Last year, we reported that FTA implemented two changes to the New  Starts process for the fiscal year 2004 cycle. FTA proposed 7 projects for funding for the fiscal year 2005  cycle, including 5 projects for FFGAs. The remaining 2 projects were  considered to be “meritorious and worthy of funding” and FTA proposed a  total of $50 million for these projects—substantially more than amounts  proposed for similar projects in prior years. FTA proposed 7 projects for funding for the fiscal year 2005 cycle. Most Project Sponsors Proposed a Federal New Starts Share of Less Than 60 Percent, but Some Raised Concerns about FTA’s Push for Lower Federal New Starts Share

FTA instituted a policy favoring projects that seek a federal New Starts  share of no more than 60 percent of the total project cost in fiscal year  2004. FTA’s description of the preference policy in its fiscal year 2005 New  Starts report suggests that this policy is absolute in that projects proposing  more than a 60 percent federal New Starts share will not be recommended  for an FFGA. FTA has agreed to clarify in its  upcoming reporting instructions that this is a general preference policy,  thus allowing for the possibility of exceptions. Administration’s Proposed Fiscal Year 2005 Budget Requests a 15 Percent Increase in New Starts Funding

In its budget proposal for fiscal year 2005, the administration requests $1.5  billion for the construction of new transit systems and the expansion of  existing systems through the New Starts program—an increase of $225  million, or 15 percent, over the amount appropriated for fiscal year 2004. Both  the Senate and House bills contain a number of provisions and initiatives  for the New Starts program. Some of the key provisions of these bills  would (1) streamline the evaluation process for projects under $75 million,  (2) expand the definition of eligible projects, (3) change the ratings  categories, and (4) maintain the maximum federal New Starts share at 80  percent. The project sponsors we interviewed had mixed reactions to  these provisions. In addition, most of the sponsors called for clear  definitions to any changes to the New Starts process. Currently, TEA-21 limits New  Starts funding to fixed-guideway projects. Change the rating categories. Project Sponsors Have Taken Steps to Address Variances in Funding

All 26 projects with existing FFGAs have not received funds as scheduled— that is, the amount of funding appropriated was less than the amount  scheduled in the FFGA. According to FTA, all completed New Starts projects received  the total FFGA amount but not necessarily according to the original FFGA  schedule. As of March 2004, the 26 projects  have received a total of $294 million, or 5 percent, less than the amount  authorized by the projects’ FFGAs. The amount and timing of the differences in funding varied for each  project, but all 26 projects with FFGAs received less than the scheduled  amount at some point. Faced with these variances in funding, project officials we interviewed  have developed methods to mitigate the impact of receiving less than the  scheduled annual amount for their project. According to FTA, its policy  is in response to language contained in appropriations committee reports  and will result in more projects receiving funding by spreading limited  resources among them and ensuring that local governments whose regions  would benefit from the project play a major role in funding such projects. Recommendations for Executive Action

To ensure that FTA’s New Starts evaluation process and policies are  objective, transparent, and comply with federal statute, we recommend  that the Secretary of Transportation direct the Administrator, FTA, to take  the following two actions:   Clearly explain the basis on which it decides which projects will be  recommended for funding outside of FFGAs, such as projects  considered to be meritorious, and what projects must do to qualify for  such a recommendation. Scope and Methodology

To address our objectives, we reviewed the administration’s fiscal year  2005 budget request and legislative reauthorization proposals, the Federal  Transit Administration’s (FTA) annual New Starts reports, records on  funding authorized and appropriated to projects with existing full funding  grant agreements (FFGAs), and federal statutes pertaining to the New  Starts program.
Why GAO Did This Study

The Transportation Equity Act for the 21st Century (TEA-21) and subsequent legislation authorized about $8.3 billion in guaranteed funding for the Federal Transit Administration's (FTA) New Starts program, which funds fixed guideway transit projects, such as rail and trolley projects, through FFGAs. GAO assessed the New Starts process for the fiscal year 2005 cycle. GAO identified (1) the number of projects that were evaluated, rated, and proposed for new FFGAs and how recent changes to the process were reflected in ratings; (2) the proposed funding commitments in the administration's budget request and legislative reauthorization proposals; and (3) the extent to which amounts appropriated since 1998 fulfilled FFGAs.

What GAO Found

For the fiscal year 2005 cycle, FTA evaluated 38 projects, rated 29 projects, and proposed 7 projects for funding. FTA recommended 5 of the 7 projects for full funding grant agreements (FFGAs). FTA considered the remaining 2 projects to be meritorious and recommended a total of $50 million for these projects in fiscal year 2005. However, FTA does not clearly explain how it decides which projects will be recommended for funding outside of FFGAs or what project sponsors must do to qualify for such a recommendation. Last year, in response to language contained in appropriations committee reports, FTA instituted a policy favoring projects that seek a federal New Starts share of no more than 60 percent of the total project cost--even though the law allows projects to seek up to 80 percent--in its recommendation for FFGAs. According to FTA officials, this policy allows more projects to receive funding and ensures that local governments play a major role in funding such projects. FTA describes the 60 percent policy as a general preference; however, FTA's fiscal year 2005 New Starts report suggests that this policy is absolute in that projects proposing more than a 60 percent federal New Starts share will not be recommended for an FFGA. Therefore, FTA agreed to describe the policy as a general preference in future reporting instructions, thus allowing for the possibility of exceptions. Although most of the projects evaluated during the current cycle proposed a federal New Starts share of less than 60 percent of total project costs, some project sponsors GAO interviewed raised concerns about the difficulties of securing the local funding share. However, the overall impact of this policy on projects is unknown. The administration's fiscal year 2005 budget proposal requests $1.5 billion for the New Starts program, a $225 million increase over the amount appropriated for the fiscal year 2004 cycle. Congress is currently considering legislative reauthorization proposals, which contain a number of provisions and initiatives for the New Starts program including streamlining the New Starts evaluation process for projects requesting less than $75 million in New Starts funds, expanding the definition of eligible projects, changing the ratings categories, and maintaining the maximum federal New Starts share at 80 percent of total project cost. Project sponsors GAO interviewed had varying views on these provisions, but most said that clear definitions would be needed for any proposed changes to the New Starts process. All 26 projects with existing FFGAs have not received funds as scheduled--the amount of funding appropriated was less than the amount authorized and scheduled by the FFGA. According to FTA, all completed projects have received the total amount authorized in the FFGAs, but not necessarily according to the original FFGA schedule. As of March 2004, the 26 projects have received a total of $294 million, or 5 percent, less than the amount scheduled by the projects' FFGAs. The amount and timing of differences varied for each project. Project sponsors GAO interviewed have developed methods to mitigate the impact of receiving less than the scheduled annual amount for their project, but these methods can generate additional costs.