Mass Transit: Implementation of FTA's New Starts Evaluation Process and
FY 2001 Funding Proposals (Letter Report, 04/28/2000, GAO/RCED-00-149).

Pursuant to a legislative requirement, GAO provided information on the
implementation of the Federal Transit Administration's (FTA) New Starts
program's evaluation process and fiscal year (FY) 2001 funding
proposals, focusing on the: (1) refinements made to FTA's evaluation and
rating process since 1999; (2) means by which New Starts projects were
selected for FTA's FY 2001 New Starts report and budget request; and (3)
impact of FTA's recommendations on its New Starts commitment authority.

GAO noted that: (1) while FTA's FY 2001 New Starts project evaluation
and rating process was very similar to the 1999 process, FTA made a
number of refinements to the process; (2) for instance, for FY 2001,
potential grantees were more strictly assessed on their ability to build
and operate a proposed project than in the past; (3) such assessments
are meant to ensure that no outstanding issues concerning a project's
scope, or cost, or a locality's financial commitment could jeopardize
the project once a grant agreement is signed; (4) while FTA has
developed an evaluation process that addresses the Transportation Equity
Act for the 21st Century's (TEA-21) requirements, final regulations need
to be issued to formalize the process; (5) FTA issued a proposed rule on
April 7, 1999, and plans to issue final regulations by the summer of
2000; (6) in selecting projects for its FY 2001 New Starts funding
proposal, FTA gave first preference to the projects with existing grant
agreements; (7) following that, FTA selected from the projects that it
had rated as highly recommended or recommended and determined to be
ready for grant agreements by the end of FY 2001; (8) of the 48 projects
evaluated, 32 were rated as highly recommended or recommended and 15
were recommended for grant agreements; (9) the remaining 17 projects
were not recommended for grant agreements for several reasons; (10)
according to FTA, 14 of the 17 projects were generally not ready for
grant agreements; (11) 3 other projects received highly recommended
ratings but were not selected because FTA did not want to fund more than
one or two projects in any given geographic area; (12) more state and
local transit agencies than ever are competing for New Starts funds;
(13) however, the 14 ongoing projects and the 15 additional projects
proposed in FY 2001 New Starts report and budget request would consume
more than the total New Starts commitment authority provided by TEA-21;
and (14) if all of these new grant agreements were executed as proposed,
FTA would not be able to commit funds to any more New Starts projects
during the last 2 years of TEA-21--through FY 2003.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-00-149
     TITLE:  Mass Transit: Implementation of FTA's New Starts
	     Evaluation Process and FY 2001 Funding Proposals
      DATE:  04/28/2000
   SUBJECT:  Mass transit operations
	     Mass transit funding
	     Eligibility determinations
	     Grant award procedures
	     Grants to states
	     Federal aid for transportation
	     Evaluation criteria
	     Financial management
	     Transportation law
IDENTIFIER:  FTA New Starts Program

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GAO/RCED-00-149

Appendix I: New Starts Criteria and Related Performance
Measures

20

Appendix II: FTA's Fiscal Year 2001 New Starts Ratings and
Funding Recommendations

21

Table 1: Projects Recommended for Funding in Fiscal Year 2001 13

Table 2: Summary of New Starts Evaluation Criteria and
Performance Measures 20

Figure 1: The FTA New Starts Evaluation and Rating Process 8

Figure 2: TEA-21 Commitment Authority for New Starts Projects and DOT's
Fiscal Year 2001 New Starts Budget Request 17

Resources, Community, and
Economic Development Division

B-285084

April 28, 2000

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

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

Since the early 1970s, the federal government has provided a large share of
the nation's capital investment in urban mass transportation. Much of this
investment has come through the Federal Transit Administration's (FTA) New
Starts program, which helps pay for certain rail, bus, and trolley projects
through full funding grant agreements. In the last 6 years, this program has
provided state and local transit agencies with about $4.7 billion to help
design and construct such projects throughout the country.

The Transportation Equity Act for the 21st Century (TEA-21)1, enacted in
1998, authorizes $6 billion in "guaranteed" funding for New Starts projects
through fiscal year 2003. While the level of New Starts funding is higher
than it has ever been, the demand for these resources is also extremely
high. Over 190 projects nationwide are authorized to compete for funding. To
prioritize projects for funding, FTA was directed to evaluate, rate, and
recommend potential projects on the basis of specific financial and project
justification criteria. Furthermore, FTA was required to issue regulations
for the evaluation and rating process.

In addition, TEA-21 requires GAO to report by April 30 of each year on FTA's
processes and procedures for evaluating, rating, and recommending New Starts
projects for federal funding and on the implementation of these processes
and procedures. In April 1999,2 we issued our first report on FTA's efforts
to develop an evaluation process and implement TEA-21's requirements. This
report discusses (1) the refinements made to FTA's evaluation and rating
process since last year, (2) the means by which New Starts projects were
selected for FTA's fiscal year 2001 New Starts report and budget request,
and (3) the impact of FTA's recommendations on the agency's New Starts
commitment authority. This report also discusses our recommendation that the
Department of Transportation (DOT) further prioritize the projects it rates
as "highly recommended" or "recommended" and ready for funding. We made the
recommendation on March 8, 2000, in testimony before the Subcommittee on
Transportation, House Committee on Appropriations.3

While FTA's fiscal year 2001 New Starts project evaluation and rating
process was very similar to last year's, the agency made a number of
refinements to the process. For instance, for fiscal year 2001, potential
grantees were more strictly assessed on their ability to build and operate a
proposed project than in the past. Such assessments are meant to ensure that
no outstanding issues concerning a project's scope, or cost, or a locality's
financial commitment could jeopardize the project once a grant agreement is
signed. While FTA has developed an evaluation process that addresses
TEA-21's requirements, final regulations need to be issued to formalize the
process. FTA issued a proposed rule on April 7, 1999, and plans to issue
final regulations by the summer of 2000.

In selecting projects for its fiscal year 2001 New Starts funding proposal,
FTA gave first preference to the projects with existing grant agreements.
Following that, FTA selected from the projects that it had rated as "highly
recommended" or "recommended" and determined to be ready for grant
agreements by the end of fiscal year 2001. Of the 48 projects evaluated, 32
were rated as "highly recommended" or "recommended" and 15 were recommended
for grant agreements. The remaining 17 projects were not recommended for
grant agreements for several reasons. According to FTA, 14 of the 17
projects were generally not ready for grant agreements. In addition, three
other projects received "highly recommended" ratings but were not selected
because FTA did not want to fund more than one or two projects in any given
geographic area. For instance, only two of five proposed projects were
selected in the Chicago area and one of three proposed projects in San
Diego.

More state and local transit agencies than ever are competing for New Starts
funds. However, the 14 ongoing projects and the 15 additional projects
proposed in the fiscal year 2001 New Starts report and budget request would
consume more than the total New Starts commitment authority provided by
TEA-21. If all of these new grant agreements were executed as proposed, FTA
would not be able to commit funds to any more New Starts projects during the
last 2 years of TEA-21--through fiscal year 2003. Because there are plans
for many more projects to compete for federal funds in the next several
years, we recommended in our March 8, 2000, testimony before the
Subcommittee on Transportation, House Committee on Appropriations, that the
Department of Transportation further prioritize that the projects it rates
as "highly recommended" or "recommended" and determines are ready for New
Starts funds.

TEA-21 authorized a total of $36 billion in "guaranteed" funding through
2003 for a variety of transit programs, including financial assistance to
states and localities to develop, operate, and maintain transit systems. One
of these programs, the New Starts program, provides funds to local transit
providers for constructing or extending certain types of mass transit
systems. A full funding grant agreement establishes the terms and conditions
for federal participation, including the maximum amount of federal
funds4--no more than 80 percent of the estimated net cost of the project.

To obtain New Starts funds, a project must first progress through a local or
regional review of alternatives, develop preliminary engineering plans, and
meet FTA's approval for the final design. TEA-21 requires that FTA evaluate
projects against "project justification" and "local financial commitment"
criteria contained in the act. FTA assesses the technical merits of a
proposed project by reviewing the project's mobility improvements,
environmental benefits, cost-effectiveness, and operating efficiencies. In
assessing the stability of a project's local financial commitment, FTA
assesses the project's finance plan for evidence of stable and dependable
financing sources to construct, maintain, and operate the proposed system or
extension. In evaluating this commitment, FTA is required to determine
whether (1) the proposed project's finance plan provides for reasonable
contingency amounts in order to cover unanticipated cost increases; (2) each
proposed local source of capital and operating funds is stable, reliable,
and available within the timetable for the proposed project; and (3) local
resources are available to operate the overall proposed mass transportation
system without requiring a reduction in existing transportation services.

While these evaluation requirements existed before TEA-21's enactment,
TEA-21 requires FTA to develop a rating for each criterion as well as an
overall rating of "highly recommended," "recommended," or "not recommended"
for each project and use these evaluations and ratings in approving a
project's advancement to the preliminary engineering and final design
phases, as well as approving grant agreements. The act further required FTA
to issue regulations by October 7, 1998, on the evaluation and rating
process.

TEA-21 also directs FTA to use these evaluations and ratings in deciding
which projects will be recommended to the Congress for funding in a New
Starts report due each February. These funding recommendations are also
reflected in the Department's annual budget proposal. In addition, TEA-21
requires FTA to issue a supplemental report to the Congress each August that
updates information on projects that have advanced to the preliminary
engineering or final design phases since the annual report.

Rating Process

In April 1999, we reported that FTA had made substantial progress in
developing and implementing an evaluation process that included the
individual criterion ratings and overall project ratings required by TEA-21.
Before TEA-21 was enacted, FTA had already taken steps to revise its New
Starts evaluation process because most of the evaluation requirements
contained in TEA-21 were introduced by the Intermodal Surface Transportation
Efficiency Act of 1991 (ISTEA). The results of these evaluations are used to
approve projects for the preliminary engineering and final design phase, to
execute grant agreements, and to make annual funding recommendations to the
Congress. In March 2000, FTA issued its fiscal year 2001 New Starts report,
which included project evaluations and ratings based upon the revised
process.

FTA's current New Starts evaluation process assigns candidate projects
individual ratings for each TEA-21 criterion in order to assess each
project's justification and local financial commitment. The process also
assigns an overall rating for each project--which is intended to reflect the
project's overall merit. FTA considers these overall ratings in deciding
which projects will proceed to the preliminary engineering and final design
phase, be recommended for funding, and receive full funding grant agreements
(see fig. 1 for an illustration of the process).

Figure 1: The FTA New Starts Evaluation and Rating Process
a The local share is the percentage of a project's capital cost to be funded
from sources other than federal funds.

b According to FTA, this optional criterion gives grantees the opportunity
to provide additional information about a project that may contribute in
determining the project's overall success.

Source: FTA.

FTA's evaluation process provides for individual ratings for the four
project justification criteria identified by TEA-21 (mobility improvements,
environmental benefits, operating efficiencies, and cost-effectiveness) as
well as for transit-supportive land-use policies (see fig. 1). Similarly, to
evaluate a project's local financial commitment, FTA rates the project on
its capital and operating finance plans and the local share of its costs.
According to FTA, the agency also considers a variety of "other factors"
when evaluating the project's justification, including the degree to which
policies and programs are in place as assumed in the forecasts, the
project's management capability, and additional factors relevant to local
and national priorities.

On the basis of an analysis of the documentation submitted by the project's
sponsors, FTA assigns a descriptive rating (high, medium-high, medium,
medium-low, or low) for each of the five project justification criteria. The
same is done for the 3 factors used to evaluate the local financial
commitment. (App. I summarizes the measures that FTA uses in applying the
criteria to develop these ratings.) As figure 1 shows, once the individual
criterion ratings are completed, FTA assigns summary project justification
and local financial commitment ratings by combining the individual criterion
ratings. In developing the summary project justification rating, FTA gives
the most weight to the criteria for transit-supportive land use,
cost-effectiveness, and mobility improvements. For the summary local
financial commitment rating, the measures for the proposed local share of
capital costs and the strength of the capital and operating financing plans
are given the most consideration. FTA combines these summary ratings to
assign an overall rating for the project of "highly recommended,"
"recommended," or "not recommended." To receive the "highly recommended"
rating, a project must have summary ratings of at least medium-high for the
project justification and local financial commitment. To receive a rating of
"recommended," the project must have summary ratings of at least medium. A
project is rated as "not recommended" when either summary rating is lower
than medium.

For its fiscal year 2001 New Starts report, FTA rated 9 projects as "highly
recommended," 23 projects as "recommended," and 9 projects as "not
recommended." Of the 9 projects rated as "not recommended," each had a
financial commitment rating of lower than medium. In assigning overall
project ratings, however, FTA emphasized the continuous nature of project
evaluation. Throughout the report, FTA underscored the fact that as
candidate projects proceed through the project development process--from the
planning through the final design stages--information concerning costs,
benefits, and impacts will be refined. Consequently, FTA updates its ratings
and recommendations at least annually to reflect this new information,
changing conditions, and refined financing plans. Thus, a project that is
rated as "not recommended" in the fiscal year 2001 report could receive a
higher rating in the fiscal year 2002 report to reflect changes in the
project.

While the criteria and measures in the New Starts evaluation and rating
process have not changed since last year, FTA has made a number of
refinements to the process. For instance, in determining which projects are
ready for grant agreements and recommended for funding in the New Starts
report and the Department's fiscal year 2001 budget proposal, FTA took
additional steps to ensure that there were no outstanding issues associated
with a project's scope, cost, or local financial commitment. FTA also
assessed the strength of a project's proposed capital finance plan by
evaluating the firmness of its funding commitments and programming of funds.
FTA also evaluated the ability of the sponsoring agency to finance the
construction as well as the maintenance and operation of the entire system
as planned, including existing service, once the project is built. Finally,
FTA considered the following issues in evaluating grantees for this year's
budget proposal:

ï¿½ the degree to which the transit agency has a satisfactory plan to manage
an existing bus fleet to ensure no degradation of service for users of the
current system;

ï¿½ compliance with the Americans with Disabilities Act of 1990, including
financial commitments necessary to maintain accessible service, make
necessary improvements, and comply with key requirements for stations; and

ï¿½ compliance with air quality standards in the region.

Requirements

While FTA has implemented a New Starts evaluation process that addresses
TEA-21's requirements, it still needs to issue final regulations to
formalize the process. FTA did not meet TEA-21's deadline of October 7,
1998, for issuing these regulations. According to FTA, priority was given to
satisfying the rating requirements and issuing the New Starts reports. FTA
issued a notice of proposed rulemaking on April 7, 1999, and the process
described mirrors the process it used to prepare the fiscal year 2000 and
2001 reports.

Comments on the proposed rule were accepted through July 19, 1999. A total
of 41 individuals and organizations provided comments. While comments were
submitted on virtually every aspect of the proposed rule, most centered on
four key issues: (1) the measure of cost-effectiveness, (2) the overall
project rating, (3) the measure for mobility improvements, and (4) the
continued use of no-build and system alternative proposals5 for evaluation
purposes. For example, 23 comments were received on FTA's use of the
historical "cost per new rider" measure to indicate the cost-effectiveness
of a proposed project. The consensus of the commenters was that the focus on
new riders ignores benefits provided to other riders, which may bias the
measure against cities with "mature" transit systems, where the focus of a
proposed project may be to improve service, not attract new riders. Comments
on the overall project rating focused on the use of this rating and on the
possibility that a rating of "not recommended" would be misinterpreted to
mean that a proposed project had no merit, resulting in the erosion of local
support and funding.

The proposed rule retained the existing measure for evaluating the mobility
improvements of a proposed project. The current measure is based on (1)
projected savings in travel time and (2) the number of low-income households
within a half-mile of the proposed stations. Fifteen comments specifically
addressed the measure's focus on low-income households. Ten recommended that
the measure address the destinations to be served by the proposed project as
well as the households, arguing that a system that is located near
low-income households is of little use to residents unless it can also
provide access to employment and other activity centers.

FTA is in the process of evaluating these and other comments to the proposed
rule and hopes to issue the final regulations by the summer of 2000. FTA
stated that any changes resulting from comments on the proposed rule will be
incorporated into the evaluation and rating process for the fiscal year 2002
annual report.

The Department's New Starts report and budget for fiscal year 2001 proposes
that $1.1 billion be made available for the construction of new transit
systems and expansions of existing systems--funded through the New Starts
program. Of this amount, a total of $639.3 million would be allocated among
the 14 projects with existing grant agreements. An additional $316 million
would be allocated among 15 projects proposed for grant agreements.6 As
authorized under TEA-21, the remaining $84.7 million (or 8 percent) would be
made available for preliminary engineering activities, with specific
recommendations for 10 projects.

In making its funding proposal each year, FTA gives first preference to
projects with existing grant agreements. Following that, consideration is
given to projects with an overall rating of "recommended" or higher.
However, some projects rated as "highly recommended" or "recommended" may
not meet FTA's "readiness test" for funding because they are in the early
stages of preliminary engineering. FTA uses a number of milestones to
determine whether a project is sufficiently developed to be considered for a
grant agreement. For example, FTA determines whether the necessary real
estate has been acquired, utility arrangements have been made, and local
funding sources are in place. According to an FTA official, this ensures
that there are no "red flags" signaling that the project has outstanding
issues it must address.

For fiscal year 2001, FTA evaluated 48 projects, rated 32 as "highly
recommended" or "recommended," and proposed executing new grant agreements
for 15 projects that are expected to be ready for grant agreements by the
end of fiscal year 2001.7 As table 1 shows, 6 of the 15 proposed projects
were rated overall as "highly recommended" on the basis of their strong
cost-effectiveness and transit supportive land-use policies and a
demonstrated local financial commitment to build and operate the projects.
For instance, the proposed Portland Interstate Metropolitan Area Express
(MAX) project received the highest summary ratings for both the financial
and project justification measures. The project received a high rating in
transit-supportive land use8 because of the number of major facilities and
centers (e.g. Portland State University, the Civic Stadium, and Memorial
Coliseum) that will encourage high ridership, the expected growth in
employment and population through 2020, and current zoning regulations that
support high residential and commercial densities. In addition, the high
ratings for the proposed project's capital and operating financing plans
reflect the solid financial condition of the transit agency and the other
funding partners, as well as the stability of operating funds, sufficient
projected revenue growth, and adequate cash reserves.

Table 1: Projects Recommended for Funding in Fiscal Year 2001

                                                 Financial rating criteria

 Phase and city      Overall       Financial     Capital      Operating
 (project)           project       rating        finance      finance
                     rating                      rating       rating

 Final design
 Newark (Newark
 Elizabeth Rail      Highly        Medium-high   Medium-high  Medium-high
 Link, MOS-1)        recommended
 San Diego (Mission
 ValleyEast LRT      Highly        Medium-high   High         Medium-high
 Extension)          recommended
 Ft. Lauderdale
 (Tri-Rail Double    Recommended   Medium        Medium       Medium
 Track Corridor)
 Northern New Jersey
 (Hudson-Bergen LRT  Recommended   Medium        Medium       Medium
 MOS-2)
 Pittsburgh (Stage
 II LRT Program)     Recommended   Medium-high   Medium-high  Medium-high

 Preliminary
 Engineering
 Portland
 (Interstate MAX     Highly        High          High         High
 Project)            recommended
 Chicago (Douglas
 Branch              Highly        Medium-high   Medium-high  Medium
 Reconstruction)     recommended
 Chicago (Metra
 South West          Highly        Medium-high   Medium-high  High
 Corridor)           recommended
 Seattle (Link Light Highly
 Rail MOS)           recommended   Medium-high   High         Medium
 Baltimore (Central
 Light Rail Double   Recommended   Medium-high   High         Medium-high
 Track)
 Denver (Southeast
 Corridor Light      Recommended   Medium-high   Medium-high  Medium-high
 Rail)
 Memphis (Medical
 Center Rail         Recommended   Medium        Medium-high  Medium
 Extension)
 Minneapolis
 (Hiawatha Avenue    Recommended   Medium-high   Medium-high  Medium
 Corridor LRT)
 Salt Lake City
 (University Light   Recommended   Medium        Medium-high  Medium
 Rail Line)
 Washington DC
 (Largo Town Center  Recommended   Medium        Medium       Medium
 Metrorail)

 Project justification criteria
 Project       Mobility     Environment Operating
 justification improvement  benefits    efficiency  Cost-effectivenessLand use
 rating        rating       rating      rating      rating            rating

 Medium-high   Low-medium   Medium      Medium      Medium-high       Medium-high
 Medium-high   Medium       High        Medium      Medium            Medium-high
                                                                      Medium
 Medium        Medium-high  Low         Low         Low-medium

 Medium        Medium       Medium      Medium      Low               Medium-high
 Medium        Low-medium   High        High        Medium-high       Medium

                                                                      High
 High          High         High        Medium      Medium-high

                                                                      High
 Medium-high   Medium       High        Medium      Medium

                                                                      Medium
 Medium-high   High         Medium      Medium      Medium-high

                                                                      High
 High          Medium       High        Medium      High

 Medium        Medium       High        Medium      Medium-high       Low-medium
                                                                      Medium
 Medium        Medium       Medium      Medium      Low-medium

                                                                      Medium
 Medium        Not rated    Medium      Medium      High

 Medium        Low-medium   High        Medium      Low-medium        Medium-high
                                                                      Medium
 Medium        Low-medium   Medium      Medium      Medium-high

 Medium        Medium       High        Medium      Medium            Medium-high

Legend

LRT = light rail transit
MOS = minimum operable segment

Source: FTA's FY 2001 New Starts Report.

The other nine projects proposed for grant agreements received overall
ratings of "recommended," most were rated medium or medium-high on the
project justification and/or local financial commitment criteria. For
instance, the Ft. Lauderdale Tri-County commuter rail project's rating was
based on the project's strong mobility improvements and the existence of
moderate population and residential densities along the corridor, as well as
the adequacy of the project's financial plan. The proposed system would
serve over 10,000 new riders daily by 2015, and the transit agency estimated
that over 11 million hours of travel time would be saved annually for local
commuters. In contrast, the sponsor of a project that was not recommended
for funding in 2001 estimated that only 0.4 million hours would be saved
annually by travelers.

Seventeen projects received "highly recommended" or "recommended" ratings
but were not proposed for grant agreements. Three of these projects--Chicago
Ravenswood subway line; San Diego Mid Coast Corridor light rail line; and
San Diego Oceanside-Escondido rail line--received "highly recommended"
ratings. FTA officials told us that these projects met FTA's evaluation and
rating criteria as well as FTA's "readiness test" but were not selected
because FTA did not want to fund more than one or two projects in any
metropolitan area. For instance, only two of the five proposed projects were
selected for the Chicago area and one of the three proposed projects in San
Diego. The other 14 projects were rated overall as "recommended." Many of
these projects were not proposed for grant agreements in fiscal year 2001
because they are in the very early stages of development.

Finally, FTA rated nine proposed projects as "not recommended" primarily
because of low local financial commitment summary ratings, reflecting their
lack of updated financial plans and/or lack of committed local funding to
build and operate the systems. For instance, one of the nine proposed
projects received low ratings for the stability and reliability of its
capital and operating financing plans, reflecting FTA's concerns about the
transit agency's financial condition and lack of demonstrated financial
capacity to undertake the proposed project. Other reasons for receiving a
low financial rating included not submitting a financial plan or other
financial information for the project or entire transit system, having a
large share of uncommitted or unidentified local funding, and lacking
financial resources to operate the proposed system.

Dollars

More state and local transit agencies than ever are competing for New Starts
funds. However, the 14 ongoing projects and the 15 new projects proposed in
the New Starts report and 2001 budget request would consume more than the
total New Starts commitment authority provided by TEA-21,9 if all of these
new grant agreements were executed as proposed. If this were to occur, FTA
would not be able to commit funds to any more projects during the last 2
years of TEA-21--through fiscal years 2002 and 2003--even though many
additional projects may soon be eligible for funding.

According to FTA, it has already committed $4.1 billion of its total
available authority of $8.4 billion to the 14 ongoing projects. After
accounting for other requirements (such as the cost of providing project
management oversight for the program), which are expected to total about
$1.2 billion through 2003, about $3.1 billion remains for future grant
agreements. The Department's fiscal year 2001 budget proposes $316 million
for the 15 new projects. However, the $316 million requested for these new
projects for 2001 will be only a down payment on what would amount to a
total federal commitment of $3.9 billion if no changes were made to the
current grant proposals. This $3.9 billion commitment is $800 million more
than FTA's remaining commitment authority of $3.1 billion. Figure 2 shows
FTA's limited commitment authority under TEA-21.

Figure 2: TEA-21 Commitment Authority for New Starts Projects and DOT's
Fiscal Year 2001 New Starts Budget Request
Source: AGO's analysis of FTA's data.

FTA officials told us that the agency decided to propose exhausting the
remaining authority in its fiscal year 2001 budget request--rather than
withholding some authority for new projects in the remaining years of
TEA-21--because New Starts funds have traditionally been provided to all
eligible projects on a first-come, first-served basis. Furthermore,
according to these officials, executing grant agreements for the 15 new
projects allows them to move forward to begin construction.

In addition to the 29 ongoing and proposed projects, TEA-21 identified more
than 160 other projects as eligible for New Starts funds. According to FTA,
as many as 40 of these projects could be ready to receive a grant agreement
and begin construction in the next several years. Because of this impending
transit "budget crunch," we recommended in our testimony on March 8, 2000,
before the Subcommittee on Transportation, House Committee on
Appropriations, that DOT further prioritize the projects it rates as "highly
recommended" or "recommended" and ready to receive New Starts funds.10 FTA
officials, including FTA's Director, Office of Policy Development, agree
with our recommendation and told us that they would consider various ways to
further prioritize eligible projects.

We provided the Department of Transportation with a draft of this report for
review and comment. We discussed the report with Federal Transit
Administration officials, including the Director for Policy Development and
an official from the Office of Planning. FTA agreed with the report's
contents and provided us with one technical clarification, which we
incorporated.

To address the issues discussed in this report, we reviewed the legislation
governing New Starts transit projects, FTA's annual New Starts reports for
fiscal year 2000 and 2001, and other documentation by the agency of its
processes and procedures for evaluating projects. We also interviewed
appropriate FTA headquarters officials. We performed our work in accordance
with generally accepted government auditing standards from March through
April 2000.

We are sending copies of this report to the Honorable Rodney E. Slater,
Secretary of Transportation; the Honorable Nuria Fernandez, Acting
Administrator, Federal Transit Administration; the Honorable Jacob Lew,
Director, Office of Management and Budget; and other interested parties. We
will also make copies available to others upon request. Key contributors to
this report were Jack Bagnulo, Susan Fleming, and Ron Stouffer. Please call
me at (202) 512-3650 if you have any questions about this report.
Phyllis F. Scheinberg
Associate Director,
Transportation Issues

New Starts Criteria and Related Performance Measures

Table 2 presents a summary of each of the New Starts criteria and the
related performance measures that the Federal Transit Administration uses to
appraise candidate New Starts projects as part of its evaluation and rating
process.

Table 2: Summary of New Starts Evaluation Criteria and Performance Measures

 Criterion                   Performance measure
                             Change in hours of travel time

 Mobility improvements       Low-income households served by the system,
                             expressed in terms of the number of such
                             households within a half-mile of a project's
                             boarding points
                             Change in pollutant emissions

                             Change in regional energy consumption,
 Environmental benefits      expressed in British thermal units

                             The Environmental Protection Agency's air
                             quality designation for the region
 Operating efficiencies      Operating cost per passenger mile
 Cost-effectiveness          Incremental cost per incremental passenger
                             Existing land use

                             Containment of sprawl

                             Transit-supportive corridor policies

 Transit-supportive land use Supportive zoning regulations

                             Tools to implement land-use policies

                             Performance of land-use policies

                             Other land-use factors

 Other factors               Local policies, programs, and factors relevant
                             to the success of the project
                             Proposed local share of project costs

 Local financial commitment  Stability and reliability of capital financing

                             Stability and reliability of operating funds

Source: FTA

FTA's Fiscal Year 2001 New Starts Ratings and Funding Recommendations

Continued

 Dollars in millions

 City/project                        Overall project    FY 2001 recommended
                                     rating             funding
 Existing full funding grant
 agreementsa
 Atlanta - North Springs             FFGA               $25.00
 Boston - South Boston Piers
 Transitway Phase 1                  FFGA               35.97
 Dallas - North Central LRT ExtensionFFGA               70.00
 Denver - Southwest Corridor LRT     FFGA               20.20
 Houston - Regional Bus Plan         FFGA               10.74
 Los Angeles - North Hollywood       FFGA               50.00
 Northern New Jersey - Hudson-Bergen
 LRT MOS-1                           FFGA               121.00
 Portland - Westside/Hillsboro LRT   FFGA               0.21
 Sacramento - South LRT Extension    FFGA               35.20
 Salt Lake City - North-South LRT    FFGA               0.72
 San Francisco - BART Extension to
 Airport                             FFGA               80.00
 San Jose - Tasman West LRT          FFGA               12.25
 San Juan - Tren Urbano              FFGA               118.00
 St. Louis - Metrolink St. Clair
 Extension                           FFGA               60.00
 Subtotal                                               $639.29
 Proposed full funding grant
 agreements
 Ft. Lauderdale - Tri-Rail Commuter
 Rail Upgrade                        Recommended        $30.00

 Newark Rail Link (MOS 1)            Highly             10.00
                                     recommended
 San Diego - Mission Valley East LRT Highly
 Extension                           recommended        65.00
 Baltimore - Central LRT
 Double-Tracking                     Recommended        10.00
 Chicago - Douglas Branch            Highly
 Reconstruction                      recommended        17.00
 Chicago - Metra South West Corridor Highly
 Commuter Rail                       recommended        10.00
 Denver - Southeast Corridor LRT     Recommended        20.00
 Memphis - Medical Center Extension  Recommended        14.17
 Minneapolis − Hiawatha
 Corridor LRT                        Recommended        20.00
 Northern New Jersey −
 Hudson-Bergen MOS-2                 Recommended        0.00
 Pittsburgh - Stage II LRT
 Reconstruction                      Recommended        20.00
 Portland - Interstate MAX LRT       Highly
 Extension                           recommended        40.00
 Salt Lake City - CBD to University
 LRT                                 Recommended        15.00

 Seattle - Central Link LRT          Highly             35.00
                                     recommended
 Washington DC/MD − Largo
 Extension                           Recommended        10.00
 Subtotal                                               $316.17

 City/project                        Overall project    FY 2001 recommended
                                     rating             funding
 Other projects in final design
 Dallas- Ft. Worth − Trinity
 Railway Express                     Recommended        $0.00
 Los Angeles − San Diego Rail
 Corridor Improvement Project        Not ratedb         0.00
 New Orleans - Canal Streetcar Spine Not recommended    0.00
 San Juan - Minillas Extension       Recommended        0.00
 Subtotal                                               $0.00
 Preliminary engineering
 recommendations
 Chicago - Metra Commuter Rail (North
 Central/UP West)                    Recommended        $10.00

 Chicago - Ravenswood Line Expansion Highly             8.80
                                     recommended
 Cleveland - Euclid Corridor
 Improvement Project                 Recommended        8.80
 Little Rock - River Rail Project    Not ratedb         5.67
 Maryland - MARC Commuter Rail
 Improvements                        Not ratedb         10.00
 Miami - South Miami-Dade Busway
 Extension                           Recommended        8.80
 Nashville - East Corridor Commuter
 Rail                                Not ratedb         8.80
 New York − Long Island Rail
 Road East Side Access               Recommended        10.00
 New York - 2nd Avenue Subway        Not ratedb         5.00
 San Diego County -                  Highly
 Oceanside-Escondido Rail Project    recommended        8.80
 Subtotal                                               $84.67
 Other projects in preliminary design
 Austin - Northwest/North Central
 Corridor                            Recommended
 Boston - South Boston Piers
 Transitway Phase 2                  Not recommended
 Cincinnati - I-71 Corridor          Not recommended
 Kansas City - Johnson County I-35
 Commuter Rail                       Not ratedb
 Hartford - New Britain-Hartford
 Busway                              Recommended
 Houston - Downtown to Astrodome
 Light Rail                          Recommended
 Las Vegas - Resort Corridor Fixed
 Guideway MOS                        Recommended
 Miami - East/West Corridor          Not recommended
 Miami - North 27th Avenue Corridor  Not recommended
 Norfolk - Norfolk-Virginia Beach LRT
 Corridor                            Not recommended
 Orange County - Centerline Rail
 Corridor                            Recommended
 Phoenix - East Valley Light Rail    Not recommended
 Raleigh - Regional Transit Plan
 Phase I                             Not recommended

 San Diego - Mid Coast Corridor      Highly
                                     recommended
 San Francisco - Third Street Light
 Rail Phase I                        Recommended
 Seattle - Everett-Seattle Sounder
 Commuter Rail                       Not ratedb
 Tampa - Tampa Bay Regional Rail     Not recommended

Table 1: Projects Recommended for Funding in Fiscal Year 2001 13

Table 2: Summary of New Starts Evaluation Criteria and
Performance Measures 20

Figure 1: The FTA New Starts Evaluation and Rating Process 8

Figure 2: TEA-21 Commitment Authority for New Starts Projects and DOT's
Fiscal Year 2001 New Starts Budget Request 17
  

1. P.L.105-178.

2. Mass Transit: FTA's Progress in Developing and Implementing a New Starts
Evaluation Process (GAO/RCED-99-114 , Apr. 26, 1999).

3. Mass Transit: Challenges in Evaluating, Overseeing, and Funding Major
Transit Projects (GAO/T-RCED-00-104 , Mar. 8, 2000).

4. Other federal funds available through the Department of Transportation's
highway and transit formula and federal loan programs can be used to
develop, plan, and/or construct these projects.

5. For each of the project justification criteria, the proposed project is
evaluated against both a no-build and a Transportation System Management
(TSM) alternative--a package of low-to moderate-cost improvements designed
to make more efficient use of an existing transportation system.

6. According to FTA, one of the 15 projects--Northern New Jersey/Hudson
Bergen light rail--is ready for a federal grant agreement but does not
require New Starts funding until fiscal year 2004; however, executing a
grant agreement in fiscal year 2001 would provide the transit agency with
authority to borrow funds to begin construction.

7. Seven projects were not rated because an exemption is granted to projects
when the anticipated New Starts share of the total estimated capital cost is
below $25 million.

8. In evaluating a proposed project against the transit-supportive land-use
criterion, FTA considers such factors as employment and population density,
existing station area development, existing zoning regulations, and
containment of sprawl.

9. TEA-21 authorized $6.0 billion in "guaranteed" funding for New Starts
projects and allowed FTA to make contingent commitments beyond this amount
subject to future authorizations and appropriations. This contingent
commitment authority is designed to allow FTA to execute grant agreements
that extend beyond the 6-year period. In implementing TEA-21, FTA determined
that it could make contingent commitments of $2.4 billion from the act's
enactment through the authorization period.

10. Mass Transit: Challenges in Evaluating, Overseeing, and Funding Major
Transit Projects (GAO/T-RCED-00-104 , Mar. 8, 2000).
*** End of document. ***