New Starts/Small Starts Program APTA Annual Meeting San Diego, CA October 4, 2008

2 Purpose of Session Increase your understanding of the New and Small Starts programs by: Describing key elements of the program (bureaucratic stuff) Providing the unbureaucratic program principles Provide responses to comments we’ve heard

3 Topics Overview of the Program New/Small Starts Project Planning & Development New/Small Starts Evaluation and Funding Outreach

4 FTA Aspirations the Program Goal: Fund meritorious projects Management objectives: –Make decisions with reliable information on project benefits and costs –Treat all projects equitably across the US –Facilitate communication between FTA, transit industry and Congress

5 Long-standing Legislative Requirements for Funding Alternative analysis Cost effectiveness Local financial commitment

6 Eligibility: New Starts New fixed guideway systems and extensions New Starts funding > $75M or costs ≥ $250m Fixed guideway is established by any of the following characteristics: –Rail; –Separate right-of-way for the use of public transportation or high occupancy vehicles; or –Catenary

7 Eligibility: Small Starts Cost criteria –Total cost <$250 million –Small Starts share < $75 million Scope criteria –Project has a fixed guideway for 50 percent or more of its length during peak periods, or –Non-fixed guideway project in a corridor including ALL of the following: -Significant transit stations -Traffic signal priority or pre-emption -Low floor buses or level boarding -Premium service branding -10 min peak/15 min off-peak headways at least 14 hours a day “Exempt” projects exist only until a new rule is published

8 Eligibility: Very Small Starts Small Starts criteria for cost and scope Plus additional eligibility criteria: –Total cost under $50 million –Cost per mile < $3 million per mile, excluding rolling stock –(Existing weekday riders over 3,000)

9 Key Program Principles Information for evaluations must properly reflect costs and benefits of the project - THIS IS HARD! FTA evaluations are mode-neutral Purpose of each project development phase should be accomplished before progressing to the next Projects accepted into PE/PD are worthy of funding

10 Principle: Proper Identification of Project Benefits and Costs Identify benefits of project realized by its infrastructure, not benefits related to: –Land use –Parking costs –Transit service frequencies and coverage –Transit fare –Transit service levels outside study corridor –Highway networks

11 Principle: Mode-neutral Credit ridership attractiveness to those attributes that riders value – performance matters, not mode per se Credit likelihood of economic development to those factors associated with it: developability of land, economic climate, plans and policies and accessibility.

12 Principle: Accomplish Purpose of Development Phase Before Progressing Systems planning: corridor identification Alternatives analysis: mode and alignment PE: final scope/cost, completion of NEPA, financial plan commitments Final design: construction documents

13 Principle: Projects Accepted into PE/PD Are Worthy of Funding Alternatives analysis is sufficiently robust to minimize uncertainties that affect: Alignment or mode Capital cost Transportation benefits Financial plan Others that could significantly affect project viability

14 New Starts/Small Starts Funding: Supply and Demand Demand: –18 New Starts projects in PE and Final Design –16 Small Starts projects in PD –Total cost of pipeline: >$22.6 billion, $10.3 billion in New Starts funding –FTA tracking >100 planning studies considering major transit capital investments Annual funding –New Starts: $1.4+ billion –Small Starts: $200 million

15 SAFETEA-LU Provisions Supporting Good Planning Estimates Before and After Study –Required for both New Starts and Small Starts project – compares cost and ridership forecasts with actual numbers 2 years after revenue operations begins Before and After Study Report –Required annually to Congress documenting results of B&A studies Contractor Performance Assessment Report –Required annually to Congress citing contractor forecasts Incentives awards –Allows more federal funding if actual ridership is at least 90% and cost no more than 110% of forecasts made during alternatives analysis

16 FTA Senate Authorizing Majority/Minority Senate Appropriations Majority/Minority House Authorizing Majority/Minority House Appropriations Majority/Minority Office of the Secretary OMB White House The New/Small Starts Environment Individual Senate and House Members 150Projects 15 FFGAs, 34 FD/PE/PD, 100 AA Inspector General Govt Accountability Office Press

New Starts Planning and Project Development

18 New Starts Project Development Process Project Development: Typically 6-12 Years Alternatives Analysis 1-2 years Preliminary Engineering 2-3 years 3-7 years Operation FTA Approval Required for Full Funding Grant Agreement (FFGA) ~ 100 AA Studies 12 PE Projects 6 FD Projects FTA Approval Required 15 FFGA Projects ConstructionFinal Design

19 Key Decisions for Each Phase of Project Development Systems planning: priority corridor Alternatives analysis: mode and alignment Preliminary engineering: final scope/cost, completion of NEPA, financial plan Final design: construction documents Full Funding Grant Agreement –FTA: funding –Project sponsor: delivery of the project

20 Planning and Project Development Alternatives Analysis Preliminary Engineering Select LPA FTA Approval to Start PE FTA Approval to Start Final Design System Planning Decisions Mode, general alignment Financial plan Decisions Needs Policies Priority corridor(s) Decisions Refinements to LPA Final scope and cost Complete NEPA Implement financial plan

21 Alternatives Analysis: Guiding Principles Information on costs, benefits and impacts of alternatives results in better decisionmaking by local and federal officials Given its importance, information needs to be reliable with frank disclosure of uncertainties

22 Alternatives Analysis: Key Elements Identification of corridor problems, project “purpose and need,” and goals and objectives Development of a range of alternatives that address causes of transportation problems Analysis of costs, benefits, and impacts of alternatives Refinement of Alternatives Evaluation of alternatives

23 Useful FTA Reviews during AA Scope of work Initiation package Technical framework Technical results Final report (AA report or AA/DEIS)

24 Preliminary Engineering: Key Elements  Work necessary to develop a firm scope and cost estimate with appropriate contingencies:  Finalize station locations and configuration  Yard and shop location  Alignment  Park and ride size and configuration  Number of vehicles and peak capacity needs  Work necessary to complete the environmental requirements  Work necessary to firm up funding commitments

25 What is a Full Funding Grant Agreement (FFGA)? Formal Agreement signed by FTA and Grantee that includes: –Project Scope, Budget, and Schedule –Terms and Conditions of Federal Participation –Multi-year Funding Commitment (subject to Congressional Appropriations) –Cap on New Starts funds

26 Significance of FFGA  Historically, 85% of New Starts Funds Appropriated for FFGAs and Projects with “Medium” or Higher Ratings  All Projects Eventually Receive 100% of Total New Starts Funding in FFGA  Majority of Projects Receive New Starts Funding according to Annual Schedule in FFGA  Practical Limits on Total New Starts Funding and Annual Schedule for Individual Projects

27 Practical Limits for New Starts Funds Consider other projects in the region and their request for New Starts funds Assume no more than 50 percent in New Starts funding Historical maximum New Starts funds per project: $750M total, $100M per year (NYC region is exception)

28 What is a Project Construction Grant Agreement (PCGA)? (Small Starts) Formal Agreement signed by FTA and Grantee that includes: –Project Scope, Budget, and Schedule –Terms and Conditions of Federal Participation –Multi-year Funding Commitment (subject to Congressional Appropriations) –Cap on Small Starts funds

29 Actual Capital Cost vs. Inflation-Adjusted AA Estimate for Projects Completed

30 Actual Ridership versus AA Forecast for Projects Completed Average = 74.5% 50th Percentile = 63.8%

New Starts Evaluation and Funding

32 Documents Related to SAFETEA-LU Requirements FTA must publish policy guidance for the New/Small Starts review and evaluation process and criteria each time significant changes are made, and not less than every two years –Guidance issued in Spring of 2006 and 2007, and in 2008 FTA must prepare new regulation for New and Small Starts –NPRM issued August 3, 2007 –Current appropriation bill prohibits issuance of final rule

33 New Starts Evaluation and Oversight Among most rigorous in government Increasingly credible and important to Congress and local communities Program Management Oversight recommended by GAO and OIG

34 New Starts Evaluation and Oversight: Over 3 Decades of Disagreement Between FTA and Project Sponsors Why??? Two significantly different perspectives –Local decisionmaking -Local values and priorities -Local questions and answers –New Starts decisionmaking -Congressionally mandated evaluation criteria -Level playing field that treats proposals fairly and objectively

35 FTA Ratings: New Starts Summary Rating Project Justification Rating Financial Rating Non-Section 5309 Share Capital Finances Operating Finances Other Factors Low Income Households User Benefits Mobility Improvements Environmental Benefits Operating Efficiencies Cost Effectiveness Land Use Minimum Project Development Requirements: Employment Capital Cost O&M Cost User Benefits Metropolitan Planning and Programming Requirements Project Management Technical Capability Other Considerations NEPA Approvals

36 What We’ve Heard…. Why doesn’t FTA use all the criteria for its ratings? Useful metrics for operating efficiencies and environmental benefits have not be developed Metrics for mobility, while useful, have been delayed until rulemaking

37 FTA Ratings: New Starts Existing New Starts Criteria –Project Justification -Land-use (transit friendliness of the setting) -Cost-effectiveness (costs in scale with benefits) -Other factors, including economic development, congestion and pricing strategies, and the case for the project –Local Financial Commitment

38 Cost Effectiveness Dollars per hour of “user benefits” = Benefits and costs computed in relation to a “Baseline Alternative” annualized capital cost + annual O&M cost user benefits Cost Effectiveness Capital Cost O&M Cost User Benefits

39 Cost Effectiveness Potential sources of transportation benefits –Highway users: benefits from less congestion due to travelers changing from driving to riding on the project –Current transit users: benefits from faster travel times using project compared to their previous transit mode –New transit users: benefits from faster travel times using project

40 Cost Effectiveness Current measurement of transportation benefits –Highway users: not included because of serious travel model difficulties in quantifying degree of congestion relief –Transit users: benefits from faster travel times for New Starts project for all travelers in the region -In-vehicle time -Walk and wait time -Number of transfers -Capacity constraints -Reliability, comfort, security, branding

41 FTA values for Non-Travel Time Benefits Maximum benefit “Other” attribute Guideway only Guideway + local Guideway-like characteristics reliability of vehicle arrival branding/visibility/learnability schedule-free service Span of good service Passenger amenities stations/stops dynamic schedule information TOTALconstant IVT coefficient0.75*Civt 0.75*Civt

42 User Benefits Example TSM BLD Local bus Train On Off Wait time = 5 min; run time = 20 min Wait time = 5 min; run time = 15 min 100 transit trips 110 transit trips User benefits = 100 trips x 5 minutes/trip (existing trips) + 10 trips x 5/2 minutes/trip (new trips) User benefits = 500 minutes + 25 minutes = 525 minutes

43 Cost-Effectiveness Current breakpoints* for ratings: –Low >$30.49 per hour –Medium-low $ $30.49 per hour –Medium$16 - $24.49 per hour –Medium-high$12 - $15.99 per hour –High < $12 per hour * Adjusted annually using the GDP deflator

44 Determination of Cost Effectiveness Breakpoints Based on the Value of Time 50% of median income per DOT policy ($10.54 when breakpoints established) plus 20% assumed for highway user benefits ($2.11) plus Indirect benefits such as economic development, safety improvements, pollutant reductions ($12.65) Result ($25.30 rounded to $25.00)

45 Breakpoints and Funding Projects with cost effectiveness over $25.00 should not be funded FTA established the breakpoint for “Low” rating at $25.00  “Low” rated projects cannot be funded April FTA announced more stringent standards –Projects with “Medium-Low” rating would not be recommended for funding

46 What We’ve Heard…… Why not include other benefits beyond user benefits in the cost effectiveness measure, e.g. economic development benefits? Other benefits, particularly for economic development cannot be easily quantified Even if additional economic development could be determined, adding these benefits to user benefits is problematic

47 What’s a Baseline Alternative? Low capital cost relative to fixed guideway Includes service frequencies, coverage, p&r lots comparable to the build alternatives “Best you can do to improve transit without building a new guideway”

48 Why Use a Baseline Alternative? Illuminates project’s benefits and costs –Allows for identification of the additional project benefits due to significantly larger additional capital costs –Addresses concerns of critics that lower cost options are just as effective Ensures consistent evaluations nationally –Enables FTA to fairly assess project benefits in areas with good current transit service and areas with poor service

49 Land Use Based on strength of: –Transit supportive existing land use –Transit supportive plans and policies –Demonstrated local performance of transit supportive policies Land Use

50 Mobility Improvements User benefits per project passenger mile for all users and for transit dependents Number of all users of project and transit dependent riders Share of user benefits for transit dependents compared to the share of transit dependents in the Region

51 Environmental Benefits  EPA air quality designation for region

52 Other Factors Considerations not captured in other criteria: Project part of a pricing strategy in congestion management plan “Case” for the project Economic development Other Other factors

53 Case for the Project Make-the-Case document –Guide to project benefits and “justification” -For FTA staff -For FTA briefing papers, talking points -For the Annual Report on New Starts –Element of project “justification” rating

54 Case for the Project - Outline No more than “five pages” –Project identification –Setting –Purpose –Current conditions in the corridor –Anticipated conditions in 2030 –The case for the proposed project –Risk –Summary

55 What We’ve Heard…. Why does FTA relegate something as important as the economic development benefits of transit projects to an “other factor”? Difficulty of both defining economic development and assessing its likelihood Reliability of economic benefit assessments compared to that of user benefits Data collection implications to project sponsors Reluctance to make significant evaluation changes prior to rulemaking

56 What We’ve Heard…. FTA’s evaluations do not give credit to the economic development benefits of transit. 50% of project justification rating determined by land use rating which includes economic development considerations. 5 to 20% of total project benefits derived from economic development according to FTA- assembled panel of experts

57 Local Financial Commitment Based on: –Current capital and operating financing condition –Commitment of capital and operating funds –Cost estimates/planning assumptions/capacity Local Financial Commitment Rating Non-Section 5309 Share (20%) Capital Finances (50%) Operating Finances (30%)

58 Acceptable Financial Ratings In Project Development PE Approval – Reasonable financial plan; Funding sources identified; Good non-federal funding history FD Approval – At least 50 percent of non New Starts funding committed; Firm cost estimates; Ability to address funding shortfalls FFGA – 100% non-New Starts funding committed; Funding shortfalls covered

59 FTA Ratings: Small Starts Summary Rating Project Justification Rating Financial Rating Non-Section 5309 Share Capital Finances Operating Finances Other Factors Cost Effectiveness Land Use Minimum Project Development Requirements: Capital Cost O&M Cost User Benefits Metropolitan Planning and Programming Requirements Project Management Technical Capability Other Considerations NEPA Approvals

60 FTA Ratings: Small Starts Existing New Starts framework Simplifications –Fewer criteria –Simpler evaluation measures for land use criterion –Opening year forecasts only –Simpler travel forecasting procedures possible –Simpler financial documentation possible

61 FTA Ratings: Small Starts (continued) Simpler financial documentation possible –Rating of “medium” for local financial commitment if: -Reasonable plan to secure local share (all non-New Starts funding committed for PCGA) -Project O&M under 5 percent of agency operating budget -Agency in solid financial condition –Projects that cannot meet these conditions submit a financial plan -According to FTA guidance -Covering period up to and including opening year -Evaluated based on criteria used for New Starts

62 FTA Ratings: Very Small Starts Summary Rating Project Justification Rating Financial Rating Non-Section 5309 Share Capital Finances Operating Finances Other Factors Cost Effectiveness Land Use Minimum Project Development Requirements: Capital Cost Benefiting Riders Metropolitan Planning and Programming Requirements Project Management Technical Capability Other Considerations NEPA Approvals

63 FTA Ratings: Very Small Starts Existing New Starts framework Simplifications –Fewer criteria –“Warrants” approach for project justification -Benefiting riders > 3,000/day -Capital cost (excl. vehicles) < $3M/mi. -Total capital cost < $50M –Simpler financial documentation possible (as with Small Starts) Demonstrate consistency with characteristics of “justified” projects

64 What We’ve Heard…. The eligibility characteristics for Very Small Starts (VSS) unfairly exclude rail projects VSS characteristics determined to ensure project’s cost effectiveness meaning limited capital and O&M costs compared to user benefits from existing riders Higher costs & more complex service plans of fixed guideways (bus and rail) usually exclude use of a simplified estimate of cost effectiveness

65 Summary Ratings Rating categories: –High –Medium-high –Medium –Medium-low –Low Decision Rule: –Must have at least “Medium” on both justification and finance to receive “Medium” overall Summary Rating Project Justification Rating (50%) Local Financial Commitment Rating (50%)

66 Project Ratings and Decisionmaking Ratings guide FTA approvals of PE/PD, Final Design, and FFGA/PCGAs “Medium” or better overall rating required to advance Once in PE/PD, rating reported each year in Annual Report on Funding Recommendations

67 What We’ve Heard…. FTA’s evaluations are becoming more stringent making it difficult for many worthwhile projects to qualify for funding FTA continues to award all the funding authorized for New and Small Starts

68 What We’ve Heard…. Increasing FTA requirements mean projects are taking longer to build

69 Length of Project Development – LPA to Opening

Planned Outreach Activities

71 Workshops and Training Courses October 28-30, Alternative Analysis Course, Washington, DC TBD in 2009, Alternatives Analysis Courses March, 2009, Workshop at APTA Legislative Conf, Washington, DC March 3-5, 2009, Travel Forecasting Workshop for New/Small Starts, Phoenix, AZ March 23-25, Travel Forecasting Workshop for New/Small Starts, Tampa, FL Spring 2009, New/Small Starts Roundtables (by invitation) June 2009, New/Small Starts Workshop at APTA Rail Conf, Chicago, IL