Changes to the New Starts Process for Fiscal Year 2004 Have Caused Difficulties for Some Project Sponsors

FTA implemented two changes to the New Starts process for fiscal year  2004. First, in response to language contained in a conference report  prepared by the House Appropriations Committee, FTA instituted a  preference policy in its ratings process favoring current and future projects  that do not request more than a 60 percent federal share. Second, FTA  revised its cost-effectiveness and mobility improvements criteria by  adopting a Transportation System User Benefits (TSUB) measure that gives  equal weight to benefits for both new and existing transit system riders. Furthermore, explicitly stating all of FTA’s  criteria and procedures in regulations would help to ensure that project  sponsors, Metropolitan Planning Organizations, and others involved in  considering potential New Starts projects were fully aware of FTA’s  preference policy and could make their investment decisions on the basis  of a transparent evaluation and ratings process. As a result, many projects experienced difficulties that prevented them  from calculating an acceptable value for the TSUB measure. These contractors provided technical support  to all affected project sponsors and assisted some sponsors in correcting  the underlying problems identified in their local travel forecasting models. The budget proposal also contains three  initiatives—reducing the federal share to 50 percent, allowing nonfixed  guideway projects to be funded through New Starts, and replacing the  “exempt” classification with a streamlined ratings process for projects  requesting less than $75 million in New Starts funding. Administration’s Proposed Fiscal Year 2004 Budget Requests 25 Percent Increase in New Starts Funding

The administration’s budget proposal for fiscal year 2004 requests that  $1.5 billion be made available for the construction of new transit systems  and expansion of existing systems through the New Starts program—an  increase of $0.3 billion, or 25 percent over the $1.2 billion appropriated for  fiscal year 2003. However, a reduction in the federal share may  adversely affect some future projects. These sponsors  said that a reduced federal share may make it more difficult for  communities to participate in the New Starts program because they will  have to provide an increased local share. Because FTA has not revised its regulations to reflect its 60  percent preference policy, transit sponsors, other members of the transit  community, and the public may not be fully aware of FTA’s preference  policy and have not had the opportunity to formally comment on it. To  identify any issues related to those changes, we interviewed  FTA officials and contractors hired by FTA to implement those changes;  11 of the 52 sponsors of fixed guideway transit projects being  considered for New Starts funding in fiscal year 2004; Metropolitan Planning Organization (MPO) officials involved in 5 of the  projects whose sponsors we interviewed; and  transit industry officials, including senior officials at the American  Public Transportation Association and the Chair of the New Starts  Working Group—an organization of New Starts project sponsors, MPOs,  and private transit industry firms, who advocate improvements to the  New Starts evaluation and ratings process.
Why GAO Did This Study

Under the Transportation Equity Act for the 21 st Century (TEA-21), Congress authorized federal funding for New Starts fixed guideway transit projects--including rail and bus rapid transit projects that met certain criteria. In response to an annual mandate under TEA-21, GAO assessed the New Starts evaluation and ratings process for the fiscal year 2004 cycle, including (1) changes to the process and any related issues and (2) any challenges related to New Starts initiatives contained in the administration's fiscal year 2004 budget proposal.

What GAO Found

FTA made two changes to the New Starts evaluation and ratings process for the fiscal year 2004 cycle. First, in response to language contained in a conference report prepared by the House Appropriations Committee, FTA adopted a 60 percent preference policy, which in effect, generally reduced the level of New Starts federal funding share for projects from 80 percent to 60 percent. Because FTA has not revised its program regulations to reflect this change, transit agencies, project sponsors, and the public did not have an opportunity to formally comment on the change. Explicitly stating its criteria and procedures in regulation would allow those involved in considering potential projects to make their investment decisions on the basis of a transparent process. Second, FTA revised some of the criteria used in the ratings process to include a new Transportation System User Benefits measure. Project sponsors GAO interviewed said that the measure was an improvement over the previous benefits measure because it considers benefits to both new and existing transit system riders. However, many project sponsors experienced difficulties in generating a value for the measure for a number of reasons, such as problems with their local forecasting models. FTA officials are working closely with project sponsors to correct these problems, but more guidance may be necessary to avert similar difficulties in the future. The administration's fiscal year 2004 budget proposal requests that $1.5 billion be made available for New Starts for that year, a 25 percent increase over fiscal year 2003. The budget proposal contains three initiatives--reducing the federal share to 50 percent, allowing certain nonfixed guideway projects to be funded through New Starts, and establishing a streamlined ratings process for projects requesting less than $75 million in New Starts funding. These initiatives may allow FTA to fund more projects and give local communities flexibility in choosing among transit modes. However, they may also create challenges for some future transit projects, such as difficulties in generating an increased local funding share or a reduction in the number of smaller communities that will participate in New Starts.