[Federal Register Volume 71, Number 19 (Monday, January 30, 2006)]
[Proposed Rules]
[Pages 4864-4876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-870]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 611

[Docket No. FTA-2005-22841]
RIN 2132-AA81


Major Capital Investment Projects

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Advance Notice of Proposed Rulemaking.

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SUMMARY: This advance notice of proposed rulemaking provides interested 
parties with the opportunity to comment on the characteristics and 
requirements proposed by the Federal Transit Administration (FTA) for a 
new capital investment program. This new program, ``Small Starts'', is 
a discretionary grant program for public transportation capital 
projects that run along a dedicated corridor or a fixed guideway, have 
a total project cost of less than $250 million, and are seeking less 
than $75 million in Small Starts program funding.
    This Small Starts program is a component of the existing New Starts 
program, but will offer project sponsors an expedited and streamlined 
application and review process.
    Consistent with the intent and provisions of the new public transit 
statute, the Safe, Accountable, Flexible, and Efficient Transportation 
Equity Act--A Legacy for Users (SAFETEA-LU), FTA hopes to simplify the 
planning and project development process for proposed Small Starts 
projects in a number of ways. In addition to the reduced number of 
evaluation measures specified in SAFETEA-LU, the process may be further 
simplified by allowing small projects to conduct alternatives analysis 
with a reduced set of alternatives, allowing evaluation measures for 
mobility and cost-effectiveness to be developed without having to rely 
on complicated travel demand modeling procedures in some cases, and 
possibly defining some classes of low-cost improvements that are pre-
approved as effective and cost-effective in certain contexts.

DATES: Comments must be received by March 10, 2006.

ADDRESSES: Written Comments: Submit written comments to the Dockets 
Management System, U.S. Department of Transportation, Room PL-401, 400 
Seventh Street, SW., Washington, DC 20590-0001.
    Comments. You may submit comments identified by the docket number 
(FTA-2005-22841) by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the online instructions for submitting comments.
     Web Site: http://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
     Fax: 1-202-493-2478.
     Mail: Docket Management System; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Hand Delivery: To the Docket Management System; Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC between 9 a.m. and 5 p.m., Monday through Friday, except 
Federal Holidays.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
notice. For detailed instructions on submitting comments and additional 
information on the rulemaking process, see the Public Participation 
heading of the Supplementary Information section of this document. Note 
that all comments received will be posted without change to http://dms.dot.gov including any personal information provided. Please see the 
Privacy Act heading under SUPPLEMENTARY INFORMATION.
    Docket: For access to the docket to read background documents or 
comments received, go to http://dms.dot.gov at any time or to the 
Docket Management System (see ADDRESSES).

FOR FURTHER INFORMATION CONTACT: Ron Fisher, Office of Planning and 
Environment, telephone (202) 366-4033, Federal Transit Administration, 
U.S. Department of Transportation, 400 Seventh Street, SW., Washington, 
DC 20590-0001. Office hours are from 9 a.m. to 5:30 p.m. for FTA, 
Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 10, 2005, President Bush signed the Safe, Accountable, 
Flexible, and Efficient Transportation Equity Act--A Legacy for Users 
(SAFETEA-LU). Section 3011 of SAFETEA-LU made a number of changes to 49 
U.S.C. 5309, which authorizes the Federal Transit Administration's 
(FTA's) fixed guideway capital investment program known as ``New 
Starts''. In addition to the changes made to the New Starts program, 
for which FTA intends to issue separate policy guidance and a revised 
regulation, section 5309 has been amended to add a new subsection (3) 
containing a new capital investment program category for projects 
requesting federal funding of less than $75,000,000 with a total 
project cost of less than $250,000,000. That new capital investment 
program, which will be referred to as the ``Small Starts'' program, is 
the subject of this ANPRM. FTA plans to issue a Notice of Proposed 
Rulemaking (NPRM) in the near future that will address changes to the 
existing New Starts program made by section 3011 of SAFETEA-LU, as well 
as a proposal for the Small Starts program based on comments received 
in response to this ANPRM.
    SAFETEA-LU created the new Small Starts program category by 
amending section 5309(e) of Chapter 53 of Title 49, United States Code. 
At the same time, the current process for larger new fixed guideway and 
extension (``New Starts'') projects was continued (with some 
modifications) under section 5309(d). The conference report 
accompanying SAFETEA-LU indicates the expectation that projects in this 
new ``Small Starts'' category would be ``advanced through an expedited 
and streamlined evaluation and rating process.''
    The New Starts process now required under section 5309(d) for 
larger new fixed guideway and extension projects has been in place for 
some time and we believe represents the point of departure from which 
the new Small Starts category should be developed. The New Starts 
process was first outlined by a Statement of Policy in 1976 and was 
refined in subsequent Statements of Policy in 1978, 1980, and 1984. In 
the Surface Transportation and Uniform Relocation Assistance Act of 
1987, the process called for in the Statements of Policy was enacted 
into law, and was subsequently modified by the Intermodal Surface 
Transportation Efficiency Act of 1991. A Statement of Policy in 1997 
and further amendments in the Transportation Equity Act for the 21st 
Century, enacted in 1998, culminated in the current Final rule on Major 
Capital Investments (Title 49; Vol. 6 CFR611.1), issued in December 
2000 and went into effect in April 2001.
    Under the process laid out in statute and in the December 2000 
Final Rule, New Starts projects, like all transportation investments in 
metropolitan areas, must emerge from a

[[Page 4865]]

regional, multi-modal transportation planning process. Under the 
process, local project sponsors are required to perform an alternatives 
analysis that evaluates the mode and alignment options in the 
community. Once local and regional decision makers select a locally 
preferred alternative, and it is adopted by the Metropolitan Planning 
Organization (MPO) into its long-range transportation plan, this phase 
is complete and the project is ready to be approved by FTA to enter the 
next phase--Preliminary Engineering (PE). During PE, local project 
sponsors consider their design options to refine the locally preferred 
alternative and complete the National Environmental Policy Act (NEPA) 
process. Upon approval by FTA, the project may undertake Final Design, 
which includes the preparation of final construction plans, detailed 
specifications, construction cost estimates, and bid documents. A 
project which meets the statutory criteria for funding is constructed 
using a ``full funding grant agreement'' which defines the scope of the 
project to be constructed, the schedule and costs, the source and 
commitment of funds, and the amount and timing of Federal funds 
committed to the project.
    Section 5309(d) requires that larger New Starts projects (seeking 
greater than $75 million in New Starts funds or greater than $250 
million in total project costs) be evaluated and rated in terms of 
project justification and local financial commitment. For project 
justification, section 5309(d) requires an assessment of mobility 
improvements, environmental benefits, cost effectiveness, operating 
efficiencies, and transit supportive land use and future patterns. (The 
SAFETEA-LU amendment to section 5309(d) added economic development 
effects to the justification criteria. As noted above, this and other 
changes made by SAFETEA-LU will be the subject of a subsequent 
rulemaking.) For local financial commitment, assessments include the 
proposed share of total project costs from sources other than New 
Starts under section 5309, including federal transit formula and 
flexible funds, the local match required by Federal law, and any 
additional capital funding; the stability and reliability of the 
proposed capital financing plan; and the ability of the sponsoring 
agency to fund the operations and maintenance of the entire transit 
system (including existing service) as planned, once the project is 
built. To assign overall project ratings to each proposed New Starts 
project, FTA considers the individual ratings for each of the project 
justification and local financial commitment measures. FTA combines 
this information into summary ``finance'' and ``project justification'' 
ratings for each prospective New Starts project. Individual measures 
and summary ratings are designated as ``High,'' ``Medium-High,'' 
``Medium,'' ``Medium-Low'' or ``Low.'' These are then combined into a 
single overall rating, which prior to enactment of SAFETEA-LU, was 
either ``Highly Recommended,'' ``Recommended,'' or ``Not Recommended;'' 
under the changes made by SAFETEA-LU, the summary ratings will range 
from ``High'' to ``Low.''
    The statutory language in section 5309(e) for Small Starts projects 
provides for some significant differences for the Small Starts program 
in comparison to the requirements for larger New Starts projects in 
section 5309(d). First, the eligibility for funding is broader, 
including certain ``corridor-based bus capital projects,'' rather than 
only new fixed guideway systems and extensions. Projects are limited to 
those with a proposed section 5309 amount of less than $75,000,000 and 
a total project cost of less than $250,000,000. The project 
justification criteria are simplified, focusing on three criteria--
cost-effectiveness, public transportation supportive land use policies, 
and effect on local economic development--rather than the more 
extensive list provided for in section 5309(d). The criteria for local 
financial commitment have been simplified to focus only on a shorter 
term financial plan. The project development process has three steps--
alternatives analysis, project development, and construction--rather 
than the four steps--alternatives analysis, preliminary engineering, 
final design, and construction--in the section 5309(d) process. 
Finally, the instrument used for implementing these Small Starts 
projects is a ``project construction grant agreement'' which is to be 
structured as a streamlined version of the ``full funding grant 
agreement'' required for larger New Starts projects under section 
5309(d).

II. Purpose of This ANPRM

    While we believe that the New Starts process represents a good 
starting point for the development of the new Small Starts program, it 
is clear from the statutory and report language that significant 
simplification is contemplated. Indeed, the concept of Small Starts was 
included in the Administration's reauthorization proposal because of 
our belief that it is appropriate to apply a simpler process and more 
streamlined evaluation approach for smaller projects seeking a more 
limited amount of Federal assistance. While FTA believes a considerable 
body of experience with the New Starts can be applied to enhance 
development of the Small Starts program we believe that a fresh look 
and early examination of key issues related to the process and criteria 
is warranted before we develop a Notice of Proposed Rulemaking. First, 
the expanded definition of eligibility raises a number of questions. 
Second, tailoring the project rating and evaluation process to the 
smaller scale and different nature of the projects, which are likely to 
be proposed for funding in this program deserves further attention. 
Finally, the project development process should also be scaled to 
properly reflect the size and nature of these projects.
    Each of these issues is discussed below, in turn. In each section, 
we describe the nature of the specific program issues which must be 
addressed in a Final Rule, and we pose a series of questions, the 
answers to which will help us frame our approach to the Notice of 
Proposed Rulemaking. In addition to accepting written comments on these 
issues, FTA plans to hold listening sessions in the following cities to 
solicit input on the Small Starts and New Starts programs:

--San Francisco, CA--February 15-16, Hyatt Regency San Francisco
--Ft. Worth, TX--March 1-2, Radisson Plaza Hotel Forth Worth
--Washington, DC--March 9-10, Wardman Park Marriott Hotel

    For more information, please contact Tonya Holland at 202-493-0283 
or [email protected].

III. Small Starts Eligibility

    SAFETEA-LU constrains eligibility of projects for Small Starts 
funding by imposing limits of $75 million in section 5309 Small Starts 
funds and $250 million for total project cost. However, it broadens 
eligibility in terms of project definition by relaxing the existing 
requirement that the project include a fixed guideway. With this 
change, a project that would not meet the fixed-guideway criterion is 
now eligible if it (1) includes a substantial portion that is in a 
separate right-of-way, or (2) represents a substantial investment in 
specific kinds of transit improvements in a defined corridor.
    The eligibility provisions of the statute raise several issues: how 
to define ``substantial portion in a separate right-of-way''; how to 
define ``substantial investment''; the possibility

[[Page 4866]]

that project sponsors could divide traditional New Starts projects into 
two or more Small Starts projects; and the possibility that a Small 
Starts project might be proposed as the initial transit service in a 
corridor.

(a) ``Separate Right-of-Way''

    The characteristics that qualify a project as having ``a 
substantial portion'' in separate right-of-way are not self-
explanatory. We might define ``substantial'' either as some minimum 
fraction of the project length or as a performance based determination 
of whether the separate right-of-way is substantial. We believe that 
the purpose of a separate right-of-way is generally to reduce trip 
times and improve reliability for transit passengers. Therefore, a 
``substantial'' separate right-of-way could be defined as one that 
results in a significant travel time reduction along the physical 
extent of the project. For example, if end-to-end trip time is reduced 
by some percentage, say 20 percent, the separate right-of-way could be 
considered ``substantial'' and the project would be eligible no matter 
what percent of the project was in a separate right-of-way.

(b) ``Substantial Investment''

    It seems clear from the language of SAFETEA-LU, referring to a 
``substantial investment'' and ``corridor'' that the Small Starts 
program is not intended to fund single stations or buy a few additional 
transit vehicles, but to fund corridor-based projects that are more 
comprehensive in nature. A thoughtful definition here will be important 
to prevent the Small Starts program from becoming an adjunct to the bus 
and rail capital-grants programs that agencies use for routine 
reinvestment in and expansion of transit systems. In response, 
``substantial investment--might be defined as some minimum project cost 
or cost per mile of the proposed project. An alternative strategy would 
be to define it in terms of a minimum scope of the project--providing 
for elements that together represent a comprehensive package of 
improvements.
    The statutory language specifically references a variety of project 
features including park-and-ride lots, transit stations, bus arrival 
and departure signage, traffic signal priority/pre-emption, off board 
fare collection, and advanced bus technologies, among others, that 
could indicate that a project constitutes a ``substantial'' investment. 
One approach would be to determine whether a project contains several 
of these project elements that have the effect of constituting a 
comprehensive package of physical and service improvements in a defined 
corridor, the project would be considered eligible. Since each of these 
potential project elements has a different purpose and effect, we do 
not believe that all Small Starts projects need to have all of the 
specified elements. Rather, the mix of project elements should respond 
specifically to the problems or opportunities presented in the 
corridor. For instance, a project that is intended to speed up peak 
period bus service in a congested corridor might be required to include 
several improvements, such as signal priority/pre-emption, queue 
jumpers, multi-door boarding and fare pre-payment, that effectively 
result in faster bus speeds. Projects with other goals could have a 
different mix of project elements as long as they represent a 
comprehensive attempt to solve the problems or respond to the 
opportunities presented in the corridor.
    Another potential way to ensure that Small Starts projects contain 
a comprehensive package of improvements would be to impose a multi-year 
period from the date the project requests entry into project 
development, in which the project sponsor could not request additional 
Small Starts funds for the same corridor. This would prevent projects 
from using the Small Starts program for miscellaneous bus system 
improvements that do not represent a ``substantial'' corridor 
investment and would also prevent the subdividing of New Starts 
projects as discussed below.
    A ``defined corridor'' might be defined as narrowly as a single 
street or as broadly as a geographic section of the metropolitan area. 
A more comprehensive definition might be derived from the travel 
patterns established on the current transit system--as in ``the travel 
corridor connecting residents of the northeastern suburbs to 
downtown.'' Still another definition might be based on the bus route(s) 
operating on a single arterial street or highway, or the rail line(s) 
operating on a single right of way, along with their branches.

(c) Subdividing New Starts Projects

    Project sponsors might elect to subdivide a traditional New Starts 
project into two or more Small Starts projects in order to qualify for 
the simplified evaluation and rating process. This possibility is not 
addressed in the language of SAFETEA-LU, but the possibility clearly 
exists for larger projects to be segmented or phased into development 
as separate Small Starts projects. This may or may not be desirable. It 
may be sensible to build some Small Starts projects in phases over a 
longer period of time. If each of those phases represents a valid Small 
Starts project, it may be justified that the Small Starts funding be 
utilized. However, it is probably undesirable for large projects that 
would otherwise be built entirely at the same time to be redefined as 
several Small Starts projects. At least three reasons suggest that this 
subdividing strategy is undesirable. First a small number of subdivided 
New Starts projects could quickly deplete the Small Starts funding 
allocation, thereby making the Small Starts option unavailable to 
projects more consistent with the purpose of the Small Starts 
allocation. Second, costly New Starts projects ought to undergo the 
full New Starts evaluation rather than the simpler evaluation reserved 
for smaller projects with lower costs and less risk. Third, FTA 
oversight resources would be stretched even further by the 
proliferation of artificially subdivided projects.
    If it is determined that separate phases of larger projects should 
not be able to use Small Starts funds, we could introduce an 
eligibility requirement that all potential Small Starts projects in a 
single corridor be considered simultaneously for eligibility. We could 
ensure that even if a Small Starts project is to be built in stages, 
the comprehensive plan for the corridor meets the eligibility criteria 
for a Small Starts project and be evaluated and rated as a 
comprehensive program of improvements. If the comprehensive corridor 
improvement plan exceeds the Small Starts cost criterion, the project 
should then be evaluated and rated as a traditional New Starts project.

(d) Small Starts as the Initial Service Offering

    Given the relatively low cost of Small Starts projects, some 
project sponsors might propose a Small Starts project as a way of 
initiating transit service in previously unserved areas. That strategy 
increases risk, however, if the transit market has not yet been 
sufficiently developed in the planned service area. Further, the 
strategy seems inconsistent with the purpose of the Small Starts 
program--to provide higher-quality service than is available from 
conventional bus routes. Consequently, we might establish a minimum-
current-ridership requirement--say 1,000 riders per average weekday in 
the immediate corridor--to screen out proposals for corridors where 
transit markets are not yet sufficiently developed.

[[Page 4867]]

Questions
    We invite comment on our current thinking regarding the project 
eligibility for the Small Starts category of the New Starts program:
    1. What portion of the project should be in a separate right-of-way 
to qualify for funding under the Small Starts eligibility criteria? 
Should this determination be based on length or on performance?
    2. How might we interpret the requirement that a project represent 
a ``substantial investment''?
    3. How might we ensure that a Small Starts project be in a 
``defined corridor''?
    4. Should we try to prevent traditional New Starts projects from 
being divided into two or more Small Starts projects? If so, in what 
ways might we prevent this from happening?
    5. Should we establish a minimum ridership requirement to ensure 
that Small Starts projects are used to improve the quality of service 
for existing transit markets rather than represent the first transit 
service offered to potentially new transit markets? If not, how can a 
project demonstrate need for investment?

IV. Evaluation and Ratings

    SAFETEA-LU section 3011(e)(2) requires that the Secretary of 
Transportation provide funding assistance to a proposed project under 
this new Small Starts category only if the Secretary finds that the 
project is:
    (A) Based on the results of planning and alternatives analysis;
    (B) Justified based on a review of its public transportation 
supportive land use policies, cost effectiveness, and effect on local 
economic development; and
    (C) Supported by an acceptable degree of local financial 
commitment.
    The statute expands on the justification required in paragraph (B), 
requiring that the Secretary make the following determinations:
     The degree to which the project is consistent with local 
land use policies and is likely to achieve local development goals;
     The cost effectiveness of the project at the time of the 
initiation of revenue service;
     The degree to which a project will have a positive effect 
on local economic development;
     The reliability of the forecasting methods used to 
estimate costs and ridership associated with the project; and
     Any other factors that the Secretary determines 
appropriate to make funding decisions.
    The SAFETEA-LU provisions for the evaluation of proposed Small 
Starts projects raise several issues. These include the framework for 
the evaluation; the specific measures used in the evaluation; and 
scaling of the evaluation approach for Small Starts projects of 
different size, cost, and complexity.

(a) Evaluation Framework

    At least two options exist for the framework used to organize the 
evaluation measures and synthesize the findings for individual 
projects. The first would be an extension of the framework used for New 
Starts projects described in the December 2000 Final Rule on Major 
Capital Investment Projects (Title 49; Vol 6; 49 CFR 611.1), adjusted 
to add and delete the specific measures listed in SAFETEA-LU. The 
second would adopt a framework designed both to implement the Small 
Starts evaluation criteria specified by SAFETEA-LU and to organize the 
measures in a way which we believe supports an informative, analytical 
discussion of the project and its merits for Small Starts funding.
Option 1--Extension of the Evaluation Framework for New Starts
    The framework that we currently use to evaluate New Starts projects 
considers each candidate project from two separate perspectives: the 
project's ``justification'' and local financial commitment proposed by 
its sponsor. Figure 1 illustrates one way in which the current 
framework could be adapted to the evaluation of Small Starts. 
Currently, ``justification'' considers a broad array of criteria but is 
based chiefly on two: cost effectiveness (50 percent of the 
justification rating) and land use (50 percent). Cost effectiveness 
addresses the trade-off between the capital, operating, and maintenance 
costs of the project and the mobility benefits that it is expected to 
produce. Land use addresses the extent to which the land-use setting 
for the project would promote a successful project--both in terms of 
the transit orientation of current land use and the policies adopted 
locally to foster transit orientation in future development. For Small 
Starts, we might respond to SAFETEA-LU direction by simply adding an 
economic-development criterion and a forecast-reliability criterion to 
the existing definition of the justification perspective. As we do 
currently for New Starts projects, we could assign a rating for each of 
the now four components (cost effectiveness, land use, economic 
development, and forecast reliability) and compute an overall 
justification rating as a weighted average of the individual ratings. 
Given that we expect far more applications than awards and the intense 
scrutiny and interest in cost-effectiveness of recommended projects 
among various participants in federal funding recommendations (e.g., 
Congress, the Office of Management and Budget (OMB), the General 
Accounting Office (GAO), and others), it may be desirable to continue 
to assign roughly half of the ``justification'' weighting to the cost-
effectiveness component, perhaps allocating the other half equally 
across the land use, economic development, and reliability criteria.

[[Page 4868]]

[GRAPHIC] [TIFF OMITTED] TP30JA06.004

    Currently, local financial commitment is defined for New Starts in 
terms of the strength of the financial plan for the capital costs of 
the proposed project (50 percent of the financial rating), the strength 
of the financial plan for operating and maintaining the entire transit 
system including the proposed project (30 percent), and the level of 
non-New-Starts funding proposed by the sponsor (20 percent). We compute 
an overall rating on local financial commitment as the weighted average 
of the individual ratings on these three criteria. Application of these 
three criteria, augmented by a new measure to reflect the reliability 
of the revenue and cost forecasts, might provide a sufficient framework 
for the evaluation of Small Starts as well.
Option 2--Development of a Broader Framework
    For some time, we have been considering ways to provide a better 
framework for the assessment of major investment projects. The current 
approach, while consistent with current laws, tends to focus attention 
on the measures themselves, rather than promoting a thoughtful 
consideration of project merit. To address these concerns, a second 
option would be to broaden the perspectives we use to evaluate proposed 
projects, re-organize the evaluation criteria within these 
perspectives, and add a brief, clearly written narrative that 
synthesizes the insights available from various measures into the best 
possible case for the project as a candidate for Small Starts funding. 
Together, the evaluation measures and the narrative case for the 
project might consider:
     The nature of the problem/opportunity--because meritorious 
transit projects emerge from efforts to solve transportation problems 
and respond to important opportunities to improve mobility and support 
economic development;
     The effectiveness of the project as a response--because 
meritorious transit projects increase mobility for existing and new 
transit riders, preserve and expand mobility for transit dependents, 
and support economic development;
     The cost-effectiveness of the required investment--because 
meritorious projects generate benefits that are commensurate with their 
capital, operating, and maintenance costs;
     The strength of the local financial commitment--because 
financially sound projects draw on capital and operating funding 
sources that are readily available given reasonable expectations of 
revenue streams and acknowledgment of competing uses for the funds; and
     Risk in the forecasts and in the evaluation measures--
because informed decision-making requires an understanding of any major 
uncertainties in information used to evaluate the project including 
land use forecasts, land use policy intentions, ridership forecasts, 
cost estimates, and other assumptions and forecasts.
    We believe that an evaluation framework comprising these five 
perspectives would provide a natural and logical place for each of the 
criteria specified in SAFETEA-LU. Cost effectiveness and local 
financial commitment are themselves two of the perspectives. Economic 
development would be a principal component of the effectiveness 
perspective. Land use policies and the reliability of ridership and 
cost forecasts would be central elements of the uncertainties 
perspective.

[[Page 4869]]

    Figure 2 provides an overview of the framework presented as Option 
2 for the evaluation of Small Starts projects. The framework could 
examine separately the merits and the financial plan for the proposed 
project, as well as factor in the risks associated with the reliability 
of the data. Project merit could depend on the weighted results of 
project evaluation from three distinct perspectives: The nature of the 
problems/opportunities, the effectiveness of the project in addressing 
the problems/opportunities, and the cost-effectiveness of the necessary 
investment in capital, operating, and maintenance costs. Given that we 
expect far more applications than awards and the intense scrutiny and 
interest at the federal level in funding cost-effective projects, it 
may be desirable to continue to assign roughly half of the project-
merit weighting to the cost-effectiveness component, perhaps allocating 
the other half equally across the problems/opportunities and 
effectiveness criteria.
[GRAPHIC] [TIFF OMITTED] TP30JA06.005

    In the evaluation of effectiveness and cost effectiveness, the 
basis for comparison for a proposed project might appropriately depend 
on the nature of the proposal. For projects that do not involve 
construction of a new guideway, the baseline might be current transit 
services in the corridor. For projects that include a new guideway, the 
baseline might be similar service levels provided by buses operating on 
the same or nearby streets and/or highways, and serving a comparable 
set of stations. Regardless of the specifics, the timeframe for the 
comparison of ridership, mobility benefits, and cost-effectiveness 
would be the year of opening of the proposed Small Starts project.
    Financial capacity could depend on the weighted results of 
financial analysis from three perspectives--the soundness of the 
capital funding plan, the soundness of the operating/maintenance 
funding plan, and the proposed non-New-Starts share of the project--
with weights equal to those used currently for New Starts evaluations.
    Risk could reflect the levels of uncertainty present in the 
information used to develop each of the component ratings for project 
merit and local financial commitment. Consequently, each component 
rating would be accompanied by an indicator of its reliability. The 
risk measures might be based on (1) the comparability of cost estimates 
and ridership forecasts to peer projects both locally and nationally, 
(2) the steps that the project sponsor has taken--including data 
collection, sensitivity testing, and peer reviews--to identify and 
minimize uncertainties, and (3) the performance of the project sponsor 
in delivering previous transit projects that met forecasts of costs and 
ridership.
    The evaluation framework might include an analytical discussion of 
the project and its performance against the evaluation criteria, 
providing direct answers to several key questions:
     What is the problem?
     What project is proposed in response?
     What are its costs?
     How well does it address the problem?
     Is it worth the investment?
     Can the project sponsor and other funding sources afford 
it?
     What are the trade-offs versus other alternatives?
     Where are the large uncertainties?
    This discussion would ensure that the evaluation rested as much on 
well stated insights into the merits of the project as on the mechanics 
of the evaluation measures themselves. We

[[Page 4870]]

might use the case for the project to support project advancement or 
funding decisions for marginally rated projects.
Baseline Alternative
    Virtually from the beginning of the New Starts program, FTA has 
required that the benefits and costs of the proposed New Starts project 
be assessed versus a baseline alternative defined as the best that can 
be done without building a new fixed guideway. The purpose of the 
baseline alternative has been to distill the benefits (and costs) of 
the proposed New Starts project from the benefits achieved through low-
cost improvements such as route realignments, increases in service 
frequency, park-and-ride lots, signal preemption and other low-cost 
improvements that could have significant benefits, but which could be 
achieved without the significant cost of a New Starts project's 
infrastructure. The baseline alternative has proven to be essential in 
properly accounting for benefits and costs of traditional New Starts 
projects. A secondary benefit is that it allows FTA to better evaluate 
projects fairly. In essence, a consistently defined baseline 
alternative prevents regions with good existing transit service from 
being disadvantaged relative to areas with poor existing service in the 
competition for New Starts funds.
    For the Small Starts program, a baseline alternative may be less 
important in both accurately determining the costs and benefits of some 
projects and establishing a level playing field for evaluations across 
the country. History has shown the need for a baseline for larger 
projects now eligible for Small Starts funding, but a baseline 
alternative may not be necessary for certain kinds of projects based on 
their costs or other characteristics.

(b) Specific Evaluation Measures

    Regardless of the framework that emerges, each criterion will 
require specific evaluation measures. In principle, the measures should 
be accurate indicators of the performance of proposed projects, be 
readily computed by project sponsors, be transit-mode-neutral, and be 
free of inherent biases that would distort the level playing field that 
we try to maintain for all project sponsors.
    A particular challenge is the appropriate inclusion of land use in 
the evaluation. Land use might usefully play a role in two parts of the 
evaluation framework: as part of the economic-development criterion and 
as part of the risk assessment. Our current evaluation of New Starts 
projects employs land use measures (current land use, plans and 
policies, and the track record of those plans and policies) that 
effectively address the risk perspective: The measures indicate the 
transit-friendliness of the project corridor, both now and in the 
future, to indicate the extent to which the proposed project would be 
implemented in a setting conducive to its success. However, because 
current land use and plans/policies do not measure the benefits 
generated by the proposed project, they do not address the anticipated 
development benefits from the project. The absence of measures of 
economic-development benefits is the result of our continuing 
difficulties in finding methods for predicting development impacts with 
sufficient reliability for use in New Starts evaluation. These 
difficulties extend to Small Starts evaluation as well. Further, 
because SAFETEA-LU introduces a separate economic-development 
criterion, the potential role for land use as a measure of development 
benefits becomes even less evident. A distinction between land-use 
development and economic development seems elusive. Consequently, an 
appropriate strategy might be to define ``land-use/economic 
development'' as a measure of project effectiveness and to define 
``transit-orientation of land use'' as a measure of risk inherent in 
both the mobility benefits and the land-use/economic development 
benefits.
Nature of the Problem/Opportunity
    New Starts projects are almost always intended to solve specific 
transportation problems, or take advantage of opportunities to improve 
transportation services, or support economic development. For this 
reason, the most useful starting point for evaluation of proposed 
transportation investments may be the nature and severity of the 
problems/opportunities the proposed projects are designed to address. 
Such a criterion might rate very highly projects designed to address 
clearly identifiable and particularly severe mobility problems, while 
rating more moderately those projects that take advantage of specific 
opportunities to improve service, but are not in corridors with a 
particular mobility problem.
    An immediate question, then, is what kinds of problems/
opportunities is the Small Starts program intended to address. Both the 
New Starts program and the SAFETEA-LU provisions for Small Starts both 
emphasize cost effectiveness and support for economic/land use 
development. Mobility benefits are implicit in cost effectiveness 
because our cost effectiveness measure has, since its inception, 
compared costs with some indicator of mobility benefits (initially new 
transit trips and, since 2001, user benefits). Consequently, measures 
to represent the nature of the problem or opportunity addressed by a 
proposed Small Starts project ought to reflect economic development and 
mobility. Useful measures for economic development might include 
vacancy rates, the value of land parcels compared to the value of 
current improvements on those parcels, and similar measures of 
development conditions in the corridor of interest. Useful measures for 
mobility might include current bus travel speeds in the immediate 
corridor, current highway speeds on principal arterials in the 
corridor, and projected speeds in the future--perhaps in 10 years.
Effectiveness
    Small Starts projects are likely to produce a wide variety of 
benefits that are candidate measures of their performance. SAFETEA-LU 
calls out two kinds of benefits: economic/land-use development 
specifically and mobility improvement implicitly through cost-
effectiveness.
    Predicting economic development impacts of transit improvements--
particularly the types of improvements anticipated to be funded through 
the Small Starts program--is a particular challenge. No predictive 
tools are available in standard practice and development of new tools 
is infeasible in the short run. Consequently, the best-available 
measures of likely economic development/land-use benefits may be 
derived from the circumstances in which the projects would be 
implemented rather than from forecasts of their specific development 
impacts. A survey of available research on the development impacts of 
transit suggests that increased accessibility and permanence of the 
transit investment are the primary transit-related drivers of 
development. Those project-related characteristics, plus indicators of 
the availability of land for development or redevelopment, may provide 
a workable representation of likely development benefits. Specific 
measures might be (1) current land-use conditions, (2) development 
plans and policies, (3) the economic development climate in the 
corridor and region, (4) the project-related change in transit 
accessibility for developable areas in the corridor, and (5) the 
economic lifespan of new transit facilities proximate to those 
developable areas.
    The measure of mobility benefits ought to capture as many benefits 
as

[[Page 4871]]

possible. Currently for New Starts projects, we define ``user 
benefits'' to include all changes in mobility that are measured by 
local ridership-forecasting methods and define the scope of those 
benefits to include both existing and new transit riders. (The 
definition also includes benefits to users of the highway system but 
measurement of those benefits has been precluded by the insufficient 
state of the practice for predicting changes in highway speeds.) 
Consequently, the user-benefits measure credits transit projects with 
reductions in transit travel times (including time spent walking, 
waiting, transferring, and riding in transit vehicles), any other 
service characteristics (such as the number of transfers) included in 
local forecasting methods, and the availability of multiple competitive 
travel options, again as represented by local forecasting methods. The 
user-benefits measure is also defined to give appropriate credit for 
other project characteristics that improve the quality of transit 
service including changes in reliability, span of service, safety and 
security, passenger stations, passenger information, permanence of the 
facilities, and other characteristics not represented by travel times 
and costs. Unfortunately, these harder-to-measure impacts of transit 
improvements are rarely measured explicitly in local travel models and 
are instead represented--very roughly--as lump-sum differences 
(transit-mode-specific ``constants'') in the attractiveness of 
different transit modes (bus, light rail, express bus, commuter rail, 
and so forth). Further, the state of the practice in ridership 
forecasting makes difficult the task of quantifying these effects in 
urban areas where a variety of transit modes exists today and provides 
no information on these effects in urban areas where the transit system 
includes bus service only. Most unfortunately, these hard-to-measure 
effects may be central to the merits of smaller projects that may not 
produce large changes in travel times. For example, we may specify 
standard values for the benefits generated by the various non-travel-
time improvements introduced by a proposed Small Starts project. For 
example, we might define passenger stations to provide the equivalent 
of M minutes of travel time savings for each rider, an exclusive 
guideway N minutes per passenger-mile of equivalent savings, and all-
day high-quality service P minutes per rider. We would then employ 
these standard values as default measures of benefits for metropolitan 
areas introducing a new transit mode. To maintain a level playing field 
for project evaluation, we might also use the standard values as limits 
on the estimated values of these benefits in metropolitan areas that 
already have the mode in question. FTA's ``Dear Colleague'' letter 
dated April 29, 2005, which addressed changes in New Starts ratings, 
stated that FTA had decided to postpone the introduction of mode-
specific constants for new guideway modes to an area. The creation of 
the Small Starts program has prompted reconsideration of the 
application of these constants.
    Given the key role that transit plays in the lives of travelers who 
rely on it for basic mobility, we might also include an indicator of 
the extent to which a proposed project improves mobility for transit 
dependent residents of the urban area. A straightforward measure might 
be the fraction of total mobility benefits that accrues to travelers in 
the lowest economic stratum (usually household income or auto-
ownership) used in the local ridership-forecasting methods, normalized 
by the fraction of all trips made by residents of that stratum.
Cost-Effectiveness
    Since the inception of the transit major capital investment 
program, we have employed a cost effectiveness measure and have 
translated its computed value for a project into a cost-effectiveness 
rating for that project using a set of breakpoints (that is, a computed 
value between X and Y obtains a ``Medium'' rating). Traditionally, we 
have computed the cost-effectiveness of New Starts projects as 
annualized capital, operating, and maintenance costs of the project per 
unit of transportation benefits, all compared to a non-guideway 
baseline alternative. We currently use the transit-user-benefits 
measure to capture the full range of quantifiable transportation 
benefits of proposed projects. A broader cost-effectiveness measure 
might add non-transportation benefits--economic development/land-use 
and mobility benefits to transit dependents, for Small Starts--to the 
effectiveness side of the calculation. In addition to the difficulty in 
quantifying non-transportation benefits such as economic development 
and land use, another complication is the need to avoid double-counting 
in the calculation of benefits applied in the cost effectiveness 
measure.
    Its role is to compare a careful accounting of costs with a careful 
accounting of benefits. The inclusion of measures that represent 
different manifestations of the same benefit would distort the benefits 
accounting. This problem occurs for mobility improvements and economic 
development/land-use: a review of the available research shows that 
transit-related changes in land values and consequent increases in 
development are largely the result of the accessibility improvements 
and apparent degree of permanence of a transit project. We contend that 
these impacts are already counted in the user benefits measure of 
mobility improvements and that they should not be counted a second time 
in the form of consequent economic development/land-use impacts. To the 
extent that some economic development/land-use benefits are independent 
of mobility and permanence, large uncertainties would occur in attempts 
to include those benefits in the cost-effectiveness calculation while 
avoiding double-counting of the main effects. Consequently, a more 
tractable approach might be to make allowances for these uncounted 
development benefits in the way that we translate values of the cost-
effectiveness measure into cost-effectiveness ratings for projects. For 
example, if adding a new class of benefits to the cost-effectiveness 
measure proves unworkable, we could adjust the cost-effectiveness 
breakpoints to account for the existence and likely magnitude of those 
benefits.
Local Financial Commitment
    The financial evaluation measures currently used for New Starts 
projects provide a useful starting point for consideration of possible 
Small Starts measures. The New Starts measures include the strength of 
the financial plan for non-New Starts funding of the project's capital 
costs, the strength of the financial plan for non-New Starts funding of 
the entire local transit system once the project is in place, and the 
non-New Starts funding proposed by the project sponsor. SAFETEA-LU 
specifies that financial commitment for Small Starts projects shall be 
evaluated ``within the project timetable.'' Therefore, a possible 
adaptation of the current measures might be to adjust the New Starts 
financial evaluation measures for Small Starts to reflect the shorter 
timeframe ending with the opening year of the proposed project.
Risk
    There is inherent risk and uncertainty in project evaluation. The 
ratings assigned to a project are based on information, assumptions and 
forecasts that often include uncertainty in the predictions of eventual 
project performance. The statutory language makes it clear that the 
evaluation of Small Starts projects is to consider the reliability of 
the forecasting methods

[[Page 4872]]

used to estimate costs and ridership (note that SAFETEA-LU also 
included this language for New Starts projects). Since SAFETEA-LU 
requires that the financial and cost-effectiveness measures be 
evaluated based on near term forecasts for Small Starts projects, some 
of the forecasting risk may be reduced. Uncertainties clearly remain, 
however. Therefore, in principle, the evaluation framework would 
include a specific risk indicator for each evaluation criterion. Some 
options for incorporating risk and uncertainty are described below.
    The risk associated with measures related to the nature and 
severity of the problem or opportunity could be based on an evaluation 
of peer projects--projects that have been implemented in similar 
conditions and their apparent success in addressing similar problems 
and/or seizing the opportunities that motivated project sponsors.
    The risk inherent in measures of project merit could be evaluated 
based on (1) the current land use and land-use policies, (2) the 
soundness of forecasting tools and data used to predict ridership and 
mobility benefits including steps to reduce uncertainty through peer 
reviews and other quality control procedures, (3) comparisons of 
ridership forecasts against peer projects--similar projects in similar 
settings, with particular risk assigned to projects without any peers, 
and (4) the track record of the project sponsor with benefits forecasts 
for previous transit projects.
    The risk associated with a cost-effectiveness measure would 
necessarily include the uncertainties in both the project-effectiveness 
measures and the cost estimates. The effectiveness risk could be 
quantified with the measures outline above. The cost risk could be 
based on (1) the soundness of cost-estimating procedures including 
steps to reduce risk through peer reviews and other quality-control 
efforts, (2) comparisons of the cost estimates against peer projects, 
and (3) the track record of the project sponsor with cost estimates for 
previous transit projects.
    A project finance risk measure could be based on apparent 
availability of non-federal funds and the ability of the financial plan 
to withstand a specific percentage increase in capital costs of the 
project. This type of evaluation is currently included within the 
financial evaluation of New Starts projects, but may be better as a 
separate financial risk measure.

(c) Project Ratings

    SAFETEA-LU specifies that projects are to be rated as high, medium-
high, medium, medium-low, and low, based on the analysis of both 
project merit and local financial commitment and that to receive a 
funding recommendation, projects should be both meritorious and have an 
acceptable degree of local financial commitment.
    Currently for New Starts projects, we develop separate ratings for 
project merit (``justification'') and local financial commitment, and 
then derive from these component ratings an overall project rating 
using decision rules. These decision rules ensure that a project does 
not get a very high or an acceptable rating unless the ratings for both 
project merit (``justification'') and financial commitment are high or 
acceptable respectively. A similar rating process could be developed 
for Small Starts.
    Because risk may be an important element of ratings for Small 
Starts projects, a strategy may be needed to incorporate risk measures 
into the ratings process. It seems clear that each risk measure ought 
to be associated as directly as possible with the evaluation measure to 
which it applies; uncertainties in the cost estimate, for example, 
ought to affect whichever evaluation criteria rely on measures computed 
from the cost estimate. A variety of strategies might be used to adjust 
the rating for each criterion to reflect the risk measure--including 
probability weightings and Monte Carlo simulations analogous to those 
used currently in FTA-sponsored ``risk assessments'' of the capital 
cost estimates for New Starts projects. A simpler strategy, however, 
might be to use the risk indicators to decide the outcome for ratings 
at the margins: a project rating whose measures produce a result at the 
breakpoint between Medium and Medium-High, for example, might be rated 
Medium if the associated risk indicator suggests large uncertainties 
and Medium-High if the risk indicator suggests minimal uncertainties.

(d) Scaling the Evaluation for Projects of Different Size

    Small Starts projects may range in size from non-guideway 
improvements costing $20 million, or perhaps less, to new guideways 
costing just under $250 million. Given this relatively wide range of 
cost and potential for complexity and risk, different approaches might 
be appropriate for projects of different scale. We recognize that the 
effort expended by project sponsors to develop the necessary 
information--and by FTA to ensure the reliability of that information--
should be matched to the size and complexity of the proposed project. 
Sponsors of relatively simple projects with very low costs--
particularly those with no guideway construction like arterial BRT or 
commuter rail service on an existing high quality rail line, for 
example--should be able to make the case for their projects with less 
effort than sponsors of relatively more complex and expensive Small 
Starts projects. Lower levels of effort should result from lower levels 
of complexity, detail, and rigor but not from a reduced ability to 
address the full range of evaluation criteria.
    Given the relatively straightforward nature of the financial 
measures, most of the differences in evaluation methods might occur in 
the evaluation of project merit (justification)--particularly in the 
methods used to compute mobility benefits and, therefore, cost-
effectiveness. Several options are available for evaluation of project 
merit for Small Starts proposals: (1) Application of the same 
evaluation methods for all projects regardless of scale; (2) 
development of simplified analytical procedures for smaller projects; 
and (3) defining for small projects a set of conditions--effectively 
``warrants'' based on project scope and implementation setting--within 
which proposals are automatically deemed to have acceptable levels of 
project merit.
Option 1--Same Methods, Regardless of Scale
    A travel forecasting capability is available in most metropolitan 
areas, usually including a forecasting component for transit ridership. 
In many urban areas with recent experience in forecasting for New 
Starts projects, these forecasting procedures are ready for use in 
ridership forecasting for Small Starts planning. The procedures 
consider project impacts on all travelers in the region, predict 
changes in both travel mode and transit routing, and provide forecasts 
for individual travel markets. In areas that do not have ridership 
forecasting procedures of acceptable quality, the necessary refinements 
can be done with appropriate data within a year or so. Therefore, one 
available option is to require that the benefits of all Small Starts 
proposals, regardless of cost or complexity, are forecast with 
traditional methods that attempt to capture the full range of impacts 
that a project would have on the quality of transit service in a 
corridor.
Option 2--Simplified Methods Where Possible
    At least some Small Starts proposals are likely to affect only a 
very specific set of travelers and may therefore not require the 
comprehensive analysis of

[[Page 4873]]

transportation impacts provided by traditional ridership forecasting 
methods. For these proposals, a simplified analysis may be sufficient 
to quantify the mobility benefits and provide insights into the merits 
of the project. A simplified analysis might rest on data rather than 
models, spreadsheet computations rather than sophisticated software, 
and limited geographic scope rather than region-wide analysis. For 
example, a very simple Small Starts project might be the conversion of 
an existing bus route into a streetcar line with passenger stations, 
dynamic passenger information, off-board fare collection, traffic 
signal priorities, some reservation of existing traffic lanes, and 
headway improvements. A sufficient analysis of the mobility benefits of 
this project might be based on on/off counts, a limited on-board 
survey, an estimate of stop-to-stop reductions in wait times and travel 
times, and a spreadsheet-based calculation of travel-time savings (and 
whatever representation we determine is appropriate of the hard-to-
quantify benefits of better passenger facilities, schedule information, 
and other project elements). To the extent that this limited analysis 
identifies mobility benefits sufficient for the project to compete well 
for Small Starts funding, the approach may be all that is needed to 
quantify those benefits. To the extent that another project has a 
broader set of impacts--because of service changes on a large number of 
bus routes throughout a corridor, for example--then the project sponsor 
might elect to use the traditional forecasting methods to capture the 
broader set of benefits.
Option 3--Development of ``Warrants'' for Smaller Projects
    We are considering specifying a class of low-cost improvements that 
are ``warranted'' to be cost effective based on their definition and 
the environment in which they are to be applied. This strategy would be 
for us to distinguish and evaluate differently those projects that are 
very low cost and that employ only those elements that are demonstrably 
effective and cost-effective within specified maximum prices and 
minimum usage (ridership). Justification for these ``Very Small 
Starts'' would be based simply on the scope/cost of the project and 
salient characteristics of the setting in which it would be 
implemented. Justification would require documentation only of (1) the 
scope elements of the project, (2) the unit costs for each scope 
element, (3) total cost, and (4) existing ridership in the immediate 
corridor. This strategy would avoid a requirement that project sponsors 
attempt to quantify benefits for low-cost projects comprising only 
those elements that have been demonstrated elsewhere to be effective 
and cost-effective transit improvements.
    This concept might be extended to Small Starts projects that add a 
new guideway along with the low-cost elements that would otherwise 
qualify a project for Very Small Starts treatment. A low-cost guideway 
project, for example, might also include the stations, signal pre-
emption, ``branding,'' and other elements whose benefits are difficult 
to quantify. Again, this strategy would avoid the substantial 
difficulties inherent in attempting to calculate the benefits of low-
cost project elements with real but hard-to-quantify impacts on the 
quality and attractiveness of transit services.
Questions
    6. How should the evaluation framework for New Starts be changed or 
adapted for Small Starts projects?
    7. How should the baseline alternative be defined?
    8. How might FTA evaluate economic development and land use as 
distinct and separate measures?
    9. Are there other measures of effectiveness that should be 
considered?
    10. Is it desirable for FTA to attempt to incorporate other 
measures of effectiveness besides mobility when evaluating cost-
effectiveness? If so, what measures might be incorporated and in what 
manner?
    11. Should mode-specific constants be allowed in the travel 
forecasts? If so, how should they be applied?
    12. How might FTA incorporate risk and uncertainty into project 
evaluation for Small Starts?
    13. What weights should FTA apply to each measure?
    14. Should the FTA make a distinction in the way we evaluate Small 
Starts projects of different total project costs and scope?

V. Procedures for Planning and Project Development

    SAFETEA-LU specifies some different procedures to be used by Small 
Starts projects in the planning and project development process 
compared to New Starts projects. Similar to the requirement for 
traditional New Starts, funding for Small Starts requires the Secretary 
to find that the project has been based on the results of planning and 
an alternatives analysis. Unlike traditional New Starts, Small Starts 
need only be approved to advance from planning and alternatives 
analysis to project development and construction; no approval to enter 
final design is required. A project construction grant agreement can be 
used to provide funding for the Small Start for future years. The main 
issues addressed in this section include defining alternatives analysis 
in a way that is appropriate to the scale of small projects, the basis 
for our decision to allow entry into project development, and linking 
alternatives analysis and the environmental process.
Alternatives Analysis
    While larger projects require a number of alternatives to be 
considered in an alternatives analysis to assess the numerous tradeoffs 
in costs, benefits, and impacts, the consideration of Small Starts 
often implies that fewer useful alternatives exist and in some cases, 
there may only be two alternatives, one representing the Small Start 
and the other today's service levels. Nevertheless, the number of 
alternatives considered must continue to meet the requirements of NEPA, 
good planning practices, and proper identification of project costs and 
benefits for funding recommendations.
    Just as there could be a simpler evaluation approach applied to 
simpler projects described as Very Small Starts in the evaluation 
section above, a very simple alternatives analysis and subsequent 
evaluation process could be used when Very Small Starts are being 
considered. Projects that are Very Small Starts could be able to 
utilize a very simple project definition-based alternatives analysis 
process. The key elements of the highly simplified AA report could be:
     Clear description and assessment of the opportunity to 
improve transportation service in the corridor.
     Clearly defined proposed project description designed to 
take advantage of the opportunity to improve transit service in the 
corridor, including a clearly defined scope, list of project elements, 
their associated costs and expected effect on transit service in the 
corridor.
     Comparison of the Very Small Start only to conditions 
today for a subset of the required measures. Mobility benefits and 
cost-effectiveness could be assumed to be met if the proposed project 
only includes pre-approved elements.
     A determination of whether or not the project sponsor can 
afford the capital and operating costs of the alternatives.
     A well supported explanation for the choice of a proposed 
project that includes an analysis of the likelihood of the proposed 
project achieving the project goals and any risks.
     A plan for implementing and operating the proposed project 
that

[[Page 4874]]

addresses the project sponsor's technical capability to build, operate 
and maintain the proposed project.
    Where the proposed New Starts project fits the eligibility criteria 
for a Small Start but cannot qualify as a Very Small Starts project, a 
simplified alternatives analysis could be allowed. Compared to Very 
Small Starts this type of alternatives analysis would include a more 
detailed analysis of the mobility benefits and cost-effectiveness of 
the proposed project. They could also entail consideration of a broader 
range of alternatives because project alternatives could cost as much 
as $250 million. As costs rise, considerations of different length 
alternatives may give insights into what could be significant 
differences in the tradeoffs of costs, benefits and impacts. Even 
without other build alternatives, examination of an alternative other 
than existing system service could be required if the Small Starts 
project is proposed where no transit service currently exists, so that 
the benefits of the investment itself can be distinguished from the 
simple realignment of service. Similarly, assessing a third alternative 
with the non-fixed-guideway elements of a fixed guideway project would 
permit the proper identification of the benefits and costs accruing 
from the guideway investment itself.
    The features of this simplified AA report could be:
     Clear description and assessment of the opportunity to 
improve transportation service in the corridor.
     Clearly defined set of transportation alternatives to take 
advantage of the opportunity to improve transit service. In cases where 
the proposed project does not involve a new fixed guideway, the 
alternatives analysis could consider a minimum of two alternatives as 
follows: (1) The no-build (existing conditions), (2) a Very Small 
Starts alternative if the proposed project includes a guideway or there 
is no existing service in the corridor, (3) the proposed Small Start, 
and (4) any useful length alternatives to the proposed project.
     Analysis of the effectiveness of the alternatives.
     Comparison of the benefits and costs of the alternatives.
     A determination of whether or not the project sponsor can 
afford the costs of the alternatives.
     A well supported choice of a proposed project that 
includes an analysis of the likelihood of the proposed project 
achieving the project goals and any risks.
     A plan for implementing and operating the proposed project 
that addresses the project sponsor's technical capability to build, 
operate and maintain the proposed project.
    We would use the alternatives analysis report or subsequent AA/DEIS 
to rate and evaluate the proposed Small Starts projects.
    Another type of alternatives analysis could occur when a 
traditional New Starts project is one of the alternatives and the 
locally preferred alternative is eligible for Small Starts funds. 
Projects that result from a traditional alternatives analysis will have 
to adjust their evaluation measures to reflect opening year rather than 
the forecast year.
Entry Into Project Development
    We currently envision reviewing the following items soon after they 
are developed during the alternatives analysis in order to support a 
decision to allow entry into project development:
     Alternatives analysis initiation report that includes a 
clear and concise description of the problem or opportunity to improve 
service in the corridor, the initial list of alternatives and their key 
elements, and the proposed approach to evaluating the alternatives.
     Interim report that specifies the alternatives to be 
evaluated and the methods that were used to forecast the mobility 
benefits.
     Final report and choice of locally preferred alternative.
     Local adoption of the proposed project and financial plan 
into the fiscally constrained, conforming (if in a non-attainment or 
maintenance area) plan and Transportation Improvement Program (TIP).
    Projects that are eligible for Small Starts funds and achieve 
acceptable ratings for the Small Starts criteria could be admitted into 
project development. We are considering including the before and after 
study requirement in the construction grant agreement as a pre-
requisite for receiving funding for Small Starts projects. Like 
traditional New Starts, documenting the predicted and actual scope, 
cost, and ridership of projects built using Small Starts funds will 
allow us as well as project sponsors to evaluate this information and 
develop in the future better approaches to forecast the costs and 
benefits of Small Starts. The results of before and after studies would 
also assist us in responding to the requirement in SAFETEA-LU that we 
consider the reliability of forecasting methods used to estimate 
ridership and costs when we consider funding proposed Small Starts 
projects.
Linking Alternatives Analysis to the Environmental Process
    Currently alternatives analyses can be conducted concurrently with 
NEPA or in advance of formal NEPA activities that begin with a Notice 
of Intent. Problems have arisen when alternatives analyses are 
conducted in advance of formal NEPA processes for a variety of reasons, 
including the lack of proper consideration of environmental factors and 
lack of response by resource agencies. Alternatives analyses conducted 
concurrently with NEPA sometimes do not have the level of detail 
necessary for mitigation of impacts, requiring a supplemental document. 
An option that we are considering that could address these problems by 
efficiently and effectively linking alternatives analyses to NEPA is a 
recognized procedure known as ``early scoping.'' The concept of early 
scoping was explained by the President's Council on Environmental 
Quality in its ``40 Questions'' guidance, as follows:

    ``Use of Scoping Before Notice of Intent to Prepare EIS. Can the 
scoping process be used in connection with preparation of an 
environmental assessment, i.e., before both the decision to proceed 
with an EIS and publication of a notice of intent?
    A. Yes. Scoping can be a useful tool for discovering 
alternatives to a proposal, or significant impacts that may have 
been overlooked. In cases where an environmental assessment is being 
prepared to help an agency decide whether to prepare an EIS, useful 
information might result from early participation by other agencies 
and the public in a scoping process.
    The regulations state that the scoping process is to be preceded 
by a Notice of Intent (NOI) to prepare an EIS. But that is only the 
minimum requirement. Scoping may be initiated earlier, as long as 
there is appropriate public notice and enough information available 
on the proposal so that the public and relevant agencies can 
participate effectively.
    However, scoping that is done before the assessment, and in aid 
of its preparation, cannot substitute for the normal scoping process 
after publication of the NOI, unless the earlier public notice 
stated clearly that this possibility was under consideration, and 
the NOI expressly provides that written comments on the scope of 
alternatives and impacts will still be considered.''
    Council on Environmental Quality, Forty Most Asked Questions 
Concerning CEQ's National Environmental Policy Act Regulations, 46 
FR 18026, 18030 (1981) (Answer to Question No. 13).

    Projects developed through the Small Starts program are not likely 
to generate significant effects on the quality of the human 
environment. Nevertheless, potential environmental effects associated 
with Small Starts proposals cannot be overlooked. In order to

[[Page 4875]]

accommodate applicable environmental review requirements and to 
integrate such requirements efficiently into Small Starts proposals, we 
are considering requiring the use of ``early scoping'' as an adjunct to 
Alternatives Analysis. Although early scoping is not a substitute for 
the standard scoping process, in combination with required notification 
initiating the environmental review process, early scoping would serve 
to signal the beginning of the NEPA process and provide a forum in 
which participating and cooperating agencies, as well as the public, 
could be actively and purposefully engaged.
    Early scoping links transportation planning (Alternatives Analysis) 
with the National Environmental Policy Act process in a way that 
promotes consideration of required environmental factors without pre-
determining the kind of documentation that has to be prepared. This 
approach is entirely consistent with regulations implementing the 
National Environmental Policy Act, as well as the planning and 
environmental review provisions of SAFETEA-LU.
    It is likely that many Very Small Starts proposals will qualify as 
Categorical Exclusions, in which case sponsors may petition to be 
exempted from the early scoping requirement. A Small Starts sponsor may 
still choose to avail itself of the practice of combining traditional 
``scoping'' (following issuance of a Notice of Intent) with 
Alternatives Analysis when preparation of an Environmental Impact 
Statement is anticipated.
Questions
    15. Should there be a distinction in the alternatives analysis 
requirements for Small Starts compared to traditional New Starts?
    16. Should there be a distinction in the alternatives analysis 
requirements for Very Small Starts compared to larger projects that 
qualify as Small Starts?
    17. Within an alternatives analysis, what other alternatives should 
be considered in addition to the Small Start and the existing service 
alternatives?
    18. What should be the key elements or features of a highly 
simplified or simplified alternatives analysis?
    19. Should Small Starts projects also be required to perform a 
Before and After study?
    20. Should FTA mandate an early scoping approach for those 
alternatives analyses that are not being conducted concurrently with 
the formal NEPA process? Are there other approaches that should be 
considered for better linking alternatives analysis and NEPA?

VI. Regulatory Notices

A. Executive Order 13132: Federalism

    Executive Order 13132 requires agencies to assure meaningful and 
timely input by State and local officials in the development of 
regulatory policies that may have a substantial, direct effect on the 
states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. We invite State and local governments 
with an interest in this rulemaking to comment on the effect that 
adoption of specific Small Starts proposals may have on State or local 
governments.

B. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175 requires agencies to assure meaningful and 
timely input from Indian tribal government representatives in the 
development of rules that ``significantly or uniquely affect'' Indian 
communities and that impose ``substantial and direct compliance costs'' 
on such communities. We invite Indian tribal governments to provide 
comments on the effect that adoption of specific small starts proposals 
may have on Indian communities.

C. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et 
seq.), we must consider whether a proposed rule would have a 
significant economic impact on a substantial number of small entities. 
``Small entities'' include small businesses, not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields, and governmental jurisdictions with 
populations under 50,000. If your business or organization is a small 
entity and if adoption of specific small starts proposals could have a 
significant economic impact on your operations, please submit a comment 
to explain how and to what extent your business or organization could 
be affected.

D. National Environmental Policy Act

    The National Environmental Policy Act of 1969 (NEPA) requires 
Federal agencies to consider the consequences of major Federal actions 
and that they prepare a detailed statement on actions significantly 
affecting the quality of the human environment. Interested parties are 
invited to address the potential environmental impacts of the small 
starts proposals contained in this ANPRM. We are particularly 
interested in comments about the costs and benefits that specific small 
starts proposals may have on the human and natural environment, or on 
alternative actions the agency could take that would provide beneficial 
impacts.

E. Statutory/Legal Authority for This Rulemaking

    This rulemaking is issued under authority of section 3011 of the 
Safe, Accountable, Flexible, and Efficient Transportation Equity Act--A 
Legacy for Users (SAFETEA-LU), which requires the Secretary of 
Transportation to prescribe regulations for capital investment projects 
funded under 49 U.S.C. Sec.  5309 with a federal share of less than 
$75,000,000 and a total cost of less than $250,000,000.

F. Executive Order 12866 and DOT Regulatory Policies and Procedures

    This rulemaking will likely be considered a significant regulatory 
action under section 3(f) of Executive Order 12866 and the Regulatory 
Policies and Procedures of the Department of Transportation (44 FR 
11032). This ANPRM was reviewed by the Office of Management and Budget.
    E.O. 12866 requires agencies to regulate in the ``most cost-
effective manner,'' to make a ``reasoned determination that the 
benefits of the intended regulation justify its costs,'' and to develop 
regulations that ``impose the least burden on society.'' We therefore 
request comments, including specific data if possible, concerning the 
costs and benefits of the specific small starts proposals contained in 
this ANPRM.

G. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, no person is required to 
respond to a collection of information unless it displays a valid OMB 
control number. This ANPRM does not propose any new information 
collection burdens.

H. Regulation Identifier Number (RIN)

    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. The RIN 
number contained in the heading of this document may be used to cross-
reference this action with the Unified Agenda.

I. Privacy Act

    Anyone is able to search the electronic form for all comments

[[Page 4876]]

received into any of our dockets by the name of the individual 
submitting the comments (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477) or you may visit http://dms.dot.gov.

    Issued in Washington, DC this 24th day of January, 2006.
Sandra K. Bushue,
Deputy Administrator, Federal Transit Administration.
[FR Doc. 06-870 Filed 1-27-06; 8:45 am]
BILLING CODE 4910-57-U