[Federal Register Volume 77, Number 16 (Wednesday, January 25, 2012)]
[Proposed Rules]
[Pages 3848-3909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-1198]



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Vol. 77

Wednesday,

No. 16

January 25, 2012

Part II





Department of Transportation





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Federal Transit Administration





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49 CFR Part 611





Major Capital Investment Projects; Proposed Rule

  Federal Register / Vol. 77 , No. 16 / Wednesday, January 25, 2012 / 
Proposed Rules  

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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 611

[Docket No. FTA-2010-0009]
RIN 2132-AB02


Major Capital Investment Projects

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: This notice of proposed rulemaking (NPRM) proposes a new 
regulatory framework for FTA's evaluation and rating of major new 
transit investments seeking funding under the discretionary ``New 
Starts'' and ``Small Starts'' programs. This notice of proposed 
rulemaking is being published concurrently with a Notice of 
Availability of proposed guidance that proposes new measures and 
methods for calculating the project justification and local financial 
commitment criteria specified in statute and this proposed rule. FTA 
seeks public comment on both this proposed rule and the proposed 
guidance.

DATES: Comments must be received by March 26, 2012.

ADDRESSES: You may submit comments identified by the docket number FTA-
2010-0009 by any of the following methods:
    1. Federal eRulemaking Portal: Go to http://www.regulations.gov. 
Follow the online instructions for submitting comments on the U.S. 
Government electronic docket site.
    2. Fax: (202) 493-2251.
    3. Mail: U.S. Department of Transportation, 1200 New Jersey Ave. 
SE., Docket Operations, M-30, West Building Ground Floor, Room W12-140, 
Washington, DC 20590-0001.
    4. Hand Delivery: U.S. Department of Transportation, 1200 New 
Jersey Ave. SE., Docket Operations, M-30, West Building Ground Floor, 
Room W12-140, Washington, DC 20590 between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays.
    Instructions: You must include the agency name (Federal Transit 
Administration) and Docket number (FTA-2010-0009) for this NPRM at the 
beginning of your comments. You should submit two copies of your 
comments if you submit them by mail. If you wish to receive 
confirmation that FTA received your comments, you must include a self-
addressed stamped postcard. Note that all comments received will be 
posted without change to www.regulations.gov including any personal 
information provided and will be available to internet users. You may 
review DOT's complete Privacy Act Statement in the Federal Register 
published on April 11, 2000 (65 FR 19477). Docket: For access to the 
docket to read background documents and comments received, go to http://www.regulations.gov at any time or to the U.S. Department of 
Transportation, 1200 New Jersey Ave. SE., Docket Operations, M-30, West 
Building Ground Floor, Room W12-140, Washington, DC 20590 between 9 
a.m. and 5 p.m., EST, Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Elizabeth Day, Office of Planning and 
Environment, (202) 366-5159; for questions of a legal nature, 
Christopher Van Wyk, Office of Chief Counsel, (202) 366-1733. FTA is 
located at 1200 New Jersey Avenue SE., Washington, DC 20590. Office 
hours are from 9 a.m. to 5:30 p.m., EST, Monday through Friday, except 
Federal holidays.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    This NPRM is being issued to amend the regulation (Part 611 of 
Title 49 of the Code of Federal Regulations) under which the Federal 
Transit Administration (FTA) evaluates major new transit investments 
seeking funding under the discretionary ``New Starts'' and ``Small 
Starts'' programs authorized by Section 5309 of Title 49, U.S. Code. 
The New Starts and Small Starts programs are FTA's primary capital 
funding programs for new or extended fixed guideway and bus rapid 
transit systems across the country, including rapid rail, light rail, 
commuter rail, bus rapid transit, and ferries. This proposed rule was 
the subject of an Advance Notice of Proposed Rulemaking (ANPRM) issued 
on June 3, 2010, which posed a series of questions about the current 
regulation, and in particular about three of the criteria used to 
assess project justification.
    In developing this NPRM, FTA has been guided by two broad goals. 
First, FTA intends, as suggested by the ANRPM and by the Secretary's 
announcement of January 13, 2010, to measure a wider range of benefits 
transit projects provide. Second, FTA desires to do so while 
establishing measures that support streamlining of the New Starts and 
Small Starts project development process. In balancing these goals, FTA 
is seeking to continue a system in which well-justified projects are 
funded. At the same time, FTA seeks to ensure that it does not 
perpetuate a system in which the measures used to determine the project 
justification or local financial commitment are so complex that they 
unnecessarily burden projects sponsors and FTA, or that make it 
increasingly difficult to understand, which hinders effective 
involvement of the public.
    To streamline the process, FTA is first proposing a simplified 
measure of mobility benefits. Second, FTA is proposing to expand the 
ability of projects to pre-qualify based on the characteristics of the 
project or the corridor in which it is located. As with the current 
``Very Small Starts'' category, FTA proposes to determine what 
characteristics would be sufficient, without further analysis, to 
warrant a satisfactory rating of ``medium'' on one or more of the 
evaluation criteria. Third, FTA is proposing ways the data submitted by 
project sponsors and the evaluation methods employed by FTA could be 
simplified. Fourth, FTA is proposing to greatly simplify the process 
for developing a point of comparison for incremental measures (i.e., 
measures that are based on a comparison between two different 
scenarios, such as a comparison of Vehicle Miles of Travel (VMT) in the 
corridor without the project and VMT in the corridor with the project). 
Fifth, FTA is proposing to clarify the local financial commitment 
criteria to address more clearly the strong interaction between capital 
and operating funding plans. Finally, FTA is proposing that if a 
project stays within a certain ``envelope'' of cost and scope during 
the project development process, no further re-evaluation of project 
merit will be required.
    To address more explicitly the broad range of benefits that transit 
projects provide, FTA is proposing several ways such benefits will be 
incorporated into the evaluation process. In particular, this includes 
livability principles and goals that relate strongly to the purposes of 
many transit investments. More specifically, FTA is proposing to 
include more meaningful measures of the environmental benefits and 
economic development effects of projects and to give these measures 
equal weight in the evaluation of project justification.

II. What This NPRM Contains

    This NPRM is one way FTA seeks to accomplish the two goals outlined 
above; FTA is also publishing a notice in the Federal Register today 
that proposes guidance related to the proposals in this NPRM that is 
available for public review and comment. The regulations act as a 
framework for the project evaluation process, and the policy guidance 
provides non-binding

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interpretations for implementing the regulations. Under current law, 
FTA is required to issue such policy guidance for public comment at 
least every two years and whenever major changes in policy are 
proposed. FTA believes that this approach allows FTA to make 
improvements in the criteria as new techniques become available. FTA 
encourages comment on both the NPRM and the proposed policy guidance.
    The Executive Summary that follows describes the New Starts and 
Small Starts programs, describes the ANPRM published on June 3, 2010, 
describes the general approach taken in the NPRM, and discusses several 
key issues and how they are resolved.
    The following section includes a detailed summary of the comments 
received on the ANPRM and FTA's response to those comments. FTA 
received over 2,000 individual comments from over 160 respondents to 
the ANRPM. FTA made a special effort to categorize the comments by 
topical area, group them, and summarize them so as to assure all 
relevant comments received consideration in the development of this 
NRPM and accompanying proposed policy guidance. The responses to 
comments will provide a sense of the proposals that FTA is carrying 
forward through this NPRM and accompanying proposed policy guidance, 
but those proposals are more specifically detailed in the ``Section-by-
Section'' analysis that directly follows the comment summaries and 
responses.
    The Section-by-Section analysis is intended to do two things: (1) 
Explain the proposed changes to the regulatory text found at the end of 
this NPRM; and (2) provide some sense of what is in the related 
proposed policy guidance also being published for comment today. FTA is 
bound by the current law when it comes to the process used to evaluate, 
rate, and approve funding for New Starts and Small Starts projects, 
including the criteria used to evaluate them. But FTA has made an 
effort in this proposal to introduce a number of streamlining features 
compatible with current law. In addition, and separately from this 
effort, FTA will be pursuing additional legislative changes to further 
streamline the process as part of its efforts toward reauthorization of 
its programs.
    Following the Section-by-Section analysis is the ``Regulatory 
Evaluation'' section of this NPRM, which includes descriptions of the 
requirements that apply to the rulemaking process and information on 
how this rulemaking effort fits within those requirements. FTA 
encourages you to read these and submit comments on them.
    The NPRM concludes with the actual regulatory text FTA is proposing 
for its New Starts and Small Starts programs. This is the language 
that, if finalized, would govern the way New Starts and Small Starts 
projects are evaluated, rated, and funded. The language would be 
binding, which means FTA's future policy guidance documents would need 
to be consistent with the language. FTA seeks your comments on this 
proposed regulatory text.

III. Executive Summary

    The New Starts and Small Starts programs, established in Section 
5309(d) and (e) of Title 49, U.S. Code, are FTA's primary capital 
funding programs for new or extended transit systems across the 
country, including rapid rail, light rail, commuter rail, bus rapid 
transit, and ferries. Under this discretionary program, proposed 
projects are evaluated and rated as they seek FTA approval for a 
Federal New Starts or Small Starts funding commitment to finance 
project construction. Currently, overall ratings for proposed New 
Starts and Small Starts projects are based on summary ratings for two 
categories of criteria: project justification and local financial 
commitment. Within these two categories, projects are evaluated and 
rated against several criteria specified in law. Details on how 
projects are currently evaluated and rated are set forth in the FTA 
regulations at 49 CFR Part 611, which can be found at the following web 
address: http://www.gpo.gov/fdsys/pkg/CFR-2009-title49-vol7/pdf/CFR-2009-title49-vol7-part611.pdf.
    Several statutory changes since 49 CFR Part 611 was first written 
have modified the evaluation process, including the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users 
(SAFETEA-LU) signed on August 10, 2005, and the SAFETEA-LU Technical 
Corrections Act of 2008, signed on June 6, 2008. FTA announced the most 
recent policy guidance on the evaluation process (issued to address the 
SAFETEA-LU Technical Corrections Act) on July 29, 2009. This policy 
guidance is available in the Federal Register at 74 FR 37763. A summary 
of the evaluation and rating process can be found at http://fta.dot.gov/documents/FY12_Evaluation_Process(1).pdf.

1. The Advance Notice of Proposed Rulemaking (ANPRM)

    The ANPRM sought comment on three of the evaluation criteria under 
the project justification category: Cost effectiveness, environmental 
benefits, and economic development benefits.
    a. Cost Effectiveness. All of the project justification criteria 
characterize the effectiveness of projects in addressing the objectives 
identified by the statute; cost effectiveness is currently the only 
project justification criterion that examines whether certain benefits 
are in scale with project costs. Cost effectiveness is not, however, an 
attempt to perform a full cost-benefit analysis. In its current cost 
effectiveness measure, FTA includes the direct mobility benefits of the 
project and compares them to the annualized capital and operating costs 
of the proposed project as compared to a baseline alternative. FTA 
defines mobility benefits as any measurable change from the proposed 
project in travel time, including walking, waiting, transfers, and 
other attributes of travel on the transportation system as compared to 
the baseline alternative.
    Although FTA's definition of mobility benefits includes time 
savings to highway users caused by congestion relief, FTA has not been 
using projections of highway time savings because of their 
unreliability and inconsistency. Instead, in determining cost 
effectiveness ratings, FTA credits all projects with an allowance for 
highway time savings that is equal to 20 percent of the project-
specific transit travel time savings. FTA has sponsored research on 
better methods to predict highway time savings so that project-specific 
highway time savings might someday be included in the mobility benefits 
that are compared to project costs in the cost effectiveness 
calculation.
    FTA has also not included other benefits among the project-specific 
benefits used to compute the current cost effectiveness measure because 
of the difficulties of combining the broad range of other benefits into 
a common unit of measurement. Instead, in determining cost 
effectiveness ratings, FTA currently credits all projects with an 
allowance for other benefits that is equal to 100 percent of the 
project-specific time savings. FTA sought comment in the ANPRM on ways 
to quantify and value other benefits so that they can be included as 
project-specific benefits, rather than as a general allowance, in the 
comparison against project costs that is done in measuring cost 
effectiveness.
    Beginning in April 2005, FTA had in place a budget decision 
approach that required at least a ``medium'' rating on cost 
effectiveness for a project to be considered for funding in the

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President's annual budget. Members of the transit community criticized 
that policy and questioned the way in which FTA measured cost 
effectiveness. Specifically, the transit community expressed concern 
that receiving a ``low'' or ``medium-low'' cost effectiveness rating 
``trumped'' the other project justification criteria established by 
law. Critics also noted that projects were sometimes designed to 
achieve a ``medium'' cost effectiveness rating to remain eligible for 
funding while sacrificing other potentially important considerations 
(such as station locations and/or design features to accommodate 
ridership growth). On January 13, 2010, Secretary Ray LaHood announced 
the end of that budget decision approach. This new direction presented 
FTA with an opportunity to rethink how it evaluates cost effectiveness 
for projects seeking New Starts and Small Starts funding, which led to 
this rulemaking effort.
    Quantitative measures often require evaluating the incremental (or 
added) benefits of implementing a proposed project against some other 
alternative. FTA sought comment in the ANPRM on what the point of 
comparison should be. As stated above, projects are currently evaluated 
against a ``baseline alternative,'' which is defined as the ``best that 
can be done'' to address identified transportation needs in the 
corridor without a major capital investment in new infrastructure. The 
baseline alternative generally includes lower cost actions such as 
traffic engineering, enhanced bus service and other transit operational 
changes, and modest capital improvements such as reserved lanes, park-
and-ride lots, and transit terminals. Although less expensive than the 
proposed project, the baseline alternative may still result in 
substantial costs, particularly in complex study areas with significant 
transportation problems.
    For more information how FTA currently calculates cost 
effectiveness, see the summary of the evaluation and rating process 
available at http://fta.dot.gov/documents/FY12_Evaluation_Process(1).pdf
    b. Environmental Benefits. Since environmental benefits was first 
added as a project justification criterion in the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA), FTA has attempted 
through various methods, with limited success, to meaningfully measure 
and compare the environmental benefits of transit projects in the 
project development pipeline, even though each project may be located 
in a unique environmental setting.
    For a number of years, FTA measured air quality effects using a 
regional forecast of the change in vehicle miles of travel (VMT) 
expected to result from implementation of the proposed project compared 
to the baseline alternative in the forecast year. The results of that 
approach proved unsatisfactory because any one project had only a minor 
effect on total regional air quality. The results also did not take 
into account the severity of the metropolitan area's air quality 
problems or the size of the population exposed to polluted air. Because 
of those concerns, FTA switched to using the Environmental Protection 
Agency's (EPA) air quality conformity designation of the metropolitan 
area in which the proposed project is located as the sole basis for 
assigning a rating on environmental benefits.
    Although FTA has focused solely on air quality for the 
environmental benefits criterion in the past, the statute is written 
broadly enough to allow FTA to take into account other factors such as 
noise pollution, energy consumption, reductions in local infrastructure 
costs achieved through compact land use development, and the cost of 
suburban sprawl. In the ANPRM, FTA sought input on how better to assess 
all of the environmental benefits connected with a proposed project.
    c. Economic Development. Under its current approach, FTA has 
defined economic development as the extent to which a proposed project 
is likely to enhance additional, transit-supportive development. 
Currently, FTA rates the economic development effects of major transit 
investments on the basis of the transit-supportive plans and policies 
in place and the demonstrated performance and impact of those policies. 
These ``on the ground'' indicators characterize the environment in 
which a project would be built and are not intended to predict future 
development outcomes. In the ANPRM, FTA requested input on how better 
to define economic development and on how to establish an improved 
approach for assessing these benefits.
    d. Outreach. In support of this ANPRM, FTA held a series of public 
outreach meetings at which FTA staff made oral presentations on the 
ANPRM and provided meeting attendees with an opportunity to pose 
questions. Additionally, the sessions were intended to encourage 
interested parties and stakeholders to submit their comments directly 
to the official docket per the instructions. These sessions, announced 
in the Federal Register, were held in: Raleigh, NC; Vancouver, Canada 
(in connection with the American Public Transportation Association's 
annual Rail Conference); Chicago, IL; San Francisco, CA; Dallas, TX; 
and Washington, DC In addition, two webinars were held to provide the 
same opportunity for those unable to attend the other outreach sessions 
in person.

2. Key Issues and Proposed Resolution

    The ANPRM laid out a series of questions on cost effectiveness, 
environmental benefits, and economic development effects. This section 
describes the current approach and lays out the changes being proposed 
in this NPRM. These proposed changes are the result of a review of the 
comments received and an application of the lessons learned from 
implementation of the current methods.
    a. Cost Effectiveness. Currently, cost effectiveness is evaluated 
based on the incremental annualized capital and operating cost of the 
project per hour of travel time savings (i.e., the cost of the project 
divided by how much time it would save travelers). Changes in cost and 
travel time are calculated by comparing the proposed project with a 
baseline alternative. FTA's thresholds for assigning ratings from 
``low'' to ``high'' are based on U.S. DOT guidance on the value of 
time. To establish these thresholds, benefits other than travel time 
savings are not calculated directly, but are assumed to be equal to the 
value of the travel time savings (as described above).
    FTA is proposing a significantly different and simpler approach. 
The measure of cost effectiveness is proposed to be cost (annualized 
capital cost and operating cost) per trip taken on the project, with 
extra weight given to project trips made by transit dependents, with 
some allowances for ``betterments'' to be excluded from the cost side 
of the equation.
    This proposed measure is intended to be much simpler that the 
current measure. It also allows project sponsors to use simplified 
forecasting methods for estimating project trips rather than 
traditional local travel forecasting methods. Given that the measure of 
effectiveness is not an incremental measure, there is no need for a 
point of comparison, or ``baseline alternative,'' to calculate it. To 
calculate the annualized capital and operating costs of the proposed 
project, the point of comparison would be the existing system.
    FTA proposes the cost of ``betterments,'' would be excluded from 
the cost side of the cost effectiveness calculation. Betterments are 
those items above and beyond the items needed to

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deliver the mobility benefits of the project and that would not 
contribute to other benefits such as operating efficiencies. 
Betterments may include, for example, features needed to obtain LEED 
certification for the transit facilities or additional features to 
provide extra pedestrian access to surrounding development or 
aesthetically-oriented design features. This would remove a 
disincentive to include such features in the design of projects. FTA is 
interested on receiving comments on the kinds of betterments that 
should be excluded from the calculation.
    FTA is proposing, in addition, to develop pre-qualification 
approaches that would allow for a project to automatically receive a 
satisfactory rating on cost effectiveness based on its characteristics 
or the characteristics of the project corridor. These approaches would 
be developed by analyzing how certain project or corridor 
characteristics would contribute to producing a satisfactory rating on 
cost effectiveness. In this way, a project whose characteristics met or 
exceeded a certain threshold value could be automatically rated without 
further project-specific analysis. Proposed pre-qualification values 
(``warrants'') would be proposed in policy guidance for comment by the 
public.
    b. Environmental Benefits. Currently, FTA uses the EPA air quality 
designation for the metropolitan area in which a project is proposed to 
be located. Thus, FTA assigns projects located in non-attainment areas 
(areas that EPA has designated as having poor air quality) with a 
``high'' rating; all other projects receive a ``medium'' rating.
    FTA is proposing to expand the measure for environmental benefits 
to include direct and indirect benefits to the natural and human 
environment. Based on estimated changes in vehicle miles of travel 
(VMT), FTA would evaluate air quality based on changes in total 
emissions of EPA criteria pollutants, changes in energy use, changes in 
total greenhouse gas emissions, and safety changes including the amount 
of accidents, fatalities, and property damage. Changes in public 
health, such as benefits associated with long-term activity levels that 
would result from changes in development patterns, would be included 
once better methods for calculating this information are developed.
    Estimated changes in VMT would be calculated in one of two ways. If 
the project sponsor uses the simplified forecasting method developed by 
FTA, changes in VMT would be imputed using standard factors developed 
by FTA that are applied to the estimated project-trips and passenger-
miles. If a project sponsor chooses at its option to use standard local 
travel forecasting methods, the changes in VMT would be an output of 
the local travel forecasting process. The estimated environmental 
benefits would be monetized and compared to the annualized capital and 
operating cost of the proposed project.
    c. Economic Development. Currently, FTA rates the economic 
development effects of major transit investments on the basis of the 
transit-supportive plans and policies in place and the demonstrated 
performance and impact of those policies. FTA proposes to continue to 
use this measure and to add a consideration of the social equity 
impacts of the proposed investment by assessing the degree to which 
policies maintaining or increasing affordable housing are in place. The 
number of domestic jobs related to design, construction and operation 
of the project would also be reported.
    FTA is also proposing to allow project sponsors, at their option, 
to estimate indirect changes in VMT resulting from changes in 
development patterns that are anticipated to occur with implementation 
of the proposed project. The resulting environmental benefits would be 
calculated, monetized, and compared to the annualized capital and 
operating cost of the project under the economic development criterion. 
In is anticipated that the project sponsor would undertake an analysis 
of the economic conditions in the project corridor, the mechanisms by 
which the project would improve those conditions, the availability of 
land in station areas for development and redevelopment, and a pro 
forma assessment of the feasibility of specific development scenarios.

3. Streamlining

    Aside from changes that will improve FTA's measures for evaluating 
projects, FTA is proposing some changes that are intended to streamline 
the process.
    First, FTA is proposing to allow project sponsors to forgo a 
detailed analysis of benefits that are unnecessary to justify a 
project. For example, if a project rates ``medium'' overall based on 
benefit calculations developed using existing conditions in the project 
corridor today, the project sponsor would not be required to do the 
analysis necessary to forecast benefits out to some future year (i.e., 
a ``horizon'' year). Similarly, FTA is proposing to develop methods 
that can be used to estimate benefits using simple approaches. Only 
when a project sponsor feels it is necessary to further identify 
benefits beyond a simplified method would more elaborate analysis be 
undertaken, and only at the project sponsor's option.

IV. Response to Comments

    The following is a summary of the comments received in response to 
the questions in the ANPRM, FTA's response to the comments received, 
and our proposal for addressing the issue raised by the questions in 
this NPRM. FTA received approximately 165 comment submissions from a 
wide-range of organizations and individuals. Comments included 
operators of public transportation; a private bus operator; State 
departments of transportation; a Federal agency; a member of Congress, 
metropolitan planning organizations (MPO) and regional councils of 
governments; local governments or entities; trade organizations; 
national non-profit organizations; lobbyists; research institutions; 
local or regional community organizations; private citizens; and 
businesses.
    Please note that FTA attempted to respond to all relevant comments 
received on the ANPRM. FTA provided a more detailed response, however, 
only to comments that specifically addressed the issues presented in 
the ANPRM. General comments that did not pertain specifically to those 
topics were summarized at the beginning of this section.

A. General Comments

1. Funding Based on Regional or Project Characteristics
    Comment: A number of comments suggested separate funding streams 
depending on the characteristics of the project or the region in which 
it is located. One comment suggested that FTA separate funding streams 
based on regional population to afford projects in medium-to-small 
regions a better chance to compete for funding. Another suggested 
creating separate funding opportunities for new transit initiatives and 
one for additions to existing systems. One comment suggested 
distinguishing between new corridors, extensions, and circulator 
projects.
    Response: FTA is bound by the current law, in which funding 
eligibility is distinguished only by the size of the project and the 
amount of New Starts/Small Starts funds being sought. FTA believes the 
simplified project development and evaluation processes for smaller 
projects provide an opportunity for smaller and medium sized regions to 
compete. So long as there is a single source of funding in law for both 
extensions and completely new

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systems, FTA must evaluate them using the same criteria.
2. Additional and Updated Guidance
    Comment: Numerous comments suggested FTA publish additional 
guidance on the New Starts/Small Starts project development and 
evaluation processes. For example, several comments suggested 
publishing additional guidance for how to achieve higher project 
justification ratings, although one comment suggested FTA retain its 
current level of guidance emphasizing the importance of regional and 
local land use planning, zoning, and economic development. Individual 
comments were received suggesting FTA should:
     Annually publish a capital cost analysis looking at 
regional variations and cost trends, as well as the actual as-built 
project costs and New Start application costs.
     Issue guidance on policies that support land use goals and 
transit-oriented development (TOD) planning.
     Update FTA's 2004 contractor guidelines on land use and 
economic development and issue it as official guidance to all 
applicants.
     Provide project sponsors with complete details on cost 
estimating and an actual FTA high-reliability ridership model.
     Facilitate the application process with best practices, 
guidelines, or other explanatory materials.
     Maximize public investment by using FTA resources to 
provide guidance, best practices, and research to facilitate efficient 
and cost-effective project completion.
     Clarify FTA's goals, objectives, and desired outcomes from 
the New Starts process.
     Assure the application process is clear, comprehensible, 
and efficient, so that project sponsors have sufficient time to make 
necessary project decisions according to whether they have qualified 
for funding.
     Create a comprehensive, up-to-date source of guidance for 
applicants.
     Enhance its current Lessons Learned and Best Practices 
procedures.
     Update the New and Small Starts guidance to reflect 
changes in policies and administrative requirements and make it 
consistent with the FTA Web site.
    Response: FTA agrees with the importance of providing clear and up-
to-date guidance about the project development and evaluation 
processes. By law, FTA is required to publish guidance about its 
policies for New and Small Starts at least every two years for comment, 
and whenever it intends to make a substantive change in its procedures 
or evaluation criteria. FTA intends to use this process to provide 
periodic updates to its policies and procedures in this arena. FTA also 
intends to continue to provide technical assistance in the form of 
research, training, and technical assistance materials on all aspects 
of the process. FTA appreciates the suggestions for specific areas of 
attention, and will use these, as well as comments on this rulemaking 
process, to guide the development of policy and procedural guidance and 
technical assistance activities in the future. In particular, FTA 
intends to use its Web site to provide a source for updated technical 
assistance and guidance materials.
3. Livability and Sustainability
    Comment: A number of comments addressed the topic of how FTA should 
address the Administration's livability and sustainability initiatives. 
A few comments expressed general support for the new livability 
initiative and policy shift to support transit projects with positive 
community, environmental, and economic impacts. One comment expressed 
support for the Administration's livability and sustainability 
initiatives recognizing the connection among DOT, HUD, and EPA in 
future regional and local planning efforts. Another comment, however, 
suggested ignoring sustainability and livability claims.
    Response: FTA believes its New and Small Starts project development 
and evaluation processes should address the Administration's livability 
and sustainability goals. Current law provides that projects be 
evaluated by factors including environmental benefits and economic 
development effects, which relate very strongly to these goals. In 
addition, the degree to which these projects are supported by local 
transit supportive plans and policies is also a criterion specified in 
law that FTA proposes to continue measuring.
    Comment: A series of comments suggested ways FTA could support this 
initiative by altering its evaluation criteria. One comment expressed 
concern that the current criteria are not compatible with streetcar 
projects, and along with another comment, recommended FTA adopt 
performance measures supporting the livability and sustainability 
criteria. One comment made a general suggestion that FTA review the 
entire livability program and alter its rating system to address 
features of the program. Another comment, however, recommended FTA 
develop new rating factors that only award more points to applicants 
agreeing to increase affordable housing investment within one-half mile 
of planned transit stops. A couple of comments suggested the six 
Federal livability and sustainability criteria should be the primary 
criteria in law for New Starts. A couple of other comments expressed 
support for FTA's furtherance of the goals of the Partnership for 
Sustainable Communities through its New Starts and Small Starts program 
analyses. Others recommended New Starts and Small Starts projects 
support building healthy and sustainable communities of opportunity, 
recommending livability indicators as a means for attaining that 
outcome. One comment recommended the criteria for New Starts and Small 
Starts funds should focus on the improvements made towards safer 
walking and biking environments. Another comment recommended modifying 
the New Starts and Small Starts regulation to incentivize the 
preservation and expansion of affordable housing near planned transit 
stops.
    Response: FTA believes it can address livability and sustainability 
in measures it establishes for the environmental benefits, economic 
development effects, and land use criteria. FTA believes reductions in 
energy use and greenhouse gas and air pollutant emissions are the 
primary environmental benefits of transit projects that promote 
sustainability. FTA is proposing to evaluate the magnitude of these 
benefits in its environmental benefits criterion. FTA also believes it 
can address livability benefits of proposed investments by assessing 
transit supportive economic development plans and policies, existing 
and proposed, that would promote development in concert with assessing 
the degree to which those policies protect affordable housing.
    In addition, FTA is proposing to allow project sponsors to evaluate 
the magnitude of the projected benefits that come from denser 
development around the transit investment as part of the measure for 
economic development. At the option of the project sponsor, indirect 
changes in VMT resulting from changes in development patterns may be 
estimated, and the resulting environmental benefits calculated, 
monetized, and compared to the annualized capital and operating cost of 
the project under the economic development criterion.
    Comment: Other comments addressed how funding priorities might be 
established to support the livability and sustainability initiatives. 
One comment recommended funding transportation projects that ensure 
that communities

[[Page 3853]]

have streets, sidewalks, and transportation networks that are safe and 
inviting. Another comment suggested addressing national environmental 
and climate challenges by promoting low-carbon types of transportation 
modes via integration of transportation, housing, environment, and 
community revitalization strategies. One other comment encouraged FTA 
to consider the unequal treatment of highway and transit investments as 
the primary obstacle to improving livability.
    Response: FTA does not believe it is necessary to explicitly 
establish funding priorities for certain kinds of projects. Rather, it 
believes having evaluation criteria in place that reward projects that 
achieve more environmental benefits and economic development effects 
can provide sufficient incentives to project sponsors to meet these 
goals. FTA notes the way highway and transit projects are treated is a 
feature of surface transportation law and cannot be changed through 
rulemaking.
4. Methodology
    Comment: A few comments addressed the weights assigned to the 
various evaluation criteria. The first comment suggested FTA's rating 
system give up to 40 percent of the points awarded for local matching 
funds. Another comment suggested only weighting environmental benefits 
higher than ten percent. A third comment suggested FTA give points to 
sponsors leveraging symbiotic projects that have private funds from 
rail companies or industry.
    Response: According to existing law, FTA must evaluate the six 
specified project justification criteria and give ``comparable, but not 
necessarily equal'' weight to each. Separately, FTA must evaluate local 
financial commitment and produce a rating for it based on the various 
factors specified in the law. The separate ratings for project 
justification and local financial commitment must then be combined into 
an overall rating. The weightings for the project justification 
criteria will not be included in this proposed rule. Rather, FTA is 
proposing specific weights in the accompanying policy guidance. FTA 
does not believe it is appropriate to provide additional weight to 
projects with private funding. The source of local funding is not as 
important as whether the project has adequate overall financial support 
from non-Federal sources for both capital and operating costs.
    Comment: A couple of comments questioned how FTA planned to 
incorporate incomplete studies commissioned by FTA, including Transit 
Cooperative Research Program studies H-39, H-41, and H-42, to develop 
data for future project evaluation.
    Response: FTA will consider the results of these studies when they 
become available through policy guidance issued for notice and comment 
at least every two years. This will allow FTA to take into account any 
improved methodologies that may result from these and other studies 
conducted in the future.
    Comment: Several comments included general suggestions for 
additional evaluation factors. One comment suggested adding a transit 
agency's management-labor relations history as a factor. Another 
comment expressed support for comparing project cost to shortened 
commute times. One other comment recommended that the project 
justification criteria should better address equity benefits associated 
with transit projects.
    Response: FTA does not believe labor-management relations affect 
the relative performance or merits of a proposed transit investment. 
Shortened commute times are one important factor in assessing project 
merit, but FTA believes a simple measure of project effectiveness, such 
as system usage, is a reasonable proxy for a wide variety of project 
benefits. FTA also believes shortened commute times can be an important 
part of evaluating the likelihood a project will produce economic 
development benefits since improvements in accessibility are often a 
major reason why development occurs around transit investments. FTA 
agrees equity issues are an important part of project evaluation and is 
proposing to incorporate assessments of equity into its evaluations of 
project justification.
    Comment: Some comments made general methodological suggestions. Of 
these, one comment questioned the use of a cost effectiveness decision 
rule. The other comment recommended FTA combine a quantitative and 
qualitative framework for New and Small Starts project evaluation.
    Response: FTA agrees that cost effectiveness should not be the 
primary test of project merit. It is for that reason the Secretary of 
Transportation announced in January 2010 that FTA would no longer 
require a ``medium'' rating on cost effectiveness, but would return to 
the approach prescribed by law in which six project justification 
criteria (including cost effectiveness) would be evaluated and given 
``comparable, but not necessarily equal'' weight. This NPRM proposes to 
continue that approach. FTA will propose both quantitative and 
qualitative measures.
5. Other General Comments
    Comment: One comment suggested program goals should include public 
communication specifically targeting transit advocates. Another comment 
encouraged FTA to support development of mixed-use activity centers 
with varied transportation access because they will provide the highest 
return on Federal New Starts investments. One comment questioned why 
FTA held a public outreach session in Vancouver, Canada.
    Response: FTA believes communication is a particularly important 
part of its New and Small Starts process and thus will continue to work 
to make sure all parties in the process have a clear understanding of 
the project development and evaluation processes. FTA will continue to 
use its Web site, training, publication of technical assistance and 
guidance documents, and outreach sessions to make the process as 
transparent as possible. FTA also believes a simpler, more 
understandable process for determining project merit can add 
considerably to more effective participation by the public and agrees 
that good transportation access and mixed-use development are important 
to assuring transit investments are successful. FTA is incorporating an 
assessment of these features in its economic development and land use 
criteria. FTA held an outreach session in Vancouver in connection with 
the American Public Transportation Association's annual Rail 
Conference. This site was selected because it was an event at which a 
substantial number of U.S. public transportation agencies and other 
interested parties would be in attendance during the public comment 
period. FTA also held outreach sessions at a number of other sites in 
the United States where such interested parties were likely to be able 
to attend, as well as two Webinars for those who were unable to be at 
one of the sessions in person.

B. Cost Effectiveness

Measuring Cost Effectiveness

Cost Effectiveness Question 1: ``How might FTA better evaluate cost 
effectiveness?''
1. Conceptual Basis for Comparing Benefits and Costs
    Comment: A large number of comments suggested various ways of 
comparing costs and benefits. Comments also provided thoughts on the 
difference between a cost effectiveness evaluation and a cost-benefit 
analysis.

[[Page 3854]]

    One comment stated cost effectiveness is often wrongly confused 
with cost-benefit analysis. The comment stated cost-benefit analysis is 
appropriate when it is possible to calculate all benefits and costs in 
dollars (or some other common denomination), but a cost effectiveness 
evaluation is appropriate when it is not possible to express all of the 
potential benefits of investments in dollar terms. The comment stated 
that for a cost effectiveness evaluation, benefits that cannot be 
expressed in dollars must still be quantified using some other measure 
or measures such as hours of time saved, tons of abated air emissions, 
or accident fatalities avoided, with the costs in dollars divided by 
the benefits to calculate the cost per hour, ton, fatality, or whatever 
is the benefit. The comment favored quantification of the annual 
outputs (or savings) of each of the key non-monetary benefits under 
each of the local alternatives.
    According to another comment, cost effectiveness is best understood 
and evaluated by comparing costs to ridership and then understanding 
other benefits individually. This comment stated that development of a 
single cost effectiveness measure that captures what decisionmakers 
would expect is too complex to ever explain and, therefore, not useful 
in this context. Another comment also argued the law does not require a 
single cost effectiveness measure.
    Response: FTA agrees a cost effectiveness evaluation should not be 
confused with a cost-benefit analysis. FTA believes a cost 
effectiveness evaluation is more appropriate for New and Small Starts 
project evaluation than is a cost-benefit analysis because it is very 
difficult to express many of the benefits of these transit projects in 
dollar terms. Further, the statute explicitly calls for cost 
effectiveness as one of a series of measures of project justification. 
FTA agrees a wide range of benefits should be quantified and is 
proposing to do so in this NPRM and in the accompanying policy guidance 
made available for public comment today.
    FTA agrees it makes sense to compare costs to measures of ridership 
and to account explicitly for other benefits in the other measures of 
project justification. Although the law may not require a single 
measure of cost effectiveness, FTA believes having multiple cost 
effectiveness measures would cause too much complexity and confusion. 
However, FTA believes it is appropriate to use cost as a way to scale 
environmental benefits (including the indirect environmental benefits 
that may be estimated at the project sponsor's option under the 
economic development criterion), but that it is better to calculate a 
summed monetary value for these benefits, rather than having a series 
of measures, one for each kind of environmental benefit.
2. Calculating Costs
    Comment: One comment stated the current cost effectiveness measure 
is adequate for large New Starts projects, and that the most effective 
way to improve it is to change FTA's treatment of New Starts project 
costs. Some comments stated concern that traditional cost effectiveness 
measures along with FTA's current guidance can be a challenge for 
projects located in more mature urban transit network environments due 
to higher real estate costs in those areas. Other comments agreed with 
this sentiment, further stating FTA should index or otherwise normalize 
the cost effectiveness thresholds to differentiate between ``low,'' 
``medium-low,'' ``medium,'' ``medium-high,'' and ``high'' ratings to 
reflect local cost levels, which are often higher in denser areas 
having the greatest transit needs. One other comment suggested FTA 
develop peer-specific cost effectiveness standards. Another comment 
said FTA should develop a method for ``equalizing'' the comparative 
disadvantages of projects that have higher capital costs because they 
are situated in environments that necessitate complex construction 
methods. Along similar lines, another comment stated FTA should account 
for cost differences among regional economies on the cost side of the 
cost effectiveness calculation.
    Also with respect to calculating cost, one comment argued the seven 
percent discount rate used by FTA to annualize costs in the existing 
cost effectiveness calculation is high, such that it discriminates 
against large, very long-term benefits associated with heavy rail 
projects.
    Finally, one comment argued a fully-allocated cost model better 
applies to new systems, and an incremental cost model better applies to 
expansions of existing systems. This comment also stated current FTA 
policy appears to prefer a fully allocated cost model.
    Response: FTA believes in general that its current approach to 
evaluating capital costs in the cost effectiveness measure is 
appropriate. FTA also believes, however, the cost of certain 
``betterments'' should be excluded from the cost effectiveness 
calculation. These include the incremental costs of features that may 
be required to obtain LEED certification of public transportation 
facilities. Such project features can achieve environmental benefits 
not well captured in the assessment of changes in travel behavior that 
accompany public transportation investments, such as improved water 
quality or reduced runoff, even though some of these project elements 
might also produce operating cost savings that would be assessed under 
the operating efficiencies criterion. To include these costs in the 
calculation of cost effectiveness would penalize project sponsors 
making such investments, and would provide a disincentive to making 
them. FTA does not believe it is appropriate to adjust the costs used 
in the cost effectiveness measure for local real estate costs, 
construction complexity, or above-average construction costs. Project 
sponsors are competing for scarce funds at the national level, so it is 
necessary to determine which projects are the most cost effective 
investments of Federal funds. For this purpose, it is necessary to 
determine how much each dollar of Federal funding is purchasing.
    FTA agrees the current seven percent discount rate used to 
annualize costs in the current cost effectiveness measure is a stiff 
test for very long-term investments and is proposing to change it to 
two percent.
    FTA believes its approach for calculating costs is appropriate. 
Although an incremental cost model may make sense when it comes to 
developing estimates for use in financial planning, for the purposes of 
understanding the complete cost of a particular investment, a fully 
allocated approach makes sense.
3. Determining What Costs Should Be Included in Cost Effectiveness
    Comment: FTA received a number of comments concerning what costs 
should be included in the calculation of cost effectiveness. Sixteen 
comments supported basing the calculation of cost effectiveness on 
either the New Starts/Small Starts share or Federal share of the 
project cost instead of the current practice of basing cost 
effectiveness on the total project cost, with thirteen comments stating 
a preference for the New Starts or Small Starts share and three 
comments expressing support for the Federal share. Comments said FTA's 
current approach is burdensome to communities with stringent local 
requirements because those communities must include locally funded 
project elements in their projects that are not necessary for the basic 
functioning of the project. Comments said the costs for these locally 
required and locally funded elements are

[[Page 3855]]

factored into the cost effectiveness calculation, which makes their 
cost effectiveness rating ``worse'' than the ratings for projects in 
communities that do not have stringent local requirements. Comments 
also said this approach would enable communities to build projects that 
best serve their local needs because project elements funded with local 
sources would be excluded from the calculation of cost effectiveness. 
Some comments also said this approach would provide an incentive for 
project sponsors to provide a higher local funding share, allowing 
Federal dollars to be distributed to a larger number of projects than 
would be the case under FTA's current approach. They stated this 
approach would reduce the likelihood that project sponsors would need 
to conduct ``value engineering'' in ways that may reduce the full 
benefit of the project in order to achieve an ``acceptable'' cost 
effectiveness rating. Some comments said this approach would enable 
project sponsors to easily calculate the cost effectiveness for the 
project based on the level of local funding that they provide to the 
project.
    Some comments stated FTA should change the current policy of basing 
cost effectiveness on total project cost and instead exclude certain 
costs from the calculation of cost effectiveness for various reasons. 
One comment stated the cost effectiveness calculation should only 
include the costs necessary for the functioning of the project, while 
another argued FTA should deduct from the cost effectiveness 
calculation the total or incremental costs of project ``upgrades'' that 
support important Federal objectives but do not produce additional 
ridership or user benefits or benefits associated with the other 
project justification criteria. Two comments said the cost included in 
the cost effectiveness calculation should be reduced by the amount of 
private sector contributions to the project, with one suggesting FTA 
only deduct costs provided by real estate developers and businesses 
that contribute funds because they realize the economic value created 
at the project's station areas. The comment said FTA should not deduct 
costs that apply to public-private partnerships in cases where the 
private sector partner provides construction funding in exchange for 
future availability payments from the public agency. Another comment 
said FTA could create a meaningful incentive by specifying that the 
private capital or public-private partnership must have a positive 
impact on the project's evaluation and rating in order to be worth 
counting in the evaluation process. One comment said FTA should limit 
the costs included in the calculation of cost effectiveness to 
operating costs, including environmental costs and benefits, stating 
the current capital and operating costs included in the calculation of 
cost effectiveness are focused on short-term costs at the expense of 
long-term environmental and economic benefits. Along similar lines, 
another comment said FTA should deduct costs associated with the use of 
new energy saving technologies from the calculation of cost 
effectiveness.
    Two comments supported FTA's current approach of basing cost 
effectiveness on the total project cost, stating that a focus on only 
Federal costs would cause a ``race to the bottom'' as projects try to 
improve the rating by reducing scope to lower the Federal share. The 
comments also stated many New Starts projects are major capital 
investments and require robust levels of Federal funding in order to be 
built. Another comment argued that reaching agreement with FTA on the 
cost of ``betterments'' would be complex and time-consuming, especially 
when agencies are seeking to incorporate ``green'' technologies into 
their routine practices. The same comment stated that comparing user 
benefits to the Federally-funded portion of a project could create 
other complications because agencies may attempt to apply Federal funds 
to the standardized cost categories with the longest useful life.
    Response: FTA does not agree the cost effectiveness measure should 
be calculated based on either the New Starts or Small Starts share or 
the total Federal share. Instead, FTA believes the total project cost 
should be the basis for the calculation, with allowances for 
``betterments'' to be excluded (as noted above). To allow a project to 
potentially obtain a satisfactory project justification rating simply 
by reducing the Federal share mixes an evaluation of project merit with 
an evaluation of the local financial commitment to the project. 
Further, it could permit an otherwise poorly performing project to 
receive an adequate rating. FTA believes it is possible, however, to 
exclude certain locally-required or preferred project elements from the 
cost calculation. FTA believes allowing ``betterments'' (those elements 
that go beyond what is needed for the basic functioning of the project) 
to be excluded from the cost side of the cost effectiveness calculation 
is reasonable. FTA understands it may be challenging to identify 
exactly what constitutes a ``betterment,'' but believes that guidelines 
or parameters can be established to help with this. FTA believes 
incentives for providing higher local funding shares should be 
considered in the local financial commitment criteria evaluation, not 
the project justification criteria evaluation. FTA agrees it is 
important that a project sponsor not delete necessary project elements 
in order to achieve an acceptable cost effectiveness rating, but 
believes this can be avoided through guidance defining necessary 
elements (along with what might be considered a betterment) and by 
thoroughly reviewing cost estimates as part of FTA's project management 
oversight.
    FTA agrees the costs used in calculating cost effectiveness can be 
limited to those necessary to produce the project's primary functions. 
This can be done to avoid counting the costs of various locally-derived 
``betterments'' and the costs of achieving certain Federal policy 
objectives, so long as these costs are not being borne by New Starts/
Small Starts or other Federal funds. These costs could include things 
like additional features to provide extra pedestrian access to 
surrounding development, aesthetically-oriented design features, or 
features to allow for LEED certification of project facilities. FTA 
agrees such features often do not produce the primary transportation 
benefits being evaluated in assessing cost effectiveness, but 
nonetheless produce desirable outcomes. To count such costs in the cost 
effectiveness measure would provide a disincentive to include such 
project features. FTA is interested in receiving comment on the kinds 
of betterments that should be excluded from the cost side of the cost 
effectiveness calculation.
    FTA does not believe it is appropriate to deduct private 
contributions to the project from the cost effectiveness measure for 
the same reasons stated above regarding calculating cost effectiveness 
based on the New Starts or Federal share alone. If a private developer 
contributes funds to a specific feature, such as an enhanced pedestrian 
linkage to a developer's project site, then it would make sense to 
delete those costs to the extent that the feature is not necessary for 
the achievement of the project's ridership or other benefits included 
in the justification measures. FTA agrees private equity contributions 
that will later be repaid through availability payments or other 
reimbursement by the project sponsor should be included in the costs 
used to calculate cost effectiveness. FTA does not agree that only 
operating costs should be part of the costs included in the cost 
effectiveness calculation. Both capital and operating costs are part of

[[Page 3856]]

the overall investment being evaluated. FTA believes it may be 
appropriate to deduct the costs of various energy saving features to 
the extent they are not necessary for the basic functionality of the 
project.
    FTA agrees using total project costs, net of betterments (i.e., 
subtracting certain elements from the cost), rather than only Federal 
funding, is appropriate since otherwise a major portion of project 
costs would be excluded. FTA agrees there will be some complexity 
involved in identifying ``betterments,'' but on balance it is worth the 
effort to assure that disincentives to such features are not an 
inadvertent part of the evaluation process. Further, FTA believes it is 
more appropriate to reward projects that contribute a higher non-New 
Starts share of funding in the evaluation of local financial 
commitment. That way, the evaluation of project justification will be 
appropriately focused on the merits of the project itself, regardless 
of funding source. The overall evaluation of the project's worthiness 
is the combination of the project justification and local financial 
commitment rating that will include an accounting of the degree to 
which additional local resources are being brought to bear on the 
project.
4. Forecasting Methods
    Comment: FTA received a number of comments on the methods used to 
forecast ridership to calculate travel time savings, which is the 
current measure FTA uses in the calculation of cost effectiveness and 
mobility. Comments expressed concern that projects are designed to meet 
the projected ridership forecasts, but that actual ridership can 
sometimes surpass projections leaving the project under-developed. The 
comment noted projects facing this situation are then required to 
undergo costly retrofits to accommodate actual ridership. One comment 
suggested that if travel time savings is retained as the measure, the 
forecasting methods behind the measure should be improved. Similarly, 
another comment suggested the creation of a national standard or 
approach to transit ridership forecasting
    Response: FTA agrees these projects are long-term investments and 
should be built to accommodate long-term demand, which is difficult to 
predict. However, calculating cost effectiveness is a necessary part of 
the evaluation process, as required by statute.
    FTA agrees with the need for improved and simplified forecasting 
methods. FTA is proposing a simplified measure of effectiveness and the 
use of approaches that are easier to apply, including an FTA-developed 
standard national model to predict the number of trips on a proposed 
project.
    Comment: Other comments suggested various ways of improving travel 
forecasts and noted concerns about consultants having a conflict of 
interest that leads them to inflate ridership forecasts. Comments 
suggested FTA require better documentation of ridership projections, 
such as origin-destination surveys of current users of existing transit 
systems in the region and origin-destination surveys of current 
automobile drivers to determine the congestion impacts when existing 
roadways are altered to allow dedicated lanes for buses in a bus rapid 
transit (BRT) system. Another comment suggested FTA create a new FTA-
specific debarment process that would prohibit a firm that submitted 
false or misleading ridership forecasts to FTA from submitting 
additional information for the next three years. Another comment stated 
that in markets without choice riders (riders that choose transit over 
driving even though they have a car or other travel options available 
to them) historically, initial choice ridership may come from special 
events such as college and professional sports games, holiday parades, 
etc. The comment went on to say FTA should develop tools to allow 
projects to better model trips generated by those special events.
    Response: FTA does not agree consultants alone are the cause of 
inflated ridership forecasts. An over-reliance on a single metric, 
whatever it may be, can provide an incentive for all parties involved, 
including consultants and project sponsors, to overinflate the numbers. 
Ultimately ridership forecasts and all data submitted to FTA about the 
proposed project are the responsibility of project sponsors.
    FTA agrees the data on which forecasting models are based can be 
improved and already requires that models be calibrated based on recent 
rider surveys. FTA will continue to evaluate the quality of the 
ridership forecasts submitted by project sponsors before accepting them 
as part of any evaluation process. FTA is proposing simplified 
forecasting methods, including an FTA-developed national model to 
predict ridership on the proposed project. FTA notes that it already 
has tools available to deal with special events and other trip 
generators, which project sponsors now currently employ.
    With respect to a debarment process, the existing government-wide 
debarment process at 2 CFR part 180, supplemented with the DOT rule at 
2 CFR part 1200 would allow FTA to suspend or debar any entity for 
numerous reasons. Conviction for making false statements is listed as 
one of the bases for debarment (see 2 CFR 180.800(a)(3)).
    Comment: One theme among comments on travel forecasting was the 
extent to which ridership forecasts take into account land use changes 
expected in the project area. One comment stated some applications of 
direct transit ridership models have been demonstrated in the field, 
and may offer a more accurate alternative to forecasting ridership than 
regional travel demand models built primarily around forecasting auto 
trips. The comment argued that such models offer the ability to 
consider the effect of fine grained land use characteristics around 
stations that may increase ridership--higher quality pedestrian 
environments, a mix of land use types, key destinations, and 
residential density. Other comments stated FTA should work with project 
sponsors, MPOs, and others to improve modeling technology to more 
accurately recognize land use-related variables and different land use 
distribution patterns, with an aim toward incorporating induced land 
development into forecasts. Other comments specifically suggested a 
standard methodology for projected land use changes in furtherance of 
better ridership forecasting.
    Response: FTA agrees it is important to fully account for the land 
use changes that occur in project areas to the extent possible, and FTA 
encourages use of the most accurate tools available. To avoid 
increasing the burden on project sponsors, FTA prefers that existing 
tools available in the project area be the primary basis for analysis. 
Use of new tools may require expensive development and calibration that 
may not be worth the time and money for the enhanced precision that 
might result. Although finer grained analysis may be helpful in 
producing more accurate forecasts, in general FTA needs only to be 
assured that the project is justified according to broad criteria for 
which existing tools have proved sufficient. Project sponsors who feel 
the need for more precise forecasts to justify projects at the local 
level are always free to pursue enhanced models on their own.
    Comment: Some comments suggested alternative methods for developing 
travel forecasts, with one comment expressing appreciation that FTA 
already allows project sponsors to use alternative methods in special 
cases. One such comment stated transit agencies should be required to 
use the

[[Page 3857]]

current travel forecasting model of the MPO for all estimates of 
ridership, revenue and ridership-related costs, and that a transit 
agency should under no circumstances develop its own model for 
estimating patronage for any proposed new transit project. That comment 
suggested any modifications of the MPO model should be clearly 
documented and certified by the MPO. Another comment stated FTA should 
require MPOs, especially those in regions with significant transit 
investments in place, to maintain an updated transit model capable of 
meeting the rigors of a New Starts evaluation.
    Response: FTA believes it should provide project sponsors with 
flexibility in determining what methods to use to develop travel 
forecasts. FTA will continue to allow use of alternative forecasting 
approaches in certain cases, and is proposing a simplified, FTA-
developed national model. FTA does not believe it is appropriate or 
necessary to mandate use of such specific models, or to require MPOs to 
have in place models appropriate for modeling New Starts project 
impacts. In some cases the models may not be sensitive to the kind of 
changes in travel that arise from a major transit investment because 
they are usually designed to produce travel forecasts in support of an 
area's metropolitan transportation plan and often focus on mainly 
regional ridership totals rather than corridor or station area levels. 
In addition, most MPOs will be called on to forecast New Starts project 
ridership only on rare occasions. In any case, FTA will continue to 
work with project sponsors to assure that the models used are 
appropriate and the results as accurate as possible.
    Comment: Some comments stated there is too much time, cost, and 
effort spent on travel modeling and ridership estimating and the 
process often is contentious. These comments suggested other approaches 
might be used instead to remedy this problem. One comment suggested a 
Delphi-based approach that uses the model as one of a number of methods 
to generate information that is then reviewed by a panel of local 
travel experts for consensus. Another suggested a transit forecasting 
model similar to the Aggregate Rail Ridership Forecasting (ARRF), 
arguing that ARRF is proving to be a more accurate generator of 
ridership forecasts than any other model. Other comments suggested 
simple, spreadsheet-based modeling tools using existing data sources, 
such as data obtained from Automatic Vehicle Locators installed on 
existing transit vehicles in the corridor data, as the basis for 
quantifying improvements in service reliability that would occur with 
the proposed project. One other comment suggested the use of sketch 
planning methods used to predict park-and-ride lot utilization, transit 
route ridership, and other travel data along with the requirement that 
the forecaster focus on results and making them plausible rather than 
expending large amounts of time and resources to figure out why the 
model is ``misbehaving.''
    Response: FTA agrees the level of effort required for producing and 
verifying the acceptability of travel forecasts should be reduced. FTA 
does not believe a Delphi approach is reasonable, but rather believes a 
model-based approach is more appropriate, since it can take into 
account more aspects of known travel behavior in a quantitative manner. 
However, the use of sketch-planning techniques such as ARRF has merit. 
FTA believes its proposal to use project trips as the effectiveness 
measure for mobility in the calculation of cost effectiveness supports 
the use of simpler forecasting methods for project sponsors. FTA agrees 
using simplified methods based on existing data for a variety of 
measures makes sense and often can produce better results than relying 
on complex travel models that may be difficult to understand.
    Comment: FTA also received a number of comments on forecasting 
various aspects of automobile travel, with some arguing for use of 
regression techniques for estimating vehicle miles travelled (VMT) and 
others suggesting FTA sponsor research on increases in automobile 
operating costs. Others simply suggested developing a minimum standard 
for highway models to improve comparisons in multimodal contexts. Some 
comments favored increased funding to improve estimates of benefits to 
highway users from transit projects.
    Response: FTA believes simple measures for assessing the impacts of 
a proposed transit investment on automobile travel have merit. FTA will 
continue to explore how to produce such measurements most effectively. 
FTA does not believe minimum standards for highway models are needed, 
although it believes continued research in this area would be 
appropriate.
    Comment: A number of comments were also submitted concerning 
details of the measurement of travel time savings, the current measure 
FTA uses in calculating mobility and cost effectiveness. Comments 
expressed concerns about the reliability of forecasts in general, and 
urged the use of ridership surveys to improve ridership forecasts. 
Other comments stated mode-specific constants (which assign a different 
weight to time spent on various modes) should be replaced with improved 
transportation demand model specifications, including quality of 
service variables, stating there is no evidence that traveler 
preference is necessarily linked to mode. Some comments expressed 
concern about the interface of non-motorized trips and transit in 
travel models, arguing most regional models do not fully consider the 
impact on ridership of quality bicycle and pedestrian networks, thereby 
penalizing transit agencies that include the costs of improved 
sidewalks or bikeways in the proposed transit investment. Another 
comment stated modeling parameters seem to give greater weight to 
``drive-to-transit'' access rather than ``walk to transit'' or ``bus to 
transit'' access, and that this approach fails to capture the benefits 
accruing to communities with transit supportive land use policies.
    Response: FTA continues to believe travel time savings are an 
important benefit of major transit investments, but it is clear it is 
difficult to produce reliable estimates of such time savings. 
Accordingly, FTA proposes to use project trips as its mobility measure, 
which should be easier to forecast while still producing a good 
indication of project merit. FTA notes improvements in accessibility, 
which are related to the travel time savings produced by a proposed 
project, are an important factor in changes in land use and economic 
development due to the project. Hence, even if a different measure of 
effectiveness is used in calculating cost effectiveness, some 
indication of the reduction in travel time will be reflected in some of 
the other project justification measures.
    FTA agrees rider surveys are an important tool in developing good 
estimates of current travel behavior and will continue to support their 
use for model calibration. FTA agrees mode specific constants are an 
imperfect way to measure travel mode changes and agrees it is the 
attributes of the mode that cause riders to change. However, FTA 
believes that mode specific constants remain a good proxy for 
calibrated factors in travel demand models (i.e., mode specific 
constants allow FTA to account for travel amenities that may differ 
between different types of transit projects, such as the differences 
between traveling on a light rail vehicle or a bus). FTA agrees many 
regional models are not sensitive to fine-grained factors such as non-
motorized access to transit. But FTA does take account of improvements 
to

[[Page 3858]]

transit walk access in the way the benefits of the transit investments 
are considered and will continue to explore methods to better evaluate 
their magnitude.

Inclusion of Benefits in Cost Effectiveness

    The following is a summary of comments related to three separate 
ANPRM questions on cost effectiveness and one question each on 
environmental benefits and economic development. The questions from the 
ANPRM are included at the beginning for reference.
Cost Effectiveness Question 2: ``What, if any, additional benefits such 
as environmental benefits, equity considerations (e.g., the social 
benefits of low-income ridership), and benefits of economic development 
attributed to a specific project could FTA include in the measure of 
cost effectiveness? What specific benefits should be included in the 
calculation of cost effectiveness?''
Cost Effectiveness Question 3: ``If you believe that FTA should include 
other benefits in the measure of cost effectiveness, how can FTA best 
quantify those benefits? Please include specifics on how FTA would 
quantify and measure these benefits.''
Cost Effectiveness Question 5 (part B): ``Should FTA consider 
additional benefit categories such as convenience for riders, reduced 
congestion, reduced travel time as a result of reduced congestion, 
reduction in the number of accidents due to reduced congestion, fuel 
costs (or other variable cost) savings for individuals who would be 
using the projects and/or the benefit to national security of 
additional transportation options? If so, how should these be 
measured?''
Environmental Benefits Question 8: ``Should environmental benefits be 
included in the cost effectiveness measure? How can environmental 
benefits be compared across projects, and incorporated into FTA funding 
decisions?''
Economic Development Question 10: ``Should economic development be a 
part of the cost effectiveness measure?''
    Comment: Numerous comments stated the cost effectiveness criterion 
should include a fuller range of benefits, with some comments stating a 
preference for certain benefits, as explained below. Some comments 
supported inclusion of non-transportation benefits (discussed below in 
response to ANPRM Questions 2 and 3 on cost effectiveness, ANPRM 
Question 8 on environmental benefits, and ANPRM Question 10 on economic 
development) and others supported inclusion of additional 
transportation-related benefits (discussed below in response to ANPRM 
Question 5 on cost effectiveness). One comment stated generally that 
including a fuller range of benefits would improve services for 
minority and low-income populations. Another comment stated cost 
effectiveness should account for all benefits of a transit project. 
Some comments that proposed cost-benefit analysis suggested specific 
measures for use in that assessment framework. One comment recommended 
consideration of system design and operational features that support 
state of good repair, land use, and equity goals since such features 
can support better service but are often value-engineered out of 
projects. One comment proposed that a cost effectiveness rating for a 
full line be applied to a minimum operable segment (MOS) if a financial 
plan is in place for the full line based on an argument that MOSs often 
have higher costs relative to benefits.
    Other comments stated no additional benefits should be included in 
the criterion for cost effectiveness. A couple of comments indicated 
other benefits are already addressed and weighted appropriately under 
other project justification criteria; one of these comments noted the 
current measure already captures certain transportation benefits beyond 
user benefits, such as service reliability and relief of transit 
congestion. Three comments expressed concern that additional benefits 
would make cost effectiveness more burdensome to measure or complex, 
while two others recommended additional research to determine how to 
quantify any additional benefits before including them in the cost 
effectiveness criterion. A few comments noted that including additional 
factors in the cost effectiveness criterion could complicate comparison 
of projects' benefits. A couple of comments suggested additional 
benefits are difficult to measure, with one specifically stating that 
capturing, measuring, and quantifying transit benefits in a way that is 
simple and nationally applicable is currently beyond the capabilities 
of agencies and sponsors. Another stated there are few tools today to 
measure the triple bottom line (economics, environment, and social 
equity), but they are in the process of being developed. Another argued 
cost effectiveness should remain as it is until accurate information is 
available that clearly defines a quantifiable non-mobility and/or 
congestion relief criteria that can evaluate the specific benefit 
between projects.
    Some comments provided criticism of the existing measure for cost 
effectiveness. One stated the current cost effectiveness measure is 
biased against certain modes (e.g., streetcars and urban circulators), 
and another comment suggested that incorporating livability principles 
into the other project justification criteria could remedy this. One 
comment argued the existing measure seems to give greater weight or 
preference for benefits resulting from drive access than to bus or walk 
access to the transit system. Another stated the current measure of 
cost effectiveness favors long trips in metropolitan areas that are not 
compact and where there is more opportunity to save travel time over 
longer distances.
    Response: FTA agrees that while there might be merit to including a 
wider range of benefits in the measure of cost effectiveness, on 
balance it is more appropriate to address these other benefits in the 
other evaluation criteria rather than trying to incorporate them into 
cost effectiveness. FTA is not convinced an effort should be made to 
include all benefits in a single measure since cost effectiveness is 
only one of six project justification criteria specified in law. In 
particular, certain benefits are not easily combined into a cost 
effectiveness measure but can be better addressed in the other 
criteria. FTA believes state of good repair goals are better assessed 
in the review of local financial commitment since they relate to 
whether a project sponsor has adequate resources to recapitalize the 
existing system in addition to constructing the new project, rather 
than serving as a reflection of the performance of the project itself, 
which is more rightly the basis on which project justification should 
be judged. Land use and equity considerations can be accounted for in 
other criteria. FTA continues to believe it should judge each operable 
segment on its own independent utility, since it is appropriate for FTA 
to evaluate the immediate investment being considered for funding.
    FTA agrees other benefits should be left out of the cost 
effectiveness measure. Cost effectiveness does not have to be the only 
measure that scales project benefits to costs. FTA is particularly 
sensitive to the concern that including additional benefits in the 
measure could increase the burden on project sponsors since it would 
add considerably to the complexity of the measure. Thus, FTA is 
proposing that a simpler measure of mobility (trips) be

[[Page 3859]]

compared to costs. Simplifying the measure for mobility should address 
concerns about the burden on sponsors. A project sponsor is not 
required to calculate the value of additional benefits, but can do so 
at its option as a part of the other measures rather than in the cost-
effectiveness measure. FTA agrees that additional research on how to 
quantify such benefits would be productive. There are Transit 
Cooperative Research Program projects underway that may provide useful 
information. FTA plans to conduct additional work as needed to assure 
sponsors have usable tools. FTA does not believe it is beyond the 
capabilities of current tools to assess these benefits, but believes 
more work is needed to improve these tools and make them more readily 
usable. Nonetheless, FTA is convinced the currently available tools are 
sufficiently accurate for their results to be used in the analysis.
    FTA agrees the current measure of cost effectiveness can be 
improved and is proposing a revised measure. FTA believes that having 
improved measures for economic development effects and environmental 
benefits will make for a more complete assessment of project merit, 
particularly when the entire range of project justification criteria 
are evaluated and weighted comparably, as required by law. FTA does not 
agree the current measure favors modes with drive access rather than 
walk or bus access. Under the current measure, savings in travel time 
are based on weightings that reflect travelers' perceptions that out-
of-vehicle travel time is more onerous than in-vehicle travel time. 
Thus, since walk time is actually weighted more than in-vehicle time, 
projects that improve walk access actually score better on the current 
measure. FTA agrees the current measure favors projects that save large 
amounts of travel time on long trips, simply because there are more 
opportunities for travel time savings.
1. Inclusion of Non-Transportation Benefits in Cost Effectiveness
    The following is a summary of non-transportation benefits proposed 
for inclusion in the cost effectiveness criterion.
a. Public Health and Environmental Benefits
    Comment: Several comments supported inclusion of public health 
benefits under the cost effectiveness criterion, with one noting health 
benefits constitute one in a series of community benefits associated 
with reduced automobile use but not currently captured under cost 
effectiveness. A few of these comments recommended FTA use public 
health or health care cost savings as a measure. Another noted ``the 
limits of information available to public transit agencies themselves 
to create this analysis'' would need to be considered if FTA elects to 
develop a public health measure.
    Numerous comments suggested environmental benefits be included in 
cost effectiveness, either generally (i.e., as an affirmative response 
to Environmental Benefits Question Number 8) or with support for 
particular benefits.
    A large number of comments endorsed inclusion of environmental 
benefits in FTA's cost effectiveness criterion without specifying a 
type of benefit. A few of these proposed the cost effectiveness measure 
capture project benefits beyond travel time savings, and one stated the 
current cost effectiveness measure is subjective. One comment asserted 
environmental sustainability, along with economic factors and social 
equity, is more critical than mobility improvements, with another 
comment suggesting inclusion of environmental benefits would help FTA 
identify and prioritize projects with the best long-term outcomes.
    Response: FTA agrees public health benefits should be considered in 
evaluating New Starts projects. FTA believes they belong primarily 
under the environmental benefits criterion. FTA will propose in policy 
guidance that they be measured once a methodology for doing so has been 
developed. FTA agrees that valuing such benefits can be complex.
    FTA does not believe its current or proposed measure of cost 
effectiveness is in any way ``subjective,'' but rather an effort to 
quantify benefits and costs and compare the two. Although FTA believes 
that environmental sustainability is important, mobility and 
accessibility are the primary benefits of transportation investments. 
FTA does not agree that incorporating environmental benefits in the 
cost effectiveness measure is an appropriate way to ensure good 
investments producing a wide range of important long-term outcomes are 
supported, mainly because it would complicate the measure. Instead, FTA 
believes the environmental benefits criterion is the appropriate place 
to examine these benefits and is proposing they be compared to cost 
under that criterion. Recognizing the importance of a multiple measure 
approach to project evaluation, FTA is proposing that environmental 
benefits receive a comparable weight to cost effectiveness in the 
evaluation of project justification.
    Comment: A number of comments proposed measures of environmental 
benefits. These are discussed in the section on environmental benefits. 
Of these comments, one suggested VMT reductions due to higher density 
development receive half of the weight assigned to cost effectiveness. 
Finally, one comment suggested the multiplier for non-travel time 
benefits be increased (from two to two and a half) if FTA does not 
adopt another method for incorporating environmental benefits.
    A couple of comments proposed techniques to evaluate environmental 
benefits as part of cost effectiveness, but did not suggest measures. 
One recommended a cost-benefit analysis of proposed environmental 
technologies given that certain ``green'' technologies can be more 
expensive than ``older established technologies.'' Another proposed 
environmental features of a project be subject to cost-benefit 
analysis, either individually or in combination with all other project 
costs and benefits, as part of a broader definition of cost 
effectiveness and suggested replacement of the current cost 
effectiveness measure with cost-benefit analysis.
    Response: FTA believes certain environmental effects resulting from 
implementation of the project (which can be estimated based on 
estimated VMT changes) should be accounted for in the measure of 
environmental benefits. In addition, FTA proposes that at the option of 
the project sponsor, indirect changes in VMT resulting from changes in 
development patterns may also be estimated, and the resulting 
environmental benefits calculated, monetized, and compared to the 
annualized capital and operating cost of the project under the economic 
development criterion. FTA is proposing to replace its current approach 
in which the thresholds for the various ratings assigned to travel time 
savings are developed by simply doubling the value of calculated travel 
time savings so as to account directly for the environmental benefits 
under the environmental benefits criterion.
    FTA believes the decision on whether or not to implement certain 
``green'' technologies should be made by local decision-makers and does 
not intend to propose any specific requirements. However, FTA believes 
it is appropriate to exclude the costs of such ``betterments'' from the 
calculation of cost effectiveness to avoid creating a disincentive to 
the application of such technologies.

[[Page 3860]]

    Comment: Several comments recommended FTA evaluate air pollution or 
greenhouse gas emissions reductions under the cost effectiveness 
criterion, with about half citing air pollution reductions as a broader 
community and efficiency benefit associated with decreased automobile 
use. A few comments proposed specific measures: one suggested FTA 
measure costs avoided due to reduced emissions; another suggested FTA 
examine project cost per ton of abated emissions, with emissions 
reductions offset by the effects of vehicular cold starts and 
electricity production for transit vehicle propulsion; a third 
suggested FTA assign a monetary value to each ton of abated emissions; 
and two others suggested the financial benefits of climate change 
impact reductions be accounted for in cost effectiveness.
    Response: FTA believes air pollution and greenhouse gas reductions 
are better accounted for under the environmental benefits criterion 
rather than as part of the cost effectiveness criterion. FTA believes 
the best approach is to estimate these benefits using standardized 
valuations per change in VMT, monetize them and compare them to the 
annualized capital and operating cost of the proposed project in the 
environmental benefits criterion.
    Comment: Several comments advocated inclusion of energy 
conservation in cost effectiveness. Of these, a couple emphasized 
incorporation of Leadership in Energy and Environmental Design (LEED) 
components and technologies. One comment cited energy conservation as a 
community benefit associated with less automobile use. Another noted 
encouragement of energy-saving LEED components would be consistent with 
the Administration's livability and sustainability goals.
    One comment suggested measuring project cost per British Thermal 
Units (BTU) of energy saved, and another proposed offering ``some level 
of credit'' against the Federal share for inclusion of LEED components. 
A couple of comments proposed identical measures for cost effectiveness 
and environmental benefits, namely projected VMT reductions and mode 
split changes, but did not mention particular environmental benefits to 
be assessed through these measures. These comments asserted that 
reductions in energy use and emissions should be key goals of any 
transit project.
    One comment suggested projects receive cost effectiveness credit 
for only ``ancillary'' environmental benefits associated with mandatory 
project components in order to maintain the New Starts program's focus 
on funding transit improvements.
    One comment suggested FTA incorporate long-term efficiency benefits 
and reductions in life-cycle costs associated with environmental 
technologies into the cost effectiveness measure so as to avoid 
penalizing projects with higher-cost, environmentally beneficial 
elements.
    Response: FTA believes energy conservation should be included in 
the environmental benefits criterion, rather than in cost 
effectiveness. To do so, FTA is proposing to calculate the monetary 
value of the energy savings that come from changes in VMT using 
standardized values. FTA notes a significant part of the benefits that 
come from reducing energy use are accounted for by the resulting 
reduction in pollutant and greenhouse gas emissions. To avoid double 
counting, the monetary value of energy conservation will be factored 
down by some percentage specified by FTA in future policy guidance. In 
addition, FTA believes it may be appropriate to exclude from the cost 
effectiveness calculation the additional costs of energy efficient 
features of the project. These features do not necessarily produce the 
changes in VMT that form the basis for the mobility benefits included 
in the measure. Thus, subtracting the costs of these energy efficient 
features from the cost calculation will avoid having the cost 
effectiveness measure produce a disincentive to the adoption of such 
features. FTA notes although energy efficiency and reductions in 
emissions are important goals for investments in transit, improving 
mobility and accessibility, and enhancing economic development are also 
important.
    Comment: A few comments discussed but did not explicitly support 
incorporation of environmental benefits into cost effectiveness. Some 
of these noted cost effectiveness could ``potentially'' comprise all 
other New Starts and Small Starts project justification criteria, 
including environmental benefits. Another recommended the cost 
effectiveness measure be left as is for now, but noted the measure 
``could eventually be strengthened'' through direct inclusion of 
environmental benefits.
    A large number of comments specifically discouraged FTA from 
including environmental benefits in the cost effectiveness measure for 
a number of reasons. Some of these comments noted environmental 
benefits are adequately recognized as a separate criterion. A couple of 
these comments observed that separate consideration of environmental 
benefits permits easier comparisons of projects. Others expressed 
concern that inclusion of environmental benefits would make the cost 
effectiveness measure more complicated and challenging to explain. 
Still others observed that quantifying environmental benefits may be 
challenging, with one comment recommending cost effectiveness remain 
focused on transportation benefits.
    Response: FTA believes it is not appropriate to include 
environmental benefits in the cost effectiveness measure. The cost 
effectiveness measure does not have to be the only measure that 
compares benefits and costs. Project-specific environmental benefits 
can estimated, monetized, and compared to the annualized capital and 
operating cost of the proposed project in the environmental benefits 
criterion. FTA agrees with a multiple measure approach to evaluating 
whether a project is justified. While mobility benefits are the primary 
reason for making a transit investment, they are not the only benefits. 
Providing for a more robust measure of environmental benefits will 
assure these other benefits are accounted for with an approach that 
will involve minor effort by the project sponsor beyond calculating the 
change in VMT per guidelines that FTA will establish in policy 
guidance.
b. Economic Development
    Comment: Numerous comments supported consideration of at least one 
facet of economic development in the cost effectiveness measure, either 
through an affirmative response to Economic Development Question 10 or 
discussion of particular factors or benefits. A large number of 
comments endorsed inclusion of economic development effects in FTA's 
cost effectiveness criterion without specifying factors or benefits. A 
number of reasons were given for supporting inclusion of economic 
development effects, including: The need to capture project benefits 
beyond travel time savings; the fact that current modeling procedures 
for Small Starts projects do not address the economic impact of transit 
use or ``site development for transit;'' that economic development 
effects is a ``key factor overall'' that should be considered as part 
of cost effectiveness; and finally, that economic development is the 
primary reason for transportation investments and potentially more 
critical to measure than mobility benefits.
    A couple of comments proposed techniques to account for economic 
development effects in the cost effectiveness calculation. One comment 
suggested that projects that spur

[[Page 3861]]

economic development receive cost effectiveness credit. The other 
proposed a project's economic development effects be subject to cost-
benefit analysis, either individually or in combination with all other 
project costs and benefits, as part of a broader definition of cost 
effectiveness and replacement of the measure with a full cost-benefit 
analysis. One other comment recommended FTA require project sponsors to 
generate matching funds through value capture.
    A number of additional comments offered general support for 
including economic development in the cost effectiveness measure and 
noted particular economic development effects or measures FTA should 
recognize: Agglomeration benefits (i.e., the benefits from land uses 
locating near each other and a transit project's ability to generate 
additional retail options near neighborhoods that are experiencing 
disinvestment). Some of these comments recommended approaches to 
quantify economic development effects as part of the cost effectiveness 
measure. One proposed using a forthcoming index from the Brookings 
Institution, Harvard JFK School of Government, and the Urban Land 
Institute to measure the economic benefit of walkable environments. The 
other proposed a larger multiplier for non-travel time benefits (two 
and a half instead of two) in the cost effectiveness thresholds 
calculation if another method to incorporate economic development 
effects is not devised.
    Response: FTA agrees economic development effects should be 
considered, but believes it is better to consider them under the 
economic development criterion rather than under cost-effectiveness. In 
particular, FTA agrees adding economic development effects to the cost 
effectiveness measure would directly and explicitly capture a wider 
range of benefits than just mobility, but FTA also recognizes that 
there are significant challenges to estimating these effects. Thus, FTA 
is proposing that at the option of the project sponsor, indirect 
changes in VMT resulting from changes in development patterns may be 
estimated, and the resulting environmental benefits calculated, 
monetized, and compared to the annualized capital and operating cost of 
the project under the economic development criterion.
    Because FTA's proposed approach is optional, it would not overly 
burden project sponsors with difficult and time consuming analytical 
requirements. FTA does not believe it is necessary to perform a 
separate analysis of economic development costs and benefits in order 
to make an informed funding decision. It may be appropriate at some 
future point to convert the entire New and Small Starts project 
evaluation framework to a full cost-benefit analysis, but for the 
present, FTA does not deem this technique to be sufficiently mature in 
terms of valuing costs and benefits to warrant such conversion at this 
time.
    FTA agrees agglomeration effects are a key benefit and is using 
this as a key concept in how it is proposing to establish a measure of 
economic development. Retail opportunities are only one part of the 
kind of development that might occur around a transit investment. 
Ultimately, FTA believes the primary benefit of a public transportation 
investment that can be most readily quantified and monetized is the 
improvement in various environmental factors coming from denser 
development that can occur around a transit investment. But the amount 
of development can be very difficult to forecast. Thus, FTA is 
proposing to allow project sponsors to develop scenario-based estimates 
of these effects, at their option, for measurement in the economic 
development effects criterion. The indirect changes in VMT resulting 
from the estimated changes in development patterns may be estimated, 
and the resulting environmental benefits calculated, monetized, and 
compared to the annualized capital and operating cost of the project 
under the economic development criterion. Once better measures for the 
agglomeration effects are developed, FTA will propose to allow project 
sponsors to also add the economic effects due to that agglomeration in 
calculating economic development benefits.
    As noted above, FTA is changing its current approach for developing 
the thresholds for assigning cost effectiveness ratings. FTA is 
proposing to explicitly include economic development effects in that 
measure rather than simply doubling the calculated travel time savings 
to account for these and other benefits in cost effectiveness, as is 
now its practice.
    Comments: A number of comments proposed that FTA consider a transit 
project's ability to foster transit-supportive land uses, higher 
densities, and mixed-use development as part of the cost effectiveness 
measure (some of these comments opposed integration of economic 
development into cost effectiveness in Economic Development question 
10). One comment noted dense land uses and convenient pedestrian and 
bicycle access around transit facilities would ultimately yield greater 
health, environmental, and travel benefits than short-term mode shifts 
to transit. Another indicated such development constitutes a community 
benefit that is not currently captured.
    Several comments proposed measures of land development benefits. 
Most of these proposed changes in average population and employment 
densities within a transit corridor or region; some also proposed 
evaluating percentages of households residing in single- versus multi-
family housing units. One comment proposed comparing automobile trip 
generation and travel distance estimates between high-density station 
areas and ``average'' portions of a region, and another comment 
recommended value capture from development potential as well as land 
reuse and conservation opportunities. Another comment recommended FTA 
only consider increased land values from transit investments as part of 
cost effectiveness, as higher land values enable use of value capture 
mechanisms to offset Federal funding shares. One comment recommended 
consideration of increased employment and housing opportunities, and 
another comment proposed assessment of employment levels in downtown 
areas, with credit offered where regions have been successful in 
maintaining downtown employment.
    One comment proposed a more qualitative assessment of cost 
effectiveness overall to recognize a project's economic goals, such as 
economic development and revitalization.
    A small number of comments supported evaluating possible negative 
effects from development expected to result from implementation of 
transit. One comment suggested FTA discourage investments that 
exacerbate sprawl by primarily serving rural commuters. Another 
proposed benefit offsets for the social costs of redevelopment to 
existing communities, stating that transit projects and their 
development effects may displace residents and small businesses, and 
Uniform Relocation Assistance is not sufficient to cover relocation 
costs.
    Response: FTA agrees that considering how well a project supports 
transit-supportive land use and higher densities should be part of the 
evaluation of project justification, but believes they are better 
addressed elsewhere than in cost effectiveness. As noted, FTA is 
proposing at the option of the project sponsor, indirect changes in VMT 
resulting from changes in development patterns may also be estimated, 
and the resulting environmental benefits calculated, monetized, and 
compared to the

[[Page 3862]]

annualized capital and operating cost of the project under the economic 
development criterion. In this way the benefits noted, such as enhanced 
pedestrian and bicycle access, and resultant reduced motor vehicle 
travel, can be captured.
    FTA appreciates the various measures of land use development 
benefits proposed. Although changes in population and employment 
density might represent a benefit, they are really changes resulting 
from economic development. Further, it is the resulting change in 
vehicular travel that primarily produces environmental benefits. An 
approach that compares trip generation and travel distance in station 
areas with those outside station areas and then multiplies these rates 
by the amount of land use development that might occur in station areas 
could be useful in assessing the amount of reduced travel and related 
environmental benefits. Although value capture can be an important 
technique for producing the revenues needed to make a transit 
investment, increases in land values are likely to be very difficult to 
forecast or estimate. FTA does not believe a qualitative approach to 
cost effectiveness is sufficient to clearly distinguish project merit, 
particularly when there are specific quantitative measures that can be 
used.
    FTA believes projects that support denser development are likely to 
rate higher and do better in FTA's evaluation. FTA is aware transit 
projects can often affect the affordability of housing around transit 
stations. But FTA believes it is more appropriate to take account of 
this problem in the measure of economic development rather than in cost 
effectiveness. FTA is proposing to whether there are policies and plans 
in place to maintain and or increase affordable housing around a 
proposed investment under the economic development criterion.
    Comment: Several comments conditionally or tentatively supported 
inclusion of economic development effects into the cost effectiveness 
calculation. Some of these comments discussed, but did not explicitly 
support, incorporation of economic development factors into cost 
effectiveness. Some of these noted all other New Starts and Small 
Starts project justification criteria could ``potentially'' be folded 
into cost effectiveness; another proposed the cost effectiveness 
measure remain as is for now, but noted the measure ``could eventually 
be strengthened'' through direct inclusion of economic development.
    A couple of comments proposed conditional inclusion of economic 
development effects in the cost effectiveness measure. One stated if 
economic development effects are included, costs (such as subsidies) 
should be as well, with the project's benefits compared at the 
metropolitan level with those of all potential alternatives. The other 
recommended economic development only be considered if it provides 
financial benefit to the project sponsor.
    Response: FTA believes economic development effects are best 
addressed in their own criterion. Therefore, FTA is proposing at the 
option of the project sponsor, indirect changes in VMT resulting from 
changes in development patterns may also be estimated, and the 
resulting environmental benefits calculated, monetized, and compared to 
the annualized capital and operating cost of the project under the 
economic development criterion.
    FTA does not believe it is appropriate to require comparing a 
project's benefits with those of all alternatives to it. FTA's role is 
in assessing the merits of the project and reaching a decision on 
whether to recommend the project for funding. Whether or not economic 
development is financially beneficial to the project sponsor does not 
address the overall merits of the project. It is more important the 
benefits be evaluated, no matter who is the beneficiary.
    Comment: A large number of comments urged FTA not to include 
economic development in the cost effectiveness measure. Most of these 
noted potential challenges in forecasting or quantifying economic 
development effects. Several noted the complexity of the cost 
effectiveness measure, either in its current form or with economic 
development effects added; four of these noted Congress intended for 
economic development to be assessed separately from cost effectiveness. 
A couple noted economic development effects are adequately addressed as 
a separate criterion. One observed that separate consideration of 
economic development effects permits easier comparisons of projects. 
One asserted transit projects only shift economic development that 
would have occurred elsewhere, rather than generating completely new 
development. One comment suggested different levels of analysis for 
cost effectiveness and economic development (i.e., project versus 
corridor or broader, respectively) should preclude the two from being 
combined. Lastly, another comment suggested FTA exclude means to an 
end, such as urban form, VMT reductions or vehicle ownership changes, 
from its cost effectiveness measure and focus only on outputs.
    Response: FTA believes there are challenges to incorporating 
economic development effects in the cost effectiveness measure. FTA 
believes it is simpler and better to follow the multiple measure 
approach to project evaluation outlined in law. Thus, FTA is proposing 
at the option of the project sponsor, indirect changes in VMT resulting 
from changes in development patterns may be estimated, and the 
resulting environmental benefits calculated, monetized, and compared to 
the annualized capital and operating cost of the project under the 
economic development criterion.
    The cost effectiveness measure would focus on one dimension of 
project-specific effectiveness--mobility. FTA disagrees that the 
shifting of development from one area to another due to implementation 
of a transit project does not actually produce a net benefit. By 
increasing the density of development, even if it only shifted from 
elsewhere in a region, a transit project can produce reductions of 
vehicular traffic and environmental benefits that can be included in a 
broadened measure of economic development. The changes in VMT resulting 
from economic development effects (agglomeration of development) can be 
estimated as can the resulting changes in pollutant emissions, energy 
use, and accidents and fatalities, and a monetary value calculated 
using standard factors. The monetary value can then be compared to the 
annualized capital and operating cost of the proposed project and used 
as on optional additional measure of economic development. FTA agrees 
outcomes are the most important issue in assessing project merit. By 
themselves, urban form, changes in VMT, or vehicle ownership are not as 
important as the resulting changes in pollutant emissions, energy use, 
or accidents and fatalities.
c. Land Use
    Comment: Several comments recommended FTA consider transit-
supportive plans or policies within the cost effectiveness measure. A 
couple of these suggested FTA award credit for the presence of state or 
regional plans that promote denser, mixed-use infill development, and 
others recommended that transit-supportive plans and policies that 
emphasize economic development and employment strategies receive 
``significant weight'' in cost effectiveness evaluations. A number of 
comments proposed credit for complete-street, pedestrian, and bicycle 
plans for

[[Page 3863]]

station areas (one of these comments suggested that better access via 
non-motorized means will increase transit use and endorsed the San 
Francisco Bay Area Rapid Transit District's Access Hierarchy policies 
as a potential model for such plans). Several comments advocated that 
FTA consider parking policies, such as supply reductions and pricing at 
stations and in station areas as an element of cost effectiveness. As 
rationale, one comment cited the importance of parking policies on 
transit ridership as shown in various studies, while another noted that 
high parking supplies decrease development densities and increase 
walking distances. Another comment added that project sponsors should 
also be required to assess the opportunity costs of providing parking 
at stations.
    A couple of comments recommended FTA reward project sponsors for 
holding charrette sessions during the planning process. These comments 
noted such sessions can help to build support for higher-density, 
mixed-use development and complete-street policies. One suggested 
charrette sessions would affirm support for automobile alternatives and 
provide direction on where the alternatives are needed. One comment 
recommended FTA award credit to projects with affordable housing 
incentives in place in station areas. The comment reasoned that better 
access to transit from affordable housing units would improve ridership 
and thus improve cost effectiveness.
    Response: Although FTA believes transit supportive plans and 
policies are an important part of assuring the success of a project, 
FTA does not believe these policies should be part of the cost 
effectiveness measure. FTA believes review of these policies is better 
handled in the economic development effects criterion as is currently 
done, because these policies by themselves do not represent an outcome 
of the project. FTA believes it is more appropriate to focus the cost 
effectiveness criterion on the mobility performance of the project. 
Likewise, policies supporting non-motorized access and dealing with 
parking supply also represent contextual factors that may contribute to 
a project's success, rather than performance-based outcomes of the 
project. Thus, they are also better addressed as part of the economic 
development criterion, rather than in the cost effectiveness measure.
    FTA believes charrette sessions may be a useful tool for project 
development, but that the process by which a project is developed 
should remain a local choice. FTA believes the evaluation and rating 
criteria should focus on the performance of the project and on the 
policies in place that support such performance. FTA believes 
affordable housing is an important issue, and is proposing that 
existing publically supported housing be considered under the land use 
criterion and the plans and policies to maintain or increase affordable 
housing be reviewed under the economic development effects criterion.
d. Local Support
    Comment: Several comments encouraged FTA to recognize local support 
for a project in the cost effectiveness measure. As justification, some 
comments noted the significance of local financial commitment to a 
project, deeming such commitment equivalent to a ``regional vote of 
cost effectiveness'' and an indication of the project's importance to 
the local environment and economy. One comment proposed that mode be 
considered in determining whether a project can gain local support 
(this comment stated that rail projects can generate more local support 
than bus-based projects).
    A couple of comments proposed measures for determining local 
support, such as documented support for the project from local 
officials and developers as well as local funding commitments such as 
revenue from tax-increment financing (TIF) districts.
    Response: FTA believes it is more appropriate to assess the degree 
of local support for a project, from both public and private sources, 
in its evaluation of local financial commitment. FTA agrees local 
financial support is crucial to the success of a project, but believes 
it is more appropriate to focus the cost effectiveness measure on the 
performance of the project itself.
2. Inclusion of Additional Transportation Benefits in Cost 
Effectiveness
    The following is a summary of additional transportation benefits 
and associated measures proposed for inclusion in the cost 
effectiveness criterion.
a. Transit Systems
    Comment: A large number of comments recommended FTA consider other 
benefits to transit system users beyond the current ``user benefits'' 
measure (which is expressed as travel time saved). Approximately a 
third of these comments proposed that FTA consider transit capacity 
increases. Of these, a few focused on the improved reliability that 
results from core capacity increases on existing systems, with one 
citing load factors as a potential measure to identify where such 
capacity improvements are needed. One comment focused on rail vehicles' 
superior capacity to buses. Several comments recommended consideration 
of ridership at the corridor, regional, or system level. One advocated 
that ridership be the primary benefit measure in the calculation of 
cost effectiveness. As rationale, the comment stated FTA should 
encourage as many transit trips as possible regardless of length, and 
that the congestion relief benefits resulting from transit investments 
accrue at the regional level.
    A few comments proposed FTA consider or analyze off-peak or all-day 
travel as part of the cost effectiveness measure, but did not specify 
what element(s) of travel should be incorporated. Another comment 
similarly proposed measuring travel time savings across a project or 
system's span of service.
    Several comments proposed using other measures of transit use in 
the cost effectiveness calculation. One of these proposed using the 
project cost per passenger mile of mobility within a metropolitan area; 
one proposed measuring mode shifts to transit, and another proposed 
measuring estimated farebox recovery improvements.
    A couple of comments suggested consideration of the transit 
investment's beneficial effects on other transit services. One of these 
proposed giving credit for connecting transit systems because of the 
``increased efficiency'' that occurs with little investment. Another 
recommended consideration of ``network benefits,'' measured by the 
length of the system expansion as a percentage of the total transit 
network. A few comments proposed measuring connectivity with existing 
transit service through transfers.
    One comment suggested FTA consider the efficacy of the fare-
collection systems proposed for projects. The comment observed that 
fare evasion associated with proof-of-payment systems hampers cost 
effective operations.
    One comment proposed FTA adopt a combination of quantitative and 
qualitative measures that ``reflect the unique characteristics of 
individual projects that will make those projects successful uses of 
Federal investments.''
    Several comments discussed the question of whether to calculate 
cost effectiveness on a corridor or a regional scale. One comment 
stated that the average [regional] values have little meaning and are 
used by opponents of transit investments. Another comment

[[Page 3864]]

suggested the cost effectiveness of a transit project in one corridor 
in a region may be very high, while the cost effectiveness of a transit 
project in another corridor in the same region may be very low, but 
that the project with low cost effectiveness still has to be provided 
for mobility reasons. One comment stated requiring that benefits be 
calculated for the entire region will ensure the benefits in the 
corridor, such as ridership gains or economic development effects, are 
not offset by losses of benefits elsewhere in the urban area.
    Response: FTA does not believe transit capacity increases should be 
included in the cost effectiveness measure. Capacity represents an 
output of a transit investment rather than an outcome. Increases in 
capacity can result in increased utilization, which is a better measure 
of effectiveness, but only if the capacity is provided in a way that is 
convenient for potential users. FTA believes that transit ridership is 
an excellent measure of effectiveness, and is proposing to use it as 
the primary transportation benefit measure for its cost effectiveness 
criterion. Estimating ridership is central to determining the number of 
vehicles that are needed, the length of trains, correctly sizing 
facilities including stations, maintenance facilities, etc. Increased 
ridership is linked to increases in the ancillary benefits of the 
transit investment, such as reduced highway congestion, vehicle 
emissions, and economic development.
    FTA agrees both peak and off-peak ridership should be included in 
the cost effectiveness calculation and is proposing to use cost per 
trip on the project as the measure. FTA believes ridership is more 
useful than passenger miles in the cost effectiveness calculation. Many 
benefits come from simply increasing the number of passengers 
regardless of those passengers' trip length, such as reduced emissions 
due to vehicle cold starts. In addition, using passenger miles in the 
measure could insert an unintended bias against shorter, circulator-
type projects as compared to commuter rail or heavy rail projects 
serving longer distances. Mode shifts to transit are part of the 
calculation of ridership. Improved farebox recovery is important, but 
may be more a feature of fare policies than of a major transit 
investment.
    FTA believes the enhancements to other transit services in the 
region that may result from implementation of a proposed project are 
important, but are not as significant as measuring usage of the 
proposed project itself. FTA is proposing the environmental benefits 
measure capture the air quality and other environmental benefits of the 
change in transit use on a regional level. Thus, the enhancements 
gained elsewhere in the region will be captured in the environmental 
benefits criterion.
    FTA does not believe the efficacy of the fare collection system is 
a performance based outcome that should be considered in the cost 
effectiveness measure. FTA's evaluation of the financial plan considers 
whether it includes a reasonable estimate of the fare revenue generated 
by the project.
    FTA does not believe a combination of qualitative and quantitative 
measures for cost effectiveness is appropriate. Rather, a single 
quantitative measure will provide an objective basis on which to judge 
project merit.
    FTA believes it is appropriate to calculate cost effectiveness 
based on the corridor in which the project is located. This will help 
focus attention on the project itself. Assessing project-related 
ridership is a good way to isolate the impacts of the project and to 
provide a basis for comparing projects around the country.
b. Transit Users
    Comment: A number of comments proposed quantification of transit 
user experiences or consideration of additional types of user 
experiences as part of cost effectiveness. Some comments supported 
evaluation of riders' productivity while riding transit and three 
suggested quantifying or monetizing productivity. One comment observed 
this evaluation would provide more information about how people make 
their travel choices and the value of a transit investment, and another 
noted that more commuters are performing work during their commutes.
    Several comments proposed elements of the transit passenger 
experience. A few of these comments focused on convenience, comfort, 
and other personal and social factors. Others focused on improved 
service attributes, such as increased frequency. Another comment 
recommended consideration of travel time reliability.
    Response: FTA believes it is more appropriate to focus on usage of 
the project in the cost effectiveness calculation. Improvements in the 
travel experience are likely to produce increased ridership and thus 
will be captured by the proposed approach. Factors like comfort, 
convenience, frequency of service, and travel time reliability all 
factor into the number of riders attracted to the project.
c. Project Planning
    Comment: Several comments proposed the inclusion of various 
measures of project planning elements in cost effectiveness. One 
comment recommended discouraging duplicate transit investments (such as 
parallel bus rapid transit and heavy rail lines), as overlapping 
projects may garner fewer riders and thus be less cost effective. One 
comment proposed that transit plans be consistent with transit market 
research, particularly with respect to travel time competitiveness, as 
the planning process needs to consider factors that can induce mode 
shifts in order for projects to be successful. Another comment proposed 
that projects including traffic signal priority receive cost 
effectiveness credit and that slow and circuitous alignments in 
downtown areas be discouraged.
    Response: FTA believes the cost effectiveness measure should focus 
on the performance of the project itself, as reflected in the number of 
trips taken on the project. The existence of transit services competing 
with the proposed investment should affect the estimated ridership on 
the proposed project. Projects should be developed based on an 
understanding of local travel markets. Projects with traffic signal 
priority and without slow, circuitous routing should have higher travel 
speeds and result in additional ridership.
d. Access
    Comment: A large number of comments proposed the cost effectiveness 
measure encompass access improvements to residential and employment 
areas. Approximately half of these comments specified types of access 
improvements to consider, suggesting access improvements to employment, 
services, or education, and special events.
    A couple of comments provided rationale for including access 
improvements. One observed that access improvements are the type of 
benefit that can result from a transit project; another noted that such 
improvements help to reduce VMT. As justification for an employment-
based measure, one comment noted job access is predictive of ridership 
and that employment data is readily available. Another comment 
justified evaluating accessibility in terms of capital cost given that 
approach's similarity to the structure of the current cost 
effectiveness measure.
    A number of comments proposed specific measures of access 
improvements. Several proposed evaluating changes in the number or

[[Page 3865]]

regional share of residents or jobs within a certain radius of 
stations; a couple of these also recommended evaluating the project 
capital cost per additional household or job. A small number of 
comments proposed travel time based measures, with one centered on the 
distance that could be traveled by transit within a certain amount of 
time and the other on the project capital cost per additional household 
that would fall within a certain transit travel time of a large 
employment center. One comment recommended evaluating whether transit 
travel times between residential and employment concentrations are 
competitive with those of driving, and another suggested defining 
accessibility in terms of improved ability to reach destinations via 
transit. One comment recommended assessing the reduction in long-
distance automobile travel associated with improved access.
    One comment proposed that accessibility, in conjunction with 
mobility improvements, supplant the current cost effectiveness measure. 
Another comment suggested that accessibility be emphasized over 
mobility, as local access and circulation are more closely connected to 
livability. One comment pointed to an analysis done by a firm in 
Portland that identified a methodology for evaluating other project 
benefits due to changes in land use and economic development as well as 
enhanced accessibility.
    One comment stated proper connections to destinations are obscured 
by the current cost effectiveness measure's focus on movement through, 
rather than arrival in, communities. The comment stated the arrival and 
connection piece is central to the benefits associated with reduced 
auto use.
    Response: FTA believes improvements to both access and mobility are 
key features of a good transit investment. However, developing a good, 
easily calculated measure of access has proven challenging. Although it 
is relatively easy to specify a measure such as number of jobs within a 
specified travel time of a single location, creating a broader corridor 
or regional measure including calculations to and from multiple 
locations is more difficult and complex. FTA believes a measure 
focusing on project ridership will indirectly address access 
improvements since more people will ride a project that has enhanced 
access to jobs or other important activity centers.
    FTA appreciates the suggestions made on ways to evaluate 
improvements in access. FTA agrees a measure that defines accessibility 
instead of mobility might be a better representation of the kind of 
benefits transit projects are intended to produce. As noted, however, 
it has proven very difficult to measure. Focusing on the way a transit 
project can enhance an individual's ability to get places, rather than 
just travel faster, is a desirable outcome of the evaluation process. 
FTA intends to continue to explore how best to do so.
e. Mobility Improvements
    Comment: Several comments advocated that cost effectiveness 
encompass mobility benefits. Each comment endorsed consideration of 
mobility improvements under cost effectiveness, but did not specify 
particular benefits. One of these comments noted general mobility 
improvements may be more important than VMT reductions in transit-rich 
areas with low automobile use. Another comment recommended defining 
mobility as improvements in the ability to travel between destinations. 
Two comments proposed special-event ridership increases associated with 
an investment.
    One comment proposed that mobility, in conjunction with 
accessibility improvements, supplant the current cost effectiveness 
measure. Another stated that mobility, not environmental benefits or 
economic development effects, should be a key project goal.
    Response: As noted, FTA believes mobility and access improvements 
are important outcomes of transit investments. FTA also believes 
measuring the trips taken on a project can help capture the 
improvements in mobility that will occur, given that increases in 
utilization are likely to be the result of improved mobility. FTA notes 
that trips made on the project to attend special events (concerts, 
sports events, etc.) can be counted in the current measure of cost 
effectiveness. FTA is proposing to continue to allow inclusion of these 
trips.
    FTA agrees mobility is an important outcome of a proposed 
investment, but notes that it is not the only benefit--changes in 
travel patterns due to a proposed project can produce significant 
environmental benefits. It is appropriate to consider them explicitly 
in the evaluation of project justification to improve the overall 
evaluation process and reduce disincentives to incorporating 
environmentally-sensitive features in the project.
f. Equity Benefits
    Comment: A large number of comments proposed equity benefits be 
included in the cost effectiveness measure. Several of these comments 
supported consideration of social equity, with one centered on 
affordable housing and transportation options, noting that recent 
foreclosures disproportionately occurred in areas with high housing and 
transportation costs. One comment proposed FTA consider as measures a 
project's total cost impact on household budgets across income levels 
so as to capture differential impacts. Another comment proposed a 
forthcoming Brookings Institution--Harvard JFK School of Government--
Urban Land Institute index to gauge the social equity of walkable 
environments.
    A number of comments proposed consideration of benefits to persons 
with disabilities, senior citizens, and lower-income populations 
(sometimes called ``transit dependents,'' because some have no other 
transportation choice, such as an automobile, available to them). 
Approximately half of these suggested measuring the number of low-
income households within a certain radius of stations. A few comments 
proposed measuring housing and transportation costs for transit 
dependents, including affordability improvements that result from a 
project in conjunction with affordable housing policies. One comment 
proposed evaluation of employment access improvements, both immediate 
and longer-term, for low- to moderate-income individuals. Finally, one 
comment recommended FTA develop qualitative measures to reflect the 
distinct nature of benefits to transit dependents.
    One comment proposed both a cost effectiveness credit for transit 
projects that include retrofitting of existing stations for Americans 
with Disabilities Act (ADA) compliance and a requirement that projects 
not negatively affect existing bus service.
    One comment proposed consideration of whether the project provides 
efficient school transportation.
    One comment suggested FTA require projects include community labor 
agreements, community participation processes, and disadvantaged 
business set-asides.
    Response: FTA agrees equity concerns are important in evaluating 
projects. FTA believes by giving added weight to trips taken by transit 
dependent riders, one aspect of equity can be addressed in its measure 
of cost effectiveness. Other aspects of equity can be addressed 
primarily in the other evaluation measures, rather than in cost 
effectiveness, because these concerns do not relate to the performance 
of the project. In particular, FTA believes the degree to which plans 
and policies

[[Page 3866]]

related to affordable housing are in place is better addressed in the 
economic development effects criterion, since changes in development 
patterns and land values lead to lack of affordable housing. Further, 
FTA is proposing that changes in access for transit dependent 
individuals be part of the mobility improvements measure. FTA believes 
the other proposed equity measures may be unnecessarily complex or 
difficult to understand, and are unlikely to produce any additional 
information about project merit that is superior to the simpler measure 
of project trips made by transit dependent riders.
    FTA believes retrofitting for Americans with Disabilities Act 
compliance is not a measure of project performance, but rather a 
requirement for compliance with Federal law and regulation that should 
be addressed by the project sponsor whether or not they implement the 
proposed project. FTA notes the current approach to assessing local 
financial commitment includes an examination of whether the proposed 
project can be implemented without a detriment to the current level and 
quality of existing transit services. Furthermore, FTA notes that fare 
and service equity analyses are required by FTA's Title VI circular to 
ensure that disadvantaged populations are not adversely impacted.
    FTA is prohibited by law from funding projects that provide 
exclusive school bus transportation. Thus, the degree to which a 
project provides any school service is not an appropriate measure.
    FTA does not believe community labor agreements, community 
participation processes, and disadvantaged business set asides are 
aspects of project performance. Compliance with requirements in these 
areas is, nonetheless, a prerequisite for ultimate approval of Federal 
funding for a New Starts or Small Starts project.
g. Reduced Vehicle Use
    Comment: A number of comments proposed that reductions in VMT or 
vehicle trips (or slower growth of either) associated with a transit 
investment be included in the cost effectiveness measure. Approximately 
one-third noted such benefits result from increases in transit 
accessibility, mixed-use development, and non-motorized travel. A small 
number stated VMT is closely related to energy use and emissions, which 
transit projects should seek to reduce. One asserted VMT reductions 
constitute one of the most important benefits that can result from a 
transit project, and another comment observed VMT reductions are a 
community benefit that is not currently captured under the cost 
effectiveness measure.
    In terms of VMT data collection, one comment suggested readings of 
household vehicles' odometers could be obtained in collaboration with 
EPA and other Federal agencies.
    Response: FTA believes changes in VMT are an important benefit of a 
proposed transit investment. However, FTA believes the primary measure 
of effectiveness used in the cost effectiveness calculation should 
focus on the usage of the project rather than a secondary effect such 
as changes in VMT. Instead, FTA believes that the environmental 
benefits produced by changes in VMT should be counted in the 
environmental benefits measure. FTA believes the best approach for 
estimating changes in VMT resulting from implementation of the project 
is to base the estimate on the number of trips expected on the project, 
multiplied by simple factors, so as not to create undue burden on 
project sponsors. Thus, collection of direct data on automobile travel 
would not be necessary.
h. Congestion and Non-Transit Travel Time Reductions
    Comment: A large number of comments addressed inclusion of 
congestion and travel time reductions in cost effectiveness, with most 
of these recommending highway travel time reductions be quantified. 
Several comments suggested project-specific projections replace the 
current 20 percent user benefit allowance for highway travel time 
savings. One indicated the travel time savings should be fairly 
straightforward to determine since travel demand models produce speed 
and volume estimates for highway network links, while another suggested 
that reductions should be possible to determine through surveys. One 
comment cautioned that the reliability of models' travel time 
projections should be ensured first. Several comments supported 
inclusion of congestion or travel time reductions without providing 
further detail. A small number of comments alluded to general travel 
time reductions, one specifically mentioning the corridor level. One 
comment referred to congestion reduction as an efficiency benefit of a 
project.
    A few comments specified measures beyond travel time reductions, 
with two proposing travel time savings be monetized, one via the value 
of conserved fuel. Another comment proposed evaluating project cost per 
hour of reduced delay. As rationale, one comment observed that public 
transportation saves Americans hundreds of millions of hours of 
congestion each year.
    Response: FTA agrees reduction in highway congestion can be an 
important benefit of a transit investment. However, FTA's recent 
experience is that it is extremely difficult to quantify reductions in 
highway travel time using current models. Although the models purport 
to estimate speeds and volumes, FTA has been unable to get reliable 
estimates of changes in aggregate highway user travel time and thus has 
not counted such benefits, even though the current regulation has 
called for their inclusion. FTA believes a direct measure of project 
utilization can provide a useful surrogate for estimates of highway 
user travel time savings, since the more the project is used the more 
highway travel time savings are likely to occur.
    Given the difficulty in obtaining reliable estimates of highway 
travel time savings, it would not be practical to calculate their 
monetary value either due to time saved or fuel saved.
i. Transportation Costs
    Comment: A large number of comments endorsed consideration of 
reduced transportation costs as part of the cost effectiveness measure. 
Many of these comments proposed infrastructure cost savings associated 
with a transit project, particularly in terms of roadway expansion and 
maintenance, be incorporated into the cost effectiveness measure. About 
half of these comments cited denser, more compact development patterns 
around transit stations as critical to realizing these savings, while 
one also cited mode shifts to transit as a factor. One comment proposed 
capital assets (such as buses) that will be replaced through a transit 
project be credited toward the project cost. Several comments proposed 
consideration of vehicle operating cost reductions associated with 
shifts to transit, such as lower parking, insurance, and fuel costs. 
One comment proposed a lower rate of automobile ownership as a benefit.
    Response: FTA agrees reductions in aggregate transportation costs 
can be an important benefit of a proposed project. FTA believes, 
however, that these can be captured well by a measure focusing on 
project utilization (such as project trips), as the more a project is 
used, the more the savings of such costs there are likely to be. 
Savings in the costs of other investments may also be important, but 
FTA believes it is more important to focus on the project's specific 
cost and benefits, rather than bringing in the

[[Page 3867]]

relative reduction in the costs of other modes. FTA agrees denser, more 
compact development can be supported by a transit investment, but 
believes it is better to account for such benefits in the measure of 
economic development. FTA is proposing, at the option of the project 
sponsor, indirect changes in VMT resulting from changes in development 
patterns may be estimated, and the resulting environmental benefits 
calculated, monetized, and compared to the annualized capital and 
operating cost of the project under the economic development criterion.
    FTA is proposing a measure in which the capital cost of the project 
is counted in the cost effectiveness measure. Reductions in investments 
in other modes can be accounted for in the assessment of local 
financial commitment. FTA agrees reduced private vehicle operating and 
ownership costs can be an important benefit of transit projects. But 
FTA believes a direct measure of project utilization can be an 
appropriate surrogate for these benefits as the more a project is used, 
the more such savings are likely to accrue to transit patrons.
j. Safety Benefits
    Comment: Several comments proposed safety benefits associated with 
a transit project be measured as part of cost effectiveness, with five 
of these proposing consideration of traffic collision reductions. 
Approximately half of these comments suggested measures: one 
recommended evaluating cost reductions associated with decreases in 
collisions, another recommended assessing project cost per life saved, 
and a third proposed monetizing benefits associated with collision 
reductions.
    A small number of comments proposed consideration of the safety 
benefits to the general transportation network and not just the 
project, with one in favor of monetizing the safety improvements and 
another stating that improvements would result from fewer distracted 
drivers on the road.
    One comment proposed consideration of transit passenger safety but 
offered no elaboration.
    Response: FTA agrees safety improvements are an important benefit 
of a proposed project. FTA is proposing to consider such improvements 
as part of its environmental benefits criterion. FTA is proposing to 
estimate the change in accidents and fatalities based on standard 
factors related to change in VMT.
k. Non-Motorized Travel
    Comment: A number of comments proposed FTA consider increases in 
non-motorized travel as part of the cost effectiveness measure. A small 
number of the comments observed that higher levels of walking and 
bicycling are associated with lower obesity, better public health, more 
human interaction, and increased sense of community. One comment 
offered that more non-motorized travel is the type of benefit that can 
result from a transit project. Another comment suggested promoting non-
motorized travel may be more beneficial than VMT reduction in transit-
rich areas with low auto use.
    A few comments proposed projected changes in mode split as a 
measure. Some comments proposed credit for locating stations in areas 
with existing bicycle and pedestrian infrastructure, with one noting 
that better access for pedestrians and bicyclists will increase transit 
use.
    One comment proposed project sponsors be required to demonstrate 
connections between existing or projected land uses and pedestrian 
travel.
    Response: FTA agrees transit investments often lead to increases in 
non-motorized travel. FTA is proposing to assess the benefits of 
increased non-motorized travel as part of the environmental benefits 
criterion.
l. National Security
    Comment: A small number of comments supported inclusion of national 
security benefits associated with transit investments in the cost 
effectiveness measure. One proposed measuring reduced fuel consumption 
associated with shifts from single-occupant vehicles to transit, and 
another recommended considering whether projects provide viable options 
to ``escape'' from traffic.
    Response: FTA agrees a reduction in the use of fuel connected with 
a transit investment could have national security benefits, but 
believes this is better captured under the environmental benefits 
criterion than under cost effectiveness. FTA is proposing to calculate 
the monetary value of the energy usage changes that come from changes 
in VMT using standardized values. FTA notes a significant part of the 
benefits that come from reducing energy use are accounted for by the 
resulting change in pollutant and greenhouse gas emissions. To avoid 
double counting, the monetary value of energy usage changes will be 
factored down by some percentage specified by FTA in future policy 
guidance.

Simplified Measures

Cost Effectiveness Question 4: ``Are there simpler measures of cost 
effectiveness that FTA could use? If so, what are they? Please be 
specific.''
    Comment: Several comments supported simplified measures in general, 
with one stating that the evaluation and rating process needs more 
transparency, clarity, and ease of understanding. Another comment 
generally stated the measurement of cost effectiveness should be 
comprehensive and reflect the value of the transit investment in 
meeting Federal and local goals. One other comment stated FTA should 
work with EPA for VMT and emissions data and further consolidate 
existing Federal data. Although some comments were received in support 
of a simplified measure of cost effectiveness with no specific proposal 
as to what measure should be used, most comments offered proposals for 
specific measures.
    Response: FTA agrees with the importance of transparency, clarity, 
and ease of understanding and is proposing what it believes is a cost 
effectiveness measure that will meet these goals. FTA also agrees the 
cost effectiveness measure should be as readily comprehensive as 
possible. FTA intends to work with EPA to ensure consistency in its 
valuation of air quality benefits in the environmental benefits 
criterion.
1. Cost Per Rider or Passenger Trips
    Comment: A number of comments supported using a cost effectiveness 
measure that would compare costs to ridership or passenger trips 
instead of the current measurement, which compares costs to 
transportation system user benefits (expressed as travel time savings). 
A few of these comments specifically supported cost per rider. Of these 
comments, one comment specified the cost per rider measure should be 
weighted for average distance traveled instead of travel time savings. 
Thus, based on this comment's suggestion, two riders that travel one 
mile would be given equal weight to one rider that travels two miles. 
Another comment suggested the use of cost per rider would remove any 
bias of one mode over another. Finally, one comment suggested FTA 
should evaluate projects based on their ridership per mile of service 
provided in order to create a more level playing field for projects 
that have high capital construction costs due to their location in 
dense urban areas.
    Two comments specified the cost effectiveness measure should be 
based on total number of trips, not passenger miles. In one, the 
rationale was that the

[[Page 3868]]

``benefit'' to the rider is the trip itself, and not the length of the 
trip. In the other case, the rationale was that it would provide an 
incentive for project sponsors to propose projects in urban core areas 
instead of lengthy projects between the central business district and 
distant suburbs. One comment specified this measure should be used only 
for Small Starts projects in order to further simplify the evaluation 
process for the Small Starts program. Another comment specified the 
cost effectiveness measure should be based on cost per new passenger.
    Response: FTA agrees cost per rider is an appropriate way to 
evaluate cost effectiveness. FTA does not believe it is appropriate to 
weight or otherwise adjust for the costs of construction in a 
particular area since it is necessary to compare projects across the 
country. FTA believes it is better to use a cost per trip measure 
rather than a cost per new rider measure. FTA used cost per new rider 
prior to using the current measure of cost per hour of travel time 
saved. It posed many of the same complexities as the current measure 
and created a bias against projects improving service for existing 
riders in favor of projects capturing new transit riders. In 
particular, it would require a point of comparison for its calculation 
(the baseline alternative) while the cost per trip measure being 
proposed does not.
2. Other Proposals for Simplification
    Comment: FTA received a number of other comments with specific 
proposals for simplification of the cost effectiveness criterion. Those 
comments are detailed here.
    One comment suggested FTA use a ``walkscore'' as a measure to 
account for the livability of a transit project, and include this 
livability factor in the calculation of cost effectiveness. According 
to the comment, walkscore.com is a Web site that uses an algorithm to 
measure the walkability of an address. The comment suggests FTA develop 
a walkscore-type rating to measure the livability of a project corridor 
before the project is implemented. In addition, the comment suggests 
FTA require project sponsors to bring their walkscore to an acceptable 
level before implementing a proposed project.
    One comment suggested that a simpler cost effectiveness measure 
would be based on VMT, modal spilt, and health outcomes.
    One comment suggested a simpler measure of cost effectiveness for 
Small Starts projects that would be calculated by dividing annualized 
cost by the sum of economic development benefits, mobility benefits 
(defined as the number of transit riders), and a measure of land use.
    One comment suggested cost effectiveness be based on the difference 
in safety and the value of productivity that is inherent in taking 
transit as opposed to driving (e.g., the productivity increase that 
would result from the ability to text, email, and talk on the phone).
    One comment suggested cost effectiveness be based on operating cost 
per rider or operating cost savings per rider (compared to the no build 
or TSM), ridership (giving credit to short trips), and some annualized 
measure of capital cost (but not making cost the main focus).
    Another comment suggested the sole or primary factor for project 
evaluation should be incremental revenue passenger mile created divided 
by dollar amount of Federal capital provided. The comment said the 
number of riders should not affect the Federal government's decision on 
whether to invest in the project.
    One other comment suggested one way to compare projects across 
cities is to use a radar plot for a variety of indicators, some of 
which reflect cost effectiveness, others of which reflect other factors 
such as safety, punctuality, reliability, and crowding.
    Response: FTA appreciates the suggestions for alternative 
approaches to measuring cost effectiveness. However, FTA believes a 
simple measure of cost per trip is preferable to those suggested. 
Improvements in walkability are an important feature of many transit 
projects. However, the measure suggested would add a degree of 
complexity that does not appear to improve the degree to which the 
merits of a project would be indicated.
    FTA agrees changes in VMT, increased transit mode split, and health 
outcomes may be important benefits of a transit investment. All of 
these are related to project usage, which is a simpler measure to 
calculate and understand. Furthermore, these are proposed to be 
estimated under the environmental benefits criterion, monetized, and 
compared to the annualized capital and operating cost of the proposed 
project under that criterion rather than under cost effectiveness.
    FTA believes monetizing forecasts of economic development may be 
simple in concept, but very difficult to evaluate in practice. 
Difficult evaluation approaches would be needed to quantify the 
economic development effects in any reliable detail, and providing 
monetary values is not an easy task. FTA prefers an approach that 
allows project sponsors to devote resources to calculating and 
monetizing economic development effects only at their discretion, using 
scenario-based approaches, rather than requiring specific forecasts.
    FTA agrees there are benefits from transit projects that come from 
changes in VMT and is proposing to measure some of those benefits under 
the environmental benefits criterion. Under the multiple measure 
approach for evaluating project justification, FTA need not try to 
capture all benefits in the cost effectiveness calculation and can 
instead evaluate them where they might more rightly belong.
    FTA agrees capital and operating costs should be part of the cost 
effectiveness measure. But FTA believes a simple measure of project 
usage is sufficient as the measure of effectiveness.
    FTA does not agree with the comment that ridership is an 
inappropriate measure of project merit. Ridership is likely to be 
directly related to many of the benefits a project is likely to 
produce, since the more riders on a project, the more there will be 
changes in VMT, changes in energy use, higher likelihood of economic 
development, etc. Changes in passenger revenue are likely to be based 
to a large degree on the fare policies in place, rather than on the 
benefits a project is likely to produce.
    FTA is proposing a cost effectiveness measure that can combine a 
simple measure of effectiveness (trips) and compare it to costs. The 
law calls for a multiple measure approach, indicating these other 
benefits should be assessed separately, so all of the benefits can be 
included in the evaluation of project justification.
3. Support for Existing Measure
    Comment: A few comments were received in support of the current 
cost effectiveness measure, which is based on cost per hour of 
transportation system user benefits (TSUB). One comment stated that 
TSUB accounts for benefits that cannot be captured by basing the 
measure on ridership alone. In that comment's opinion, the use of TSUB 
allows project sponsors to accurately account for travel time savings 
and it enables transit agencies and MPOs to better calibrate their 
travel demand forecasting models, which are used for purposes other 
than applying for New Starts funding. One comment wants FTA to continue 
to use TSUB but to also allow project sponsors more flexibility in the 
development of costs and benefits (e.g., allowing a project

[[Page 3869]]

sponsor to take into account growth in pedestrian trips). Another 
comment stated the current measure is predictable, objective, and 
provides a comparison of different projects. That comment stated it is 
appropriate for projects that are utilizing large amounts of Federal 
discretionary funding, and that the use of a simplified measure would 
be more subjective, thereby creating more unpredictability for project 
sponsors.
    Response: FTA agrees the current measure has merit in that it 
accounts explicitly for benefits to transit system users. It has met 
with resistance from project sponsors, though, because it requires 
comparison to a baseline alternative. Further, it has proven to be 
nearly impossible to include highway user travel time savings in the 
calculation, which was the original intent. TSUB focuses attention only 
on direct mobility improvements. While these are extremely important, 
they are not the only reason why transit investments are made. FTA 
agrees the current measure is objective and quantitative. However, its 
accuracy depends on the quality of the local travel demand forecasting 
process and how the baseline alternative is defined. Often, FTA and 
project sponsors have had to spend significant amounts of time and 
resources to improve models to the point where they will produce 
forecasts sensitive enough to the project being proposed. FTA believes 
a simplified measure will make it possible to use simpler forecasting 
techniques, including an FTA-developed national model. FTA agrees it is 
important decisions regarding how to allocate large amounts of Federal 
discretionary funding be based on the best possible information and is 
not proposing a simplified cost effectiveness measure to make access to 
federal funds easier. FTA does not believe use of simplified measure 
will be any less objective than the current approach. In fact, by 
having a measure based on absolute usage of the project (trips) rather 
than an incremental value of travel time savings compared to an 
artificial baseline alternative, the impact of changes in project costs 
or characteristics on the cost effectiveness measure are likely to be 
more predictable.

C. Environmental Benefits

Measuring Environmental Benefits

Environmental Benefits Question 1: ``How might FTA better measure 
environmental benefits?''
    Comment: FTA received numerous comments that supported a new 
approach for assessing the environmental benefits of New Starts 
projects.
    Response: FTA agrees a new approach is required and is proposing 
several new measures.
1. Comments on the Existing Measure
    Comment: A few comments agreed with FTA that the existing 
environmental benefits measure is not useful in distinguishing between 
projects and needs to be replaced. Another comment mentioned that using 
the EPA's air quality conformity designation was not a useful measure 
because the area in which the commenter resides does not have air 
quality concerns. If FTA opts to keep the regional air quality 
conformity designation as the measure for environmental benefits, 
another comment added FTA should allow regions to provide information 
on progress that has been made to improve regional air quality and take 
credit for these actions.
    Response: FTA agrees the existing measure, which examines only the 
EPA air quality conformity designation for the area in which the 
proposed project is located and does not look at any project specific 
environmental benefits, does not provide a useful basis for decision-
making. FTA believes air quality improvements are an important 
environmental benefit resulting from transit investments, however, 
whether or not a particular area has air quality conformity issues. FTA 
currently gives proposed New Starts projects located in non-attainment 
areas a ``High'' rating for environmental benefits. Thus, the 
suggestion FTA use the existing measure but give additional credit to 
regions that have made progress on improving regional air quality is 
not possible since the projects are already receiving the highest 
rating possible. Further, progress that an area has made toward 
improving air quality from actions other than the proposed transit 
investment does not help to evaluate the merits of the proposed 
project. Thus, FTA does not believe this should be part of the 
evaluation. FTA is proposing to estimate emissions reductions resulting 
from changes in VMT due to implementation of the project and then 
assign monetary values to the benefits based on the current EPA air 
quality designation for the metropolitan area in which the corridor is 
located, with benefits gained in a non-attainment area being worth more 
than benefits gained in an attainment area.
2. Data Reliable and Easily Obtained
    Comment: While most comments generally supported a new 
environmental benefits measure, comments also expressed concern about 
the potential burden on project sponsors from collecting and submitting 
data not previously requested as part of the New Starts process. 
Several comments stated that the environmental benefits criterion 
should be simple, readily understood without specialized environmental 
expertise, should not require arduous new data collection, and should 
emphasize the use of data already collected for other purposes or 
easily attainable.
    Response: FTA is particularly concerned that any measures used to 
calculate environmental benefits not pose an undue burden on project 
sponsors. FTA is proposing measures that flow directly from the project 
analysis methods normally used by project sponsors, as well as 
simplified approaches for calculating environmental benefits.
3. Incorporation of Environmental Benefits Into Other Metrics
    Comment: One comment recommended the environmental benefits measure 
be eliminated as a stand-alone measure and instead be added to the 
economic development effects measure to reflect the importance of 
economic renewal objectives. Another comment stated it is too difficult 
to separate environmental benefits from economic development effects 
and that those metrics should be combined into a single measure. One 
comment supported replacing all metrics (including cost effectiveness, 
environmental benefits, and economic development effects) with an 
affordability index metric presented in a report by the Center for 
Transit Oriented Development.
    Response: The law requires a multiple measure approach and that FTA 
consider environmental benefits and that they be weighted ``comparably, 
but not necessarily equally'' with the other statutorily-required 
project justification criteria. Thus, the environmental benefits 
criterion must be treated distinctly from the economic development 
effects criterion. In particular, environmental factors such as 
improved air quality, reduced greenhouse gas emissions, reduced energy 
use, safety improvements, and public health benefits are all distinct 
from economic development effects such as enhanced regional 
productivity and support for job creation. Some of the economic 
development effects of public transportation investments, including 
denser, more compact development, have environmental benefits due to 
the resulting reduction

[[Page 3870]]

in the need for motorized travel. FTA is proposing at the option of the 
project sponsor, indirect changes in VMT resulting from changes in 
development patterns may be estimated, and the resulting environmental 
benefits calculated, monetized, and compared to the annualized capital 
and operating cost of the project under the economic development 
criterion. FTA recognizes compact development may have other 
environmental benefits not accounted for in changes in VMT, but FTA is 
not proposing a measure to quantify those benefits. FTA will also 
propose, in policy guidance, to incorporate a measure of public health 
into the environmental benefits measure, once a methodology for 
measuring public health benefits of transit projects is developed.
    Because the law calls for individual evaluation and comparable but 
not necessarily equal weighting of each of the project justification 
criteria (cost effectiveness, environmental benefits, economic 
development, mobility, transit supportive land use, and operating 
efficiencies), FTA must develop a process for each, rather than using a 
metric such as the affordability index.
4. Consideration of Transit Agency Size, Project Setting, and Project 
Size
    Comment: One comment encouraged FTA to employ environmental 
benefits measures that provide a fair and equal comparison among small, 
medium, and large transit agencies that have different capabilities and 
needs with regard to certification and extensive environmental 
management systems. A couple of comments stated FTA should not choose 
measures that penalize project sponsors seeking to make transit 
investments in dense urban environments compared to project sponsors 
making investments in suburban, less dense areas or vice versa. Another 
comment suggested FTA should consider a scaled approach to 
environmental benefits analysis based on the size of the proposed 
project.
    Response: FTA agrees environmental benefits measures should be fair 
and equitable and should not burden agencies with varying capabilities. 
FTA is proposing the environmental benefits criterion include an 
evaluation of a proposed project's effect on several factors including 
changes in emissions, greenhouse gases, safety, energy use, and public 
health, which would then be monetized and compared to the annualized 
capital and operating cost of the proposed project. FTA is aware that 
how a measure is scaled is very important to ensuring beneficial 
projects are recommended for funding.
5. Consideration of Local versus Regional Context
    Comment: Several comments discussed the context that should be used 
to evaluate environmental benefits. Many comments expressed a 
preference for a local rather than a regional environmental benefits 
analysis. One comment stated the environmental benefits rating should 
be based on the project's scope, consistency with local goals, and how 
well it avoids, minimizes, and mitigates environmental impacts. The 
comment added the environmental benefits measure should include the 
extent to which the proposed project includes context sensitive 
solutions that support fitting the project into the community. Under 
this approach, the comment stated each locality would have its own 
goals for a project so it is important that the project achieves those 
local planning goals. A few comments stated FTA should consider the 
environmental benefits of the project in the context of the immediate 
surrounding area. The comment suggested evaluating broader conditions 
in the region or the transit agency's environmental practices is less 
likely to assist FTA in ranking projects. One comment suggested it may 
be possible for a project sponsor to make the case that certain 
environmental benefits be given higher priority than others based on 
existing environmental conditions within a region and the project's 
ability to contribute to a solution. Another comment stated FTA should 
not have a pre-set weighting nationally on one attribute over another.
    Other comments suggested FTA should give credit to areas that have 
implemented major projects in support of green initiatives.
    Response: FTA believes the amount of environmental benefits 
generated by the proposed project should be the basis for its 
evaluation. Thus, the analysis should focus on the project itself. 
Since it is the quantity of the benefits resulting from implementation 
of the project that will be evaluated, rather than what percentage 
these benefits represent in some larger context, it does not matter 
whether they are viewed at a regional or local level. As noted earlier, 
FTA understands that how the measures are scaled is critical to 
assuring that environmental benefits are evaluated accurately.
    FTA believes it is more appropriate to use the National 
Environmental Policy Act (NEPA) process to assess how a project's 
environmental impacts fit into a local or regional context rather than 
considering this in the environmental benefits criterion in the New 
Starts process. While locally established environmental goals for a 
project are important, FTA must address the merits of proposed projects 
on a national basis. For consistency, fairness, and to avoid 
unnecessary complication in the evaluation process, FTA must develop 
measures that will be applied to all proposed projects.
6. Project Specific Impacts
    Comment: One comment stated the environmental benefits criterion 
should be limited to measuring the impacts of the project as opposed to 
the transit agency's policies.
    Response: FTA agrees the environmental benefits criterion should 
measure the impacts resulting from implementation of the proposed 
project. FTA is proposing to remove a disincentive for including 
environmentally friendly design elements by allowing the costs of these 
elements to be subtracted from the cost used in the cost effectiveness 
calculation.
7. Consideration of NEPA and the Environmental Benefits Measure
    Comment: A number of comments provided positive and negative 
statements on linking the environmental impacts assessed during the 
NEPA process with the environmental benefits criterion.
    One comment suggested the benefits that would be derived from 
taking steps to address additional environmental sensitivity should be 
included in a comprehensive qualitative and quantitative environmental 
benefits criterion. The comment went on to state that evidence of 
environmental sensitivity can come from a review of the impacts 
identified in the NEPA document and any state environmental document, 
and the extent to which these impacts have been mitigated or avoided. 
Another comment said the environmental benefits criterion should 
consider a project's ``net'' benefits by considering some of the 
adverse environmental impacts. For example, projects with equal air 
quality benefits would be rated similarly even if one project was 
overall more environmentally detrimental than another when looking at 
other factors in addition to air quality. The comment suggested that 
information addressed through NEPA should be addressed in the New 
Starts process.
    Other comments stated there are impacts and benefits best evaluated 
in NEPA and not through the New Starts evaluation process. A couple of 
comments stated there is no need to duplicate reporting of negative 
impacts

[[Page 3871]]

covered in NEPA because they have already been analyzed and mitigated. 
Instead, comments suggested the environmental benefits criterion should 
focus on positive benefits and especially those with long-term effects 
such as potential changes to the built form that reduce the frequency 
of motorized trips. Another comment stated that inclusion of all the 
factors traditionally covered as part of NEPA analysis would be too 
broad for inclusion in the New Starts evaluation process. The comment 
went on to state some factors could bias ratings based on the context 
in which the project occurs (urban versus suburban) as opposed to 
focusing the rating on actual project performance. One comment 
requested the NEPA-related analysis remain separate from the 
environmental benefits criterion because of the lack of relevant 
information available at the preliminary engineering stage of the New 
Starts process. That comment also expressed concern that integrating 
information about a project's environmental impacts into a funding 
decision could jeopardize the integrity of the NEPA process.
    Another comment suggested FTA include a 45 percent weight for NEPA-
defined environmental benefits and a 55 percent weight for project-
specific environmental benefits.
    One comment suggested using the funding incentive that comes from 
having an environmental benefits criterion in the New Starts evaluation 
process to encourage the preparation of quality analyses and 
documentation in the NEPA process. That comment suggested this would 
create an added incentive for project sponsors to submit high quality, 
focused environmental documents.
    Response: FTA agrees the NEPA process is the best venue for 
assessing all of the environmental impacts and context of a proposed 
project. However, the law requires an evaluation of the environmental 
benefits of the proposed project as part of the New Starts evaluation 
and rating process and, hence, FTA must develop an approach to assess 
these benefits.
    FTA agrees the context and intensity of many of the proposed 
project's impacts, and their mitigation, are best addressed in the NEPA 
process and do not need further assessment as part of the New Starts 
evaluation and rating process. FTA agrees long-term effects, such as 
changes in the built environment, may be part of the environmental 
benefits criterion, as well as the economic development effects 
criterion. Thus, FTA is proposing at the option of the project sponsor, 
indirect changes in VMT resulting from changes in development patterns 
may also be estimated, and the resulting environmental benefits 
calculated, monetized, and compared to the annualized capital and 
operating cost of the project under the economic development criterion. 
FTA agrees it is important the New Starts evaluation process not be 
biased against projects in one type of location versus another, such as 
urban versus suburban. FTA believes evaluation measures should focus on 
project performance and the evaluation process should not jeopardize 
the integrity of the NEPA process.
    FTA does not believe the quality of the NEPA analysis and 
documentation should play a part in the evaluation of environmental 
benefits in the New Starts process. The New Starts process should focus 
solely on project performance. While it is important high quality NEPA 
documents be produced, the quality of the documentation is not an 
indication of the merits of the project.
8. Priority and Weighting for Environmental Benefits Measures
    Comment: One comment stated FTA should focus on environmental 
performance in specific areas, giving highest weight to effects that 
potentially harm humans and lesser weight to those that harm the 
environment. The comment explained that attempts to broaden the 
environmental benefits criterion to include the human and natural 
environment are notoriously subjective, prone to political 
manipulation, and have not worked well in Europe. A couple of comments 
suggested because of the overlap of considerations of the human 
environment with other New Starts criteria, emphasis should be placed 
on natural factors rather than human factors in the environmental 
benefits criterion. However, one of those comments stated the human 
environment is still worthy of consideration under the environmental 
benefits criterion.
    Another comment recommended FTA give credit in the environmental 
benefits criterion for transit projects that increase accessibility and 
mobility for trips beyond work trips. The comment stated these types of 
transit projects are more sustainable because work trips are less than 
30 percent of VMT and only 20 percent of person trips in the United 
States.
    Response: FTA believes a full range of environmental benefits to 
both the human and natural environment should be addressed. However, 
FTA is cognizant of the difficulty of evaluating all of the potential 
effects. Thus FTA is proposing to focus on those most easily addressed 
such as changes in air quality pollutant and greenhouse gas emissions, 
energy use, and safety (FTA believes that at a later date it may also 
be possible to develop an approach for assessing public health 
benefits.). For example, while impacts on wetlands are very important, 
rather than examining that as part of the environmental benefits 
criterion, it makes more sense to carefully assess any negative impacts 
during the NEPA process and assure that those impacts are carefully 
mitigated and the costs of doing so are included the overall cost of 
the project.
    FTA agrees non-work travel is a very important component of overall 
travel. Currently, both work and non-work travel benefits are counted 
in FTA's assessment of project performance and FTA intends to continue 
this practice. But FTA does not believe it is appropriate to weight 
work and non-work travel differently. Rather, FTA believes the measures 
used should simply assess the quantities of each.
9. Qualitative Versus Quantitative Environmental Benefits Measures
    Comment: A number of comments suggested looking at both 
quantitative and qualitative environmental benefits metrics. One 
comment stated that these metrics do not need to be monetized. Another 
comment stated the rating should be indexed by ridership as an 
indicator of the scale of the benefit.
    One comment suggested that environmental benefits lend themselves 
to quantification. Therefore, that comment suggested it should be 
possible to produce a scoring system that objectively evaluates a range 
of appropriate measures.
    To address most environmental benefits, another comment added a 
qualitative rather than a quantitative approach would probably be 
needed. Another comment recommended not quantifying any environmental 
benefit measures other than possibly developing a checklist format.
    Response: FTA believes it is possible to develop effective, 
relatively easy to apply quantitative measures and so proposes their 
use. FTA proposes that environmental benefits such as change in 
emissions, green house gases, energy use, and safety be estimated based 
on estimated change in VMT, then monetized and compared to the 
annualized capital and operating cost of the proposed project. Proper 
scaling is critical to a fair comparison of environmental benefits 
across projects. FTA prefers to evaluate environmental benefits 
directly rather than develop

[[Page 3872]]

scoring methods, such as a checklist approach in which certain 
environmental measures are assigned points.
10. Other General Environmental Benefits Suggestions
    Comment: One comment suggested the best way for environmental 
benefits to be measured is to use heuristic research to look at the 
history of other projects and study whether they met environmental 
needs when they were constructed and what has occurred since then. One 
comment suggested FTA should look at the upcoming results from the 
Transit Cooperative Research Program (TCRP) panel on environmental 
benefits and implement those recommendations. That comment suggested 
the recommendations will include significant research and review by 
experts in the field.
    Response: FTA believes methods exist to translate direct benefits 
of project performance, such as forecast changes in VMT, to quantities 
of environmental benefits. Because there is already a broad array of 
literature and research available, FTA is not proposing new research. 
As new research and methods become available, FTA would consider 
applying them in future policy guidance for measuring environmental 
benefits. FTA wrote the problem statement for the TCRP study being 
undertaken and serves as part of the review panel. Thus, FTA agrees the 
completion of that project may provide additional assistance in this 
matter, which FTA can address through future policy guidance.
11. Proposed Approaches to Measuring Environmental Benefits
    Comment: In general, comments did not focus on a single 
environmental benefits metric. One comment stated there is no one 
universal quantifiable criterion that could be used to measure 
environmental benefits. Most comments recommended FTA consider a range 
of defined environmental benefits measures. Comments provided a range 
of recommendations for how FTA should consider the range of 
environmental benefits. Some of these comments were general statements, 
but a few comments provided specific frameworks for considering and 
rating environmental benefits. The following were the specific 
framework approaches proposed.
a. Checklist or Point Systems
    Several comments stated FTA should further consider an indexing or 
checklist approach as proposed in the summary of the March 2009 
Colloquium on Environmental Benefits. Another comment stated the 
checklist brings the environmental benefits criterion from its current 
focus only on the regional level to a project-specific level. Other 
comments added that a checklist approach is a way of incorporating 
quantitative and qualitative measures and evaluating environmental 
impacts as well as project performance. These comments stated some 
items could be mandatory and other items could be optional. One comment 
suggested a point system be assigned to each item so that FTA could 
distinguish between projects based on point totals. These comments 
suggested the checklist of good environmental practices might take the 
approach of a commitment agreement or contract document. One comment 
suggested FTA look at an evaluation/scoring tool for policies that is 
similar to what is currently used by FTA to evaluate transit supportive 
land use. As an example, the comment suggested FTA look at EPA's Water 
Quality Scorecard.
    A couple of comments suggested a point-based rating system focused 
on three major criteria: (1) Environmental Management; (2) 
Environmental and Community Enhancement; and, (3) Environmental and 
Community Preservation. This framework would rate projects based on 
representative measures under each of these criteria. The ``points'' 
awarded for each measure under each criterion would establish the 
rating of ``high,'' ``medium-high,'' ``medium,'' etc., for that 
criterion. The criteria would be rolled up into a summary environmental 
benefits rating. The environmental and community preservation portion 
would examine avoidance of endangered species and their habitat, 
inclusion of pedestrian friendly features (another comment suggested 
specifically a pedestrian oriented environment one-half mile around the 
station), and location of the proposed project in an area that has 
livable community characteristics and provides access to environmental 
justice populations (although this could go under a mobility 
criterion). The environmental and community enhancement portion would 
be based on measures such as project or corridor fleet emissions in 
terms of changes in greenhouse gas (GHG) emissions per passenger mile, 
an agency's fleet average age or composition as indicators of air 
quality and energy consumption, stations built to LEED standards, and 
maintenance facilities built to LEED standards. The environmental 
management portion would assess the project sponsor's commitment to 
environmental management of the project. Consideration would be given 
to agencies with environmental management systems (EMS) specific to the 
project or who properly document with a similar process. Another 
comment also supported the use of EMS, but said that consideration 
should be given to whether the EMS covers only the capital program 
including the New Starts project or whether it also includes the 
agency's operating system and other environmental audits.
    One comment stated FTA should consider creating a pollution 
reduction point system. The comment suggested that projects would be 
evaluated based on their ability to achieve a higher index number 
corresponding to a lower impact on the environment. This would give 
project sponsors flexibility in meeting environmental goals while 
tailoring projects to meet local needs.
b. Warrants
    One comment suggested if a more robust measure of environmental 
benefit is used in the New Starts evaluation process, than these 
benefits should be credited to the project justification rating as 
extra points rather than mandated. In a similar vein, a few comments 
suggested using a warrants-based approach to rating environmental 
benefits. Another comment added this warrants/checklist approach should 
use information readily obtained through the NEPA process. Another 
comment suggested projects should be required to meet minimum goals in 
greenhouse gas emissions reductions, increased energy efficiency, 
reduction in fleet petroleum, conservation of water, reduction in 
waste, support of sustainable communities, and leveraging of Federal 
purchasing power to promote environmentally-responsible products and 
technologies. One of these comments went on to add that a warrants-
based approach would be preferable because an indexing method would 
require weights that may be difficult for FTA to identify and a 
checklist may promote compliance to a minimal level.
c. Economic Models--Natural Resource Valuation
    One comment suggested that costs, incurred in the form of ``natural 
services'' that a project would cause to be replaced by public 
infrastructure if the project disturbed nature, be counted in the 
evaluation process. For example, according to the comment, costs of 
destroying wetlands should be assigned to projects that impact wetlands 
as opposed to projects that leave them intact. The comment suggests the

[[Page 3873]]

Krutilla-Fisher Algorithm should be used to place break-even values on 
certain environmental benefits when the net present value calculations 
are used (this is an approach used in the European Union). The comment 
stated if the value of something is high enough to bring the net 
present value of a project to zero, then the project is worth 
constructing.
    Another comment suggested the environmental benefits rating should 
include a cost-benefit analysis of environmental effects. However, 
another comment recommended FTA proceed cautiously with any approach 
that relies on monetized measurement. Another comment stated FTA should 
not attempt to monetize environmental benefits for comparison across 
projects. That comment stated the environmental benefit measures, 
including those with livability and sustainability objectives, should 
be considered apart from the cost effectiveness measure.
d. ``Warrants-Plus-Merits''
    One comment suggested FTA adopt a ``warrants-plus-merits'' approach 
where projects must meet one of several identified core measures and 
then would be scored based on how many additional environmental 
measures the project incorporates. The comment recommended FTA aim for 
simplicity over comprehensiveness.
    Specifically under the proposed warrants plus merits approach, the 
comment suggested a project must meet at least one of several warrants 
(or thresholds) to be considered further for environmental merit 
points. The comment proposed three warrants that it stated emphasize 
the two most important environmental benefits of transit--reductions in 
greenhouse gas emissions/air pollution and supporting mature, 
intensively patronized systems for which an individual extension may 
have lower marginal emissions reductions. The comment stated that FTA 
could assign overall environmental benefits scores based on whether 
projects achieve a specified threshold of merit points. The comment 
gave an example for ``high,'' ``medium-high,'' ``medium,'' ``medium-
low,'' and ``low'' thresholds. The proposed environmental warrants 
included greenhouse gas emissions reduction, air quality non-attainment 
status, and air pollution capacity issues. Proposed environmental 
merits include greenhouse gas emissions reductions, air quality 
improvement and climate change impact, recycling, water quality-related 
improvements, land use effects, integration with planning, and 
environmental justice. The comment mentioned FTA could consider ISO 
14001 certification, transit facilities associated with the project 
that have attained LEED gold or platinum standards, use of brownfields 
sites for the project, low impact construction methods, use of 
technology to reduce energy consumption, and compliance with one or 
more directives included in Executive Order 13154.
    Response: FTA does not agree a checklist or point system that 
primarily evaluates good environmental practices would be advantageous 
over relatively simple quantitative measures of environmental benefits 
that measure project performance. The simple quantitative measures can 
assess a range of human and natural environment values including 
changes in air pollutants, greenhouse gas emissions, energy use, safety 
and public health (public health would be measured once a methodology 
for doing so is developed).
    Under a point system, it is difficult to develop a weighting scheme 
assigning points based on the relative importance of various factors. 
It is also difficult to fairly establish the number of points needed to 
get each rating level (``low'' through ``high''). FTA believes there 
are better ways to remove disincentives for use of good environmental 
practices, for example, by not counting the cost of certain desirable 
environmentally friendly design features in the calculation of cost 
effectiveness. While use of environmental management systems is a 
worthy goal, the merits of the project are the focus of FTA's 
evaluation process. Some of the factors suggested for environmental and 
community enhancements are issues that should be addressed during the 
NEPA process if there are negative impacts needing mitigation. FTA 
believes some of the others factors mentioned in the comments are 
better addressed in the economic development effects criterion. FTA 
agrees that metrics such as the change in greenhouse gas emissions or 
energy use represent aspects of project performance and should be 
counted as part of a quantitative measure.
    FTA agrees warrants-based approaches can be useful in streamlining 
project evaluation. Such approaches, however, should be based primarily 
on the evaluation measures being utilized. Once these measures are put 
in place, the degree to which a project can automatically receive a 
certain rating based on characteristics of the project or the project 
corridor without detailed analysis can be established. FTA is proposing 
to develop such warrants and specify them in future policy guidance.
    FTA believes a detailed analysis of the net impacts on certain 
environmental factors is unnecessarily complicated. For example, while 
impacts on wetlands are very important, rather than using those impacts 
as part of the environmental benefits measures, it makes more sense to 
carefully assess any negative impacts on wetlands as part of the NEPA 
process and assure that those impacts are carefully mitigated and the 
costs of doing so are internalized in the overall cost of the project. 
Although a warrants-plus-merits approach has some appeal, FTA believes 
it more appropriate to focus on a quantitative assessment of the 
relative value of environmental benefits since that approach can be 
implemented relatively easily. Further, FTA intends to address possible 
incentives for taking into account broader environmentally friendly 
practices, such as ISO 14001 or LEED certification, use of brownfield 
sites, low construction impact methods, etc., by subtracting the 
additional costs of these from the cost effectiveness calculation.
Environmental Benefits Question 2A: ``In measuring environmental 
benefits, should FTA consider a broad definition of environment, as 
does the National Environmental Policy Act (NEPA), which includes 
consideration of both the human and natural environment?''
    Comment: A substantial number of comments supported expanding the 
definition of environmental benefits. Of these comments, a few stated 
FTA should consider as broad a definition of environmental benefits as 
NEPA does. A couple of comments suggested environmental benefits should 
be broad to consider the natural, human, and social environment and 
address a wide range of contexts. Another comment stated in addition to 
NEPA, FTA should use livability principles to consider a broad 
definition of the environment, which includes creating healthy 
transportation systems, achieving environmental justice, and addressing 
climate change. Another comment provided a caveat that a broad 
definition of environmental benefits should be used if it can be 
incorporated into an efficient process.
    A number of comments also recommended the negative environmental 
impacts of high-density development around projects should be assessed, 
including traffic, noise, pollution, shadowing, and wind tunnel 
effects. One comment suggested FTA should consider community quality of 
life instead of environmental issues.

[[Page 3874]]

    Response: FTA agrees an expanded definition of environmental 
benefits should be used and that it should include benefits to the 
human and natural environments. In particular, FTA will focus on air 
quality emissions, greenhouse gas emissions, energy usage, safety 
improvements, and public health benefits (public health would be 
measured once a methodology for doing so is developed). These can be 
addressed with a reasonable amount of effort and are consistent with 
broader livability principles. FTA believes environmental justice 
concerns are better addressed in the NEPA process. Environmental 
justice concerns are generally dependent on detailed considerations of 
a project's setting and design, and are thus a part of the project 
development process. They are not appropriate as a national measure of 
project merit. In addition, FTA considers transit equity and how a 
project affects the mobility of transit dependent populations in its 
evaluation of mobility benefits.
Environmental Benefits Question 2B: ``Should FTA focus on the 
environmental performance of specific areas such as air quality 
emissions, energy use, greenhouse gas emissions, or water quality?''
1. Air quality
    Comment: FTA received a large number of comments supporting the use 
of air quality changes in the environmental benefits criterion. Several 
comments expressed a preference for a ``project specific'' approach to 
assessing air quality impacts, as opposed to a regional air quality 
analysis, or suggested comparing emissions at a local level to corridor 
area emissions. Other comments suggested FTA measure the air quality 
impacts from reduced VMT, changes in land use patterns or density, 
projected average daily ridership, and reduced automobile trips 
projected to occur from implementation of the proposed project. 
Generally, those comments who supported using air quality changes felt 
that it should not be the only measure for the environmental benefits 
criterion.
    A couple of comments opposed using air quality changes as a measure 
of environmental benefits. They either opposed FTA's current approach 
to measuring environmental benefits based upon EPA's air quality 
conformity designation for the metropolitan area in which the proposed 
project is located, or they felt that air quality benefits were already 
accounted for in other measures.
    Another comment suggested the methods to evaluate environmental 
benefits also take into account the impacts from increased traffic 
congestion that might occur from construction or loss of traffic lanes 
for trucks, passenger cars, and buses due to the adoption of transit-
only lanes.
    Response: FTA agrees air quality benefits are among those that 
should be explicitly examined in assessing environmental benefits. FTA 
believes the changes in EPA-regulated pollutant emissions projected to 
occur as a result of implementation of the proposed project should be 
the primary measure of air quality environmental benefits. To avoid 
concerns about the level of analysis required FTA is proposing to 
calculate the change in emissions based on estimated changes in VMT 
resulting from implementation of the proposed project. FTA is also 
proposing at the option of the project sponsor, indirect changes in VMT 
resulting from changes in development patterns may also be estimated, 
and the resulting environmental benefits calculated, monetized, and 
compared to the annualized capital and operating cost of the project 
under the economic development criterion.
    FTA agrees its current approach, focusing only on the EPA air 
quality conformity designation for the metropolitan area in which the 
proposed project is located, is inadequate. Thus, FTA is proposing a 
series of quantitative measures to be used to measure environmental 
benefits. Since evaluation of environmental benefits is required by 
law, FTA will use changes in air quality emissions as part of its 
evaluation approach.
    Any negative effects of a proposed project on traffic congestion 
are evaluated and mitigated as part of the NEPA process. Further, FTA 
believes it would be unnecessarily complicated to attempt to address 
such effects in the air quality evaluation.
2. Greenhouse Gas Emissions
    Comment: FTA received a large number of comments supporting using 
the change in greenhouse gas emissions estimated to result from 
implementation of the proposed transit project as a measure of 
environmental benefits. A few of these comments stated FTA should 
consider change in carbon dioxide (CO2) emissions, or CO2 per passenger 
mile. Several comments recommended FTA base the change in greenhouse 
gas emissions on the change in regional VMT projected to occur from 
implementation of the proposed project. A couple of comments 
recommended FTA consider the analysis of greenhouse gas emissions as 
described in the American Public Transit Association's (APTA) 
``Recommended Practices for Quantifying Greenhouse Gas Emissions'' 
document. Another comment recommended the approach used in FTA's 
discretionary Transportation Investments for Greenhouse Gas and Energy 
Reduction (TIGGER) program. Another comment recommended FTA evaluate 
changes in carbon dioxide emissions and then monetize each ton of 
change based on independently determined ceilings of relative cost 
effectiveness (e.g., $50 per ton reduced).
    Response: FTA agrees changes in greenhouse gas emissions should be 
examined in the measure of environmental benefits. Total change in CO2 
can be calculated using the estimated change in VMT occurring from 
implementation of the proposed project. At the option of the project 
sponsor, indirect changes in VMT resulting from changes in development 
patterns may also be estimated, and the resulting environmental 
benefits calculated, monetized, and compared to the annualized capital 
and operating cost of the project under the economic development 
criterion. FTA notes that the APTA methodology was developed for 
evaluating the greenhouse gas effects of existing transit systems and 
agencies, and relied on standard multiplication factors to convert 
transit ridership to changes in VMT. FTA proposes to do the same with 
respect to calculating changes in VMT that result from transit 
projects. The environmental benefits would be monetized and compared to 
the annualized capital and operating cost of the proposed project for 
use in the establishment of an environmental benefits rating.
3. Energy Use
    Comment: FTA received a substantial number of comments on whether 
change in energy use should be included as a measure of environmental 
benefits. A large number of these comments supported change in energy 
use as a measure of environmental benefits. Many of these comments 
suggested measuring differences in fossil fuels, foreign oil, or 
reductions in energy use as a result of change in regional land use 
patterns. Several comments suggested using change in regional VMT to 
calculate changes in energy use, with two of these suggesting that this 
be linked to changes in regional land use patterns. A couple of 
comments suggested looking at a change in energy consumption in the 
project corridor based upon changes in walk and pedestrian access, as 
well as reduced auto travel. Other comments suggested measuring change 
in energy use based on the forecasted change in

[[Page 3875]]

regional VMT or projected average daily ridership.
    Response: FTA agrees change in energy use is appropriate as part of 
the environmental benefits criterion. As with greenhouse gas emissions, 
FTA is proposing that change in energy use be calculated from estimates 
of direct changes in VMT. At the option of the project sponsor, 
indirect changes in VMT resulting from changes in development patterns 
may also be estimated, and the resulting environmental benefits 
calculated, monetized, and compared to the annualized capital and 
operating cost of the project under the economic development criterion. 
FTA believes it is sufficient to calculate change in energy use and 
that it is not necessary to make the extra effort to determine whether 
such energy is derived from fossil fuels or foreign oil. FTA notes a 
significant part of the benefits that come from reducing energy use are 
accounted for by the resulting change in pollutant and greenhouse gas 
emissions. To avoid double counting, the monetary value of energy 
conservation will be factored down by some percentage specified by FTA 
in future policy guidance.
4. Water Quality
    Comment: A few comments supported considering change in water 
quality as a measure of environmental benefits. One comment stated that 
change in surface runoff should be considered.
    Response: FTA does not agree water quality change should be 
examined in the environmental benefits criterion. FTA believes the 
primary environmental benefits of major transit investments come from 
changes in air quality, greenhouse gas emissions, energy use, and 
public health and safety. Water quality changes related to transit 
infrastructure come primarily from change in surface runoff, which 
generally arises from changes in paved surface area. Although some of 
these changes may be localized effects, the primary water quality 
benefit is likely to come from regional effects due to changes in land 
use patterns that may come about after a public transportation 
investment; those changes in land use patterns are more difficult to 
evaluate.
5. Public Health
    Comment: A number of comments recommended FTA consider in the 
environmental benefits criterion the public health benefits that would 
result from improved air quality and increased physical activity 
resulting from implementation of a proposed project. One comment 
favoring the inclusion of human health and pollution in the 
environmental benefits criterion suggested FTA consider a better 
assessment for air quality that looks at a range of air quality values 
rather than the current approach that evaluates whether a project is or 
is not in an attainment area. Another comment recommended the 
environmental benefits criterion include data from environmental health 
studies as well as evaluate diesel particulate matter impacts separate 
from ambient particulate matter pollution, as recommended by the 
California Air Resources Board. The comment further recommended FTA 
include an assessment of cancer incidence and type in areas with 
transit over time and separate this information by age and race.
    FTA also received several comments recommending inclusion of a 
physical activity measure in the environmental benefits criterion. 
Comments stated walking and biking, including to and from public 
transit, decreases obesity and improves public health. One comment 
recommended FTA compare a projected ``business as usual'' scenario to 
the number of walking, biking, and other mode shifts estimated to 
result from implementation of a proposed transit project to estimate 
reductions in weight and improvement in health outcomes.
    Another comment suggested FTA evaluate the walk, bike and transit 
estimated modal split to award environmental benefits credit because 
these activities increase human interaction and increase a sense of 
community.
    Response: In its implementation of the Clean Air Act, EPA 
establishes National Ambient Air Quality Standards (NAAQS) for criteria 
pollutants based on assessments of levels which are protective of 
public health. FTA believes any reduction in the emission of these 
criteria pollutants would be beneficial to public health and has 
determined for the purposes of New Starts project evaluation and rating 
it is not necessary to explicitly calculate changes in health as a 
result of changes in pollutant emissions.
    On the other hand, FTA agrees some public health benefits other 
than improvements in air quality should be part of the environmental 
benefits criterion. FTA agrees these benefits are likely to be based on 
the degree to which there is additional walking or physical activity 
related to the usage of the proposed system. FTA is proposing to 
measure public health benefits as part of the environmental benefits 
criterion once a methodology for doing so is developed.
6. Consistency With State or Regional Sustainability Plans or Policies
    Comment: Several comments stated consistency with state or regional 
sustainability plans and policies should be included in the 
environmental benefits criterion. One comment stated it is premature to 
evaluate projects based on their alignment with state or regional 
sustainability plans because these plans do not exist consistently 
across the country. One comment noted these types of plans depend on a 
variety of factors that are not within the direct control of the 
project sponsor. The comment added that if these plans are considered 
in the environmental benefits criterion, there should be flexibility to 
consider various environmental or smart growth plans. Another comment, 
however, noted it was important to evaluate the transit project in the 
context of regional sustainability planning.
    A couple of comments stated that transportation and land use 
issues, including plans that encourage development along the project 
corridor, should be given more weight. Another comment recommended FTA 
consider how a project affects regional air quality plans, growth 
management plans, and other environmental plans and policies.
    Response: FTA does not agree that consistency with regional 
sustainability plans should be part of the environmental benefits 
criterion. These plans are not as closely related to the performance of 
the project, which FTA believes should be the focus of the 
environmental benefits measures used. FTA believes it is more 
appropriate to consider how these plans might be supportive of the 
project in the economic development criterion. Likewise, plans 
encouraging development along the project corridor are also better 
evaluated as part of the economic development criterion. In addition, 
the degree to which a project is consistent with regional 
sustainability plans may be considered in the ``other factors'' that 
FTA evaluates.
7. Environmental Management Systems
    Comment: FTA received several comments on including environmental 
management systems (EMS) in the environmental benefits criterion. A 
number of these comments opposed the use of EMS as a measure. Their 
justifications included the following statements: The New Starts 
evaluation should not include good business practices such as EMS; the 
presence of an EMS does not aid in distinguishing among projects; EMS 
are not fairly open enough to all project sponsors; and

[[Page 3876]]

important environmental benefits associated with projects such as 
changes in VMT and emissions or air quality improvements would not be 
reflected.
    Several comments expressed general support for consideration of 
whether a project sponsor has an EMS in the environmental benefits 
criterion. One comment stated project sponsors should be encouraged to 
look at their ongoing environmental impacts and identify means and 
measures to reduce these impacts. A couple of comments added FTA should 
evaluate whether a project sponsor has a project specific EMS, an EMS 
for their capital program, or an EMS for operations of facilities. One 
of these comments also recommended FTA consider whether project 
sponsors have obtained ISO certification or other EMS certification for 
their program. Another comment suggested FTA consider whether a project 
sponsor is applying EMS principles to the project. The comment stated 
that to satisfy this measure, a project sponsor with an EMS for a 
specific project would be allowed to provide less information than a 
project sponsor implementing EMS principles, but without a broader EMS.
    Response: Although FTA encourages the use of EMS, it does not 
believe its use should be part of the environmental benefits criterion. 
FTA believes environmental benefits measures should focus on overall 
project performance. While a project-specific EMS may be indicative of 
project sponsor's sensitivity to the environment and may improve the 
implementation quality of environmental mitigation measures and 
requirements, these environmental benefits would be small in comparison 
to direct environmental benefits resulting from implementation of a 
well-designed transit project. Use of an EMS is an appropriate part of 
tracking commitments from a NEPA process or as part of transit 
operations, and FTA will continue to support its use in those contexts. 
FTA is proposing to allow the costs of certain environmentally friendly 
elements and practices, such as the implementation of a project-
specific EMS, to be treated as a ``betterment'' that can be subtracted 
from the cost effectiveness calculation.
8. Parking
    Comment: A few comments recommended FTA consider parking policies 
in the environmental benefits criterion. A couple of comments said 
projects in areas with limits on per-capita off-street parking or 
projects in areas with low per-capita parking should receive extra 
credit. Another comment said that the environmental benefits evaluation 
should consider flexible parking requirements.
    Response: FTA believes it is more appropriate to assess parking 
policies under the economic development criterion since they are likely 
to be supportive of a project, rather than a performance-based outcome 
of the project.
9. Other Metrics
    Comment: A number of comments suggested environmental benefits 
cover a range of issues. Those mentioned included protection of 
historic resources, access to cultural resources, access to open space 
and recreation, access to education, environmental justice, reductions 
in air quality emissions, fuel savings and reductions in energy use, 
reductions in greenhouse gas emissions, improvements in water quality, 
impacts on endangered species, spatial impacts on streetscapes, noise 
impacts, parking, environmental management systems, mode shift, mixed 
use infill development, complete streets, VMT reductions, transit use 
increases, provision of greenways/streets for pedestrian travel, low-
income households served, physical activity, transit dependent 
households served, use of infrastructure, access for low-income people 
to job centers, creation of a healthier community, preservation and 
strengthening of communities and social fabric, environmentally 
friendly administrative policies including telework, support for 
transit-appropriate development on brownfields, flexible work 
schedules, corridor car counts, transportation demand management 
policies, allowance of Federal tax credits, and pre-tax set asides for 
alternative commutes.
    Response: FTA believes protection or support for a wide range of 
human and natural resources, such as those noted, are best covered in 
the NEPA process or as part of the economic development criterion. 
Potential negative project impacts should be evaluated in the NEPA 
process, and mitigated to the degree appropriate and included in the 
cost of the project. Such impacts, as well as various supportive 
policies are not project-specific performance outcomes.
Environmental Benefits Question 3: ``Should the environmental benefits 
evaluation consider the steps a project sponsor takes to mitigate the 
construction impacts of New Starts projects in addition to the 
environmental effects of their operation? Should the origin and methods 
to obtain construction or vehicle materials; energy type and use; and 
water consumption be considered in the overall evaluation of 
environmental benefits?''
1. Construction Mitigation
    Comment: FTA received a large number of comments on the 
consideration of construction mitigation in the environmental benefits 
criterion. Several comments recommended FTA consider a project 
sponsor's construction mitigation efforts; however, one comment stated 
it should not be the sole measure of environmental benefits.
    One comment recommended construction impacts be evaluated by 
comparing construction emissions to the project's emissions savings 
over a twenty-year analysis period. Another comment stated FTA should 
not include greenhouse gas emissions resulting from project 
construction in the evaluation of a project's overall environmental 
benefits.
    Several comments cited the following reasons for not considering 
construction mitigation: Construction impacts are temporary; the New 
Starts evaluation takes place too early in the process to know the 
construction impacts; construction mitigation could increase the 
project cost, thereby affecting the cost effectiveness rating; 
construction mitigation already occurs in the NEPA process; and, it 
does not represent an ``environmental benefit.'' One comment suggested 
that construction mitigation become a requirement for all projects, 
thereby eliminating it as a distinguishing factor. Another comment 
noted that construction mitigation best practices should be adopted as 
a minimum requirement for projects.
    Response: FTA agrees construction mitigation should not be part of 
the environmental benefits criterion. Construction mitigation efforts 
are not related to the operational performance of projects and they 
would be difficult to measure nationally. Moreover, mitigation of the 
negative impacts of construction is sensitive to context, and is thus 
best handled as part of the NEPA process.

[[Page 3877]]

2. Including Lifecycle Environmental Costs in the Measure of 
Environmental Benefits
    Comment: FTA received a large number of comments on whether the 
origin and methods to obtain construction or vehicle materials, energy 
type and use, and water consumption should be considered in the 
environmental benefits criterion.
    A number of comments suggested FTA provide higher ratings for 
proposed projects powered by renewable energy sources (partially or 
wholly), credit those projects that do not use fossil-based fuels, and 
provide lower ratings to proposed projects that use fossil-based fuels. 
A number of comments suggested FTA consider the energy source required 
to operate the project, methods of terminal construction (including the 
energy savings and efficiencies used for long-term station operations), 
and full lifecycle impacts of bio-fuels (including emissions from 
indirect land use).
    One comment recommended FTA implement environmental benefits 
measures that encourage the use of local materials because they reduce 
transportation and associated environmental costs. Another comment 
recommended project sponsors receive credit for using recycled 
materials. A couple of other comments suggested FTA evaluate the 
lifecycle costs of design choices, specifically sustainable design, by 
incorporating LEED design criteria that evaluate the origin and methods 
used to obtain materials, energy use, and water consumption.
    A couple of comments recommended FTA not consider lifecycle impacts 
when measuring environmental benefits because, among other reasons, 
lifecycle analysis tools are incomplete. They went on to state that in 
general transit has lower greenhouse gas emissions than competing 
modes.
    Response: FTA believes it is not necessary to evaluate a project 
based specifically on what source of energy is used for project 
propulsion, but rather on the estimated energy savings expected to 
result from implementation of the project. One of the reasons for not 
considering the source of energy anticipated to be used for a proposed 
project explicitly is that it can change over time for some modes, and 
may not be different enough from project to project to help 
differentiate among projects. Further, FTA believes that public 
transportation investments support national energy policy goals (such 
as reduced dependence on foreign fuels), whether or not transit 
vehicles run on fossil fuels or alternative sustainable energy sources 
since they reduce VMT. FTA intends to take steps to remove 
disincentives to incorporating environmentally friendly features that 
are potentially more costly, such as alternative fueled vehicles, by 
subtracting these costs from the calculation of cost effectiveness.
    FTA agrees using local materials would reduce the environmental 
impacts of projects, but does not believe that the impacts would be 
significant enough to help distinguish between projects.
    FTA believes it is appropriate to provide incentives encouraging 
incorporation of elements that would allow for LEED certification and 
other environmentally friendly construction techniques, but believes it 
is better to address these incentives by subtracting their costs from 
the calculation of cost effectiveness.
    FTA is not proposing to evaluate lifecycle impacts in the 
environmental benefits criterion because it adds complexity and is 
unlikely to produce different project rating results.
Environmental Benefits Question 4: ``Should FTA consider the reduction 
in single occupant vehicle usage as part of its evaluation of 
environmental benefits? What method should be used to measure the 
changes in vehicle miles travelled resulting from implementation of a 
project? Please be specific about how FTA should measure this.''
1. Reduction in Single Occupant Vehicle Usage
    Comment: FTA received a large number of comments on whether it 
should consider change in single occupant vehicle use in the 
environmental benefits criterion. Many of those comments supported 
measuring changes in single occupant vehicle use, and six comments were 
opposed.
    Of those supporting evaluation of the change in single occupant 
vehicle use, a few comments stated that local agencies should be 
allowed flexibility in calculating changes in single occupant vehicle 
use. One comment stated that avoided motorized trips should be used as 
a proxy for single occupant vehicle use.
    Several comments opposed to evaluating the change in single 
occupant vehicle use stated that such changes do not reflect an 
environmental benefit. Other comments noted that the project may 
achieve environmental and performance objectives, despite a failure to 
reduce single occupant vehicle use.
    Response: FTA agrees the change in single occupant vehicle use by 
itself does not reflect an environmental benefit. Instead, FTA believes 
it is appropriate to estimate all of the environmental effects of 
reducing motorized travel due to implementation of the proposed 
project, either directly or indirectly, and to calculate these effects. 
This includes changes in emissions, energy use and improvements in 
safety and public health using simplified methods (public health would 
be measured once a methodology for doing so is developed).
2. Method for Calculating the Change in Vehicle Miles Traveled
    Comment: FTA received a substantial number of comments on whether 
to use change in VMT in the environmental benefits criterion. Most of 
these comments suggested using change in VMT; two of those suggested a 
corridor-based measure of VMT. One comment suggested using VMT per 
capita, and another suggested using VMT per household in the station 
areas.
    Several comments were opposed to using a change in VMT. The 
comments expressed concern that a change in VMT may not be an 
environmental benefit; that it would be difficult to attribute a change 
in VMT to a transit project; and that areas with high transit 
dependency would not have substantial changes in VMT.
    Response: FTA believes that changes in VMT estimated to occur with 
implementation of the proposed project are a primary indicator of the 
project's likely environmental benefits. However, FTA believes it is 
fairly simple to calculate environmental benefits in their own terms 
(e.g., tons of pollutant emission reductions) and that expressing these 
benefits in these terms is helpful in understanding the full effects of 
a proposed project. Calculation of change in VMT is the main way in 
which FTA proposes deriving these benefits.
Environmental Benefits Question 5: ``Should FTA consider certification 
of the planned facility through the Leadership in Energy and 
Environmental Design (LEED) Green Building Rating System; low impact 
development of transit facilities; or energy production with windmills 
or solar panels?''
1. Leadership in Energy and Environmental Design (LEED)
    Comment: A large number of comments discussed whether FTA should 
consider certification of a planned facility through the Leadership in 
Energy and Environmental Design (LEED) Green Building Rating System in 
the environmental benefits criterion. Many of those comments 
recommended

[[Page 3878]]

that FTA include LEED and similar rating systems and principles in the 
environmental benefits criterion. One comment stated incorporating LEED 
design criteria for stations and maintenance facilities would allow for 
consideration of the origin and methods to obtain materials, energy 
type and use, and water consumption in the environmental benefits 
criterion. Another comment stated building stations and maintenance 
facilities to LEED standards (including storm water management and 
water quality) promotes environmentally responsible projects by 
reducing energy consumption and enhancing environmental design. One 
comment suggested incorporation of LEED certified buildings in a 
project only be considered as a bonus in the environmental benefits 
rating. Another comment suggested LEED buildings be included in the 
measurement of environmental benefits, but should not make the whole 
difference between a project that gets funding and one that does not.
    Several comments stated FTA should not include LEED and/or similar 
rating systems in the environmental benefits criterion. A couple of 
comments recommend FTA encourage LEED and similar systems, but not 
mandate them. Another comment stated current LEED specifications are 
often inappropriate for transportation facilities, but are more suited 
for offices, commercial buildings, and multi-use dwellings. Other 
comments noted LEED certification requirements may be best addressed 
through NEPA, and that building certifications measure processes rather 
than outcomes. A comment suggested use of LEED or similar rating 
systems may not fit well into the New Starts evaluation and rating 
process because LEED accreditation for buildings is determined at the 
end of the process after a full range of decisions are made, whereas 
the New Starts evaluation and rating process happens early in project 
development before significant engineering and design has occurred. 
Another comment suggested FTA use LEED-ND (neighborhood development).
    Comments also provided suggestions for how LEED may be incorporated 
into the New Starts process. Several comments noted FTA should consider 
the higher upfront costs associated with applying such methods and 
standards (LEED, low impact development (LID), energy production, etc). 
The comments stated increased costs could impact project 
implementation, and the result could be a substantial increase in the 
overall project cost that could perhaps keep the project from rating 
acceptably or being funded. Therefore, the comment stated that projects 
that do not incorporate these standards should not be penalized. One 
comment stated ``if the additional construction cost is not fully 
offset by the increased energy savings or the ability to avoid buying 
from the Grid, the sponsor can receive a credit for the difference'' 
and ``[i]f energy rates increase in the future and start to turn a 
profit from the sales, [the transit agency] should not have to fully 
pay back the credit.'' According to the comment, ``[t]his potential 
additional source of revenue could be an incentive to build.''
    Response: FTA agrees LEED or similar certifications are useful to 
understand how well sensitivity to environmental concerns has been 
incorporated by project sponsors into project development. However, 
while having elements of a project LEED certified demonstrates good 
environmental behavior by the project sponsor, it is not a meaningful 
measure of the greater environmental performance of a well designed and 
implemented transit project. Nonetheless, FTA believes it is 
appropriate to assure the New Starts process provides incentives for 
good environmental practices such as environmentally-sensitive design 
and development, which may have additional costs to them. To assure 
there are incentives for pursing LEED-certification or other similar 
rating systems, rather than disincentives, FTA intends to subtract the 
additional costs of such environmental friendly features in the cost 
effectiveness calculation.
2. Low impact development (LID)
    Comment: A few comments stated FTA should encourage sustainable 
design and credit projects that use it. Several comments said FTA 
should consider the added costs of implementing LID or sustainable 
design even if they increase the capital cost in the short term but 
lead to long-term operating efficiencies and reduced costs. A couple of 
comments stated FTA should encourage sustainable infrastructure, but 
not mandate it. Another comment suggested LID be included in the 
environmental benefits criterion to encourage these practices, but it 
should not make the whole difference between a project that gets 
funding and one that does not. Another comment stated FTA should allow 
more flexibility in examining sustainability and environmental impacts 
in design decisions. One comment said LID should not be included in the 
environmental benefits criterion.
    Response: As with LEED certification, although various LID methods 
demonstrate good environmental behavior by the project sponsor, their 
use is not a meaningful measure of the greater environmental 
performance of a well designed and implemented transit project. 
However, FTA is proposing to subtract the additional costs of 
environmentally friendly features, such as LID, from the calculation of 
cost effectiveness so there is not a disincentive to using LID methods.
3. Alternative Energy
    Comment: FTA received several comments on whether alternative 
energy production should be considered in the environmental benefits 
criterion. A few comments stated it should be considered and two 
comments opposed its inclusion. One comment opposed to its inclusion 
stated that it should be considered once costs of alternative energy 
source production decrease. Another comment suggested alternative 
energy production be included in the environmental benefits criterion 
to encourage its use, but should not constitute the whole difference 
between a project that receives funding and one that does not. Several 
comments stated FTA should consider the added cost associated with 
generating alternative energy.
    Response: FTA believes that, while the incorporation of alternative 
energy production may be a feature of a transit investment, the added 
burden of determining the amount of energy produced is unlikely to 
produce a measurable difference compared to the amount of energy saved 
as a result of reduced vehicular travel. However, FTA is proposing to 
exclude the additional costs of certain environmentally friendly 
practices from the calculation of cost effectiveness.
Environmental Benefits Question 6: ``In measuring the environmental 
benefits of a project, how might FTA take into account the goals and 
objectives of Executive Order 13514 [Federal Leadership in 
Environmental, Energy, and Economic Performance]? Should a project be 
evaluated and rated on how well it maximizes the land use efficiencies 
created through locating the project in areas that facilitate 
sustainable development?''
1. Executive Order 13514
    Comment: A number of comments responded to the question regarding 
how FTA might take into account the goals and objectives of Executive 
Order 13514, ``Federal Leadership in Environmental, Energy and Economic 
Performance.'' A few comments suggested that FTA include the goals

[[Page 3879]]

and objectives of the Executive Order. The comments suggested FTA 
assess the change in greenhouse gas emissions resulting from 
implementation of the proposed project. Another comment noted it is 
important to consider projects that facilitate sustainable development 
because the carbon footprint of any individual transit project is small 
in a regional context. The comment added FTA should provide credit for 
these types of projects by increasing the weight given for avoided 
trips and other land use and economic development criteria in the 
project justification rating. A couple of comments stated FTA should 
not include the goals and objectives of the Executive Order in the 
environmental benefits criterion. A couple of comments added the goals 
and objectives of the Executive Order are largely addressed in the land 
use criterion.
    Another comment added the goals of the Executive Order are 
agencywide and, therefore, may not be easily translated to the project 
level. A comment suggested innovation proposals be encouraged (e.g., 
``green'' methods in proposed facilities and construction methods) but 
not included in project ratings.
    Response: FTA believes the principles of the Executive Order will 
be addressed in the quantification of the direct and indirect 
environmental benefits of proposed transit investments, including the 
degree to which policies supporting transit oriented development are in 
place, as accounted for in the economic development criterion. FTA 
believes there is no need to further address the Executive Order in the 
environmental benefits criterion.
2. Land Use Efficiency
    Comment: FTA received a substantial number of comments on whether a 
project should be rated on how well it maximizes land use efficiencies 
by being located in an area that facilitates sustainable development.
    A large number of comments stated that encouragement of compact/
sustainable development and sprawl reduction should be considered in 
the environmental benefits criterion. Another comment stated FTA should 
give credit through the environmental benefits criterion for transit's 
role in retaining existing dense, energy efficient land use patterns as 
well as its role in encouraging new energy per efficient land use 
patterns.
    Several comments stated FTA should encourage transit oriented 
development by quantifying the additional development that can be built 
due to implementation of the transit project. In particular, one 
comment stated communities should be rewarded for investing in transit 
oriented development that preserves access to affordable housing. A few 
comments stated FTA should reward communities that develop plans to 
revitalize communities.
    One of the comments specified FTA should also give consideration to 
the potential water quality improvements from more compact development 
patterns facilitated by fixed guideway transit service. Another comment 
stated such a project (in a densely developed, transit rich area) may 
also generate ``smart growth'' land use and development patterns that 
reduce short automobile trips or encourage walking or biking, thereby 
reducing congestion and encouraging healthier lifestyles.
    One comment suggested compact land development can be measured by 
comparing models of development patterns with and without the proposed 
project. A couple of comments suggested anticipated land use impacts of 
projects would likely be easier to measure early in project planning 
than mitigation or energy impacts.
    One comment recommended FTA not lower a proposed project's rating 
if the project is located in a suburban area where existing land uses 
are less dense, because these areas need transit to create a market for 
more compact development.
    Response: FTA believes future estimated changes in development 
patterns are actually better addressed in the economic development 
criterion and that the land use criterion should focus instead on 
existing. Thus, FTA is proposing at the option of the project sponsor, 
indirect changes in VMT resulting from changes in development patterns 
may be estimated, and the resulting environmental benefits calculated, 
monetized, and compared to the annualized capital and operating cost of 
the project under the economic development criterion. Public 
transportation projects can support increased density and clustering of 
development in a way that can reduce motorized travel, thereby 
improving the environment. FTA notes, however, the practice of actually 
predicting the changes in development patterns that will occur as a 
result of implementation of the proposed project is not particularly 
well developed. While research is under way, for example, through the 
Transit Cooperative Research Program, presently there are no well 
developed tools that can easily be applied by all project sponsors. FTA 
agrees policies that encourage transit oriented development can help 
assure a positive impact on development patterns is actually achieved. 
But FTA believes whether such policies are in place and are being 
effectively implemented can be better assessed in the economic 
development criterion.
    While FTA believes water quality impacts can be cited as benefits 
of public transportation investments, they usually come as a secondary 
effect resulting from the denser, more compact development patterns 
that transit projects can foster.
    In sum, FTA believes the economic development criterion should 
account for the degree to which the project is likely to result in 
additional environmental benefits due to compact, more-dense 
development patterns. However, given the lack of readily available 
tools, FTA intends to make evaluation of these secondary impacts 
voluntary.
Environmental Benefits Question 7: ``To what extent, if any, can 
technology improvements--lower carbon transport technologies, the use 
of emerging light weight materials, improved engine designs, or bio-
fuel applications, for example--be said to reflect environmental 
benefits of transit proposals? How would such improvements be measured 
and compared?''
    Comment: FTA received a large number of comments regarding whether 
the environmental benefits criterion should consider technology 
improvements such as use of lower carbon transport technologies or use 
of emerging light weight materials.
    Several comments stated technology improvements should be 
considered. A couple of comments provided caveats that use of these 
technologies should not be required, but treated as extra credit 
instead. Another comment stated FTA should consider technology 
improvements as they pertain to a project's operation, but that the 
measure should not necessarily be based on the use of new technology. 
This comment suggested technology improvements could be measured by 
composition of fleet technologies and fleet age, as well as reductions 
in greenhouse gas emissions.
    Several comments suggested use of sustainable technologies should 
be encouraged, but it should not be a part of the environmental 
benefits criterion. One comment noted it would be difficult to identify 
predictable and measureable differences between transit projects with a 
technology metric and instead recommended that the added cost of a 
sustainable technology could

[[Page 3880]]

be an item removed from the calculation of cost effectiveness. A couple 
of comments noted measures of environmental benefits should be derived 
from the operation of the project. Another comment stated projects 
should not receive extra credit in the evaluation process for 
technology improvements. One comment stated FTA should be careful not 
to be overly prescriptive with the application of a technology metric 
to maintain competitive bidding and innovation.
    Response: FTA agrees it would be difficult to include use of 
environmentally friendly technologies in the environmental benefits 
criterion. However, FTA does not want the New Starts evaluation process 
to provide disincentives to their use. Accordingly, FTA is proposing to 
eliminate the additional costs of such technological enhancements from 
the calculation of cost effectiveness.
Environmental Benefits Question 8: ``Should environmental benefits be 
included in the cost effectiveness measure? How can environmental 
benefits be compared across projects, and incorporated into FTA funding 
decisions?''
    Comments on this question are summarized under the section of this 
NPRM focused on cost effectiveness.

D. Economic Development

Measuring Economic Development

Economic Development Question 1: ``How might FTA better measure the 
impact of transit on local land use patterns and/or economic 
development (ED)?''
    Comment: A substantial number of comments were received in response 
to this question. Most of the comments suggested generally that FTA 
could improve its measure of the impact of transit on local land use 
patterns or economic development.
    Several comments addressed how FTA should consider its evaluations 
of land use policies and plans and economic development differently. 
Over half of these comments emphasized considering future development 
in conjunction with land use and three noted that both existing and 
future land use policies and plans should be used to consider land use.
    A number of comments related to the consideration of the potential 
impact of a project on future development. Most of these comments 
support this idea. One of these comments suggested looking at new 
business attracted to the area due to the implementation of transit (as 
compared to locating on or near a highway), expansion of established 
businesses in the community, and the ability to retain businesses. One 
opposing comment indicated that measuring the economic effect of 
transit investments would be difficult because of industry clusters or 
geographic concentrations of interconnected employment centers and the 
role of transit in enhancing linkages between such clusters.
    A number of comments noted FTA should consider additional measures 
for evaluating land use and/or economic development, including changes 
in employment densities and household income within the transit 
corridor and assigning credit for enhanced transportation connectivity. 
A third of these comments suggested FTA give extra credit in the New 
Starts evaluation process to projects with economic development 
effects, with one suggesting that credit be given to projects located 
in areas with local government incentives to encourage economic 
development and one suggesting credit be given for enhanced 
transportation connectivity. A third of these comments also referenced 
using changes in property values as an additional measure of economic 
development effects. On the other hand, one comment opposed using 
changes in land value as an economic development measure due to the 
sensitivity of market cycles.
    A few comments proposed different methodologies to determine the 
effects of transit on land use and/or economic development, including 
quantitative studies (e.g., before and after studies), a hybrid 
framework of quantitative and qualitative measures, and satellite 
imaging and windshield surveys.
    A few of the comments pertained to development and redevelopment 
impacts. Most of these comments supported consideration of these 
impacts and one opposed. The opposing comment noted that the first 
level of analysis should be how well the project fits with the goals 
and objectives of the community.
    A small number of comments recommended emphasizing transit-oriented 
development and market strength.
    One comment advised that measuring the extent to which a more 
efficient network links multiple centers (as opposed to a discrete 
investment, either as an initial starter segment or an extension to an 
existing system) will show how a project enhances economic development.
    One comment supported the belief that implementing transit 
investments can be an enormous employment generator.
    One comment suggested that when finding alternatives to the single 
occupancy vehicle, one must consider the costs to individuals 
(consumers), the costs of public dollars, the ability to leverage 
public dollars with private investments for an acceptable return on 
investments to all parties, and the creation of wealth (jobs).
    A couple of comments recommended the economic development effects 
criterion focus on economic value creation or assess the value added 
for mature and newer urban areas because capital invested in different 
areas could produce different returns.
    One comment stated FTA should not give credit to projects that 
maximize land use efficiencies in an area that already has taken steps 
to facilitate sustainable development.
    One comment encouraged FTA to consider a funding model where 
station-area improvements are funded largely through value capture, 
while transit fares underwrite operations, maintenance, and capital 
investments in rolling stock.
    One comment suggested developing more accurate modeling techniques 
capable of recognizing land use differences resulting from 
implementation of transit.
    One comment stated the economics of a project and the degree to 
which a project cannot develop good public relations with its 
surrounding community should be weighed.
    One comment noted that in selecting a streetcar as the locally 
preferred alternative for their area, the study team considered the 
estimated potential economic benefits resulting from real estate 
redevelopment adjacent to the streetcar line. This included estimates 
(based on a range of scenarios) of increased occupancy of existing 
structures, higher rents, and potential new construction on vacant 
parcels. (Also considered were the income, employment, and economic 
output effects of construction.)
    Response: FTA agrees an improved economic development criterion is 
necessary. The current measure focuses on adopted plans and policies 
that would support economic development. It does not address the degree 
to which the proposed project itself produces economic development 
effects. FTA believes it is important to focus both on the plans and 
policies supporting future development, as well as the accessibility 
improvements that result from implementation of the proposed project.
    FTA believes one primary economic development benefit that should 
be

[[Page 3881]]

evaluated is the effect that a major transit capital investment can 
have on clustering development. Such clustering produces what 
economists refer to as an ``agglomeration'' benefit. In essence, 
because firms are able to do business in an area in which similar 
economic activity is taking place, transaction costs are lowered, 
productivity is increased, additional employment is created, and 
overall, there are increased levels of economic activity. Clustered 
development can also reduce the environmental impacts of travel (such 
as air pollution, greenhouse gas emissions, energy use, safety, etc.) 
and the costs of providing public infrastructure compared to un-
clustered development. Such clustering occurs because the transit 
investment increases the accessibility of locations around it by 
reducing the cost of travel to those locations and because transit 
supportive policies are developed to concentrate development at those 
locations.
    FTA believes focusing on the two main factors that produce these 
benefits --how the proposed project improves the accessibility of 
locations along its route, and the strength of the policies in place to 
support clustered development around the transit project--is the best 
way to determine how likely it is the project will produce economic 
development benefits. FTA agrees that, in the long run, implementation 
of the transit project is likely to increase housing and employment, 
occupancy rates, property values, rents, new construction, and overall 
economic activity. However, FTA believes it is extremely difficult to 
forecast such long-term changes. FTA agrees there are a number of tools 
for determining the potential for these changes, such as use of land 
records, geographical information systems, and windshield surveys, as 
well as approaches for determining the impacts after a project is 
implemented such as before-and-after studies. These studies have 
demonstrated the key factors leading to changes in these indicators are 
the relative change in accessibility brought about by the project and 
how well the project is supported by appropriate local land use and 
development policies. However, there are not currently available any 
easy-to-apply and accurate methods for actually predicting the economic 
development impact. An ongoing Transit Cooperative Research Program 
(TCRP) is addressing the issue of improved predictive techniques. FTA 
agrees there are certain policies, such as those that foster transit 
oriented development that can have a large positive impact on the 
development outcome of a project. Thus, FTA is proposing to measure 
economic-development effects based on the plans and policies to support 
economic development proximate to the project and the demonstrated 
performance of the policies. FTA is proposing to evaluate the transit 
supportive plans and policies and demonstrated performance of those 
plans and policies in a manner that is similar to the existing 
practice. At the option of the project sponsor, indirect changes in VMT 
resulting from changes in development patterns may also be estimated, 
and the resulting environmental benefits calculated, monetized, and 
compared to the annualized capital and operating cost of the project 
under the economic development criterion.
Economic Development Question 2: ``Should FTA continue to use its 
current approach for evaluating the economic development effects of 
major transit investments?''
    Comment: A substantial number of comments were received in response 
to this question. Approximately one third of the comments pertained to 
the weight given to the economic development effects criterion in the 
rating of project justification, and most supported increasing the 
weight. One of the supporting comments also suggested eliminating the 
environmental benefits criterion. One comment partly supported 
increasing the weight of the economic development criterion by 
suggesting prioritization of supportive land use policies above 
existing land use and past performance of policies. One comment opposed 
consideration of the economic development effects criterion as a major 
factor for evaluation and rating.
    A number of comments suggested simplification of the economic 
development effects criterion. A small number of these comments advised 
adjustment of submittal requirements based upon the phase of project 
development. For instance, according to those comments, when a project 
sponsor is seeking entry into preliminary engineering, FTA should only 
include a review of local policies in place that support the transit 
investment and encourage development/redevelopment.
    Several comments suggested FTA revise its approach to measuring 
economic development by considering other factors. A small number of 
these comments stated the current approach is limited because it 
assumes economic development is a zero sum game within a region and 
does not account for regional growth that might be a function of 
significant improvements in regional mobility from connecting major 
population and employment centers. A couple of the comments recommended 
looking at labor statistics to determine the types of jobs needed in an 
area. One comment proposed special consideration (preference) should be 
given to viable projects in economically distressed areas. One comment 
proposed, for each region, giving consideration to global 
competitiveness.
    A few comments stated FTA must recognize that public transit 
agencies have limited direct impact on land use policies and land uses 
(via the properties that they actually own) versus the tremendous 
indirect impacts that follow-on from transit investments. One of these 
comments also added project sponsors of proposed streetcar projects are 
often municipalities rather than independent transit agencies, and thus 
can directly impact those land use decisions.
    Response: With respect to the weight assigned to the economic 
development effects criterion, FTA must follow the law, which calls for 
each of the six specified criteria to be given ``comparable, but not 
necessarily equal'' weight. FTA cannot eliminate either the economic 
development effects or environmental benefits criteria as they are both 
required by law.
    FTA agrees the economic development effects criterion should be as 
simple as possible and that it should depend on the project development 
stage--the level of detail and commitment to specific policies should 
be greater as the project moves from preliminary engineering to final 
design and construction funding. FTA already takes this approach in its 
evaluation of the land use, economic development, and local financial 
commitment criteria. FTA is proposing an approach that assesses how 
well local plans and policies support clustered development around the 
proposed project without requiring that a detailed forecast of economic 
development be made. At the option of the project sponsor, indirect 
changes in VMT resulting from changes in development patterns may also 
be estimated, and the resulting environmental benefits calculated, 
monetized, and compared to the annualized capital and operating cost of 
the project under the economic development criterion.
    FTA believes it should focus on the likelihood of the project 
fostering development, rather than attempting to forecast how much 
development will occur, whether or not there is an increase in net 
regional development, or whether there is just a redistribution of

[[Page 3882]]

the development forecast for the region. FTA agrees the kinds of jobs 
produced and whether a project is located in an area of economic 
distress are important issues and proposes to take these issues into 
account, at the project sponsor's option. In addition, FTA plans to 
report under the economic development effects criterion the number of 
design, construction and operations jobs expected to be created with 
implementation of the project.
    FTA agrees public transit agencies have limited direct impact on 
local land use plans and policies. But because these are major transit 
investments, they should be supported by local policies no matter who 
is responsible in the region for developing the policies. Hence, it is 
appropriate for FTA to assess whether the region and local 
jurisdictions are supportive of a major investment of Federal funds in 
that region.
Economic Development Question 3: ``Should FTA define economic 
development differently? If so, how?''
    Comment: A substantial number of comments were received in response 
to this question. The majority of the comments supported defining 
economic development differently, and a number were opposed.
    Of the comments supporting a different definition of economic 
development, most offered an alternative. Several noted economic 
development should refer to increases in underlying economic strength, 
as measured by increases in employment, in gross domestic product, or 
in wealth. One comment stated economic development should be defined as 
the increase in economic activity that stems from the transit 
investment and from the accompanying improvements in livability and 
other benefits that accrue from permanent land use changes that link to 
economic activity. Another comment noted the increase in economic 
activity may be difficult to quantify. A couple of comments indicated 
increased economic activity should be evaluated based on the increase 
in transit trips. One comment stated the current measures for economic 
development give substantial consideration to ``existing pedestrian-
friendly station areas'' and to ``higher density existing conditions.'' 
These considerations inevitably favor existing, developed and often 
wealthy areas over developing communities. In contrast, one comment 
favored promoting economic development in areas that are transit 
deficient, by considering the potential for future, not existing, 
development performance. A couple of comments indicated economic 
development should be based on the estimated direct impact on 
individual household costs and benefits (i.e., housing affordability) 
resulting from implementation of the transit project. Other comments 
stated economic development should be defined relative to improved 
accessibility to jobs and services for low-income populations and 
minorities. A small number of comments stated FTA needs to redefine 
economic development, moving away from trying to measure overall 
economic activity by using increasing land values as a ``proxy'' for 
this activity, and move more specifically towards measuring employment 
and transit connectivity. Another comment observed the current approach 
appears to be ``justifying'' the project via the economic benefits 
identified by the sponsor, rather than using the measurable impacts of 
the project.
    One comment noted FTA should not be in the business of economic 
development. It should be in the business of providing easy and 
affordable access to transit.
    Of the comments opposing any change to the current definition of 
economic development, one comment opposed changing the current 
definition so long as the criterion included an assessment of the 
degree to which project sponsors demonstrated an understanding of how 
to stimulate transit-oriented development.
    Response: FTA agrees it should have in mind the economic 
development outcomes of a proposed project as the basis for assessing 
the economic development criterion; with a focus on increased economic 
strength, such as employment levels, gross domestic product, and 
wealth. As noted earlier, FTA believes these types of economic 
development benefits occur because implementation of a proposed project 
produces agglomeration effects through the clustering of development 
around the proposed project. FTA agrees these agglomeration effects may 
be difficult to quantify, but are likely to be related to how a project 
produces enhanced accessibility at various locations around which 
development could be clustered. FTA believes the number of transit 
trips taken on the project may be a useful indicator of this enhanced 
accessibility. FTA notes changes in accessibility result from changes 
in travel costs, rather than changes in housing costs. FTA evaluates 
mobility improvements (and hence changes in accessibility) for persons 
with lower incomes as part of its mobility improvements and cost 
effectiveness criteria. FTA agrees land value in particular is very 
difficult to quantify and the change in accessibility is the more 
important direct effect of a project that can enhance economic 
activity. FTA agrees it is the performance of the project that 
determines whether or not it is likely to have economic development 
benefits.
    FTA agrees its primary focus is to improve public transportation, 
but notes that economic development outcomes should be evaluated to 
help determine which public transportation improvements it should 
support. The section-by-section analysis that follows this response to 
comments provides more detail on how FTA plans to measure the economic 
development effects of proposed projects.
Economic Development Question 4: ``Should FTA use either a qualitative 
or a quantitative approach (or both) for evaluating the economic 
development effects of New Starts and Small Starts projects? Should FTA 
consider a qualitative approach for evaluating land use policies or a 
quantitative approach for predicting changes in land use values and 
patterns (or both) as a proxy for evaluating economic development 
benefits?''
    Comment: A substantial number of comments responded to the question 
of whether FTA should use a qualitative or a quantitative approach (or 
both) for evaluating the economic development effects of New Starts and 
Small Starts projects.
    For the first question, several respondents indicated both 
quantitative and quantitative approaches are necessary for evaluating 
economic development.
    A substantial number of comments did not support the use of both 
quantitative and qualitative approaches, with most suggesting using 
only a qualitative approach. Only about a fifth of these comments 
recommended using only a quantitative approach. One suggested using 
clear and objective quantitative measures of market realities.
    More than half of those who responded to the second part of this 
question supported a qualitative approach for evaluating land use 
policies in lieu of predicting changes in land use values and patterns 
as a proxy for evaluating economic development benefits. None of the 
comments supported a quantitative approach for predicting changes in 
land use values and patterns for evaluating economic development 
benefits. One comment did not support either a qualitative or a 
quantitative approach for evaluating economic development; instead, the 
comment simply noted that the

[[Page 3883]]

appropriate scale should be corridor based.
    One comment did not support either a qualitative or a quantitative 
approach, preferring an alternative definition for economic development 
not based on land use. A few comments did not identify a preference for 
either a qualitative or a quantitative approach.
    The comments were split evenly for and against using land use 
patterns and values as a proxy for evaluating economic development. The 
comments in support of using land use tended to view it as a subset of 
economic development. One comment suggested that FTA consider estimated 
changes in land values as evidence of potential economic growth, using 
such measures as block and intersection density, existing and projected 
population, absorption and vacancy rates, station area and corridor 
land values, residential and commercial real estate values, and 
estimates of development of underused land. One comment recommended FTA 
consider the density of commercial and residential development using 
employment within one-half mile of stations and population within one-
quarter mile of stations. In addition, a comment stated FTA should 
consider the changes in the quality (``value'') of jobs created in the 
corridor by the investment in an alternative transportation mode.
    Those against using land use as a proxy for evaluating economic 
development recommended using economic measures such as employment, 
wages, and revenues instead. The recommendation was based on the idea 
that doing so would avoid double-counting the benefits that come from 
land use changes themselves and that forecasting land use assumptions 
is difficult. In addition, one comment said using land use as a proxy 
for economic development overlooks other benefits including new jobs, 
retail sales, tax revenues, and agglomeration effects.
    Response: FTA agrees with comments opposed to using a purely 
quantitative measure for the economic development criterion. FTA is 
proposing to allow a project sponsor, at its option, to estimate 
indirect changes in VMT resulting from changes in development patterns, 
and calculate the resulting environmental benefits, monetize them, and 
compare them to the annualized capital and operating cost of the 
project. While forecasting the amount of economic development effects 
resulting from agglomeration effects would seem to have value, the 
analytical challenges of doing so are too great. As noted earlier, 
tools to accurately forecast land value changes, changes in aggregate 
regional employment, or changes in local gross domestic product are 
often not readily available and thus this analysis is optional.
    In particular, FTA agrees the primary measure of the economic 
development criterion should be an assessment of the existence of 
transit supportive land use plans and policies. These create a 
foundation for changes in development patterns and land values that 
would result from a major transit capital investment. Hence, they are 
an important part of a proxy measure for assessing economic development 
benefits. But as already noted, FTA is also proposing to allow project 
sponsors, at their option, to evaluate quantitatively the likely 
performance of the project itself in producing economic development 
benefits. FTA believes that providing the option for a project sponsor 
to conduct such scenario-testing would be an effective way of 
addressing this issue in a partially quantitative way. By making this 
scenario testing optional rather than mandatory, FTA is avoiding 
placing undue burden on project sponsors.
    FTA does not believe that addressing land use policies as part of 
the economic development criterion represents inappropriate double-
counting. FTA is proposing to use only existing population, employment, 
and publically supported housing within station areas in its land use 
criterion.

Land Use and Economic Development

Economic Development Question 5: ``What scale should be used to measure 
economic development? At a corridor level or at the metropolitan area 
level?''
    A large number of comments were received in response to this 
question. Of those responding, just under half recommended measuring 
economic development only at the corridor level. Some of these comments 
mentioned the economic development criterion is very important for 
urban circulators and streetcars projects in particular, stating these 
types of projects are often primarily justified by their economic 
development benefits. Thus, the comments indicated these projects 
should be required to demonstrate they can support sufficient density 
of commercial and residential development to justify the Federal 
investment.
    Two of the comments recommended FTA require project sponsors to 
develop analyses of projected development including estimates of 
employment growth anticipated within the corridor. They stated economic 
analyses should describe the geographic range of economic impacts and 
effects on nearby corridors and any interaction between corridors.
    Over half the comments in this area recommended measuring economic 
development only at the metropolitan area or regional level. One 
comment stated economic development should refer to increases in 
underlying economic strength, as measured by increases in employment, 
increases in gross domestic product or increases in wealth. The comment 
indicated these are not easily measured at the corridor level but are 
instead best measured at the regional or national level. One submission 
stated such increases in employment, productivity or wealth may result, 
in part, from the increased accessibility and reductions in the cost of 
travel resulting from implementation of a proposed transit investment. 
The comment indicated impacts are almost always observed and measured 
regionally, not just in the area of the transit investment, since the 
measures are ``macro'' in nature and lend themselves to regional 
measurement.
    About a third of the comments in this area recommended measuring 
economic development at both the corridor and metropolitan area/
regional levels. Several comments pointed out that the metropolitan 
area considered in measuring economic development need not be 
coincident with the jurisdictional boundaries of the metropolitan 
planning organization (MPO).
    Additionally, two comments recommended measuring economic 
development solely at the station area level, while several comments 
recommended using both the station area and corridor levels. Two 
comments recommended using both station area and metropolitan area or 
regional levels to measure economic development.
    Several comments recommended using multiple scales, including 
station area, corridor, and regional, to measure economic development. 
Two comments noted multiple scales are necessary to capture relevant 
aspects of economic development, such as employment, land use, and the 
multiplier effects of direct, indirect, and induced spending in the 
local, regional and state economies. One comment stated the appropriate 
scale for measuring economic development depends on how economic 
development is defined, while another comment noted that the scale 
should be comparable to the project type. Another comment noted 
different scales should be used for Small Starts projects than for New 
Starts projects, with Small Starts projects best evaluated at the 
corridor level. One comment stated economic development should be 
measured

[[Page 3884]]

individually for each city/jurisdiction within the transit corridor.
    Response: FTA believes it is appropriate to consider economic 
development at both the corridor and regional level. FTA agrees the 
economic development effects of a proposed transit project are 
concentrated in the corridor or sub-area served by the project. 
However, FTA also believes these impacts have an effect on the economy 
of the region as a whole.
    FTA agrees project sponsors should be required to demonstrate 
sufficient population and employment densities around proposed projects 
as a primary evaluation factor. FTA believes this is addressed, to an 
extent, by the degree to which the project, taken together with the 
development in the project corridor, produces sufficient ridership to 
be cost effective. Further, in the land use criterion, FTA is proposing 
to evaluate existing population and employment densities as well as 
existing publically supported housing. In addition, in the economic 
development effects criterion, FTA is proposing to allow project 
sponsors, at their option, to estimate future employment and 
residential development in the corridor.
    FTA agrees increases in underlying regional economic strength (such 
as employment, gross domestic project, or overall regional wealth) are 
the key economic development outcomes that should be evaluated. 
However, FTA does not believe it is necessary to forecast such effects 
directly. FTA agrees they are not easily measured at the corridor 
level, but also believes that tools do not exist to readily measure 
them at the regional level either. Accordingly, FTA believes it is 
better to focus on the factors that are likely to produce these 
regional effects, namely the degree to which a proposed project is 
estimated to improve accessibility and the kinds and quality of local 
land use and economic development policies in place that will foster 
clustered development. Under this approach, the exact boundaries of the 
corridor or region being considered are not really important.
Economic Development Question 6: ``How should FTA distinguish between 
the land use effects and the economic development effects of a proposed 
project? How should they be measured?''
    Comment: A substantial number of comments were received in response 
to the question of distinguishing between land use and economic 
development. Of those responding to this question, nearly all concurred 
with the need to distinguish between the land use and economic 
development effects of a proposed project. Only a few comments stated 
there was no need for FTA to distinguish between land use and economic 
development effects, with one of these noting that land use and 
economic development effects are not transportation outcomes but are 
instead inputs into determining the likely success of a transit 
project.
    Approximately half of the comments concurring in the need to 
distinguish between the land use and economic development effects of a 
proposed project recommended an approach to use for making the 
distinction. These are summarized below.
    Several comments recommended distinguishing between the land use 
and the economic development effects of a proposed project on the scale 
of development that may be expected to occur. A number of comments 
recommended FTA retain its current approach of distinguishing between 
land use and economic development effects. A small number of comments 
recommended evaluating how much a project may be supported by revenues 
produced from the increase in land values around it to distinguish 
between land use and economic development effects. One comment 
recommended using the creation of economic value, e.g., increases in 
gross domestic product or wealth, to distinguish between land use and 
economic development effects. One comment recommended differentiating 
between future land use patterns and future development to distinguish 
between land use and economic development effects. One comment 
suggested real estate development be considered in evaluating land use 
effects and the economic development effects be measured by activity 
levels, such as employment, retail sales, etc.
    A number of comments suggested measures for considering land use 
effects. A few of these recommended using past performance in addition 
to existing land use policies and plans. One recommended using local 
real estate market conditions for measuring land use. Another 
recommended evaluating increases in the square footage of development 
to assess the level of real estate development activity.
    A large number of comments suggested measures for considering 
economic development effects. A few comments recommended retaining the 
current evaluation of land use plans and policies and the demonstrated 
performance of those plans and policies. A small number of comments 
recommended using demographic changes such as changes in population and 
employment densities and household income. A couple of comments 
recommended using the increase in the underlying economic strength or 
economic activity of the region or corridor (the choice would depend on 
the scale selected for the measure). Individual comments were submitted 
on each of the following measures: change in land value; the project's 
ability to generate economic development; and change in land use and 
economic development with the creation of economic value.
    Response: FTA agrees it should distinguish between economic 
development and land use when evaluating projects. To do so, FTA is 
proposing to focus the assessment of land use on existing population 
and employment densities and publically supported housing in the 
corridor that will support the transit investment. FTA believes 
economic development effects should be assessed based on the land use 
patterns and resulting development that is likely to result from 
implementation of the project and the plans and policies in place to 
support transit oriented development. FTA is proposing to allow project 
sponsors, at their option, to also analyze the magnitude of the 
development effects. FTA agrees that land use and economic development 
are not direct transportation outcomes of the project. Land use can be 
considered an input to achieving certain transportation outcomes. 
However, economic development is an outcome of the project that, even 
if not a direct transportation outcome, is a very important aspect of 
why these projects are implemented. FTA does not agree it should 
distinguish between land use and economic development based on the 
scale of the project. These impacts should be part of the assessment, 
no matter the project scale. While value capture is an important tool 
in finding ways to cover the cost of a transit project, whether or not 
value capture is used more properly belongs in the evaluation of local 
financial commitment rather than economic development. FTA believes it 
is appropriate to think of creation of economic value and the activity 
which takes place in development around a transit investment as the 
kind of things that represent economic development. As stated earlier, 
however, FTA does not believe it is necessary to explicitly quantify 
and value such factors.
    FTA appreciates the suggestions made for measures for economic 
development. FTA believes each of the specific measures has merit, but 
is concerned about the ability of project sponsors to

[[Page 3885]]

forecast changes in household income, property values, etc., given 
readily available tools. Instead, FTA is proposing to evaluate how 
likely it is that such changes will take place given the land use plans 
and policies in place (as a required feature of the measure for 
economic development) and how well the project improves accessibility 
(through scenario testing, at the project sponsor's option).
Economic Development Question 7: ``Can a New Starts or Small Starts 
project generate new economic development that would otherwise not have 
occurred in the surrounding area? If so, how might that economic 
development be measured? Should FTA consider the overall economic 
health of a metropolitan area when estimating the potential for a New 
Starts or Small Starts project to foster economic development?''
    Comment: A large number of comments addressed whether proposed 
transit projects generate new economic development that would otherwise 
not have occurred in the surrounding area. Most of these comments 
indicated other matters need to be addressed and pointed to other 
concerns, such as whether the resulting economic development would 
reduce VMT, improve health and social impacts (e.g., environmental 
justice, high-need, vulnerable communities), allow more money to stay 
in the local economy rather than being exported to oil and auto 
producers, and lead to location efficiencies. One comment noted it is 
worth making the distinction between new economic activity generated by 
a transit project and economic activity that was going to take place 
anyway but gets moved to a location near transit. Another comment 
suggested that how FTA distinguishes between new economic development 
in a region versus relocated activity is irrelevant. This comment 
suggested the location efficiency that results from increased density 
around a transit system can be used as a measure instead and that much 
of the benefit comes from creating a more efficient system rather than 
net regional gain. One comment stated it should not matter to FTA 
whether investment is ``relocated'' due to the transit project (as 
opposed to being newly attracted development to a region). Rather, the 
comment suggested, it matters that the investment may yield a higher 
return, both to the developer and to society, through increased or 
enhanced economic returns from location efficiency. The comment stated 
location efficiency could be measured by jobs, homes, and services 
brought within a specified proximity of transit.
    One commenter stated in their metropolitan area, New Starts and 
Small Starts projects have generated new economic development rather 
than shifting it from other locations.
    Most comments addressing economic development implied that New and 
Small Starts projects generate economic development. The suggestions 
submitted, by one or more comments, for possible quantitative measures 
of economic development were:
    a. Private return on investment (ROI) measured by a capitalization 
rate on the dollar amount invested in the project. In this case, the 
public ROI would be weighed against the costs of the alternatives in 
addition to the return of the dollars invested. Factors addressed would 
be higher land values, jobs, and reduction in capital and operating 
expenses for the transportation modes over time and/or the life of the 
project. Reductions in personal household transportation costs would 
also be evaluated.
    b. An Affordability Index based on infill development. These 
comments suggested measuring economic development in terms not related 
to land use values could include calculations similar to the combined 
``housing and transportation affordability'' index work that has come 
into use by some.
    c. Possible building volume (at a set value per square foot) in the 
future minus building volume today, multiplied by probability. This 
comment suggested the calculation could include estimating maximum 
possible capital investment as the difference between entitled building 
volume and current building volume. This value could be multiplied by 
probability of success to produce an estimate of economic development 
potential. The ratio of forecasted (or historic) growth in gross local 
domestic product, divided by the national average, could be used to 
estimate the probability that economic development in a specific 
location will actually occur.
    d. Use of the LEED 2009 Neighborhood Development rating system 
(LEED-ND). LEED-ND can be used to analyze the existing land around the 
proposed transit project to determine how accessible stations are 
without an automobile. This could be accomplished by prioritizing the 
funding of transit projects in locations that meet metrics established 
in LEED-ND, such as the smart location and linkage prerequisites and 
credits. For example, funding could be prioritized for locations that 
meet the density requirements outlined as ``Neighborhood Pattern & 
Development (NPD) Prerequisite 2: Compact Development'' in the LEED 
process.
    e. Quantitative rating thresholds using data already reported to 
FTA. Suggested factors to be indexed include: (1) Base year and 
forecast year households, population, and employment and associated 
densities for the region as a whole, the corridor, the central business 
district, and station areas; (2) existing and planned floor area 
ratios; (3) existing and planned densities and scale of development 
included in existing and in-progress zoning changes, and referenced in 
station area land use plans; (4) anticipated development within station 
areas, including estimations of development by type, square feet, etc., 
as reported in development market studies and assessment of developable 
parcels; (5) amounts of development, including square feet, number of 
housing units (including affordable units), already occurring or 
proposed within station areas; (6) examples of recent and proposed 
development activity that reflect transit-supportive densities and 
other transit-oriented development (TOD) features. The comment did not 
propose how these factors would be weighted.
    f. Gross Regional Product statistics.
    g. Geographic and land use mix.
    h. Measured density, mixed land uses, proximity to transit, quality 
of the walking/biking environment, and per capita parking in existing 
communities (not whole metropolitan areas) and the measured VMT and 
mode split to predict the results of transit additions and infill 
development.
    i. Change in percentage of developable or re-developable land.
    j. Growth in total employment and/or change in the percent of 
unemployment expected near stations and regionally.
    k. Sales tax receipts.
    l. Predicted increases in educational attainment.
    m. Increases in wealth and wages in metropolitan areas.
    n. Business growth/small business starts and successes perhaps by 
reduction in long distance travel of goods.
    o. Changes in land use due to site location of transit, then 
measure property tax assessments in a specified concentric circle from 
transit center.
    p. Changes in tax assessments, vacancy rates, rent rates and per 
foot sales prices. A best practices benchmark could be used.
    Other comments suggested a range of evaluation approaches 
including:

[[Page 3886]]

    a. Evaluate development patterns over the past five to ten years, 
such as the percentage of development downtown and near transit versus 
in ``green fields'' or in the exurbs, as well as the character of that 
development, such as average densities and other factors that can more 
reliably measure growth management success.
    b. Use quantitative approaches for summarizing changes in land 
value as the ultimate value ``puddles'' in the land not the assets on 
the land.
    c. Require each transportation investment, including transit, to 
have a minimum of value capture (tolling, TIF, private property upside 
value sharing, etc.) to qualify for Federal funding. There should be 
higher ratings for projects serving lower-income areas.
    d. Explicitly call out residential development in the measures to 
make it clear that more housing units are needed. Have a new rating 
that ensures the commitment to a minimum share of new residential 
development around proposed transit stations that is affordable to 
moderate-income families and will remain affordable for as long as the 
transit stations are in operation. Have a rating factor that rewards 
projects that serve areas with existing subsidized housing and that 
plan to preserve this important resource after the transit investment 
is made by using such policies as incentive zoning, voluntary 
inclusionary zoning, and density bonuses.
    e. Measure the increase in regional transit accessibility as a good 
indication of the potential changes in land values and affordability of 
housing due to reduced transportation commuting costs.
    f. Compare the VMT induced by development at an outlying location 
with the VMT induced by development located at a central location 
served by transit.
    g. Use data providing the true cost of auto ownership and the 
direct reductions in annual costs plus any reduction that may be 
realized by alternative public transportation investment.
    h. Measure the direct impact on individual household costs and 
benefits.
    i. Use parcel-level data on property assessments, number of jobs, 
and incomes in the transit corridor.
    j. Use measures of the impact on community access to jobs, housing, 
education, and health care rather than complex models that are based on 
existing patterns of transportation and development.
    k. Measure actual funds put forward for redevelopment. The 
provision of local overmatch and/or amount of developer/private money 
used should be considered heavily as the best measure of land use 
changing potential.
    Several comments responded to whether FTA should consider the 
overall economic health of a metropolitan area in the evaluation of 
economic development. A couple of comments suggested the overall 
economic health of individual communities is not applicable, but did 
not explicitly address the matter of the metropolitan area. One comment 
noted the underlying economic development strategy of the region, and 
whether plans and policies are in place to foster economic growth are 
important. One of the comments recommended using metrics in existing 
communities, not whole metropolitan areas, to predict the results of 
transit additions and infill development.
    One comment suggested new business could be attracted to an area 
due to transit, (as compared to locating on or near a highway) and 
recommended that FTA consider expansion of established businesses in 
the community and the ability to retain business as part of the 
evaluation process.
    Response: FTA agrees whether or not a major transit capital 
investment produces net economic development in a region or just 
redistributes the development that would have occurred in a region 
otherwise is less important than assessing the particular 
transportation and environmental benefits of the project. FTA agrees 
the main economic development effects of proposed transit projects come 
from supporting clustered development around the investment that can 
result in agglomeration effects on net economic activity and in 
environmental benefits such as changes in energy use, greenhouse gas 
emissions, and pollutant emissions. In any case, these effects are 
secondary to the transportation benefits. Any net regional economic 
benefits would be a third-order effect difficult to attribute to the 
investment given all the other things that affect the economic 
competitiveness of a particular region.
    FTA appreciates the suggestions made for measuring economic 
development effects. In general, the quantitative approaches suggested 
for calculating return on investment, an affordability index, building 
volume changes, LEED-ND, changes in housing, employment, floor area 
ratios, development density, etc., all have merit. But they all are 
very difficult to forecast and use for evaluation purposes. Instead, 
FTA plans to assess the change in accessibility produced by the 
proposed project and the plans and policies in place. FTA will continue 
to explore how more quantitative metrics might be applied.
    FTA also appreciates the other evaluation approaches suggested. FTA 
notes the evaluation approach needs to be easily applied by all project 
sponsors, should produce information about future outcomes, should 
produce information that can help distinguish projects from each other, 
and should not involve an inordinate amount of effort. FTA agrees even 
relocated land development has positive benefits and is worth 
considering since there are benefits to society that come from denser 
development. However, FTA believes it is sufficient to focus on the 
likelihood such effects will occur and, at the sponsor's option, the 
general magnitude of such effects rather than trying to forecast them 
explicitly. FTA believes value capture is a useful tool in evaluating 
local financial commitment, but does not believe it should be mandatory 
or considered in the economic development criterion. FTA agrees it is 
important to consider whether affordable housing is provided since it 
is important to assure that the benefits of public transportation 
investments are enjoyed on an equitable basis. FTA is proposing to 
evaluate existing publically supported housing in the corridor under 
the land use criterion and the plans and policies in place to maintain 
or increase affordable housing in the corridor under the economic 
development criterion. FTA agrees transit accessibility is an important 
part of the evaluation of economic development and is proposing an 
analytic approach that considers how changes in accessibility translate 
into economic development around a project, at the project sponsor's 
discretion. The change in VMT resulting from a transit investment is an 
important benefit, but FTA believes it is more appropriately captured 
in the environmental benefits criterion. Likewise, change in auto 
ownership and operating costs can be captured in the calculation of 
mobility benefits.
    FTA believes using parcel level data is unnecessarily complex and 
instead believes a broader analytical approach focusing on changes in 
transit accessibility and transit supportive plans and policies is 
sufficient. Complex models are not needed under this approach. While 
funds made available for redevelopment would be a good indicator of the 
potential for changing land use patterns, these are long-term 
investments with impacts that will continue to occur for many years. 
Thus, current development commitments, while a useful indicator, cannot 
be the only consideration.

[[Page 3887]]

Instead, current development commitments are a part of the assessment 
of transit supportive plans and policies and the demonstrated 
performance of those policies. Finally, assessing the commitment of 
funds available for development would be difficult to measure, given 
the variability in how governmental entities and developers ``commit'' 
funding. Also, the degree of commitment varies along a continuum, and 
it would be difficult to choose what is considered ``committed'' along 
that continuum.
    FTA agrees the overall economic health of an area is not as 
important as the economic development strategies in place and whether 
the proposed project makes certain locations more accessible. Further, 
FTA believes a focus on the project corridor for analytical purposes, 
rather than on the metropolitan area as a whole, is more important. 
Retaining and growing existing businesses is an important outcome of 
investments, and how much a project supports such outcomes should be 
captured through an analysis of the change in accessibility and the 
transit supportive plans and policies in place.

Scope of Measurement and Factors Considered

Economic Development Question 8: ``How should FTA assess whether the 
plans, policies, and incentives intended to promote economic 
development would lead to transit oriented development that provides 
jobs and services within the corridor? Should FTA consider the economic 
development effects of the project on adjacent corridors? Should FTA 
consider commitments by developers or funding offered by developers as 
evidence of future economic development benefits? What time horizon 
should be used for considering economic development effects?''
    Comment: A very substantial number of comments were received in 
response to all or part of this question. Nearly half were submitted in 
response to how FTA should assess whether the plans, policies, and 
incentives intended to promote economic development would lead to 
transit oriented development that provides jobs and services within the 
corridor. Several of these comments stated FTA should assess whether 
the region has a coherent, cohesive set of policies in place based on a 
rational assessment of what is realistic given the region's existing 
development and its specific attributes (locational, natural, 
institutional, etc.). These comments further stated reasonable 
qualitative judgments can be made about the likely effect of combined 
land use, transportation and economic development policies on 
employment increases as well as other economic vitality factors. One 
comment went on to say that a significant and relevant indicator would 
be how well the region's economic development blueprint is integrated 
with its transportation strategy. One comment stated FTA should base 
its evaluation on whether there is a regional agreement that 
prioritizes transit projects in targeted growth areas. Another comment 
stated that FTA should consider: (1) City/regional history in 
delivering TOD; (2) the consistency between applicable plans and 
whether they are mutually supportive; (3) the existence of special 
designation of station areas/corridors for TOD; (4) how local zoning 
supports TOD; (5) whether infrastructure/public improvement/development 
plans are complementary; and (6) the level of developer commitments to 
TOD. One comment stated FTA should establish recommended best practices 
for TOD and give credit to jurisdictions that adopt these best 
practices. The proposed best practices mentioned included transit-
oriented land use regulations (especially incentive or inclusionary 
zoning), parking requirements and pricing, affordable housing on public 
and private land in station areas, and the pedestrian environment 
around proposed stations. Several comments suggested giving credit to, 
strengthening support for, or giving greater emphasis to jurisdictions 
that adopt transit supportive policies. A couple of the comments 
received did not support the use of transit supportive policies for the 
evaluation of economic development. One comment stated projects will 
create larger communities that will bring greater population and 
density without creating the supportive policies to handle the scale of 
these changes resulting from the project. The other comment stated 
transit projects relying on park and ride access for getting ridership 
do little to influence land use patterns.
    A large number of comments were received in response to whether FTA 
should consider the economic development effects of the project on 
adjacent corridors. Approximately half of these comments supported such 
consideration by FTA based on the connectivity provided by transit 
between locations and that the economic development impacts of a 
project extend beyond the transit corridor. Several of the comments 
stated there is significant variability in economic growth between 
metropolitan areas across the country due to multiple factors that 
affect economic development. These comments suggested this makes it 
difficult to isolate the effect of a discrete, specific transit 
investment and, therefore, leads to potential inequalities in how 
projects are evaluated and rated. One of the comments stated economic 
development in adjacent corridors is too broad a measure.
    A number of comments were received in response to whether FTA 
should consider commitments by developers or funding offered by 
developers as evidence of future economic development benefits. Most of 
these supported consideration of developer commitments, but one was 
opposed due to the sensitivity of developer commitments to funding 
cycles. None of the comments received specifically addressed 
developers' offers of funding.
    A large number of comments were received in response to the 
question regarding the time horizon used for considering economic 
development effects. A few generally supported balancing the accuracy 
of predictions (requiring a short time horizon) with the need to allow 
for market responses to transit investments (requiring a longer time 
horizon). An opposing comment suggested that given the long timeframe 
for conceiving, designing, and implementing transit projects, it is 
difficult to effectively assess developer interest and commitments at 
the beginning of the process. The comment indicated developers are more 
responsive when a Record of Decision is issued, believing that it 
reflects a more solid commitment to the project by local decision-
makers. A few comments stated a twenty-year horizon is appropriate. A 
couple of comments suggested using a twenty-year or greater time 
horizon. One of these wrote that the time horizon should be specific to 
local conditions and that twenty years or greater is the best due to 
the long build out time for transit projects and spin-off development. 
There was a single comment each supporting less than twenty years and 
for twenty to twenty-five years.
    One comment recommended the use of land use and economic 
development forecasts consistent with the time horizon of these 
forecasts used by the MPO.
    One comment stated economic development is important, but in many 
regions there are corridors with sufficient existing development and 
unmet transit needs to justify a proposed project.
    Response: FTA believes its review of transit supportive plans, 
policies, and

[[Page 3888]]

incentives and the demonstrated performance of those plans and policies 
should cover the full range of such items. Areas with ``blueprint 
plans'' will have identified a wide range of policies likely to support 
economic development around a transit investment. Regional agreements 
to target development around transit could also be important. FTA does 
not intend to establish best practices as part of the New and Small 
Starts evaluation process, but will certainly look to the literature to 
determine what policies are most likely to produce economic development 
benefits and evaluate whether they are in place. FTA does not agree 
with comments that it should discontinue evaluation of the existence of 
these transit oriented development plans and policies. Increasing the 
clustering of land uses around transit has been shown to have positive 
effects in reducing motorized travel and enhancing economic activity.
    FTA believes it should focus most of its attention on economic 
development effects in the corridor in which the proposed project is 
located, rather than effects on adjacent corridors or the metropolitan 
area as a whole. The accessibility changes brought about by the project 
are likely to be primarily concentrated in the corridor in which it is 
located, and impacts outside the corridor are likely to be less 
significant.
    FTA agrees commitments by developers are a useful indicator of the 
likelihood of future changes in development patterns. However, FTA 
believes projects being evaluated are likely to have long term impacts 
on development well beyond those for which commitments by developers 
may exist today. Accordingly, while FTA proposes to include such 
commitments in the evaluation process, they will not be the only factor 
considered.
    FTA believes it is appropriate to take a longer term view of the 
economic development effects of proposed transit projects. FTA believes 
it is not necessary to look at a specific time frame, such as 20 or 25 
years. Rather than make an explicit forecast of changes in development, 
FTA proposes to assess the transit supportive plans and policies in 
place and the demonstrated performance of those plans. At the sponsor's 
option, changes in population and employment may be estimated based on 
the changes in accessibility and elimination of mobility-based barriers 
to economic development, rather than requiring an explicit forecast of 
changes in development.
    FTA agrees land use forecasts prepared and used by MPOs form an 
important part of the evaluation. But it is not clear these forecasts 
are complete or detailed enough to assess the impact of a particular 
proposed transit investment on economic development. FTA proposes that 
project sponsors will have the discretion to use an analytical approach 
to assess the scale and nature of those impacts. FTA will not require 
an explicit forecast using an MPO's regional land use model.
    FTA agrees there are corridors that can already support a major 
transit investment based on existing development. FTA believes such 
projects will do well on the other project justification criteria in 
the multiple measure approach called for by law, such as mobility 
improvements and cost effectiveness. FTA intends to develop measures 
that do not penalize a project for modest but positive effects on any 
one of the evaluation criteria.
Economic Development Question 9: ``Should FTA consider changes in land 
values as evidence of potential economic growth in a station area or 
project corridor? How would FTA quantify recent and future changes in 
land values? How can FTA avoid double counting benefits given that 
changes in land values may be caused in part by the improved 
accessibility from the project that FTA already measures as part of 
cost effectiveness? Should FTA consider the extent to which existing 
affordable housing and commercial space can be maintained in the 
corridor after implementation of a transit project there?''
    Comment: A substantial number of comments were received in response 
to this question. Approximately one-third of the comments responded to 
the portion of the question about the consideration of affordable 
housing. Of these, most supported such an evaluation. One of the 
supportive comments noted that affordable housing should be accorded 
one-quarter of the points that the New Starts process gives to land use 
and economic development. Another suggested several strategies for 
ensuring that a share of new development is affordable to moderate-
income families stating that FTA should examine whether communities: 
Use projected Federal, state or local housing subsidies for development 
near proposed transit stations; use publicly owned land to develop 
affordable housing; require a share of proceeds from tax increment or 
tax assessment districts to be used for affordable housing near the 
proposed stations; adopt an employer-assisted housing policy; or use 
community land trusts or other shared equity homeownership mechanisms. 
The one opposing comment to the consideration of affordable housing 
stated that the goal might be unmanageable.
    A large number of comments supported livability and affordability 
to minimize displacement of low-income households. Suggestions 
included: having FTA work with the Department of Housing and Urban 
Development (HUD) and EPA to determine opportunities for reinvestment; 
having FTA, HUD, and EPA give emphasis to regions that target areas for 
growth and commit to reducing greenhouse gas emissions and VMT; and 
giving consideration to the character and goals of the local community.
    A large number of comments pertained to changes in land values. 
Several of the comments support the use of land values, but most 
opposed it. One of the supportive comments noted land value changes 
should be considered because they are an important, universal indicator 
of the impact of a transit project and that the value of increased 
accessibility should be credited as part of the economic development 
criterion (the external measure) rather than as part of the cost 
effectiveness criterion (the internal measure). A small number of 
comments suggested FTA consider changes in land values as evidence of 
potential economic development in a station area or project corridor, 
but provided no rationale.
    The reasons given by those opposed to including land values were 
that land values are subject to market cycles, do not grow in a 
consistent manner, depend on actual use, and cannot be used to predict 
potential economic development accurately. Comments stated there can be 
extreme variability, even within one region, in methods of appraising 
or assessing commercial and residential values. The comments went on to 
say land value changes can be speculative and artificially inflated, 
are affected by urban economic and market factors other than transit 
service provision, and will not help FTA differentiate among transit 
projects. One comment stated the biggest increases in land values 
result when four factors are present: the region is growing, the 
transit system is growing, there are increasing levels of congestion in 
the region, and the region has supportive public policies. This 
commenter stated predicting these factors into the future presents a 
level of complexity the program does not need. Lastly, a comment stated 
using changes in land values as a metric for potential growth might 
interfere with many of the recent initiatives announced by FTA, HUD, 
and EPA and even recent studies by the

[[Page 3889]]

Government Accountability Office that concentrate on livable 
communities, environmental sustainability and affordable housing. 
Another comment opposing the consideration of land value changes 
observed that land value increases attributable to transit investments 
are difficult to isolate from a variety of other market and locational 
factors. The comment also noted it is not clear what the benefit of 
increased land values would be to the New Starts/Small Starts project.
    One comment suggested FTA only use land use values as an indicator 
of economic development if the project sponsor plans to utilize tax 
increment financing to fund a portion of the transit investment since 
that would independently require the sponsor to undertake rigorous and 
expensive projections in order to underwrite the financing and convince 
potential investors of the soundness of the venture.
    One comment suggested the consideration of both a qualitative and 
quantitative approach for forecasting changes in land use values and 
patterns. The summary for Question 7 deals with the qualitative and 
quantitative factors suggested.
    Response: FTA believes that affordable housing should be a 
consideration in both the land use and economic development effects 
criteria. FTA is proposing to assess the existing publically supported 
housing in the project corridor under the land use criterion. FTA is 
aware of the concern that increases in land value that often accompany 
implementation of major capital transit investments can lead to 
increases in rents and gentrification and thereby reduce the stock of 
affordable housing. Hence, FTA intends to include an evaluation of 
whether the transit supportive plans and policies examined under the 
economic development criterion include features designed to ensure 
affordable housing remains in the proximity of the proposed project. 
The variety of factors suggested is very helpful. FTA is already 
working closely with HUD and EPA and intends to continue to work 
closely with these agencies.
    FTA agrees changes in land values should not be used in the 
economic development effects criterion. While land values are likely to 
be affected by implementation of the proposed project because of 
changes in the accessibility afforded by the project, they are very 
difficult to predict. FTA agrees they are subject to various market 
forces and trends, and result from a wide range of factors such as the 
overall health of the region and corridor, other locational factors, 
and other public policies, not just implementation of the transit 
project.
    FTA agrees forecasts of changes in land values are important if a 
project intends to use such tools as tax-increment financing, since a 
forecast of the change is required to determine how much revenue will 
be available. But the evaluation of the reasonableness of these revenue 
assumptions more properly belongs in local financial commitment 
criteria.
    FTA believes it is appropriate to allow for an optional analytical 
approach to measure economic development effects in terms of population 
and employment around the transit investment, primarily because of the 
challenges in predicting and quantifying the measures discussed above. 
FTA believes projects sponsors that choose to do the optional analysis 
can assess the likely direction and general magnitude of economic 
development benefits sufficiently to evaluate project justification 
without a fully forecast measure.
Economic Development Question 10: ``Should economic development be a 
part of the cost effectiveness measure?''
    Comments on this question are summarized under the section of this 
NPRM focused on cost effectiveness.

V. Section-by-Section Analysis

Reorganization

    FTA is proposing to completely rewrite and reorganize part 611 by 
dividing it into three subparts. Subpart A would include general 
provisions, including purpose and contents, applicability, definitions, 
and a description of how the provisions of this regulation relate to 
the requirements of the transportation planning process. Subpart B 
would provide the process and project evaluation requirements 
applicable to New Starts projects. Subpart C would provide the process 
and project evaluation requirements applicable to Small Starts 
projects. The current Appendix describing the evaluation measures would 
remain. This distribution table shows the changes proposed to the 
organization structure of part 611 by section:

                           Distribution Table
------------------------------------------------------------------------
            Current part 611                    Proposed part 611
------------------------------------------------------------------------
611.1 Purposes and contents............  Subpart A--611.101 Purpose and
                                          contents.
611.3 Applicability....................  Subpart A--611.103
                                          Applicability.
611.5 Definitions......................  Subpart A--611.105 Definitions.
611.7 Relation to planning and project   Subpart A--611.107 Relation to
 development processes.                   the planning processes.
                                         Subpart B--611.209 Project
                                          development process (New
                                          Starts).
                                         Subpart C--611.309 Project
                                          development process (Small
                                          Starts).
                                         Subpart B--611.211 Before and
                                          after study (New Starts).
611.9 Project justification criteria     Subpart B--611.203 Project
 for grants and loans for fixed           justification criteria (New
 guideway systems.                        Starts).
                                         Subpart C--611.303 Project
                                          justification criteria (Small
                                          Starts).
611.11 Local financial commitment        Subpart B--611.205 Local
 criteria.                                financial commitment criteria
                                          (New Starts).
                                         Subpart C--611.305 Local
                                          financial commitment criteria
                                          (Small Starts).
611.13 Overall project ratings.........  Subpart B--611.207 Overall
                                          project ratings (New Starts).
                                         Subpart C--611.307 Overall
                                          project ratings (Small
                                          Starts).
Appendix A--Description of Measures      Appendix A--Description of
 Used for Project Evaluation.             Measures Used for Project
                                          Evaluation.
------------------------------------------------------------------------

    Although much of the regulation would remain the same, FTA is 
proposing a series of changes to better comport with the requirements 
of Section 5309, Title 49 U.S. Code (Section 5309) as amended by the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU) and the SAFETEA-LU Technical Corrections 
Act.
    First, and foremost, as noted above, FTA is proposing a new subpart 
to formally establish the process and

[[Page 3890]]

evaluation requirements for Small Starts. SAFETEA-LU established new, 
streamlined requirements for smaller projects that FTA has until now 
implemented through issuance of policy guidance. SAFETEA-LU also 
required that FTA initiate rulemaking to implement the Small Starts 
program, which FTA is now doing through this NPRM. Along those lines, 
this NPRM specifically proposes to add eligibility of corridor-based 
bus systems for Small Starts funding as provided by SAFETEA-LU. In 
addition, as provided for by SAFETEA-LU, this NPRM proposes elimination 
of the exemption from the evaluation and rating process for projects 
requesting less than $25 million in Section 5309 funding.
    Second, FTA is proposing changes in the project justification 
criteria, especially for cost effectiveness, mobility benefits, 
environmental benefits, and economic development benefits. These 
changes respond to the comments received in response to the questions 
asked in the ANPRM issued on June 3, 2010.
    Third, FTA is proposing to put in place a process whereby details 
related to evaluation measures and processes are included in policy 
guidance issued periodically for notice and comment, but not less than 
every two years as specified in SAFETEA-LU. This proposed guidance will 
supplement the current Appendix to the regulation and provide a formal 
process, linked to this regulation, whereby changes in the technical 
details of the New Starts and Small Starts project development and 
evaluation processes can be specified and changed over time as needed. 
FTA is making available a draft of its initial proposed guidance 
together with this NPRM and is requesting comment on it. In addition, 
this ``section-by-section'' analysis will contain some information on 
what the proposed policy guidance contains as it relates to that 
section of the regulation.
    Fourth, FTA is proposing to change the point of comparison for 
incremental measures from the ``baseline'' alternative (typically a 
TSM, or Transportation Systems Management, alternative) to a no-build 
alternative to be defined in the policy guidance.
    Fifth, FTA is proposing to establish a process whereby projects 
could pre-qualify based on their characteristics or the characteristics 
of the corridor in which they are located for automatic ratings of 
``medium'' or better on one or more project justification or local 
financial commitment criteria. This is similar to the automatic ratings 
currently allowed under the ``Very Small Starts'' category that FTA has 
established through policy guidance. The NPRM proposes to add this 
process for both New Starts and Small Starts projects, but details and 
specific pre-qualification values (``warrants'') would be specified in 
future policy guidance that will be subject to a public comment period 
prior to finalization.
    Sixth, FTA is proposing to re-rate projects only if there have been 
material changes in scope or estimated costs as they proceed through 
the project development process. A definition of what constitutes a 
material change would be established in future policy guidance that 
will be subject to a public comment period prior to finalization.
    Finally, FTA is proposing a series of language changes to clarify 
various requirements and definitions and to alter the references to law 
to be consistent with changes made by SAFETEA-LU and the SAFETEA-LU 
Technical Corrections Act.

Subpart A--General Provisions

Section 611.101 Purpose and Contents

    This proposed section, like Section 611.1 in the current 
regulation, describes the purpose and contents of this regulation, 
which is to guide the development and evaluation of projects that are 
candidates to receive discretionary major capital investment funding 
under Section 5309 of Title 49, U.S. Code. Those projects can include 
fixed guideway projects, either completely new systems or extensions to 
existing systems, (``New Starts'' or ``Small Starts'' depending on size 
and the amount of Section 5309 funding sought), and corridor-based bus 
systems (under ``Small Starts''), as specifically added by SAFETEA-LU.
    The proposed section also specifically allows for separate 
procedures (described in a new subpart C) for ``Small Starts'' 
projects, which are projects that have a total cost of less than $250 
million and are seeking less than $75 million in funding under Section 
5309. As in the current regulation, this section indicates that New 
Starts projects will be evaluated and rated at several steps in project 
development, including advancement into preliminary engineering and 
final design and prior to entering into a full funding grant agreement. 
Ratings are shown in the report that must be submitted to Congress each 
year making funding recommendations. New language also indicates that 
this process will be used for Small Starts projects for advancement 
into project development and prior to entering into a project 
construction grant agreement. The language has also been changed to 
reflect that overall ratings will now be assigned on a five-level scale 
from ``high'' to ``low,'' instead of ``highly recommended,'' 
``recommended,'' or ``not recommended,'' as required by amendments to 
Section 5309 made by SAFETEA-LU.

Section 611.103 Applicability

    As in the current regulation, this proposed section specifies that 
part 611 would apply to all projects that are candidates for 
discretionary funding for major capital investment projects under 
Section 5309. Also as in the current regulation, it would apply to new 
fixed guideway projects and extensions to existing fixed guideway 
projects. But the section would also be amended to add the eligibility 
for corridor-based bus systems as Small Starts projects, as authorized 
by SAFETEA-LU.
    As in the current regulation, FTA proposes that the evaluation 
process would not apply to projects that have already received a full 
funding grant agreement. The section would be modified to also indicate 
that it would not apply to Small Starts projects that have already 
received a project construction grant agreement, and would clarify that 
the previous regulation (now the current regulation) would continue to 
apply to those projects. In addition, FTA proposes to modify this 
section to eliminate the exemption from the project development and 
evaluation process in the current regulation for projects seeking less 
than $25 million in funding from Section 5309. In addition, FTA is 
proposing to remove the provision for expedited procedures for projects 
that are air-quality transportation control measures, since that 
provision was deleted from the law by SAFETEA-LU.

Section 611.105 Definitions

    This section proposes definitions that apply to terms used 
throughout part 611. FTA proposes to keep most of the definitions in 
the current regulation and to add a number of additional definitions.
    A new definition is proposed for a ``corridor-based bus system.'' 
This definition is the same as is currently in the law (49 U.S.C. 
5309(e)(10)), and consistent with how FTA has defined it in policy 
guidance. FTA expects to continue to define the term more specifically 
through policy guidance so that it can be updated and revised as needed 
without the need for rulemaking. This definition essentially replaces 
the definition of ``bus rapid transit'' in the current regulation.
    FTA proposes to delete the definition of ``baseline alternative'' 
and to add a

[[Page 3891]]

definition of ``no-build alternative'' as an alternative that includes 
the existing transportation system as well as those transportation 
investments committed in the Transportation Improvement Plan (TIP) 
pursuant to 23 CFR Part 450. In Appendix A and through its policy 
guidance, FTA is proposing to most often use the existing system as a 
point of comparison when calculating incremental measures (i.e., 
measures that need some other alternative as a point of comparison so 
that the change in that measure can be shown), but to use the no-build 
alternative for some measures when a project sponsor chooses to 
forecast benefits in a future year.
    FTA is also proposing a number of changes to definitions that 
relate to the project development process. First, FTA proposes to 
modify the definition of ``alternatives analysis'' in the regulation to 
track with the definition in 49 U.S.C. 5309(a)(1). Second, FTA is 
proposing a definition for ``early systems work agreement'' by 
expanding on language which defines them in Section 5309. Third, FTA 
proposes to expand slightly the definition of ``final design'' to 
indicate that all funding commitments must be obtained during final 
design. Finally, FTA is proposing to add definitions of ``metropolitan 
transportation plan'' and ``locally preferred alternative'' that are 
consistent with the metropolitan planning regulations located in 23 CFR 
Part 450.
    FTA is proposing to expand the definition of ``major capital 
investment project'' to include corridor-based bus systems since they 
are now eligible as Small Starts projects. The proposed revision to the 
definition of ``NEPA process'' would indicate that NEPA may be complete 
if a project is approved as a categorical exclusion, as well as if it 
has received a Record of Decision or a Finding of No Significant 
Impact. FTA is also proposing to amend the definition of ``New Starts'' 
to account for the funding thresholds added by SAFETEA-LU and 
accordingly add a definition of ``Small Starts.'' The proposed 
definition for Small Starts indicates that they are projects for new or 
extended fixed guideways or corridor-based bus systems with a capital 
cost of less than $250 million and seeking less than $75 million in 
funding from Section 5309. FTA is also proposing definitions for New 
Starts funds and Small Starts funds to improve the readability of the 
regulation.
    The definition proposed for ``project development'' accounts for 
the addition of the Small Starts program by SAFETEA-LU, as that is the 
primary phase of development for Small Starts projects. The definition 
for TEA-21 is proposed for deletion given that it is no longer 
necessary.

Section 611.107 Relation to the Planning Process

    As in the current regulation, this section proposes to require that 
projects seeking New Starts funds emerge from and be consistent with 
the metropolitan and statewide planning processes required by 23 CFR 
Part 450. It proposes to add Small Starts projects to this requirement, 
as provided for by SAFETEA-LU. It also proposes to require, as in the 
current regulation, that a project be based on the results of an 
alternatives analysis. As in the current regulation, the section 
provides details on what an alternatives analysis must include. The 
section proposes to remove the requirement for a specified baseline 
alternative (which often was required to be a ``Transportation System 
Management'' (TSM) alternative), because the point of comparison for 
the various incremental measures will hereafter be defined in Appendix 
A and the policy guidance as the existing system (for comparisons with 
current travel patterns) or the no-build alternative (for comparisons 
with travel patterns in the future.) The no-build alternative is 
defined as the existing transportation system as well as those 
transportation investments committed in the Transportation Improvement 
Plan (TIP) pursuant to 23 CFR Part 450..
    The project development process included in the current regulation 
is proposed to be modified and moved to the separate subparts for New 
Starts and Small Starts, allowing them to be customized for each of the 
programs.

Subpart B--New Starts

Section 611.201 Eligibility

    This is a new proposed section designed to clarify the basic 
requirements of what must be accomplished to be eligible for approval 
of grants at various stages of the project development process. The 
proposed requirements are similar to the requirements in the current 
regulation for approval into the various phases of project development.

Section 611.203 Project Justification Criteria

    Many of the topics in this section of the proposed regulation are 
specified in Appendix A and, in far greater detail, described in the 
proposed policy guidance made available for public comment today. Thus, 
the section analysis for Section 611.203 will contain one portion that 
describes the proposed changes to the regulation and another portion 
that discusses what FTA is proposing in the Appendix and by way of 
guidance.

A. Proposed Regulation

    Although Section 611.203 is a new section proposed for the 
regulation, much of the content is taken from the current regulation at 
49 CFR 611.9. As in the current regulation, project justification will 
be evaluated based on a multiple measure approach that takes account of 
each of the criteria specified in Section 5309(d). The measures for the 
criteria are being proposed in Appendix A and described further in the 
policy guidance, which may be modified and re-issued periodically by 
FTA whenever significant changes are proposed, but not less frequently 
than every two years, as required by Section 5309(d)(6) of Title 49, 
U.S. Code. This would supplement Appendix A of the current regulation. 
FTA has found that the process of notice and comment for this policy 
guidance established by SAFETEA-LU to be an extremely effective way of 
continuing the improvement of the New Starts project evaluation process 
by providing flexibility to make changes to recommended technical 
methods as new methods become available.
    As in the current regulation, individual project justification 
criteria would be assigned ratings on a five-level scale from ``high'' 
to ``low.'' The regulation would implement the changes made by SAFETEA-
LU, which added economic development and public transportation 
supportive land use patterns and policies to the criteria required by 
law, and the proposed text would eliminate transportation system user 
benefits from cost effectiveness. In addition, FTA proposes to broaden 
the ``other factors,'' by simply noting that it includes any factors 
likely to be relevant to the success of the project. It would indicate 
that any incremental project justification measures would be evaluated 
against a point of comparison specified in Appendix A and the policy 
guidance. This proposed language would replace the current requirement 
that a baseline alternative, usually in the form of a ``Transportation 
System Management'' (TSM) alternative, be used as a point of 
comparison. As in the current regulation, it would be expected that as 
a project advances through the project development process, a greater 
degree of specificity would be in required with respect to project 
scope and costs, that commitments made to public transportation 
supportive land use policies would be expected to increase, and that a 
project sponsor's

[[Page 3892]]

technical capacity would be expected to improve.
    FTA is proposing the regulation not include the ``considerations'' 
listed in 49 U.S.C. 5309(d)(3). All of these factors are covered by one 
or more of the project justification criteria themselves, or are 
relevant to the basic grant eligibility findings required under Section 
611.201. FTA will continue to assure forecasting methods are reliable 
before accepting them as justifying a project. The direct and indirect 
costs of alternatives are assessed as part of the evaluation of cost 
effectiveness. Congestion relief is covered as part of the evaluation 
of mobility improvements and is likely to be related to the amount of 
transit use which forms a part of the measure of cost effectiveness. 
Improved mobility is explicitly measured by the mobility improvements 
criteria. Air pollution, noise pollution, energy consumption, and 
environmental mitigation are all part of the measure of environmental 
benefits. Reductions in local infrastructure costs and the costs of 
suburban sprawl are considered in the measure for economic development. 
Whether a project increases the mobility of public transportation 
dependent persons is covered by the measure of mobility improvements. 
Population density and current transit ridership are covered by the 
public transportation supportive land use criterion. Technical 
capability is covered by the requirement that a project meet the 
overall requirements for a grant under Section 5309. Differences in 
land, construction, and operating costs are considered by the cost 
effectiveness measure.
    The section is proposed to include a provision that would allow for 
a process by which a project could pre-qualify to receive an automatic 
rating of ``medium'' or better on one or more of the project 
justification criteria based on its characteristics or the 
characteristics of the corridor in which it is being planned. FTA 
believes that it may be able to specify such characteristics, as it 
currently does for ``Very Small Starts'' under its policy guidance, for 
a range of larger projects and a wider range of corridor types. The 
pre-qualification values would be established by FTA by determining how 
projects would rate on the justification criteria based on an analysis 
at the national level. Proposed pre-qualification values would be 
published in policy guidance for comment by the public before their 
finalization. In this way, a project sponsor would not be required to 
conduct forecasts of various factors, since the project itself would be 
deemed to have sufficient merit to proceed for purposes of any such 
criterion.
    Pursuant to the SAFETEA-LU Technical Corrections Act, the ratings 
on each of the project justification criteria would be combined using 
``comparable, but not necessarily equal'' weights into a summary rating 
of project justification. FTA proposes that the process to do so, and 
the specific weights, would be described in the periodic policy 
guidance and would thus be subject to notice and comment if changes are 
proposed.

B. Appendix A and Proposed Guidance

    As noted above, FTA is today making available draft policy guidance 
for public review and comment. That policy guidance provides greater 
detail on the proposed project justification measures specified in 
statute and proposed in regulation, as described above.
    First, FTA is proposing in Appendix A to measure mobility benefits 
as the number of trips using the project, with extra weight given to 
trips that would be made on the project by transit dependent persons. 
Because this project trips measure derives exclusively from the 
performance of the project itself, it does not require a point of 
comparison (formerly the baseline alternative) for the computation.
    FTA notes this change may have an impact on the kinds of projects 
that receive favorable ratings on the mobility and cost effectiveness 
criteria. Under the current approach, which uses ``transportation 
system user benefits'' (essentially travel time savings) as the measure 
of effectiveness, projects that involve longer trips are advantaged 
because there is more of an opportunity to save time. The revised 
measure is likely to rate projects with shorter trips better than they 
would have been rated under the former measure. On the other hand, 
projects with longer trips are more likely to reduce VMT, and thus are 
more likely to rate better on the measure of environmental benefits.
    To facilitate the estimation of project trips, FTA will provide a 
simplified forecasting model that uses census data and ridership 
experience on existing fixed-guideway systems. The policy guidance 
proposes that sponsors of projects who can obtain a satisfactory 
overall rating based on estimates prepared with the simplified model 
will not be required to provide to FTA estimates of project trips 
prepared using traditional local travel forecasting models. At the 
project sponsors' option, estimates of project trips prepared with 
traditional methods may be used instead, but FTA will continue to 
require that those methods be tested for their understanding of local 
transit ridership patterns using recent data adequate to the support 
the tests.
    FTA proposes to consider the project trips measure in the current 
year or in both the current year and the horizon year. The estimate of 
project trips for the current year puts all proposed projects in a 
consistent near-term timeframe for the evaluation. The estimate of 
project trips for the horizon year captures the increases in trips on 
the project that would be associated with growth and increasing 
congestion. Sponsors of projects that can obtain a satisfactory 
mobility, cost-effectiveness, and project justification rating 
(``medium'' or better) based on current-year estimates of project trips 
may choose to forego the preparation of horizon year estimates.
    FTA proposes to assign the mobility rating based on the number of 
trips estimated to use the project, with extra weight given to trips 
made on the project by transit dependent persons. FTA is proposing in 
the accompanying policy guidance to give a weight of 2.0 to estimated 
trips made on the project by transit dependent persons. FTA proposes to 
assign rating breakpoints in future policy guidance based on an 
assessment of the values calculated for projects now in the project 
development process.
    Second, FTA proposes in Appendix A to focus economic development on 
the likely future development outcomes resulting from the project (the 
land use criterion would focus on current land use patterns likely to 
support the proposed transit investment). Accordingly, FTA proposes to 
assess economic development benefits based on: (1) The existing or 
anticipated plans and policies to support economic development 
proximate to the project; (2) and (2) at the option of the project 
sponsor, indirect changes in VMT resulting from changes in development 
patterns may also be estimated, and the resulting environmental 
benefits calculated, monetized, and compared to the annualized capital 
and operating cost of the project under the economic development 
criterion. FTA would evaluate the existing or anticipated plans and 
policies in a manner that is similar to the existing practice with the 
addition of an examination of plans and policies in place to maintain 
or increase affordable housing in the corridor. Projects sponsors may 
chose whether or not to perform the optional quantitative analysis 
based on whether they believe it will help improve the economic 
development benefit rating for the project. Because of the absence of 
tools to predict development changes

[[Page 3893]]

associated with transit projects, quantification would involve an 
examination by the project sponsor of economic conditions in the 
project corridor, the mechanisms by which the project would improve 
those conditions, the availability of land in station areas for 
development and redevelopment, and a pro forma assessment of the 
feasibility of specific development scenarios. The environmental 
benefits stemming from such changes in land use would be estimated, 
monetized, and compared to the annualized capital and operating cost of 
the proposed project. FTA would review the analysis before assigning a 
rating.
    Third, in Appendix A, FTA proposes to measure environmental 
benefits by considering the dollar value of changes in: (1) Air-
pollutant emissions, estimated using changes in vehicle-miles of travel 
(VMT), with recognition of the air-quality attainment status of the 
metropolitan area; (2) greenhouse gas emissions estimated using VMT 
changes; (3) transportation energy use estimated using VMT changes; and 
(4) transportation fatalities, injuries, and property damage estimated 
using changes in VMT and transit-passenger miles of travel, compared to 
the annualized capital and operating cost of the proposed project. 
Changes in public health costs associated with long-term activity 
levels would be considered once better methods for calculating the 
information are developed. FTA would establish in policy guidance 
breakpoints for the environmental benefits rating.
    Fourth, FTA proposes in Appendix A to measure operating 
efficiencies as the change in operations and maintenance cost per 
``place-mile'' compared to the existing transit system in the current 
year or to the no-build transit system (as defined in this proposed 
regulation) in the horizon year. A ``place-mile'' would be defined as 
the seated plus standing capacity of vehicles multiplied by the annual 
revenue-miles of those vehicles. FTA would define the rating 
breakpoints in policy guidance. This would replace the current approach 
in which changes in cost per passenger mile is the measure used. 
Changes in cost per ``place-mile'' better focuses only on changes in 
the cost to supply transit service. The former measure mixed in issues 
related to deployment and usage patterns, which are better addressed in 
the mobility and cost effectiveness measures.
    Fifth, FTA proposes in Appendix A to measure cost effectiveness as 
the incremental cost per trip on the project. The policy guidance 
proposes to define incremental costs as the sum of: (1) The additional 
annualized capital cost of the project as compared to the existing 
system, and (2) the change in annual operating and maintenance costs. 
(The annual trips on the project would include the additional weight 
applied to project trips by transit dependents. The annualized capital 
cost of the project used to compute the cost effectiveness measure 
would exclude the costs of certain ``betterment'' elements of project 
scope that foster economic development and environmental benefits 
(e.g., the incremental cost of obtaining LEED-certifications, station-
access provisions beyond those required by the ADA, and station-design 
and station-access elements that would enhance development impacts).
    Finally, FTA proposes in Appendix A to measure existing land use 
generally as it does today based on existing population and employment 
density in the corridor with the addition of the amount of publically 
supported housing in the corridor today.
    The project justification rating would continue to be a weighted 
combination of the six criteria: (1) Mobility, (2) economic development 
effect, (3) environmental benefits, (4) operating efficiency, (5) cost 
effectiveness, and (6) land use. The accompanying policy guidance 
proposes that equal weights would be applied to each measure, although 
``other factors'' could also be taken into account.

Section 611.205 Local Financial Commitment Criteria

    Some of the topics in this section of proposed regulation are 
specified in Appendix A and, in far greater detail, described in the 
proposed policy guidance made available for public comment today. Thus, 
the section analysis for Section 611.203 will contain one portion that 
describes the proposed changes to the regulation and another portion 
that discusses what FTA is proposing in Appendix A and by way of 
guidance.

A. Proposed Regulation

    As under the current regulation, a project must be supported by an 
acceptable degree of local financial commitment. FTA is proposing to 
continue to rate the proposed share of funding for the project provided 
by non-New Starts or non-Small Starts funds. In accordance with 
language in SAFETEA-LU, however, a project's overall local financial 
commitment rating cannot be downgraded based on this criterion (i.e., 
``overmatch'' can only help the summary local financial commitment 
rating). FTA proposes to reorganize the rating of the other local 
financial commitment criteria to better reflect the strong interaction 
between capital and operating funding needs. FTA has found that the 
current process, which produces ratings on the capital and operating 
plans separately, is duplicative in many ways. FTA proposes instead 
that the remaining two measures for local financial commitment be: (1) 
The current capital and operating financial condition of the agency 
that would operate the project; and (2) the reliability of the capital 
and operating cost and revenue estimates and the resulting financial 
capacity of the project sponsor.
    As with the project justification criteria, FTA is proposing the 
possible use of standards for the local financial commitment criteria 
that would allow a project to receive an automatic rating or ``medium'' 
or better based on the characteristics of the project and the project 
sponsor. These thresholds would be established in the periodic policy 
guidance. As in the current regulation, each of the local financial 
commitment criteria would be rated on a five-level scale from ``low'' 
to ``high'' and a summary local financial commitment rating would be 
established combining the individual ratings. The process and weights 
used to develop the summary rating would be established in the periodic 
policy guidance, just as they are now. The current regulation calls for 
combining the ratings but does not provide details on how it must be 
done.

B. Appendix A and Proposed Guidance

    As noted above, FTA is today making available draft policy guidance 
for public review and comment. That policy guidance provides greater 
detail on the proposed local financial commitment measures specified in 
statute and proposed in regulation, as described above.
    FTA is proposing to restructure the examination of local financial 
commitment to better reflect the interdependency of capital and 
operating financial plans submitted by project sponsors. Currently, FTA 
examines a project sponsor's financial plan and evaluates and rates: 
(1) The non-New Starts or non-Small Starts share of the project; (2) 
the strength of the capital financial plan (based on the current 
capital condition, the commitment of capital funds, and the 
reasonableness of the estimates used in the financial plan and the 
resulting financial capacity of the project sponsor); and (3) the 
strength of the operating financial plan (based on the current 
operating condition, the commitment of operating funds, and the 
reasonableness of the estimates used in the financial plan and the 
resulting

[[Page 3894]]

financial capacity of the project sponsor). FTA is proposing to instead 
examine the project sponsor's financial plan and evaluate and rate it 
based on: (1) The non-New Starts or non-Small Starts share of the 
project; (2) the current financial condition of the project sponsor 
(both capital and operating); (3) the commitment of capital and 
operating funds for the project; and (4) the reasonableness of the 
estimates used in the financial plan and the resulting capital and 
operating financial capacity of the project sponsor. The individual 
measures are described in Appendix A with more detail and breakpoints 
provided in the policy guidance.

Section 611.207 Overall New Starts Project Ratings

    As in the current regulation, FTA proposes that the ratings for 
project justification and local financial commitment be combined into 
an overall rating of project merit. The proposed regulation would 
assign an overall rating on a five-level scale from ``low'' to ``high'' 
in conformance with the requirements of SAFETEA-LU, which replaced 
ratings of ``highly recommended,'' ``recommended,'' and ``not 
recommended.'' As in the current regulation, these overall ratings will 
be assigned when a project is a candidate for approval into preliminary 
engineering, approval into final design, and approval for a full 
funding grant agreement. In contrast to the current regulation, 
however, FTA will not require re-rating of the project for each Annual 
Report to Congress so long as the scope and cost of the project have 
not changed materially from the previous rating. The policy guidance 
will provide a definition of material changes that will trigger a re-
rating. If there are no materials changes, the rating developed at the 
earlier step will continue in force. As in the current regulation, the 
overall ratings will be used for approval of entry into preliminary 
engineering, approval of entry final design, for approval of a full 
funding grant agreement, and in the Annual Report to Congress. The 
proposal provides that the overall rating will be established by 
averaging the summary ratings obtained on project justification and 
local financial commitment and that the rating will be rounded up when 
there is a one-level rating difference for the two summary ratings. As 
in the current regulation, the proposed regulation requires that in 
order to receive an overall rating of ``medium,'' both the summary 
project justification rating and the summary local financial commitment 
rating must be at least ``medium.'' Also, if a project is rated ``low'' 
on either the summary project justification rating or the local 
financial commitment rating, the overall rating will be ``low.''

Section 611.209 Project Development Process

    This section includes requirements for the project development 
process now included in paragraphs (b) through (d) of Section 611.7. It 
includes the requirements for advancement into preliminary engineering, 
final design, and for a full funding grant agreement. For clarity, 
provisions related to the ``before and after study'' have been moved to 
Section 611.211.
    As in the current regulation, FTA proposes that a project can be 
considered for entry into preliminary engineering only if an 
alternatives analysis has been completed, the locally preferred 
alternative has been adopted into the metropolitan transportation plan 
by the metropolitan planning organization, all other FTA program 
requirements are met, and the overall New Starts rating for the project 
is at least ``medium.'' Projects already approved for entry into 
preliminary engineering when this regulation goes into effect would 
continue in preliminary engineering under the proposed regulation.
    As in the current regulation, the proposed rule would provide 
automatic pre-award authority for a project sponsor to conduct 
preliminary engineering, allowing for reimbursement of such costs prior 
to award of any FTA grant for the purpose. As in the current 
regulation, such authority would not be a commitment of future Federal 
funding, and all Federal requirements would have to be met to assure 
that such costs are eligible should a grant be made. In addition, FTA 
is also proposing to codify its recent policy change to allow, upon 
completion of the NEPA process, pre-award authority for utility 
relocation, real property acquisition, and vehicle acquisition. Real 
estate acquisition could be reimbursed when a project is approved into 
final design, and vehicle purchases could be reimbursed when a project 
is approved for construction.
    As in the current regulation, the proposed regulation would allow a 
project to be approved into final design upon completion of the NEPA 
process. In addition, a project sponsor would have to demonstrate 
adequate technical capacity to carry out the project and meet all other 
grant requirements. The proposed regulation would also continue to 
require that the project receive an overall New Starts rating of 
``medium'' or better. Projects already in final design when this 
regulation becomes final would continue in that status under the 
proposed regulation. FTA is proposing codify its recent policy change 
which extended automatic pre-award authority with approval into final 
design for final design activities, as well as demolition and non-
construction activities (such as procurement of long-lead time items, 
such as rails, ties, and other specialized commodities and equipment). 
The regulation specifies that those costs are potentially reimbursed 
upon grant approval.
    As in the current regulation, the proposed regulation provides that 
a full funding grant agreement would be executed once no outstanding 
issues remain that would interfere with the successful implementation 
of the proposed project and once the sponsor has demonstrated 
sufficient technical capabilities to carry out the project. To be 
eligible for an FFGA, the project would have to be authorized by law, 
have an overall New Starts project rating of ``medium'' or better, have 
completed all applicable project development requirements, and be ready 
to utilize New Starts funds. The proposed regulation specifies that the 
issuance of an FFGA is at FTA's discretion, as in the current 
regulation. The proposed regulation clarifies that an FFGA will include 
a baseline cost estimate and baseline schedule. As in the current 
regulation, the proposed regulation provides that the FFGA will provide 
for a fixed maximum level of New Starts funding, a schedule for 
anticipated Federal funding, a requirement that the project sponsor 
complete the project to the initiation of revenue service, and that the 
project sponsor absorb any cost overruns using funding from sources 
other than the New Starts program. The proposed regulation requires 
that, as noted in the current regulation, annual New Starts funding in 
an FFGA is subject to the availability of appropriated budget authority 
and the ability of the project sponsor to use the funding effectively.
    As in the current regulation, the proposed regulation provides that 
the total amount of funding that can be committed by FTA to FFGAs, as 
well as to ESWAs and Letters of Intent is limited by law to the amount 
of funding authorized for New Starts. As provided by statute, and the 
current regulation, the proposed regulation provides that FTA may also 
make limited ``contingent commitments'' beyond the authorized amount.

[[Page 3895]]

Section 611.211 Before and After Study

    This section provides the requirements for the ``before and after 
study'' required by law. In the current regulation, these requirements 
appear in Section 611.7(c)(4) and (5) and in Section 661.7(d)(7). This 
proposed section consolidates these requirements in one place and makes 
certain other changes to improve clarity. As in the current regulation, 
the purpose of the study in the proposed regulatory language is to 
assess the impacts of the New Starts project and to compare the costs 
and impacts of the project with costs and impacts forecast during the 
project development process. Also in the current regulation, the 
proposed regulation requires that a project sponsor produce a plan for 
the before and after study during preliminary engineering. New proposed 
language specifies in more detail the kind of information to be 
collected in the study, including information on the characteristics of 
the project and other related changes in the transit system (such as 
service levels and fares), the capital and operating costs of the 
project, and the impacts of the project on transit service quality, 
ridership, and fare levels.
    As is generally required by the current regulation, the plan under 
this proposal developed during preliminary engineering would provide 
for preservation of data on the predicted scope, costs, and ridership; 
collection of ``before'' data on the transit system and ridership 
patterns and travel behavior; documentation of capital costs as the 
project is built; collection of ``after'' data two years after the 
project opens on actual project scope, costs, and ridership; an 
analysis of the project costs and impacts; and an assessment of the 
consistency of the forecasts of costs and ridership between those 
forecast and those actually achieved. FTA is requesting comments on 
whether two years after opening is a sufficient time for project 
impacts to be fully realized. The proposed regulation also calls for 
the plan to include preparation of a final report to be submitted 
within three years of project opening. As in the current regulation, 
the costs of carrying out the before and after study, including the 
necessary data collection, is proposed to be an eligible expense of the 
proposed project. Also as in the current regulation, the proposed 
regulation requires that the plan be approved before the project may 
advance into final design.
    A new requirement in the proposed regulation provides that, before 
execution of the full funding grant agreement, there must have been 
satisfactory progress on carrying out the plan. As in the current 
regulation, the full funding grant agreement would include a 
requirement that the plan be carried out during the construction of the 
project and that FTA may condition receipt of funding during an FFGA on 
satisfactory execution of the before and after study.

Subpart C--Small Starts

    Subpart C is a completely new subpart laying out the requirements 
for Small Starts projects. These are projects for new fixed guideways 
or extensions to existing fixed guideways, or new or extended corridor-
based bus projects meeting the definitions in law and guidance ensuring 
that they represent a ``substantial investment'' provided for in law. 
Small Starts projects must have a capital cost of less than $250 
million and be seeking less than $75 million in Small Starts funds.
    Because the regulatory framework for Small Starts projects in 
subpart C is quite similar to that of the framework in subpart B for 
New Starts, this portion of the section-by-section analysis will only 
highlight differences between Subpart B and Subpart C.

Section 611.301 Eligibility

    This proposed section is designed to clarify the basic requirements 
of what must be accomplished for a project to be eligible for approval 
at each step of the process to prepare for and achieve execution of a 
project construction grant agreement (PCGA). This proposed section is 
nearly identical to the proposed Section 611.201 for New Starts in 
subpart B, except that this section expands eligibility to corridor-
based bus systems, requires that a project be a Small Starts project 
rather than a New Starts project, references the Small Starts 
evaluation criteria rather than the New Starts evaluation criteria, 
references a PCGA rather than an FFGA, and provides details on project 
development grants (rather than on preliminary engineering or final 
design grants).

Section 611.303 Project Justification Criteria

    As in the proposed regulation for New Starts in Section 611.203, 
this section proposes that the evaluation of project justification for 
Small Starts be based on a multiple measure approach that takes into 
account each of the criteria specified in Section 5309(e). This 
proposed section differs in that Small Starts projects are proposed to 
be rated on just three criteria: economic development, public 
transportation supportive land use patterns and policies, and cost 
effectiveness (at the time of initiation of revenue service), in 
accordance with the language of SAFETEA-LU. In addition, Small Starts 
projects are more likely to be able to take advantage of standards that 
could lead to automatic ratings in paragraph (e) of this proposed 
section given that such automatic ratings would more likely be 
applicable to smaller projects. That said, the proposed regulatory 
language on that point is the same.
    As in the proposed parallel Section 611.203 for New Starts, details 
concerning project justification criteria, the point of comparison for 
certain incremental measures, and the weights given to the criteria in 
Section 611.303 for Small Starts can be found in proposed Appendix A 
and in the proposed policy guidance made available today for public 
review and comment. Thus, it is not necessary to repeat the details on 
Appendix A and the proposed policy guidance located above in Section 
611.203, as the same details apply to Small Starts projects, only to 
slightly different evaluation criteria.

Section 611.305 Local Financial Commitment Criteria

    This proposed section is nearly identical to the parallel section 
for New Starts projects in proposed Section 611.205. There are two 
primary differences: (1) References are made to Small Starts and to the 
statutory language for Small Starts rather than for New Starts; (2) the 
local financial commitment is evaluated based on the year the project 
is put into operation rather than based on a twenty-year planning 
horizon, as provided for in SAFETEA-LU.
    As with the parallel section for New Starts, FTA is proposing 
details concerning its proposals for evaluating local financial 
commitment in policy guidance made available today. Other than for the 
change in year for evaluation of local financial commitment, this 
process is proposed to be similar to that of New Starts, so there is no 
need for a fuller explanation of the proposed guidance here.

Section 611.307 Overall Small Starts Project Ratings

    The only differences between proposed Section 611.307 and the 
parallel provision for New Starts in the proposed Section 611.207 are: 
(1) References are made to Small Starts and to the statutory language 
for Small Starts rather than for New Starts; and (2) references in the 
proposed section for

[[Page 3896]]

New Starts to preliminary engineering and final design are replaced in 
this proposed section with references to project development; and (3) 
references to FFGAs and ESWAs are replaced with references in this 
section to PCGAs.

Section 611.309 Project Development Process

    This section is substantially similar to the parallel proposed 
Section 611.209 for New Starts, with the following differences: (1) 
References are made to Small Starts and to the statutory language for 
Small Starts rather than for New Starts; (2) references in the proposed 
section for New Starts to preliminary engineering and final design are 
replaced in this proposed section with references to project 
development (which includes the combination of the paragraphs on 
preliminary engineering and final design into a paragraph on project 
development); and (3) references to FFGAs and ESWAs are replaced with 
references in this section to PCGAs.

VI. Regulatory Analysis and Notices

A. Executive Orders 13563 and 12866

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. FTA has determined that this is an ``economically 
significant'' rule under Executive Order 12866, as it would affect 
transfer payments totaling more than $100 million annually. However, 
FTA does not know precisely how much transfer payments would be 
affected by this rule. Due to changes in the evaluation criteria, the 
projects selected for funding by the FTA may change. For example, by 
proposing to add quantified measures for environmental benefits, 
projects which have relatively large amounts of such benefits may be 
advantaged. On the other hand, the proposed change to the cost 
effectiveness measure from cost per hour of travel time savings to cost 
per trip could advantage projects serving shorter trips and more 
densely developed areas. For the purposes of this initial regulatory 
impact analysis, FTA preliminarily estimates that the proposals in the 
rule could affect the allocation of about $250 million of annual New 
Starts and Small Starts grant funds. FTA requests public comments on 
this estimate, as well as specific methods for more precisely 
estimating the impact of the rule.

B. Need for Regulation

    The rule proposes to implement changes mandated by SAFETEA-LU and 
the SAFETEA-LU Technical Corrections Act to the major capital 
investment program evaluation and review process that has been defined 
in statute for 35 years. The proposed rule and accompanying proposed 
policy guidance, would change FTA's implementation of the major capital 
investment program, primarily by adding the Small Starts project 
category to the program as required by SAFETEA-LU, giving the project 
justification criteria specified in law ``comparable but not 
necessarily equal weights'' as required by the SAFETEA-LU Technical 
Corrections Act, improving the measures FTA uses for each of the 
evaluation criteria specified in law, and streamlining and simplifying 
the means by which project sponsors develop the data needed by FTA.
    The rule may have the effect of altering the pattern or timing of 
major transit capital expenditures and changing the allocation of funds 
by transit agency size. For example, SAFETEA-LU makes corridor based 
bus projects eligible for Small Starts funding when previously only 
fixed guideway projects were eligible for major capital investment 
program funding. Fixed guideway projects tend to be costlier than 
corridor based bus projects. This eligibility change allows smaller 
transit agencies with smaller scale projects to obtain funding from the 
program.
    The NRPM, combined with the proposed policy guidance being 
published concurrently for comment, would improve the evaluation of 
project outcomes in mobility improvements, operating efficiency, cost 
effectiveness, environmental benefits, land use economic development, 
and local financial commitment.
    The NPRM proposes revisions to the project justification and local 
financial commitment criteria for FTA's evaluation of New Starts and 
Small Starts projects under Section 5309(d) and (e) of Title 49, U.S. 
Code. In the NPRM and accompanying proposed guidance, FTA also proposes 
to simplify the various means through which project sponsors may obtain 
the information they need to provide to FTA for its evaluation of 
projects. For example, FTA is proposing to allow project sponsors to 
use a simplified FTA-developed national model to estimate ridership 
rather than standard local travel forecasting models, to use a series 
of standard factors in a simple spreadsheet to calculate vehicle miles 
traveled (VMT) and environmental benefits, to no longer require the 
development of a baseline alternative for calculation of cost-
effectiveness, and to expand the use of warrant whereby a project may 
be able to automatically qualify for a rating if it meets parameters 
established by FTA.
    The purpose of this regulatory assessment is to examine the likely 
effects of this proposed rule and proposed policy guidance on project 
sponsors, including potential small entities such as local units of 
government populated by less than 50,000 people.
    These proposed changes may alter the pattern or timing of major 
capital investment expenditures, with a possible change in costs and/or 
benefits to individual transit agencies and their stakeholders. 
However, each change proposed in the regulation will be examined as to 
its likely effect, and a determination will be made as to whether the 
effect can be quantified with available information or with information 
that may be provided by commenters to the rule. Several questions will 
be raised in this analysis where additional data may help FTA to 
quantify some benefit or cost of the regulation. In the absence of this 
data, FTA will discuss the costs and or benefits in a qualitative 
manner in the next rulemaking action for this program.

B. Regulatory Evaluation

1. Overview
    The NPRM and proposed policy guidance address public comments that 
FTA received in response it its Advance Notice of Proposed Rulemaking 
(ANPRM) published June 3, 2010. These comments pertain to how FTA would 
manage project sponsors' calculation of cost effectiveness, 
environmental benefits, and economic development effects. The NPRM and 
accompanying policy guidance propose changes to streamline the project 
evaluation process for major capital projects. The regulatory text and 
appendix to the regulation outline FTA's proposed approach, with 
technical details proposed in policy guidance.
    Based in part on public comments on the ANPRM, the NPRM clarifies 
the discussion of project performance. This includes the project's 
effectiveness in generating benefits in the areas required by law and 
of interest to FTA, cost

[[Page 3897]]

effectiveness in obtaining these benefits, and equity in the 
distribution of benefits to groups of concern to the Federal 
government. Sponsors are given the latitude to forego the analysis of 
benefits that are not relevant to individual projects, which will 
simplify the project evaluation process, eliminating unnecessary 
analytical effort on the part of project sponsors. The NPRM and 
proposed policy guidance achieve this by allowing for the use of 
default methods and assumptions whenever possible. The NPRM and 
proposed policy guidance defer to project sponsors' decisions to pursue 
estimation of additional benefits and better ratings through more 
elaborate analysis.
2. Covered Entities
    Eligible applicants under the major capital investment program are 
public bodies and agencies (transit authorities and other state and 
local public bodies and agencies thereof) including states, 
municipalities, other political subdivisions of states; public agencies 
and instrumentalities of one or more states; and certain public 
corporations, boards, and commissions established under state law. 
Private corporations and private non-profit entities are not eligible 
and would not be affected by the proposed regulation.
    The majority of applicants to the major capital investment program 
are transit agencies and other state and local public bodies such as 
metropolitan planning organizations or units of City or state 
governments located in areas with greater than 50,000 in population. 
These would be the entities most affected by the proposed regulation. 
Over the past four years, FTA has received approximately 60 
applications for entry into one of the various phases of project 
development, roughly 40 of which were New Starts projects and 20 of 
which were Small Starts projects. New Starts projects have tended to be 
proposed primarily in medium to large sized urbanized areas with 
greater than 500,000 in population. Small Starts projects have been 
proposed in all different sized cities, including some of the largest 
urbanized areas in the country, as well as in areas with less than 
500,000 in population.
    The proposal would affect few local governments with populations of 
less than 50,000 people, as jurisdictions proposing New and Small 
Starts projects are usually much larger in size with more extensive 
transit service already in place Transit capital and operating funding 
for areas with populations less than 50,000 people is provided by FTA 
under a separate formula funding program to the states, which decide 
how to allocate the funds to the local areas within the state. However, 
smaller jurisdictions are not prohibited from applying for major 
capital investment program funding. To date, FTA has funded only one 
project in an area under 50,000 in population through the major capital 
investment program.
3. Cost Effectiveness
    FTA's existing regulation for the major capital investment program 
(49 CFR Part 611) defines cost effectiveness as the incremental 
annualized capital and operating cost per incremental hour of 
transportation system user benefits (essentially travel time savings). 
The cost and travel time savings of the proposed project are compared 
to a baseline alternative (usually a lower cost bus project serving 
similar travel pattern in the corridor).
    The breakpoints that FTA uses to assign cost effectiveness ratings 
currently are based on the value of time with a 20 percent upward 
adjustment to account for congestion benefits and a 100 percent 
adjustment to account for non-mobility benefits. U.S. Department of 
Transportation (USDOT) guidance (Departmental Guidance for the 
Valuation of Travel Time in Economic Analysis, April 9, 1997) 
describes, in detail, the derivation of the standard values of time to 
be used by all U.S. DOT Administrations in the economic evaluation of 
proposed projects. Consistent with this departmental guidance, FTA 
values travel time-savings at 50 percent of Median Household Income 
published by the Census Bureau, divided by 2,000 hours. However, FTA 
acknowledges that the time savings for transit users alone does not 
capture the full range of benefits of major transit projects. Pending 
improved reliability of the estimates of highway congestion relief, FTA 
assumes that congestion relief adds about 20 percent to the travel time 
savings generated by the project. Further, indirect benefits (economic 
development, safety improvements, pollutant reductions, energy savings, 
etc.) increase that value. Assuming that indirect benefits are 
approximately equal to the direct transportation benefits, FTA 
increases the value of each hour of transit travel time by a factor of 
two. FTA inflates the breakpoints annually based on the Gross Domestic 
Product Index (also known as the GDP deflator).
    This NPRM proposes a simplified cost effectiveness measure: 
annualized capital and operating cost per trip. Because it is not an 
incremental measure, it requires no baseline alternative or point of 
comparison.. In addition, project elements that respond to specific 
Federal policies would not count as project costs. Instead, they would 
be considered ``betterments'' and would be excluded from the cost-
effectiveness calculation. Betterments could include items that are 
above and beyond the items needed to deliver the mobility benefits and 
which would not contribute to other benefits such as operating 
efficiencies. For example, betterments could include features needed to 
obtain LEED certification for a transit facilities or additional 
features to provide extra pedestrian access to surrounding development 
or aesthetically-oriented design features. Finally, to further 
streamline the evaluation and rating process, FTA may use ``warrants'' 
to pre-qualify projects as cost-effective based on their 
characteristics and/or the characteristics of the corridor in which 
they are located. For example, if there is an certain level of transit 
ridership in the corridor today, and the proposed project falls within 
total cost and cost per mile parameters defined by FTA, then it would 
be ``warranted'' by FTA as cost-effective, it would receive an 
automatic medium rating on the cost-effectiveness criterion, and the 
project sponsor would not need to undertake or submit the results of 
certain analyses.
    The net effect of these proposed changes is to reduce the reporting 
and analytical burden on project sponsors. For example, the analytical 
design of a hypothetical alternative project is a costly effort that is 
eliminated in this NPRM. Any increased burden would result from project 
sponsors electing to perform optional additional analysis in support of 
their projects entirely at their option.
    The simplified cost-effectiveness measure proposed may result in 
different kinds of projects receiving more favorable ratings than under 
the current approach, which could lead to transfer payments totaling 
more than $100 million annually. Some examples are described below:
    (a) Under the current approach, which uses ``transportation system 
user benefits'' (essentially travel time savings) as the measure of 
effectiveness, projects that involve longer trips are advantaged 
because there is more of an opportunity to save time. The revised 
measure values all trips equally, whether short or long. Thus, projects 
with shorter trips are likely to fare better than they do under the 
current measure.
    (b) Under the current approach which requires comparing the project 
to a baseline alternative to calculate cost-effectiveness, many project 
sponsors

[[Page 3898]]

have had difficulty demonstrating sufficient travel time savings as 
compared to project cost. As a result, in an effort to reduce costs, 
project sponsors have eliminated stations, shortened platforms, 
eliminated landscaping and other elements desirable to the local 
community, reduced parking, purchased only the number of vehicles 
needed to meet near term demand rather than longer term demand, etc. In 
some cases, this has resulted in disproportionate impacts to minority 
and low-income populations and led to litigation which delayed the 
project and caused further cost increases. To add deferred project 
scope at a later date is far more costly then if it had been 
constructed as part of the original project. FTA believes the proposed 
measure will help reduce these instances of nearsighted scope changes, 
given its emphasis on trips rather than travel time savings and its 
elimination of the baseline alternative point of comparison.
4. Economic Development
    Currently, FTA evaluates economic development based on the local 
plans and policies in place to enhance transit oriented development in 
proximity to the proposed transit stations. In other words, FTA 
examines the likelihood the project will foster economic development 
based on the transit supportive plans and policies in place, including 
whether increased densities are encouraged in station areas, whether 
there is a plan for pedestrian and non-motorized travel, whether zoning 
and parking requirements are in place, etc.
    This NPRM would proposed to continue to evaluate economic 
development based on the transit supportive land use plans and policies 
in place, but would add an examination of affordable housing policies 
and plans to ensure they allow for a maintenance of or increase to 
affordable housing in the corridor after implementation of the project. 
FTA is also proposing to require that project sponsors report under 
economic development the number of domestic jobs related to project 
design, construction, and operation, although this figure would not be 
used for evaluation purposes. Lastly, project sponsors have the option 
of using a scenario approach to characterize and estimate the 
quantitative impacts of economic development resulting from 
implementation of the project, including the environmental benefits 
that would result from such economic development due to agglomeration 
effects.
    The added cost of the proposed additions to the economic 
development criterion would be marginal because most sponsors already 
develop this information as part of the local planning process. Many 
project sponsors are pursuing major capital investment projects to 
facilitate efforts to induce economic development, thus, information 
pertaining to economic development scenarios and job creation are 
typically developed during the planning process.
5. Environmental Benefits
    Currently, the environmental benefits of transit New Start projects 
are evaluated on the basis of the EPA air quality designation for the 
metropolitan area.
    This NPRM proposed to instead examine the direct and indirect 
benefits to the natural and human environment, including air quality 
improvement from changes in vehicular emissions, reduced energy 
consumption, reduced green house gas emissions, reduced accidents and 
fatalities, and improved public health (once a measure is developed). 
The direct benefits are calculated using standard factors from changes 
in vehicle miles traveled and assigned a dollar value. The dollar value 
of the benefits is then compared to project cost. Project sponsors 
customarily calculate environmental benefits for transit projects to 
meet local political needs and for the purpose of the review required 
by the National Environmental Policy Act. FTA is proposing a simplified 
approach for developing the information needed for New Starts 
evaluation and rating that would be based on simple spreadsheet 
calculations using a series of standard factors. Therefore, the 
proposed calculations for the New Starts process would not measurably 
change the analytical and reporting burdens.
6. Mobility Improvements
    Currently, five measures are applied to estimate mobility 
improvements: (1) The number of transit trips using the project; (2) 
their transportation system user benefits per passenger mile on the 
project; (3) the number of trips by transit dependent riders using the 
project; (4) their transportation system user benefits per passenger 
mile on the project; and (5) the share of transportation system user 
benefits received by transit dependents compared to the share of 
transit dependents in the region. Transportation system user benefits 
reflect the improvements in regional mobility (as measured by the 
weighted in- and out-of-vehicle changes in travel-time to users of the 
regional transit system) caused by the implementation of the proposed 
project. The measures are calculated by comparing the proposed project 
to a baseline alternative, which is usually the ``Transportation System 
Management'' (TSM) alternative.
    In the NPRM, FTA is proposing to use total trips on the project as 
the measure of mobility, with extra weight given to trips made by 
transit dependents. Because it is not an incremental measure, no 
comparison to a baseline alternative is required.
    Under the current approach, which uses ``transportation system user 
benefits'' (essentially travel time savings), projects that involve 
longer trips are advantaged because there is more of an opportunity to 
save time. The revised measure values all trips equally, whether short 
or long. Thus, projects with shorter trips are likely to fare better 
than they do under the current mobility improvements measure. However, 
because transit dependent trips are given higher weight in the proposed 
approach than they are given in the current approach not all projects 
with shorter trips may fare better.
    The reporting burden for the mobility improvements measure will be 
significantly lowered under the proposed approach as compared to the 
current approach because FTA is proposing a simplified FTA-developed 
national model that would calculate trips rather than project sponsors 
spending significant time and effort adjusting their local travel 
forecasting model to estimate trips on the project. Local models are 
typically developed by the metropolitan planning organization to 
forecast regional trips and are not often honed to adequately perform 
corridor-level analyses. In addition, because development of the 
baseline alternative is no longer required under the proposed measure, 
significant time developing that alternative is no longer required if 
it is not an alternative local decisions-makers wish to pursue. For 
local decision-making purposes, the number of trips made on the project 
is typically calculated so the data required by FTA is not considered 
onerous.
7. Operating Efficiencies
    The current measure for operating efficiencies is the incremental 
difference in system-wide operating cost per passenger mile between the 
proposed project and the baseline alternative. In the NPRM, FTA is 
proposing instead that the measure of operating-efficiency be the 
change in operating and maintenance cost per ``place-mile'' compared to 
either the existing transit system in the current year or, at the 
discretion of the project sponsor, both the existing transit system in 
the current

[[Page 3899]]

year and the no-build transit system in the horizon year.
    Changes in cost per ``place-mile'' better focuses only on changes 
in the cost to supply transit service. The current measure mixes in 
issues related to deployment and usage patterns, which FTA believes are 
better addressed in the mobility and cost effectiveness measures.
    Operating and maintenance costs are developed by project sponsors 
in the normal course of project planning, thus FTA's need for this data 
does not impose any additional burden. The ``place-mile'' data, 
however, is new and not typically developed by project sponsors. Thus, 
some reporting burden will be added but it is expected to be minimal 
given that the data used to develop ``place-miles'' is generally 
readily available from commonly gathered performance statistics kept by 
transit agencies such as vehicle-miles and mix of vehicle types in the 
fleet.
8. Regulatory Evaluation
    FTA considered the industry-wide costs and benefits of this NPRM. 
Each is discussed below.
Costs
    Regulatory Familiarization--While FTA believes the rule will have 
overall net benefits, project sponsors and their contractors will need 
to expend resources to read and understand the final rule and policy 
guidance, and may need to make changes to their existing systems, 
programs, and procedures in response to the changes made by the rule. 
FTA estimates it will take project sponsors and their contractors 40 
hours on average to perform these tasks. Assuming 100 project sponsors 
and 100 contractors, and an average hourly wage (including benefits) of 
$39.04 for project sponsors and $37.51 for contractors, FTA estimates a 
cost of $306,200 for regulatory familiarization. The hourly wage rates 
assumed came from the Bureau of Labor Statistics' 2010 National 
Compensation Survey and represent the median rates for civil engineers 
in local government and in private industry, respectively. Civil 
engineers were chosen as the reference point for simplification 
purposes and also because that hourly rate was higher than the rate for 
urban planners, but they are just two of the many professions involved 
in planning and project development of New and Small Starts projects. 
FTA expects project sponsors and their contractors to incur these 
regulation familiarization costs one time only. FTA requests comments 
on these assumptions and estimates.
    The NPRM would require project sponsors to submit information on 
project characteristics that they have not previously been required to 
submit to FTA. This includes the number of jobs resulting from 
implementation of the project, the ``place-miles'' of service used in 
the operating efficiencies measure, the change in environmental 
benefits resulting from the expected change in vehicle miles travelled, 
the amount of affordable housing existing in the corridor, and the 
plans and policies to maintain or increase affordable housing in the 
future. In general, FTA believes this information can be gathered and 
estimated rather quickly and easily, and will not require significant 
additional cost, time, or effort. The number of jobs created is 
something project sponsors typically estimate for local decision-
makers. The data needed to calculate ``place-miles'' is typically 
gathered by reporting to FTA's National Transit Database. FTA expects 
the existing affordable housing will come directly from readily 
available data published on the U.S. Department of Housing and Urban 
Development Web site. FTA will develop spreadsheets with a number of 
standard factors to estimate environmental benefits. Project sponsors 
will be asked only to input a few key variables. Therefore, FTA 
estimates the time to prepare the additional information proposed in 
the NPRM to be at most 40 hours.
    The optional scenario analysis allowed under the economic 
development criterion may require some time and effort to prepare. 
However, project sponsors may choose to forgo this analysis.
Benefits
    The need for additional information described above would be 
counterbalanced by the simplification of methods that will be used to 
generate the information, as provided in the proposed appendix to the 
regulation and the proposed guidance made available concurrently to the 
public for comment. For example:
    (a) Project sponsors would no longer be required to use local 
travel forecasts to obtain the information needed for FTA's evaluation 
of the various project justification criteria. Instead, project 
sponsors may use an FTA-developed simplified national model. Project 
sponsors may continue to use information generated by local travel 
forecasts if they believe it will result in a more favorable rating for 
the proposed project, but it is at the project sponsors' discretion 
(i.e., not required by regulation or suggested in guidance). FTA 
expects this change would save significant time and project sponsor 
resources. It often costs project sponsors several hundreds of 
thousands of dollars up to millions of dollars in consultant help and 
six months or longer to adjust local travel forecasting models to 
obtain acceptable ridership results for FTA's evaluation and rating 
purposes.
    (b) Project sponsors would no longer be required to develop a 
baseline alternative. The process of defining a baseline alternative is 
an iterative one. By eliminating the need to develop a baseline 
alternative (which may not be an alternative local decision-makers wish 
to implement), FTA estimates up to six months of time could be saved. 
The cost of this time savings is difficult to estimate, and FTA has not 
seen any particular data on the estimation, but project sponsors have 
suggested that each month of delay in implementing a project is roughly 
$1 million in additional cost.
    (c) The expanded use of warrants (a process by which a project can 
qualify for an automatic rating if it can meet certain FTA defined 
parameters) would eliminate the need for project sponsors to undertake 
certain analyses and submit that data to FTA. This can save significant 
time and money since project sponsors often hire consultants to help 
undertake the analyses required to develop the data for FTA.
    FTA believes the improved measures for cost effectiveness, 
environmental benefits, and economic development will reduce the 
influence of a ``one size fits all'' evaluation approach that, 
historically, has favored some transit benefits over others and thereby 
has minimized locally preferred benefits. For example, by focusing on 
travel time savings, the current process tends to favor projects in 
areas with extreme congestion over areas that do not currently have 
extreme congestion but are planning future transit to keep from 
becoming mired in extreme congestion. Similarly, the focus on travel 
time savings does not acknowledge that some areas undertake transit 
projects to encourage development rather than to address mobility 
challenges. The proposed NPRM, and its focus on trips rather than 
travel time savings as the measure of mobility acknowledges more varied 
purposes for undertaking these projects and a different ``basket'' of 
transit benefits.
    FTA estimates the paperwork burden on project sponsors involved 
with developing and reporting the information to FTA will be lowered if 
the proposals in the NPRM and accompanying policy guidance are adopted 
based on the above mentioned

[[Page 3900]]

benefits. FTA estimates 15 hours of paperwork burden reductions for 
each of the estimated 135 annual respondents resulting in $150,000 in 
benefits on an annual basis.

C. Departmental Significance

    This proposed rule is a ``significant regulation'' as defined by 
the Department's Regulatory Policies and Procedures because it 
implements the Departmental initiative to revise, simplify, and 
streamline the New and Small Starts processes. This NPRM is expected to 
generate interest from sponsors of major transit capital projects, the 
general public, and Congress.

D. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., FTA evaluated the likely effects of the proposals contained in 
this NPRM on small entities. Based on this evaluation, FTA believes 
that the proposals contained in this NPRM will not have a significant 
economic impact on a substantial number of small entities because the 
proposals concern only New and Small Starts which, by their scale and 
nature, are not usually undertaken by small entities. FTA seeks public 
comment on this assessment.

E. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), a Federal agency may not conduct or sponsor the collection of 
information without obtaining approval and a control number from the 
Office of Management and Budget (OMB). FTA has been collecting project 
evaluation information from project sponsors under the existing OMB 
approval for this program (OMB No. 2132-0561) entitled ``49 CFR Part 
611 Major Capital Investment Projects.''
    FTA has a longstanding requirement to evaluate proposed projects 
against a prescribed set of statutory criteria at specific points 
during the projects' development including when they seek to enter 
preliminary engineering, final design, and a Full Funding Grant 
Agreement. In addition, FTA is required by law to report on its project 
evaluations and ratings annually to Congress. The Surface 
Transportation and Uniform Relocation Assistance Act of 1987 (STURAA) 
established in law a set of criteria that proposed projects had to meet 
in order to be eligible for federal funding. The requirement for 
summary project ratings has been in place since 1998. Thus, the 
requirements for project evaluation and data collection for New Starts 
projects are not new. One addition included in SAFETEA-LU is the Small 
Starts program. The Small Starts program enables smaller cost projects 
with a smaller requested share of Section 5309 major capital investment 
funds to progress through a simplified and streamlined project 
evaluation and data collection process. In general, the information 
used by FTA for New and Small Starts project evaluation and rating 
should arise as a part of the normal planning process. However, due to 
modifications in the proposed project evaluation criteria and FTA 
evaluation and rating procedures for the New Starts program and the 
addition of the Small Starts program in the NPRM, some information be 
beyond the scope of ordinary planning activities.
    Eligible applicants under the major capital investment program are 
public bodies and agencies (transit authorities and other state and 
local public bodies and agencies thereof) including states, 
municipalities, other political subdivisions of states; public agencies 
and instrumentalities of one or more states; and certain public 
corporations, boards, and commissions established under state law. 
Private corporations and private non-profit entities are not eligible 
for funding under the program; however, private corporations such as 
consulting and engineering and construction firms could be impacted by 
the regulation if they are hired by project sponsors to assist in the 
development of the data needed by FTA.
    Applicants must submit information to FTA for evaluation and rating 
purposes each time they wish to enter the next phase of project 
development. In addition, applicants must submit updated information if 
the project scope and cost have changed materially since the most 
recent rating was assigned. FTA evaluates and rates projects in order 
to: (1) Decide whether proposed projects may advance into project 
development and construction for Small Starts and advance from 
alternatives analysis into preliminary engineering and then final 
design and construction for New Starts projects; (2) assign ratings to 
proposed projects for the Annual Report on Funding Recommendations; and 
(3) develop funding recommendations for the administration's annual 
budget request.
    FTA needs to have accurate information on the status and projected 
benefits of proposed New and Small Starts projects on which to base its 
decisions regarding funding recommendations in the President's budget. 
As discretionary programs, both the New and Small Starts programs 
require FTA to identify proposed projects that are worthy of federal 
investment, and are ready to proceed with project development and 
construction activities.
    The law also requires that FTA evaluate the performance of the 
projects funded through the New and Small Starts programs in meeting 
ridership and cost estimates two years after they are opened for 
service, through implementation of a ``before-and-after'' study 
requirement. This also helps to evaluate the success of the grant 
program itself for purposes of the Government Performance and Results 
Act.
    FTA has tried to minimize the burden of the collection of 
information, and requests that project sponsors submit project 
evaluation data by electronic means. FTA has developed standard format 
templates for project sponsors to complete that automatically populate 
data used in more than one form. FTA then utilizes spreadsheet models 
to evaluate and rate projects based on the information submitted. In 
addition, FTA is proposing in the NPRM to make available a simplified 
national model that can estimate project trips based on simple inputs 
including census data and project characteristics.
    Where and when possible, FTA makes use of the information already 
collected by New and Small Starts project sponsors as part of the 
planning process. However, as each proposed project develops at a 
different pace, FTA has a duty to base its funding decisions on the 
most recent information available. Project sponsors often find it 
necessary to develop updated information specifically for purposes of 
the New or Small Starts program. This is particularly true for the 
Annual Report on Funding Recommendations, which is a supporting 
document to the President's annual budget request to Congress. However, 
in order to reduce the reporting burden on project sponsors, FTA 
instituted a policy that Annual Report submissions are only required of 
projects that are seeking a funding recommendation or have changed 
significantly in cost or scope from the last evaluation.
    FTA estimates current overall New and Small Starts annual paperwork 
burden hours to be approximately 275 hours for each of the estimated 
135 respondents totaling 37,070 hours and annual costs totaling 
$2,780,250. The proposals in this NPRM and accompanying proposed 
guidance, if adopted, would modify the time required to prepare and 
submit an applications. Thus, FTA estimates burden hours would be 
approximately

[[Page 3901]]

260 hours for each of the estimated 135 respondents totaling 35,070 
hours and annual costs totaling $2,630,250. Additional information will 
be required of project sponsors due to the proposed addition of several 
new measures in the NPRM, however, FTA has also proposed simplified 
methods of data collection and data estimation (e.g., the proposal to 
no longer require sponsors to model a Transportation System Management 
(TSM) alternative, the proposal to allow estimation of project trips 
using an FTA-developed national model rather than local travel 
forecasting models, standard factoring approaches). Thus, this NPRM and 
accompanying proposed guidance is estimated to reduce the net paperwork 
burden for project sponsors. These and other paperwork requirement 
trade-offs were an express objective in developing this NPRM and 
accompanying proposed guidance. The amount of paperwork burden is 
partially proportionate to the scale of the project and the 
determination by the project sponsor whether it will choose to develop 
detailed forecasts of project benefits (instead of the simplified 
default methods FTA is proposing in its guidance). Such increased 
burdens are at the sponsor's discretion, rather than a requirement of 
this NPRM or the accompanying proposed policy guidance. Most of the 
estimated paperwork reduction would be realized when project sponsors 
are preparing the application for the first time, which is the 
preliminary engineering request for New Starts projects and the project 
development request for Small Starts projects.
    The table below shows the average annual project paperwork burden 
across sponsors of New Starts and Small Starts projects if the 
proposals in this NPRM are adopted.

                                     Total Project Sponsor Cost and Hours *
----------------------------------------------------------------------------------------------------------------
                                                     
                      Task                            Annual       Average hours    Total hours       $ Total
                                                    occurrences   per occurrence
----------------------------------------------------------------------------------------------------------------
Data Submission, Evaluation, and Ratings
----------------------------------------------------------------------------------------------------------------
NEW STARTS:
    (A) PE Request..............................              10             350            3500        $262,500
    (B) Annual Report...........................              20              75            1500         112,500
    (C) Final Design Request....................               6              75             450          33,750
    (D) FFGA Approval...........................               5              50             250          18,750
                                                 ---------------------------------------------------------------
        Subtotal................................  ..............  ..............           5,700         427,500
SMALL STARTS:                                     ..............  ..............  ..............  ..............
    (A) Project Development.....................              10              60             600          45,000
    (B) Annual Report...........................              10              25             250          18,750
    (C) PCGA Approval...........................               4             100             400          30,000
                                                 ---------------------------------------------------------------
        Subtotal................................  ..............  ..............           1,250          93,750
                                                 ---------------------------------------------------------------
        Data Sub, Eval, and Ratings Total.......  ..............  ..............           6,950         521,250
----------------------------------------------------------------------------------------------------------------
Before and After Data Collection
----------------------------------------------------------------------------------------------------------------
NEW STARTS:
    (A) Data Collection Plan....................               4              80             320          24,000
    (B) Before Data Collection..................               4            3000           12000         900,000
    (C) Documentation of Forecasts..............               4             160             640          48,000
    (D) After Data Collection...................               4            3000           12000         900,000
    (E) Analysis and Reporting..................               4             240             960          72,000
                                                 ---------------------------------------------------------------
      Subtotal..................................  ..............  ..............          25,920       1,944,000
                                                 ---------------------------------------------------------------
SMALL STARTS:                                     ..............  ..............  ..............  ..............
    (A) Data Collection Plan....................              10              10             100           7,500
    (B) Before Data Collection..................              10              80             800          60,000
    (C) Documentation of Forecasts..............              10              10             100           7,500
    (D) After Data Collection...................              10              80             800          60,000
    (E) Analysis and Reporting..................              10              40             400          30,000
                                                 ---------------------------------------------------------------
        Subtotal................................  ..............  ..............           2,200         165,000
                                                 ---------------------------------------------------------------
        Before and After Total..................  ..............  ..............          28,120       2,109,000
                                                 ===============================================================
            Total...............................  ..............  ..............          35,070       2,630,250
----------------------------------------------------------------------------------------------------------------

    The estimates for total number of annual submissions are based on 
projected annual workload. The estimated average number of hours per 
task is based on information shared by a sample of project sponsors. 
Estimated hourly costs are based on information informally shared by 
local project sponsors and the professional judgment of FTA staff.
    Interested parties are invited to send comments regarding any 
aspect of this information collection, including: (1) The necessity and 
utility of the information collection for the proper performance of the 
functions of the FTA; (2) the accuracy of the estimated burden; (3) 
ways to enhance the quality, utility, and clarity of the collected 
information; and (4) ways to minimize the collection burden without 
reducing the quality of the collected information.
    The collections of information proposed by this NPRM, and 
identified

[[Page 3902]]

as such, have been submitted to OMB for review under section 3507(d) of 
the Paperwork Reduction Act. Please submit any comments on the proposed 
collections to the Office of Information and Regulatory Affairs of OMB, 
Attention: Desk Officer for the Federal Transit Administration. OMB 
also encourages commenters to submit their comments via email to [email protected].

F. Executive Order 13132

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132. The proposed regulations 
would implement a discretionary grant program that would make funds 
available, on a competitive basis, to States, local governments, and 
transit agencies. The requirements only apply to those entities seeking 
funds under this chapter, and thus this action would have not 
substantial direct effects on the States, on the relationship between 
the Federal government and the States, or on the distribution of power 
and responsibilities among the various levels of government. FTA has 
also determined that this proposed action would not preempt any State 
law or regulation or affect the States' ability to discharge 
traditional State governmental functions. Based on this analysis, it 
has been determined that the proposed rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. Comment is solicited specifically on the Federalism 
implications of this proposal.

G. National Environmental Policy Act

    FTA has analyzed this proposed action for the purpose of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321), and has 
determined that this proposed action would not have any effect on the 
quality of the environment. This action qualifies for a categorical 
exclusion under FTA's NEPA regulations at 771.117(c)(20), which covers 
the ``[p]romulgation of rules, regulations, and directives.''

H. Energy Act Implications

    The proposals contained in this NPRM and accompanying proposed 
guidance would likely have a positive effect on energy consumption 
because, through the Federal investment in public transportation 
projects, these projects would increase the use of public 
transportation.

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

    Executive Order 13175 requires agencies to ensure 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 proposals in this NPRM 
and accompanying proposed guidance may have on Indian communities.

J. Unfunded Mandates Reform Act

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, of $100,000,000 or more in any 
one year.

K. Statutory/Legal Authority for This Rulemaking

    This rulemaking is issued under authority of section 3011 of the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act--A 
Legacy for Users (SAFETEA-LU), which requires the Secretary of 
Transportation to prescribe regulations for Small Starts capital 
investment projects funded under 49 U.S.C. 5309 with a Federal share of 
less than $75,000,000 and a total cost of less than $250,000,000. In 
addition, this NPRM and its accompanying proposed guidance implements 
changes made by section 3011 of SAFETEA-LU to the New Starts program 
for funding capital investment projects with a higher Federal share or 
total cost than that specified for the Small Starts program.

L. 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.

VII. Proposed Regulatory Text

List of subjects in 49 CFR part 611

    Government contracts; Grant programs--transportation; Public 
transportation.

    For the reasons stated in the preamble, the Federal Transit 
Administration proposes to revise 49 CFR part 611 to read as follows:

PART 611--MAJOR CAPITAL INVESTMENT PROJECTS

Subpart A--General Provisions
Sec.
611.101 Purpose and contents
611.103 Applicability
611.105 Definitions
611.107 Relation to the planning processes
Subpart B--New Starts
611.201 Eligibility
611.203 Project justification criteria
611.205 Local financial commitment criteria
611.207 Overall project ratings
611.209 Project development process
611.211 Before and after study
Subpart C--Small Starts
611.301 Eligibility
611.303 Project justification criteria
611.305 Local financial commitment criteria
611.307 Overall project ratings
611.309 Project development process
Appendix A to Part 611--Description of Measures Used for Project 
Evaluation

    Authority:  49 U.S.C. 5309.

Subpart A--General Provisions


Sec.  611.101  Purpose and contents.

    (a) This part prescribes the process that applicants must follow to 
be considered eligible for capital investment grants for a new fixed 
guideway, an extension to a fixed guideway, or a corridor-based bus 
system (known as New Starts and Small Starts). Also, this part 
prescribes the procedures used by FTA to evaluate and rate proposed New 
Starts projects as required by 49 U.S.C. 5309(d), and Small Starts 
projects as required by 49 U.S.C. 5309(e).
    (b) This part defines how the results of the evaluation described 
in paragraph (a) of this section will be used to:
    (1) Approve entry into preliminary engineering and final design for 
New Starts projects, as required by 49 U.S.C. 5309(d)(5)(A);
    (2) Approve entry into project development for Small Starts 
projects, as required by 49 U.S.C. 5309(e)(6)(A);
    (3) Rate projects as ``high,'' ``medium-high,'' ``medium,'' 
``medium-low'' or ``low'' as required by 49 U.S.C. 5309(d)(5)(B) and 49 
U.S.C. 5309(e)(6)(B);
    (4) Assign individual ratings for each of the project justification 
criteria specified in 49 U.S.C. 5309(d)(2)(C) and 49 U.S.C. 
5309(e)(2)(B);
    (5) Determine project eligibility for Federal funding commitments, 
in the form of Full Funding Grant Agreements (FFGA) for New Starts 
projects and Project Construction Grant Agreements (PCGA) for Small 
Starts projects; and

[[Page 3903]]

    (6) Support funding recommendations for the New Starts and Small 
Starts programs for the Administration's annual budget request.
    (c) The information collected and ratings developed under this part 
will form the basis for the Annual Report on Funding Recommendations, 
required by 49 U.S.C. 5309(k)(1).


Sec.  611.103  Applicability.

    (a) This part applies to all proposals for Federal major capital 
investment funds under 49 U.S.C. 5309 for new fixed guideways, 
extensions to fixed guideways, and corridor-based bus systems.
    (b) This part does not apply to projects for which an FFGA or PCGA 
has already been executed, nor to projects that have been approved into 
preliminary engineering or project development. The regulations in 
existence prior to the effective date of this rule will continue to 
apply to projects for which an FFGA or PCGA has already been executed 
and may continue to apply to projects approved into preliminary 
engineering, final design, or project development.


Sec.  611.105  Definitions.

    The definitions established by Titles 12 and 49 of the United 
States Code, the Council on Environmental Quality's regulation at 40 
CFR parts 1500-1508, and FHWA-FTA regulations at 23 CFR parts 450 and 
771 are applicable. In addition, the following definitions apply to 
this part:
    Alternatives analysis is a corridor-level analysis that is an 
assessment of a wide range of public transportation alternatives 
designed to address a transportation problem in a corridor or subarea 
and results in the adoption of a locally preferred alternative by the 
appropriate State and/or local agencies and official boards through a 
public process.
    Corridor-based bus project means a bus capital project where:
    (1) A substantial portion of the project operates in a separate 
right-of-way dedicated for public transit use during peak hour 
operations; or
    (2) The project represents a substantial investment in a defined 
corridor as demonstrated by features such as park-and-ride lots, 
transit stations, bus arrival and departure signage, intelligent 
transportation systems technology, traffic signal priority, off-board 
fare collection, advanced bus technology, and other features that 
support the long-term corridor investment.
    Early system work agreement means a contract, pursuant to the 
requirements in 49 U.S.C. 5309(g)(3), that allows some construction 
work and other clearly defined elements of a project to proceed prior 
to execution of a Full Funding Grant Agreement. It typically includes a 
limited scope of work that is less than the full project scope of work 
and specifies the amount of Federal New Starts participation that will 
be provided for the defined scope of work included in the agreement.
    ESWA means early system work agreement.
    Extension to fixed guideway means a project to extend an existing 
fixed guideway or planned fixed guideway.
    FFGA means a full funding grant agreement.
    Final design is the final phase of project development for New 
Starts projects, and includes (but is not limited to) the preparation 
of final construction plans (including construction management plans), 
detailed specifications, construction cost estimates, and bid 
documents. During final design all remaining local funding must be 
committed.
    Fixed guideway means a public transportation facility that utilizes 
and occupies a separate right-of-way, or rail line, for the exclusive 
use of mass transportation and other high occupancy vehicles, or uses a 
fixed catenary system and a right-of-way usable by other forms of 
transportation. This includes, but is not limited to, rapid rail, light 
rail, commuter rail, automated guideway transit, people movers, ferry 
boat service, and fixed-guideway facilities for buses (such as bus 
rapid transit) and other high occupancy vehicles. A new fixed guideway 
means a newly-constructed fixed guideway in a corridor or alignment 
where no such guideway exists.
    FTA means the Federal Transit Administration.
    Full funding grant agreement means a contract that defines the 
scope of a project, the Federal financial contribution, and other terms 
and conditions.
    Locally preferred alternative means an alternative evaluated 
through an alternatives analysis and adopted by the appropriate State 
and/or local agencies and official boards through a public process.
    Major capital transit investment means any project that involves 
the construction of a new fixed guideway, extension of an existing 
fixed guideway, or a corridor-based bus system for use by mass transit 
vehicles.
    Metropolitan transportation plan means a financially constrained 
long-range plan, developed pursuant to 23 CFR Part 450, that includes 
sufficient financial information for demonstrating that projects can be 
implemented using committed, available, or reasonably available revenue 
sources, with reasonable assurance that the Federally supported 
transportation system is being adequately operated and maintained. In 
areas classified by the Environmental Protection Agency as ``non 
attainment'' or ``maintenance'' of air quality standards, the 
metropolitan transportation plan must have been found by DOT to be in 
conformity with the applicable State Implementation Plan.
    NEPA process means those procedures necessary to meet the 
requirements of the National Environmental Policy Act of 1969 (NEPA), 
as amended, at 23 CFR Part 771; the NEPA process is completed when the 
project receives a Categorical Exclusion, a Finding of No Significant 
Impact (FONSI) or a Record of Decision (ROD).
    New Starts means a new fixed guideway, or an extension to an 
existing new fixed guideway with a total capital cost of $250,000,000 
or more or a request of $75,000,000 or more in funding from 49 U.S.C. 
5309.
    New Starts funds mean funds granted by FTA for a New Starts project 
pursuant to 49 U.S.C. 5309(d).
    No-build alternative means an alternative that includes only the 
current transportation system as well as the transportation investments 
committed in the Transportation Improvement Plan (TIP) required by 23 
CFR Part 450.
    Preliminary engineering is a phase of project development for New 
Starts projects during which the scope of the proposed project is 
finalized; estimates of project costs, benefits and impacts are 
refined; NEPA requirements are completed; project management plans and 
fleet management plans are further developed; and a majority of local 
funding is committed.
    Project development is a phase in the Small Starts process during 
which the scope of the proposed project is finalized; estimates of 
project costs, benefits and impacts are refined; NEPA requirements are 
completed; project management plans and fleet management plans are 
further developed; and local funding is committed. It also includes 
(but is not limited to) the preparation of final construction plans 
(including construction management plans), detailed specifications, 
construction cost estimates, and bid documents.
    Secretary means the Secretary of Transportation.

[[Page 3904]]

    Small Starts means a new fixed guideway, an extension to an 
existing fixed guideway, or a corridor-based bus system, with a total 
capital cost of less than $250,000,000 and a request for less than 
$75,000,000 in funding from 49 U.S.C. 5309.
    Small Starts funds means funds granted by FTA for a Small Starts 
project pursuant to 49 U.S.C. 5309(e).


Sec.  611.107  Relation to the planning processes.

    (a) All New Starts and Small Starts projects proposed for funding 
assistance under this part must emerge from the metropolitan and 
Statewide planning process, consistent with 23 CFR Part 450 and be 
included in the financially-constrained long range transportation plan 
required under 23 CFR Part 450.
    (b) Alternatives analysis. To be eligible for FTA major capital 
investment funding, local project sponsors must perform an alternatives 
analysis that:
    (1) Develops information on the benefits, costs, and impacts of 
alternative strategies to address a transportation problem in a given 
corridor sufficient to enable the Secretary to evaluate project 
justification and local financial commitment as required by 49 U.S.C. 
5309;
    (2) Includes a no-build alternative and an appropriate number of 
build alternatives;
    (3) Results in the selection of a locally preferred alternative; 
and
    (3) Results in the adoption of the locally preferred alternative as 
part of the metropolitan transportation plan.

Subpart B--New Starts


Sec.  611.201  Eligibility.

    (a) To be eligible for a preliminary engineering or final design 
grant under this part for a new fixed guideway or an extension to a 
fixed guideway, a project must:
    (1) Be a New Starts project as defined in Sec.  611.105; and
    (2) Have completed an alternatives analysis.
    (b) To be eligible for a construction grant under Sec. 5309 for a 
new fixed guideway or extension to a fixed guideway, a project must:
    (1) Be a New Starts project as defined in Sec.  611.105;
    (2) Have completed alternatives analysis, preliminary engineering, 
and final design;
    (3) Receive a ``medium'' or better rating on project justification 
pursuant to Sec.  611.203;
    (4) Receive a ``medium'' or better rating on local financial 
commitment pursuant to Sec.  611.205;
    (5) Meet the other requirements of Chapter 53 of Title 49, U.S. 
Code; and
    (6) Be authorized for construction by Federal law.


Sec.  611.203  Project justification criteria.

    (a) To perform the statutorily required evaluations and assign 
ratings for project justification, FTA will evaluate information 
developed locally through alternatives analyses and refined through 
preliminary engineering and final design.
    (1) The method used to make this determination will be a multiple 
measure approach by which the merits of candidate projects will be 
evaluated in terms of each of the criteria specified by this section.
    (2) The measures for these criteria are specified in Appendix A and 
elaborated on in policy guidance issued periodically by FTA whenever 
significant changes are proposed and subject to a public comment 
period, but not less frequently than every two years, as required by 49 
U.S.C. 5309(d)(6).
    (3) The measures will be applied to projects defined by project 
sponsors that are proposed to FTA for New Starts funding.
    (4) The ratings for each of the criteria in Sec.  611.203(b)(1)-(5) 
will be expressed in terms of descriptive indicators, as follows: 
``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or ``low.''
    (b) The project justification criteria are as follows:
    (1) Mobility improvements.
    (2) Environmental benefits.
    (3) Operating efficiencies.
    (4) Economic development effects.
    (5) Cost effectiveness.
    (6) Existing land use, transit supportive land use policies, and 
future patterns.
    (7) Other factors. These may include additional factors relevant to 
local and national priorities and relevant to the success of the 
project, and are defined further in Appendix A and the policy guidance.
    (c) In evaluating proposed New Starts projects under these 
criteria:
    (1) As a candidate project proceeds through preliminary engineering 
and final design, a greater level of commitment will be expected with 
respect to transit supportive land use plans and policies, the non-
Federal New Starts funding share of the project's cost, and the project 
sponsor's technical capacity to implement the project.
    (2) For any criteria under paragraph (b) of this section that use 
incremental measures, the point for comparison will be defined in 
policy guidance.
    (d) FTA may amend the measures for these project justification 
criteria. Any such amendment will be included in policy guidance.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the project 
justification criteria outlined in this section.
    (f) The individual ratings for each of the criteria described in 
this section will be combined into a summary project justification 
rating of ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low,'' through a process that gives comparable, but not necessarily 
equal, weight to each criterion. ``Other factors'' will also be 
considered as appropriate. The process by which the project 
justification rating will be developed, including the assigned weights, 
will be described in policy guidance.


Sec.  611.205  Local financial commitment criteria.

    In order to approve a grant under 49 U.S.C. 5309 for a New Starts 
project, FTA must find that the proposed project is supported by an 
acceptable degree of local financial commitment, as required by 49 
U.S.C. 5309(d)(4). The local financial commitment to a proposed project 
will be evaluated according to the following measures:
    (a) The proposed share of the project's capital costs to be funded 
from sources other than New Starts funds, including both the non-New 
Starts match required by Federal law and any additional state, local or 
other Federal capital funding (also known as ``overmatch'');
    (b) The current capital and operating financial condition of the 
project sponsor;
    (c) The commitment of capital and operating funds for the project 
and the entire transit system; and
    (d) The accuracy and reliability of the capital and operating costs 
and revenue estimates and the financial capacity of the project 
sponsor.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the local financial 
commitment criteria outlined in this section.
    (f) For each proposed project, ratings for paragraphs (a) through 
(d) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,''

[[Page 3905]]

``medium-low,'' or ``low.'' For paragraph (a) of this section, the 
percentage of New Starts funding sought from 49 U.S.C. 5309 will be 
rated and used to develop the summary local financial commitment 
rating, but only if it improves the rating and not if it worsens the 
rating.
    (g) The ratings for each measure described in this section will be 
combined into a summary local financial commitment rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low.'' The process by 
which the summary local financial commitment rating will be developed, 
including the assigned weights to each of the measures, will be 
described in policy guidance.


Sec.  611.207  Overall New Starts project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment (Sec. Sec.  611.203(f) & 611.205(g)) will 
form the basis for the overall rating for each New Starts project.
    (b) FTA will assign overall project ratings to each proposed 
project of ``high,'' ``medium-high, ``medium,'' ``medium-low,'' or 
``low'' as required by 49 U.S.C. 5309(d)(5)(B).
    (1) These ratings will indicate the overall merit of a proposed New 
Starts project at the time of evaluation.
    (2) Ratings for individual projects will be developed upon entry 
into preliminary engineering, updated for entry into final design, and 
prior to an FFGA. Additionally, ratings may be updated while a project 
is in preliminary engineering or final design if the project scope and 
cost have changed materially since the most recent rating was assigned.
    (c) These ratings will be used to:
    (1) Approve or deny advancement of a proposed project into 
preliminary engineering or final design;
    (2) Approve or deny projects for ESWAs and FFGAs; and
    (3) Support annual funding recommendations to Congress in the 
Annual Report on Funding Recommendations required by 49 U.S.C. 
5309(k)(1).
    (d) FTA will assign overall ratings for proposed New Starts 
projects by averaging the summary ratings for project justification and 
local financial commitment. When the average of these ratings is 
unclear (e.g. summary project justification rating of ``medium-high'' 
and summary local financial commitment rating of ``medium''), FTA will 
round up the overall rating to the higher rating except in the 
following circumstances:
    (1) A ``medium'' overall rating requires a rating of at least 
``medium'' on both project justification and local financial 
commitment.
    (2) If a project receives a ``low'' rating on either project 
justification or local financial commitment, the overall rating will be 
``low.''


Sec.  611.209  Project development process.

    (a) Preliminary engineering.
    (1) A proposed project can be considered for advancement into 
preliminary engineering only if:
    (i) An alternatives analysis has been completed;
    (ii) The proposed project is adopted as the locally preferred 
alternative by the metropolitan planning organization into the 
metropolitan transportation plan;
    (iii) The project sponsor has demonstrated adequate technical 
capability to carry out preliminary engineering for the proposed 
project; and
    (iv) All other applicable Federal and FTA program requirements have 
been met.
    (2) FTA's approval will be based on the results of its evaluation 
as described in Sec.  611.201 through 611.207.
    (3) At a minimum, a proposed project must receive an overall rating 
of ``medium'' or better to be approved for entry into preliminary 
engineering.
    (4) This part does not in any way revoke prior FTA approvals to 
enter preliminary engineering made prior to [EFFECTIVE DATE OF FINAL 
RULE].
    (5) Projects approved by FTA to advance into preliminary 
engineering receive automatic pre-award authority to incur project 
costs prior to grant approval for preliminary engineering activities 
(potentially reimbursable upon funding availability). Upon completion 
of the National Environmental Policy Act (NEPA) requirements, FTA 
extends automatic pre-award authority to projects in preliminary 
engineering to incur costs for utility relocation and real property 
acquisition (potentially reimbursable when approved into final design), 
as well as for vehicle purchases (potentially reimbursable when 
approved for construction).
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (b) Final design.
    (1) A proposed project can be considered for advancement into final 
design only if:
    (i) FTA has determined the project to be a Categorical Exclusion, 
or has issued a Finding of No Significant Impact (FONSI) or a Record of 
Decision (ROD) under NEPA for the project, in accordance with FTA 
environmental regulations at 23 CFR Part 771;
    (ii) The project sponsor has demonstrated adequate technical 
capability to carry out final design for the proposed project; and
    (iii) All other applicable Federal and FTA program requirements 
have been met.
    (2) FTA's approval will be based on the results of its evaluation 
as described in Sec.  611.201 through 611.207.
    (3) At a minimum, a proposed project must receive an overall rating 
of ``medium'' or better to be approved for entry into final design.
    (4) This part does not in any way revoke FTA approvals to enter 
final design that were made prior to [EFFECTIVE DATE OF FINAL RULE].
    (5) Projects approved to advance into final design receive 
automatic pre-award authority to incur project costs prior to grant 
approval for final design activities, demolition, and non-construction 
activities such as procurement of long-lead time items or items for 
which market conditions play a significant role in the acquisition 
price. This includes, but is not limited to procurement of rails, ties, 
and other specialized equipment, and commodities. These costs are 
potentially reimbursable upon grant approval.
    (i) This pre-award authority does not extend to construction, nor 
does it constitute a commitment by FTA that future Federal funds will 
be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (c) Full Funding Grant Agreements.
    (1) FTA will determine whether to execute an FFGA based on:
    (i) The evaluation and rating of the project as described in Sec.  
611.201 through 611.207;
    (ii) The technical capability of the project sponsor to complete 
the proposed New Starts project; and
    (iii) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed New 
Starts project.
    (2) FFGAs will be executed only for those projects that:
    (i) Are authorized for final design and construction by Federal 
law;
    (ii) Receive an overall rating of ``medium'' or better;

[[Page 3906]]

    (iii) Have completed the appropriate steps in the project 
development process;
    (iv) Meet all applicable Federal and FTA program requirements; and
    (v) Are ready to utilize New Starts funds, consistent with 
available program authorization.
    (3) When FTA decides to provide New Starts funds for construction 
of a New Starts project, FTA will negotiate an FFGA with the project 
sponsor during final design of that project. Pursuant to the terms and 
conditions of the FFGA:
    (i) A baseline cost and baseline schedule of the project will be 
established and a maximum level of New Starts funds will be fixed;
    (ii) The project sponsor will be required to complete construction 
of the project, as defined, to the point of initiation of revenue 
operations, and to absorb any additional costs incurred or necessitated 
to reach that point using non-New Starts funds;
    (iii) FTA and the project sponsor will establish a schedule for 
anticipating Federal New Starts contributions during the final design 
and construction period; and
    (iv) Specific annual contributions of New Starts funds under the 
FFGA will be subject to the availability of budget authority and the 
ability of the project sponsor to use the funds effectively.
    (d) Commitments.
    (1) The total amount of Federal New Starts funding obligations 
under ESWAs, FFGAs, and potential obligations under Letters of Intent 
will not exceed the amount authorized for New Starts under 49 U.S.C. 
5309.
    (2) FTA may also make a ``contingent commitment'' of New Starts 
funds, which is subject to future congressional authorizations and 
appropriations, pursuant to 49 U.S.C. 5309(g), 5338(b), and 5338(h).


Sec.  611.211  Before and After Study.

    (a) During preliminary engineering, project sponsors shall submit 
to FTA a plan for collection and analysis of information to identify 
the characteristics, costs, and impacts of the New Starts project and 
the accuracy of the forecasts prepared during development of the 
project.
    (1) The Before and After Study plan shall consider:
    (i) Characteristics including the physical scope of the project, 
the service provided by the project, any other changes in service 
provided by the transit system, and the schedule of transit fares;
    (ii) Costs including the capital costs of the project and the 
operating and maintenance costs of the transit system in appropriate 
detail; and
    (iii) Impacts including changes in transit service quality, 
ridership, and fare levels.
    (2) The plan shall provide for:
    (i) Documentation and preservation of the predicted scope, service 
levels, capital costs, operating costs, and ridership of the project;
    (ii) Collection of ``before'' data on the transit service levels 
and ridership patterns of the current transit system including origins 
and destinations, access modes, trip purposes, and rider 
characteristics;
    (iii) Documentation of the actual capital costs of the as-built 
project;
    (iv) Collection of ``after'' data two years after opening of the 
project, including the analogous information on transit service levels 
and ridership patterns, plus information on operating costs of the 
transit system in appropriate detail;
    (v) Analysis of the costs and impacts of the project; and
    (vi) Analysis of the consistency of the predicted and actual 
characteristics, costs, and impacts of the project and identification 
of the sources of any differences.
    (vii) Preparation of a final report within three years of project 
opening to present the actual characteristics, costs, and impacts of 
the project and an assessment of the accuracy of the predictions of 
these outcomes.
    (3) For funding purposes, preparation of the plan for collection 
and analysis of data is an eligible part of the proposed project.
    (4) Approval of the plan by FTA shall be a pre-requisite to 
approval of the project into final design.
    (b) The FFGA will require implementation of the plan prepared in 
accordance with paragraph (a) of this section.
    (1) Satisfactory progress on implementation of the plan required 
under paragraph (a) of this section shall be a prerequisite to approval 
of an FFGA.
    (2) For funding purposes, collection of the ``before'' data, 
collection of the ``after'' data, and the development and reporting of 
findings are eligible parts of the proposed project.
    (3) FTA may condition receipt of funding provided for the project 
in the FFGA upon satisfactory submission of the report required under 
this section.

Subpart C--Small Starts


Sec.  611.301  Eligibility.

    (a) To be eligible for a project development grant under this part 
for a new fixed guideway, an extension to a fixed guideway, or a 
corridor-based bus system, a project must:
    (1) Be a Small Starts project as defined in Sec.  611.105; and
    (2) Have completed an alternatives analysis.
    (b) To be eligible for a construction grant under this part for a 
new fixed guideway, an extension to a fixed guideway, or a corridor-
based bus system, a project must:
    (1) Be a Small Starts project as defined in Sec.  611.105;
    (2) Have completed an alternatives analysis;
    (3) Receive a ``medium'' or better rating on project justification 
pursuant to Sec.  611.303;
    (4) Receive a ``medium'' or better rating on local financial 
commitment pursuant to Sec.  611.305;
    (5) Meet the other requirements of Chapter 53 of Title 49, U.S. 
Code; and
    (6) Be authorized for construction by Federal law.


Sec.  611.303  Project justification criteria.

    (a) To perform the statutorily required evaluations and assign 
ratings for project justification, FTA will evaluate information 
developed locally through alternatives analyses and refined through 
project development.
    (1) The method used to make this determination will be a multiple 
measure approach by which the merits of candidate projects will be 
evaluated in terms of each of the criteria specified by this section.
    (2) The measures for these criteria are specified in Appendix A and 
elaborated on in policy guidance issued periodically by FTA whenever 
significant changes are proposed and subject to a public comment 
period, but not less frequently than every two years, as required by 49 
U.S.C. 5309(d)(6).
    (3) The measures will be applied to projects defined by project 
sponsors that are proposed to FTA for Small Starts funding.
    (4) The ratings for each of the criteria in Sec.  611.303(b)(1)-(5) 
will be expressed in terms of descriptive indicators, as follows: 
``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or ``low.''
    (b) The project justification criteria are as follows:
    (1) Cost effectiveness, at the time of revenue service.
    (2) Economic development effects.
    (3) Existing land use, transit supportive land use policies, and 
future patterns.
    (4) Other factors. These may include additional factors relevant to 
local and national priorities and relevant to the success of the 
project.

[[Page 3907]]

    (c) In evaluating proposed Small Starts projects under these 
criteria:
    (1) As a candidate project proceeds through project development, a 
greater level of commitment will be expected with respect to transit 
supportive land use plans and policies, the non-Federal Small Starts 
funding share of the project's cost, and the project sponsor's 
technical capacity to implement the project.
    (2) For any criteria under paragraph (b) of this section that use 
incremental measures, the point for comparison will be defined in 
policy guidance.
    (d) FTA may amend the measures for these project justification 
criteria. Any such amendment will be included in policy guidance.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the project 
justification criteria outlined in this section.
    (f) The individual ratings for each of the criteria described in 
this section will be combined into a summary project justification 
rating of ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low'' through a process that gives comparable, but not necessarily 
equal, weight to each criterion. ``Other factors'' will also be 
considered as appropriate. The process by which the project 
justification rating will be developed, including the assigned weights, 
will be described in policy guidance.


Sec.  611.305  Local financial commitment criteria.

    In order to approve a grant under 49 U.S.C. 5309 for a Small Starts 
project, FTA must find that the proposed project is supported by an 
acceptable degree of local financial commitment, as required by 49 
U.S.C. 5309(e)(2)(c). The local financial commitment to a proposed 
project will be evaluated according to the following measures:
    (a) The proposed share of the project's capital costs to be funded 
from sources other than Small Starts funds, including both the non-
Small Starts match required by Federal law and any additional state, 
local, or other Federal capital funding (known as ``overmatch'');
    (b) The current capital and operating financial condition of the 
project sponsor;
    (c) The commitment of capital and operating funds for the project 
and the entire transit system; and
    (d) The accuracy and reliability of the capital and operating costs 
and revenue estimates and the financial capacity of the project 
sponsor.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or the corridors to 
be served. If a proposed project can meet the established standards, 
FTA may assign an automatic rating on one or more of the local 
financial commitment criteria outlined in this section.
    (f) For each proposed project, ratings for paragraphs (a) through 
(d) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' For paragraph (a) of this section, the 
percentage of Small Starts funding sought from 49 U.S.C. 5309 will be 
rated and used to develop the summary local financial commitment 
rating, but only if it improves the rating and not if it worsens the 
rating.
    (g) The ratings for each measure described in this section will be 
combined into a summary local financial commitment rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low.'' The process by 
which the summary local financial commitment rating will be developed, 
including the assigned weights to each of the measures, will be 
described in policy guidance.


Sec.  611.307  Overall project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment (Sec. Sec.  611.303(f) and 305(g)) will form 
the basis for the overall rating for each project.
    (b) FTA will assign overall project ratings to each proposed 
project of ``high,'' ``medium-high, ``medium,'' ''medium-low,'' or 
``low,'' as required by 49 U.S.C. 5309(e)(8).
    (1) These ratings will indicate the overall merit of a proposed 
Small Starts project at the time of evaluation.
    (2) Ratings for individual projects will be developed upon entry 
into project development and prior to a PCGA. Additionally, ratings may 
be updated while a project is in project development if the project 
scope and cost have changed materially since the most recent rating was 
assigned.
    (c) These ratings will be used to:
    (1) Approve or deny advancement of a proposed project into project 
development;
    (2) Approve or deny projects for PCGAs; and
    (3) Support annual funding recommendations to Congress in the 
Annual Report on Funding Recommendations required by 49 U.S.C. 
5309(k)(1).
    (d) FTA will assign overall ratings for proposed Small Starts 
projects by averaging the summary ratings for project justification and 
local financial commitment. When the average of these ratings is 
unclear (e.g., summary project justification rating of ``medium-high'' 
and summary local financial commitment rating of ``medium''), FTA will 
round up the overall rating to the higher rating except in the 
following circumstances:
    (1) A ``medium'' overall rating requires a rating of at least 
``medium'' on both project justification and local financial 
commitment.
    (2) If a project receives a ``low'' rating on either project 
justification or local financial commitment, the overall rating will be 
``low.''


Sec.  611.309  Project development process.

    (a) Project development.
    (1) A proposed project can be considered for advancement into 
project development only if:
    (i) An alternatives analysis has been completed;
    (ii) The proposed project is adopted as the locally preferred 
alternative by the metropolitan planning organization into the 
metropolitan transportation plan;
    (iii) The project sponsor has demonstrated adequate technical 
capability to carry out project development for the proposed project; 
and
    (iv) All other applicable Federal and FTA program requirements have 
been met.
    (2) FTA's approval will be based on the results of its evaluation 
as described in Sec.  611.301 through 611.307.
    (3) At a minimum, a proposed project must receive an overall rating 
of ``medium'' or better to be approved for entry into project 
development.
    (4) This part does not in any way revoke prior FTA approvals to 
enter project development made prior to [EFFECTIVE DATE OF FINAL RULE].
    (5) Projects approved by FTA to advance into project development 
receive automatic pre-award authority to incur project costs prior to 
grant approval for preliminary engineering activities (potentially 
reimbursable upon funding availability). Upon completion of the 
National Environmental Policy Act (NEPA) requirements, FTA extends 
automatic pre-award authority to projects in project development to 
incur costs for final design activities, utility relocation and real 
property acquisition, as well as for vehicle purchases, demolition, and 
non-construction activities such as procurement of long-lead time items 
or items for which market conditions play

[[Page 3908]]

a significant role in the acquisition price. This includes, but is not 
limited to procurement of rails, ties, and other specialized equipment, 
and commodities.
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (b) Project construction grant agreements.
    (1) FTA will determine whether to execute a PCGA based on:
    (i) The evaluation and rating of the Small Starts project as 
described in Sec.  611.301 through 611.307;
    (ii) The technical capability of the project sponsor to complete 
the proposed Small Starts project; and
    (iii) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed Small 
Starts project.
    (2) PCGAs will be executed only for those projects that:
    (i) Are authorized for construction by Federal law;
    (ii) Receive an overall rating of ``medium'' or better;
    (iii) Have completed the appropriate steps in the project 
development process;
    (iv) Meet all applicable Federal and FTA program requirements; and
    (v) Are ready to utilize Small Starts funds, consistent with 
available program authorization.
    (3) When FTA decides to provide Small Starts funds, FTA will 
negotiate a PCGA with the project sponsor during project development of 
that project. Pursuant to the terms and conditions of the PCGA:
    (i) A baseline cost estimate and baseline schedule will be 
established and a maximum level of Small Starts funds will be fixed;
    (ii) The project sponsor will be required to complete construction 
of the project, as defined, to the point of initiation of revenue 
operations, and to absorb any additional costs incurred or necessitated 
to reach that point using non-Small Starts funds;
    (iii) FTA and the project sponsor will establish a schedule for 
anticipating Federal Small Starts contributions during the construction 
period; and
    (iv) Specific annual Small Starts funds contributions under the 
PCGA will be subject to the availability of budget authority and the 
ability of the project sponsor to use the funds effectively.
    (c) Commitments.
    (1) The total amount of Federal Small Starts obligations under 
PCGAs and potential obligations under Letters of Intent will not exceed 
the amount authorized for Small Starts under 49 U.S.C. 5309.
    (2) FTA may also make a ``contingent commitment'' of Small Starts 
funds, which is subject to future congressional authorizations and 
appropriations, pursuant to 49 U.S.C. 5309(g), 5338(b), and 5338(h).

Appendix A to Part 611--Description of Measures Used for Project 
Evaluation

A. New Starts

I. Project Justification

    FTA will evaluate candidate New Starts projects according to the 
six project justification criteria established by 49 U.S.C. 
5309(d)(2)(B). These measures have been developed according to the 
considerations identified at 49 U.S.C. 5309(d)(3) (``Evaluation of 
Project Justification''), including Other Factors.
    From time to time, but not less than frequently than every two 
years as directed by U.S.C. 5309 (d)(6), FTA publishes policy 
guidance on the application of these measures, and the agency 
expects it will continue to do so. Moreover, FTA may choose to amend 
these measures, pending the results of ongoing studies regarding 
transit benefit and cost evaluation methods. In addition, FTA may 
establish warrants for one or more of these criteria through which 
an automatic rating would be assigned based on the characteristics 
of the project and/or its corridor. FTA will develop these warrants 
based on analysis of the features of projects and/or corridor 
characteristics that would produce satisfactory ratings on one or 
more of the criteria. Such warrants would be included in draft 
policy guidance issued for comment before being finalized.
    (a) Mobility Improvements.
    (1) The total number of trips using the proposed project, with 
extra weight given to trips that would be made on the project by 
transit dependent persons.
    (2) If the project sponsor chooses to consider project trips in 
the horizon year in addition to the current year, trips will be 
based on the weighted average of current-year and horizon-year.
    (b) Environmental Benefits.
    (1) Incremental annualized capital and operating cost of the 
project compared to the monetized value of the anticipated direct 
and indirect benefits to human health, safety, energy, and the air 
quality environment that are expected to result from implementation 
of the proposed project compared to:
    (i) The existing environment with the transit system in the 
current year or,
    (ii) At the discretion of the project sponsor, both the existing 
environment with the transit system in the current year and the no-
build environment and transit system in the horizon year.
    (2) Environmental benefits used in the calculation would 
include:
    (i) Change in air quality criteria pollutants,
    (ii) Change in energy use,
    (iii) Change in greenhouse gas emissions, and
    (iv) Change in safety.
    (c) Operating Efficiencies.
    (1) The change in operating and maintenance (O&M) cost per 
``place-mile'' (passenger capacity of a vehicle multiplied by its 
annual revenue miles of service and summed over all vehicles in the 
transit system) compared to:
    (i) The existing transit system in the current year or,
    (ii) At the discretion of the project sponsor, both the existing 
transit system in the current year and the no-build transit system 
in the horizon year.
    (d) Cost Effectiveness.
    (1) The annualized cost per trip on the project, where cost 
includes changes in capital, operating, and maintenance costs 
compared to:
    (i) The existing transit system in the current year, or
    (ii) At the discretion of the project sponsor, both the existing 
transit system in the current year and the no-build transit system 
in the horizon year.
    (e) Public transportation supportive land use policies and 
future patterns.
    (1) Existing corridor and station area development;
    (2) Existing corridor and station area development character;
    (3) Existing station area pedestrian facilities, including 
access for persons with disabilities; (4) Existing corridor and 
station area parking supply; and
    (5) Existing publically supported housing in the corridor.
    (f) Economic Development.
    (1) The extent to which a proposed project is likely to enhance 
additional, transit-supportive development based on the existing 
plans and policies to support economic development proximate to the 
project including:
    (i) Growth management plans and policies;
    (ii) Policies in place to support maintenance of or increases to 
the share of affordable housing in the project corridor; and
    (iii) Performance and impact of policies.
    (2) At the option of the project sponsor, an additional 
quantitative analysis (scenario-based estimate) to estimate indirect 
changes in VMT resulting from changes in development patterns that 
are anticipated to occur with implementation of the proposed 
project. The resulting environmental benefits would be calculated, 
monetized, and compared to the annualized capital and operating cost 
of the project.
    (g) Other factors. Other factors may be considered in the 
project justification rating. Others factor may include, but are not 
limited to:
    (1) The multimodal connectivity the proposed New Starts project 
will provide;
    (2) Environmental justice considerations and equity issues;
    (3) Livable Communities initiatives and local economic 
activities;
    (4) The degree to which there are policies in place to locate 
federal, and other major public, facilities and investments in 
proximity to the proposed project;

[[Page 3909]]

    (5) Consideration of innovative procurement, and construction 
techniques, including design-build turnkey applications; and
    (6) Additional factors relevant to local and national priorities 
and to the success of the project.

II. Local Financial Commitment

    FTA will use the following measures to evaluate the local 
financial commitment to a proposed New Starts project:
    (a) The proposed share of total project costs from sources other 
than the Section 5309 major capital investment program, including 
other Federal transportation funds and the local match required by 
Federal law;
    (b) The current financial condition, both capital and operating, 
of the project sponsor;
    (c) The commitment of funds for both the proposed project and 
the ongoing operation and maintenance of the project sponsor's 
system once the project is built.
    (d) The reasonableness of the financial plan, including planning 
assumptions, cost estimates, and the capacity to withstand funding 
shortfalls or cost overruns.

B. Small Starts

I. Project Justification

    FTA will use several measures to evaluate candidate Small Starts 
projects according to the three project justification criteria 
established by 49 U.S.C. 5309(E)(4)(B), taking account of the 
considerations identified in 49 U.S.C. 5309(3)(4) (``Project 
Justification''), including Other Factors.
    From time to time, but not less than frequently than every two 
years as directed by U.S.C. 5309 (d)(6), FTA publishes for comment 
technical guidance on the application of these measures, and the 
agency expects it will continue to do so. Moreover, FTA may choose 
to amend these measures, pending the results of ongoing studies 
regarding transit benefit and cost evaluation methods. In addition, 
FTA may establish warrants for one or more of these criteria through 
which an automatic rating would be assigned based on the 
characteristics of the project and/or its corridor. Such warrants 
would be included in the policy guidance so that they may be subject 
to public comment.
    (a) Cost Effectiveness.
    (1) The cost per trip on the project, where cost includes 
changes in capital, operating, and maintenance costs compared to:
    (i) The existing transit system in the current year, or
    (ii) At the discretion of the project sponsor, both the existing 
transit system in the current year and the no-build transit system 
in the horizon year.
    (b) Public transportation supportive land use policies and 
future patterns.
    (1) Existing corridor and station area development;
    (2) Existing corridor and station area development character;
    (3) Existing station area pedestrian facilities, including 
access for persons with disabilities;
    (4) Existing corridor and station area parking supply.; and
    (5) Existing publically supported housing in the corridor.
    (c) Economic Development.
    (1) The extent to which a proposed project is likely to enhance 
additional, transit-supportive development based on the existing 
plans and policies to support economic development proximate to the 
project including:
    (i) Growth management plans and policies
    (ii) Policies in place to support maintenance of or increases to 
the share of affordable housing in the project corridor; and
    (c) Performance and impact of policies.
    (2) At the option of the project sponsor, an additional 
quantitative analysis (scenario-based estimate) to estimate indirect 
changes in VMT resulting from changes in development patterns that 
are anticipated to occur with implementation of the proposed 
project. The resulting environmental benefits would be calculated, 
monetized, and compared to the annualized capital and operating cost 
of the project.
    (d) Other factors. Other factors may be considered in the 
project justification rating. Others factor may include, but are not 
limited to:
    (1) The multimodal connectivity the proposed Small Starts 
project will provide;
    (2) Environmental justice considerations and equity issues,
    (3) Opportunities for increased access to employment for low 
income persons;
    (4) Livable Communities initiatives and local economic 
activities;
    (5) Consideration of innovative procurement, and construction 
techniques, including design-build turnkey applications; and
    (6) The degree to which there are policies in place to locate 
federal, and other major public, facilities and investments in 
proximity to the proposed project.
    (7) Additional factors relevant to local and national priorities 
and to the success of the project.

II. Local Financial Commitment

    If the Small Starts project sponsor can demonstrate the 
following, the project will qualify for a highly simplified 
financial evaluation:
    (a) A reasonable plan to secure funding for the local share of 
capital costs or sufficient available funds for the local;
    (b) The additional operating and maintenance cost to the agency 
of the proposed Small Starts project is less than 5 percent of the 
project sponsor's existing operating budget; and
    (c) The project sponsor is in reasonably good financial 
condition, as demonstrated by the past three years' audited 
financial statements.
    Small Starts projects that meet these measures and request 
greater than 50 percent Small Starts funding would receive a local 
financial commitment rating of Medium. Small Starts projects that 
request 50 percent or less in Small Starts funding would receive a 
High rating for local financial commitment.
    FTA will use the following measures to evaluate the local 
financial commitment to a proposed Small Starts project if it cannot 
meet the conditions listed above:
    (a) The proposed share of total project costs from sources other 
than the Section 5309 major capital investment program, including 
other Federal transportation funds and the local match required by 
Federal law;
    (b) The current financial condition, both capital and operating, 
of the project sponsor;
    (c) The commitment of funds for both the proposed project and 
the ongoing operation and maintenance of the project sponsor's 
system once the project is built.
    (d) The reasonableness of the financial plan, including planning 
assumptions, cost estimates, and the capacity to withstand funding 
shortfalls or cost overruns.

    Issued on: January 17, 2012.
Peter Rogoff,
Administrator, Federal Transit Administration.

[FR Doc. 2012-1198 Filed 1-24-12; 8:45 am]
BILLING CODE 4910-57-P