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Final New Starts / Small Starts Regulation

Reconnecting America has released two documents related to the Federal Transit Administration's New Starts / Small Starts final rule and proposed policy guidance. The first is a broad overview of key features of the rule, along with a set of Frequently Asked Questions (FAQs). The second provides a detailed look at the changes to the project justification criteria and FTA's new methodology for evaluating and rating projects. (The text of the documents appear below. Links to download the documents appear at the bottom of this page.) 

Overview of the Final New Starts / Small Starts Regulation

The Federal Transit Administration’s (FTA) New Starts and Small Starts program represents the federal government’s most significant source of funding for new rail and bus rapid transit projects.  In partnership with local communities – which typically provide about half of projects’ funding - the program has supported construction of dozens of new transit systems across the country, which have produced significant economic and mobility benefits.  The program is highly competitive, and projects are selected for funding only after a rigorous evaluation by FTA.  However, over the last decade the process for seeking New Starts funding has become increasingly cumbersome, raising project costs and adding months or even years to project schedules.

With limited federal resources to support these projects, it is important for the New Starts/Small Starts evaluation process to elevate those projects which will provide the greatest return on the investment without burdening applicants with needlessly complex requirements.  FTA’s recently issued rule supports this goal: 

  • More straightforward evaluation measures are intended reduce the cost and time of the New Starts process.  For example, the new rule uses the common-sense measure of “trips taken on the project” to determine the project’s mobility improvements.  The old measure, transportation system user benefits (TSUB) – also known as travel time savings - had proven difficult to implement in practice, and project sponsors often spent considerable time and money calculating it in a way that would be satisfactory to FTA.  In addition, TSUB favored projects with longer routes (on which more travel time could be saved), while “trips taken on the project” does not have an inherent bias toward one type of transit investment over another.
  • More meaningful evaluation measures are designed to provide a better bang for the buck.  Although the law has long required FTA to consider a project’s environmental benefits when deciding whether to award New Starts funds, until the new rule was issued, FTA’s review of environmental benefits looked only at whether a project was located in an air quality attainment or non-attainment area.  Projects located in an attainment area were automatically rated “medium,” and those in non-attainment areas were automatically rated “high” – hardly a meaningful way of distinguishing among projects.  Under the new rule, FTA will consider four different elements of projects’ projected environmental benefits - air quality, greenhouse gas emissions, energy savings, and safety – and will compare those benefits to the project’s cost.  This change will generate a much more comprehensive picture of the environmental impact of a proposed project.
  • Integration of affordable housing with New and Small Starts projects will support increased ridership for the transit system and economic benefits for the community.  Low-income households are more likely to ride transit if it is available to them, leading to a stronger and more stable ridership base for new transit projects.  Providing low-income households with low-cost access to jobs and services also reduces the need for public subsidies for food, healthcare, and other essentials.  FTA’s new rule considers communities’ affordable housing plans and policies as part of the New Starts and Small Starts evaluation process, which will lead to better project planning and outcomes.

Frequently Asked Questions

When does the new rule go into effect?

The rule will go into effect, as published, on April 9, 2013. It is FTA’s intention to publish final policy guidance on that date as well.  Comments on the proposed policy guidance are due on March 11, 2013.

Will any projects still be covered by the old rules?

Projects already approved into final design (New Starts) or project development (Small Starts) will continue under the old rules.  For projects in preliminary engineering, FTA will work with individual project sponsors to help them determine whether they are covered by the new rule or the old rule, based primarily upon where they are in the NEPA process.

What elements of the New Starts / Small Starts program are covered by the new rule?

The new rule and accompanying policy guidance lays out the methodology FTA will use to evaluate the merits of proposed projects.  The rule does not address the process for project development, to which MAP-21 made some significant changes.  It also does not include other changes made by MAP-21, including:

  • the process for evaluating “core capacity” projects, a new type of project made eligible by MAP-21
  • the process for evaluating “programs of interrelated projects”, a new category of projects under MAP-21
  • details of the new law’s pilot program for expedited project delivery
  • a process for expedited review for sponsors of successful past projects, as required in the new law

How does the new rule address affordable housing near transit?

The new rule considers affordable housing under two of the project justification criteria evaluated by FTA (there are six project justification criteria in total, each of which receives equal weight under the proposed policy guidance).  The “economic development” criterion considers the potential economic development impact of proposed projects, including whether there are plans and policies in place to preserve and create affordable housing.  The “land use” criterion considers the amount of affordable housing in existence today in the area to be served by the project.  Higher levels of existing affordable housing, and robust plans and policies for future affordable housing, will help proposed projects achieve higher scores.

How does the new rule address transit-dependent individuals?

The new rule considers transit-dependent individuals in the calculation of “mobility benefits,” one of the six project justification criteria enumerated in law.  Mobility benefits are calculated as the number of trips projected to be taken on the project.  The project sponsor can choose whether to calculate trips using a standard model that FTA will be making available in Spring 2013, or using their own local travel forecasting models.  In either case, a trip by a transit-dependent individual counts twice, while all other trips count only once.  In FTA’s standard model, a transit-dependent individual is an individual from a household that does not own a car.  In local travel forecasting models, a transit-dependent individual is typically defined as either an individual from a household that does not own a car (as will be the case in FTA’s standard model), or an individual from the lowest income group.

How does the new rule change the way FTA evaluates the environmental benefits of projects?

The law requires FTA to evaluate the environmental benefits of proposed transit projects as one of the six project justification criteria.  Today, the environmental benefits review is a simple “check-the-box” exercise: if a project is located in a non-attainment area for air quality, the project receives a “high” rating for environmental benefits.  If the project is in an attainment area, it receives a “medium” rating.

FTA is proposing to transform the environmental benefits criterion into a meaningful measure of a project’s actual impact on various environmental elements.  The measure FTA is proposing will not increase the burden on project sponsors, as the only data project sponsors will need to provide is the number of trips that will be taken on the project, which they will already have calculated for the mobility benefits criterion.  FTA will develop a spreadsheet that will:

1)    translate the number of trips into an estimate of highway and transit VMT reduction

2)    translate the VMT reduction into changes in:

  1. air-pollutant emissions
  2. greenhouse gas emissions
  3. transportation energy use
  4. safety

3)    and finally, translate those changes into dollar values (changes in non-attainment areas would be worth more than changes in attainment areas).

The dollar values of environmental changes would be compared to the cost of the project (or, for Small Starts, to the federal share of the project’s cost).

How does the new rule change the way FTA evaluates the cost-effectiveness of projects?

FTA is required by law to evaluate the cost-effectiveness of proposed transit projects.  FTA measures cost-effectiveness by comparing the mobility benefits of a project to its costs.  Under the new rule, mobility benefits will be measured in terms of “trips taken on the project” rather than “travel time savings”; as a result, cost-effectiveness will be measured by comparing trips taken on the project to its cost.  This is consistent with MAP-21’s requirement that cost-effectiveness be measured in terms of cost per rider.  (Note: while trips taken by transit-dependent individuals will count double for purposes of the mobility benefits measure, they will not get extra weight for purposes of the cost-effectiveness measure.) 

The other key change to the cost-effectiveness measure is that for the first time, FTA will allow project sponsors to subtract certain project costs from the total cost of the project.  These costs, called “enrichments,” are for elements that are not required to achieve the mobility goals of the project but rather foster economic development or environmental benefits.  Enrichments can include artwork, landscaping, pedestrian and bicycle improvements, sustainable building design elements (up to 2.5% of facilities’ cost), 50% of the cost of clean fuel buses, and joint development costs.  In the past, project sponsors have often not included these elements in their projects because doing so would increase project costs without increasing mobility benefits, and therefore would lower projects’ cost-effectiveness ratings.  By subtracting “enrichments” from the cost side of the equation, FTA proposes to remove a disincentive to include these project elements at the time of design and construction, which is often much cheaper than retrofitting the project years later to include them.

Finally, in accordance with MAP-21’s requirement, cost-effectiveness of Small Starts projects will be evaluated by comparing their mobility benefits to the federal share of the project costs, not to the total project cost.  For purposes of this evaluation, federal share includes all federal funding being used for the project, not just Small Starts funding.

How does the new rule affect the Small Starts program?

Under the previous law, Small Starts projects were evaluated according to a streamlined process and set of criteria.  MAP-21 requires Small Starts projects to be rated on the same six project justification criteria as New Starts projects.  Since the rule streamlines and simplifies the criteria, the expectation is that MAP-21’s change will not significantly increase the burden on Small Starts applicants.  Small Starts evaluations will also differ from New Starts evaluations as follows:

  • MAP-21 requires evaluation of Small Starts project costs to consider only the federal share, not total costs
  • local financial commitment is evaluated at opening year, not on a 20-year horizon as it is for New Starts
  • expedited financial review is possible for Small Starts projects where costs are below a certain percentage of the sponsor’s annual budget

Does the new rule affect the eligibility of bus rapid transit (BRT) for New Starts and Small Starts funds?

The new rule reflects MAP-21’s changes regarding BRT and the New Starts / Small Starts program.  Under previous law, BRT projects were eligible for New Starts funding only if they ran on a dedicated right-of-way for 100% of their route.  Under MAP-21, BRT projects are eligible for New Starts funding as long as they run on a dedicated right-of-way for at least 50% of their route.  In addition, MAP-21 specifies other features that the BRT system must have to ensure that it operates in a manner similar to a rail system.  MAP-21 did not change the eligibility of BRT projects for Small Starts funding.  The new rule follows the changes in MAP-21, and FTA intends to provide further guidance about BRT project eligibility in future policy guidance.

When can core capacity projects begin to apply for New Starts funds?

Because core capacity projects (projects to expand capacity on existing transit lines) were added to the New Starts program in MAP-21, core capacity projects were not covered in the proposed New Starts rule, since it was issued prior to MAP-21’s passage. FTA cannot include items in the final rule that were not included in the proposed rule.  FTA plans to issue a proposed rule in the future that will cover the evaluation process for core capacity projects.  FTA is encouraging potential core capacity project sponsors to refrain from applying for New Starts funds until that rulemaking is complete.

How does the new rule simplify the New Starts application process?

The new rule simplifies the application process in several ways.  First, the rule simplifies the calculations needed to measure mobility by eliminating the old measure of “transportation system user benefits” in favor of the more straightforward “trips on the project.”  In addition, FTA is no longer requiring project sponsors to compare their projects’ performance to an artificially constructed alternative package of smaller-scale projects, but rather to the existing transportation system.  This change could shave months off the application process as project sponsors will no longer have to spend time developing the details of a package of hypothetical smaller-scale projects that are only used as a basis for comparison.

FTA is also emphasizing that they plan to develop a system of warrants, which is a mechanism by which a project can get an automatic rating based on project or corridor characteristics, without having to provide detailed projections of project performance.  However, FTA has not yet issued guidance describing the circumstances in which warrants will be used.

What types of projects will do better under the new rule?

The answer to this question is not yet clear, and will likely require several years of project evaluations under the new measures to determine what the impact is.  Some types of projects will likely do better under some of the new metrics than they would under the old, but we cannot tell yet whether that will translate into a higher overall project rating: it is important to remember that projects will still be rated on six project justification criteria, so doing better on one or two measures may or may not equate to a higher rating overall, especially if they do not do as well on other measures.

Still, it is useful to understand how particular changes may help certain types of projects. The changes in how FTA will measure mobility benefits, environmental benefits, and cost-effectiveness, in particular, seem likely to benefit certain types of projects.

Regarding mobility benefits, the old evaluation measure focused on travel time savings.  That measure generally favored projects with a longer route, as those projects provide more of an opportunity for riders to save time.  The proposed change to “trips taken on the project” treats longer and shorter projects equally: the number of trips taken on a project does not depend solely on how long the project is, but rather on a variety of factors, including density at stations, connections to key destinations, and frequency of service (just to name a few).  Travel time savings is still a factor in that projects that save riders time will likely garner more riders, but it is no longer the only factor considered.  As a result, projects with shorter routes, such as streetcars, will likely do better under the new measure of mobility benefits than they did under the old measure.  Also, since the number of trips taken on the project replaces travel time savings for purposes of the cost-effectiveness calculation as well, shorter projects should do better on cost-effectiveness under the new rule.

The new rule changes the environmental benefits measure from a simple “check-the-box” exercise (is the project inside or outside of a non-attainment area) to a more comprehensive review of several different environmental impacts.  The extent of the environmental impacts is determined by first calculating how much the proposed project will reduce vehicle miles traveled (VMT).  The focus on VMT change benefits two types of projects: those with longer routes and those that attract more new riders.  When a rider chooses to use a transit project with a long route, more VMT is saved than if the same person used a transit project to travel a shorter distance.  Similarly, a project that shifts more people to transit from single-occupancy automobile travel reduces more VMT than a project that primarily provides better service for existing transit riders.  Therefore, projects in transit-dependent areas, where many riders already use transit, may not fare as well on the new measure.  However, projects that serve a highly transit-dependent population could potentially fare better on the new measures for mobility benefits, cost-effectiveness, and economic development.

The new rule also changes the time horizon on which projects are judged.  The old rules required project sponsors to submit projections of their projects’ performance 20 years into the future.  The new rule requires project sponsors to submit only current year data.  If a project sponsor chooses, it can also submit projections for 10 or 20 years in the future.  If the project sponsor exercises that option, FTA will weight the current year and future year data equally.  There is no option for a project sponsor to submit only future year data, as was the case under the previous rule.  This change could help projects whose benefits will be realized more quickly, such as projects in densely developed areas or projects in corridors with existing transit ridership.

Summary of Project Justification Criteria Changes

Detailed Summary of Project Justification Criteria Changes in the Final New Starts / Small Starts Rule

On December 27, 2012, the Federal Transit Administration published a final rule and proposed policy guidance covering certain elements of its New Starts and Small Starts capital investment programs.  FTA identified two goals for the rule: to measure a wider range of benefits from transit projects and to streamline the New Starts/Small Starts application process.  Changes intended to measure a wider range of benefits are outlined in the table below.  Streamlining is accomplished by: 

  • reducing the need for comparisons to a baseline
  • allowing the use of warrants (prequalifications based on project or corridor characteristics)
  • using a national model to calculate ridership

Because the original proposed rule was issued prior to passage of MAP-21, the final rule does not include several changes made by the new law, such as:

  • a methodology for evaluating the new “congestion relief” criterion
  • the process for evaluating “core capacity” projects
  • the process for evaluating “programs of interrelated projects”
  • details of the pilot program for expedited project delivery
  • a process for expedited review for sponsors of successful past projects
  • changes to the application process resulting from the elimination of alternatives analysis and reduction in the number of points at which FTA rates projects
  • details for how and when warrants will be applied.

While MAP-21 retained the Small Starts program, the new law requires Small Starts projects to be rated on the same six project justification criteria as New Starts projects.  Small Starts evaluations will still differ from New Starts evaluations as follows:

  • MAP-21 requires evaluation of Small Starts project costs to consider only the federal share, not total project costs
  • local financial commitment is evaluated at opening year, not on a 20-year horizon
  • expedited financial review is possible for projects where costs are below a certain percentage of the sponsor’s annual budget

While this document is focused on changes to the project justification criteria, the rule makes changes to the local financial commitment evaluation as well.  Local financial commitment is modified by combining capital and operating condition into a single factor (currently they are considered separately).  Overmatch (when a sponsor provides more than 50% local share) raises the rating one level, but sponsors are not penalized for providing less than 50% local share.  Following MAP-21’s language, the rule requires “consideration of private contributions” in the review of local funding commitment for New Starts projects.

The rule as published and final policy guidance will go into effect April 9, 2013.  Projects already approved into final design (New Starts) or project development (Small Starts) will continue under the old rules.  For projects in preliminary engineering, FTA will work with individual project sponsors to help them determine whether they are covered by the new rule or the old rule, based upon where they are in the NEPA process.

New Starts/Small Starts Final Rule – Project Justification Criteria

 

**The new evaluation under the final rule is the same as that in the proposed rule except for items in bold

**Items proposed in the policy guidance are in italics

 

Criterion

Old Evaluation

Old weight

New Evaluation

New weight

Comments

Mobility improvements

Transportation system user benefits (TSUB) per passenger mile on the project, with additional credit for transit-dependent trips

TSUB = measurable change in travel time, compared to a baseline alternative, over a horizon of 20 years, generally referred to as “travel-time savings”

Baseline alternative = the best that can be done without a major capital investment in new infrastructure

Trips are estimated based on local or regional travel forecasting models

 

20%

Total “linked” trips on the project, with each trip by a transit-dependent individual counted twice.

A “linked” trip is a trip made on the project whether or not the rider boards or alights on the project or elsewhere in the transit system.

No comparison to a baseline is required.

FTA will develop a national model for estimating project trips using census data and actual ridership experience.  If a project sponsor chooses, they can estimate trips using local travel forecasting models instead of FTA’s model.

Project sponsors can estimate trips for the current year only, or for the current year and the horizon year (10 or 20 years out¸ at the sponsor’s discretion).  If they choose to do both the current year and the horizon year, trips will be based on the weighted (proposed to be 50%/50%) average of current-year and horizon-year.

In FTA’s national model, transit-dependence will be defined as households that do not own a car; if a project sponsor uses local models instead of FTA’s national model, transit-dependence will be either zero-car households or the lowest income level, whichever is used in the local model.

16.66%

The current measure’s focus on travel-time savings benefits longer projects, which provide more of an opportunity to save time.  The proposed change to number of trips on the project would treat longer and shorter projects equally.

The current requirement for comparison to a baseline alternative requires significant expenditures of time on reaching agreement with FTA on the appropriate baseline.  The proposed elimination of the baseline alternative would reduce the amount of time project sponsors would need to spend on the application.

Using a national ridership model and requiring only current year ridership estimates should also reduce time needed in the application process, as FTA will no longer need to review local travel models (unless a sponsor chooses to use local models rather than the national model).

Environmental benefits

Projects located in a non-attainment area for air quality receive a “high” rating; projects located in an attainment area receive a “medium” rating

10%

Quantified by measuring dollar value of changes in:

(1)   Air-pollutant emissions, estimated using changes in VMT as a result of the project

(2)   Greenhouse gas emissions, estimated using changes in VMT

(3)   Transportation energy use (only benefits of reduced reliance on fuel, not emissions-related benefits), estimated using changes in VMT

(4)   Safety changes (transportation fatalities and injuries) estimated using changes in VMT and transit-passenger miles

compared to the annualized capital and operating cost of the proposed project  minus enrichments for New Starts, or to the annualized federal share for Small Starts projects.  Comparison would be to the existing environment in the current year, or at the option of the project sponsor, to the current year and the no-build environment in the horizon year.

If a sponsor prepares a forecast based on a 10-year horizon, the point of comparison is the current transportation system plus projects in the TIP.  If the sponsor prepares a forecast based on a 20-year horizon, the point of comparison is all projects included in the fiscally constrained long-range transportation plan.

FTA will develop a spreadsheet with standard conversion factors to calculate the dollar values of the elements above.  FTA’s spreadsheet will convert project trips (calculated under the mobility benefits criterion) into VMT reduction, but project sponsors may choose to calculate VMT reduction from local travel forecasting models instead.

FTA’s spreadsheet will monetize benefits so that those gained in a non-attainment area would be worth more than those gained in an attainment area.

FTA will estimate highway and transit VMT change based on transportation system users changing modes (“first-order effects”), not based on changing land-use patterns or higher densities (“higher-order effects”), although the optional scenario analysis in the economic development criterion would allow a project sponsor to consider these higher-order effects.

Changes in public health would be considered once better methods for calculating those effects are developed.

16.66%

The key changes are to include multiple measures of environmental benefits and to compare them to the cost of the project.  This is designed to capture more of the potential benefits of transit projects, and by comparing the benefits to the costs, to get a more useful measure for comparison across different projects.

The focus on VMT change would benefit projects that attract new riders or have longer routes.  Projects in transit-dependent areas would likely have less VMT reduction (but could potentially fare better on mobility, cost-effectiveness, and economic development criteria).

 

Cost effectiveness

Measured by changes in annualized capital and operating cost of the project per hour of travel time savings, compared to a baseline alternative

20%

Incremental cost per trip on the project. 

Trips would be calculated under mobility benefits, except that trips by transit-dependent individuals will not receive extra weight for this criterion.

Costs include:

(1)   for New Starts: Annualized cost of the project, including changes in capital, operating, and maintenance costs compared to the existing system, or at the project sponsor’s option, to the existing system in the current year and the no-build system in the horizon year, minus the costs of “enrichments”

(2)   for Small Starts: annualized federal share of the project (where federal share includes all federal funds, not just Small Starts funds)

The project sponsor may prepare only current year forecasts, or current and horizon-year forecasts (as in the environmental benefits criterion).

“Enrichments” are costs for elements that are not required for mobility but rather foster economic development or environmental benefits: artwork, landscaping, pedestrian and bicycle improvements, sustainable building design elements (up to 2.5% of facilities’ cost), 50% of the cost of clean fuel buses, and joint development costs.

Annualized capital costs will have a discount rate of 2% rather than 7% to better reflect the long-term nature of these assets.

16.66%

 

 

MAP-21 requires FTA to measure cost-effectiveness as “cost per rider,” which was consistent with the proposed rule

MAP-21 requires evaluation of Small Starts project costs to include only the federal share, not total project cost

The proposed rule used the term “betterments,” which was changed to “enrichments” in the final rule.

By subtracting “enrichments” from the cost side of the equation, FTA proposes to remove a disincentive to include these project elements, which can have a direct effect on the success of the project as a catalyst for economic development.

FTA intends the list of enrichments in the proposed policy guidance to be an exclusive list.  They do not plan to allow project sponsors to request additional types of enrichments on a case-by-case basis.

Economic development effects

Qualitative assessment of the transit-supportive plans and policies in place and demonstrated performance and impact of those policies.

20%

Qualitative assessment with an optional quantitative measure of likely future development outcomes resulting from the project

Qualitative assessment continues the old evaluation method and adds consideration of the social equity impacts of projects by examining plans and policies in place to maintain or increase affordable housing in the corridor.

Quantitative measure (at the project sponsor’s option) includes indirect changes in VMT resulting from changes in land use (improved accessibility), with the resulting environmental benefits calculated, monetized, and compared to the annualized capital and operating cost of the project for New Starts projects, and to the annualized federal share for Small Starts projects.  Quantification would involve examining the economic conditions in the corridor, mechanisms by which the project would improve those conditions, availability of land in station areas for development and redevelopment, and a pro forma assessment of the feasibility of specific development scenarios.

16.66%

 

FTA focuses this measure on the likelihood of the project fostering development, rather than attempting to forecast how much development will occur.

FTA staff indicated that they based the quantitative measure of economic development effects on monetized environmental benefits due to the lack of available tools to predict future economic impact in quantifiable terms.  They are open to adding measures, e.g., a measure of agglomeration benefits, once such measures are developed.

Land use

Existing population and employment density, parking supply, and facilities for pedestrians

20%

Similar to old evaluation, with the addition of the amount of affordable housing currently in the corridor

Affordable housing includes “legally binding affordability restricted” housing, which would be evaluated by comparing such housing in the project corridor with the region’s share overall of such housing.

16.66%

 

The final rule uses the term “affordable housing” rather than “publicly supported housing” as in the NPRM to ensure that consideration is given to more than just federally-supported public housing.

Operating efficiencies

Change in operations and maintenance cost per passenger mile compared to the existing transit system in the current year, or the baseline transit system in the horizon year.

Passenger mile = number of passengers multiplied by annual revenue miles.

10%

This criterion was deleted by MAP-21

 

 

 

 

Congestion Relief

N/A

-

New criterion added by MAP-21.  Evaluation methodology will be addressed in future rulemaking.  Until then, all projects will receive a “medium” rating on this criterion.

16.66%

 

Other factors

 

 

MAP-21 removed the Secretary’s discretion to consider other factors

 

 

Additional notes:

  • The final rule requires project sponsors to report the number of domestic jobs related to design, construction, and operation of the project, though these will not factor into the evaluation of the project.
  • Breakpoints - the thresholds at which projects are given particular ratings on a scale of low, low-medium, medium, medium-high, and high – are published in proposed policy guidance accompanying the rule.
  • FTA will issue a subsequent rulemaking to consider how to roll up the project justification rating and the local financial commitment rating into an overall rating for New Starts projects.  Until then, FTA will continue weighting both project justification and local financial commitment at 50%, and requiring at least a medium rating on both to obtain a medium or better rating overall.