Insights on the Federal Transit Administration

Why the FTA should reassess its newly proposed rules for approving major capital grants

The Federal Transit Administration’s (FTA) proposals to modify the rules for approving major capital grants under New Starts and Small Starts programs are ill-advised, for several reasons. First, they are a step toward less rigorous assessment of which projects deserve a portion of limited federal assistance, during an upcoming era of continual federal budget stringency. Second, they will tend to favor projects with a lower average ratio of real transportation benefits to costs than heretofore, thereby undercutting the justification for continuing to fund much of FTA’s budget from highway user tax revenues. Finally, the proposals fail to advance in meaningful ways FTA’s previous emphasis on greater use of bus rapid transit by ignoring several proposed pro-Bus Rapid Transit (BRT) reforms.

Ignoring the Link Between Cost-Effectiveness and the Federal Budget Crisis

The Notice of proposed rulemaking’s (NPRM) proposed changes appear to ignore the changed federal budget context, under which all federal agencies are faced with the potential of across-the-board cuts in discretionary funding in coming years and decades. The federal surface transportation reauthorization bills currently being debated in both houses of Congress are the first such measures since the creation of the federal Highway Trust Fund (HTF) in 1956 to propose no net increase in real federal transportation spending, compared with previous years.

In this kind of fiscal and budgetary environment, the rational response by federal agencies should be to emphasize in their grant programs the greatest bang for the buck. In the case of New Starts and Small Starts, this would mean strengthening, rather than watering down, the cost-effectiveness threshold that proposed projects must meet.

The previous administration’s minimum criterion that a proposed transit project could cost no more than $24 per hour of travel time savings may not have been ideal, but at least it screened out projects that could not demonstrate a reasonable impact on traffic congestion-compared with projects that may be preferred by local officials for non-transportation reasons such as economic development. For FTA to remain as part of the U.S. Department of Transportation, it must be a good steward of the federal transportation dollars provided to it, and not try to duplicate the economic-development missions of other cabinet agencies such as the Department of Housing & Urban Development.

The current FTA cost-effectiveness methodology (i.e., that which it is proposing to replace) nominally retains travel-time savings as part of the measure, but instead of using numbers derived from analysis, makes a number of arbitrary assumptions about related benefits. The revised version proposed by this NPRM is even more arbitrary, ignoring travel-time savings altogether, discarding the use of a baseline for comparison, and using just the annualized operating and capital cost per trip. It even excludes a number of project costs from this calculation, so as to deliberately favor projects that meet other non-transportation goals of this administration.

Most egregiously, the proposed methodology dispenses with, rather than strengthening, the traditionally required alternatives analysis. This is especially troubling, since the FTA-despite rhetorically supporting BRT-has failed to disqualify applicants that have presented alternatives analyses that are rigged against a meaningful BRT alternative. Chapter Five of the Institute for Transportation & Development Policy’s excellent report, “Recapturing Global Leadership in Bus Rapid Transit” provides a number of telling examples showing how the “lenience of federal funding criteria towards dubious rail projects” has been carried out by applicants that essentially “cook the books” by presenting a BRT alternative chosen to be inferior to the locally preferred rail alternative.

The Institute for Transportation and Development Policy (ITDP) points out that currently proposed FTA policy changes that would “include additional environmental or economic development benefits” in project assessment would “weaken the importance of cost-effectiveness” and make the assessment project “even less transparent.” ITDP calls instead for an alternatives analysis that would require a “best-case” BRT alternative, and that would explicitly take into account that for a given investment of dollars, “well-designed BRT alternatives can often provide more one-seat rides and a higher level of public transport service.” It concludes that “Given the incredible fiscal pressure on the United States today, and the shortage of funds for New Starts and Small Starts, . . . FTA should apply even more rigorous cost-effectiveness criteria to New Starts and Small Starts.” This is the opposite of what the NPRM calls for.

Undercutting the Transportation Justification for FTA-Supported Capital Projects

The timing of the NPRM could not have been worse, from the standpoint of continued congressional support for FTA funding. More or less simultaneously with the publication of the NPRM in the Federal Register, the House majority embraced a reauthorization bill that would end the funding of most of FTA’s budget from highway user tax monies deposited in the Highway Trust Fund. While this proposal was unlikely to be supported in the Senate (and may not command a majority vote in the House), it is nevertheless unprecedented. Never before in the 30-year history of the Mass Transit Account has there been a serious move in Congress to shift FTA’s funding to the federal general fund.

Yet the kinds of changes proposed in the NPRM provide strong ammunition for those who contend that FTA is morphing from a transportation agency into a smart-growth/economic-development agency. The long-standing rationale for spending money that has always been called “highway user tax revenues” on non-highway forms of transportation is that the provision of well-run urban transit helps not only its riders but motorists, too. There is a direct connection between using travel-time savings as a key cost-effectiveness criterion for transit capital projects and the rationale that transit also benefits highway users.

However, the whole thrust of the NPRM’s changes is to downplay transit attributes that benefit motorists in favor of economic development, livability, and social equity. This is spelled out in great detail in the NPRM’s sections on Economic Development and Environmental Benefits. But it is also reflected in the changes proposed under Cost Effectiveness and Operating Efficiencies. For example, the NPRM explains that under the current approach based on transportation system user benefits, “projects that involve longer trips are advantaged, because there is more of an opportunity to save time. The revised measure values all trips equally, whether short or long.” Thus, a local streetcar that has a lower cost per (3-block) average trip would be favored over a BRT project featuring an equal number of daily (15-mile) average trips at a slightly higher cost per trip. The latter would have a much greater impact on traffic congestion than the streetcar (which might actually add to the congestion on city streets). Thus, the NPRM’s approach seriously undercuts the historic rationale for motorists to accept the diversion of 20 percent of their gas taxes to transit.

The FTA’s new approach could well do more for smart growth and economic development than prior approaches based largely on travel time savings. But adopting this approach further undermines the already weak case for using highway user tax revenue to support transit.

Missing the Opportunity for Pro-BRT Reforms

As FTA itself has pointed out under both this administration and its predecessor, there is considerable potential for FTA to obtain more transportation bang for the buck by investing more of its capital funding in well-thought-out BRT projects than in streetcars and most of the remaining light-rail projects now contending for funding. A more rigorous alternatives analysis requirement and a major emphasis on travel time savings are prerequisites for such an approach. As noted previously, the ITDB has made several suggestions that a serious BRT alternative be required in every transit capital alternatives analysis. Given that many jurisdictions seem inclined to rig their alternatives analysis to favor what ITDP has called “dubious” rail projects, an alternative might be for FTA itself to commission independent “best case” analyses of BRT alternatives. For New Starts project over a certain budgetary size, independent BRT consultants could be commissioned by FTA to propose and analyze a BRT alternative requiring the same amount of New Start dollars as the applicant is requesting. Both the locally preferred rail project and the best-case BRT project would then be assessed on a number of criteria to see which delivers better value for the same amount of money.

Several other FTA policy changes could also make BRT a more attractive alternative to transit agencies:

  1. Change the current FTA requirement that for BRT projects, at least 60 percent of the guideway must consist of bus-only capacity. This requirement should be waived for cases where the BRT buses would operate in variably-priced mixed-traffic lanes (also known as “managed lanes”), which are the virtual equivalent of bus-only lanes in terms of bus speeds and travel-time reliability.
  2. Consistent with the above, FTA’s current funding formula that includes in a transit agency’s total of “fixed guideway miles” high occupancy vehicle (HOV) lanes and former HOV lanes converted to high occupancy toll (HOT) lanes should be expanded to include HOT lanes that result from new construction (i.e., lane additions). There is no functional difference, as far as bus performance is concerned, between a HOT lane created via HOV conversion and a HOT lane created from the outset as that type of lane.
  3. Finally, to the extent that transit agencies desire to partner with other transportation providers (state Departments of Transportation, local or state toll authorities, or companies developing facilities under long-term concession agreements) to create new HOT lane capacity for the purpose of expanding BRT operations, FTA should permit New Start grant funds to be used by such transit agencies as their portion of a shared investment in new HOT lanes (as long as the transit agency secures by contractual agreement a share in any net toll revenues proportional to its share of the capital investment in the new lanes). This concept is currently being developed in a federally funded “Bus Toll Lanes” study being carried out jointly by Hillsborough Area Regional Transit (HART) and the Tampa Hillsborough Expressway Authority (THEA) in Tampa, Florida.


For the reasons set forth above, the Secretary of Transportation should reject in their entirety the policy changes set forth in this NPRM. He should direct FTA to go back to the drawing board, rethinking their approach to major capital investment projects in light of these points.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation.