FTA New Starts

Since enactment of the Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991, the Federal Transit Administration (FTA) has funded more than 30 New Starts projects.

This article reviews the New Starts that were funded under ISTEA and the Transportation Equity Act for the 21st Century (TEA-21) through early 2001. It also offers observations on reauthorization of TEA-21 in 2003.

The FTA’s Section 5309 New Starts program provides capital funding for the development of new fixed guideway transit systems and extensions to existing systems. New Starts funds are allocated on a discretionary basis. Federal funding decisions are made jointly by the administration and the Congress through a four-step process:

•               Projects are authorized in laws enacted by Congress and signed by the president;

•               Each year, FTA evaluates those projects that are in final design and preliminary engineering and assigns a rating of “highly recommended,” “recommended” or “not recommended” based on project readiness, project justification, local financial commitment and other factors;

•               Once an authorized and recommended project reaches final design, FTA and the grantee may enter into a Full Funding Grant Agreement (FFGA) under which FTA agrees to seek New Starts funding for the project through the appropriations process and the grantee agrees to build the project; and

•               Congress then appropriates the funds each year.

Growth in number of projects

The number of projects seeking New Starts funding has grown dramatically under ISTEA and TEA-21. Before ISTEA, there were less than 10 New Starts projects covered by FFGAs. By early 2001, there were 26. Thirteen of these agreements were signed in 2000 and early 2001. Meanwhile, the number of projects with pending or proposed FFGAs, plus other projects in Final Design and Preliminary Engineering, grew from 15 in 1994 to 42 in 2001. 

In 2001, FTA reported that it was tracking over 110 planning studies that were considering fixed guideway transit investments, with a total cost of around $60 billion. This is more than twice the number of planning studies the agency was tracking in 1994.

Characteristics of the FFGA projects

Fourteen of the FFGAs promised funds to extend existing lines, while eight provided funds for new lines on existing fixed guideway systems. Just five of the FFGAs led to the construction of new fixed guideway systems where such systems did not already exist.

Five of the FFGAs involve the reconstruction or rehabilitation of existing rail systems: Secaucus Transfer in New Jersey; MARC Extension in Maryland; Tri-Rail Commuter Rail Upgrade in Florida; Chicago’s Douglas Branch; and Pittsburgh’s Stage II LRT Reconstruction.

While each of these projects might logically have been funded through the Section 5309 Fixed Guideway Modernization program, project sponsors successfully pursued funding through the discretionary New Starts program.

Twenty of the 32 FFGAs, well over half, were for light rail projects. Of the balance, five were for heavy rail, three were for commuter rail and three were for bus projects.

Federal funding share

The New Starts program can fund up to 80% of the capital cost of a project. In practice, however, the average New Starts project receives about half of its funding from the New Starts program.

Because the demand for New Starts funding exceeds the supply of funds available, recent administrations and Congress have urged project sponsors to request less than the authorized 80% share, so that available funds might be distributed to more projects. The Section 5309 share has averaged around 50% over the last 10 years, and has trended lower.

For individual projects, the Section 5309 New Starts has varied considerably from the average. For FFGAs signed during 2000 and 2001, for example, the Section 5309 New Starts share ranged from a low of 19% in Seattle to a high of 80% in Memphis. Five of the 13 FFGAs signed in this two-year period had New Starts shares of less than 50%, while six had New Start shares of more than 60% and four had shares exceeding 70%.

In dollar terms, the amount of Section 5309 New Starts funding has ranged from a low of $59.7 million in Memphis to a high of $1.4 billion in Los Angeles. Eight of the 32 FFGAs committed $500 million or more in Section 5309 New Starts funding.

Since 1997, however, the largest FTA commitment was $525 million, suggesting perhaps the growing demand for New Starts funding has led to an informal cap on the amount that FTA is willing to commit to any single project.

Project sponsors also have been successful in obtaining “other” federal funds for their projects. Over the past decade, close to 10% of New Starts project costs were funded through the Bus and Fixed Guideway Modernization categories of Section 5309, the Section 5307 formula program, the Surface Transportation Program, or the Congestion Mitigation and Air Quality Program. The “other” federal funding share has ranged from 0% in 1998-1999 to 14.1% in 1996-1997. 

Non-federal funding

Non-federal funds have met close to 40% of the cost of the 32 projects. This includes capital funding provided by state and local governments, as well as funding from “other” non-federal sources such as regional port and airport authorities and the private sector. In 2000 and 2001, non-federal funding reached 50% of project costs. While local governments provided the largest proportion of non-federal funding, much of the growth in the non-federal funding share has come from the states. State funding grew from nothing in 1992-1993 to 13.4% in 2000-2001. Of the 13 FFGAs signed in 2000 and 2001, nine projects had some state funding.

Geographic distribution of funds

Most of the major metropolitan areas in the country benefited from the New Starts program during the past decade. Of the largest 25 metropolitan areas in the country, 19 received at least one FFGA. The 10 largest metropolitan areas received 15 of the 32 FFGAs, and 62% of all New Starts funding.

Implications for reauthorization

While funding has grown during the last decade, the mismatch between the supply of funding and the demand for funding remains very large. Meanwhile the kinds of projects that are seeking New Starts funding has grown as well, with new funding requests coming for projects that involve the reconstruction and rehabilitation of existing systems. Reauthorization of TEA-21 in 2003 will contend with this growth in demand.

One option that has been suggested by both the Bush administration and the House Appropriations Committee is to reduce the maximum Section 5309 New Starts share.

The conference committee report accompanying the FY2002 U.S. DOT Appropriations Act addressed the issue as follows:

“While the conference agreement has funded many worthy projects in the New Starts program, there are not sufficient federal resources available to fund even a fraction of the projects under consideration. As a result, the conferees direct FTA not to sign any new full funding grant agreements after September 30, 2002, that have a maximum federal share of higher than 60%.”

The American Public Transportation Association (APTA) has opposed efforts to establish a federal match for transit capital projects that is lower than the match for highway capital projects.

APTA stated, “Federal policy should promote balanced transportation decision-making; a differential federal share is contrary to such balance. The decision to use one transportation solution or another should be based on which project best meets the needs of the community, and not on which is eligible for the highest federal share.”

The New Starts share has already been dropping, and for the program as a whole the share was well below 50% in the last two years. The opportunity to spread the available funds more widely by lowering the share to 60%, or even 50%, is limited. If the 13 FFGAs signed in the 2000-2001 biennium had been capped at 60% from the New Starts program, $3.33 billion of New Starts funding would have been committed to these projects instead of $3.52 billion.

Just over 5% of the total funding might then have been redirected to other projects. Even with a 50% cap, the New Starts commitment would have totaled $3.03 billion.

With a lower Section 5309 share, however, several of the funded projects might not have been feasible, and the benefits of these projects might never have been achieved.

The sponsors of several New Starts projects funded in 2000-2001 are developing other fixed guideway projects without Section 5309 funding. Transit agencies in Portland and San Diego, for example, signed FFGAs during 2000 under which they expect to receive New Starts funds for over 70% of the costs of their federally funded projects. But these agencies also are building other fixed guideway projects without New Starts funding, and the Section 5309 share of their overall programs is much less than 70%. Congress and the administration may consider the impact of a reduced federal share on situations where Section 5309 New Starts funds are being requested for only part of a region’s fixed guideway transit program.     TME