Starts projects for advancement into the project development phase on the basis of its review, evaluation, and rating of their applications. The total capital cost of these projects is estimated to be $118.4 million, and the total Small Starts, including Very Small Starts, share is expected to be $84.9 million. FTA has also recommended that $48.2 million be allocated for “other” Small Starts projects that were not ready for advancement into project development at the time applications were due, but that may be ready for advancement later in fiscal year 2008.

The Administration’s Fiscal Year 2008 Budget Proposal Requests $1.40 Billion for the New Starts Program

The administration’s fiscal year 2008 budget proposal requests that $1.40 billion be made available for the New Starts program. This amount is $166 million less than the program’s fiscal year 2007 appropriation. Figure 4 illustrates the planned uses of the administration’s proposed fiscal year 2008 budget for New Starts, including the following: $863.74 million would be shared among the 11 New Starts projects with $120 million would be shared between the 2 New Starts projects with $210 million would be shared between the 2 New Starts projects proposed $72.08 million would be shared by as many as 6 “other” New Starts projects to continue their development, and $100 million would be used for new Small Starts and Very Small Starts projects.

Although SAFETEA-LU authorized $200 million for the Small Starts program each year from fiscal years 2006 through 2009, no funding for the program has been allocated to date. For fiscal year 2007, the administration’s budget proposal requested $100 million for the Small Starts program. Of the $1.57 billion allocated to the New Starts program for fiscal year 2007, no funding was appropriated for Small Starts projects. The administration’s budget proposal for fiscal year 2008 also requests $100 million for the Small Starts program. FTA officials told us that they requested less than the authorized amounts for the Small Starts program for both fiscal years 2007 and 2008 because it has taken time for them to establish the program, and because they did not receive as many Small Starts applications as expected.

FTA Is Implementing Several Changes to the New Starts Evaluation and Rating Process

SAFETEA-LU requires FTA to make several changes to the New Starts evaluation and rating process, including adding economic development as an evaluation criterion and changing the rating scale. FTA is in the process of implementing these changes. For example, table 3 describes the act’s changes to the evaluation and rating process and the status of their implementation, as of July 2007.

Although FTA has taken steps to implement changes required by SAFETEA-LU, the project sponsors we interviewed frequently expressed concern that FTA has not yet fully incorporated economic development into its evaluation. Specifically, FTA currently assigns a weight of 50 percent each to cost-effectiveness and land use to calculate a project’s overall rating. The other four statutorily defined criteria, including economic development, mobility improvements, operating efficiencies, and environmental benefits, are not weighted. As described in table 3, to reflect SAFETEA-LU’s increased emphasis on economic development, FTA has encouraged project sponsors to submit information that they believe demonstrates the impact of their proposed transit investments on economic development. According to FTA, this information is considered as an “other factor” in the evaluation process, but is not weighted. However, FTA officials told us that few project sponsors submit information on their projects’ economic development benefits for consideration as an “other factor.” We previously reported that FTA’s reliance on two evaluation criteria to calculate a project’s overall rating is drifting away from the multiple-measure evaluation and rating process outlined in statute and current New Starts regulations. Thus, we recommended that FTA (1) improve the measures used to evaluate New Starts projects so that all of the statutorily defined criteria can be used in determining a project’s overall rating or (2) provide a crosswalk in the regulations showing clear linkages between the criteria outlined in the statute and the criteria and measures used in the evaluation and rating process in the upcoming rulemaking process.

Many of the project sponsors and all of the industry groups we interviewed also stated that they believe certain types of projects are penalized in the evaluation and rating process because of the weights assigned to the different evaluation criteria. Specifically, the project sponsors and industry groups said that by not weighting economic development, the evaluation and rating process does not consider an important benefit of some transit projects. They also expressed concern that the measure FTA uses to determine cost-effectiveness does not adequately capture the benefits of certain types of fixed-guideway projects—such as streetcars—that have shorter systems and provide enhanced access to a dense urban core, rather than transport commuters from longer distances (e.g., light or heavy rail). Project sponsors and an industry group we interviewed further noted that FTA’s cost-effectiveness measure has influenced some project sponsors to change their project designs from more traditional fixed-guideway systems (e.g., light rail or streetcars) to bus rapid transit, expressly to receive a more favorable cost- effectiveness rating from FTA.

According to FTA officials, they understand the importance of economic development to the transit community and the concerns raised by project sponsors, and said they are currently working to develop an appropriate economic development measure. FTA is currently soliciting input from industry groups on how to measure economic development, studying possible options, and planning to describe how it will incorporate economic development into the project justification criteria in its upcoming rulemaking. FTA officials also stated that incorporating economic development into the evaluation process before issuing a regulation could potentially create significant uncertainty about the evaluation and rating process for project sponsors. Furthermore, they agreed with our previous recommendation that this issue should be addressed as part of their upcoming rulemaking, which they expect to be completed in April 2008. As part of its upcoming rulemaking, FTA will also conduct several outreach efforts with project sponsors and industry groups.

FTA officials noted that they have had difficulty developing an economic development measure that both accurately measures benefits and distinguishes competing projects. For example, FTA officials said that separating economic development benefits from land-use benefits— another New Starts evaluation criterion—is difficult. In addition, these officials noted that many economic development benefits result from direct benefits (e.g., travel time savings). Therefore, including economic development benefits in the evaluation could lead to double-counting the benefits FTA already measures and uses to evaluate projects. Furthermore, FTA officials noted that some economic development impacts may represent transfers between regions, rather than a net benefit for the nation, thereby raising questions about the usefulness of these benefits for a national comparison of projects. We have also reported on many of the same challenges of measuring and forecasting indirect benefits, such as economic development and land-use impacts. For example, we noted that certain benefits are often double-counted when transportation projects are evaluated. We also noted that indirect benefits, such as economic development, may be more correctly considered transfers of direct user benefits or of economic activity from one area to another. Therefore, estimating and adding such indirect benefits to direct benefits could constitute double-counting and lead to overestimating a project’s benefits. Despite these challenges, we have previously reported that it is important to consider economic development and land-use impacts, since they often drive local transportation investment choices.

Changes in the Size and Composition of the New Starts Pipeline Are Likely Due to Different Factors

The number of projects in the New Starts pipeline has decreased since the fiscal year 2001 evaluation and rating cycle, and the types of projects in the pipeline have changed. FTA and project sponsors attributed these changes to different factors, with FTA officials citing their increased scrutiny of applications and projects, and the project sponsors pointing to the complex, time-consuming, and costly nature of the New Starts process. FTA is considering different ideas on how to improve the New Starts process, some of which may address the concerns identified by project sponsors.

The Number of Projects in the New Starts Pipeline Has Decreased, and the Types of and Funding for Projects Have Changed

Since the fiscal year 2001 evaluation cycle, the number of projects in the New Starts pipeline—which includes projects that are in the preliminary engineering or final design phases—has decreased by more than one-half, from 48 projects in the fiscal year 2001 evaluation cycle to 19 projects in the fiscal year 2008 evaluation cycle. Similarly, the number of projects FTA has evaluated, rated, and recommended for New Starts FFGAs has decreased since the fiscal year 2001 evaluation and rating cycle.

Specifically, as shown in table 4, the number of projects that FTA evaluated and rated decreased by about two-thirds, from 41 projects to 14 projects.

Although the number of projects in the New Starts pipeline has decreased, the amount of funding FTA has requested for the program remained relatively the same, while the average dollar amount per FFGA has increased since fiscal year 2001. Adjusted to current dollars, FTA has requested nearly the same funding amounts for the program during this time frame, having requested $1.22 billion in fiscal year 2001 and $1.37 billion in fiscal year 2008. Twelve projects were recommended for FFGAs in fiscal year 2001, while only 2 were recommended for fiscal year 2008. However, in the fiscal years between 2001 and 2008, the number of projects recommended for FFGAs varied from as many as 5 to as few as 2 for any given fiscal year. Furthermore, we found that the average dollar amount requested for proposed FFGAs has increased since fiscal year 2001. When adjusted to current dollars, the average dollar amount of an FFGA proposed in fiscal year 2001 was about $20 million, but for fiscal year 2008 it was $103 million (see table 5).

The composition of the pipeline—that is, the types of projects in the pipeline—has also changed since the fiscal year 2001 evaluation cycle. During fiscal years 2001 through 2007, light rail and commuter rail were the more prevalent modes for projects in the pipeline. In fiscal year 2008, bus rapid transit became the most common transit mode for projects in the New Starts pipeline (see fig. 5). The increase in bus rapid transit projects is likely due to a number of factors, including foreign countries’ positive experiences with this type of transit system. To be eligible, a corridor-based bus project must (1) operate in a separate right-of-way dedicated for public transit use for a substantial portion of the project or (2) represent a substantial investment in a defined corridor. Furthermore, medium and smaller project sponsors may be expressing more interest in the New Starts program, including Small Starts, because bus rapid transit may serve as a more affordable and cost-effective alternative to other fixed-guideway options.

Although bus rapid transit projects are now more common than commuter or light rail projects, they represent a small amount of the total cost for all projects in the pipeline. We found that bus rapid transit accounts for about 12 percent of the total cost of all projects in the New Starts pipeline, while commuter rail (36 percent), heavy rail (30 percent), and light rail (22 percent) account for greater shares—which is not surprising, given that bus rapid transit projects are often less expensive than rail projects. However, although bus rapid transit projects account for a smaller share of the total costs, we found that project sponsors seek higher funding shares for these projects. In fiscal year 2008, project sponsors sought, on average, New Starts funding to cover about 58 percent of the total cost of bus rapid transit projects, whereas they sought about 49 percent for commuter rail projects, about 50 percent for light rail projects, and about 38 percent for heavy rail projects.

FTA and Project Sponsors Attributed the Decrease in the New Starts Pipeline to Different Factors

FTA and project sponsors identified different factors for the decrease in the New Starts pipeline. FTA officials cited their increased scrutiny of applications to help ensure that only the strongest projects enter the pipeline, and said they had taken steps to remove projects from the pipeline that were inactive, not advancing, or did not adequately address identified problems. According to FTA officials, these projects consume FTA oversight resources and congressional funding without demonstrating evidence of progress. FTA officials said they believed projects had been progressing slowly through the pipeline in recent years and, therefore, needed encouragement to move forward or be removed from the pipeline. Along these lines, since fiscal year 2004, FTA has issued warnings to project sponsors that alert them to specific project deficiencies that must be corrected by a specified date for the project to advance through the pipeline. If the deficiency is not corrected, FTA removes the project from the pipeline. To date, FTA has issued warnings for 13 projects. Three projects have only recently received a warning and their status is to be determined; 3 projects have adequately addressed the deficiency identified by FTA; 1 project was removed by FTA for failing to address the identified deficiency; and 6 projects were withdrawn from the pipeline by the project sponsors. FTA officials told us that project sponsors are generally aware of FTA’s efforts to better manage projects in the pipeline.

Although FTA has taken steps to remove inactive or stalled projects from the pipeline, FTA officials noted that most projects have been withdrawn by their project sponsors, not FTA. According to FTA data, 23 projects were withdrawn from the New Starts pipeline between calendar years 2001 and 2007. Of these, 16 projects were withdrawn from the pipeline at the request of project sponsors; 6 were removed from the pipeline in response to efforts initiated by FTA; and 1 was removed from the pipeline at congressional direction. Of the 16 projects that were withdrawn by project sponsors, the most common reasons were that the project was either reconfigured (the project scope or design was significantly changed) or reconsidered, or that the local financial commitment was not demonstrated. Similarly, FTA initiated the removal of 4 of 6 projects for lack of local financial commitments, often demonstrated by a failed referendum at the local level. Of the 23 projects withdrawn from the New Starts pipeline, 3 were expected to reenter the pipeline at a later date.

The project sponsors we interviewed provided other reasons for the decrease in the number of projects in the New Starts pipeline. The most common reasons cited by project sponsors were that the New Starts process is too complex, costly, and time-consuming: Complexity and cost of the New Starts process: The majority of project sponsors we interviewed told us that the complexity of the requirements— including those for financial commitment projections and travel forecasts, which require extensive analysis and economic modeling—creates disincentives to entering the New Starts pipeline. Sponsors also told us that the expense involved in fulfilling the application requirements, including the costs of hiring additional staff and private grant consultants, discourages some project sponsors with fewer resources from applying for New Starts funding. Furthermore, concerns about the cost of applying to the New Starts program come at a time when project sponsors expect to receive less funding for their projects from the program. Specifically, for recently completed transit projects that received an FFGA, the project sponsors we surveyed reported that, on average, the federal government funded approximately 60 percent of the total project costs via the New Starts program. For ongoing projects, sponsors reported that they expect to receive an average of about 50 percent of the total project costs from the New Starts program.

Time required to complete the New Starts process: More than one-half of the project sponsors we interviewed said that the application process is time-consuming or leads to project delays, although sponsors could not provide specifics on how long various components of the process contributed to a specific delay. One project sponsor told us that constructing a project with New Starts funding (as opposed to without such funding) delays the timeline for the project by as much as several years, which in turn leads to increased project costs since inflation and expenses from labor and materials increase with the delay. The lengthy nature of the New Starts process is due, at least in part, to the rigorous and systematic evaluation and rating process established by law—which, as we have previously noted, could serve as a model for other transportation programs. In addition, FTA officials noted that most project delays are caused by the project sponsor, not FTA. These delays are attributable to the sponsor’s inability to obtain local funding commitments, local decisions to significantly modify the project’s scope or alignment, or unanticipated environmental impacts.

Other reasons for the decrease in the pipeline that were cited by the project sponsors we interviewed include that the project sponsors are finding alternative sources of funding, such as other federal funds or state, local, or private funding. One project sponsor remarked that sponsors try to avoid the New Starts process by obtaining a congressional designation, so that they can skip the New Starts application process and construct their project more quickly. In addition, three other project sponsors said that since the New Starts process is well-established and outcomes are predictable, potential project sponsors do not even apply to enter the pipeline because they realize their projects will not fare well against the New Starts criteria and, thus, are unlikely to receive New Starts funding.

Our survey found similar reasons that project sponsors provided for the decline in the New Starts pipeline. Among the project sponsors we surveyed with completed transit projects, the most common reasons given for not applying to the New Starts program were that the process is lengthy or that the sponsor wanted to move the project along faster than could be done in the New Starts process. About two-thirds of these project sponsors reported that their most recent project was eligible for New Starts funding, yet more than one-fourth of them did not apply to the program. Instead, these project sponsors reported using other federal funding and state, local, and private funding—with other federal and local funding the most commonly used and private funding the least commonly used—to fund their most recently completed project. In addition, we found that almost two-thirds of the large project sponsors we surveyed applied to the New Starts program for their most recently completed project, while only about one-third of medium and smaller project sponsors applied. Other reasons these project sponsors cited for not applying to the program include sufficient funding from other sources to complete the project, concern about jeopardizing other projects in the pipeline, time and resources needed to complete application each year are too great, and difficulty in understanding and completing the process and in understanding the program’s eligibility requirements.

FTA is considering and implementing different means of improving the New Starts process—many of which would address the concerns identified by project sponsors. For example, FTA has recognized that the process can be lengthy, and in 2006 FTA commissioned a study to examine, among other issues, opportunities for accelerating and simplifying its implementation of the New Starts program. According to FTA officials, one of the study’s recommendations was to use project development agreements to solidify New Starts project schedules and improve FTA’s timeline for reviews. FTA officials told us that they are pursuing this recommendation, and have already implemented project schedules for three New Starts projects in the pipeline. Other key recommendations for FTA contained in the study include developing a simple “road map” that concisely identifies requirements for navigating through preliminary engineering and final design, more clearly defining entry criteria for each phase of the process, simplifying the travel forecasting modeling, and clarifying and consistently implementing the New Starts technical guidance and policies. The FTA Administrator has publicly stated that FTA will continue to look for ways to further improve the program.

In June 2007, FTA issued in the Federal Register a number of changes to the New Starts and Small Starts processes, including streamlining through the elimination of a number of reporting requirements. For example, FTA will no longer require project sponsors to submit information on operating efficiencies and environmental benefits, nor will they be required to submit information for evaluation for FTA’s annual report if their project is not likely to be ready for a funding recommendation. In addition, the resubmission of information on land-use patterns for the annual report will now be optional for project sponsors. Other changes to the processes include expanding the evaluation criteria to a five-tiered rating scale, and considering a project’s innovative contractual agreements in the evaluation and rating of the operating finance plan for projects. The guidance also states that under the evaluation of “other factors,” if a project is a principal element of a congestion management strategy, this could increase a project’s overall rating. Projects could also increase their overall rating by reporting economic development; therefore, FTA encourages project sponsors to submit such information.

Future Demand for New Starts Program Expected; Project Sponsors Seek Small Starts Program Improvements

Our survey and interviews of project sponsors indicated that there will likely be a future demand for New Starts funding. Survey respondents told us that they plan to seek New Starts funding for 101 of 141 future planned New Starts, Small Starts, and Very Small Starts transit projects. While FTA has taken steps to streamline the Small Starts program as envisioned by SAFETEA-LU, project sponsors find the application process to be time- consuming and too costly to complete. In addition, project sponsors we interviewed, especially those that have never applied for New Starts funding, find the Small Starts interim guidance difficult to understand and would like more assistance from FTA on how to complete the application process.

Project Sponsors Indicated That Future Demand for New Starts Funding Is Likely

Our survey of project sponsors indicated that there is likely to be a future demand for New Starts funding. About 46 percent (77 of 168) of the project sponsors we surveyed reported that they had a total of 141 planned transit projects, which we defined as projects currently undergoing an alternatives analysis or other corridor-based planning study. According to the project sponsors, they will likely seek New Starts funding for almost three-fourths (72 percent, or 101) of these 141 planned New Starts, Small Starts, and Very Small Starts projects. More specifically, they will likely seek New Starts funding for 57 of the planned New Starts projects, 30 of the planned Small Starts projects, and 14 of the planned Very Small Starts projects (see fig. 6). Although the project sponsors we surveyed indicated that they were considering a range of alternative project types in their planning, the most commonly cited alternatives were bus rapid transit and light rail.

All of the Small Starts and Very Small Starts project sponsors we interviewed viewed the new Small Starts program favorably. These project sponsors told us that they appreciated the emphasis FTA has placed on smaller transit projects through its new programs and the steps FTA has taken to streamline the application process for the programs. The project sponsors also told us that the Small Starts program, including the Very Small Starts eligibility category, address a critical and unmet funding need, and that they believe their projects will be more competitive under these programs because they are vying for funding with projects and agencies of similar size. FTA officials told us that they have been responsive in providing assistance on the program when contacted.

Our survey results also indicated that, through its Small Starts program, FTA is attracting more project sponsors than before, including those that have not previously applied for the New Starts program and also those that would not otherwise be applying for New Starts funds. For example, of the 30 project sponsors that intend to seek New Starts funding for their planned Small Starts and Very Small Starts projects, 13 have not previously applied for New Starts funding. Project sponsors also indicated that the Small Starts program, including the eligibility category for Very Small Starts projects, has influenced how they plan for their ongoing projects, which are projects that have completed the alternatives analysis phase and have moved forward into the later stages of development, such as preliminary engineering or final design. Of the ongoing Small Starts and Very Small Starts projects for which respondents indicated they would be requesting New Starts funding, project sponsors definitively reported that they would have sought New Starts funding for only about one-quarter of those ongoing projects if the Small Starts program, including the eligibility category for Very Small Starts projects, had not been established.

Project Sponsors Would Like FTA to Further Streamline the Small Starts Program

In implementing the Small Starts program, FTA has taken steps to streamline the application and evaluation and rating processes for smaller- scale transit projects, as envisioned by SAFETEA-LU. According to our analysis of the numbers and types of requirements for the New Starts and Small Starts application processes, the Small Starts process has fewer requirements. For example, in the categories of travel forecasting, project justification, and local financial commitment, the number of requirements was reduced. FTA also established a simplified financial evaluation process for Small Starts, which reduced the reporting burden for qualified projects. In addition, FTA allows simplified methods for travel forecasts that predict transportation benefits, and it reduced the number of requirements for the Small Starts application process. For example, the Small Starts application process is about one-quarter fewer requirements than those for the New Starts program. FTA also established the Very Small Starts process, which has even fewer application requirements than the Small Starts program. This process expedites the reporting, evaluation, and advancement of simple and inexpensive projects. FTA’s steps have greatly reduced the amount of information to be submitted for each of the specific requirements (see table 6).

Despite these efforts, many of the project sponsors we interviewed find the Small Starts application process time-consuming and too costly to complete, and would like to see FTA further streamline the process. Frequently, project sponsors said that the current Small Starts application process takes as long and costs as much to complete as the New Starts application process, even though the planned projects cost less. For example, a project sponsor that applied to the Small Starts program told us that FTA asks applicants to submit templates used in the New Starts application process that call for information not relevant for a Small Starts project, such as travel forecasts beyond the opening year, which are not required for the Small Starts program. The project sponsor suggested that FTA develop a separate set of templates for the Small Starts program that would ask only for Small Starts-related information. FTA officials told us that in these cases, they would not expect project sponsors to provide the additional information that is not required. Another project sponsor we interviewed told us that although FTA tried to streamline the process by requiring ridership projections only for the opening year of Small Starts projects, the environmental impact statement still mandates the development of multiyear ridership projections. Such extensive ridership projections take a considerable amount of work, staff time, and funding to produce. FTA officials explained to us that the level of ridership projections required is dependent on the nature of the project. Several other project sponsors that applied to the Small Starts program, including sponsors that used the Very Small Starts process, expressed additional concerns about having to provide duplicate information, such as project finance and capital cost data that can be found in other required worksheets. FTA officials do not believe that such duplicate information is burdensome for project sponsors to submit. Nonetheless, smaller-sized entities that lack New Starts experience, in-house expertise, and resources may find the process burdensome.

In reviewing the Small Starts application process requirements, we also found that the application is not always tailored for Small Starts applicants and, in several instances, requests duplicate information. FTA officials acknowledged that the Small Starts application process could be further streamlined and said that they are working to decrease the burden by, for example, reducing land-use reporting requirements, simplifying the rating process, and developing specific Small Starts templates. However, FTA officials noted that some requirements are statutorily defined or reflect industry-established planning principles. For example, federal statute requires that projects, even Small Starts projects, emerge from an alternatives analysis that considers various options to address the transportation problem at hand. Therefore, only certain aspects of the process can be streamlined.

Project Sponsors Seek Additional Application Assistance and Consistent Information from FTA on Small Starts

The project sponsors we interviewed, especially those that have never applied for New Starts funding, would like more assistance from FTA in completing the application process because some find the interim guidance difficult to understand. Before the Small Starts and Very Small Starts application deadline, FTA provided initial outreach to applicants. Despite this outreach, 8 of the 12 applications were incomplete or sought funding for ineligible projects. In some cases, the project sponsors that submitted these applications had no past experience with the New Starts process, limiting their familiarity with the information required for the application. To help address this issue, FTA officials told us that, in one instance, they provided a Very Small Starts project sponsor with a copy of a submitted application from another project sponsor (with New Starts program experience) to use as a guide. The Very Small Starts project sponsor found the application to be helpful in preparing its own application. FTA officials told us that they plan to host an informal meeting of potential Small Starts project sponsors later this calendar year. In addition, some project sponsors did not understand what constitutes an eligible project. For example, one project sponsor we interviewed submitted an application for the construction of a new station. However, FTA officials told us that the construction of a station did not meet the definition of a corridor-based project, as required. Another project sponsor we interviewed told us that it believed FTA deemed its two Small Starts and Very Small Starts projects ineligible because service was already being provided on the proposed route (and, therefore, the proposed service would not be new). In response, FTA officials told us that these projects were in fact ineligible because they already had incremental developments, including some of the elements FTA requires for Small Starts and Very Small Starts projects, such as traffic signal priority or preemption and branding of the proposed service. Yet, these project sponsors were unaware that the incorporation of some of these elements into their existing service rendered their project ineligible. We found that although FTA’s Small Starts guidance outlines the elements required for a project to receive funding, it does not explicitly state that projects that have already begun to incrementally incorporate these elements are ineligible. When we discussed this concern with FTA officials, they told us that they might consider asking project sponsors to demonstrate the cost- effectiveness of the preexisting elements to allow for such projects to be eligible for Small Starts funding.

The project sponsors we interviewed said they need more consistent, reliable information from FTA. We found that on several occasions, FTA headquarters and regional offices provided project sponsors with inconsistent information, which contributed to the sponsors’ submitting applications for ineligible projects and submitting incomplete applications. For example, two project sponsors said they thought their projects were eligible after talking with FTA regional officials. However, after submitting their applications, these project sponsors learned from FTA headquarters officials that their projects were ineligible. Furthermore, one project sponsor stated that officials from a regional FTA office said there was no need to submit a separate application for the Small Starts program, since the sponsor had previously applied to the New Starts program. Rather, FTA regional officials said the project sponsor needed to submit only a few additional pieces of information. However, after the project sponsor sent this information, along with a letter to FTA requesting that the application be transferred from the New Starts program to the Small Starts program, FTA headquarters officials responded that the application was incomplete. The study of the New Starts process that FTA recently commissioned found similar inconsistencies in the information provided by officials in its regional offices and headquarters. Therefore, the study recommended that FTA develop internal standard operating procedures for New Starts staff that formalize the duties and responsibilities for each position. In addition, the study recommended implementing Web-based technology to standardize the communication and enforcement of policies across the program, and having FTA establish a formal policy for responding to every project sponsor’s correspondence with a formal response or written notification. FTA officials told us that they understand the need to ensure consistent information, and that they are already working on developing standard operating procedures for New Starts staff, as recommended in the study.

Conclusions

The recent decrease in the New Starts pipeline does not appear to be a reflection of diminishing interest in the program. In fact, our survey showed that there will likely be substantial demand for New Starts funding in the future if most potential project sponsors follow through on their plans for new transit projects. Rather, the decrease is likely due to a combination of factors, including FTA’s increased scrutiny of projects, project sponsors’ perceptions of the process as lengthy and too complex, and project sponsors’ uncertainty given the recent changes made to the New Starts program. As FTA moves forward with the rulemaking process for New Starts and Small Starts, it will have to balance both the need to make the programs accessible to a range of project sponsors—both large and small agencies—and the need to maintain the rigor of the evaluation and rating process.

Although project sponsors expressed substantial interest in both the New Starts and the Small Starts programs, they also identified a number of ways to improve the programs. In particular, project sponsors raised specific concerns about the Small Starts program. Because the Small Starts program is in its first few years of implementation, it is not surprising that it may experience growing pains. Some of the project sponsors may find their concerns about the program addressed as they become more familiar and comfortable with it and as a number of implementation details are finalized through the upcoming rulemaking process. However, we believe that the relatively low number of Small Starts applications received to date and the number of project sponsors submitting ineligible applications due to unclear guidance suggest that additional FTA action is warranted, including further streamlining the Small Starts program, providing additional information about the program through training and a working group, and clarifying eligibility guidance. Although FTA has taken some steps to further streamline the Small Starts program, continued refinement is needed to ensure a simplified and expedited evaluation process. FTA’s upcoming rulemaking, including the associated outreach efforts, will provide an opportunity for FTA to continue to streamline the Small Starts program, provide additional training, and clarify guidance.

Recommendations for Executive Action

To improve the Small Starts program, we are recommending that the Secretary of Transportation direct the FTA Administrator to take the following three actions: To increase awareness and information sharing about the Small Starts, including Very Small Starts, application process, FTA should conduct training (in-person, Web-based, or both) for potential applicants and facilitate the development of a working group or community of practice.

To ensure that project sponsors better understand the types of corridor bus projects that are eligible for Small Starts funding, FTA should clarify in its Small Starts program guidance that bus rapid transit projects cannot already include any of the required elements for eligibility, or if they do, must demonstrate the cost-effectiveness of the preexisting elements.

To ensure that the Small Starts program provides a streamlined application process as envisioned by SAFETEA-LU, FTA should continue to refine this process as outlined in the Small Starts program guidance. Examples of refinements include collapsing the project finance or cost worksheets to minimize the duplication of data to be submitted and providing specific guidance on how, when applicable, Small Starts applicants can conduct a simplified alternatives analysis.

Agency Comments

We provided DOT, including FTA, with a draft copy of this report for review and comment. DOT generally agreed with the report’s findings and conclusions, and agreed to consider our recommendations. DOT also 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 are listed in appendix II.

Appendix I: Scope and Methodology

To address our objectives, we reviewed the Federal Transit Administration’s (FTA) guidance on the New Starts and Small Starts programs; the Advanced Notice of Proposed Rule Making for Small Starts; and the provisions of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users and prior law that address the New Starts program. We reviewed this legislation to identify changes that have occurred in the New Starts program and to gather information on FTA’s new Small Starts program, which we used, in part, to analyze the quantitative differences in application requirements between this program and the New Starts program. Furthermore, we reviewed the FTA’s Annual Reports on New Starts for fiscal years 2001 through 2008 to determine trends in the New Starts pipeline (those projects in preliminary engineering and final design) for each year, including the number of projects evaluated, rated, and recommended for funding; the modes of projects in the pipeline; and the amount of New Starts funding requested for projects, and the total costs of proposed projects.

We also interviewed FTA officials and industry associations to gain their insights on past, current, and future aspects of the programs. We interviewed FTA officials who work extensively with the New Starts and Small Starts programs to gain a better understanding of the programs. In addition, we interviewed three industry associations that represent project sponsors that participate closely in these programs: the American Public Transportation Association, the New Starts Working Group, and Reconnecting America. Furthermore, we attended an American Public Transportation Association legislative workshop to learn about the New Starts and Small Starts programs, including New Starts project planning and evaluation process, and Small Starts interim guidance and rulemaking.

We also interviewed 15 project sponsors, including all 10 sponsors that applied for the Small Starts program (including Very Small Starts applicants) for the fiscal year 2008 evaluation cycle. We interviewed the project sponsors to gather information on their past experiences with the New Starts and Small Starts programs, and their potential future use of these programs. The 10 project sponsors we interviewed that applied for the fiscal year 2008 Small Starts program (including Very Small Starts applicants) included the City of Breckenridge Public Works Department (Breckenridge, Colorado); Dallas County Utility and Reclamation District (Irving, Texas); Fort Collins Transportation Department (Fort Collins, Colorado); Kansas City Area Transportation Authority (Kansas City, Missouri); King County Metro (King County, Washington); Lane Transit District (Springfield, Oregon); Los Angeles County Metropolitan Transit Authority (Los Angeles, California); Northern Arizona Intergovernmental Public Transportation Authority (Flagstaff, Arizona); Sarasota County Area Transit (Sarasota County, Florida); and Sound Transit (Seattle, Washington). In addition, we interviewed 5 other project sponsors that varied in their levels of experience with the New Starts program, size, and regional location. These 5 sponsors were the Metropolitan Transit Authority of Harris County (Houston, Texas); New Jersey Transit Corporation (Newark, New Jersey); Orange County Transit Authority (Orange County, California); St. Louis Regional Transit (St. Louis, Missouri); and TriMet (Portland, Oregon).

To further address our objectives, we used a Web-based questionnaire to survey all of the project sponsors that are located in an urbanized area with a population of over 200,000 and have an annual ridership of over 1 million. These project sponsors may or may not have previously applied to the New Starts or Small Starts programs, but because of their size and ridership, they would be more likely to plan the types of transit projects that would potentially qualify for New Starts funding. Project sponsors were defined typically as transit agencies, but they may also have included city transportation offices and metropolitan planning organizations, among other entities.

The questionnaire to project sponsors asked questions that allowed for a combination of open-ended and closed-ended responses. The questionnaire included questions about project sponsors’ (1) current transit situation, (2) most recently completed transit projects, (3) current ongoing transit projects, and (4) future planned transit projects. For each question, we asked the project sponsors about the types of transit project they sponsored, how they funded or intended to fund transit projects in the future, and their experiences with and perceptions of the various programs.

The questionnaire was designed by a GAO survey specialist in conjunction with other GAO staff knowledgeable about the grant program. We pretested the questionnaire with 5 project sponsors that had varying levels of experience in working with the New Starts program. Three project sponsors had previously applied to either the New Starts program or the Small Starts program, while 1 project sponsor had not applied to either program. In addition, the 5 project sponsors represented both larger and smaller project sponsors included in our list of the 215 largest transit agencies. The 5 project sponsors were the Fort Collins Transportation Department (Fort Collins, Colorado); Maryland Transit Administration (Baltimore, Maryland); Rockford Mass Transit District (Rockford, Illinois); TriMet (Portland, Oregon); and Washington Metropolitan Area Transit Authority (Washington, D.C.). Furthermore, we asked two industry groups (the American Public Transportation Association and the New Starts Working Group) and FTA to review the project sponsor questionnaire and provide comments. During the pretests and reviews of the questionnaire, we asked the project sponsors and industry groups whether the questions were understandable and if the information was feasible to collect. We refined each of the questions as appropriate in response to the feedback we received.

To conduct the questionnaire, we posted self-administered electronic questionnaires to the World Wide Web and sent e-mail notifications to project sponsor contacts provided to us by FTA in early February 2007. We found after our first e-mail that some addresses were no longer valid, so we contacted each agency by telephone to find the appropriate contact to send the e-mail notification. We also responded to inquiries from project sponsors. Many project sponsor contacts believed they were not the right person to answer the questions. In these instances, we resent the e-mail notification to the correct contact at the project sponsor. Our goal was to find the staff member at each project sponsor who was the most knowledgeable about the New Starts program and the Small Starts program.

After determining the correct contact, we e-mailed each potential respondent a unique username and password to ensure that the project sponsor would have access to the questionnaire. We asked the project sponsor contact to complete the questionnaire within 2 weeks. To encourage respondents to complete the questionnaire, we sent an e-mail message to prompt each nonrespondent every 2 weeks after the initial e-mail message for approximately 6 weeks. After 6 weeks, we called all nonrespondents at least once to encourage their participation in the questionnaire and to increase our response rate. We closed the questionnaire on May 11, 2007. In total, we surveyed 215 project sponsors and received responses from 168 of them, for a response rate of 78 percent. To view our questionnaire and the aggregated project sponsor responses, go to www.gao.gov/cgi-bin/getrpt?GAO-07-927SP.

Because the questionnaire was not a sample survey, it has no sampling errors. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as “nonsampling” errors. For example, difficulties in how a particular question is interpreted, in the sources of information available to the respondents, or in how the data are entered into a database or were analyzed can introduce unwanted variability into the questionnaire results. We took steps in developing the questionnaire, collecting the data, and analyzing the data to minimize these nonsampling errors. For example, as we have previously noted, our survey specialists designed the questionnaire in collaboration with GAO subject matter experts, and we pretested the draft questionnaire with the appropriate officials to ensure that the questions were relevant, clearly stated, and easy to comprehend. After the data were analyzed, a second, independent analyst checked all computer programs. Since this was a Web-based questionnaire, the respondents entered their answers directly into the electronic questionnaire, eliminating the need to have the data keyed into a database, thereby removing an additional potential source of error.

We performed our work from November 2006 through July 2007 in accordance with generally accepted government auditing standards.

Appendix II: GAO Contact and Staff Acknowledgments

Staff Acknowledgments

In addition to the individual named above, other key contributors to this report were Nikki Clowers, Assistant Director; Elizabeth Eisenstadt; Carol Henn; Bert Japikse; Amanda Miller; SaraAnn Moessbauer; Nitin Rao; Tina Won Sherman; Bethany Claus Widick; and Elizabeth Wood.

Related GAO Products

Public Transportation: Preliminary Analysis of Changes to and Trends in FTA’s New Starts and Small Starts Programs. GAO-07-812T. Washington, D.C.: May 10, 2007.

Public Transportation: New Starts Program Is in a Period of Transition. GAO-06-819. Washington, D.C.: August 30, 2006.

Public Transportation: Preliminary Information on FTA’s Implementation of SAFETEA-LU Changes. GAO-06-910T. Washington, D.C.: June 27, 2006.

Public Transportation: Opportunities Exist to Improve the Communication and Transparency of Changes Made to the New Starts Program. GAO-05-674. Washington, D.C.: June 28, 2005.

Mass Transit: FTA Needs to Better Define and Assess Impact of Certain Policies on New Starts Program. GAO-04-748. Washington, D.C.: June 25, 2004.

Mass Transit: FTA Needs to Provide Clear Information and Additional Guidance on the New Starts Ratings Process. GAO-03-701. Washington, D.C.: June 23, 2003.

Mass Transit: Status of New Starts Program and Potential for Bus Rapid Transit Projects. GAO-02-840T. Washington, D.C.: June 20, 2002.

Mass Transit: FTA’s New Starts Commitments for Fiscal Year 2003. GAO-02-603. Washington, D.C.: April 30, 2002.

Mass Transit: FTA Could Relieve New Starts Program Funding Constraints. GAO-01-987. Washington, D.C.: August 15, 2001.

Mass Transit: Implementation of FTA’s New Starts Evaluation Process and FY 2001 Funding Proposals. GAO/RCED-00-149. Washington, D.C.: April 28, 2000.

Mass Transit: Status of New Starts Transit Projects With Full Funding Grant Agreements. GAO/RCED-99-240. Washington, D.C.: August 19, 1999.

Mass Transit: FTA’s Progress in Developing and Implementing a New Starts Evaluation Process. GAO/RCED-99-113. Washington, D.C.: April 26, 1999.