Public Transportation: New Starts Program Is in a Period of	 
Transition (30-AUG-06, GAO-06-819).				 
                                                                 
The Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users (SAFETEA-LU) authorized about $7.9	 
billion in commitment authority, through fiscal year 2009, for	 
the Federal Transit Administration's (FTA) New Starts program,	 
which is used to select fixed guideway transit projects, such as 
rail and trolley projects, and to award full funding grant	 
agreements (FFGAs). The New Starts program serves as an important
source of federal funding for the design and construction of	 
transit projects throughout the country. SAFETEA-LU requires GAO 
to report each year on FTA's New Starts process. As such, GAO	 
examined (1) the number of projects that were evaluated, rated,  
and proposed for FFGAs for the fiscal year 2007 evaluation cycle 
and the proposed funding commitments for the fiscal year 2007	 
budget; (2) procedural changes that FTA proposed for the New	 
Starts program beginning with the fiscal year 2008 evaluation	 
cycle; and (3) changes SAFETEA-LU made to the New Starts program 
and FTA's implementation of these changes. GAO reviewed New	 
Starts documents and interviewed FTA officials and project	 
sponsors, among other things, as part of its review. GAO is not  
making recommendations in this report. In commenting on a draft  
of this report, FTA provided technical clarifications, which we  
incorporated as appropriate.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-819 					        
    ACCNO:   A59906						        
  TITLE:     Public Transportation: New Starts Program Is in a Period 
of Transition							 
     DATE:   08/30/2006 
  SUBJECT:   Budget controllability				 
	     Budgeting						 
	     Federal aid for transportation			 
	     Federal grants					 
	     Mass transit funding				 
	     Program evaluation 				 
	     Program management 				 
	     Transportation					 
	     Policies and procedures				 
	     FTA New Starts Program				 
	     FTA Small Starts Program				 
	     FTA Very Small Starts Program			 

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GAO-06-819

     

     * Results in Brief
     * Background
     * FTA Proposed Five New Projects for FFGAs and Requested $1.47
     * FTA Proposed Nine Procedural Changes to the New Starts Progr
     * SAFETEA-LU's Changes to the New Starts Program Include Ident
          * FTA Has Started to Implement SAFETEA-LU Changes and Will Con
          * Small Starts Program Is Intended to Offer a Streamlined Proc
          * FTA Also Identified Possible Changes to the New Starts Progr
     * Concluding Observations
     * Agency Comments
     * Appendix I: Scope and Methodology
     * Appendix II: FTA's Proposed Changes to the New Starts Progra
          * Order by Mail or Phone

Report to Congressional Committees

United States Government Accountability Office

GAO

August 2006

PUBLIC TRANSPORTATION

New Starts Program Is in a Period of Transition

GAO-06-819

Contents

Letter 1

Results in Brief 3
Background 5
FTA Proposed Five New Projects for FFGAs and Requested $1.47 Billion for
the New Starts Program in Fiscal Year 2007 10
FTA Proposed Nine Procedural Changes to the New Starts Program and Adopted
Four after Considering Comments from the Transit Community 16
SAFETEA-LU's Changes to the New Starts Program Include Identifying New
Evaluation Criteria to Establishing the Small Starts Program 21
Concluding Observations 34
Agency Comments 34
Appendix I Scope and Methodology 36
Appendix II FTA's Proposed Changes to the New Starts Program 38

Tables

Table 1: Comparison of the Fiscal Year 2006 and Fiscal Year 2007 Rating
Scales 12
Table 2: Projects Proposed for FFGAs and Other Funding, Fiscal Year 2007
13
Table 3: Procedural Changes Proposed by FTA 16
Table 4: Summary of Common Transit Community Concerns and FTA's Responses
to the New Starts Procedural Changes 19
Table 5: Comparison of SAFETEA-LU's and TEA-21's New Starts Provisions 22
Table 6: Comparison of Small Starts and New Starts Program Statutory
Requirements 26
Table 7: Changes to the New Starts Program Proposed by FTA and the Transit
Community's Response 38

Figures

Figure 1: New Starts Planning and Development Process 7
Figure 2: New Starts Project Evaluation Criteria 9
Figure 3: New Starts Projects in Final Design and Preliminary Engineering,
Fiscal Year 2007 11
Figure 4: Planned Uses of Administration's Proposed Fiscal Year 2007
Budget for New Starts 15
Figure 5: Time Line for Implementing SAFETEA-LU Changes to the New Starts
Program 25
Figure 6: FTA's "Option 1" for Revising the New Starts Evaluation and
Ratings Framework 30
Figure 7: FTA's "Option 2" for Revising the New Starts Evaluation and
Ratings Framework 31

Abbreviations

ANPRM Advanced Notice of Proposed Rulemaking

BRT bus rapid transit

DOT Department of Transportation

FD Final design

FEIS Final environmental impact statement

FFGA full funding grant agreement

FHWA Federal Highway Administration

FONSI Finding of no significant impact

FTA Federal Transit Administration

HOV High-occupancy vehicle

LPA locally preferred alternative

LRT light rail transit

MOS minimum operable segment

MPO Metropolitan Planning Organization

NEPA National Environmental Policy Act

NPRM Notice of Proposed Rulemaking

PDA Project development agreements

PE Preliminary engineering

PMP Project Management Plans

ROD Record of decision

ROW right-of-way

SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users

TEA-21 Transportation Equity Act for the 21st Century

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
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copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office

Washington, DC 20548

August 30, 2006 August 30, 2006

The Honorable Richard C. Shelby Chairman The Honorable Paul S. Sarbanes
Ranking Minority Member Committee on Banking, Housing, and Urban Affairs
United States Senate The Honorable Richard C. Shelby Chairman The
Honorable Paul S. Sarbanes Ranking Minority Member Committee on Banking,
Housing, and Urban Affairs United States Senate

The Honorable Don Young Chairman The Honorable James L. Oberstar Ranking
Democratic Member Committee on Transportation and Infrastructure House of
Representatives The Honorable Don Young Chairman The Honorable James L.
Oberstar Ranking Democratic Member Committee on Transportation and
Infrastructure House of Representatives

A significant portion of the federal government's share of new capital
investment in mass transportation since the early 1970s has come through
the Federal Transit Administration's (FTA) New Starts program, which
awards full funding grant agreements (FFGAs) for fixed guideway projects,
including rail, bus rapid transit, and ferry systems across the country.1
An FFGA establishes the terms and conditions for federal participation in
a project, including the maximum amount of federal funds available for the
project, which by statute cannot exceed 80 percent of its net cost. Since
fiscal year 1998, the New Starts program has provided state and local
agencies with more than $10.4 billion to help design and construct transit
projects throughout the country.2 A significant portion of the federal
government's share of new capital investment in mass transportation since
the early 1970s has come through the Federal Transit Administration's
(FTA) New Starts program, which awards full funding grant agreements
(FFGAs) for fixed guideway projects, including rail, bus rapid transit,
and ferry systems across the country.1 An FFGA establishes the terms and
conditions for federal participation in a project, including the maximum
amount of federal funds available for the project, which by statute cannot
exceed 80 percent of its net cost. Since fiscal year 1998, the New Starts
program has provided state and local agencies with more than $10.4 billion
to help design and construct transit projects throughout the country.2

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU) authorized the New Starts program through
fiscal year 2009 and provided approximately $7.9 billion in commitment
authority3 from fiscal year 2005 through fiscal year 2009. The Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for
Users (SAFETEA-LU) authorized the New Starts program through fiscal year
2009 and provided approximately $7.9 billion in commitment authority3 from
fiscal year 2005 through fiscal year 2009. Competition for New Starts
funds continues to grow: According to FTA, SAFETEA-LU identified over 300
projects as eligible to compete for New Starts funding, compared with 190
such projects identified by the previous authorization legislation, the
Transportation Equity Act for the 21st Century (TEA-21). For that reason,
SAFETEA-LU, like TEA-21, directs FTA to continue to prioritize projects
for funding by evaluating, rating, and recommending potential projects on
the basis of specific financial and project justification criteria
including mobility improvements, cost-effectiveness, environmental
benefits, and operating efficiencies. However, SAFETEA-LU made several
changes to the New Starts evaluation and rating process, including
identifying a new eligibility category for smaller fixed guideway projects
and establishing new evaluation criteria. FTA is currently implementing
these changes.

1Fixed guideway systems use and occupy a separate right-of-way for the
exclusive use of public transportation services. These systems include
fixed rail, exclusive lanes for buses and other high-occupancy vehicles,
and other systems.

2This is the amount appropriated through fiscal year 2006, according to
FTA.

3Commitment authority is the amount of funding Congress has authorized FTA
to commit to New Starts projects for a given period of time.

SAFETEA-LU also requires us to report each year on FTA's processes and
procedures for evaluating, rating, and recommending New Starts projects
for funding and on FTA's implementation of these processes and procedures.
This report discusses (1) the number of projects that were evaluated,
rated, and proposed for FFGAs for the fiscal year 2007 evaluation cycle4
and the proposed funding commitments for the fiscal year 2007 budget; (2)
procedural changes that FTA proposed for the New Starts program beginning
with the fiscal year 2008 evaluation cycle; and (3) changes SAFETEA-LU
made to the New Starts program and FTA's implementation of these changes.
To address these objectives, we reviewed SAFETEA-LU; FTA guidance and
regulations governing the New Starts program; and other relevant FTA
documents, including the annual New Starts report. We also interviewed FTA
officials, project sponsors from five projects in preliminary engineering
and final design that were rated in the fiscal year 2007 evaluation cycle,
and representatives from the American Public Transportation Association
and the New Starts Working Group.5 In addition, we reviewed comments to
FTA's docket on New Starts and Small Starts and the Advanced Notice of
Proposed Rulemaking (ANPRM) for Small Starts. Finally, we attended one of
FTA's three meetings with project sponsors-the New Starts/Small Starts
Seminar and Listening Sessions-in March 2006. We conducted our work from
February 2006 through August 2006 in accordance with generally accepted
government auditing standards. (See app. I for more information on our
scope and methodology.)

4The fiscal year 2007 evaluation cycle began in May 2005 with the issuance
of the New Starts reporting instructions. Applications were due in August
2005, and FTA evaluated the applications in the fall of 2005. The annual
report was published in February 2006 and included funding recommendations
for fiscal year 2007.

5The New Starts Working Group is an organization of New Starts project
sponsors, metropolitan planning organizations, and private industry
transit firms that advocate on behalf of the New Starts program and
specific projects.

                                Results in Brief

For the fiscal year 2007 evaluation cycle, FTA evaluated and rated 20
projects, proposed 5 projects for new FFGAs, and requested $1.47 billion
for the New Starts program. Of the 20 projects rated, 1 was rated as
"high," 17 were rated as "medium," and 2 were rated as "low." FTA
recommended 12 of the 20 projects for funding. Specifically, FTA
recommended 5 projects for new FFGAs and 2 projects with pending FFGAs.6
In addition, FTA identified 5 other projects that may be eligible for
funding outside of FFGAs. The administration's budget request of $1.47
billion for the New Starts program is about $200 million more than the
amount received last year. The majority of the $1.47 billion would be
allocated to projects with existing and pending FFGAs and projects
proposed for new FFGAs.

FTA proposed nine procedural changes for the New Starts program, beginning
with the fiscal year 2008 evaluation cycle that were generally intended to
improve the management of the New Starts process. These changes include
linking the New Starts and the National Environmental Policy Act (NEPA)
planning requirements and processes and capping New Starts funding when
projects enter the final design phase. As required by SAFETEA-LU, FTA
published these proposals in policy guidance and sought public input. A
total of 41 transit agencies, government entities, consultants,
associations, and organizations submitted written comments to FTA's docket
in response to the proposed procedural changes. Project sponsors and other
members of the transit community supported changes that they thought would
make the New Starts process more efficient, but many commenters expressed
strong opposition to other changes. For example, many commenters opposed
FTA's proposal that project sponsors analyze ridership and cost
uncertainties, citing concerns about the lack of guidance on how to
conduct the analysis as well as about the time and resources required to
perform such an analysis. FTA implemented four of the nine proposed
procedural changes and, on the basis of the comments received, did not
implement the other five changes. FTA, however, noted that it may revisit
these proposed changes in the future.

6Projects with pending FFGAs have been previously recommended for FFGAs by
FTA; however, the FFGAs have not been executed. FTA expects to execute
both pending FFGAs by the end of fiscal year 2006.

SAFETEA-LU introduced eight changes to the New Starts program, such as
establishing the Small Starts program and identifying new evaluation
criteria. FTA has taken some initial steps to implement these changes,
including issuing an ANPRM for the Small Starts program and guidance for
the New Starts program, both in January 2006. The Small Starts program is
a component of the New Starts program and is intended to offer an
expedited and streamlined application and review process for small
projects. The transit community, however, questioned whether the Small
Starts program, as outlined in the ANPRM, would provide such a process. In
July 2006, FTA simplified how Small Starts projects would be evaluated and
rated and introduced a new eligibility category within the Small Starts
program called Very Small Starts, which is for the least costly projects.7
Very Small Starts projects will qualify for an even simpler and more
expedited evaluation process. FTA's actions appear to have streamlined the
Small Starts program more than was originally proposed in the ANPRM. FTA
will have the opportunity to make additional modifications, as
appropriate, as it works to develop the final rule for the Small Starts
program over approximately the next 18 months. In its January 2006
guidance, FTA also identified and sought public input on possible changes
to the New Starts program that would have an impact on traditional New
Starts projects, such as revising the evaluation process to incorporate
the new evaluation criteria identified by SAFETEA-LU. According to FTA,
potential challenges in moving forward are incorporating both land use and
economic development as separate criteria in the evaluation process, as
required by the statute-including developing appropriate measures for
these criteria and avoiding duplication in counting benefits. We have also
previously reported similar challenges in measuring these types of
benefits and noted that experts have suggested potential solutions, such
as using qualitative information about the benefits rather than relying
strictly on quantitative information and expanding the use of risk
assessment or probability analysis in conjunction with economic analysis.8
Some of FTA's proposed changes to the New Starts process, which would
consider qualitative information about the project and the project's
uncertainties, appear to be in line with these suggestions.

7In July 2006, FTA issued final interim guidance that will govern the
Small Starts evaluation and rating process until the final rule is issued
in early 2008.

8GAO, Highway and Transit Investments, Options for Improving Information
on Projects' Benefits and Costs and Increasing Accountability for Results,
GAO-05-172  (Washington, D.C.: Jan. 24, 2005).

The Department of Transportation, including FTA, reviewed a draft of this
report. FTA officials provided technical clarifications, which we
incorporated as appropriate.

                                   Background

SAFETEA-LU authorized a total of $45.3 billion for a variety of transit
programs, including financial assistance to states and localities to
develop, operate, and maintain transit systems from fiscal year 2005
through fiscal year 2009. Under one program, New Starts, FTA identifies
and selects fixed guideway transit projects for funding-including heavy,
light, and commuter rail; ferry; and certain bus projects (such as bus
rapid transit). The New Starts program serves as an important source of
federal funding for the design and construction of transit projects
throughout the country. FTA generally funds New Starts projects through
FFGAs, which establish the terms and conditions for federal participation
in a New Starts project and also define a project's scope, including the
length of the system and the number of stations; its schedule, including
the date when the system is expected to open for service; and its cost.

For a project to obtain an FFGA, it must progress through a local or
regional review of alternatives and meet a number of federal requirements,
including requirements for information used in the New Starts evaluation
and rating process (see fig. 1). As required by SAFETEA-LU, New Starts
projects must emerge from a regional, multimodal transportation planning
process. The first two phases of the New Starts process-systems planning
and alternatives analysis-address this requirement. The systems planning
phase identifies the transportation needs of a region, while the
alternatives analysis phase provides information on the benefits, costs,
and impacts of different corridor-level options, such as rail lines or bus
routes. The alternatives analysis phase results in the selection of a
locally preferred alternative-which is intended to be the New Starts
project that FTA evaluates for funding, as required by statute. After a
locally preferred alternative is selected, project sponsors submit a
request to FTA for entry into the preliminary engineering phase.9
Following completion of preliminary engineering and federal environmental
requirements, the project may be approved by FTA to advance into final
design,10 after which the project may be approved by FTA for an FFGA and
proceed to construction, as provided for in statute. FTA oversees grantee
management of projects from the preliminary engineering phase through
construction and evaluates the projects for advancement into each phase of
the process, as well as annually for the New Starts report to Congress.

9During the preliminary engineering phase, project sponsors refine the
design of the proposal, taking into consideration all reasonable design
alternatives and estimating their costs, benefits, and impact (e.g.,
financial or environmental). According to FTA officials, to gain approval
for entry into preliminary engineering, a project must (1) be identified
through the alternatives analysis process, (2) be included in the region's
long-term transportation plan, (3) meet the statutorily defined project
justification and financial criteria, and (4) demonstrate that the
sponsors have the technical capability to manage the project during
preliminary engineering. Some federal New Starts funding is available to
projects for preliminary engineering activities, if so appropriated by
Congress.

10Final design is the last phase of project development before
construction and may include right-of-way acquisition, utility relocation,
and the preparation of final construction plans and cost estimates.

Figure 1: New Starts Planning and Development Process

Legend:

LPA = locally preferred alternative MPO = Metropolitan Planning
Organization NEPA = National Environmental Policy Act PE = Preliminary
engineering PMP = Project Management Plans ROW = right-of-way

Note: NEPA requires federal agencies to prepare detailed statements
assessing the environmental impact of and alternatives to major federal
actions significantly affecting the environment. In the transportation
context, the NEPA evaluation measures the impact of different alternatives
by the extent to which the alternative meets the project purpose, need,
and consistency with the goals and objectives of any local urban planning.

To help inform administration and congressional decisions about which
projects should receive federal funds, FTA assigns ratings on the basis of
various financial and project justification criteria, and then assigns an
overall rating. For the fiscal year 2007 evaluation cycle, FTA primarily
used the financial and project justification criteria identified in
TEA-21.11 These criteria reflect a broad range of benefits and effects of
the proposed project, such as cost-effectiveness, as well as the ability
of the project sponsor to fund the project and finance the continued
operation of its transit system (see fig. 2). Projects are rated at
several points during the New Starts process-as part of the evaluation for
entry into preliminary engineering and final design, and yearly for
inclusion in the New Starts annual report.

11As will be discussed later in this report, SAFETEA-LU identified
additional criteria for FTA to use in its evaluation and rating process.
However, according to FTA's January 2006 proposed guidance, FTA does not
plan to change the current framework and methodology for evaluating and
rating New Starts projects before publishing the new final rule for its
New Starts program, which is expected in January 2008. However, FTA did
incorporate several SAFETEA-LU changes in the fiscal year 2007 evaluation
and rating process, including using a revised rating scale and downgrading
the emphasis placed on the federal share. These changes will be discussed
later in this report.

Figure 2: New Starts Project Evaluation Criteria

FTA assigns the proposed project a rating for each criterion and then
assigns a summary rating for local financial commitment and project
justification. Finally, FTA develops an overall project rating. The
exceptions to this process are statutorily "exempt" projects, which are
those with requests for less than $25 million in New Starts funding. These
projects do not have requirements for submitting project justification
information-although FTA encourages their sponsors to do so-do not receive
ratings from FTA and are not eligible for FFGAs; thus, the number of
projects in preliminary engineering or final design may be greater than
the number of projects evaluated and rated by FTA.

As required by statute, the administration uses the FTA evaluation and
rating process, along with the stage of development of New Starts
projects, to decide which projects to recommend to Congress for funding.12
Although many projects receive a summary rating that would make them
eligible for FFGAs, only a few are proposed for FFGAs in a given fiscal
year. FTA proposes projects for FFGAs when it believes that the projects
will be able to meet certain conditions during the fiscal year for which
funding is proposed. These conditions include the following:

12The administration's funding recommendations are made in the President's
budget and are included in FTA's annual New Starts report to Congress,
which is released each February in conjunction with the President's
budget.

           o  All non-New Starts funding must be committed and available for
           the project.
           o  The project must be in the final design phase and have
           progressed to the point where uncertainties about costs, benefits,
           and impacts (e.g., environmental or financial) are minimized.
           o  The project must meet FTA's tests for readiness and technical
           capacity, which confirm that there are no cost, project scope, or
           local financial commitment issues remaining.

           FTA Proposed Five New Projects for FFGAs and Requested $1.47
			  Billion for the New Starts Program in Fiscal Year 2007
			  
			  FTA's Annual Report on New Starts: Proposed Allocations of Funds
           for Fiscal Year 2007 (annual report) identified 24 projects in
           preliminary engineering and final design (see fig. 3). FTA
           evaluated and rated 20 of these projects,13 and 4 projects were
           statutorily exempt from being rated because their sponsors
           requested less than $25 million in New Starts funding.14 FTA
           evaluated and rated fewer projects during the fiscal year 2007
           cycle than in fiscal year 2006. According to FTA, this decrease
           occurred because 12 proposed projects are no longer in preliminary
           engineering or final design.15 FTA stated in its annual report
           that the sponsors of these projects have either (1) fully
           implemented the project; (2) received the total New Starts funding
           requested to implement the project; (3) terminated or suspended
           project development activities; (4) withdrawn from the New Starts
           process while they address outstanding issues; or (5) decided not
           to pursue New Starts funding.

FTA Proposed Five New Projects for FFGAs and Requested $1.47 Billion for the New
                       Starts Program in Fiscal Year 2007

13FTA does not evaluate and rate projects that already have FFGAs or that
are in alternatives analysis.

14Projects with requests for less than $25 million in New Starts funding
were not evaluated and rated during the fiscal year 2007 cycle; however,
these projects will be evaluated and rated as "Small Starts" once the
final rule for the Small Starts program is in place, as specified in
section 5309(e)(B) of SAFETEA-LU.

15These projects include Boston, Silver Line Phase III; El Paso, Starter
Line; Ft. Collins, Mason Transportation Corridor; Kansas City, Southtown
BRT; Las Vegas, Resort Corridor Downtown Monorail; Los Angeles, Exposition
Corridor; New Orleans, Desire Streetcar; Orange County, CenterLine LRT;
San Diego, Mid-Coast LRT; San Jose, Silicon Valley Rapid Transit Corridor;
South Wasilla, Track Realignment; and Tampa Bay, Regional Rail System.

Figure 3: New Starts Projects in Final Design and Preliminary Engineering,
Fiscal Year 2007

Of the 20 projects that were rated in the fiscal year 2007 evaluation
cycle, 1 was rated as "high," 17 were rated as "medium," and 2 were rated
as "low." Under TEA-21, during fiscal years 2000 through 2006, FTA
designated projects as highly recommended, recommended, or not
recommended, based on the results of FTA's evaluation of each of the
criteria for project justification and local financial commitment.
SAFETEA-LU replaced this rating scale with a 5-point scale of high,
medium-high, medium, medium-low, and low. To help transition to the new
rating scale, FTA used a 3-point scale of high, medium, and low for the
fiscal year 2007 evaluation cycle, but used the same decision rules to
determine overall project ratings as it did in previous years (see table
1). According to FTA officials, FTA intends to work closely with the
industry to implement the SAFETEA-LU provisions so that they can be
applied in subsequent annual project evaluation cycles. In addition, FTA's
current schedule anticipates that the final rule will be completed in time
to use the 5-point scale for the fiscal year 2010 evaluation cycle.

Table 1: Comparison of the Fiscal Year 2006 and Fiscal Year 2007 Rating
Scales

                                     Fiscal year 2006        Fiscal year 2007 
                                     evaluation cycle rating evaluation cycle 
Decision rule                     scale                   rating scale     
At least "medium-high" for        Highly recommended      High             
finance and project justification                         
At least "medium" for finance and Recommended             Medium           
project justification                                     
Not rated at least "medium" for   Not recommended         Low              
finance and project justification                         

Source: FTA's New Starts annual report.

FTA's evaluation process informed the administration's recommendation to
fund 12 projects. FTA recommended five projects for new FFGAs. The total
capital cost of these five projects is estimated to be $3.3 billion, of
which the total federal New Starts share is expected to be $1.9 billion.
In addition, FTA recommended funding for two projects with pending FFGAs.
The total capital cost of these two projects is estimated to be $8.2
billion, of which the total federal New Starts share is expected to be
$2.8 billion. FTA also recommended reserving $101.9 million in New Starts
funding for five "other projects." In its annual report, FTA stated that
four of the five other projects (1) were in or nearing final design, (2)
received overall medium or higher ratings, and (3) had medium or better
cost-effectiveness ratings, or (4) were exempt from the requirement to
achieve a medium cost-effectiveness rating.16 According to FTA, no other
project in preliminary engineering or final design met these criteria. The
fifth project-Washington, D.C., Largo Metrorail Extension-did not meet
these criteria but was congressionally designated for funding in
SAFETEA-LU.17 Similar to last year, FTA did not specify funding levels for
the five other projects because it wanted to ensure that the projects were
moving forward as anticipated before making specific funding
recommendations to Congress. FTA also notes in its annual report that some
projects may encounter unexpected obstacles that slow their progress. For
example, FTA stated that some of the projects must still complete the
environmental planning process and address FTA-identified concerns related
to capital costs or project scope. Reserving funds for these projects
without specifying a particular amount for any given project will allow
the administration to make "real time" funding recommendations when
Congress is making appropriations decisions. FTA does not expect that all
five other projects will be recommended for funding in fiscal year 2007.
(See table 2 for more information about the 12 projects recommended for
funding.)

16SAFETEA-LU exempted four projects from a requirement to have a medium
cost-effectiveness rating.

17SAFETEA-LU, section 3043(a) (31) and 3043(j).

Table 2: Projects Proposed for FFGAs and Other Funding, Fiscal Year 2007

Dollars in millionsa                                            
                                                                   New Starts 
                                               New Starts   Total    share of 
                                               project    capital     capital 
Project name                Location        category      cost        cost 
West Corridor LRT           Denver, CO      New FFGA    $593.0         49% 
South Corridor              Portland, OR    New FFGA     557.4          60 
I-205/Portland Mall LRT                                         
Wilsonville to Beaverton    Washington      New FFGA     117.3          50 
Commuter Rail               County, OR                          
Northwest/Southeast LRT     Dallas, TX      New FFGA   1,406.2          50 
MOS                                                             
Weber County to Salt Lake   Salt Lake       New FFGA     611.7          80 
City Commuter Rail          City, UT                            
Long Island Rail Road East  New York, NY    Pending    7,779.3          34 
Side Access                                 FFGA                
North Shore LRT Connector   Pittsburgh, PA  Pending      393.0          55 
                                               FFGA                
Second Avenue Subway MOS    New York, NY    Other      4,947.8          26 
Norfolk LRT                 Norfolk, VA     Other        203.7          49 
Dulles Corridor Metrorail   Northern VA     Other      1,840.1          50 
Project - Extension to                                          
Wiehle Avenue                                                   
University Link LRT         Seattle, WA     Other      1,720.0          41 
Extension                                                       
Largo Metrorail Extension   Washington,     Other       433.87          60 
                               D.C.                                

Source: GAO summary of information in the New Starts annual report.

Legend:

LRT = Light rail transit MOS = Minimum operable segment

aThe numbers included in this table are what was recommended by FTA in the
New Starts annual report but the actual total capital cost and percent of
New Starts share is subject to change at the time FTA executes the FFGA.

The administration's fiscal year 2007 budget proposal requests that $1.47
billion be made available for the New Starts program. This total includes
funding for 16 projects already under an FFGA. Figure 4 illustrates the
planned uses of the administration's proposed fiscal year 2007 budget for
New Starts, including the following:

           o  $571.9 million would be shared among the 16 projects with
           existing FFGAs,
           o  $355 million would be shared between the 2 projects with
           pending FFGAs,
           o  $302.6 million would be shared by the 5 projects proposed for
           new FFGAs,
           o  $101.9 million would be shared by as many as 5 "other" projects
           to continue their development, and
           o  $100 million would be used for new Small Starts projects.

           Figure 4: Planned Uses of Administration's Proposed Fiscal Year
           2007 Budget for New Starts

           Note: FTA is authorized to use up to 1 percent of amounts made
           available for the New Starts/Small Starts program for project
           management oversight activities. SAFETEA-LU also authorized New
           Starts funds to be set aside for each fiscal year from 2006
           through 2009 for projects in Alaska and Hawaii, for fixed guideway
           systems and extension projects utilizing ferry boats, ferry boat
           terminals, or approaches to ferry boat terminals. Finally, FTA is
           also authorized to provide $5 million for each fiscal year from
           2006 through 2009 for the Denali Commission, which provides
           critical utilities, infrastructure, and economic support
           throughout Alaska, particularly in remote communities. According
           to FTA, the Small Starts program, authorized in SAFETEA-LU, does
           not go into effect until fiscal year 2007, and FTA had no projects
           in the pipeline when this report was prepared.

           FTA Proposed Nine Procedural Changes to the New Starts Program and
			  Adopted Four after Considering Comments from the Transit Community
			  
			  In January 2006, FTA proposed nine procedural changes for the New
           Starts program beginning with the fiscal year 2008 evaluation
           cycle. These changes include linking the New Starts and NEPA
           planning requirements and processes and capping New Starts funding
           when projects enter the final design phase. FTA's guidance states
           that these procedural changes are generally intended to improve
           the management of the New Starts process and to ensure the
           accuracy and consistency of the information submitted to the
           agency as part of the New Starts evaluation and rating process.
           According to FTA, these procedural changes do not alter the New
           Starts evaluation and rating framework, and they are not subject
           to the formal rule-making process. Table 3 summarizes the proposed
           procedural changes and FTA's rationale for proposing these
           changes.

FTA Proposed Nine Procedural Changes to the New Starts Program and Adopted Four
             after Considering Comments from the Transit Community

Table 3: Procedural Changes Proposed by FTA

Proposed procedural                                                        
change               Description               FTA's rationale for change
NEPAa interfaces     Sponsors must complete    To mitigate conflicts       
                        NEPA scoping before       between NEPA and New Starts 
                        preliminary engineering   by fostering earlier        
                        (PE).                     interaction and general     
                                                  consensus among             
                                                  participants about the      
                                                  alternatives considered     
                                                  during NEPA review.         
NEPA interfaces      Sponsors must present New To ensure the use and       
                        Starts evaluation of      disclosure of information   
                        locally preferred         for decision making.        
                        alternative with NEPA     
                        evaluation of             
                        alternatives.             
NEPA interfaces      Sponsors must achieve an  To minimize the need for    
                        acceptable New Starts     additional environmental    
                        rating before the final   reviews after a project's   
                        environmental impact      scope is changed to improve 
                        statement (FEIS), record  the New Starts ratings, and 
                        of decision (ROD), or     to ensure the public is     
                        finding of no significant presented with accurate     
                        impact (FONSI) is issued. information on projects     
                                                  that are acceptable for New 
                                                  Starts funding.             
Preservation of      Sponsors must document    To ensure that information  
information for      the information produced  is preserved and will be    
before and after     during the planning phase available to be analyzed in 
studyb               that will be needed for   the before-and-after study  
                        the before-and-after      required by SAFETEA-LU.     
                        study and update the      
                        information and analysis  
                        before entering final     
                        design (FD).              
Certification of     Individuals must certify  To ensure that local and    
technical methods,   the tools and techniques  federal decision makers are 
planning             used in the analysis to   provided with accurate      
assumptions, and     ensure that the           information when evaluating 
project development  approaches have been      New Starts projects.        
procedures           developed and applied     
                        according to professional 
                        standards and FTA         
                        guidelines.               
Analysis of          Sponsors must analyze     To respond to SAFETEA-LU's  
ridership and cost   uncertainties when        emphasis on improving the   
uncertainties        developing ridership      reliability of forecasts    
                        forecasts and cost        used in the evaluation      
                        estimates.                process.                    
Project development  FTA will selectively      To ensure that project      
agreements           require projects to       sponsors advance through    
                        establish a project       phases of project           
                        development agreement     development, to focus       
                        (PDA).                    project sponsors'           
                                                  effort/FTA oversight on     
                                                  principal issues, and to    
                                                  provide basis for FTA       
                                                  rescission of PE/FD         
                                                  approval.                   
New Starts FFGA      FFGA New Starts funding   To ensure submission of     
funding level set at amount will be capped     reliable cost and ridership 
final design         once the project is       forecasts for decision      
approval             approved for FD.          making, to minimize cost    
                                                  increases between stages of 
                                                  development, and to clarify 
                                                  FTA's participation in      
                                                  project costs.              
Mode-specific        All sponsors will be      To acknowledge and capture  
constants            allowed to represent the  previously unmeasured       
                        benefits from             attributes of fixed         
                        improvements in transit   guideway projects in areas  
                        service attributes, such  considering new modes, to   
                        as reliability, span of   enhance consistent          
                        service, and passenger    treatment of projects       
                        amenities, when           nationally, and to improve  
                        developing their          the reliability of travel   
                        projects.                 forecasts.                  

Source: GAO summary of the proposed changes and FTA's rationale for
proposing these changes.

aNEPA requires federal agencies to prepare detailed statements assessing
the environmental impact of and alternatives to major federal actions
significantly affecting the environment. In the transportation context,
the NEPA evaluation measures the impact of different alternatives by the
extent to which the alternative meets the project purpose, need, and
consistency with the goals and objectives of any local urban planning.

bA before and after study is similar to an outcome evaluation in that it
compares the forecasted benefits and costs of a project with the actual
benefits and costs of the project after the project is completed.

As we have previously recommended and SAFETEA-LU now requires, FTA
published its proposed procedural changes in policy guidance and sought
public comments on them.18 FTA obtained comments on its proposals by
asking sponsors to submit comments to the docket for up to 60 days. In
addition, FTA held three New Starts/Small Starts Seminar and Listening
Sessions ("listening sessions") across the country. The listening sessions
were intended to solicit comments from attendees on the implementation of
New Starts and Small Starts provisions of SAFETEA-LU, as well as to share
information about planning and project development activities for projects
seeking New Starts funding. FTA received 41 written comments in response
to these changes, including submissions from 33 transit agencies and
government entities and 8 consultants, associations, and organizations.
Most of the project sponsors and industry representatives we interviewed
told us that they appreciated FTA's efforts to obtain their input and to
encourage an open discussion about the proposed changes. Similarly, FTA
officials said that they were pleased with the volume of written comments
they received from the docket and the strong attendance at the three
listening sessions conducted in February and March 2006.

18GAO, Public Transportation: Opportunities Exist to Improve the
Communication and Transparency of Changes Made to the New Starts Program,
GAO-05-674 (Washington, D.C.: June 28, 2005). SAFETEA-LU requires that FTA
publish, for comment and response, policy guidance on the new fixed
guideway capital project review and evaluation process and criteria at the
following times: (1) 120 days after the enactment of SAFETEA-LU, (2) each
time significant changes are made to the process and criteria, and (3) at
least every 2 years.

Although the project sponsors and industry representatives were supportive
of some proposals that they thought would improve the New Starts program,
they also expressed a number of concerns about all of the changes. (See
table 4 for a summary of these concerns.) For example, the commenters were
generally supportive of FTA's proposal to require sponsors to keep and
update the information produced during alternatives analysis prior to each
phase of project development until the FFGA is awarded, since this
information is necessary for the before-and-after study. In contrast, most
project sponsors and transit industry groups opposed FTA's proposed
certification of technical methods, planning assumptions, and project
development procedures, citing concerns that such a certification would
raise questions about professional liability and lead to potential federal
prosecution, and noting that a single individual is typically not
responsible for producing all the underlying assumptions used to develop
cost estimates and ridership forecasts. On the basis of the comments
received, FTA adopted four proposals, including the mandatory completion
of NEPA scoping before entry into preliminary engineering (PE), the
presentation of the New Starts information in the NEPA documents, the
preservation of information for the before and after study, and the
capping of New Starts funds upon approval into final design. For two of
the four adopted proposals, FTA slightly revised its original proposals on
the basis of the comments received. FTA did not adopt five proposals;
however, FTA noted that it may revisit these proposed changes in the
future.

Table 4: Summary of Common Transit Community Concerns and FTA's Responses
to the New Starts Procedural Changes

Proposed procedural    Common concerns expressed                           
change                 by the transit community    FTA's response
NEPA interfaces           o  Increases time and    Adopted.                
(Sponsors must            cost of project          
complete NEPA scoping     development              
before preliminary        o  Makes it more         
engineering.)             difficult to achieve     
                             local buy-in of the      
                             planning process         
NEPA interfaces           o  FTA is not using the  Adopted. However, FTA   
(Sponsors must present    formal rule-making       clarified that it will  
New Starts evaluation     process                  not develop a new       
of locally preferred      o  Subjects FTA to       rating for the NEPA     
alternative with NEPA     litigation               document, but simply    
evaluation of                                      report on the project's 
alternatives.)                                     most recent rating.     
NEPA interfaces           o  Recommended that FTA  Not adopted. But if FTA 
(Sponsors must achieve    use the formal           needs to issue a        
an acceptable New         rule-making process due  supplemental document   
Starts rating before      to the extent of changes to reflect a scope      
the final                 o  Could escalate        change required to      
environmental impact      project costs            justify a "medium" or   
statement (FEIS),         o  May jeopardize        better rating, then a   
record of decision        nonfederal funding       rating will not be      
(ROD), or finding of                               issued until this       
no significant impact                              document is completed.  
(FONSI).)                                          FTA will also describe  
                                                      the impact that a New   
                                                      Starts rating of less   
                                                      than "medium" may have  
                                                      on advancing projects.  
Preservation of           o  The lack of guidance  Adopted.                
information for before    on before and after      
and after study           study and data           
                             collection methods       
                             o  FTA is not using the  
                             formal rule-making       
                             process                  
                             o  Encourages FTA to     
                             consider land use and    
                             economic development in  
                             analyses                 
Certification of          o  Technical information Not adopted. However,   
technical methods,        and key assumptions are  FTA expanded the scope  
planning assumptions,     often generated by       of technical procedures 
and project               multiple individuals or  and assumptions covered 
development procedures    organizations, making it by existing Chief       
                             difficult to assign      Executive Officer       
                             responsibility for       certification.          
                             certification            
                             o  No industry-accepted  
                             standards to use for     
                             certification            
                             o  May create liability  
                             concerns for companies   
                             and consultants          
                             o  Duplicates other FTA  
                             reviews                  
Analysis of ridership     o  Increases time and    Not adopted. FTA plans  
and cost uncertainties    cost of project          to issue guidance       
                             development              clarifying the          
                             o  No guidance on        information needed to   
                             characterizing           identify uncertainties, 
                             uncertainties            which will be subject   
                             o  No discussion of how  to the notice and       
                             uncertainties will be    comment process.        
                             addressed in             
                             cost-effectiveness       
                             measure                  
Project development       o  No criteria for when  Not adopted. However,   
agreements (PDA)          PDAs will be used        FTA will work with      
                             o  May increase time of  sponsors who request    
                             project development      the use of a PDA, and   
                             o  PDAs will be used in  this proposal may be    
                             a punitive way           revisited during the    
                             o  Process may be        rule-making process.    
                             duplicative of FTA's PE  
                             and FD approval points   
New Starts FFGA           o  No acknowledgment of  Adopted. FTA will       
funding level set at      increased costs due to   broaden the scope of PE 
final design approval     higher prices of         activities and          
                             materials or             establish PE "exit      
                             unforeseeable            criteria," consider     
                             circumstances            requests for additional 
                             o  Negotiation of FFGA   New Starts funding for  
                             should be moved forward  costs out of the        
                             to coincide with FD      sponsor's control, and  
                             entry                    exempt projects in FD   
                             o  May inhibit           from future New Starts  
                             innovative contracting   policy changes.         
                             procedures (e.g., design 
                             build)                   
                             o  FTA is not using the  
                             formal rule-making       
                             process                  
Mode-specific             o  May be unnecessary    Not adopted. FTA will   
constants                 for areas with existing  analyze options and may 
                             data for different modes set values in the       
                             o  Unclear how values    future, which will be   
                             were developed           subject to the Notice   
                             o  Experts need to be    and Comment process.    
                             involved in establishing 
                             constants and guidance   

Source: GAO summary of public comments and FTA's response to these
comments.

Note: The concerns summarized in this table reflect the comments submitted
by members of the transit community and do not necessarily reflect our
views or opinions.

More recently, FTA hired a consulting firm to conduct an assessment of the
New Starts project development process. According to FTA's Deputy
Administrator, the impetus for the review is to streamline the project
development process while still ensuring that projects recommended for
funding are delivered in a timely manner and stay within budget. We have
previously reported that project sponsors have raised concerns about the
number of changes FTA has made to the New Starts process, such as
requiring project sponsors to prepare risk assessments, and the time and
cost associated with implementing these changes.19 According to FTA, the
results of the review may help inform the development of the Notice of
Proposed Rulemaking (NPRM) for the New Starts program.

19 GAO-05-674 .

     SAFETEA-LU's Changes to the New Starts Program Include Identifying New
          Evaluation Criteria to Establishing the Small Starts Program

SAFETEA-LU made a number of changes to the New Starts program, including
establishing a new eligibility category, the Small Starts program, and
identifying new evaluation criteria. The Small Starts program is intended
to expedite and streamline the application and review process for small
projects, but the transit community has questioned whether FTA would
implement the program in a way that would do so. FTA has also proposed and
sought public input on the new evaluation criteria and other possible
changes to the New Starts program that would affect traditional New Starts
projects. In addition, FTA identified possible implementation challenges,
including how to distinguish between land use and economic development
criteria in the evaluation framework.

FTA Has Started to Implement SAFETEA-LU Changes and Will Continue to Do So
through the Rule-making Process

SAFETEA-LU introduced eight changes to the New Starts program, codified an
existing practice, and clarified federal funding requirements. The changes
include the creation of the Small Starts program and the introduction of
new evaluation criteria, such as economic development. In addition,
SAFETEA-LU codified FTA's requirement that project sponsors conduct before
and after studies for all completed projects. SAFETEA-LU also clarified
the federal share requirements for New Starts projects. Specifically,
SAFETEA-LU continues to require that the federal share for a New Starts
project may be up to 80 percent of the project's net capital project cost,
unless the project sponsor requests a lower amount, and prohibits the
Secretary of Transportation from requiring a nonfederal share of more than
20 percent of the project's total net capital cost. This language changes
FTA's policy of rating a project as low if it seeks a federal New Starts
share of more than 60 percent of the total cost. FTA had instituted this
policy beginning with the fiscal year 2004 evaluation cycle in response to
language contained in appropriation committee reports. Table 5 describes
SAFETEA-LU provisions for the New Starts program and compares them with
TEA-21's requirements.

Table 5: Comparison of SAFETEA-LU's and TEA-21's New Starts Provisions

                                                           Status of          
Provisions         SAFETEA-LU         TEA-21            implementation     
Establish the         o  Projects        o  Projects    FTA issued the     
Small Starts          seeking less       seeking less   ANPRM in January   
program               than $25           than $25       2006 and interim   
                         million in New     million in New final guidance in  
                         Starts funds       Starts funding August 2006 for    
                         will no longer     were exempt    the Small Starts   
                         be exempt from     from ratings   program. By law,   
                         the ratings        process.       exempt projects    
                         process once       o  No separate will continue to   
                         the Small          program for    be eligible for    
                         Starts rule is     small fixed    funding without    
                         finalized.         guideway or    being rated until  
                         o  Establishes     nonfixed       the final rule on  
                         a new capital      guideway       Small Starts is    
                         investment         projects.      issued.            
                         program called                    
                         Small Starts                      
                         for projects                      
                         that (1) have a                   
                         total project                     
                         cost of less                      
                         than $250                         
                         million and (2)                   
                         are seeking                       
                         less than $75                     
                         million in                        
                         federal Small                     
                         Starts funding.                   
Codify the         Project sponsors   Not required      FTA's May 2006     
before-and-after   with FFGAs must    under TEA-21, but guidance requires  
study requirement  conduct a study    FTA required, as  that project       
                      that (1) describes part of its       sponsors document  
                      and analyzes the   December 2000     the information    
                      impacts of the new Final Rule,       produced during    
                      fixed guideway     project sponsors  the planning phase 
                      capital project on to conduct a      that will be       
                      transit services   before and after  needed for the     
                      and transit        study on          before-and-after   
                      ridership, (2)     completed         study and update   
                      evaluates the      projects.         the information    
                      consistency of                       and analysis       
                      predicted and                        before entering    
                      actual project                       FD.                
                      characteristics                      
                      and performance,                     
                      and (3) identifies                   
                      sources of                           
                      differences                          
                      between predicted                    
                      and actual                           
                      outcomes. Project                    
                      sponsors must                        
                      prepare an                           
                      information                          
                      collection and                       
                      analysis plan,                       
                      which must be                        
                      approved prior to                    
                      execution of the                     
                      FFGA.                                
Revise New Starts  Overall project    Overall project   FTA used a 3-point 
overall project    rating is based on rating was based  scale for the      
rating scale       a 5-point scale of on 3-point scale: fiscal year 2007   
                      "high,"            "highly           evaluation, but    
                      "medium-high,"     recommended,"     changed ratings to 
                      "medium,"          "recommended,"    "high," "medium,"  
                      "medium-low," and  and "not          and "low."         
                      "low;" Projects    recommended."     
                      are required to                      
                      receive an overall                   
                      rating of "medium"                   
                      or higher to be                      
                      recommended for                      
                      funding.                             
Identify           Requires Secretary Not required      FTA identified     
reliability of     to analyze,        under TEA-21.     options for        
cost estimate and  evaluate, and                        incorporating      
ridership forecast consider the                         reliability of     
as a consideration reliability of the                   forecasts in the   
in evaluation      forecasting                          evaluation process 
process            methods used by                      and sought public  
                      New Starts project                   input in its       
                      sponsors and their                   January 2006       
                      contractors to                       guidance.          
                      estimate costs and                   
                      ridership.                           
Add economic       Projects will be   Not required      FTA identified     
development        evaluated based on under TEA-21.     options for        
criterion to       a review of their                    incorporating      
evaluation process effects on local                     economic           
                      economic                             development in the 
                      development.                         evaluation process 
                                                           and sought public  
                                                           input in its       
                                                           January 2006       
                                                           guidance and ANPRM 
                                                           for Small Starts.  
Identify land use  Projects will be   Land use was not  FTA identified     
as a specific      evaluated based on identified as an  options for        
evaluation         a review of their  evaluation        incorporating land 
criterion          public             criterion by      use in the         
                      transportation     TEA-21. However,  evaluation process 
                      supportive land    TEA-21 identified and sought public  
                      use policies and   land use as a     input in its       
                      future patterns.   "consideration"   January 2006       
                                         in the evaluation guidance and ANPRM 
                                         process, and FTA  for Small Starts.  
                                         incorporated it   
                                         into the          
                                         evaluation        
                                         process.          
Clarify nonfederal The Secretary is   Federal share     FTA implemented    
financial          not authorized to  could not exceed  this provision in  
commitment         require a          80 percent. But,  its fiscal year    
                      nonfederal         in response to    2007 evaluation    
                      financial          language          cycle.             
                      commitment for a   contained in      
                      project that is    appropriations    
                      more than 20       committee         
                      percent of its net reports, FTA      
                      capital cost.      instituted a      
                                         preference policy 
                                         favoring projects 
                                         that seek a       
                                         federal New       
                                         Starts share of   
                                         no more than 60   
                                         percent of the    
                                         total project     
                                         cost beginning    
                                         with the fiscal   
                                         year 2004         
                                         evaluation cycle. 
Establish          A higher share of  No similar        FTA's May 2006     
incentives for     New Starts funding provision in      guidance requires  
accurate cost and  may be made        TEA-21.           that projects      
ridership          available to                         requesting entry   
forecasts          project sponsors                     into PE submit     
                      if project's cost                    information on the 
                      is not more than                     variables and      
                      10 percent higher                    assumptions used   
                      and ridership is                     to prepare         
                      not less than 90                     forecasts and the  
                      percent of those                     parties            
                      estimates when                       responsible for    
                      project was                          developing the     
                      approved for PE.                     different elements 
                                                           of the forecasts.  
                                                           This information   
                                                           could potentially  
                                                           be used to apply   
                                                           the incentive      
                                                           provision.         
Require FTA to     New Starts policy  Not specifically  FTA issued draft   
publish policy     guidance must be   addressed in      policy guidance in 
guidance           published for      TEA-21.           January 2006 and   
                      notice and comment                   final guidance in  
                      no later than 120                    May 2006. FTA also 
                      days after the                       issued draft       
                      enactment of                         interim Small      
                      SAFETEA-LU, each                     Starts guidance in 
                      time significant                     June 2006 and      
                      changes are made,                    final interim      
                      and at least every                   guidance in July   
                      2 years.                             2006.              
Assess             The Secretary will Not required      FTA's May 2006     
contractors'       submit an annual   under TEA-21.     guidance requires  
performance        report to                            that projects      
                      congressional                        requesting entry   
                      committees                           into PE submit     
                      analyzing the                        information on the 
                      consistency and                      variables and      
                      accuracy of the                      assumptions used   
                      cost and ridership                   to prepare         
                      estimates made by                    forecasts and the  
                      contractors to                       parties            
                      public                               responsible for    
                      transportation                       developing the     
                      agencies                             different elements 
                      developing new                       of the forecasts.  
                      capital projects.                    

Source: GAO analysis of SAFETEA-LU and TEA-21.

FTA has taken some initial steps in implementing SAFETEA-LU changes. For
example, in January 2006, FTA published the proposed New Starts policy
guidance and, as will be discussed later in this report, the ANPRM for the
Small Starts program. In addition, in the final policy guidance published
in May 2006, FTA took steps to support its use of incentives for accurate
cost and ridership forecasts and assessing contractors' performance by
requiring that projects requesting entry into PE submit information on the
variables and assumptions used to prepare forecasts and the parties
responsible for developing the different elements of the forecasts. FTA
will continue to implement the changes outlined in SAFETEA-LU through the
rule-making process over the next 1 1/2 years. Specifically, in response
to SAFETEA-LU changes, FTA is developing the NPRM for the New Starts and
Small Starts programs. FTA plans to issue the NPRM in January 2007, with
the goal of implementing the final rule in January 2008. Figure 5 shows a
time line of FTA's actual and planned implementation of SAFETEA-LU
changes.

Figure 5: Time Line for Implementing SAFETEA-LU Changes to the New Starts
Program

Small Starts Program Is Intended to Offer a Streamlined Process, but Transit
Community Members Question Whether It Will Do So

The creation of the Small Starts program was a significant change made by
SAFETEA-LU. The Small Starts program is a discretionary grant program for
public transportation capital projects that (1) have a total cost of less
than $250 million and (2) are seeking less than $75 million in federal
Small Starts program funding. The Small Starts program is a component of
the existing New Starts program that, according to the conference reports
accompanying SAFETEA-LU, is intended to provide project sponsors with an
expedited and streamlined evaluation and ratings process. Table 6 compares
New Starts and Small Starts program statutory requirements.

Table 6: Comparison of Small Starts and New Starts Program Statutory
Requirements

Program                                                                    
requirements    Small Starts                 New Starts
Definition of   Projects qualify as Small    Projects qualify as New       
eligibility     Starts if less than $75      Starts if they are seeking    
                   million in federal fixed     $75 million or more in        
                   guideway funding is sought,  federal New Starts funding.   
                   provided the total project                                 
                   cost is also less than $250  Provides funding for new      
                   million.                     fixed guideway systems and    
                                                extensions.                   
                   Provides funding for new     
                   fixed guideway systems and   
                   extensions, as well as       
                   corridor-based bus capital   
                   projects.                    
Project            o  Cost-effectiveness        o  Mobility improvements   
justification      o  Public transportation     o  Environmental benefits  
criteria           supportive land-use          o  Operating efficiencies  
                      policies                     o  Cost-effectiveness      
                      o  Economic development      o  Public transportation   
                      o  Reliability of            supportive land-use        
                      forecasting                  policies                   
                                                   o  Economic development    
                                                   o  Reliability of          
                                                   forecasting                
Local financial    o  Stability and             o  Stability and           
commitment         reliability of financial     reliability of financial   
criteria           plan for capital costs       plan for capital costs     
                      o  Stability and             o  Stability and           
                      reliability of financial     reliability of financial   
                      plan for operating and       plan for operating and     
                      maintenance costs            maintenance costs          
                      o  Level of non-Small        o  Level of non-New Starts 
                      Starts funding               funding                    
Project            o  Alternatives analysis     o  Alternatives analysis   
development        o  Project development       o  Preliminary engineering 
process            o  Construction              o  Final design            
                                                   o  Construction            
Funding         Project will use a Project   Project requires a signed     
instrument      Construction Grant           FFGA, which sets scope, cost, 
                   Agreement.                   and schedule for the project, 
                                                as well as the maximum New    
                                                Starts share, source of other 
                                                funds, and schedule for       
                                                obligating funds.             

Source: GAO analysis of FTA data.

In January 2006, FTA published an ANPRM to give interested parties an
opportunity to comment on the characteristics of and requirements for the
Small Starts program. In its ANPRM, FTA suggested that the planning and
project development process for proposed Small Starts projects could be
simplified by allowing analyses of fewer alternatives for small projects,
allowing the development of evaluation measures for mobility and
cost-effectiveness without the use of complicated travel demand modeling
procedures in some cases, and possibly defining some classes of
preapproved low-cost improvements as effective and cost-effective in
certain contexts. FTA also sought the transit community's input on three
key issues in its ANPRM, including eligibility, the rating and evaluation
process, and the project development process. For each of these issues,
FTA outlined different options for how to proceed and then posed questions
for public comment.

FTA's ANPRM for Small Starts generated a significant volume of public
comment. Members of the transit community were supportive of some
proposals for the Small Starts program, but also had a number of concerns.
In particular, the transit community questioned whether FTA's proposals
would, as intended, provide smaller projects with a more streamlined
evaluation and rating process. As a result, some commenters recommended
that FTA simplify some of its original proposals in the NPRM to reflect
the smaller scope of these projects. For example, several project sponsors
and industry representatives thought that FTA should redefine the baseline
alternative as the "no-build" option20 and make the before-and-after study
optional for Small Starts projects to limit the time and cost of their
development. In addition, others were concerned that FTA's proposals
minimized the importance of the new land use and economic development
evaluation criteria introduced by SAFETEA-LU, and they recommended that
the measures for land use and economic development be revised.

Since FTA does not plan to issue its final rule for the New Starts and
Small Starts programs until early 2008, FTA issued final interim guidance
for the Small Starts program in July 2006 to ensure that project sponsors
would have an opportunity to apply for Small Starts funding and proposed
projects could be evaluated in the upcoming cycle (i.e., the fiscal year
2008 evaluation cycle).21 The final interim guidance describes the process
that FTA plans to evaluate proposed Small Starts projects to support (1)
the decision to approve or disapprove their advancement to project
development and (2) decisions on project construction grant agreements,
including whether proposed projects are part of a broader strategy to
reduce congestion.22 In addition, FTA introduced a separate eligibility
category within the Small Starts program for "Very Small Starts" projects
in the final interim guidance. Small Starts projects that qualify as Very
Small Starts are projects that have all of the following elements:

20FTA requires that the benefits and costs of the proposed New Starts
project be assessed in comparison with a baseline alternative defined as
the best that can be done without building a new fixed guideway. The
purpose of the baseline alternative is to distill the benefits (and costs)
of the proposed New Starts project from the benefits that could be
achieved through low-cost improvements, such as route realignments and
increases in service frequency, that would not entail the significant cost
of a New Starts project's infrastructure. FTA defines the no-build
alternative in two ways: (1) an alternative that incorporates "planned"
improvements that are included in the fiscally constrained long-range plan
for which need, commitment, financing, and public and political support
are identified and are reasonably expected to be implemented or (2) an
alternative that adds only "committed" improvements together with minor
transit service expansions or adjustments that reflect a continuation of
existing service policies in newly developed areas.

           o  have substantial transit stations;
           o  include traffic signal priority and preemption, where
           appropriate;
           o  provide low-floor vehicles or level boarding;
           o  include branding of the proposed service;
           o  offer 10 minute peak and 15 minute off-peak headways or better
           while operating at least 14 hours per weekday;23 
           o  are in corridors with existing riders who will benefit from the
           proposed project and number more than 3,000 on an average weekday;
           and
           o  have a total capital cost of less than $50 million (including
           all project elements) and less than $3 million per mile (excluding
           rolling stock).

           According to the final interim guidance, FTA intends to scale the
           planning and project development process to the size and
           complexity of the proposed projects. Therefore, Very Small Starts
           projects will undergo a very simple and streamlined evaluation and
           rating process. For instance, according to the guidance, Very
           Small Starts projects are cost-effective and produce land use and
           economic development benefits commensurate with their costs; thus,
           if a project meets the Very Small Starts eligibility criteria, it
           will automatically receive "medium" ratings for land use and
           cost-effectiveness. Small Starts projects that do not meet all of
           the criteria for Very Small Starts projects will be evaluated and
           rated using a framework similar to that used for traditional New
           Starts projects, with the exception that fewer measures are
           required and their development is simplified. In particular, FTA's
           evaluation and rating process for Small Starts will diverge from
           the traditional New Starts process in several ways. For example,

           o  the project's cost-effectiveness will be rated based on a
           shorter time frame (i.e., opening year);
           o  other technically acceptable ridership forecasting procedures,
           besides traditional "four-step" travel demand models can be used;
           o  the opening year's estimate of user benefits will be adjusted
           upward when determining a project's cost-effectiveness;
           o  the financial and land use reporting requirements have been
           simplified; and
           o  the project's economic development benefits and inclusion in a
           congestion reduction strategy will be considered an "other factor"
           in the evaluation process.

           FTA Also Identified Possible Changes to the New Starts Program in
			  Response to SAFETEA-LU as Well as Implementation Challenges
			  
			  In response to SAFETEA-LU, FTA identified possible changes to the
           New Starts program that would affect traditional New Starts
           projects in its January 2006 guidance. According to FTA, some
           SAFETEA-LU provisions could lead to changes in the definition of
           eligibility, the evaluation and rating process, and the project
           development process. (See app. II for a description of the
           different changes FTA is considering.) In the guidance, FTA
           outlined changes it is considering and solicited public input,
           through a series of questions, on the potential changes. For
           example, FTA identified two options for revising the evaluation
           and rating process to reflect SAFETEA-LU's changes to the
           evaluation criteria. The first option would extend the current
           process to include economic development impacts and the
           reliability of cost and ridership forecasts. (See fig. 6.)

21Prior to the issuance of the final interim guidance, FTA issued proposed
interim guidance on the Small Starts program in June 2006 for review and
comment. FTA received comments from members of the transit community. A
concern expressed in the comments was that Very Small Starts projects
unfairly favored bus projects, due to the exclusion of fixed guideway as a
criterion for eligibility. Based on the comments received, FTA made
several changes to the final interim guidance, including eliminating the
requirement that Very Small Starts projects do not include the
construction of a new fixed guideway.

22FTA's emphasis on congestion relief reflects DOT's ongoing efforts to
reduce the nation's congestion. Specifically, in May 2006, DOT issued the
National Strategy to Reduce Congestion on America's Transportation
Network, which outlines a six-point plan for reducing congestion. To
implement this plan, DOT states that it will use discretionary resources,
potentially including Small Starts funds, to the maximum extent possible.

23This feature is not required for commuter rail or ferries.

FTA Also Identified Possible Changes to the New Starts Program in Response to
SAFETEA-LU as Well as Implementation Challenges

Figure 6: FTA's "Option 1" for Revising the New Starts Evaluation and
Ratings Framework

Specifically, FTA suggested that economic development impacts and the
reliability of forecasts simply be added to the list of criteria
considered in developing the project justification rating. The second
option would be to develop a broader process to include the evaluation
criteria identified by SAFETEA-LU and to organize the measures to support
a more analytical discussion of the project and its merits. (See fig. 7.)
According to FTA, the second option would broaden the evaluation process
beyond a computation of overall ratings based on individual evaluation
measures and develop better insights into the merit of a project than are
possible from using the quantified evaluation measures alone. In addition,
the second option would also consider the major uncertainties associated
with any of the information used to evaluate the project, such as
ridership forecasts, cost estimates, projected land use, and other
assumptions. According to FTA, understanding a project's uncertainties is
needed for informed decision making.

Figure 7: FTA's "Option 2" for Revising the New Starts Evaluation and
Ratings Framework

In its guidance, FTA also identified potential challenges in implementing
some SAFETEA-LU changes. In particular, FTA described the challenges of
incorporating and distinguishing between two measures of indirect
benefits24 in the New Starts evaluation process-land use and economic
development impacts.25 For example, FTA noted that its current land-use
measures (e.g., land-use plans and policies) indicate the
transit-friendliness of a project corridor both now and in the future, but
do not measure the benefits generated by the proposed project. Rather, the
measures describe the degree to which the project corridor provides an
environment in which the proposed project can succeed. According to FTA's
guidance, FTA's evaluation of land use does not include economic
development benefits because FTA has not been able to find reliable
methods of predicting these benefits. FTA further stated that because
SAFETEA-LU introduces a separate economic development criterion, the
potential role for land use as a measure of development benefits becomes
even less clear, given its potential overlap with the economic development
criterion. In addition, FTA noted that many economic development benefits
result from direct benefits (e.g., travel time savings), and therefore
including them in the evaluation could lead to double counting the
benefits FTA already measures and uses to evaluate projects. Furthermore,
FTA noted that some economic development impacts may represent transfers
between regions rather than a net benefit for the nation,26 raising
questions of whether these impacts are useful for a national comparison of
projects. To address some of the challenges, FTA suggested that an
appropriate strategy might be combining land use and economic development
into a single measure.

In our January 2005 report on the costs and benefits of highway and
transit investments, we identified many of the same challenges of
measuring and forecasting indirect benefits, such as economic development
and land-use impacts.27 For example, we noted that it is challenging to
predict changes in land use because current transportation demand models
are unable to predict the effect of a transportation investment on
land-use patterns and development, since these models use land-use
forecasts as inputs into the model. In addition, we noted that certain
benefits are often double counted when evaluating transportation projects.
In particular, indirect benefits, such as economic development, may be
more correctly considered transfers of direct user benefits or economic
activity from one area to another. Therefore, estimating and adding such
benefits to direct benefits could constitute double counting and lead to
overestimating a project's benefits. Despite these challenges, experts
told us that evaluating land use and economic development impacts is
important since they often drive local transportation investment
choices.28 To help overcome some of the challenges, experts suggested
several potential solutions, including using qualitative information about
the benefits rather than relying strictly on quantitative information and
expanding the use of risk assessment or probability analysis in
conjunction with economic analysis. For example, weather forecasters talk
about the probability of rain rather than suggesting that they can
accurately predict what will happen. This approach could illustrate that
projects with similar rates of return have very different risk profiles
and different probabilities of success. FTA's second option for revising
the New Starts evaluation process, which would consider qualitative
information about the project and the project's uncertainties, appear to
be in line with these suggestions.

24Direct benefits of transportation investments, such as lowered
transportation costs and improved access to goods and services, result in
individuals, households, and firms acting to take advantage of those
benefits. These actions can then lead to several types of indirect
benefits, such as increased property values and new development.

25SAFETEA-LU added economic development to the list of evaluation
criteria; it also identified land use as a specific evaluation criterion.
Under TEA-21, land use was not identified as an evaluation criterion, but
rather as a "consideration" in the evaluation process, and FTA
incorporated it into the evaluation process.

26Indirect benefits, such as economic development, may represent transfers
of economic activity from one area to another; and, while such a transfer
may represent real benefits for the jurisdiction making the transportation
investment, it is not a real economic benefit from a national perspective
because the economic activity is simply occurring in a different location.

27 GAO-05-172 .

FTA received a large number of written comments on its online docket in
response to its proposed changes. (See app. II for common comments
submitted for each proposed change.) While members of the transit
community were supportive of some proposals, they expressed concerns about
a number of FTA's proposed changes. For example, a number of commenters
expressed concerns about FTA's options for revising the evaluation
process, noting that both proposals deemphasized the importance of
economic development and land use. For example, as described in FTA's
January 2006 guidance, land use would receive less weight in calculating
the overall project rating in both proposals than it receives in the
current process. Some commenters also noted that land use and economic
development should not be combined into a single measure and that they
should receive the same weight as cost-effectiveness in the evaluation and
rating process. These commenters argued that combining land use and
economic development into a single measure or assigning them less weight
than cost-effectiveness serves to deemphasize these benefits.

28For our January 2005 report on the costs and benefits of highway and
transit investments, we contracted with the National Academy of Sciences
to convene a balanced, diverse panel of experts to discuss the use of
benefit-cost analysis in highway and transit decision making and gather
views about options to improve the information available to decision
makers. The experts selected for the panel were knowledgeable about
benefit-cost analysis, transportation policy and planning, highway and
transit use and transportation decision making. For more information about
our expert panel, see GAO-05-172.

                            Concluding Observations

FTA's New Starts program is in a period of transition. SAFETEA-LU made a
number of significant changes to the program, and FTA is off to a good
start in implementing these changes. Tough decisions and implementation
challenges remain, however. For example, FTA must determine how to
incorporate economic development into the evaluation process and implement
the Small Starts program in the upcoming evaluation cycle. Through the
issuance of the final interim guidance on the Small Starts program, FTA
has acted to provide a streamlined evaluation process for small projects
by simplifying the evaluation measures and introducing the Very Small
Starts eligibility category. As the Small Starts program is implemented in
the upcoming cycle, FTA officials will have the opportunity to determine
whether the Small Starts program is sufficiently streamlined and whether
the streamlined evaluation process provides adequate information to
differentiate among projects for funding purposes. FTA will also have the
opportunity to make necessary modifications to the Small Starts program as
it learns through its experience in implementing the program and working
to develop the final rule. Thus, the coming months will be a critical
period for the New Starts program, as FTA works through these remaining
decisions and implementation challenges to fully incorporate SAFETEA-LU
changes.

                                Agency Comments

We provided a draft of this report to the Department of Transportation,
including FTA, for review and comment. FTA officials provided technical
clarifications, which we incorporated as appropriate.

We are sending copies of this report to the congressional committees with
responsibilities for transit issues; the Secretary of Transportation; the
Administrator, Federal Transit Administration; and the Director, Office of
Management and Budget. We also will make copies available to others upon
request. In addition, this report will be available at no charge on GAO's
Web site at http://www.gao.gov .

If you or your staff have any questions on matters discussed in this
report, please contact me on (202) 512-2834 or at [email protected] .
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Individuals making
key contributions to this report were Nikki Clowers, Assistant Director,
Vidhya Ananthakrishnan, and Daniel Hoy.

Katherine Siggerud Director, Physical Infrastructure

Appendix I: Scope and Methodology

To address our objectives, we reviewed the administration's fiscal year
2007 budget request, the Federal Transit Administration's (FTA) annual New
Starts report, FTA's New Starts policy guidance and Small Starts Advanced
Notice of Proposed Rulemaking (ANPRM), public comments received on FTA's
docket on New Starts and Small Starts, FTA's fiscal year 2008 reporting
instructions for the New Starts program, federal statutes pertaining to
the New Starts program, and previous GAO reports. We also interviewed FTA
officials and representatives from the American Public Transportation
Association and the New Starts Working Group. In addition, we attended
FTA's New Starts/Small Starts Seminar and Listening Session with project
sponsors in Washington, D.C., in March 2006.

We also conducted semistructured interviews with the sponsors of five
projects that were evaluated and rated in the fiscal year 2007 evaluation
cycle, including Raleigh, Regional Rail System; Dallas,
Northwest/Southeast Light Rail Transit MOS; Minneapolis, Northstar
Corridor Rail; Philadelphia, Schuylkill Valley Metrorail; and Seattle,
University Link Light Rail Transit Extension. We selected these projects
because they represent different phases of project development
(preliminary engineering and final design), received different overall
project justification and finance ratings, varied in size based on the
project's total capital cost, received different levels of New Starts
funding, and are geographically diverse. We obtained this information from
FTA's annual New Starts report for fiscal year 2007. Our interviews were
designed to gain project sponsors' perspectives on three main topics,
including the impact of FTA's proposed changes to the New Starts
application and project development process during the fiscal year 2008
evaluation cycle, FTA's implementation of the newly established Small
Starts program, and FTA's plans to align and revise its evaluation and
ratings process with the changes required by the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU). Specifically, we asked for their opinions on how FTA plans
to measure and weight new criteria in its evaluation framework. We
provided all project sponsors with a list of topics and questions prior to
our interviews, and we reviewed the comments they submitted to FTA's
docket. Because the five projects were selected as part of a
nonprobability sample, the results cannot be generalized to all projects.

In addition to our interviews, we analyzed the content of the comments
submitted to FTA's docket on the New Starts policy guidance and the Small
Starts ANPRM to systematically determine the project sponsors' views on
key issues and identify common themes in their responses to different
questions. We received from FTA a summary of all the written comments
submitted to the docket on both the Small Starts ANPRM and the New Starts
guidance on policies and procedures. These comments were organized by
topic. To verify the accuracy of the summaries, we checked 20 percent of
the comments against the original source documents.1 Two analysts reached
consensus on the coding of the responses, and a third analyst was
consulted in case of disagreement to ensure that our codes were reliable.

To ensure the reliability of the information presented in this report, we
interviewed FTA officials about FTA's policies and procedures for
compiling the New Starts annual reports, including FTA's data collection
and verification practices for New Starts information. Specifically, we
asked the officials whether their policies and procedures had changed
significantly since we reviewed them for our 2005 report on New Starts.2
FTA officials told us that there were no significant changes in their data
collection and verification policies and procedures for New Starts
information. Therefore, we concluded that the FTA information presented is
sufficiently reliable for the purposes of this report.

We conducted our work from February 2006 through August 2006 in accordance
with generally accepted auditing standards, including standards for data
reliability.

1All written comments are available at http://dms.dot.gov.

2 GAO-05-674.

Appendix II: FTA's Proposed Changes to the New Starts Program

In its January 2006 guidance, FTA identified possible long-term changes to
the New Starts program. According to FTA, some of these changes were
driven by SAFETEA-LU, while others were designed to improve the New Starts
program or correct past problems. Table 7 summarizes FTA's proposed
changes to the definition of eligibility, the evaluation and rating
process, and the project development process as well as FTA's rationale
for the proposed changes and the transit community's response to the
proposed changes.

Table 7: Changes to the New Starts Program Proposed by FTA and the Transit
Community's Response

                             FTA's rationale for      Comments submitted by   
Proposed change           change                   the transit community   
Definition of Eligibility 
Definition of a fixed     A fixed guideway has not    o  The current       
guideway: FTA asks        been specifically           definition of fixed  
whether a Bus Rapid       defined in the statute.     guideway works well; 
Transit project is a                                  thus, FTA should     
"fixed guideway" project                              make no changes.     
and whether FTA should                                o  A minimum         
fund high-occupancy                                   percentage of the    
vehicle (HOV) projects to                             guideway (e.g.,      
the degree that they                                  30-75 percent)       
provide benefits to                                   should be dedicated  
public transit riders.                                in order for a       
                                                         project to get       
                                                         funding.             
                                                         o  HOV projects      
                                                         should be funded by  
                                                         the Federal Highway  
                                                         Administration       
                                                         (FHWA).              
Project evaluation and ratings process
Evaluation framework: FTA The current evaluation      o  Both proposed     
proposes two options for  framework can be            options raise        
revising the evaluation   restructured to provide     concerns because     
framework. Option 1 would a more informative          they continue to     
extend the current        analytical discussion of    define               
framework to include      the project and its         cost-effectiveness   
economic development      merits for New Starts       only in terms of     
impacts and the           funding.                    mobility.            
reliability of                                        o  Neither proposed  
forecasting methods for                               option gives enough  
costs and ridership.                                  weight to land use   
Option 2 would be a                                   and economic         
broader framework that                                development.         
incorporates the new                               
evaluation factors                                 
specified by SAFETEA-LU                            
and, according to FTA,                             
organizes the measures to                          
better describe the                                
merits of the project,                             
its effectiveness, and                             
its cost-effectiveness.                            
Nature of the problem or  New Starts projects are  Funding should be       
opportunity evaluation    intended to solve        available for projects  
measure: FTA asks (1)     specific transportation  seeking to shape        
whether measures that     problems, take advantage economic development or 
represent the nature of   of opportunities to      to provide a solution   
the problem or the        improve transportation   to mobility problems.   
opportunity the proposed  services, or support     
projects are designed to  economic development. In 
address should be         particular, it is        
included in the           important in evaluating  
evaluation framework and  projects to understand   
(2) how FTA should        what problem the project 
evaluate or rate projects is intended to solve.    
that address significant                           
transportation problems                            
compared with projects                             
that take advantage of                             
opportunities to improve                           
service.                                           
Economic development      SAFETEA-LU identified       o  Station area      
impacts measure: FTA      economic impacts as a       development benefits 
identifies two options    new evaluation              better isolate the   
for characterizing        criterion.                  effect of the        
economic development                                  transit project.     
benefits: (1) regional                                There are too many   
economic benefits and (2)                             other variables      
station area development                              associated with      
impacts. FTA sought                                   regional economic    
comment on whether there                              benefits.            
was preference for either                             o  FTA should use    
option, as well as on how                             both regional and    
to evaluate economic                                  station area         
development and land use                              economic benefits.   
as distinct and separate                              o  Land use and      
measures.                                             economic development 
                                                         should be separate   
                                                         measures and have as 
                                                         much weight as       
                                                         cost-effectiveness   
                                                         o  Differentiating   
                                                         between land use and 
                                                         economic development 
                                                         is difficult.        
Mobility benefits         The measure of mobility     o  FTA should        
measure: FTA proposes to  benefits ought to           continue to work     
measure mobility by using capture the number of       toward capturing     
a combination of user     travelers that will         transportation       
benefits per passenger    benefit as well as the      benefits to highway  
mile and project          magnitude of the            users in a project   
ridership. FTA also asked benefit.                    corridor.            
whether other measures of                             o  FTA should        
mobility benefits could                               analyze the impact   
be used.                                              of nonhome-based     
                                                         trips, trips         
                                                         generated by special 
                                                         events, and          
                                                         automobile trips not 
                                                         taken because of     
                                                         enhanced pedestrian  
                                                         activity established 
                                                         in a project         
                                                         corridor.            
Mobility for transit         o  Since low-income   An implementation       
dependents measure: FTA      populations and       difficulty would be the 
proposes to measure          households without    inconsistencies in      
mobility for transit         access to automobiles regional travel demand  
dependents by the share      depend critically on  models-that is, some    
of user benefits accruing    the public            models are based on     
to the passenger in the      transportation system income, others on       
lowest income stratum,       to provide basic      automobile ownership,   
compared with the            mobility, access to   and some on both.       
regional share of the        jobs, health care,    
lowest income stratum.       and other critical    
FTA asked whether this       services, projects    
proposed measure would       that improve transit  
cause any implementation     services for these    
difficulties and whether     populations have      
there were other measures    special merit.        
FTA should consider.         o  FTA's previous     
                                measure-percentage of 
                                low-income households 
                                in the project        
                                corridor-did not      
                                measure whether       
                                low-income riders     
                                actually used the     
                                system.               
Environmental benefits    No other measures have   FTA should retain its   
measure: FTA proposes to  been identified.         current measure of      
continue using the same                            environmental benefits. 
environmental benefits                             
measure, which uses the                            
projected change in                                
regional vehicle miles                             
traveled, to estimate the                          
change in various harmful                          
types of vehicle                                   
emissions and energy                               
consumption.                                       
Operating efficiency      The current              FTA should use the      
measure: FTA proposes     measure-projected        cost-effectiveness      
removing this measure as  systemwide change in     evaluation measure to   
a separate evaluation     operating cost per       address the operating   
criterion, relying        passenger mile-does not  efficiency criterion.   
instead on an evaluation  distinguish among        
of cost-effectiveness to  proposed projects, while 
address the statutory     the projected operating  
criterion. According to   cost of the system is a  
FTA, the impact of the    key component in         
project on operating and  calculating              
maintenance costs is      cost-effectiveness.      
captured in the                                    
calculation of                                     
cost-effectiveness.                                
Cost-effectiveness        The current measure         o  Broadening the    
measure: FTA proposes to  reflects breakpoints        cost-effectiveness   
broaden the current       that anticipate             measure would        
cost-effectiveness        nontransportation           increase the time    
measure to include        benefits, but this is       and cost of project  
nontransportation         not readily apparent to     development.         
benefits, such as         the industry or             o  FTA should use    
economic development      decisionmakers.             the consumer price   
benefits, land use                                    index, not the gross 
impacts, and mobility                                 domestic product     
benefits to transit                                   price index, to      
dependents. FTA also                                  adjust the dollar    
suggests using two                                    value of the         
cost-effectiveness                                    cost-effectiveness   
measures-one for the                                  threshold.           
forecast year as is done                           
today and the second                               
calculated for the year                            
the project opens.                                 
Financial capabilities    SAFETEA-LU identifies       o  It is unclear     
measure: FTA proposes     the following factors       from the guidance    
changing the way the      that FTA must use in        who is responsible   
financial rating factors  evaluating financial        for assessing the    
related to uncertainty    capability: (1) the         reliability of       
are incorporated into the reliability of              financial forecasts. 
evaluation process.       forecasting methods for     o  The emphasis      
Specifically, FTA         costs and ridership, (2)    placed on the        
suggests using the        existing grant              reliability of the   
project sponsor's ability commitments, (3) the        financial forecast   
to absorb funding         degree to which funding     should correlate to  
shortfalls and cost       sources are dedicated,      the stage of project 
overruns as an explicit   (4) debt obligations of     development.         
measure of financial      the project sponsor, and 
risk.                     (5) the non-New Starts   
                             funding share.           
Reliability of forecasts  SAFETEA-LU requires that    o  Proposal is       
measures: FTA proposes to the reliability of the      confusing.           
assess the risk and       forecasting methods used    o  Recent experience 
uncertainty inherent in   to estimate costs be        with risk            
project evaluation.       considered in the           assessments suggests 
Specifically, FTA plans   evaluation of New Starts    that the proposal    
to evaluate the           projects. The               would require        
uncertainty associated    reliability factor is a     substantial effort   
with the nature and       way of assessing the        with little          
severity of the problem,  likelihood the cost and     reduction in         
as well as individual     ridership projections       uncertainty.         
measures of project merit will be achieved.           o  FTA should place  
and cost-effectiveness                                significant weight   
measures.                                             on the project       
                                                         sponsor's ability to 
                                                         enhance the          
                                                         reliability of       
                                                         forecasts through    
                                                         the proven quality   
                                                         control methods.     
Development of project    SAFETEA-LU requires that Economic development    
ratings: Currently, FTA   the reliability of the   and land use should     
develops separate ratings forecasting methods used receive the same weight 
for project justification to estimate costs be     as cost-effectiveness.  
and local financial       considered in the        
commitment, and then      evaluation of New Starts 
derives an overall        projects.                
project rating from these                          
component ratings using                            
decision rules. FTA                                
proposes to use a similar                          
process for rating                                 
projects. However,                                 
SAFETEA-LU requires that                           
the reliability of                                 
forecasts be incorporated                          
into the ratings process                           
and FTA suggests                                   
different options for                              
accomplishing this, such                           
as using probability                               
weightings or using                                
uncertainty indicators to                          
decide the outcome for                             
ratings at the margins.                            
FTA also seeks input                               
about the weights that                             
should be assigned to                              
each measure.                                      

                                                         Comments submitted   
                                  FTA's rationale for    by the transit       
Proposed change                change                 community            
Project development process                           
Local endorsement of the          o  SAFETEA-LU          o  Securing an    
financial plan: FTA proposes      requires that FTA      endorsement will  
to require that project           ensure that            be overly         
sponsors specify all proposed     proposed New Starts    burdensome and    
sources of funding in the         projects are           delay project     
financial plan, and that the      supported by an        development.      
sponsoring agency provide a       acceptable degree      o  FTA should not 
letter endorsing the proposed     of local financial     dictate when      
financial strategies and          commitment and         project sponsors  
amounts of planned funding by     resources.             receive financial 
those agencies identified as      o  FTA has             commitments.      
funding sources.                  experienced            o  It is hard to  
                                     situations in which    fully secure      
                                     a project's            funding           
                                     financial plans        commitments in    
                                     state that local       preliminary       
                                     agencies will          engineering (PE)  
                                     provide funding,       and final design  
                                     but in reality         (FD).             
                                     those local         
                                     agencies do not     
                                     support the project 
                                     plan.               
Approval of the baseline       There has been            o  More clarity   
alternative: FTA proposes to   significant confusion     is needed on how  
maintain the current approval  over the definition of    FTA defines       
process and definition of the  the baseline              baseline          
baseline alternative. However, alternative.              alternative.      
FTA asks whether the baseline                            o  Selection of   
can be more clearly defined                              baseline          
and whether there is a way to                            alternative       
report on the benefits of the                            should not be     
project, including the                                   driven by FTA.    
benefits attributable to the                          
difference between the                                
no-build and the baseline                             
alternatives.                                         
On-board transit survey: FTA   Data on current           o  Surveys are    
is considering requiring that  ridership patterns are    expensive and may 
a recent survey of transit     essential to the          be unnecessary in 
riders be used to inform the   development of            some areas.       
travel-forecasting procedures  reliable forecasts.       o  FTA should     
used during alternatives                                 consider other    
analysis. FTA suggests that                              means of          
"recent" could be defined as                             collecting data   
within the 5 years preceding a                           on ridership,     
request to enter PE.                                     such as           
                                                            electronic fare   
                                                            collection data   
                                                            and small sample  
                                                            surveys.          
Preliminary engineering        FD is intended to be      o  A clearer      
purpose and exit criteria: FTA used to develop           definition of the 
is considering defining the PE documents for             PE phase is       
phase as the process of        construction. As such,    needed to help    
finalizing the project's       all issues related to     project sponsors  
scope, cost, and financial     significant scope and     target resources. 
plan such that (1) all         cost should be            o  Design costs   
environmental impacts are      resolved in PE.           will be           
identified and adequate                                  frontloaded,      
provisions are made for their                            thereby           
mitigation in accordance with                            increasing the    
the National Environmental                               costs of PE.      
Policy Act, (2) all major or                          
critical project elements are                         
designed to the level that no                         
significant unknown impacts                           
relative to their costs will                          
result, and (3) all cost                              
estimating is complete to a                           
level of confidence necessary                         
for the sponsor to implement                          
the financing strategy.                               
                                                         Comments submitted   
                                  FTA's rationale for    by the transit       
Proposed change                change                 community            
Project reaffirmation by the   Before a project is       o  Creates        
metropolitan planning          approved for              another step that 
organization (MPO): FTA is     advancement into PE,      will increase the 
considering requiring that the the project must be       time and cost of  
sponsoring agencies reaffirm   adopted by the MPO        project           
their adoption of the project, into its long-range       development.      
in its final configuration and transportation plan.      o  Duplicates     
costs, in the MPO's long-range However, a project's      sponsoring        
transportation plan as part of scope and costs may       agencies' ongoing 
the application to advance the change during the PE      work with the MPO 
project to FD.                 phase. Thus, this         and provides no   
                                  requirement would         added certainty.  
                                  ensure that a revised     o  Will likely    
                                  project still conforms    have limited      
                                  to the MPO's              impact on local   
                                  transportation plans      financial         
                                  and financial             endorsement.      
                                  constraint                o  Inconsistent   
                                  requirements.             with FHWA         
                                                            regulations.      
New Starts funding share       SAFETEA-LU allows the     o  Incentive      
incentives: FTA asks how it    Secretary to provide a    money should be   
should implement the provision higher grant              invested back     
in SAFETEA-LU that would give  percentage than           into the New      
FTA discretion to provide a    requested by the          Starts program.   
higher percentage of New       project sponsor if (1)    o  Incentive      
Starts funding than that       the net cost of the       should focus on   
requested by the project       project is not more       the project's     
sponsor as an incentive to     than 10 percent higher    outcomes like     
produce reliable ridership and than the net cost         project impacts.  
cost estimates.                estimated at the time  
                                  the project was        
                                  approved for           
                                  advancement into PE,   
                                  and (2) the ridership  
                                  estimated for the      
                                  project is not less    
                                  than 90 percent of the 
                                  ridership estimated    
                                  for the project at the 
                                  time the project was   
                                  approved for           
                                  advancement into PE.   

Source: GAO analysis of FTA guidance and public comments posted on FTA's
docket.

(542086)

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www.gao.gov/cgi-bin/getrpt? GAO-06-819 .

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Highlights of GAO-06-819 , a report to congressional committees

August 2006

PUBLIC TRANSPORTATION

New Starts Program Is in a Period of Transition

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU) authorized about $7.9 billion in commitment
authority, through fiscal year 2009, for the Federal Transit
Administration's (FTA) New Starts program, which is used to select fixed
guideway transit projects, such as rail and trolley projects, and to award
full funding grant agreements (FFGAs). The New Starts program serves as an
important source of federal funding for the design and construction of
transit projects throughout the country.

SAFETEA-LU requires GAO to report each year on FTA's New Starts process.
As such, GAO examined (1) the number of projects that were evaluated,
rated, and proposed for FFGAs for the fiscal year 2007 evaluation cycle
and the proposed funding commitments for the fiscal year 2007 budget; (2)
procedural changes that FTA proposed for the New Starts program beginning
with the fiscal year 2008 evaluation cycle; and (3) changes SAFETEA-LU
made to the New Starts program and FTA's implementation of these changes.
GAO reviewed New Starts documents and interviewed FTA officials and
project sponsors, among other things, as part of its review. GAO is not
making recommendations in this report. In commenting on a draft of this
report, FTA provided technical clarifications, which we incorporated as
appropriate.

For the fiscal year 2007 evaluation cycle, FTA evaluated and rated 20
projects, recommended 5 projects for new FFGAs and 2 projects with pending
FFGAs. FTA also identified 5 other projects that may be eligible for
funding outside of FFGAs. The administration's fiscal year 2007 budget
proposal requests $1.47 billion for the New Starts program, which is about
$200 million more than the amount received last year.

FTA proposed nine procedural, or nonregulatory, changes for the New Starts
program beginning with the fiscal year 2008 evaluation cycle that were
generally intended to improve the management of the New Starts process.
These changes include linking the New Starts and National Environmental
Policy Act planning requirements and processes and capping New Starts
funding when projects enter the final design phase. As required by
SAFETEA-LU, FTA published these proposals in policy guidance and sought
public input. Members of the transit community supported changes that they
thought would make the New Starts process more efficient, but many
commenters expressed strong opposition to other changes, citing, for
example, the time and resources required to analyze ridership and cost
uncertainties. Consequently, FTA implemented only 4 of the proposed
procedural changes, but indicated that a final decision on the other 5
proposed changes would be made through the rulemaking process.

SAFETEA-LU introduced eight statutory changes to the New Starts program
that include establishing the Small Starts program and identifying new
evaluation criteria. FTA has taken some initial steps to implement these
changes, including issuing an Advanced Notice of Proposed Rulemaking
(ANPRM) for the Small Starts program and proposed policy guidance for the
New Starts program, both in January 2006. The Small Starts program is a
new component of the New Starts program and is intended to offer an
expedited and streamlined application and review process for small
projects. The transit community, however, questioned whether the Small
Starts program, as outlined in the ANPRM, would provide such a process. In
July 2006, FTA introduced a new eligibility category called Very Small
Starts, which is for the simplest and least costly projects. Very Small
Starts projects will qualify for an even simpler and more expedited
evaluation process. FTA also identified and sought public input on
possible changes to the New Starts program that would have an impact on
traditional New Starts projects, such as revising the evaluation process
to incorporate the new evaluation criteria identified by SAFETEA-LU.
According to FTA, a potential challenge in moving forward is incorporating
both land use and economic development as separate criteria in the
evaluation process, including developing appropriate measures for the
criteria and avoiding duplication in counting benefits.
*** End of document. ***