[Federal Register: August 3, 2007 (Volume 72, Number 149)]
[Proposed Rules]               
[Page 43327-43377]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03au07-27]                         


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Part II





Department of Transportation





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Federal Transit Administration



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49 CFR Part 611



 Major Capital Investment Projects; Proposed Rule



Notice of Availability of Proposed Policy Guidance on Evaluation 
Measures for New Starts/Small Starts; Notice


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 611

[Docket No. FTA-2006-25737]
RIN 2132-AA81

 
Major Capital Investment Projects

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This Notice of Proposed Rulemaking (NPRM) provides interested 
parties with the opportunity to comment on proposed changes to the 
Federal Transit Administration's (FTA's) New Starts program and a new 
proposed Small Starts program category. The new Small Starts program 
category is a discretionary grant program category for public 
transportation capital projects that run along a dedicated corridor or 
a fixed guideway, have a total project cost of less than $250 million, 
and are seeking less than $75 million in Small Starts program funding. 
This NPRM addresses comments on the Advanced Notice of Proposed 
Rulemaking (ANPRM) on Small Starts issued on January 30, 2006 and the 
draft Guidance on New Starts Policy and Procedures issued on January 
19, 2006, and makes proposals for the New Starts and Small Starts 
programs which take into account these comments. FTA is concurrently 
issuing policy guidance for comment that describes the factors and 
measures used in its evaluation process, which are not described in the 
NPRM.

DATES: Comments must be received by November 1, 2007.

ADDRESSES: Written Comments: Submit written comments to the Docket 
Management System, U.S. Department of Transportation, Docket 
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Ave., SE., Washington, DC 20590.
    Comments. You may submit comments identified by the docket number 
(FTA-2006-25737) by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 

Follow the online instructions for submitting comments.
     Web Site: http://dms.dot.gov. Follow the instructions for 

submitting comments on the DOT electronic docket site.
     Fax: 1-202-493-2251.
     Mail: U.S. Department of Transportation, Docket 
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Ave., SE., Washington, DC 20590.
     Hand Delivery: To the Docket Management System; U.S. 
Department of Transportation, Docket Operations, M-30, West Building 
Ground Floor, Room W12-140, 1200 New Jersey Ave., SE., Washington, DC 
20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
Holidays.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
notice. For detailed instructions on submitting comments and additional 
information on the rulemaking process, see the Public Participation 
heading of the Supplementary Information section of this document. Note 
that all comments received will be posted without change to http://dms.dot.gov
 including any personal information provided. Please see the 

Privacy Act heading under Supplementary Information.
    Docket: For access to the docket to read background documents or 
comments received, go to http://dms.dot.gov at any time or to the 

Docket Management System (see ADDRESSES).

FOR FURTHER INFORMATION CONTACT: Ron Fisher, Office of Planning and 
Environment, telephone (202) 366-4033. FTA is located at 1200 New 
Jersey Ave., SE., East Building, Washington, DC 20590. Office hours are 
from 9 a.m. to 5:30 p.m., Monday through Friday, except Federal 
holidays.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 10, 2005, President Bush signed the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act--A Legacy for Users 
(SAFETEA-LU). Section 3011 of SAFETEA-LU made a number of changes to 49 
U.S.C. 5309, which authorizes the Federal Transit Administration's 
(FTA's) fixed guideway capital investment grant program known as ``New 
Starts.'' This Notice of Proposed Rulemaking (NPRM) implements those 
changes and proposes a number of other changes that FTA believes will 
improve the New Starts program.
    In addition to the changes made to the New Starts program, SAFETEA-
LU amended 49 U.S.C. 5309 to add a new capital investment program 
category for projects requesting less than $75 million in Section 5309 
Capital Investment funds and having a total project cost of less than 
$250 million. That new capital investment program, which will be 
referred to as the ``Small Starts'' program, is the other subject of 
this NPRM. Based on comments received on this NPRM, FTA plans to issue 
a final rule in the future that will finalize the proposed changes to 
the existing New Starts program, as well as proposed rules for the 
Small Starts program.
    This NPRM is the culmination of two public involvement initiatives 
for the New Starts and Small Starts programs--the Small Starts Advance 
Notice of Proposed Rulemaking (ANPRM) (71 FR 4864, Jan. 30, 2006) and 
the Guidance on New Starts Policies and Procedures (Notice of 
availability and request for comments, 71 FR 3149, Jan. 19, 2006). 
These separate pre-rule public involvement processes are being 
consolidated into this one rulemaking so that issues of overlap and 
coordination between these two aspects of FTA's discretionary capital 
investment program may be addressed. This NPRM closes the dockets for 
both of these pre-rule activities and creates a new docket for comments 
on the NPRM.
    FTA provided further opportunity for public involvement by holding 
a number of listening sessions throughout the country. Those listening 
sessions were held at the following dates and locations:

--San Francisco, CA--February 15-16, 2006, Hyatt Regency San Francisco.
--Ft. Worth, TX--March 1-2, 2006, Radisson Plaza Hotel Fort Worth.
--Washington, DC--March 9-10, 2006, Wardman Park Marriott Hotel.

FTA is planning to conduct similar outreach activities on both this 
NPRM and the policy guidance that FTA is issuing concurrently. Details 
on these activities will be announced in a Federal Register notice at a 
later date and on FTA's Web site.
    The Response to Comments section of this notice summarizes and 
responds to comments received on each of the questions raised in the 
Small Starts ANPRM and the Guidance on New Starts Policies and 
Procedures. It begins by restating each question, then summarizes the 
comments received on that question, as well as our response to the 
comments and concludes with FTA's proposal for addressing those 
comments in our proposed regulatory language. The Response to Comments 
portion of the Preamble is broken down by the following subjects: 
Eligibility, Evaluation and Ratings, and Procedures for Planning and 
Project Development, first with respect to the Guidance on New Starts 
Policies and Procedures and then with respect to the APRM on Small 
Starts and concludes with a section entitled ``Additional Discussion 
Items for Comment'' where FTA specifically seeks feedback on several 
new issues that it would like to address in the final rule. The 
Section-by-Section Analysis in this notice explains our rationale for 
the

[[Page 43329]]

language proposed for the regulation, as well as suggesting alternative 
proposals to some provisions.
    In order to make the regulation more understandable, FTA is 
proposing to divide it into four subparts that will cover General 
Provisions, ``New Starts,'' ``Small Starts,'' and ``Very Small 
Starts.'' Subpart A would include General Provisions that apply to all 
projects seeking Section 5309 Capital Investment funds. Subpart B would 
include those provisions that apply to New Starts (projects of $250 
million or more in total cost or requesting $75 million or more in New 
Starts funds). Subpart C would cover Small Starts projects (projects of 
less than $250 million in total cost and requesting less than $75 
million in Small Starts funds but not qualifying as a Very Small 
Start). Subpart D would cover Very Small Starts (a subset of Small 
Starts projects which are less than $50 million in total cost and $3 
million per mile (excluding vehicles) and which meet other specified 
characteristics). FTA has chosen this approach, even though there is a 
lot of similarity in the requirements of each subpart, in order to 
assist a project sponsor in finding all of the applicable procedures 
and evaluation criteria in a single subpart, depending on the size and 
nature of the proposed project.

II. Response to Comments

    The following is a summary of the comments received in response to 
our questions raised in Part 2 of the Guidance on New Starts Policies 
and Procedures and in the Small Starts ANPRM, our response to the 
comments received and our proposal for addressing the issue raised by 
the questions in the proposed NPRM.

Guidance on New Starts Policies and Procedures

Eligibility
    1. How might FTA determine whether a Bus Rapid Transit (BRT) 
project is a ``fixed guideway'' project?
    Comment: Nine comments were received in answer to this question. 
The range of BRT eligibility requirements suggested in the comments 
highlights the inherent difficulty in determining whether a BRT project 
is a ``fixed guideway'' project. Some commenters suggested that 
eligible BRT projects should operate in an exclusive right-of-way (ROW) 
or that certain percentages of project length should be in an exclusive 
ROW. Others stated that eligibility should be based on percentage of 
length subject to certain features or ``intensity'' of usage, such as 
ridership or vehicles per unit of time. Finally, some thought that 
eligibility should be determined on a case-by-case basis.
    Response: There is no statutory requirement that a fixed guideway 
project must operate in its entirety in a separate or exclusive ROW. 
The varied responses indicate the difficulty in strictly defining the 
parameters that should apply to BRT when it does not include a fixed 
guideway for its full length. FTA has previously made eligibility 
determinations on a case-by-case basis and has allowed eligibility for 
projects that include a significant fixed guideway portion, e.g., a 
dedicated busway, but also include some mixed-traffic sections.
    Proposal: FTA proposes to define a BRT project as a ``fixed 
guideway'' if the project operates on a fixed guideway that is 
dedicated to transit or high occupancy vehicle use for at least 50 
percent of its length during the peak period, or when congestion 
inhibits transit system performance. In making this determination it is 
not necessary that the 50 percent of its length be contiguous as long 
as the 50 percent that is dedicated is designed to provide significant 
travel times savings.
    In addition, for the purposes of funding design and construction of 
New Starts and Small Starts, FTA proposes to revise the definition of a 
``fixed guideway'' to include projects meeting certain other 
conditions. FTA is asking for specific comment, under a section 
entitled ``Additional Discussion Items for Comment'' on this revised 
definition that would include a transportation facility that, by means 
of pricing and other enhancements, replicates the benefits of ``free-
flow'' conditions for transit users historically achieved by a 
physically separated right-of-way available solely for transit and 
high-occupancy vehicles. To make such projects eligible for New Starts 
or Small Starts funding, FTA proposes to incorporate into the 
regulatory definition of ``fixed guideway system'' a provision that 
deems such a facility, subject to certain limitations, to be ``a 
separate right-of-way reserved for the exclusive use of public 
transportation.'' The operation of the new provision would be limited 
strictly to defining eligibility for discretionary funding under New 
Starts (49 U.S.C. 5309(d)) and Small Starts (49 U.S.C. 5309(e)), and 
would not alter the definition of ``fixed guideway mile'' for purposes 
of calculating the distribution of funds under formula programs 
administered by FTA.
    The practical effect of amending the definition of ``fixed 
guideway'' in this way is that it would allow FTA to fund a portion of 
the construction of high occupancy toll (HOT) lanes, on which transit 
vehicles would run, with money from the Section 5309 Capital Investment 
program. This has the advantage of providing more flexibility to 
project sponsors with creative ideas for potentially building cost 
effective transit projects.
    Specifically, FTA proposes to revise the definition of ``fixed 
guideway system'' to include the following clause at the end of the 
definition:

    ``Additionally, a transportation facility shall be deemed a 
fixed guideway system solely for the purposes of funding eligibility 
under New Starts (49 U.S.C. 5309(3) if the project is designed so 
that in any given month (i) transit vehicles utilize the 
transportation facility on a barrier-separated right-of-way; and 
(ii) by means of tolling or other enhancements, 95 percent of the 
transit vehicles using the facility will be able to maintain an 
average speed of not less than 5 miles per hour below the posted 
speed limit for the time they are on the facility.''

In applying this definition FTA intends to limit the amount of New 
Starts and Small Starts funds that can be used for constructing the 
facility to that portion which benefits transit. FTA could calculate 
the ``total project cost'' of a fixed guideway made eligible under this 
proviso as follows: (i) The total project cost of the fixed guideway in 
its entirety, multiplied by (ii) a ratio, (a) the numerator of which 
would be the expected peak transit vehicle-miles traveled on the fixed 
guideway and (b) the denominator of which would be the expected total 
peak vehicle-miles traveled on the fixed guideway. The product of the 
calculation would be deemed the total project cost attributable to a 
transit project eligible for funding under New Starts or Small Starts. 
Eligible fixed guideway costs, in other words, would be proportionate 
to the transit use of the facility. Alternatively, FTA and the 
applicant may designate a mutually agreeable amount as the total 
project cost. In either case, the Federal share, if any, contributed 
toward such project costs would be made available subject to full 
compliance with the standard rating criteria for New Starts (or Small 
Starts) projects, as provided by applicable statutes, regulations, and 
FTA guidance.
    2. Should FTA fund HOV projects to the degree that they provide 
benefits to public transit riders?
    Comment: Sixteen comments were received in answer to this question. 
Responses to this issue were equally mixed, with similar numbers of 
commenters supporting and opposing the concept. Those who favored 
support for HOV projects cited minimum service

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levels and ridership as necessary conditions. Those opposed were 
concerned that the already limited FTA funding for New Starts projects 
would be further reduced by those funds being diverted to projects 
traditionally funded by the FHWA.
    Response and Proposal: FTA has not participated in HOV projects 
through the New Starts program for the last decade and FTA does not 
propose to change that policy. However, as stated in the response 
above, FTA is considering revising the definition of a fixed guideway 
system, to allow for funding a portion of a new HOT facility that meets 
certain conditions.
Project Evaluation and Ratings
    3. How might the New Starts evaluation framework be changed to 
better support informed decision-making? Is there a preference for 
Option 1, Option 2, or something different?

    Note: Option 1 was described as an extension of the current 
framework with the two new criteria in SAFETEA-LU, economic 
development and reliability of the forecast of costs and ridership, 
added to the project justification criteria currently used. The 
project justification rating would result from weights applied to 
the ratings for each of the component criteria. The project 
justification rating described in Option 2 relied on ratings of the 
problem or opportunity that the New Start was intended to address, 
the effectiveness of the project as a response, and the project's 
cost effectiveness. The rating for effectiveness would be based on 
ratings for mobility for all users, mobility for transit dependents, 
environmental benefits, and economic development. The rating for 
reliability would be used to raise or lower ratings for project 
justification and local financial commitment.

    Comment: Seventeen comments were received in answer to this 
question. Of those commenters who chose between Options 1 and 2, the 
majority favored the Option 2 framework, stating that it allows FTA to 
more fully understand and appreciate the merits of a particular 
project. However, these commenters suggested some slight modifications 
to Option 2, specifically with regard to the treatment of land use. The 
commenters stated that the treatment of land use solely as a risk/
uncertainty measure rather than as a benefit measure under project 
effectiveness is inconsistent with the intent of SAFETEA-LU.
    Those commenters favoring Option 1 stated that it has the benefit 
of continuity and keeps the rating process stable for project sponsors. 
One of these commenters wrote that because Option 2 involves the 
simultaneous introduction of numerous complex factors and includes 
subjective appraisals by FTA or its contractors for some of the 
proposed measures, it is less desirable than Option 1. Several of the 
commenters favoring Option 1 stated that Option 2 overemphasized the 
role of reliability in the evaluation of projects relative to what was 
intended by SAFETEA-LU.
    A number of commenters suggested that neither Option 1 nor Option 2 
is preferred, but rather a new framework should be developed in 
consultation with the transit industry. However, few commenters 
provided specifics on how the framework could be structured. Most 
stated that analytical perfection should not be the goal, and that an 
overemphasis on quantification of measures misses the need for judgment 
about some factors that are important yet inherently subjective. One 
commenter suggested a point system be developed, similar to the one 
proposed in the Transit Cooperative Research Program Quick Response 
Project J-06 on the Small Starts program.
    Response: FTA has striven to make its evaluations understandable, 
consistent, and fair, and has emphasized that quantifiable measures 
best achieve these goals. Nevertheless, qualitative measures have been 
used when sufficient quantitative measures cannot be identified. Each 
option relies on a combination of quantitative and qualitative 
measures.
    Given the myriad of benefits associated with New Starts projects, 
it is difficult to create a New Starts evaluation process to 
effectively capture all of them. Further, it is not necessary to 
evaluate all the benefits in order to distinguish the merits of 
projects. Option 2 allows for a more complete organization of the key 
project evaluation factors that address different perspectives of a 
project's merits. These include the nature of the problem/opportunity 
in the area where the project has been proposed, the project's 
effectiveness as a response, the degree to which the project generates 
benefits commensurate with its costs (cost effectiveness), the strength 
of the local financial commitment, and the uncertainty in the 
evaluation measures. This organization facilitates a more coherent 
description of the worthiness of a project for New Starts funding in 
language that is more understandable to decision makers. In addition, 
SAFETEA-LU emphasizes the need for more reliable ridership and cost 
information, adding ``the reliability of forecasting methods'' as a new 
evaluation consideration, codifying the ``before and after'' study 
requirement, and requiring FTA to produce an annual report on 
contractor performance in the development of ridership forecasts and 
cost estimates. Option 2 responds to SAFETEA-LU by directly 
incorporating an evaluation of the reliability of the forecasts when 
FTA evaluates and rates proposed projects.
    Proposal: FTA proposes to advance the framework described in Option 
2 into the NPRM with one exception that is discussed more fully in the 
next set of questions. Instead of the nature of the problem or 
opportunity being evaluated as one of the primary factors of project 
justification, along with effectiveness and cost effectiveness, FTA 
proposes that it will be rated and evaluated under ``other factors''. 
The effect of this change is that the ``nature of the problem/
opportunity'' rather than being included as a separate factor, will be 
considered as an ``other'' factor that can either raise or lower the 
overall rating for project justification.
    4. In what ways could FTA improve the evaluation process to 
highlight the ``case'' for a proposed New Starts project rather than 
focus on numerical ratings?
    5. Are there any other measures that might indicate and 
characterize the nature and extent of the problem or opportunity 
addressed by a proposed New Starts project?
    6. How should FTA evaluate or rate projects that address 
significant transportation problems compared to projects that take 
advantage of opportunities to improve service?
    Comment: Question 4 received 4 comments, question 5 received 7 
comments, and question 6 received 6 comments. Questions 4, 5, and 6 
addressed FTA's proposal to include in the evaluation of project merit 
an examination of the nature or extent of the problem or opportunity in 
a corridor. FTA suggested some measures that might be used to quantify 
the problem or opportunity in the corridor, including current bus 
travel speeds, current highway speeds, vacancy rates, value of land, 
and others.
    The majority of commenters wrote that each project may have unique 
strengths or may be structured to meet specific local objectives. 
Rather than FTA dictating standard measures that might indicate and 
characterize the nature and extent of the problem or opportunity, these 
commenters felt that each sponsoring agency should be left to define 
the specific measures appropriate to their project. A few commenters 
provided specific suggestions for measures that might be included in 
defining the problem or opportunity such as congestion/crowding relief 
and maintenance of existing mode share.
    The majority of commenters were opposed to giving more weight to 
projects that seek to address

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demonstrated transportation problems than those projects that take 
advantage of opportunities.
    Response: At the heart of any planning, environmental, or 
transportation study is an adequate description of the nature and 
magnitude of the needs that are driving consideration of projects that 
could require significant funding and/or have significant impacts on 
the communities in which they are built. Because of the diversity of 
regional conditions in which New Starts projects are implemented, local 
areas are in the best position to describe the nature of the needs that 
a project is intended to address. It is undeniable that projects that 
address problems that are already severe have more benefits over the 
long term than those that address problems that are less severe now, 
but which are forecast to be worse over time. However, the New Starts 
process, which measures project benefits for forecast periods that are 
20 to 25 years into the future, based on annualized costs and benefits, 
does not account for the year in which the benefits occur. The 
conventional approach that properly accounts for costs and benefits 
over time would be to determine them for each year into the future and 
perform a net present worth computation to today. However, to account 
for each year of project costs and benefits would pose a significant 
burden on project sponsors due to the considerable effort required for 
interim year forecasts of travel and transit system capital and 
operating and maintenance costs. Therefore, projects designed to take 
advantage of an opportunity to improve transportation and economic 
development, while serving areas that have less severe transportation 
problems compared to what is predicted in the future, are currently 
advantaged in the New Starts evaluation process compared to areas with 
current severe problems. Consideration of higher ratings for projects 
with severe problems currently can reduce this unfair advantage.
    Proposal: FTA proposes to use the current ``make the case'' 
document under ``other factors'' as the basis for evaluating the 
severity of the transportation or economic development problem that the 
New Starts project is to address. This document is currently part of 
the evaluative information that FTA requests of sponsors of New Starts 
projects. While FTA will not dictate specific measures to describe the 
nature and extent of the problem or opportunity addressed by the 
proposed New Start project, it will consider the nature of the problem 
and opportunity in the overall project justification rating. While 
actual rating measures will be described in policy guidance, one way to 
do this is to use a three-tiered rating with the highest rating given 
to projects with severe transportation or economic problems; the next 
highest rating to projects with less severe transportation or economic 
problems; and the lowest rating for projects which are opportunities to 
improve transportation or economic development. Projects in areas with 
demonstrable existing problems will be rated more highly than projects 
in areas where problems are only predicted to develop over the next 20 
to 25 years, all else being equal. As congestion is one of the Nation's 
most daunting transportation challenges, one measure that FTA intends 
to consider under ``other factors'' is the degree to which a project is 
a part of an effective congestion reduction strategy. FTA will evaluate 
projects that are a principal element of an effective congestion 
reduction strategy, in general and a pricing strategy, in particular, 
more highly. FTA seeks comment on how it might better measure 
congestion in the future.
    FTA will also consider as an ``other factor'' any benefit of the 
project not covered under the project justification criteria or other 
factors that the Secretary determines to be appropriate to carry out 
the evaluation. The rating for ``other factors'' will be compared to 
the combined rating for effectiveness and cost effectiveness and can be 
used to raise or lower the overall project justification rating.
    7. Is there a preference for analyzing regional economic benefits 
or station area economic development benefits? Could FTA utilize both 
perspectives in evaluating expected economic development impacts?
    8. How might FTA evaluate economic development and land use as 
distinct and separate measures?
    9. Are there any additional methods available to predict economic 
development impacts? If so, how might these other measures be used to 
evaluate proposed New Starts projects?
    Comment: Question 7 received 7 comments, question 8 received 11 
comments, and question 9 received 16 comments. Four commenters 
expressed a preference for analyzing station area economic development 
benefits rather than regional economic development benefits. Reasons 
given for the preference included agreement with FTA's stated opinion 
that projections of regional benefits would be time-consuming and 
expensive and that a project's influence on a regional basis would be 
greatly diluted by other regional economic factors.
    Three commenters supported an evaluation of both regional and 
station area economic impacts. One of these commenters stated that 
regional forecast models tend to be more reliable than those for 
smaller station areas.
    Commenters generally supported the evaluation of both land use and 
economic development as distinct and separate measures, though few 
comments articulated a clear difference between these two measures. 
Many comments characterized economic development and land use factors 
interchangeably or stated that land use factors were a component or 
indicator of economic development potential. One industry association 
supported characterizing land use impacts as ``buildings and density'' 
while economic development would be characterized as ``jobs and 
sales.''
    As a means of predicting economic development impacts, several 
commenters suggested that FTA focus on existing developer agreements 
and partnerships and the existence of local development incentives.
    Response: FTA agrees that both station area economic development 
and regional economic impacts are useful and valid measures of project 
benefits. At the current time, however, the analytical tools used to 
develop regional economic analyses appear to be overly costly and 
burdensome to impose on every project sponsor. FTA intends to continue 
research efforts and case studies of both the station area impacts and 
regional economic impacts to develop tools that can be applied to 
measure the economic development impacts of New Starts projects. The 
regulation is structured to allow new measures to be added through 
policy guidance, following public review and comment.
    Whether for land use or economic development, a common theme of the 
majority of respondent suggestions was to use indicators of the 
likelihood of increased development in areas near projects. Past 
research confirms that this increased development is not added to the 
region but that the effect of transit investments is to attract 
development around stations that would locate elsewhere if not for the 
project, in effect redistributing development within a region. Existing 
land use conditions, existing and planned transit-oriented plans and 
policies, and projections of increases in employment and revenues are 
all factors that help to determine whether or not a transit project is 
likely to have an impact on development. Indeed, it is not possible to 
ascertain the

[[Page 43332]]

likelihood of a project's effect on surrounding development unless a 
number of factors relating to both land use and economic development 
are considered in combination. Land use considerations provide 
information about the potential for development or redevelopment and 
whether that development can occur in a transit-oriented way. Although 
these are necessary conditions, they are not in themselves sufficient 
to ensure that the proposed project spurs development, as the local 
development climate must be robust enough to provide the engine needed 
for development; the project must be perceived as permanent to entice 
developer interest; and the project must increase accessibility to the 
area. Because all these factors must be viewed in combination, it is 
critical that land use and economic evaluation criteria be combined 
into a single criterion.
    Proposal: Until additional research is completed, FTA proposes to 
implement an evaluation measure for land use and economic development 
impacts that focuses on the potential for station-area development 
impacts of the proposed projects. The best available measures of likely 
land use and economic development benefits can be derived from the 
circumstances in which the projects would be implemented rather than 
from actual forecasts of development. This approach is necessary 
because forecasts of additional development due to New Starts projects 
require considerable resources and contain considerable uncertainty.
    FTA proposes to use a single criterion to ascertain the likelihood 
of increased transit-oriented development resulting from a New Starts 
project. Given the important role that land use plays in increasing 
development, in developing specific measures for this criterion, FTA 
will draw upon many of the same factors used in its current evaluation 
of land use. These will be augmented with indicators that provide 
further incentives to development. A survey of available research on 
the development impacts of transit suggests two primary transit-related 
drivers of development (1) increased accessibility and (2) permanence 
of the transit investment. While the actual FTA proposes to evaluate 
whether or not the conditions necessary to support economic development 
exist in the project corridor by using the following specific measures: 
(1) Current land-use conditions, (2) development and land-use plans and 
policies, (3) the economic development climate in the corridor and 
region, (4) the project-related change in transit accessibility for 
developable areas in the corridor; and (5) the economic lifespan of new 
transit facilities proximate to those developable areas. FTA seeks 
comment on how it might better measure land use/economic development in 
the future.
    10. Are there any other measures of mobility benefits that could be 
used to evaluate New Starts projects?
    Comment: Ten comments were received in answer to this question. 
Commenters suggested that FTA should examine ways to better capture the 
following in the mobility benefits measure: benefits to highway users; 
benefits resulting from special events trips; benefits resulting from 
non-home-based trips; and benefits generated by automobile trips not 
taken due to enhanced pedestrian activity in the corridor.
    Response: FTA is committed to incorporating highway benefits into 
its mobility and cost effectiveness rating in every way feasible. In 
fact, the ``SUMMIT'' software used by FTA to calculate user benefits 
already has the ability to capture benefits to all transportation 
system users (including highway users). Further, the definition of user 
benefits included in the current regulation includes benefits to 
highway users. However, this function of the SUMMIT software cannot 
currently be used because FTA has found that most travel models around 
the country do not accurately predict changes in highway speeds 
resulting from transit improvements. This is a problem with travel 
models nationally. FTA does not have the resources on its own to 
correct the deficiencies but is working with the Federal Highway 
Administration to address this issue. The rule is structured in a way 
that once reliable forecasts of such benefits can be produced, they can 
easily be incorporated into the measures of mobility and cost 
effectiveness through the policy guidance. In addition, FTA proposes to 
adopt other measures on a temporary basis that would provide an 
indication of the congestion relief benefits to highway users. Such 
measures would be based on measures of current congestion in the 
project corridor. FTA seeks comment on how it might better measure 
congestion in the future.
    Likewise, the SUMMIT software used by FTA already captures the 
benefits resulting from non-home based trips to the extent they are 
accurately estimated in the local travel model. Typically, few areas of 
the country have good data on the non-home-based trip market, which 
affects the ability of the local model to develop accurate forecasts. 
If a local area is willing to put resources into a data collection 
effort to improve the forecasts for this market, the Summit software 
used by FTA to calculate user benefits will automatically capture any 
additional benefits that may accrue.
    FTA has always worked individually with various project sponsors to 
better capture the benefits resulting from special events markets. 
Local travel models are not generally structured to capture ridership/
benefits for this market. Consequently, FTA has helped project sponsors 
in the past to include ``off-model'' calculations to capture these 
benefits and will continue to do so in the future.
    FTA acknowledges the value of the trip not taken in terms of 
reducing congestion but has not yet been able to develop methodologies 
capable of making reliable estimates of this benefit.
    Proposal: FTA is proposing to adopt a definition of user benefits 
that explicitly includes congestion relief benefits to highway users 
and pedestrians. FTA is supporting the Office of the Secretary of 
Transportation and the Federal Highway Administration to improve travel 
forecasts so that the transportation system user benefits to highway 
users can be calculated reliably and be included in the cost 
effectiveness calculation. The Department of Transportation expects to 
release a Request for Proposals/Work Statement for model improvements 
in Fall 2007. In the interim, as discussed below under item 4 of 
``Additional Discussion Items for Comment,'' FTA will explore the use 
of surrogate measures which can assess the degree to which a proposed 
New Start results in congestion relief. These measures could include 
the current level of service, delay compared to free flow speed, or the 
average daily VMT on any highway facility in the project corridor.
    Absent any specific suggestions for other measures of mobility 
benefits, FTA will use its policy guidance to set specific measures for 
mobility. Two measures that FTA considers to have merit are user 
benefits per passenger mile for those using the New Starts project, and 
the absolute number of passengers using the project. The first would 
measure the magnitude of the user benefits for each traveler and 
whether the savings are significant, while the second would measure the 
number of travelers affected.
    11. Does the proposed (low-income mobility) measure entail 
implementation difficulties for measurement, reporting, or comparison 
between projects?
    12. Are there any other measures that FTA should consider when 
evaluating

[[Page 43333]]

the benefits that accrue to transit dependent populations?
    Comment: Question 11 received 3 comments and question 12 received 6 
comments. In the Guidance on New Starts Policies and Procedures, FTA 
proposed using a new measure for determining mobility for transit 
dependents--the share of user benefits accruing to passengers in the 
lowest income stratum or to the lowest auto ownership stratum 
(depending on which is used in the local travel model) compared to the 
regional share of the lowest income stratum or lowest auto ownership 
stratum. All commenters to Question 11 noted that the proposed measure 
may result in some inconsistencies among projects because of this 
difference in how local models stratify trip takers. An additional 
comment noted that in densely developed urban areas, transit dependency 
does not correlate with either income or car ownership.
    The comments included the following suggested alternative 
populations to include when calculating the benefits to transit 
dependent populations, but did not identify a specific way to measure 
the benefits to these populations: Elderly persons, persons with 
disabilities, and university students. One commenter suggested that FTA 
should include in the measure how well the overall transit system 
serves job centers, but there was no specific discussion of how this 
might be measured.
    Response: FTA acknowledges that examining the benefits that accrue 
to the lowest income stratum or the lowest auto ownership stratum from 
the local travel forecasting models is only a surrogate for determining 
the benefits to transit dependents. But this information is already 
available from all local travel models and does not require development 
of additional data by project sponsors. Furthermore, since the 
measurement relies on the change in service for that stratum in a given 
city, it is not necessary for every city to use the same stratum in 
order for the measure to allow for comparisons between cities.
    FTA believes that whatever measure is used, it should have a way of 
identifying how the project serves transit dependents rather than 
simply characterizing the project corridor demographics. Unfortunately, 
local travel models do not usually stratify trips by some of the 
suggested categories--elderly persons, persons with disabilities, and 
university students. Consequently, the benefits accruing to these 
populations cannot be calculated.
    Proposal: The regulation simply states that FTA will measure 
Mobility Benefits. The actual measures will be listed in policy 
guidance. One approach that FTA is considering is to utilize the share 
of user benefits accruing to passengers in the lowest income stratum or 
to the lowest auto ownership stratum (depending on which is used in the 
local travel model) compared to the regional share of the lowest income 
stratum or lowest auto ownership stratum for the region for evaluating 
mobility for transit dependents.
    13. How could FTA improve the current method of evaluating 
environmental benefits to produce a more useful measure?
    Comment: Three comments were received in answer to this question. 
FTA currently measures environmental benefits from proposed New Starts 
projects by examining the projected change in regional vehicle miles 
traveled (VMT), various types of vehicle emissions, and energy 
consumption. All comments received indicated support for continuing the 
current measures given that other replacement measures are not readily 
available. One commenter expressed concern that the current measures 
are biased in favor of projects that help reduce highway congestion and 
against those projects that help relieve transit congestion. Since a 
project that is meant to reduce existing congestion on a transit system 
does not reduce VMT, no environmental benefits would be shown under the 
current method. The commenter stated that the rating process should 
make accommodations for this situation, but acknowledged that no other 
measures of environmental benefits are readily available to address 
this problem.
    Response: The current measure is limited to capturing reduced 
emissions, projecting the change in VMT and energy consumption as a 
result of automobiles being taken off the road when travelers use 
transit instead of driving. However, even in that case, the change is 
usually very small compared to emissions region wide, limiting the 
usefulness of the measure.
    Proposal: FTA proposes to continue to evaluate environmental 
impacts, with the actual measures identified in policy guidance. FTA is 
currently conducting research to try to develop other measures that 
better distinguish the environmental merits of projects.
    14. Should FTA rely on the cost effectiveness evaluation to address 
the operating efficiency criterion?
    15. If not, in what way could agency operating cost information be 
used to compare New Starts projects to each other?
    Comment: Question 14 received 6 comments and question 15 received 
11 comments. Four comments received were in favor of eliminating the 
operating efficiency criterion because of the inability of the measure 
to distinguish in a meaningful way between projects. However, two 
commenters disagreed with the proposal, stating that operating 
efficiency can be a significant factor in comparing a single new rail 
line with the transit system as a whole.
    Response: In the past, FTA has used the projected system-wide 
change in operating cost per passenger mile to measure the impact of 
proposed New Starts projects on operating efficiency. However, this 
measure has not proven to be a meaningful way of distinguishing among 
proposed projects. On the other hand, FTA's evaluation of cost 
effectiveness has always included the annual system-wide operating and 
maintenance expense as a component of annualized cost. Therefore, the 
impact of the project on operating and maintenance costs is already 
captured in the calculation of cost effectiveness.
    Proposal: FTA proposes to remove the operating efficiency factor as 
a separate evaluation criterion, relying instead on the evaluation of 
cost effectiveness to address this statutory criterion. Project 
sponsors may still calculate operating efficiency if they find it 
useful for their own comparisons.
    16. Is it desirable for FTA to attempt to incorporate other 
measures of effectiveness besides mobility when evaluating cost 
effectiveness?
    17. If so, what measures might be incorporated and how?
    18. How could FTA combine transportation system user benefits 
measures with economic development measures into a valid measure of 
cost effectiveness?
    Comment: Question 16 received 2 comments, question 17 received 1 
comment, and question 18 received 8 comments. For all three of the 
questions, comments received were opposed to incorporating other 
measures of effectiveness in the evaluation of cost effectiveness. 
Reasons for the opposition included the potential for ``double-
counting'' benefits and the increased complexity that would result from 
adding other measures.
    Response: FTA sees value in acknowledging additional benefits of 
transit projects when comparing benefits to costs. There are two major 
components of these additional benefits that are distinct from those 
currently calculated: Travel time saved by users of the highway system 
who experience less

[[Page 43334]]

congestion as a result of fewer vehicles on the highway; and 
transportation benefits from more compact development patterns. For the 
first, FTA has discovered that current highway assignment models do not 
reliably predict the reductions in travel time for highway users. 
Research and development of improved travel models are needed to ensure 
that highway travel time benefits are reliable. For the second, 
additional development would have to be forecast with and without the 
New Starts project and travel models employed to ascertain the user 
benefits that result. The analytical analysis required to accomplish 
this is beyond the capabilities of the current demand forecasting 
models in virtually every urban area in the nation. As a result, at 
this time there is no analytical approach that can be implemented to 
determine the additional economic development benefits that should be 
added to those currently predicted for travel time savings. However, 
FTA has identified a surrogate for including economic benefits to the 
travel time savings calculation. The breakpoint for cost effectiveness 
already includes an assumption that the non-transportation benefits, 
including economic development, are approximately equal to the value of 
the travel time savings for a project. Therefore every city is given 
the same credit for other benefits.
    Proposal: Because of the difficulty of incorporating additional 
measures into its evaluation of project cost effectiveness, FTA is 
proposing to maintain its current cost effectiveness measure of 
annualized cost per hour of user benefits at this time.
    19. Are there any ways that FTA could improve the evaluation of 
financial capability?
    Comment: Five comments were received in response to this question. 
Two comments were received with specific suggestions for improvements 
or changes to the financial evaluation process. The first comment 
stated FTA should consider the degree to which private sector resources 
are leveraged to assist with project financing (public-private 
initiatives) as well as the degree to which synergies between Federal 
funding sources are leveraged to build and operate the project. The 
second comment stated that FTA should consider a broader set of 
indicators to rate the current capital condition of an agency rather 
than just the average age of the fleet and the agency's bond ratings. 
The commenter stated that capital condition should be evaluated in the 
context of the project sponsor's full fleet management plan, including 
replacement cycles, miles between breakdowns, and budgeted purchases.
    Three additional comments concerned with the current evaluation 
methodology were received, but the commenters did not suggest ways to 
improve the evaluation methodology. Other points noted in the five 
comments indicated the policy guidance was not clear with regards to 
who will assess financial capability. One commenter stated that the 
current process examines the reliability of capital, operating, and 
maintenance cost estimates under both the project justification 
evaluation and the financial capability evaluation and requested more 
detail from FTA on exactly how financial capability is currently 
evaluated. Lastly, one commenter stated that the requirements for 
operating and maintenance plans are more detailed than necessary for 
systems with a long history of consistent performance.
    Response: Although not specifically accounted for in the financial 
capability evaluation process, FTA does consider the degree to which 
private sector resources are utilized to assist with project financing 
when making funding recommendations. In addition, FTA has recently 
initiated the Public Private Partnership Pilot Program outlined in 
SAFETEA-LU as a means to distinguish projects that are supported by 
private sector resources.
    Section 3011(c) of SAFETEA-LU authorizes the Secretary of 
Transportation to establish and implement the Pilot Program to 
demonstrate the advantages and disadvantages of public-private 
partnerships (PPPs) for certain new fixed guideway capital projects. In 
particular, the Pilot Program is intended to study whether, in 
comparison to conventional procurements, innovative contracting 
arrangements, known as PPPs, better reduce and allocate risks 
associated with new construction of such projects, accelerate their 
delivery, enhance their operating performance once they are constructed 
and improve the reliability of projections of project costs and 
benefits. This Pilot Program will evaluate this view as applied to the 
procurement and operation of eligible projects, which may include 
projects funded under the Section 5309 Capital Investment program.
    On March 22, 2006, FTA issued a notice in the Federal Register (71 
FR 14568), soliciting comments and requesting preliminary expressions 
of interest in sponsoring a project under the Pilot Program. Five 
potential project sponsors submitted expressions of interest. On 
January 19, 2007, FTA issued a notice in the Federal Register (72 FR 
2583) establishing the Pilot Program's operating criteria and 
soliciting formal applications.
    FTA believes that the process of establishing Public-Private 
Partnerships, which include innovative arrangements for operating New 
Starts projects, can result in contractual arrangements that can reduce 
and/or improve the reliability of forecasts of operating costs on New 
Starts systems. Arrangements under which private sector interests take 
responsibility for the design, construction, operations, finance, and 
maintenance of projects can result in transferring much of the long 
term risk of project capital and operating costs to the private 
partner. Alternatively, the process of procuring such arrangements can 
identify changes that can produce significant improvements in the 
efficiency of publicly provided services through innovative contractual 
arrangements. As a result, projects which utilize such approaches are 
likely to be rated better, because operating costs will be lower 
(producing better ratings of cost effectiveness), and the reliability 
of the estimates of such costs will be higher (producing higher ratings 
of reliability). FTA asks for specific comments on this approach under 
question 5 under the section ``Additional Discussion Items for 
Comment.''
    FTA has tried whenever possible to base the financial ratings on 
readily available information that all project sponsors consistently 
calculate and report. Of the additional items mentioned by one 
commenter for inclusion in the capital condition subfactor rating, FTA 
believes that two--replacement cycles and budgeted purchases--are 
already captured in the average fleet age calculation. Clearly the 
average fleet age will change from year to year as replacement vehicles 
are purchased and older vehicles retired. This is true for all 
grantees. The other item mentioned by the commenter--miles between 
breakdowns--is not always routinely prepared by all transit agencies or 
prepared with a consistent methodology. For example, different 
operators may classify breakdowns in a different way. Therefore, FTA 
feels this would not be a good measure to use. FTA believes the 
existing measures for capital condition are fair, easily reported, and 
consistently applied to all grantees.
    In response to the comment that more detail is needed from FTA on 
exactly how financial capability is evaluated, FTA would like to point 
out that each year as part of the New Starts Reporting Instructions and 
again as an appendix to the Annual Report on New Starts, FTA

[[Page 43335]]

includes a detailed description of the entire rating process, including 
a discussion of the financial capability evaluation and rating process. 
Included in this appendix are two matrices that outline specifically 
what is required in the financial plan to receive each level of rating 
(from low to high) for each and every financial subfactor used in the 
evaluation. In addition, FTA has posted on its Web site the guidance 
that it provides to its financial contractors who help develop the 
financial capability ratings. This provides the industry with 
additional insight into exactly how the ratings are determined for 
those areas of the evaluation that are more subjective than 
quantitative. FTA feels the process is very well described, 
standardized, and completely transparent.
    Proposal: FTA proposes to keep the current financial capability 
evaluation and rating process since the requirements were not changed 
by SAFETEA-LU, the current process has proven to be useful for 
distinguishing among projects, and the process is thoroughly documented 
and transparent. However, FTA will continue to issue the specific 
measures for each factor for review and comment in its policy guidance. 
In addition, the proposed regulation would provide for an assessment of 
the degree to which project proposals include innovative contractual 
arrangements which produce significant reductions in operating 
expenses, or which improve the reliability of forecasts of operating 
costs.
    20. Should the existing weighting factors used to develop the 
financial ratings be changed?
    Comment: Seven comments were received in answer to this question. 
Of the comments received, approximately half were in favor of 
maintaining the existing weights used to develop the financial ratings, 
and half were opposed, stating that the current weights are awkward, 
provide little insight, and should be changed. Of those opposed to the 
existing weighting scheme, one commenter proposed a simple pass/fail 
approach for evaluating the capital financial plan as well as a much 
less rigorous review of the operating financial plan. Other comments 
received concerned retaining the credit given on the New Starts share 
rating when higher local shares are proposed.
    Response: Not only does SAFETEA-LU require FTA to rate projects on 
both project justification and local financial commitment on a five 
tier scale from low to high, but also FTA sees merit in showing 
gradations in financial plan ratings versus employing a simple pass/
fail approach, particularly with regard to making tough funding 
recommendation decisions. A less rigorous evaluation of the operating 
and maintenance financial plan, as suggested by one commenter, is 
inconsistent with the requirement added by SAFETEA-LU that FTA must 
ensure local funding is available to operate, maintain, and re-
capitalize the proposed project as well as the rest of the transit 
system without a reduction in existing services or levels of service. 
The change in SAFETEA-LU to this criterion was clearly intended to 
strengthen, not weaken, FTA's review of the operating and maintenance 
financial plan. FTA believes the current financial capability 
evaluation methodology meets the requirements of the law.
    FTA agrees that project sponsors should be given credit when higher 
local shares are proposed. FTA proposes to maintain the non-New Starts 
funding share as one of the financial capability evaluation criterion. 
FTA proposes to continue the practice of giving project sponsors a 
higher rating based on a higher non-New Starts share and will set the 
measures for this in its policy guidance. In addition, FTA may consider 
the non-New Starts share during the decision to recommend a project for 
a Full Funding Grant Agreement (FFGA). However, consistent with 
SAFETEA-LU, FTA will also consider the project sponsor ability to 
provide only a 20 percent match and will not rate the project's local 
financial commitment at less than Medium, solely on the basis of a 20 
percent match, so long as the project sponsor can demonstrate that the 
20 percent match is based on the limited fiscal capacity of State and 
local governments. In this way, FTA can address the SAFETEA-LU 
requirement that FTA consider State and local fiscal capacity at the 
same time that it addresses the SAFETEA-LU requirement that it gives 
priority to financing projects with a higher-than-required non-New 
Starts/Small Starts share.
    Proposal: The NPRM proposes that the local financial commitment 
rating consist of equally weighting the ratings of the capital and the 
operating financial plan.
    21. How might the FTA incorporate measures of reliability into 
project evaluation?
    Comment: Four comments were received in answer to this question. 
All comments received were opposed to incorporating measures of 
reliability into project evaluation, stating that the New Starts 
process already includes a number of mechanisms to evaluate the 
reliability of forecasts so that additional reviews are unnecessary. In 
addition, one commenter stated that peer projects are difficult, if not 
impossible, to identify.
    Response: Although the New Starts process certainly includes 
mechanisms intended to improve the quality of forecasts, reliability 
can vary considerably for a variety of reasons that relate to (1) 
transit-orientation of existing and future land uses and land-use plans 
and policies, based on the degree to which project effectiveness 
depends upon projected changes in future land use patterns and the 
likelihood of those changes occurring;
    (2) Project sponsor experience with implementing previous projects; 
(3) Industry experience with the proposed project type; (4) The 
reliability of forecasting methods used to prepare those estimates, as 
well as the reliability of the information provided to FTA for its 
evaluation of the project; (5) How the opening year project ridership 
compares to that estimated for the 20 to 25 year planning horizon; (6) 
Enhanced reliability of operating cost forecasts due to use of 
innovative contractual arrangements; and (7) Mitigation actions the 
project sponsor takes to help improve the reliability of the 
information submitted in support of a proposed project. For example, 
travel forecasts made for downtown circulator projects are by their 
very nature less reliable than those for projects intended to attract a 
predominately commuter-oriented travel market. This is because travel 
models have traditionally been better able to predict the travel 
behavior of commuters, and historically have been poor predictors of 
travel involving the type of discretionary trips that a downtown 
circulator is intended to attract. Other travel markets that can be 
problematic to predict include suburban-to-suburban travel and park-
and-ride travel in areas with few existing park-and-ride lots. In 
addition, capital cost estimates historically have been problematic for 
tunnels and elevated structures. Moreover, recent construction 
experience has shown that commodity prices can be volatile and that the 
bidding environment plays a much larger role in cost estimates compared 
to the past.
    Project sponsors of new transit projects commonly ask for peer 
reviews to help them assess the quality of their cost and ridership 
forecasts. While FTA acknowledges that no two projects are identical, 
drawing on past experience from a similar type of project has proven 
invaluable to improving the cost and ridership forecasts of the newer 
project because these projects often have enough features in common to 
gain

[[Page 43336]]

insights that result in improved forecasts.
    Proposal: SAFETEA-LU specifically requires FTA to evaluate projects 
based on the reliability of their forecasts. Furthermore, FTA's 
experience over the past three decades indicates that there is a 
considerable range of reliability in forecasts based on the factors 
discussed above. FTA proposes to consider reliability of the costs and 
ridership forecasts in its evaluation and to adjust, either upward or 
downward, the ratings of the individual criteria that rely on these 
forecasts. The measures for reliability will be identified in policy 
guidance but are likely to be designed to address the issues addressed 
above, such as transit-orientation of existing and future land use 
plans and policies; project sponsor experience with implementing 
previous projects; industry experience with the proposed project type; 
the reliability of the forecasting methods; a comparison of the opening 
year ridership to that estimated for the planning horizon covering no 
less than 20 years; use of innovative contractual arrangements which 
improve the reliability of cost estimates; and mitigation actions taken 
by the project sponsor.
    22. How should information on the reliability of forecasts be 
modified or updated as a proposed project advances through project 
development?
    Comment: Six comments were received in answer to this question. One 
comment was received stating that FTA and the project sponsor should 
work to improve reliability of forecasts as projects advance through 
project development. The remaining respondents addressed the unrelated 
topic of how and when to solidify funding sources.
    Response: FTA agrees that with more detailed information generated 
as the project progresses through project development the reliability 
of forecasts should improve over time. However, FTA's experience also 
shows that even with this updated information, forecasts are by their 
very nature predictive and that it is only through actual completion of 
the project that true costs and ridership are known.
    Proposal: FTA acknowledges that it is impossible to totally remove 
uncertainty from any stage of the process. However, the measures 
prescribed by FTA are written broadly enough to allow FTA to tailor its 
assessment of reliability to reflect the stage that the project is in. 
Therefore, FTA will use these measures to assess the reliability of 
forecasts as a proposed project advances through project development 
and use the most recent information available in making its assessment 
of reliability.
    23. How should FTA help to ensure that contingencies adequately 
reflect the uncertainties in project design, prices, and quantities at 
each stage of project development?
    Comment: Three comments were received in response to this question. 
Four themes or suggestions emerged from the comments that relate to the 
treatment of uncertainties, project costs, and project contingencies. 
In the first theme, dealing with project uncertainties, many commenters 
stated that FTA's project management oversight (PMO) program and risk 
assessment processes constitute a worthwhile and sufficient approach. 
In addition, one commenter stressed the value of peer review for cost 
estimates. Many commenters suggested that uncertainties could be 
reduced through simplification of FTA's process, specifically through 
implementation of policies to screen out unworthy projects earlier 
(i.e., at entry to preliminary engineering (PE)) and to execute FFGAs 
within six months of final design entry.
    A second theme, calling for greater collaboration between project 
sponsors and FTA, was seen throughout the comments. Collaborative 
relationships and ``shirt-sleeve'' working sessions were suggested as a 
way of establishing appropriate contingency amounts after risk 
assessment, improving project reviews ``through a series of intense 
partnering sessions,'' achieving greater accountability for project 
success, and assisting new project sponsors or sponsors with previous 
difficulties.
    The third suggestion was that FTA should use an index other than 
the GDP deflator to adjust cost effectiveness breakpoints given that 
supporting studies show that construction costs over the past five 
years have risen at rates up to17 percent faster than costs reflected 
in the GDP deflator.
    The fourth theme is a corollary to the third and pertains to cost 
management procedures. Rather than requiring project sponsors to carry 
extraordinarily large contingencies that may jeopardize a cost 
effectiveness rating, many commenters suggested an incentive approach 
to cost control, specifically allowing sponsors to retain remaining 
funds at construction completion. In addition, commenters stated that 
project sponsors should be allowed to incur costs, even if they exceed 
the FFGA amount by more than 5 percent, as long as the project sponsor 
is responsible for paying for the cost increases out of its own funds. 
The commenters did feel, however, that FTA should provide New Starts 
funding flexibility when a project experiences cost increases due to 
sudden market shifts beyond the project sponsor's control.
    Response: Although SAFETEA-LU calls for projects to include 
adequate contingency funds ``to cover unanticipated cost increases,'' 
the amount of contingency required depends on the amount and nature of 
uncertainties. FTA agrees that reducing uncertainties earlier in the 
process benefits everyone. FTA intends to pursue this through earlier 
use of its risk assessment and project management oversight programs, 
as well as peer reviews of cost estimates. The amount of contingency at 
various points can be guided by industry standard percentages but 
should be established for a specific project through collaboration 
between FTA and the project sponsor after reviews have been conducted. 
FTA will further study the commenters' suggestions regarding early 
screening of projects, rapid execution of the FFGA, institution of more 
collaborative processes, the makeup of the cost effectiveness 
breakpoints, and cost management. Nothing in the proposed regulation 
would preclude FTA from making changes in these areas through its 
policy guidance.
    Proposal: FTA proposes to add a requirement, taken directly from 
SAFETEA-LU, as part of the criterion on the stability of capital 
funding plan that takes into account the availability of contingency 
amounts that the Secretary determines to be reasonable to cover 
unanticipated cost increases. FTA will collaborate with project 
sponsors to ensure that project contingencies are appropriate to the 
specific uncertainties related to the proposed project and to the level 
of design. For the purpose of rating a project to address the 
reliability of the cost estimate, FTA will rely in large part on 
evaluations by its project management oversight contractors.
    24. What weights should FTA apply to each measure?
    Comment: Six comments were received in answer to this question. FTA 
proposed to continue the equal weighting of the local financial 
commitment and project justification ratings when determining the 
overall project rating. Of the comments received on this question, 
there was no clear majority of opinion. One commenter agreed with FTA's 
equal weighting of local financial commitment and project 
justification. One commenter stated that local financial commitment and 
project justification should not be combined to arrive at an overall 
project rating. This commenter stated that the local financial 
commitment rating should merely be pass/fail, and that the project

[[Page 43337]]

justification rating would prevail for the overall project rating if 
local financial commitment were found to be worthy of a passing grade. 
Another commenter suggested an entirely new weighting scheme: 20 
percent weight each to mobility improvements, cost effectiveness, and 
financial capability; 15 percent weight each to land use and economic 
development; and, 10 percent weight to the remaining measures. The 
remainder of the comments focused solely on how the project 
justification rating is derived, stating that cost effectiveness should 
not be weighted greater than one third of project justification and 
should not be used as a project veto if it does not meet FTA's 
specified threshold.
    Response: SAFETEA-LU places equal emphasis on project justification 
(referred to as ``project merit'' in the January 19, 2006 Guidance on 
News Starts Policies and Procedures) and local financial commitment 
(referred to as ``financial capability'' in the January 19, 2006 
proposed Guidance on New Starts Policies and Procedures). As stated 
previously, FTA feels there is merit in showing gradations in financial 
plan ratings (low to high) versus employing a simple pass/fail 
approach, particularly with regard to making tough funding 
recommendation decisions. Furthermore, FTA believes that moving to a 
pass/fail rating approach for financial commitment as suggested by one 
commenter would diminish its importance relative to project 
justification, going against the apparent intention of SAFETEA-LU.
    Regarding the new weighting scheme proposed by another commenter, 
FTA has stated previously the general difficultly in measuring economic 
development benefits and the concern of ``double-counting'' when rating 
and evaluating economic development versus land use. Consequently, 
until such time as better measures are developed for these areas, the 
proposed weighting scheme would be very difficult to implement. With 
regards to not using a cost effectiveness to veto a project, in the 
past there has been considerable support by the Administration to 
establish a minimum standard for a project's cost effectiveness in 
order for the project to advance through project development.
    Proposal: FTA proposes to give equal weight to both project 
justification and local financial commitment in calculating the 
project's overall rating. Within the Project Justification rating, cost 
effectiveness and effectiveness are proposed to be weighted equally at 
50 percent. Further, the NPRM proposes that the effectiveness rating be 
comprised of the following criteria and weights: 40 percent to land 
use, 40 percent to mobility for the general population, 10 percent to 
environmental benefits, and 10 percent to transit dependent mobility. 
Finally, under the proposed regulatory text, a project would not be 
eligible for a funding recommendation unless it achieves a medium or 
better rating on cost effectiveness.
    25. How can the reliability of forecast measures be used to adjust 
New Starts project ratings?
    Comment: Four comments were received in answer to this question. 
Three of these comments stated opposition to FTA's proposal to add 
uncertainty and risk of the forecasts as evaluation criteria or stated 
that additional guidance and clarification is needed before 
implementation. The primary reason given for opposing the proposal was 
that determining the uncertainties in the forecasts would require 
lengthy reviews that would ultimately add cost to the project. The 
commenters also stated that the additional analyses would not eliminate 
risk and uncertainty in the forecasts.
    The one commenter supportive of the proposal agreed with FTA's 
simple strategy for incorporating the uncertainty measures into the 
ratings process. That is, the uncertainty ratings should be used to 
decide the outcome for ratings at breakpoint between two ratings.
    Response: FTA is not proposing to eliminate risk and uncertainty 
from forecasts, which is impossible, but for project sponsors to report 
the nature of the uncertainty as a result of their analysis. This will 
allow both the project sponsor and FTA to use that information as they 
make decisions on whether to advance the project.
    More explicit representation of uncertainties is required by 
SAFETEA-LU because reliability of forecasts is now one of the listed 
criterions for project justification. An explicit representation of 
uncertainties is also essential if the project sponsor and FTA are to 
meet other requirements in SAFETEA-LU. For instance, an early 
discussion of uncertainties is essential if the project sponsor is to 
understand and explain the reasons that forecasts may change between 
entry into PE, entry into final design, and after opening the project 
to revenue operations as required for before/after studies, as well as 
for FTA to accurately assess contractor performance. An understanding 
of uncertainties also provides information to FTA as it implements 
SAFTETEA-LU's cost incentive provision, which allows FTA to provide 
more New Starts funding if project costs are no more than 110 percent, 
and ridership no less than 90 percent, of the estimates made when the 
project was admitted into PE.
    Current FTA guidance on capital cost estimation and travel 
forecasting discusses the role of uncertainty in forecasts and 
describes how these uncertainties could be reported. However, to ensure 
that uncertainties are being reported consistently by all grantees, FTA 
intends to issue more explicit guidance of what factors should be 
included in this discussion.
    Proposal: FTA believes a requirement to adjust ratings based on the 
reliability of the data should be included to satisfy several SAFETEA-
LU requirements. Understanding uncertainty will allow FTA to better 
recommend funding among projects with similar costs and benefits, but 
with significant differences in uncertainties. A better understanding 
of uncertainties will facilitate a better understanding of why costs 
and ridership vary from predictions so that better approaches to 
forecasts can be developed for future projects. Additionally, because a 
major purpose of planning and project development studies is to 
disclose information for decision-making, a more explicit 
representation of uncertainties better informs decision-makers by 
providing richer information about the likelihood of achieving the 
project benefits and costs. FTA will consider the reliability of 
operating costs certainties by looking at whether there are any 
innovative contractual arrangements which produce significant 
reductions in operating expenses, or which improve the reliability of 
forecasts of operating costs.
Project Development Procedures
    26. Does the proposed requirement to have local endorsement of the 
financial plan address FTA's desire to enhance the degree of confidence 
in the likelihood of proposed funding sources to materialize?
    27. Do project sponsors foresee any potential problems securing 
these local endorsements?
    Comment: Question 26 received 3 comments and question 27 received 7 
comments. FTA proposed a requirement that all proposed sources of 
funding be specified in the financial plan and that each sponsoring 
agency provide a letter endorsing the proposed financial strategies and 
funding amounts. The proposal was meant to increase FTA's confidence 
level earlier in the project development process (prior to entry into 
PE) that the project has the support of the proposed funding partners. 
Almost

[[Page 43338]]

all commenters misunderstood the proposal to mean that letters of 
commitment of local funding would be required earlier in the project 
development process. As a result, of the 3 comments received in 
response to this question, only one (an MPO) thought the proposed 
requirement had merit and would enhance the degree of confidence in the 
likelihood of funding sources materializing. The MPO also stated that 
the inability of a project sponsor to get the required endorsement 
would be most telling. All other commenters stated that requiring 
letters of endorsement (which they interpreted as letters of 
commitment) from local agencies on the financial plan early in the 
project development process was premature. They indicated it would be 
difficult to get financial commitments from local governments without a 
corresponding commitment at the same time from FTA. Others stated that 
FHWA does not require a similar endorsement from State and local 
governments for highway projects.
    Response: The requirement to obtain a letter of endorsement of a 
financial plan is not intended to be as stringent as having to obtain a 
firm letter of commitment of funding. FTA believes that this 
requirement, so clarified, should not be that difficult to address, so 
long as the project sponsor has worked closely with the proposed 
funding partners, and these partners have actually developed an 
understanding of their proposed roles. FTA acknowledges that, as with 
many of the New Starts requirements, there is not a similar requirement 
for highway projects. However, the great majority of Federal aid 
highway projects are funded through FHWA formula grants, and the 
selection of projects is the prerogative of the States, in cooperation 
with the metropolitan planning organization designated for the area per 
23 U.S.C. 134 (j)(5) and (k)(4), and 49 U.S.C. 5303 (j)(5) and (k)(4); 
conversely, major transit capital investments are funded through the 
Section 5309 Capital Investment discretionary program, and projects are 
selected for funding on a competitive, nationwide basis.
    Proposal: FTA is proposing to require letters of endorsement for 
any non-grantee controlled or non-committed source of funding specified 
in the financial plan prior to entry into PE and with each annual New 
Starts submission. In the letter of endorsement, each sponsoring agency 
would need to give their support to pursuing whatever steps are 
necessary for them to ultimately commit the proposed financial 
strategies and funding amounts.
    28. Are there any other policies or requirements that could enhance 
FTA's confidence in the funding plans for proposed New Starts projects?
    Comment: Four comments were received in answer to this question. 
Three comments were received that suggested other policies or 
requirements FTA might use. Two transit agencies discussed including a 
timeline for obtaining funding commitments in a project development 
agreement (PDA). The fourth comment suggested that FTA consider the 
degree to which the project sponsor has expended funds on the project 
at its own risk as an indication of the agency's commitment to the 
project.
    Response: FTA agrees that a PDA could be used to lay out timelines 
for receipt of funding commitments, but this would not provide FTA with 
any added confidence that the funding would actually materialize. FTA 
also agrees that the degree to which a project sponsor has expended 
funds on a project is an indication of the project sponsor's commitment 
to the project. However, FTA does not agree that this in and of itself 
reflects local political support from other potential funding partners. 
Too often, project sponsors have been unable to obtain sufficient local 
funding from outside sources, even though they have expended a 
considerable amount of their own resources to undertake alternatives 
analysis and PE.
    Proposal: Lacking any other suggestions, FTA will rely on the 
requirement that all proposed sources of funding be specified in the 
financial plan and that each sponsoring agency provide a letter 
endorsing the proposed financial strategies and funding amounts. Again, 
such a letter would not constitute a commitment on the part of a 
proposed funding partner, but only an indication that the funding 
partner understands and is willing to proceed with further development 
of its proposed role in funding the project. In addition, FTA would 
continue to require that funding commitments be provided as the project 
moves through the process, with 50 percent of the commitments in place 
as a condition of entry into final design, and 100 percent of the 
commitments in place prior to execution of a FFGA.
    29. In what ways could FTA describe the baseline alternative more 
clearly?
    Comment: Twelve comments were received in answer to this question. 
Two commenters said the no-build should be the baseline. One commenter 
stated that the use of a baseline that is different than the no-build 
puts it in conflict with the National Environmental Policy Act (NEPA). 
Others stated that it should be the Transportation System Management 
(TSM) alternative, defined succinctly as the best than can be done 
without construction of a new fixed guideway, and that it should be 
identified as such. Other concerns included changes to the baseline 
late in the project development process and the opinion that too much 
emphasis is placed on the baseline alternative given that in most 
circumstances it would not be built.
    Response: FTA believes that a properly-defined TSM constitutes an 
appropriate baseline for the purpose of estimating New Starts project 
justification criteria and that, because there are only limited 
circumstances in which the use of a no-build alternative is justified, 
referring to the baseline by its ``intended'' name--the TSM 
alternative--makes sense. FTA does not support using the no-build as 
the baseline because a consistently defined TSM alternative is required 
to ensure a level playing field when comparing projects across the 
country. FTA has not required that the TSM alternative be carried 
forward in NEPA documents when the project sponsor has adequately 
described its reason in the NEPA document for not carrying the 
alternative forward for detailed analysis. Both FTA's oversight of the 
technical work supporting alternatives analyses and the project 
sponsor's performance of the tests identified in the policy guidance 
prior to FTA approval of the baseline alternative are intended to 
obviate the need for review and adjustment of the baseline during 
subsequent project development stages. The fact that SAFETEA-LU 
establishes a Small Starts program that provides a source of capital 
funding for low-cost major transit investments undermines the argument 
that TSM-level improvements cannot be built. This undercuts the 
argument that it is not fair to evaluate the merits of a New Start 
against an ``academic'' TSM, because the TSM is now a viable 
alternative, which could receive funding through the Small Starts 
program category.
    Proposal: FTA is already in the process of enhancing its guidance 
on the development of the New Starts baseline alternative. Because FTA 
is only clarifying, rather than changing, its existing guidance, such 
clarification can be addressed as technical guidance, without affecting 
any of the higher-level principles articulated in the existing 
regulation and carried forward in the NPRM. The guidance will clarify 
FTA's expectations that the New Starts baseline will be identical to 
the TSM alternative in all but very rare cases, and will use that 
terminology to describe the

[[Page 43339]]

attributes of the baseline. Since in most cases the baseline will be 
the TSM alternative, the guidance will describe the process for 
developing the TSM alternative, the appropriate tests for optimizing 
the TSM alternative, and the rationale for these tests. The guidance 
will further provide examples for the development of appropriate TSM 
alternatives in specific environments.
    30. Should there be a way to report project benefits of the 
proposed New Starts project compared to the no-build alternative 
outside the cost effectiveness evaluation?
    Comment: Two comments were received in answer to this question. 
Both commenters answered in the affirmative, although neither provided 
suggestions on how to report benefits.
    Response: In response to comments submitted by the transit industry 
and in recognition of the desire to simplify the New Starts process, 
the December 2000 New Starts Final Rule eliminated the requirement for 
an evaluation comparing the New Starts criteria for the build 
alternative against both the no-build and the TSM alternative. Instead, 
the regulation promulgated the current requirement that projects be 
evaluated against a single ``baseline'' alternative, typically the TSM 
alternative. Permitting an alternative presentation of project benefits 
(build vs. no-build) would result in additional work for project 
sponsors and could lead to confusion over the true representation of 
project benefits. Nevertheless, FTA has always allowed project sponsors 
to use criteria and measures in their studies that depart from those 
used by FTA, but which address local concerns.
    Proposal: FTA will maintain the requirement as stated in the 
current regulation that cost effectiveness will be based solely on a 
comparison between the proposed project and the baseline alternative, 
while clarifying that the baseline in almost all cases is the TSM 
alternative and providing enhanced guidance on the development of the 
TSM alternative.
    31. How recent should on-board surveys be to ensure that the 
information is still valid?
    32. Are there cases where an on-board survey less than 5 years old 
could be out of date? If so, how might FTA be sure of the usefulness of 
on-board survey information?
    Comment: Question 31 received 5 comments and question 32 received 3 
comments. One commenter believed that on-board surveys were not needed, 
stating that other data sources would suffice. Four commenters 
suggested surveys be conducted within the past 5 to 10 years.
    Response: Given the critical role that the information gleaned from 
on-board surveys plays in understanding the nature of the transit 
riding market and in ensuring that travel models can replicate current 
conditions, it is essential that the data on ridership patterns be as 
current as possible. To the extent that the data used to validate the 
model varies from current ridership patterns because of significant 
changes in population, service, or other factors, the usefulness of the 
data is diminished. In fact, it may be necessary to update all or a 
portion of the survey more frequently than every five years if an area 
has experienced dramatic changes in service, population, and employment 
or other factors during that time. For example, if the survey was taken 
when little park-and-ride service existed, and considerable park-and-
ride service was implemented after the survey, a new survey would be 
necessary to understand park-and-ride behavior if the New Start project 
relied in large part on the park-and-ride market to generate ridership.
    Proposal: FTA proposes that, for project sponsors using traditional 
four-step travel forecasting procedures to estimate transportation 
system user benefits, the procedures be rigorously validated using an 
on-board survey of transit riders completed no more than five years 
prior to entry into PE. FTA will determine if changes in service, 
demographics, or other factors are significant enough to require a more 
recent survey to validate the model.
    33. Would a clearer definition of the preliminary engineering phase 
for New Starts projects help project sponsors target resources expended 
on preliminary engineering in ways that better support the decision-
making process for New Starts?
    Comment: Three comments were received in answer to this question. 
Two comments were received in support of this proposal, and one 
provided an alternative. Commenters stated that significant resources 
would need to be shifted from final design to preliminary engineering 
(PE). Commenters also stated concern about potential increases in 
costs. One commenter stated that an explanation of how PE relates to 
the NEPA process would be helpful. Another stated that all NEPA 
requirements should be met during PE and that a Record of Decision 
(ROD) and FFGA should be issued simultaneously prior to final design. 
Another respondent inquired about the purpose of final design if PE is 
expanded to include capping of funds. That agency suggested that FTA 
should have clear criteria for entrance into PE.
    Response: The goal of PE is to finalize the project scope, cost 
estimate, and financial plan. Project scope must be defined such that 
all environmental impacts are identified and adequate provisions made 
for their mitigation in accordance with NEPA. FTA will not complete the 
NEPA process until a project has been approved for entry into PE. In 
addition, although the level of scope development may vary from project 
to project, it must, at a minimum, be advanced to the point where 
design issues are fully addressed and no significant unknown impacts to 
cost may result. FTA intends that the cost estimate produced at the end 
of PE be used as the baseline cost estimate for determining the share 
of Section 5309 Capital Investment funds to be awarded in the full 
funding grant agreement. Similarly, FTA expects that the project 
financial plan produced during PE (and submitted to FTA as part of its 
statutory evaluation to approve project entrance into final design) 
will demonstrate adequate financial capacity and provide support for 
the local financial commitment necessary before FTA can execute the 
FFGA.
    In its May 2006 New Starts Policy Guidance, FTA adopted a policy 
requiring that NEPA scoping be performed prior to entry into PE. 
Scoping prior to PE fosters informed decision-making in the New Starts 
process and allows for resolution of issues regarding the alternatives 
to be considered in the NEPA review to be made during the planning 
process instead of discovering them during PE and having to do 
additional planning analyses to address them. NEPA completion during PE 
facilitates performing the requisite engineering and analysis to define 
the project scope, cost, and financial plan, which are documented in a 
ROD.
    Final design is a statutorily prescribed phase of the New Starts 
project development process following PE and preceding construction. 
Technically, final design is the phase of project development in which 
the project sponsor prepares for project construction. During final 
design, the engineering and design products of PE are refined for the 
development and solicitation of construction contract packages, as well 
as the development and/or updating of various project management plans 
and risk mitigation strategies. It is, however, expected that under the 
definition of New Starts PE adopted in the May 2006 New Starts Policy 
Guidance, the duration of final design will be considerably shortened 
as PE would result in developing sufficient engineering and design to 
arrive at an

[[Page 43340]]

accurate and reliable cost estimate. Thus, it is expected that the time 
between entrance into final design and negotiations on an FFGA will be 
reduced.
    Proposal: FTA has defined the conditions that must be met at the 
completion of New Starts PE. FTA believes that these conditions will 
help in clarifying when a New Starts project is ready to move from one 
step to the next.
    34. How might the Project Management Oversight (PMOC) process be 
designed to support the higher expectation regarding the results of 
preliminary engineering?
    Comment: Only one comment was received, and it favored enhanced 
PMOC assistance. The respondent stated that although nearly all the 
information needed to make a final decision on project funding should 
be complete at the end of PE, completion of engineering should not be a 
criterion for exiting PE. Design refinements and subsequent cost 
adjustments should be expected through the final design phase. The 
earlier in the process that the PMOC understands the unique challenges 
the project faces in terms of engineering and cost estimating, the more 
likely the PMOC will be able to assist in determining whether or not 
the contingencies are appropriate.
    Response: FTA has a number of activities underway to strengthen its 
project management oversight activities during PE. These include cost 
validation, independent cost estimates, and risk analysis and 
management. The PMOC reviews grantee data and corresponding engineering 
analysis throughout PE to determine the completeness and mechanical 
correctness of the baseline cost estimate. Project cost reviews are an 
iterative review process, whereby costs are assessed for consistency 
with the project scope adopted in the ROD (as amended and/or updated to 
the selected alignment), as well as consistency with relevant, 
identifiable industry or engineering practices. In this manner, FTA can 
determine that the project scope and costs are sufficiently complete to 
support the level and quality of revenue service expected. Using these 
tools during project development allows the grantee, with Federal 
oversight, to identify opportunities to improve the operation and cost 
effectiveness of its project. Whereas design refinements are expected 
during final design, significant cost adjustments should not occur. The 
scope and cost reviews that FTA incorporates in its risk analysis 
conducted during PE are intended to identify those project elements 
that are likely to require cost adjustments so that these potential 
cost adjustment may be accounted for in the resulting baseline cost 
estimate, as part of the contingency calculation, at the completion of 
PE.
    Proposal: FTA is currently reviewing its PMOC regulations and 
guidance with the goal of providing greater program effectiveness in 
New Starts project development and delivery. These changes will be 
discussed under a separate rulemaking to amend the Project Management 
Oversight regulation and are not reflected in this NPRM.
    35. Does this approach significantly increase the cost of 
preliminary engineering? If so, is that problematic if costs are just 
shifted from final design?
    Comment: Two comments were received in response to this question, 
both generally agreeing that the cost of PE would increase. One 
commenter stated that the proposed requirement would result in an 
extended PE phase and blur the line between PE and final design. 
Specifically, the commenter noted that a shift in consultants between 
phases could result in increased costs due to the need to redesign 
project elements and that increased costs should not eliminate projects 
from the New Starts pipeline. The other stated that asking project 
sponsors to front load their design costs may prove to be an onerous 
burden.
    Response: It is not clear that costs for PE will increase in order 
to meet FTA's requirement for a more reliable cost estimate. This is 
because the nature of work performed in PE and in final design has 
never been well defined, and as a result the level of engineering 
performed varies widely among projects. Expenditures for PE in the past 
have not always been focused on a reliable cost estimate, but have 
addressed a variety of concerns, many of which did not necessarily 
enhance the soundness of the cost estimate. In addition, many candidate 
New Starts project sponsors have already undertaken ``continuing/
extended PE'' prior to entry into final design in order to identify and 
resolve engineering and/or design issues. In those instances, the 
project's sponsors have generally been able to complete final design in 
a shorter timeframe. From an accounting standpoint, requiring this 
effort by all project sponsors may increase costs incurred during the 
designated PE phase but decrease costs during final design.
    Proposal: The proposed regulation clearly identifies the products 
of both PE and final design. With FTA clearly defining each phase of 
New Starts project planning and development, along with prescribed exit 
criteria, project sponsors can assess their resource needs and plan for 
them accordingly.
    36. Does the proposed policy of MPO reaffirmation of the proposed 
project address FTA's goal of ensuring local support for implementing 
and financing proposed New Starts projects?
    37. If FTA implements the previously mentioned local endorsement of 
the Financial Plan, does this separate action become redundant?
    Comment: FTA received 8 comments on question 36 and 1 comment on 
question 37. Five commenters noted opposition to the proposal mentioned 
in question 36. Those opposed who wrote this proposal would add an 
unnecessary step to the process that would delay final design approval 
and thereby add to the cost of project development. In addition, they 
wrote this would not help to address FTA's concern of ensuring local 
support for financing of the project. Lastly, commenters suggested this 
would create a disconnect with requirements placed on highway projects. 
Three comments were received stating no objection to the proposal, but 
also not stating strong support of it. These commenters wrote it was 
reasonable and in line with current local planning process 
requirements, but would not help address FTA's concern. Only one 
comment was received on whether the proposal was redundant should FTA 
implement its other proposal for local endorsement of financial plans. 
That commenter wrote it was not redundant and that it is important for 
the MPO as a regional entity to formally state that it supports the 
project in its final configuration.
    Response: FTA does not believe this proposal would add significant 
time or cost to the project development process. The FTA/FHWA 
metropolitan and statewide planning regulations require that before 
Federal funds may be spent on a project, it must be adopted into the 
MPO's financially constrained metropolitan transportation plan and 
transportation improvement program. FTA's proposal would ensure that 
the latest information on the project's cost estimate and impacts is 
incorporated into the region's transportation plan.
    Proposal: To verify that New Starts projects, with their final 
scope and costs, are supported by regional planning partners, FTA 
proposes to require that MPOs reaffirm their commitment to implementing 
and financing projects, prior to those projects advancing into final 
design, if significant changes have occurred in the project definition 
or cost.

[[Page 43341]]

    38. Section 5309(h)(3) as amended by SAFETEA-LU accords FTA the 
discretion to provide a higher percentage of New Starts funding than 
that requested by the project sponsor as an incentive to producing 
reliable ridership forecasts and cost estimates. How could FTA 
implement this provision of SAFETEA-LU?
    Comment: Eight comments were received in total, but very few 
included specific ideas on how the incentive could be implemented. Two 
commenters were opposed to the incentive idea. Four transit agencies 
and one MPO were supportive of the idea. One transit agency expressed 
neither support nor opposition, but rather concerns with what 
projections would be evaluated to determine eligibility, suggesting 
that the proposal may result in less accurate cost and ridership 
forecasts. The two commenters opposed to the idea, and one of the 
transit agencies in support of the idea, suggested that rather than 
allowing grantees to reduce the local share if New Starts funding is 
increased under the incentive, project sponsors should instead be 
required to use the additional funding for betterments to the project. 
One transit agency suggested that incentives are acceptable only if 
they are kept small (2-3 percent increase) while another transit agency 
suggested that FTA should work with the project sponsor to determine an 
incentive amount that would be meaningful. Another comment stated that 
an FFGA should be amended before it is fully paid out to increase the 
New Starts share if ridership and cost estimates prove reliable over 
the course of the first year of operation.
    Response: Regarding the accuracy of forecasts, the concern of the 
commenting agency that this proposal could result in less accurate cost 
and ridership forecasts may be unfounded. Presumably the commenter is 
suggesting that grantees would overstate costs and understate ridership 
during project development so as to come in under budget after 
completion of the project and with higher ridership to be eligible for 
an incentive. The very nature of the New Starts rating and evaluation 
process would prevent this from happening, because overstating costs 
and understating ridership would significantly impact a project's cost 
effectiveness. Furthermore, FTA examines both cost and ridership 
projections closely throughout project development and would not accept 
obvious misrepresentation of costs and ridership.
    Proposal: FTA proposes to implement a new feature of FFGAs, 
consistent with changes made by SAFETEA-LU, that would include an 
incentive clause that would allow for an amendment to either increase 
the Federal funding contribution or allow for the addition of scope, 
when actual opening year ridership is no less than 90 percent of that 
forecast and actual capital costs, adjusted for inflation, are not more 
than 110 percent of that estimated, at the time the project entered PE. 
This standard is slightly more stringent than the wording in SAFETEA-
LU, as FTA is proposing to amend the FFGA only after the project is 
complete and operating, rather than assessing whether forecasts have 
stayed within these limits prior to execution of the FFGA. FTA believes 
that the incentive should only be provided for actual performance not 
for projected performance. However, as suggested by the commenters, FTA 
is allowing the incentive to be used either to increase the Federal 
share or to add scope to the system.

ANPRM on Small Starts

Small Starts Eligibility

    SAFETEA-LU constrains eligibility of projects for Small Starts 
funding by imposing limits of less than $75 million in Section 5309 
Capital Investment funds and less than $250 million for total project 
cost. However, it broadens eligibility in terms of project definition 
by relaxing the existing requirement that the project include a fixed 
guideway. With this change, a project that would not meet the fixed-
guideway criterion is now eligible if it (1) includes a substantial 
portion that is in a separate right-of-way, or (2) represents a 
substantial investment in specific kinds of transit improvements in a 
defined corridor.
    The eligibility provisions of the statute raise several issues: (1) 
How to define ``substantial portion in a separate right-of-way;''; (2) 
how to define ``substantial investment''; (3) the possibility that 
project sponsors could divide traditional New Starts projects into two 
or more Small Starts projects; and (4) the possibility that a Small 
Starts project might be proposed as the initial transit service in a 
corridor. The ANPRM provided a discussion of the challenges and merits 
of various approaches to addressing these issues, and readers of this 
NPRM are encouraged to refer to it for more information. The ANPRM 
further posed several questions related to the eligibility of Small 
Starts projects with the goal of facilitating a discussion of this 
important topic. These questions, a summary of industry reaction to the 
questions, and FTA's response and proposal for the NPRM follows:
    1. What portion of the project should be in a separate right-of-way 
to qualify for funding under the Small Starts eligibility criteria? 
Should this determination be based on length or on performance?
    2. How might FTA interpret the requirements that a project 
represent a ``substantial investment?''
    3. How might we ensure that a Small Starts project is in a 
``defined corridor?''
    Comments: Questions 1 and 2 received 20 comments each, and question 
3 received 11 comments.
    Comments were generally split on the first question of eligibility. 
Of the 12 comments that noted the need for a separate right-of-way for 
Small Starts projects, there was a consensus that 25-50 percent of the 
length of the project should be in exclusive right-of-way to be 
eligible for Small Starts funding. Reasons cited for a minimum guideway 
threshold included the ability to show a permanence of investment, 
which would better support the land use and economic development 
objectives of proposed transit investments, and to ensure travel time 
savings. But 4 of the 8 commenters not in favor of requiring a 
dedicated right-of-way noted similar gains in performance may be made 
through the use of ITS technology such as signal prioritization, queue 
jumping, and other operational treatments. Indeed, slightly more than 
half of the commenters on this question favored a performance-based 
determination of eligibility, with travel time savings the most 
commonly suggested performance criteria.
    All 20 of the commenters favored the inclusion in the NPRM of a 
definition of ``substantial investment.'' However, 2 comments stressed 
the need for flexibility and opposed either a dollar value or a 
specific list of criteria elements that needed to be met, as proposed 
in the ANPRM. Twelve comments requested that a portion of the right-of-
way be dedicated, although 7 of these stated that FTA should not 
mandate that a separate right-of-way be an element of every Small 
Start. More specific comments noted that a substantial investment 
should be defined in terms of infrastructure investment. Fifteen 
commenters recommended that FTA define substantial investment as a 
``package'' of investments listed in 49 U.S.C. 5309(e)(10), as amended 
by SAFETEA-LU, including hardware such as signal pre-emption, off-board 
fare collection, level boarding, station investment, and special 
vehicles. Due to the large number of potential variables associated

[[Page 43342]]

with a ``substantial investment,'' 7 comments noted the need for clear, 
non-regulatory based guidance that should cover the majority of 
projects.
    Suggestions to the question on ``defined corridor'' were wide 
ranging. Three commenters noted that a traditional view of an arterial 
street or a transportation corridor may be too rigid of a definition 
and suggested that FTA take a flexible approach to the definition of a 
``corridor'' for Small Starts purposes. One commenter recommended, for 
example, that a corridor could be defined as a combination of parallel 
streets, as a downtown shopping area, or as a central business 
district. To further define the corridor, local policies on economic 
development and land use should be examined and matched to the 
corresponding area of interest. Seven commenters suggested that a more 
narrow definition be used, for the reason that the modest costs of 
Small Starts tend to lend themselves to improvements to existing travel 
corridors rather than creation of more expensive new services. Two 
commenters expressed concern that any definition must be able to 
distinguish Small Starts from improvements that could be funded under 
the Section 5309 bus or FTA formula programs.
    Two commenters cited additional concerns on consideration of a 
Small Starts project that would cross multiple jurisdictions. To 
proceed on a project spanning jurisdictions, it was recommended that a 
number of construction and planning phases be allowed if that type of 
implementation approach facilitated project delivery.
    Response: FTA believes that there is significant merit to using a 
performance-based approach to determine whether or not the separate 
right-of-way is ``significant.'' Because all fixed guideway projects 
(rail projects and those with catenary, i.e., electric trolley-bus 
service using overhead wires for power supply) are automatically 
eligible for New Starts and Small Starts, the following is relevant to 
bus projects only. Generally, the purpose of a separate right-of-way 
for bus projects is to remove transit vehicles from general-purpose 
traffic, thereby speeding up service. Therefore, a performance-based 
determination would ensure that the portion of the project in a 
separate right-of-way actually had the intended effect of better 
operating performance. However, FTA has never applied a performance 
standard to fixed-guideway projects. Thus, in the interest of 
consistency among potential Section 5309 Capital Investment projects, 
FTA believes that using a criterion based on physical characteristics 
is more appropriate.
    Likewise, FTA believes that it is necessary to define a minimum 
level of transportation investment sufficient to justify the project 
for discretionary Small Starts funding. Otherwise, Small Starts 
projects would be competing for funding with many capital investments 
(e.g. buses) that should be funded with FTA formula, bus discretionary, 
or Title 23 flexible funds. Thus, FTA is proposing a number of specific 
project components that would comprise a ``substantial investment'' to 
improve the level of transit service, yet not require a specific 
threshold or dollar value of improvements.
    It is very difficult to prescribe the dimensions of a ``defined 
corridor'' given the diversity of project contexts. Nevertheless, the 
principles guiding the definition should be that the project addresses 
a single travel shed that consists of a concentration of trip origins 
and destinations. While there is no rigid definition of travel 
corridor, routes with significant geographic separation would be 
considered to serve different corridor travel markets.
    Proposal: FTA proposes in this NPRM that to qualify for funding, 
Small Starts bus projects must either (a) provide a dedicated right-of-
way for at least 50 percent of the total project length in the peak 
period or when congestion inhibits transit system performance, or (b) 
be a corridor-based bus project with the following minimum elements:
     Substantial transit stations
     Traffic signal priority/pre-emption, provided that there 
are traffic signals on the corridor,
     Low-floor buses or level boarding,
     Branding of the proposed service, and
     10-minute peak/15-minute off peak headways or better while 
operating at least 14 hours per weekday
    The first three bullets are taken directly from the statute; the 
fourth is a low-cost strategy for achieving a sense of the uniqueness 
and permanence of transit service and is thus consistent with SAFETEA-
LU's requirement that a corridor-based bus capital project include 
``features that support long-term corridor investment.'' The fifth 
bullet embodies the underlying concept that, to be successful 
transportation investments, Small Starts projects must provide for a 
significant level of transit service. Experience in major transit 
corridors across the United States suggests that 10-minute peak 
frequencies, in addition to representing a high level of service, is 
the minimum headway at which passengers' decision to take transit is 
not based upon route schedule information.
    While other project features such as park-and-ride lots and off-
board fare collection are also eligible expenses under the program, 
they are not required elements. The regulation simply states that the 
project must be a corridor bus project; however, FTA intends to review 
proposed projects on a case-by-case basis to determine whether they are 
located in a ``defined corridor.'' A key consideration for this review 
will be whether the project is located in a single travel shed.
    4. Should we try to prevent traditional New Starts projects from 
being divided into two or more Small Starts projects? If so, in what 
ways might we prevent this from happening?
    Comments: Twenty comments were received in answer to this question. 
Only three of the commenters indicated they were in favor of allowing 
traditional New Starts projects to be divided into two or more Small 
Starts projects. The main reason cited to permit this division was that 
any phased implementation would result in faster implementation of at 
least some portions of a larger proposed investment, and that any 
``stand-alone'' segment/project should be considered by FTA so long as 
it is deemed worthy when evaluated against the Small Starts criteria. 
The remaining 17 commenters noted that the division of large New Starts 
projects into two or more Small Starts projects is contrary to the 
intent of the Small Starts program. However, 14 commenters noted that 
the funding of projects in the same region but on adjacent or unrelated 
corridors should be allowed and even encouraged. In addition, other 
more specific comments included limiting the amount of funding over a 
given time period or justifying funding on the basis of how corridor 
improvements are included in a region's metropolitan transportation 
plan.
    Response: The purpose of the simplified evaluation and project 
development process for Small Starts is to scale the analysis and 
procedures according to the complexity of the projects. Projects that 
are very large investments in fixed guideway transit facilities demand 
the full due diligence regarding the benefits, costs, and the project 
sponsor's capability and readiness in order to ensure that public 
resources are allocated to their best use. These larger projects should 
not be able to evade due diligence simply because they are divided into 
phases which individually meet the cost limits for Small Starts.
    Proposal: FTA proposes that all potential Small Starts projects 
(i.e.,

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portions of a larger investment) planned in a corridor will be 
evaluated as a single project. If the combined cost or total requested 
funding amount, both expressed in year-of-expenditure dollars, is over 
the Small Starts limits, the project will be evaluated as traditional 
New Starts project.
    5. Should we establish a minimum ridership requirement to ensure 
that Small Starts projects are used to improve the quality of service 
for existing transit markets rather than represent the first transit 
service offered to potentially new transit markets? If not, how can a 
project demonstrate need for an investment?
    Comments: Twenty-seven comments were received in answer to this 
question. Approximately two-thirds of commenters opposed the idea of 
instituting a minimum ridership requirement for Small Starts, citing 
that this would penalize communities that are in the initial stages of 
land development and thus currently do not have a demand for transit or 
communities that are trying to open up new markets to transit. The 9 
commenters in favor of the minimum ridership requirements indicated 
that such a threshold would allow Small Starts funds to be provided 
only to those areas that have a demonstrated need for improved transit. 
It was further suggested by 8 of these 9 commenters that in these 
existing cases, there would be substantially less risk to a project's 
achievement of success because of this demonstrated need.
    Response: FTA recognizes that the implementation of high quality 
transit service in areas where such service does not exist today can, 
when combined with aggressive corridor land use development 
initiatives, contribute to future use of service.
    Proposal: In the interim guidance for Small Starts, FTA required, 
as one criterion for qualifying as a Very Small Start, that sponsors of 
such projects provide evidence of current corridor ridership that would 
benefit from the project of no less than 3,000 average weekday 
passengers. FTA proposes to maintain this eligibility requirement for 
Very Small Starts since it is an intrinsic element of FTA's ability to 
warrant the project as being cost effective. For all other projects, 
FTA proposes not to require a minimum ridership threshold. However, FTA 
notes that it would seem unlikely that Small Starts projects proposed 
in corridors with a small or non-existent transit market would be able 
to generate immediate transportation benefits, as required by SAFETEA-
LU in its requirement that cost effectiveness be calculated for an 
opening, rather than design, year. In considering the reliability of 
ridership estimates, FTA will closely examine the justification for the 
ridership and travel time benefits of such projects. Consequently, 
sponsors of such projects must make an extremely compelling case that 
there is sufficient planned development to result in conditions that 
support a strong transit travel market.

Small Starts Evaluation and Ratings

    As amended by SAFETEA-LU, 49 U.S.C. 5309(e)(2) allows the Secretary 
of Transportation to provide funding assistance to a proposed project 
under this new Small Starts category only if the Secretary finds that 
the project is:
    (A) Based on the results of planning and alternatives analysis;
    (B) Justified based on a review of its public transportation 
supportive land use policies, cost effectiveness, and effect on local 
economic development; and
    (C) Supported by an acceptable degree of local financial 
commitment.
    The statute expands on the justification required in paragraph (B), 
requiring that the Secretary make the following determinations:
     The degree to which the project is consistent with local 
land use policies and is likely to achieve local development goals;
     The cost effectiveness of the project at the time of the 
initiation of revenue service;
     The degree to which a project will have a positive effect 
on land use and local economic development;
     The reliability of the forecasting methods used to 
estimate costs and ridership associated with the project; and
     Any other factors that the Secretary determines 
appropriate to make funding decisions.
    The statutory provisions for the evaluation of proposed Small 
Starts projects raise several issues. These include the framework for 
the evaluation; the specific measures used in the evaluation; and 
scaling of the evaluation approach for Small Starts projects of 
different size, cost, and complexity. The ANPRM provided a discussion 
of the challenges and merits of various approaches to addressing these 
issues. Most notably, FTA proposed two potential options for organizing 
the Small Starts project criteria into a coherent evaluation framework. 
This is the same framework that is discussed in Question 3 under the 
Guidance on New Starts Policy and Procedures. The ANPRM further posed 
several specific questions related to the evaluation and rating of 
Small Starts projects. These questions, a summary of industry comments, 
and FTA's response and proposal for this NPRM follow:
    6. How should the evaluation framework for New Starts be changed or 
adapted for Small Starts projects?
    Comments: Twenty-four comments were received in response to this 
question. Several commenters addressed not only the overall evaluation 
framework but also measures for local financial commitment and FTA's 
proposal that the nature of the problem or opportunity in the Small 
Starts project corridor be included in FTA's evaluation of Small 
Starts. Comments on these specific measures were addressed in our 
response to questions that specifically addresses these two issues. Of 
the two evaluation framework options presented in the ANPRM, Option 2 
generated the most support, although 3 commenters strongly indicated 
that land use should be elevated to a benefit rather than used as a 
risk factor. Four commenters objected to both Options 1 and 2, and 
proposed an alternative approach--a ``point-system'' developed in a 
Transit Cooperative Research Program (TCRP) quick study report.
    In terms of local financial commitment, 1 commenter noted that FTA 
should not penalize smaller Small Starts project sponsors who may not 
be able to generate more than a 20 percent local funding match, 
although another commenter hoped that FTA would continue to encourage 
local overmatch through its evaluation of local financial commitment. 
Two commenters suggested that State and local governments or private 
investors are unwilling to commit project revenues until they receive 
assurances of Federal funding, and that FTA needs to consider prior 
history in obtaining non-Federal commitments as a surrogate for actual 
commitments.
    There was little comment on the proposal that projects be evaluated 
in terms of the problems they solve or the opportunity they take 
advantage of. One respondent was concerned that the ANPRM couches 
``problems'' as only being mobility related.
    Response: Based upon the comments received, FTA intends to advance 
the framework described in Option 2 into the NPRM with one exception 
that is discussed more fully in the question 3 under the Guidance on 
New Starts Policy and Procedures. FTA has reviewed the TCRP proposal 
for evaluating Small Starts projects and notes that the approach 
entails double counting and difficulties determining the proper 
weights. FTA understands the positive and negative aspects of

[[Page 43344]]

encouraging local overmatch to Federal discretionary funding, but notes 
that SAFETEA-LU permits FTA to consider the degree to which the project 
financial plan depends upon non-New Starts funding, and FTA therefore 
intends to reward overmatch for Small Starts just as it does New 
Starts. Further it would be poor program management for FTA to make 
Federal funding commitments in advance of local commitments. Equally 
importantly, FTA expects that the demand for Small Starts funding will 
be great enough among projects that can demonstrate such commitments 
that it would be counterproductive for FTA to commit its funds in 
advance of local funding commitments. FTA strongly encourages project 
sponsors to provide an overmatch under the Small Starts program as it 
is likely to be as highly competitive, if not more so, as the New 
Starts program.
    Proposal: The NPRM advances for further review and comment the 
Option 2 evaluation framework first proposed in the ANPRM. However, 
Option 2 has been modified in three important ways. First, the 
``nature/extent of problem or opportunity'' in the project corridor has 
been removed as an explicit evaluation criterion. FTA acknowledges that 
this factor is not specifically identified in 49 U.S.C. 5309(e)(4). 
However, FTA notes that 49 U.S.C. 5309(e)(4)(E) directs FTA to 
``consider other factors that the Secretary determines appropriate.'' 
Therefore, whenever a project is evaluated, FTA intends to consider the 
degree to which the proposed Small Starts project addresses the 
existing and forecast problem and opportunity as an ``other'' factor. 
As congestion is one of this Nation's most daunting transportation 
challenges, another measure that FTA currently intends to consider 
under ``other factors'' is the degree to which a project is a part of a 
significant congestion reduction strategy. FTA will evaluate projects 
that are a principal element of a congestion reduction strategy, in 
general and a pricing strategy, in particular, more highly. FTA seeks 
comment on how it might better measure congestion in the future.
    FTA will also consider as an ``other factor'' any benefit of the 
project not covered under the project justification criteria or other 
factors that the Secretary determines to be appropriate to carry out 
the evaluation. This consideration could result in a project's rating 
being increased or decreased.
    Further, FTA is proposing that land use be included under both the 
economic development/land use criterion (under effectiveness) and the 
reliability criterion. FTA intends that current land use conditions, as 
well as land use plans and policies, be critical components of these 
criteria. The economic development/land use criterion will account for 
60 percent of the effectiveness rating, with the remaining 40 percent 
of the rating comprised of mobility benefits. This should ensure that 
the factor is given sufficient overall attention in the rating process. 
FTA seeks comment on how it might better measure economic development/
land use in the future.
    In addition to revising Option 2, FTA is asking for specific 
comment, under a section entitled ``Additional Discussion Items for 
Comment'' on an alternate evaluation framework for rating proposed 
Small Starts projects. This framework is based upon three principles 
that FTA espouses, which it has heard expressed by many in the transit 
industry. The first principle is that there are two primary reasons for 
implementing major transit capital investments--mobility improvements 
and economic development--and that these can be evaluated on a pass/
fail basis. In the Small Starts program, FTA considers cost 
effectiveness in terms of the cost of improving mobility. The second 
principle is that FTA's evaluation process for Small Starts should be 
as simple as possible, and only needs to be sufficient to identify the 
best projects, ferret out the worst projects, and array those in the 
middle. Finally, the third principle is that whatever the merit of 
proposed Small Starts, lack of sufficient financial capability will 
prevent its implementation; therefore, financial commitment should be 
treated as a ``minimum'' or ``readiness'' requirement, rather than a 
component of an overall New Starts project rating.

Figure 1 presents FTA's proposed Option 3 evaluation framework: 
[GRAPHIC] [TIFF OMITTED] TP03AU07.039

    Under this framework, the financial commitment, as measured by the 
adequacy of a project's capital and operating plan (but not its 
proposed Small Starts share) would join technical and legal capacity, 
and the achievement of Federal metropolitan planning requirements, as 
basic ``readiness'' requirements for being considered for advancement 
in the Small Starts project development process. Once readiness is 
determined, projects would be subject to a ``pass/fail'' assessment of 
their cost effectiveness and economic development/land use impacts. If 
projects pass both assessments, they will receive an initial rating of 
High. If a project passes the cost effectiveness assessment but not the 
economic development/land use assessment, it would receive an initial 
rating of Medium. A project that fails both assessments, or passes the 
economic development assessment but not the

[[Page 43345]]

cost effectiveness assessment, would receive an initial rating of Low 
and will not be considered by FTA for either advancement into project 
development or a funding recommendation until the rating is improved.
    These initial ratings are then adjusted by three factors: (1) The 
reliability of the project's travel forecasts and cost estimates; (2) 
the degree of Small Starts funding overmatch; and (3) the magnitude of 
the problem or opportunity the project is intended to address. All of 
these factors are important. Based upon these adjustments, the initial 
project ratings may go up or down. For example, a project that received 
an initial rating of Medium, but that is providing a significant 
overmatch of Small Starts funding and/or demonstrates reliable 
estimates of project costs and ridership could receive a Medium-High or 
High overall project rating. On the other hand, a project with a 
similar initial rating of Medium but that does not address a severe 
transportation problem and/or for which ridership and cost forecasts 
are considered not as reliable would receive an overall rating of 
Medium-Low or Low. However, consistent with SAFETEA-LU, FTA will also 
consider the project sponsor's ability to provide only a 20 percent 
match and will not rate the project's local financial commitment at 
less than Medium, solely on the basis of a 20 percent match, so long as 
the project sponsor can demonstrate that the 20 percent match is based 
on the limited fiscal capacity of State and local governments. In this 
way, FTA can address the SAFETEA-LU requirement that FTA consider State 
and local fiscal capacity at the same time that it addresses the 
SAFETEA-LU requirement that it gives priority to financing projects 
with a higher-than-required non-New Starts/Small Starts share.
    7. How should the baseline alternative be defined?
    Comments: Twenty-three comments were received in response to this 
question. Twenty-one commenters strongly favored the use of a ``no-
build'' scenario as a baseline alternative for Small Starts. Expanding 
on this, 1 commenter suggested that the Small Starts baseline be 
consistent with the NEPA baseline, be locally driven, and reflect a 
project that is included in local transportation plans and improvement 
programs. It was further suggested by a commenter that the baseline no 
longer be carried into final design. Another commenter suggested that 
the Small Starts baseline should be adjusted based on the complexity of 
the project. For example, one commenter favored using a ``no-build'' 
scenario for smaller projects, but using the TSM for larger projects.
    Response: FTA agrees that the definition of the Small Starts 
baseline should be a locally driven process but disagrees that it 
should be identical to the NEPA ``no build'' in all cases. 
Consequently, FTA continues to require--as it does for traditional New 
Starts--that the alternatives analysis study be the venue for 
developing and evaluating a number of low- to higher-cost alternatives 
that meet the purpose and need for transportation improvements in a 
given corridor. No reasonable alternative should be excluded for 
consideration until an appropriate analysis determines that it does not 
sufficiently address locally-identified problems, commensurate with its 
cost and other impacts. It is through this process that a Small or New 
Starts baseline alternative should be defined. However, while the 
alternatives analysis process is the venue for identifying the baseline 
alternative it should be noted that FTA uses the baseline alternative 
not to determine whether it is reasonable to advance that alternative 
for further study, but as the required comparison for measuring the 
benefits of the project.
    FTA acknowledges that many Small Starts, particularly Very Small 
Starts, will be Transportation System Management (TSM) improvements: 
that is, lower-cost, operations-oriented upgrades to existing transit 
services that do not require construction of a new fixed guideway. For 
such projects, a no-build alternative would be the appropriate Small 
Starts baseline. For more complex projects, including those that 
contemplate the implementation of a fixed guideway, a non-guideway 
alternative--for example, a TSM alternative that provides for similar 
service levels as the proposed Small Starts--would be the appropriate 
baseline. Whatever the baseline alternative, FTA agrees that, once a 
Small Starts project is approved into project development, the baseline 
should not change unless the scope of the Small Start project changes 
and will be used only as a comparison for preparing the required 
information for the annual New Starts Report (as necessary) and for 
making a recommendation on funding for a PCGA.
    Proposal: Cognizant of SAFETEA-LU's expectation that the 
advancement of Small Starts projects be streamlined to the extent 
possible, FTA has simply proposed in the NPRM that FTA must approve the 
baseline alternative. However, FTA intends to rely on the following 
simple guidelines for definition of the Small Starts baseline 
alternative:
     A project with a dedicated right-of-way for 50 percent or 
more of its length in the peak period would usually have a TSM as its 
baseline. In general, a TSM can be satisfied by (1) the inclusion 
within its scope of the physical features found in a Very Small Starts 
project, as defined elsewhere in this NPRM; and (2) service levels 
which are comparable to the proposed Small Start.
     A project that does not meet the definition above, 
including a Very Small Start, would use a no-build alternative as its 
baseline alternative.
    By following these guidelines, FTA believes that the process for 
approving the Small Starts baseline alternative will be extremely 
simplified in comparison with the process for FTA approval of the 
baseline alternative for traditional New Starts. FTA also desires to 
provide some flexibility in the definition of the baseline alternative 
for project sponsors who believe, for whatever reason, these guidelines 
are inappropriate for their proposed Small Starts project. Therefore, 
FTA will consider deviations from these guidelines. In such cases, FTA 
strives to make its review and determination as quickly as possible, 
but notes that it is the responsibility of the project sponsor to make 
a compelling justification for deviation from the guidelines.
    8. How might FTA evaluate economic development and land use as 
distinct and separate measures?
    Comments: Eighteen comments were received in response to this 
question. In terms of land use, 2 commenters suggested comparing the 
current densities with the proposed densities of planned developments. 
In addition to density, however, it was also noted by 7 commenters that 
the existence or planning of transit-oriented policies would be a good 
measure. Economic development had a similar depth of interest and 
comments. For example, 4 commenters suggested measurement of the 
increase in employment and tax revenue, or the property values of 
current properties versus the selling price of future acreage/
developments. In addition to these specific suggestions, other 
commenters noted precautions that should be taken when considering 
these two measures. One commenter cited concern that these should be 
downplayed in the initial stages of the project's development, and 
focus should instead be placed on mobility and cost effectiveness.
    Response: Whether referring to land use or economic development, a

[[Page 43346]]

common theme of the majority of respondent suggestions was to use 
indicators of the likelihood of increased development in areas near 
projects. Existing land use conditions, existing and planned transit-
oriented plans and policies, and projections of increases in employment 
and revenues are all necessary, but not sufficient conditions for 
inducing transit-supportive development patterns as a result of a 
transit project. Indeed, it is not possible to ascertain the likelihood 
of a project's effect on surrounding development unless a number of 
factors relating to both land use and economic development are 
considered in combination. Land use considerations provide information 
about the potential for development or redevelopment and whether that 
development can occur in a transit-oriented way. However, while these 
are necessary conditions, they are not sufficient in and of themselves, 
as the local development climate must be sufficiently robust to provide 
the engine needed for development; the project must be perceived as 
permanent to entice developer interest; and the project must increase 
accessibility to the area. All these factors must be viewed in 
combination in order to evaluate the potential economic development 
benefits of the project.
    Proposal: FTA proposes to use a single economic development/land 
use criterion based on the likelihood of increased transit-oriented 
development resulting from a Small Starts project. The following 
describes FTA's current thinking with respect to what these measures 
will be. Given the important role that land use plays in supporting, 
guiding, and often increasing development, FTA will draw upon many of 
the same factors used in its current evaluation of land use. These will 
be augmented with indicators that provide further incentives to 
development. Because measurement of economic development in terms of 
jobs or value of future development is not currently feasible, FTA 
proposes instead to evaluate whether or not the conditions necessary to 
support economic development exist in the project corridor. To 
accomplish this, FTA proposes to use the following specific measures: 
(1) Current land-use conditions, (2) development and land-use plans and 
policies, (3) the economic development climate in the corridor and 
region, (4) the project-related change in transit accessibility for 
developable areas in the corridor, and (5) the economic lifespan of new 
transit facilities proximate to those developable areas. FTA is 
conducting research in this area and as more quantifiable measures are 
developed they will be proposed as part of any new policy guidance. FTA 
seeks additional comment on how it can better measure economic 
development/land use.
    9. Are there other measures of effectiveness that should be 
considered?
    Comments: Thirteen comments were received in response to this 
question. An assessment of a project's effect on economic development 
was the subject of many commenters. The response to those comments was 
addressed as part of Question 3 above. Two commenters stated that FTA 
faces a challenging task when creating appropriate measures of 
effectiveness for Small Starts projects. For example, it was noted that 
one measure, changes in passenger travel time, may be difficult to 
capture in cities where limited ridership or bus service exists. 
Despite the potential challenges, several measures of effectiveness 
were suggested. Increased access to job centers as well as the 
reduction in the number of single occupancy vehicles on the roadway 
were two measures noted. In addition, several ideas mentioned in the 
ANPRM were emphasized in the comments, including: Reductions in 
passenger travel time, the ability to maintain a cost effective transit 
project, the appearance of permanence of the Small Starts project, and 
trends in land values and development in and near the project area. 
Other suggested measures included the availability of land, the success 
in development near transit in neighboring communities, plans, 
ordinances and policies that support transit-oriented development, and 
economic development.
    Response: Measures of effectiveness vary within each project due to 
its size, sponsor experience and capabilities, and location specific 
criteria. For the concerns relating to changes in passenger travel time 
and increased access to jobs, transportation user benefits provides an 
excellent metric that captures all the benefits of interest. Measures 
related to land use and economic development will be considered by FTA 
in its evaluation of the criterion for economic development/land use.
    Proposal: Because the primary objectives of transit projects are to 
improve mobility and foster economic development, FTA has chosen to use 
two criteria for measuring the project's effectiveness. These are 
mobility, which is the travel time savings calculated as part of the 
cost effectiveness measure, and economic development/land use, the 
components of which are discussed in Question 8 under Guidance on New 
Starts Policies and Procedures. Although FTA sees merit in identifying 
other measures of effectiveness, the lack of analytical methods to 
address many of the desirable characteristics of transit projects 
results in an inability to determine these benefits fairly at this 
time. If FTA is later able to identify additional measures, these can 
be added to the evaluation as part of any changes to our policy 
guidance, which would be subject to public review and comment.
    10. Is it desirable for FTA to attempt to incorporate other 
measures of effectiveness besides mobility when evaluating cost 
effectiveness? If so, what measures might be incorporated and in what 
manner?
    Comments: Thirteen comments were received in response to this 
question. The number and variety of responses seem to indicate not only 
a great interest in this evaluation tool, but also provide a view of 
priorities in the respondent communities. Suggestions regarding cost 
effectiveness concerned numerous areas, including service, neighborhood 
revitalization, and congestion reduction. Commenters specifically 
suggested increased service to transit dependent users and improved 
connectivity to job, residential, or retail centers, and contributions 
to local land-use changes and economic development as measures. 
Specifically, 2 commenters noted that the cost effectiveness should 
include mobility benefits that would accrue to highway users with the 
increase of transit use. In addition, 2 other commenters noted that 
walkability should also be incorporated into cost effectiveness. In 
addition to the mobility-oriented measures listed previously, other 
suggested measures include the extent to which a community is 
considered livable. Other comments noted that the evaluation of 
effectiveness should be simplified, thus eliminating the need for 
additional measures of evaluation.
    Response: FTA supports a simplified cost effectiveness evaluation 
process. The need to maintain this simplification has been taken into 
account when choosing the appropriate measures and tools. Thus, 
specific, quantifiable, and easily attainable measures such as 
transportation user benefits and capital costs are necessary components 
of the evaluation process. More qualitative measures such as regional 
connectivity, neighborhood revitalization, walkability, and 
contributions to land-use and economic development are difficult to 
incorporate in a measure of cost effectiveness because they are 
difficult to measure reliably. As described in the response to Question 
10 under New Starts, FTA is currently

[[Page 43347]]

unable to accurately assess the mobility benefits that accrue to 
highway users from high-capacity transit due to the inability of local 
travel models to reliably determine the effect. Once travel models have 
been improved to reliably forecast these benefits, FTA will use them. 
In addition, as described under Question 4 in ``Additional Discussion 
Item for Comment,'' FTA is interested in exploring certain surrogate 
measures that could account for highway user benefits.
    Proposal: Because of the difficulty of incorporating additional 
measures into its evaluation of project cost effectiveness, FTA is 
proposing to maintain its current cost effectiveness measure of 
annualized cost per hour of user benefits. As described in Question 10 
under New Starts above and Question 4 under ``Additional Discussion 
Items for Comment,'' FTA will continue to seek ways to include the 
benefits to highway users in the calculation of user benefits.
    11. Should mode-specific constants be allowed in the travel demand 
forecasts? If so, how should they be applied?
    Comments: Fourteen comments were received in response to this 
question. All but two of the commenters favored use of an asserted 
modal constant in the estimation of Small Starts project ridership and 
mobility estimates. The two opposed cited the short timeframe for a 
Small Start project and that there is too little national data gathered 
at this time and too much variation between communities to make this 
worthwhile. Those in favor of utilizing a modal constant noted that in 
areas with a total absence of a particular transit mode, it may provide 
a useful assessment tool. These comments varied from using a locally-
derived constant when the mode is in place to use of nationally 
determined constants.
    Response: FTA allows use of a mode-specific constant in forecasts 
that have been carefully calibrated using ridership information from 
the mode. Mode-specific constants play two roles in travel forecasting. 
The first is to represent all the attributes of the mode that are not 
otherwise explicitly included in the travel models. These service 
attributes include visibility, reliability, span of service, and 
comfort, as well as others. Constants also act as correction factors 
for all the errors that occur in the models so that model results can 
replicate current transit ridership. Deciding the magnitude of each of 
these roles is extremely difficult and the subject of current FTA-
sponsored research. When this research has been completed, FTA aspires 
to having an approach to the application of mode-specific constants 
nationally that will both produce accurate representations of these 
omitted attributes and be fair to all projects seeking funding. In the 
interim, in the policy guidance issued in June 2007, FTA has allowed 
credits for a constant for a new transit mode to an area. The credits 
are based on the attributes of the project.
    Proposal: FTA's current policy allows the use of mode constants for 
travel models that have been carefully calibrated against travel demand 
for an existing transit mode, and which fall within a reasonable range 
established by prior experience. For areas proposing a new mode, FTA 
has specified credits for a constant based on the project's attributes. 
It should be noted that this position is not specifically addressed in 
the NPRM as FTA intends to treat the issue of a modal constant through 
policy guidance, not regulation.
    12. How might FTA incorporate risk and uncertainty into project 
evaluation for Small Starts?
    Comments: Fifteen comments were received in response to this 
question. Due to the simplified nature of the Small Starts program, 7 
comments related to ways in which risk and uncertainty (which FTA now 
describes as reliability) could be incorporated into the evaluation 
process without compromising this simplicity. For instance, 4 
commenters indicated that peer reviews and risk analysis based on 
similar and previously approved projects would be a sufficient means of 
evaluation. Six other commenters indicated that risk analysis measures 
should be broad in scope such that simple travel demand models would be 
able to analyze these measures effectively and without costly software 
packages. To further simplify risk analysis, 4 commenters were in favor 
of creating separate Small Start and Very Small Start project analysis 
criteria. Specific measures of risk and uncertainty proposed by 
commenters include the presence or development of transit-oriented 
development policies and public/private funding.
    Three commenters stated that risk and uncertainly were adequately 
addressed within the financial analysis and evaluation and that 
additional measures of risk may overly complicate the process.
    Two commenters questioned the inclusion of travel forecast and cost 
estimate reliability as an evaluation factor, noting that (1) the 
simplified nature of Small Starts projects minimizes risk and 
uncertainties associated with their implementation and (2) the process 
for evaluating projects should be streamlined and no new measures 
should be introduced.
    Response: Although the Small Starts evaluation process is meant to 
be simpler than that used for New Starts projects, accurately weighting 
reliability factors remains an important task. Further, SAFETEA-LU 
calls for FTA to include an assessment of the reliability of forecasts 
for Small Starts, just as it does for New Starts. Reliability measures 
take into account a project sponsor's ability to manage transit 
projects, as well as factoring in local expertise and development 
conditions. Financial reliability depends on both the amount and the 
terms of local financial funding, as well as the size of the funding 
request (e.g., is it reasonable in relation to other projects of a 
similar size in a similar community?). In addition, measures such as 
forecasted ridership and peer reviews are valid means to assess 
reliability.
    Proposal: FTA proposes to consider reliability of the costs and 
ridership forecasts in its evaluation and to adjust, either upward or 
downward, the ratings of the individual criteria that rely on these 
forecasts. The measures for reliability will be identified in policy 
guidance and these could include a number of factors. For instance, for 
travel forecasts (1) the current land use and land-use policies, (2) 
the soundness of forecasting tools and data used to predict ridership 
and mobility benefits, including steps to reduce uncertainty through 
peer reviews and other quality control procedures, (3) comparisons of 
ridership forecasts against peer projects--similar projects in similar 
settings, with particular scrutiny for projects without any peers, and 
(4) the track record of the project sponsor with benefits forecasts for 
previous transit projects.
    The reliability of the cost effectiveness measure would necessarily 
depend on any uncertainties associated with both the effectiveness 
measures and the cost estimates. The effectiveness reliability could be 
quantified with the measures outlined above. The cost reliability 
measures could be based on (1) the soundness of cost-estimating 
procedures, including steps to reduce risk through peer reviews and 
other quality-control efforts, (2) comparisons of the cost estimates 
against peer projects, and (3) the track record of the project sponsor 
with cost estimates for previous transit projects. In addition, since 
operating efficiencies are measured as part of cost effectiveness, FTA 
would consider any innovative contractual arrangements, especially 
Public Private Partnership arrangement, which produce significant 
reductions in

[[Page 43348]]

operating expenses, or which improve the reliability of forecasts of 
operating costs in its assessment of reliability.
    13. What weights should FTA apply to each measure?
    Comments: Nine comments were received in response to this question. 
Although the specific weights varied considerably among commenters, 
most agreed that the overall measures of cost effectiveness, land use, 
and economic development would provide an accurate assessment of the 
project. Those who stated that cost effectiveness is a moderate to 
important factor weighted it between 33 percent and 50 percent. One 
commenter suggested a scenario in which a project would be required to 
rate well in cost effectiveness, land use, and economic development, or 
be able to score highly in any of the three, to receive project 
funding. Three commenters suggested that although cost effectiveness 
was an important measure, the evaluation process should allow for 
leniency where other project benefits outweigh cost effectiveness. One 
additional commenter indicated that project merit and a local 
commitment to funding should outweigh the cost effectiveness measure.
    Response: The variety of responses indicates the difficulty in 
assigning weights to each measure. This difficulty is compounded by the 
fact that there is no research that can be used to guide a decision on 
the importance of each of the criteria. Therefore, the application of 
weights is policy driven.
    Proposal: FTA proposes in the NPRM to give equal weight to both 
project justification and local financial commitment for the overall 
project rating. Further, the project justification rating will be 
comprised of cost effectiveness, weighted at 50 percent and 
effectiveness, weighted at 50 percent. Economic development/land use 
will account for 60 percent of the effectiveness rating, with the 
remaining 40 percent of the rating comprised of mobility benefits. An 
alternative approach, which uses a pass/fail decision rule in lieu of 
weights was described in Question 6 under the ANPRM on Small Starts and 
is specifically called out in the ``Additional Discussion Items for 
Comment'' at the end of this section.
    14. Should the FTA make a distinction in the way we evaluate Small 
Starts projects of different total project costs and scope?
    Comments: Thirty-three comments were received in response to this 
question. Twenty-seven commenters favored a scaled approach to Small 
Starts projects. Although some of these preferred the distinction 
between Small Starts and Very Small Starts as proposed in the ANPRM, 
others simply noted that a threshold should be created below which 
little modeling or intensive quantitative analysis would occur. Of the 
6 commenters opposed to creating a distinction among Small Starts 
projects, most still saw the need for a scaled approach to evaluating 
Small Starts projects. This was especially true for those commenters 
who operated existing transit projects, and for which the proposed 
project was simply an extension of an existing project.
    Response: As noted in the ANPRM, several options are available for 
evaluation of Small Starts proposals: (1) Application of the same 
evaluation methods for all projects regardless of scale; (2) 
development of simplified analytical procedures for smaller projects; 
or (3) defining for small projects a set of conditions, effectively 
``warrants'' based on project scope and implementation setting, under 
which proposals are automatically deemed to have an acceptable level of 
project justification.
    Small Starts projects may range in size from non-guideway 
improvements costing $20 million, or perhaps less, to new guideways 
costing just under $250 million. Given this relatively wide range of 
project costs and the potential for complexity and risk, different 
approaches seem appropriate for projects of different scale. 
Furthermore, FTA recognizes that the effort expended by project 
sponsors to develop the necessary information and by FTA to ensure the 
reliability of that information should be matched to the size and 
complexity of the proposed project. Lower levels of effort, however, 
should result from lower levels of complexity, detail, and rigor, not 
from a reduced ability to address the full range of evaluation 
criteria. Given the relatively straightforward nature of the financial 
measures, most of the differences in evaluation methods should occur in 
the evaluation of project justification, particularly in the methods 
used to compute mobility benefits and, therefore, cost effectiveness.
    Proposal: FTA advances in this NPRM the very simplified evaluation 
process for Very Small Starts projects that was first proposed in the 
ANPRM and established, on an interim basis, in the Final Interim 
Guidance on Small Starts issued August 8, 2006. This process relies on 
pre-existing ``warrants,'' which if met set the project's justification 
and local financial commitment ratings at Medium. In addition, while 
Small Starts projects would be subject to a similar evaluation process 
as is used for New Starts, the forecast year and level of detail are 
significantly simplified.

Small Starts Procedures for Planning and Project Development

    SAFETEA-LU specifies the use of some different planning and project 
development procedures for Small Starts projects from those used for 
traditional New Starts projects. Like the requirement for traditional 
New Starts, 49 U.S.C. 5309 requires that Small Starts projects be based 
on the results of planning and alternatives analyses but because of the 
short timeframe for the analysis (opening year versus the planning 
horizon covering no less than 20 years), it is likely that this process 
can be simplified. Unlike traditional New Starts, Small Starts need 
only be approved to advance from planning and alternatives analysis to 
project development and construction; no separate approval to enter 
final design is required. A Project Construction Grant Agreement 
(PCGA), which is a simplified Full Funding Grant Agreement, is used to 
provide a multi-year funding stream for Small Starts projects. The 
ANPRM included a discussion of, and asked for comment on, a number of 
these issues. The following summarizes the comments received, FTA's 
response and proposal for addressing the issue in the NPRM:
    15. Should there be a distinction in the alternatives analysis 
requirements for Small Starts compared to traditional New Starts?
    16. Should there be a distinction in the alternatives analysis 
requirements for Very Small Starts compared to larger projects that 
qualify as Small Starts?
    17. Within an alternatives analysis, what other alternatives should 
be considered in addition to the Small Start and the existing service 
alternatives?
    18. What should be the key elements or features of a highly 
simplified or simplified alternatives analysis?
    Comments: Question 15 received 18 comments, and question 16 
received 12 comments. Question 17 received 7 comments, and question 18 
received 8 comments. There was universal support expressed for 
differentiating alternatives analysis between Small Starts and New 
Starts. Numerous commenters suggested that letting the NEPA process 
fulfill the requirement for alternatives analysis would streamline the 
project development process. The desire for simplification was rooted 
in the idea that Small Starts projects, due to their small size, are 
inherently less risky than the larger New Starts projects, and the 
planning process should be correspondingly less complicated.

[[Page 43349]]

Another suggestion was to permit the analysis of different alignments 
or phasing strategies of just one mode or technology, rather than to 
require an analysis of alternative modes.
    Approximately two-thirds of the commenters favored a distinction in 
the requirements of alternatives analysis between Very Small Starts and 
Small Starts. These commenters opined that the size of the Very Small 
Starts projects were not substantial enough to warrant an alternatives 
analysis. Some mentioned that this would be a redundant step that could 
be easily covered in the NEPA documentation process. The remaining 
third of commenters did not believe there should be a difference in the 
alternatives analysis process, because by differentiating between the 
two programs, some may use this as an incentive to keep projects just 
under the Small Starts cost thresholds in order to perform less 
analysis and be able to step through a streamlined process.
    There was a consensus from the commenters that no additional 
alternatives should be considered. Six commenters suggested that the 
alternatives analysis should be limited to a ``build'' and a ``no 
build.'' One commenter specified that such an analysis was appropriate 
in established transit markets, but that a simplified analysis might 
include a ``build'' and ``improved system'' for less-well-served 
transit markets. One commenter wrote that the consideration of other 
alternatives should be a matter of local discretion, so long as the 
process meets NEPA requirements.
    In terms of what constitutes a highly simplified or simplified 
alternatives analysis, 3 commenters again focused on the narrowing of 
alternatives and adherence to NEPA as the key factors that would 
simplify the process. One commenter noted that many Small Starts, and 
in particular Very Small Starts, would qualify as categorical 
exclusions and thus not require an analysis of alternatives. In such 
cases, they suggested that the NEPA determination ought to serve as 
meeting the requirement for alternatives analysis.
    Response: Although larger projects require a number of alternatives 
to be considered in an alternatives analysis to assess the numerous 
tradeoffs in costs, benefits, and impacts, the consideration of Small 
Starts often implies that fewer useful alternatives exist, and in some 
cases, there may only be two alternatives, one representing the Small 
Start and the other representing today's service levels. Nevertheless, 
the number of alternatives considered must continue to meet the 
requirements of NEPA, good planning practices, and proper 
identification of project costs and benefits for funding 
recommendations. Where an alternatives analysis is performed prior to 
initiation of NEPA (but consistent with NEPA principles), the 
subsequent NEPA process and document ought to recognize and incorporate 
planning analysis and decisions; this applies to both New Starts and 
Small Starts. A very simple alternatives analysis and subsequent 
evaluation process can be used when Very Small Starts are being 
considered.
    Proposal: In this NPRM, FTA incorporated the proposal advanced in 
the ANPRM and established, on an interim basis, in its Final Interim 
Guidance on Small Starts issued August 8, 2006. This proposal 
acknowledges that a very limited number of alternatives are permissible 
and that use of the no-build alternative as the baseline is appropriate 
if the project does not include a new fixed guideway. For Small Starts, 
the level of analysis for an alternatives analysis may be considerably 
simpler than that for New Starts if issues associated with the projects 
being considered are less complex. For Very Small Starts only minimal 
information needs to be developed relating to a clear description and 
assessment of the problem or opportunity in the corridor, a clear 
description of the project and how it addresses the problem or 
opportunity, determination of the project sponsor's ability to support 
the costs of building and operating the project, and a plan for 
implementing the project.
    19. Should Small Starts projects also be required to perform a 
``before and after'' study?
    Comments: Nineteen comments were received in answer to this 
question. Approximately two-thirds of the commenters indicated a 
``before and after'' study should not be required of Small Starts 
projects. Of those opposed to requiring the study, reasons cited 
included the cost relative to the project funding allotment, as well as 
the need for greater consistency in reporting requirements. Others 
opposed to requiring the study noted that while data collection and 
analysis is a useful process, and one that should be included in the 
project funding, it should not be a requirement. For the one-third of 
the commenters who supported a requirement for a ``before and after'' 
study, the need for a solid base of data and analysis of Small Starts 
projects nationwide was consistently cited as a reason. However, 
another commenter noted the need for simplicity with regard to data 
requirements and analysis methods. It was further suggested that the 
``before and after'' study be cost effective and in line with the 
project size and scope, with little or no analysis required for Very 
Small Starts projects. Specific measures that were noted as potentially 
useful included projected versus actual ridership; annual report of 
ridership; projected versus actual costs (operations and maintenance, 
capital); project scope; and projected service levels versus actual 
service levels.
    Response: The objectives of the ``before and after'' study are two-
fold: (1) To expand insights into the costs and impacts of major 
transit investments; and (2) to improve the technical methods and 
procedures used in the planning and development of those investments. 
These objectives are equally important to both large-scale and smaller-
scale transit projects. Small Starts projects have a unique opportunity 
to affect a greater number of transit agencies with the results 
provided from a ``before and after'' study.
    Proposal: FTA proposes to require a ``before and after'' study for 
all Small Starts projects. Support for this approach can be found in 49 
U.S.C. 5309(g)(2)(C), which applies to all Section 5309 Capital 
Investments, not just to those funded under 49 U.S.C. 5309(d). However, 
FTA is cognizant of the need to simplify this process and therefore the 
FTA guidance on ``before and after'' studies for New Starts will be 
modified to allow for a simplified study approach for Small Starts. In 
addition, for Very Small Starts, the requirements for the Before and 
After Study in the NPRM have been extremely simplified since the 
project sponsor is required to submit project information that is 
generally available.
    20. Should FTA mandate an early scoping approach for those 
alternative analyses that are not being conducted concurrently with the 
formal NEPA process?
    Comments: Fifteen comments were received in answer to this 
question. In order to better address environmental requirements for 
alternatives analyses, the ANPRM proposed an ``early scoping'' 
procedure. That procedure is described in Council on Environmental 
Quality's (CEQ) guidance. It allows for a scoping process in advance of 
the Notice of Intent to prepare an Environmental Impact Statement. 
Response to this proposal was mixed with 6 commenters supporting the 
approach and 9 commenters opposing it. However, it should be noted that 
more experienced entities and those

[[Page 43350]]

representing the largest transit operators were opposed to the proposal 
due primarily to the fact that scoping is likely to not be required for 
the majority of Small Starts projects under the National Environmental 
Policy Act (NEPA) regulations. Those entities stated that because the 
requirement will often be more stringent than what NEPA requires, it 
should not be imposed.
    Response: Early scoping, undertaken by sponsors, could assist FTA 
in making a well-reasoned class of action determination for each Small 
Starts project. If, in advance of any informal early scoping process, 
it appears that, based on established facts and circumstances, a 
particular project proposal qualifies for a categorical exclusion, then 
early scoping by the project sponsor need not be undertaken; otherwise, 
early scoping is the best means of determining the appropriate class of 
action for purposes of the NEPA process. However, because of the 
likelihood that a vast majority of proposed projects will not be 
required to engage in formal scoping, this additional effort outweighs 
its limited value.
    Proposal: FTA is not proposing that early scoping, as defined by 
CEQ guidance, be required for Small Starts projects. Instead, for 
projects requiring an Environmental Impact Statement, FTA is proposing 
to require that the project has progressed beyond the NEPA scoping 
phase before FTA will approve entry into project development. This 
requirement is identical to that currently applied to New Starts.

Additional Discussion Items for Comment

    A few additional issues have been raised since publication and 
comment on the Guidance on New Starts Policies and Procedures and the 
ANPRM on Small Starts. FTA specifically requests feedback on these 
issues, which are identified below and are also discussed in either the 
Response to Comments or in the Section-by-Section Analysis. FTA will 
consider comments received on these issues during future stages of the 
rulemaking process.
    1. FTA has revised the definition of a fixed guideway system in 
section 611.5 to reflect the changes included in SAFETEA-LU. In 
addition, however, FTA has included in that definition facilities, such 
as HOT lanes, that replicate the kind of free-flow conditions expected 
of a traditional fixed guideway system through pricing or other 
enhancements. This proposal is more fully described under the proposal 
for Question 1 in the Eligibility section of the Guidance on New Starts 
Policies and Procedures.
    2. In sections 611.13(b), 611.23(b), and 611.33(b) of the 
regulatory text, of the NPRM FTA is proposing that the costs of all 
``essential project elements'' must be included in the capital cost 
estimates that lead to a project's cost effectiveness rating. Cost 
estimates that do not include all of these elements will be considered 
incomplete and will not be accepted for rating. FTA requests industry 
input as to which ``essential project elements'' should be required for 
inclusion. There has been much discussion in the past as to what 
constitutes an essential element of the project versus a project 
betterment, which can and should be funded entirely with local funds. 
In addition, in the interest of ``right-sizing'' some project sponsors 
have excluded improvements needed in the latter years of the planning 
horizon from the scope of the FFGA, even though such costs are always 
required for cost effectiveness calculations. This has led to some 
confusion as to whether the project sponsor is required to provide 
these improvements, since they are necessary to generate the benefits 
used in the cost effectiveness calculation. One way this problem has 
been addressed is that the project sponsor has included these 
improvements in the 20 year financial plan but has shown that they will 
be funded with non-Section 5309 Fixed Guideway funds. FTA seeks the 
industry views on how these various concepts, ``essential project 
elements'', ``betterments'' and ``right-sizing'' should be addressed in 
the New Starts/Small Starts process.
    3. FTA is considering whether an extremely simplified alternative 
evaluation framework should be allowed for Small Starts projects. The 
framework would allow for a ``pass/fail'' rating for economic 
development/land use and cost effectiveness, which, when combined with 
a reliability factor, would translate into the five levels (high, 
medium-high, medium, medium-low, and low) for the overall rating. This 
framework could simplify the rating process, while identifying the 
projects with the most potential. It would not, however, provide as 
much information on the variations between projects. This proposal is 
more fully described in the Response to Comments section under the 
proposal for Question 6 in the Small Starts Evaluation and Ratings 
section.
    4. Relief of congestion is a top priority of the Department of 
Transportation, as reflected in its recently announced Congestion 
Initiative. The proposals made in this Notice include several features 
which are designed to assure that Major Investment projects contribute 
to reducing congestion. For example, as noted below, FTA intends to 
take account of, as a part of its review of ``other factors,'' the 
degree to which a project is supported by an effective congestion 
relief strategy including variable pricing. Second, FTA proposes to 
continue to include highway user transportation benefits, such as 
travel time savings from reduced demand on the highway system, as part 
of its measure of transportation system user benefits used to calculate 
mobility improvements and cost effectiveness. However, while this 
factor has been included in the definition of user benefits for some 
time, as described above in response to Question 10 under New Starts, 
reliable estimation of these benefits has been problematic. FTA intends 
to continue to work closely with the Federal Highway Administration to 
address the improvements needed in travel models to assure that 
reliable estimates can be developed and included in the measurement of 
transportation system user benefits. However, until such estimates are 
uniformly available on a reliable basis, FTA believes it is appropriate 
to use alternative measures that could provide some indication of the 
congestion relief benefits of New Starts projects. One such measure 
could be the reduction in highway vehicle miles of travel between the 
New Start and baseline alternative, weighted by a factor of highway 
congestion (e.g., daily vehicle miles of travel per lane mile in the 
New Starts project corridor). Such a measure, while imperfect, would 
allow for consideration of the amount of reduced highway demand to be 
assessed in the context of the severity of congestion in the corridor. 
Accordingly, as the third way in which congestion would be addressed in 
evaluating projects, FTA is proposing to include ``congestion relief'' 
as one of the features of ``mobility improvements'' evaluated as part 
of establishing project justification. FTA is interested in comment on 
the implications for the New Starts program of taking into account the 
congestion reduction benefits of transit projects, the measure of 
congestion relief proposed above, other possible measures of congestion 
relief, and the methods by which the current travel models could be 
used to produce better and nationally consistent estimates of highway 
system user benefits.
    5. FTA is seeking feedback on how to provide additional incentives 
to increase the role of public/private partnerships in Section 5309 
Capital Investment projects. FTA is proposing

[[Page 43351]]

to explicitly address the role of public/private partnerships as part 
of an assessment of the role that innovative contractual arrangements 
can play in reducing and/or improving the operating costs both as a 
measure of the reliability of estimates of operating costs and in its 
assessment of the operating plan under local financial commitment. 
However, there may be additional steps that FTA could take. In 
addition, FTA is looking at ways that public/private partnerships can 
enhance the capital plan under local financial commitment as well as 
measure cost effectiveness. For purposes of this question, a public/
private partnership assumes that the private sector invests its own 
financial capital (as opposed to an in-kind contribution) in the 
project. One possible approach would be to allow ``betterments'' funded 
by private entities to be excluded from the cost effectiveness 
calculation. This would allow private entities to invest in particular 
elements of a project that they viewed to be of particular benefit to 
them without jeopardizing an acceptable cost effectiveness rating. This 
approach would be available to a project with an acceptable cost 
effectiveness rating calculated without taking into account such 
betterments. To the extent that the addition of the betterments to the 
project's design would result in the project's cost effectiveness 
becoming unacceptable, FTA would exclude such costs from the 
calculation of cost effectiveness if they were borne by private 
entities. Examples of such improvements, or betterments, could include 
additional station entrances to subway stations, substantial 
improvements to a station's design beyond the design standards used for 
other stations in the system, and changes in the vertical or horizontal 
alignment of the project. Alternatively, FTA could exclude from the 
calculation of the cost effectiveness rating those project costs paid 
for by private capital--whether such costs are for betterments or 
otherwise--and calculate a project's cost effectiveness based only on 
costs borne by the public.
    6. FTA has chosen to publish the weights used to calculate the 
Project Justification and local financial commitment ratings for New 
and Small Starts projects in the final rule. Previously, these weights 
as well as measures used to determine New or Small Starts Project 
Justification and Local Financial Commitment ratings have been 
published in the Annual Report on Funding Recommendations and 
separately in other FTA publications. FTA seeks comment on whether to 
publish both the weights and the measures in the final rule, or to 
preserve a degree of flexibility and maintain the measures in a 
separate document.
    7. FTA is seeking comment on how it might develop a methodology to 
better quantify the user benefits attributable to a project. First, FTA 
seeks comment on a methodology for quantifying the user benefits that 
would accrue from the interaction of the proposed New Start or Small 
Start project and road pricing included in an effective congestion 
management strategy.
    Second, FTA seeks a methodology for quantifying the benefits 
attributable to the economic development/land use changes that occur as 
a result of a proposed New Start or Small Start project. Those changes 
in economic development/land use may provide benefits that are not 
otherwise included in FTA's current estimation of user benefits. FTA 
seeks comment on how to quantify this difference in economic 
development/land use attributable to the project, as well as how to 
measure the benefits that result.

III. Section-by-Section Analysis

Reorganization

    In order to make the regulation more understandable, FTA is 
proposing to divide it into four subparts that will cover General 
Provisions, ``New Starts,'' ``Small Starts,'' and ``Very Small 
Starts.'' Subpart A would include General Provisions that apply to all 
projects seeking Section 5309 Capital Investment funds. Subpart B would 
include those provisions that apply to New Starts (projects of over 
$250 million in total cost or requesting more than $75 million in New 
Starts funds). Subpart C would cover Small Starts projects (projects of 
under $250 million in total cost and requesting less than $75 million 
in Small Starts funds but not qualifying as a Very Small Start). 
Subpart D would cover Very Small Starts (a subset of Small Starts 
projects which are less than $50 million in total cost and $3 million 
per mile (excluding vehicles) and which meet other specified 
characteristics). FTA has chosen this approach, even though there is a 
lot of similarity in the requirements of each subpart, in order to 
assist a project sponsor in finding all of the applicable procedures 
and evaluation criteria in a single subpart, depending on the size and 
nature of the proposed project.
    Subpart A includes a general statement of purpose and contents, 
statements on applicability of the regulation, and a section on 
definitions. These sections are similar to section in the current 
regulation, but include certain amendments, which are described below. 
This is followed by a new section on measures of reliability, which 
applies to all projects seeking Section 5309 Capital Investment funds, 
no matter the size.
    Subparts B, C, and D each include separate provisions on 
eligibility, the project justification criteria, the local financial 
commitment criteria, overall project development ratings, and the 
project development process, as they apply to New Starts, Small Starts, 
and Very Small Starts, respectively. These subparts build on the 
sections in the existing regulations that cover these subjects, amended 
as described below, and tailored to the size and complexity of the 
projects being considered.

Distribution Table

    For ease of reference, the following distribution table indicates 
proposed changes in section numbering and titles from the current 
version of the regulations in 49 CFR part 611.

------------------------------------------------------------------------
            Current part 611                    Proposed part 611
------------------------------------------------------------------------
611.1 Purposes and Contents............  Subpart A--611.1 Purpose and
                                          Contents.
611.2 Applicability....................  Subpart A--611.3 Applicability.
                                         Subpart B--611.9 New Starts--
                                          Eligibility.
                                         Subpart C--611.19 Small Starts--
                                          Eligibility.
                                         Subpart D--611.29 Very Small
                                          Starts--Eligibility.
611.5 Definitions......................  Subpart A--611.5 Definitions.
611.7 Relation to planning and project   Subpart B--611.17 New Starts--
 development processes.                   Project development process.
                                         Subpart C--611.27 Small Starts--
                                          Project development process.
                                         Subpart D--611.37 Very Small
                                          Starts--Project development
                                          process.
611.9 Project justification criteria     Subpart B--611.11 New Starts--
 for grants and loans for fixed           Project justification
 guideway systems.                        criteria.
                                         Subpart C--611.21 Small Starts--
                                          Project justification
                                          criteria.

[[Page 43352]]


                                         Subpart D--611.31 Very Small
                                          Starts--Project justification
                                          criteria.
611.11 Local financial commitment        Subpart B--611.13 New Starts--
 criteria.                                Local financial commitment
                                          criteria.
                                         Subpart C--611.23 Small Starts--
                                          Local financial commitment
                                          criteria.
                                         Subpart D--611.33 Very Small
                                          Starts--Local financial
                                          commitment criteria.
611.13 Overall project ratings.........  Subpart A--611.7 Measures of
                                          reliability in the Section
                                          5309 capital investment
                                          evaluation and rating process.
                                         Subpart B--611.15 New Starts--
                                          Overall project ratings.
                                         Subpart C--611.25 Small Starts--
                                          Overall project ratings.
                                         Subpart D--611.35 Very Small
                                          Starts--Overall project
                                          ratings.
------------------------------------------------------------------------

Subpart A--General Provisions

Section 611.1: Purpose and Contents

    This section describes the purpose of the proposed rule, which is 
to implement the requirements of Title 49, United States Code (U.S.C.), 
sections 5309(d) and (e) and 5328(a).
    As is the case with the current regulation, the proposed rule 
establishes the methodology by which FTA will evaluate candidate 
projects for Section 5309 Capital Investment funding. Applicants must 
follow these rules to be considered eligible for discretionary capital 
investment grants for new fixed guideway systems, including substantial 
corridor-based bus systems or extensions to existing systems. As in the 
current regulation, data collected as part of the planning and project 
development process and related regulations, conducted under 23 CFR 
part 450 and 23 CFR part 771, provide the basis for evaluating projects 
seeking to proceed under the New Starts, Small Starts, or Very Small 
Starts programs.
    As in the current regulation, the results of these evaluations will 
be used by FTA to make the findings required to advance a project into 
preliminary engineering (PE) and final design for New Starts, and into 
project development for Small Starts and Very Small Starts. They also 
will be used to make recommendations, as required under 49 U.S.C. 
5309(k)(1), for inclusion in the President's annual budget request, and 
to determine which projects are eligible for funding commitments under 
Full Funding Grant Agreements, in the case of New Starts, or Project 
Construction Grant Agreements, in the case of Small Starts and Very 
Small Starts. The annual report was previously called the New Starts 
Report, but will now be retitled because it will include funding 
recommendations for both New Starts and Small Starts. In contrast to 
the current regulation, information will not be needed for an annual 
Supplemental Report on New Starts, formerly required by 49 U.S.C. 
5309(o)(2), as it was dropped by the amendments made to 49 U.S.C. 
Chapter 53 by SAFETEA-LU.

Section 611.3: Applicability

    This section states that this rule, as in the current regulation, 
applies only to the evaluation of projects seeking Federal capital 
investment funds (New Starts and Small Starts) for new fixed guideway 
systems and extensions to existing systems under 49 U.S.C. 5309. 
However, in contrast to the current regulation, ``substantial capital 
investments in new corridor-based bus projects'' are added to the 
eligible activities for Small Starts, implementing additional 
eligibility provided by SAFETEA-LU. New Starts projects must continue 
to include a fixed guideway component, as will be described below in 
more detail.
    As in the current regulation, this section also states that the 
rule does not apply to projects already in final design or under a Full 
Funding Grant Agreement.
    The proposed rule, consistent with SAFETEA-LU, does not continue 
the current exemption from the requirements of this rule for projects 
seeking less than $25 million in Section 5309 Capital Investment funds. 
However, the proposed rule would permit projects which had been exempt 
and which had already been approved into project development (PE or 
final design) to use funds that have already been made available 
through the appropriations process and to receive those funds without 
being rated and evaluated under the proposed rule. However, to receive 
additional Section 5309 Capital Investment (New Starts and Small 
Starts) funds from FTA, previously exempt projects would have to be 
rated and evaluated in accordance with the provisions of the rule.

Section 611.5: Definitions

    As in the current regulation, this section defines key terms used 
in 49 CFR part 611. Many of the definitions would remain unchanged from 
the current regulation. However, several definitions have been changed 
to provide more detail or specificity or to be consistent with changes 
proposed to be made elsewhere in the rule. Key changes include the 
following.
    The definition of ``alternatives analysis'' is proposed to be 
expanded to include a requirement that an alternatives analysis must 
``include sufficient key information to enable the Secretary to make 
the findings * * * required under section 5309.'' This was added to be 
consistent with the definition of alternatives analysis added to 49 
U.S.C. 5309 by SAFETEA-LU.
    The definition of ``baseline alternative'' is proposed to be 
changed slightly to modify the reference to alternatives that have a 
better ratio of measures of mobility to cost than the no build 
alternative by explicitly stating the condition that the cost 
effectiveness of the baseline alternative must meet. This is consistent 
with long standing FTA guidance. Specific reference to Transportation 
System Management or Very Small Start-like alternatives as typical 
baseline alternatives is proposed to be added.
    A definition of ``metropolitan transportation plan'' is proposed to 
be added, which is based on the requirements in 49 U.S.C. 5303.
    The term ``Project Construction Grant Agreement (PCGA)'' is 
proposed to be defined as a document similar in concept to a Full 
Funding Grant Agreement (FFGA), but for Small Starts (including Very 
Small Starts) projects.
    The term ``project development'' is proposed to be defined as steps 
taken during PE and final design, prior to award of a FFGA or a PCGA.
    A definition is provided for the term ``Section 5309 Capital 
Investments Program'' which includes funding for New Starts and Small 
Starts projects under Section 5309(b)(1), (b)(4), and (m)(2)(A). While 
the title for all of Section 5309 is ``Capital Investment Grants,'' 
this rule applies only to projects seeking discretionary grants for New 
Starts and Small Starts funding under subsections (b)(1), (b)(4) and 
(m)(2)(A) and not to funding for Fixed Guideway Modernization under

[[Page 43353]]

subsections (b)(2) and (m)(2)(B) or discretionary bus grants under 
subsections (b)(3) and (m)(2)(C).
    FTA is proposing a definition of ``Project Development Agreement'' 
(PDA), which is an agreement between FTA and the project sponsor that 
must be executed before the project is approved for entry into PE. The 
terms and conditions of a model PDA are set forth in Appendix A to the 
proposed rule.
    The term ``Section 5309 Capital Investment'' is proposed to be 
defined as those projects eligible for assistance with funds from the 
discretionary Section 5309 Capital Investment Program. This includes 
new fixed guideway systems and extensions, as in the current 
regulation, but also an expanded definition of this term. First, FTA 
has proposed that the definition include a transportation facility 
that, by means of pricing or other enhancements, replicates the 
benefits of ``free-flow'' conditions for transit. Second, in response 
to SAFETEA-LU for Small Starts funding, the definition includes 
corridor-based bus projects with at least 50 percent of the project 
operating in a guideway dedicated to transit or high occupancy vehicle 
use during peak periods, or a substantial investment in a defined 
corridor which includes certain key elements. The key elements proposed 
are substantial transit stations, traffic signal priority/pre-emption, 
low floor buses or level boarding, branding of the proposed service, 
and 10 minute peak and 15 minute off-peak headways or better for at 
least 14 hours per day. The definition also would provide for a 
categorization of projects into three categories (New Starts, Small 
Starts, and Very Small Starts), depending on the size of the project 
and certain project features. New Starts projects would be defined as 
those requesting $75 million or more in Section 5309 Capital Investment 
funds, or a total project cost of $250 million or more. Small Starts 
projects would be projects requesting less than $75 million in Section 
5309 Capital Investment funds and a total project cost of less than 
$250 million. Very Small Starts projects would be defined as meeting 
Small Starts requirements, but in addition having a total cost of less 
than $3 million per mile (not including vehicles), a total project cost 
of less than $50 million, and including demonstrably effective and 
cost-effective project elements. For the purpose of categorizing 
projects, costs would be expressed in year-of-expenditure dollars.
    A definition of ``Transportation System Management (TSM)'' would be 
added that is drawn from long-standing use of the term in the planning 
process. In essence, it is defined as the best than can be done without 
construction of a new fixed guideway. At a minimum it must be more cost 
effective as compared to the no build alternative than the New or Small 
Starts project compared to the no build alternative. This could include 
upgrades to transit service through operational and small physical 
changes, selected highway improvements, minor widenings, and other 
focused traffic engineering improvements.
    A definition of ``user benefit'' has been added. The term is 
defined as transportation system user benefits accruing to all 
travelers affected by the proposed Section 5309 Capital Investment 
improvement, compared to a baseline alternative. User benefits include 
travel time savings, reduced out-of-pocket travel costs, improvements 
in comfort, convenience, and reliability, and other benefits that 
accrue to users of specific travel modes, where such benefits are 
supported by verifiable data. The definition explicitly includes 
highway users, transit users, and pedestrians as users of the 
transportation system.

Section 611.7: Measures of Reliability in the Section 5309 Capital 
Investment Evaluation and Rating Process

    This section, which is completely new compared to the existing 
regulation, would provide that FTA would evaluate and rate the 
reliability of the forecasts of ridership and costs estimated and 
proposed for a Section 5309 Capital Investment project. SAFETEA-LU 
amended 49 U.S.C. 5309 to add new provisions (49 U.S.C. 5309(d)(3)(B) 
and 49 U.S.C. 5309 (e)(4)(D)) that require FTA to evaluate the 
reliability of these forecasts and proposals. However, as stated in the 
NPRM, the specific measures that will be used to evaluate and rate 
reliability will be established in policy guidance. It is likely that 
these measures would address the transit orientation of existing and 
future land uses in the environment of the proposed project, the 
experience of the project sponsor in implementing previous major 
projects similar to that being proposed, industry experience with 
implementation of projects of a similar nature, the reliability of 
forecasting methods used by the project sponsor and of the information 
provided by the project sponsor in support of the evaluation process, a 
comparison of opening year project ridership to that estimated for the 
planning horizon covering no less than 20 years, the degree to which 
innovative contractual arrangements are in place or planned which 
reduce the uncertainty of operating cost estimates, and mitigation 
efforts by the project sponsor to improve the reliability of forecasts. 
Once a project's reliability of forecasts has been established, the 
proposed rule would allow FTA to adjust, upward or downward, specific 
ratings that would otherwise be applied to the specific project 
justification or local financial commitment criteria that would be 
affected by the uncertainties associated with the area of estimation 
reliability determined in the evaluation of the factors outlined above.
    FTA is considering an alternative structure for developing overall 
project ratings for Small Starts projects. This proposal is more fully 
described in the Response to Comments section under the Proposal for 
Question 6 under the Small Starts Evaluation and Ratings section. 
Should the alternative approach be adopted, FTA would also consider the 
amount of funding proposed to come from outside the Section 5309 
Capital Investment program as an indication of the reliability of the 
financial commitment to the proposed Small Starts project.

Subpart B--New Starts

Section 611.9: Eligibility for Section 5309 Capital Investments Funds 
(New Starts)

    This section would establish the eligibility for New Starts 
funding. New Starts are defined, in section 611.5, as those projects 
requesting $75 million or more in New Starts funds or having a total 
project cost of $250 million or more. As in the current regulation, New 
Starts projects must be the result of planning and alternatives 
analysis. Codifying current FTA practice, projects must have at least 
50 percent of the project length (not necessarily contiguous) operating 
on a fixed guideway that is dedicated to transit or high occupancy 
vehicle use during the peak period or when congestion inhibits transit 
system performance. Projects which qualify as a New Start project due 
to their cost or requested New Starts share must be evaluated under the 
criteria and procedures provided for in Subpart B; they may not be 
subdivided for the purpose of analysis, rating, and evaluation into a 
series of Small Starts or Very Small Starts projects covered by 
Subparts C or D.

Section 611.11: Project Justification Criteria (New Starts)

    The approach taken in the proposed rule for evaluation of the 
justification for New Starts projects builds on the approach in section 
611.9 of the current

[[Page 43354]]

regulation. As required by 49 U.S.C. 5309(d)(2)(B), FTA must find that 
a project is ``justified'' based on a comprehensive review of a series 
of criteria. Many of these criteria were unchanged by SAFETEA-LU, but 
several were added or were given added emphasis. As under the current 
regulation, FTA will evaluate and rate a proposed project based on 
information coming from locally-conducted alternatives analyses and 
project development processes. Also as in the current regulation, FTA 
will use a ``multiple measure'' approach to determine the overall 
justification of a proposed project, combining the ratings made against 
a series of criteria.
    As in the current regulation, ratings for each of the specified 
criteria will be expressed in terms of five levels of descriptive 
indicators ranging from ``high'' to ``low.'' Subsection (a)(2) provides 
that the specific measures for each of the project justification 
criteria will be published in policy guidance and may be changed from 
time to time. However, as required by SAFETEA-LU, such changes will be 
subject to notice and comment before they are finalized and will be 
published at least every two years or when substantial changes occur.
    As proposed in the January 2006 Guidance on New Starts Policy and 
Procedures, FTA is proposing to adopt a new approach to classify the 
criteria used for project justification. Mobility improvements 
(including mobility for transit dependents and congestion relief), 
economic development/land use, and environmental benefits will be 
classified as measures of project effectiveness.
    Cost effectiveness is proposed to be evaluated separately, measured 
as annualized capital and operating costs divided by transportation 
system user benefits. The capital cost used for cost effectiveness must 
include all essential project elements necessary for completion of the 
project. Transportation system user benefits are explicitly defined 
elsewhere to incorporate benefits to all transportation system users, 
including transit riders, highway users, and pedestrians. In the long 
run, it is expected that the measure will count highway user benefits 
explicitly, once transportation models are capable of providing 
reliable and nationally consistent estimates of their value.
    ``Operating efficiencies'' is no longer included as a separate 
evaluation criteria, even though it is called out in 49 U.S.C. 
5309(d)(2)(B) as one of the factors to be assessed by FTA in finding 
that a project is ``justified.'' Instead, FTA proposes to address this 
factor through the cost effectiveness measure, which already includes 
operating costs in the annualized costs, because experience has shown 
that a separate measure of operating efficiencies does not meaningfully 
distinguish between projects. FTA expects that operating efficiencies 
resulting from innovative contractual arrangements will result in lower 
operating expenses and hence higher cost effectiveness ratings. FTA 
will consider any innovative contractual arrangements, including public 
private partnerships, as a measure of operating efficiencies in its 
evaluation of both reliability and the operating plan as part of local 
financial commitment.
    Consistent with the changes made by SAFETEA-LU, which explicitly 
added ``economic development'' to the list of justification factors, 
and which elevated ``public transportation supportive land use policies 
and future patterns'' from a consideration to a justification factor, 
``economic development/land use'' is included as a measure of 
effectiveness. As described above in the Questions 7 and 8 of the 
response to comments received on the Guidance on New Starts Policies 
and Procedures and Question 8 of the ANPRM on Small Starts, it is 
difficult to separately evaluate these two factors. Nonetheless, 
recognizing the importance that SAFETEA-LU provided by including both 
these factors, FTA will use this combined measure as an important part 
of the evaluation of project justification. Thus, the rating of cost 
effectiveness and of effective will be weighted equally in computing 
the project justification rating. Economic development/land use will 
comprise 40 percent of the effectiveness measure, with an additional 40 
percent given to mobility for the general population (including 
congestion relief), 10 percent to environmental benefits, and the final 
10 percent to transit dependent mobility.
    As in the current regulation, effectiveness and cost effectiveness 
are evaluated by comparing the project to the baseline alternative and 
``other factors'' will be considered in setting the overall rating for 
project justification. Although FTA is not proposing, as was proposed 
in the January 19, 2006 draft Guidance on New Starts Policies and 
Procedures, to explicitly assess the case for the project as a separate 
measure, FTA intends to evaluate this issue for all projects as part of 
its assessment of ``other factors.'' As part of its policy guidance FTA 
will identify which additional factors will be considered as ``other 
factors.'' One measure that FTA currently intends to consider under 
``other factor'' is the degree to which a project is a part of a 
significant congestion reduction strategy that incorporates pricing. 
Others could include multimodal emphasis of the locally preferred 
investment strategy, including the proposed New Starts project as one 
element; environmental justice considerations and equity issues; 
consideration of innovative financing, procurement and construction 
techniques, including design-build turnkey applications; and additional 
factors relevant to local and national priorities and to the success of 
the project.
    In the current regulation, a series of ``considerations'' specified 
in 49 U.S.C. 5309(d) are laid out. The proposed rule does not 
explicitly include these considerations as specific criteria. However, 
the measures which will be used to support the criteria that are 
explicitly identified do implicitly cover the considerations included 
in 49 U.S.C. 5309(d). Specifically, congestion relief (49 U.S.C. 
5309(d)(3)(D)(i)) and improved mobility (49 U.S.C. 5309(d)(3)(D)(ii)) 
are incorporated in the measures of mobility and transportation system 
user benefits; air pollution (49 U.S.C. 5309(d)(3)(D)(iii)), noise 
pollution (49 U.S.C. 5309(d)(3)(D)(iv), and energy consumption (49 
U.S.C. 5309(d)(3)(D)(v) are addressed in the measure for environmental 
benefits; and, finally, ancillary and mitigation costs (49 U.S.C. 
5309(d)(3)(D)(vi)) and local land, construction, and operating costs 
(49 U.S.C. 5309(d)(3)(J)) are included in the costs used to calculate 
cost effectiveness. As noted earlier, measures of congestion relief 
could also include measures of reduced highway travel weighted by 
severity of congestion, as well as being included in the measure of 
transportation system user benefits used to calculate cost 
effectiveness. Further, infrastructure costs and other [land use] 
benefits (49 U.S.C. 5309(d)(3)(E)) and the cost of suburban sprawl (49 
U.S.C. 5309(d)(3)(F)) are addressed in the measure of economic 
development/land use. The mobility of the public transportation 
dependent population (49 U.S.C. 5309(d)(3)(G)) is, in fact, a key part 
of the mobility measure of effectiveness, and economic development 
(also in 49 U.S.C. 5309(d)(3)(G)) is part of the economic development/
land use measure of effectiveness. Population density (49 U.S.C. 
5309(d)(3)(H)) is addressed as part of the economic development/land 
use measure of effectiveness and current transit ridership (also in 49 
U.S.C. 5309(d)(3)(H)) forms an important part of the new measure of 
reliability.

[[Page 43355]]

Finally, the technical capacity of the grant recipient (49 U.S.C. 
5309(d)(3)(I) is addressed in the measures of reliability, as well as 
forming an important part of the assessment of readiness to proceed to 
through project development.
    Subsection (c) is essentially unchanged from the existing 
regulation and requires the New Starts project to be compared to the 
baseline alternative and that a greater degree of certainty with 
respect to the scope, level of commitment and the plans and policies 
that support land use and economic development are required as the 
project moves through the process.
    A new subsection (d) is added that indicates that while project 
sponsors are expected to use the traditional four-step model to 
estimate mobility benefits, alternative, simpler methods may be applied 
with FTA approval.
    Finally, as in the current regulation, subsection (e) states that 
the ratings for each of the criteria will be combined into an overall 
rating of project justification. As in the current regulation, the 
overall rating for project justification will range on a five level 
scale from ``high'' to ``low.'' ``Other factors'' will be considered in 
setting the overall rating. The proposed rule explicitly indicates that 
applying these ``other factors'' can result in an adjustment, upward or 
downward, in the overall rating of project justification.

Section 611.13: Local Financial Commitment Criteria (New Starts)

    The approach taken to evaluate local financial commitment is 
proposed to be largely unchanged from the current regulation. This 
includes an assessment of the amount of non-Section 5309 Capital 
Investment funds being requested, and the stability and reliability of 
the funding proposed to be used to cover both the capital costs of the 
project and the operating costs of the entire transit system, including 
the project. As in the current regulation, the capital and operating 
financing plans will be rated over the planning horizon covering no 
less than 20 years for the project. The measures for rating the 
stability of the funding to cover operating costs will include an 
assessment of the degree to which innovative contractual arrangements 
are in place to assure the reliability of operating cost estimates.
    The provision which calls for FTA to assess the degree to which 
planning and PE have been carried out with other than Section 5309 
Capital Investment funds has been dropped, as this requirement was 
deleted by SAFETEA-LU. In addition, as required by SAFETEA-LU, a 
provision is proposed that would provide that FTA would give priority 
to financing projects that require less New Starts funds, while at the 
same time considering the fiscal capacity of State and local 
governments to provide more New Starts funds in determining whether to 
rate the project's overall local financial commitment below ``medium.''
    As in the current regulation, ratings of the percentage of Federal 
funds sought from the New Starts program and the capital and operating 
financial commitments will be made on a five level scale ranging from 
``low'' to ``high.'' These ratings will be combined, as in the current 
regulation, into an overall rating of financial commitment on a five 
level scale ranging from ``low'' to ``high.''

Section 611.15: Overall Project Ratings (New Starts)

    As in the current regulation, the ratings on project justification 
and local financial commitment will be combined into an overall project 
rating. In contrast to the current regulation, which, as provided for 
in Transportation Equity Act for the 21st Century (TEA-21), called for 
overall project ratings to be expressed as ``highly recommended,'' 
``recommended,'' or ``not recommended,'' the proposed rule calls for, 
consistent with SAFETEA-LU, projects to be assigned overall ratings on 
a five level scale of ``high,'' ``medium-high,'' ``medium,'' ``medium-
low,'' and ``low.'' In addition, in response to the requirement in 
SAFETEA-LU, the proposed rule calls for the summary rating to take into 
account the degree of the reliability of the estimates of ridership and 
costs.
    As in the current regulation, ratings will be made at the time a 
project seeks to move from one step in the project development process 
to another, and annually for the purposes of the annual report on 
funding recommendations required by 49 U.S.C. 5309(k)(1).
    The proposed rule does not specify how the ratings of project 
justification and local financial commitment will be translated into 
the overall project ratings, except to indicate, similar to the current 
regulation, that a project must be rated at least ``medium'' on project 
justification, and local financial commitment to be rated ``medium'' 
overall. Since, as required by SAFETEA-LU, a five level scale will now 
be used, FTA proposed to apply a similar decision rule to determining 
the rating of ``medium-high'' and ``high'' as is used in the current 
regulation which required ratings of at least ``medium'' on both local 
financial commitment and project justification to achieve a rating of 
``recommended,'' which is now a rating of ``medium.'' In other words, 
both project justification and local financial commitment would have to 
be rated ``high, medium-high or medium'' in order to achieve an overall 
rating of ``high, medium-high or medium.'' Consistent with SAFETEA-LU, 
the proposed rule continues to require an overall project rating of at 
least ``medium'' for a project to advance to a subsequent step in the 
project development process or to be recommended for funding.

Section 611.17: Project Development Process (New Starts)

    This section provides for the procedures by which New Starts 
projects are to advance through the project development process. For 
New Starts, this process is largely consistent with the project 
planning and development procedures in section 611.7 of the current 
regulation. All projects must emerge from the metropolitan and 
Statewide planning processes. Projects must proceed through both the PE 
and final design stages of the project development process before being 
eligible to be recommended for New Starts funding.
    As in the current regulation, project sponsors must perform an 
alternatives analysis. The proposed rule indicates that this analysis 
must be consistent with FTA guidance and NEPA requirements. The 
alternatives analysis must cover a range of alternatives and result in 
selection of a locally preferred alternative that is formally adopted 
and included in the region's metropolitan transportation plan.
    The proposed rule defines project development to include PE and 
final design. The proposed rule includes more detail on the definition 
of the activities that are included in PE which are then translated 
into entry criteria for final design. It indicates that PE includes 
completion of the NEPA process, design of all major project elements to 
the extent that no significant cost-related issues remain, and cost 
estimation that permits development of a financial plan that 
establishes the maximum amount of New Starts funding which FTA will 
provide if the project were to receive a full funding grant agreement. 
As in the current regulation, minimum readiness criteria for entry into 
PE are provided. Along with the previous requirement that FTA approve 
the baseline alternative, new features of these criteria include a 
requirement that the NEPA scoping process has been completed before FTA 
approves entry into PE, that independent endorsement has been

[[Page 43356]]

received from potential funding partners of the proposed financing 
strategy, and that the travel demand forecasting methods have been 
validated against a survey of transit riders no more that five years 
old. In addition, approval to enter PE will also require development of 
a preliminary plan to conduct the ``before and after study'' that is 
required by the amendment to 49 U.S.C. 5309(g)(2)(C) added by SAFETEA-
LU. Such studies are already required by the current regulation. This 
added requirement to enter PE is designed to assure that the process of 
conducting such studies is facilitated. An overall rating of ``medium'' 
is required to receive approval to enter PE; this is consistent with 
the current regulation's requirement that the project have an overall 
rating of ``recommended.'' As in the current regulation, project 
sponsors approved to enter PE are granted pre-award authority to 
conduct all PE activities prior to grant approval.
    In a new subsection (2(H)) FTA is proposing to require the 
execution of a Project Development Agreement (PDA) before approval of 
entry into PE. The PDA would set forth the mutual understandings of FTA 
and the project sponsor regarding the steps and schedule to ensure the 
satisfactory completion of the NEPA process, the steps and schedule to 
complete preliminary engineering and final design, including 
development of reliable cost estimates and ridership forecasts, a 
discussion of all significant uncertainties in the development of 
costs, benefits and financial information, and the steps and schedule 
to secure funding commitments. The terms and conditions of a model PDA 
between FTA and a project sponsor are set forth in Appendix A to the 
proposed rule.
    Final design entry criteria are also proposed in subsection (d), 
similar to those in the current regulation. New readiness criteria 
include a requirement that the project be reaffirmed in the region's 
metropolitan transportation plan if there are any significant cost or 
scope changes during PE, and a requirement for an agreement between FTA 
and the project sponsor as to the maximum amount of New Starts funding 
that will be sought for the project. However, as stated in subsection 
(d)(2)(D), FTA will entertain requests for increases above this amount 
in an FFGA for the project if it is determined that costs have 
increased outside of the project sponsor's control. As in the current 
regulation, approval to enter final design will require further 
development of the plan to conduct the ``before and after'' study. 
However, the proposed rule requires that data on the project through 
the end of PE must be collected and submitted to FTA as part of the 
final design submittal. Again, analogous to the current regulation's 
requirement for a rating of ``recommended,'' a project must receive an 
overall rating of at least ``medium'' to advance into final design. 
Further, as in the current regulation, project sponsors approved to 
enter final design are granted pre-award authority to conduct final 
design activities, right-of-way acquisition and utility relocation 
prior to grant approval. Other project activities would require a 
Letter of No Prejudice. As stated in subsection (d)(7), projects that 
are approved into final design will be exempt from any changes in New 
Starts policy or guidance.
    As in the current regulation, criteria are provided for execution 
of Full Funding Grant Agreements (FFGAs) in subsection (e). Projects 
must be rated ``medium'' or better, project sponsors must be determined 
to have the technical capacity to carry out the project, and no 
outstanding issues may remain. The proposed rule notes in subsection 
(e)(2) that FTA's funding decision is distinct from project evaluation 
and rating process. Projects that meet or exceed the criteria described 
in this section are eligible, but are not guaranteed, to be recommended 
for funding. FTA will recommend projects for funding in the annual 
Report on Funding Recommendations and President's Budget only if the 
project is rated at least ``medium'' overall and has a cost-
effectiveness rating of at least ``medium.''
    As noted earlier, it is intended that the maximum New Starts share 
of the project be established at entry into final design. However, FTA 
will entertain requests for additional New Starts funds, on a case-by-
case basis where costs have increased outside the control of project 
sponsors. FFGAs are proposed to continue to specify the cost and scope 
of the project, the schedule that the project sponsor must meet, and 
the schedule of Federal funding amounts (subject to appropriations). 
Consistent with changes made by SAFETEA-LU, in subsection (e)(7), FTA 
proposes to add a new feature of FFGAs, which would be an incentive 
clause that would allow for an amendment to increase the Federal 
funding contribution when actual opening year ridership is no less than 
90 percent of that forecast and actual capital costs are not more than 
110 percent of that estimated at the time the project entered PE, 
compared in constant dollars. The standard being set for ridership and 
cost is slightly more stringent than provided for in SAFETEA-LU, as FTA 
is proposing to process an amendment for these additional incentive 
funds only after the project is complete and operating, rather than 
providing an immediate incentive based on whether forecasts stayed 
within these limits after entry into PE but prior to execution of the 
FFGA. FTA believes that the incentive should only be provided for 
actual performance, not for projected performance. As in the current 
regulation, FTA is limited in the amount of FFGA commitments it can 
make during a given reauthorization cycle by the amount authorized, 
plus a statutory limit on contingent commitments, which are subject to 
future authorizations. Finally, consistent with the current regulation, 
a ``before and after'' study must be completed within 30 months of 
project opening that assesses the costs of the project and actual 
ridership two years after opening compared with the estimated costs and 
forecast ridership at entry into PE, final design, and the FFGA.

Subpart C--Small Starts

    Subpart C provides for the eligibility, criteria, and process 
requirements that will be applied to Small Starts projects that do not 
meet the requirements for Very Small Starts. As required by 49 U.S.C. 
5309(e), as amended by SAFETEA-LU, it is based on a simplified process 
but similar to that used for the larger, New Starts projects covered by 
Subpart B.

Section 611.19: Eligibility for Section 5309 Capital Investment Funds 
(Small Starts)

    Section 611.19 provides the eligibility criteria for Small Starts. 
First, as defined in section 611.3, a Small Starts project must have a 
total project cost of less than $250 million and seek no more than $75 
million in Section 5309 Capital Investment funds. To be eligible as a 
fixed guideway, as with New Starts, the project must involve operation 
for at least 50 percent of its total length (not necessarily 
contiguous) on a facility dedicated to transit and other high occupancy 
vehicles during peak periods (or other congested periods). However, in 
contrast to New Starts, a Small Starts project may also involve a 
corridor bus project with certain design features. The proposed rule 
requires substantial transit stations, traffic signal priority or 
preemption, low floor buses or level boarding, branding of the service, 
and 10 minute peak/15 minute off peak headways at least 14 hours per 
day. New Starts projects may not be subdivided to meet Small Starts

[[Page 43357]]

eligibility. Larger projects must follow the requirements of Subpart B.

Section 611.21: Project Justification Criteria (Small Starts)

    This section provides the justification criteria for Small Starts. 
Although similar to the criteria for New Starts in section 611.11, 
there are some significant simplifications. Small starts projects must 
still be rated based on the results of an alternatives analysis, but, 
given the reduced amount of justification information required, it is 
likely that such analysis may be simpler. A multiple measure approach 
is again specified, but the number of criteria is reduced. Specific 
measures for each criterion are not specified in the regulation but 
will be published and changed, upon notice and comment as part of the 
process of developing policy guidance.
    The project justification criteria for Small Starts are classified 
into those related to effectiveness, contributing to 50 percent of the 
project justification rating and cost effectiveness contributing 50 
percent of the project justification rating. For Small Starts, the 
effectiveness criteria are mobility improvements for the general 
population and economic development/land use. The mobility measure 
would include a calculation of the travel time savings for highway 
users as discussed under New Starts above and provides 40 percent of 
the effectiveness rating. As with New Starts, economic development and 
land use will be evaluated together as a measure of effectiveness. But 
under Small Starts, economic development/land use will contribute to 60 
percent of the effectiveness rating. As described above in the Response 
to Comments under Question 7 and 8 on the Guidance on New Starts 
Policies and Procedures and under Question 8 on the ANPRM on Small 
Starts, it is difficult to evaluate these two factors separately. 
Nonetheless, recognizing the importance that SAFETEA-LU provided by 
including both these factors, FTA has incorporated a combined criterion 
as an important part of the evaluation of project justification.
    As with New Starts, cost effectiveness is proposed to be defined as 
annualized costs divided by user benefits. As with New Starts, ``other 
factors'' will be used to assess those features not included in the 
explicit criteria for effectiveness and cost effectiveness, and will be 
used to adjust the overall project rating. Other factors will always 
include a rating for the problem or opportunity in the project 
corridor. Another measure that FTA intends to consider as an ``other 
factor'' is the degree to which a project is a part of a significant 
congestion reduction strategy. FTA will evaluate projects that are a 
principal element of a significant congestion reduction strategy, in 
general and a pricing strategy, in particular, more highly. FTA will 
also consider as an ``other factor'' any benefit of the project not 
covered under the project justification criteria or other factors that 
the Secretary determines to be appropriate to carry out the evaluation. 
Measures of effectiveness and cost effectiveness will be based on 
comparing the proposed project with a baseline alternative and will be 
assessed using opening year forecasts (rather than the forecasts for 
the planning horizon covering no less than 20 years, as is the case for 
New Starts).
    There is likely to be a significant difference between the 
analytical procedures used for Small Starts and New Starts projects. As 
opening year forecasts will be the basis for evaluation, simplified 
methods for projecting user benefits may be used, but are subject to 
FTA approval.
    As with New Starts, an overall rating on a five level scale ranging 
from ``high'' to ``low'' will be applied to the measures for each 
criterion that make up the Small Starts project justification rating.

Section 611.23: Local Financial Commitment Criteria (Small Starts)

    Section 611.23, covering local financial commitment criteria for 
Small Starts, is almost identical to section 611.13, which covers these 
criteria for New Starts. Project financial plans for capital and 
operating costs must be rated to determine their stability and 
reliability. The rating of the stability of operating costs will take 
into account the degree to which innovative contractual arrangements, 
especially public private partnerships, are in place which can improve 
the reliability of estimates of operating costs. Based on the amount of 
non-Section 5309 Capital Investment funding proposed, the capital plan 
and the operating plan will each be rated on a five level scale from 
``high'' to ``low.'' An overall rating of ``high'' to ``low,'' also on 
a five level scale, will be assigned based on the ratings of the 
capital and operating plans and proposed New Starts share. The only 
significant difference in the regulation is that projects will be rated 
based on plans which go through the year of opening, rather than for 
the planning horizon covering no less than 20 years. Detailed measures 
will be provided in the policy guidance that will identify simplified 
information that can be used to satisfy the financial plan requirement. 
Furthermore, while FTA will give priority to projects that include more 
than required Small Starts funds it will not rate projects that propose 
a funding strategy based on an 80 percent Section 5309 funding share 
below ``medium'' so long as the amount of Section 5039 funding 
requested is consistent with the fiscal capacity of State and local 
governments. FTA strongly encourages all project sponsors to request 
the lowest amount of Section 5309 funding reasonable. Like New Starts, 
the Small Starts program is likely to be extremely competitive. While 
FTA will not use the Section 5309 funding request to reduce the overall 
local financial commitment rating below ``medium,'' it is likely in its 
policy guidance to propose a process that rewards projects for 
requesting a lower than 80 percent Section 5309 share. In addition, as 
noted in section 611.27(c)(2) just because a project is rated Medium, 
there is no guarantee that the project will be recommended for funding.

Section 611.25: Overall Project Ratings (Small Starts)

    The approach taken in section 611.25 for developing the overall 
project ratings for Small Starts projects is essentially identical to 
the approach used in section 611.15 for New Starts. Projects will be 
assigned an overall project rating on a five level scale ranging from 
``high'' to ``low'' that will combine the ratings made for project 
justification and local financial commitment. Projects must be rated at 
least ``medium, medium-high or high'' on both project justification and 
local financial commitment to receive an overall rating of ``medium, 
medium-high or high,'' respectively. Projects must have an overall 
rating of ``medium'' to advance from one step in the project 
development process to the next. The only significant differences are 
that there is no requirement for a separate approval for PE and final 
design in project development and the commitment document is a simpler 
Project Construction Grant Agreement (PCGA), rather than an FFGA.

Section 611.27: Project Development Process (Small Starts)

    The initial steps in the project planning and development process 
for Small Starts are identical to the process required under section 
611.17 for New Starts. On the other hand, due to the smaller scale of 
these projects, the type and detail of the analysis that must be 
conducted is likely to be somewhat simpler. Projects must be the result 
of alternatives analyses and must be included in the local metropolitan 
transportation plan. The alternatives

[[Page 43358]]

analysis must address a range of alternatives (albeit, a shorter list), 
including a TSM alternative as the baseline alternative. However, where 
no fixed guideway alternative is being considered, the no-build 
alternative may serve as the baseline.
    For Small Starts, the second step in the process is ``project 
development,'' which combines PE and final design. The steps which must 
be undertaken for entry into project development are essentially the 
same as those required under section 611.17 for New Starts PE and final 
design, but combined and tailored to the smaller scale of the proposed 
Small Starts project. The NEPA process must be completed before final 
design can begin and before a funding recommendation can be made. 
During the project development, costs must be established and 
uncertainties mitigated, but the Federal contribution of Small Starts 
will not be set until negotiation of the PCGA.
    The criteria for entry into Small Starts project development are 
essentially the same as those for entry into New Starts PE, again 
scaled to the project's size: (1) Alternatives analysis must be 
completed; (2) the NEPA scoping process must be completed unless a 
categorical exclusion has been granted; (3) the project must be in the 
metropolitan transportation plan; (4) financing strategies must be 
endorsed by prospective funding partners; (5) the travel demand 
forecasting process must be validated; and (6) the project sponsor must 
have adequate technical capacity to carry out the project. A project 
must be rated at least ``medium'' to advance into project development. 
A ``before and after'' study is required for Small Starts, and the plan 
for developing the study must be completed during project development. 
Pre-award authority is provided for all preliminary engineering 
activities upon approval to enter project development. In addition, 
once the environmental process is completed, as represented by a signed 
ROD or FONSI or a finding that the project is a categorically excluded 
under 23 CFR 777.117, the project sponsor also has automatic pre-award 
authority for final design, right of way acquisition and utility 
relocation.
    For Small Starts, the commitment document is a PCGA. As with the 
FFGA for New Starts, the PCGA specifies the amount and schedule of 
Federal funding, which can include a commitment of future funds, and 
the project cost, scope, and schedule, and commits the grantee to 
complete the project based on these parameters. To be eligible for a 
PCGA, FTA must find that the environmental process is complete, the 
project is based on the evaluations and ratings required, the project 
has an overall rating of ``medium'' or better, the sponsor has the 
technical capacity to carry out the project, and there are no major 
outstanding issues interfering with successful completion of the 
project. The PCGA will include a requirement for completion of the 
``before and after'' study. In the case of Small Starts, ``after'' is 
defined as one year after service commences, rather than two years as 
is the case with New Starts. Data on the progress of the project to 
date must be submitted before the PCGA will be awarded. FTA's funding 
decision is distinct from project evaluation and rating process. 
Projects that meet or exceed the criteria described in this section are 
eligible, but are not guaranteed, to be recommended for funding. FTA 
will recommend projects for funding in the annual Report on Funding 
Recommendations and President's Budget only if the project is rated at 
least ``medium'' overall and has a cost-effectiveness rating of at 
least ``medium.'' The total amount of funding committed in PCGAs cannot 
exceed the amount of funding for Small Starts authorized in law, plus a 
statutorily limited amount of contingent commitments, subject to future 
authorizations.

Subpart D--Very Small Starts

    Subpart D provides for the eligibility, evaluation criteria, and 
procedural requirements that will be applied to Very Small Starts 
projects. It is essentially identical to Subpart C, but provides for an 
even more simplified approach to project development and uses 
``warrants'' for determining project justification for Very Small 
Starts projects, which are a subset of Small Starts projects that have 
a set of defined characteristics. These very simple, smaller projects 
can be found to be justified solely on the basis of these project 
characteristics. This process is also based on, but now highly 
simplified from, the requirements for the larger, New Starts projects 
covered by Subpart B.

Section 611.29: Eligibility for Section 5309 Capital Investment Funds 
(Very Small Starts)

    Section 611.29 provides the eligibility criteria for Very Small 
Starts. First, as defined in section 611.3, a Very Small Starts project 
must have a total project cost of less than $50 million and a project 
cost of less than $3 million per mile (not including vehicles) and 
serve a corridor where at least 3,000 existing riders per day will 
benefit from the project. Projects that do not meet these criteria, but 
which still are small enough to qualify as a Small Start, must follow 
the procedures and criteria set out in Subpart C. To be eligible as a 
fixed guideway, as with New Starts, a Very Small Starts project must 
involve operation for at least 50 percent of its total length (not 
necessarily contiguous) on a facility dedicated to transit and other 
high occupancy vehicles during peak periods (or other congested 
periods). However, in contrast to New Starts, and similar to a Small 
Starts project, a Very Small Start project may also involve a corridor 
bus project with certain design features. The proposed rule requires 
substantial transit stations, traffic signal priority or preemption, 
low floor buses or level boarding, branding of the service, and 10 
minute peak/15 minute off peak headways at least 14 hours per day. As 
with New Starts, projects may not be subdivided to meet Very Small 
Starts eligibility. Larger projects must follow the requirements of 
Subpart B or C.

Section 611.31: Project Justification Criteria (Very Small Starts)

    This section provides the justification criteria for Very Small 
Starts. Although similar to the criteria for Small Starts in section 
611.21, there is a major simplification. While Very Small Starts 
projects must still be based on the results of an alternatives 
analysis, the justification information required is related to the 
predefined characteristics of the Very Small Starts project. Because 
Very Small Starts projects are made eligible based on a set of project 
characteristics that assures that they are effective and cost-
effective, rather than rate these projects on the basis of an 
evaluation of information, FTA will simply assign an overall project 
justification rating of ``medium'' to these projects if they meet the 
predefined characteristics, although ``other factors'' can be used to 
increase this rating. ``Other factors'' include whether a project is a 
principal element of a significant congestion reduction strategy, in 
general and a pricing strategy, in particular. FTA will also consider 
as an ``other factor'' any benefit of the project not covered under the 
project justification criteria or other factors that the Secretary 
determines to be appropriate to carry out the evaluation. Another 
significant difference between Very Small Starts and Small/New Starts 
will be in the analytical procedures used. No forecasts are required; 
the sponsor need only provide counts of existing ridership in the 
corridor and the cost per mile.

[[Page 43359]]

Section 611.33: Local Financial Commitment Criteria (Very Small Starts)

    Section 611.33, covering local financial commitment criteria for 
Very Small Starts, is identical to section 611.23, which covers these 
criteria for Small Starts. Financial plans for capital and operating 
costs must be rated to determine their stability and reliability. FTA 
intends to issue very simplified information to support the capital and 
operating plan requirements as part of its Policy Guidance. The rating 
of the stability of operating costs will take into account the degree 
to which innovative contractual arrangements, especially public private 
partnerships, are in place which can improve the reliability of 
estimates of operating costs.
    Furthermore, while FTA will give priority to projects that include 
more than required Small Starts funds, it will not rate projects that 
propose a funding strategy based on an 80 percent Section 5309 funding 
share below ``medium'' so long as the amount of Section 5039 funding 
requested is consistent with the fiscal capacity of State and local 
governments. FTA strongly encourages all project sponsors to request 
the lowest amount of 5309 funding that is financially feasible. Like 
New Starts, the Very Small Starts program is likely to be extremely 
competitive. While FTA will not use the 5309 funding request to reduce 
the overall local financial commitment rating below ``medium,'' it is 
likely in its policy guidance to propose a process that rewards 
projects for requesting a lower than 80 percent 5309 share. In 
addition, as noted in section 611.27(c)(2), just because a project is 
rated Medium, there is no guarantee that the project will be 
recommended for funding.
    The capital plan and operating plan and the proposed Section 5309 
Capital Investment share will each be rated on a five level scale from 
``high'' to ``low.'' An overall rating of ``high'' to ``low,'' also on 
a five level scale, will be assigned based on the ratings of the 
capital and operating plans and proposed Section 5309 Capital 
Investments share. Projects will be rated based on plans that go 
through the year of opening.

Section 611.35: Overall Project Ratings (Very Small Starts)

    The approach taken in section 611.35 for developing the overall 
project ratings for Very Small Starts projects is similar to the 
approach used in section 611.25 for Small Starts. Projects will be 
assigned an overall project rating on a five level scale ranging from 
``high'' to ``low,'' which will combine the ratings made for project 
justification and local financial commitment. Since projects which 
qualify as a Very Small Start by their nature automatically are granted 
a rating of ``medium'' for project justification, a project must have a 
rating of at least ``medium'' on local financial commitment to receive 
an overall rating of ``medium.'' It should be noted that a project can 
receive a rating higher than ``medium'' for project justification only 
through the use of ``other factors'' or the application of the 
reliability measures. Projects must be rated at least ``medium'' 
overall to enter the project development process or to be recommended 
for funding and receive a PCGA.

Section 611.37: Project Development Process (Very Small Starts)

    The initial steps in the project planning and development process 
for Very Small Starts are identical to the process required under 
section 611.17 for New Starts and under Section 611.27 for Small 
Starts. However, due to the even smaller scale of these projects, the 
type and detail of the analysis that must be conducted is simpler. For 
instance, no baseline alternative is required as the project sponsor 
does not prepare specific information on effectiveness and cost 
effectiveness but simply provides existing data that supports the 
rating for the project. However, projects must be the result of 
alternatives analyses and must be included in the local metropolitan 
transportation plans.
    For Very Small Starts, as with Small Starts, the second step in the 
process is ``project development,'' which combines PE and final design. 
The steps that must be undertaken are essentially the same as those 
required under section 611.17 for New Starts PE and final design, but 
again combined and tailored to the much smaller scale of the proposed 
Very Small Starts project. The NEPA process must be completed during 
project development, which for a Very Small Start, might involve only 
documentation of a categorical exclusion. During project development, 
costs must be established and uncertainties mitigated but the Federal 
contribution of Small Starts will not be set until negotiation of the 
PCGA.
    As with Small Starts, the criteria for entry into Very Small Starts 
project development are essentially the same as those for entry into 
New Starts PE, again scaled to the project's much smaller size: (1) 
Alternatives analysis must be completed; (2) the NEPA scoping process 
must be completed unless a categorical exclusion has already been 
granted; (3) the project must be in the metropolitan transportation 
plan; (4) financing strategies must be endorsed by prospective funding 
partners; and (5) the project sponsor must have adequate technical 
capacity to carry out the project. A project must be rated at least 
``medium'' to advance into project development. A very simplified 
``before and after'' study is required for Very Small Starts and the 
plan for developing the study must be complete before a PCGA is 
executed. Pre-award authority is provided for preliminary engineering 
upon approval to enter project development. In addition, once the 
environmental process is completed, as represented by a signed ROD or 
FONSI or a finding that the project is categorically excluded under 23 
CFR 117.17, the project sponsor also has automatic pre-award authority 
for final design, right of way acquisition and utility relocation.
    For Very Small Starts, the commitment document is a PCGA. As with 
the FFGA for New Starts, the PCGA specifies the amount and schedule of 
Federal funding, which can include a commitment of future funds, and 
the project cost, scope, and schedule, and commits the grantee to 
complete the project based on these parameters. To be eligible for a 
PCGA, FTA must find that the environmental process is complete, the 
project is based on the evaluations and ratings required, the project 
has an overall rating of ``medium'' or better, the sponsor has the 
technical capacity to carry out the project, and there are no major 
outstanding issues interfering with successful completion of the 
project. The PCGA will include a requirement for completion of the 
``before and after'' study. In the case of Very Small Starts, ``after'' 
is defined as one year after service commences, rather than two years 
as is the case with New Starts. The NPRM notes again in subsection 
611.37(d)(2) that a sufficient rating under the proposals contained in 
this NPRM is not a guarantee that a PCGA will be recommended. The total 
amount of funding committed in PCGA's cannot exceed the amount of 
funding for Small Starts authorized in law plus a statutorily limited 
amount of contingent commitments, subject to future authorizations.

IV. Regulatory Analysis and Notices

A. Executive Order 12866

    FTA has determined that this is a significant rule under E.O. 12866 
because it will affect transfers (i.e., grant payments) of more than 
$100 million or more annually. This NPRM implements a grant program, 
and as such, it only

[[Page 43360]]

imposes regulatory requirements upon applicants requesting funding 
under the program. The rating criteria that are the subject of this 
NPRM are Congressionally-mandated.
    The proposed rule is not intended to address a market failure, 
rather it is intended to both make the regulation consistent with the 
recent changes to 49 U.S.C. 5309 and change the way projects are 
currently evaluated. Under the existing regulation, all non-exempt New 
Starts projects are evaulated using the same process without regard to 
the size of the investment. This results in a more rigorous evaluation 
of smaller projects than is needed given the size of the Federal 
investment. Thus, this proposed rule would vary the level of evaluation 
based on the size of the project and the size of the Federal investment 
based on the changes recently made to 49 U.S.C. 5309.

B. Regulatory Evaluation

    FTA performed a regulatory evaluation of this NPRM, but did so in a 
qualitative manner due to the difficulty of evaluating the industry-
wide costs and benefits of the program this NPRM would implement. This 
NPRM proposes a process that FTA will use to evaluate and rate major 
capital investments under the statutory criteria in 49 U.S.C. 5309. 
This includes smaller capital projects requesting less than $75 million 
in Section 5309 Capital Investment program funds and that have a total 
cost of less than $250 million. Given the discretionary nature of the 
program and the fact that FTA cannot anticipate in advance which 
projects will be submitted for evaluation and funding, it is impossible 
to determine with accuracy the industry-wide costs and benefits of this 
rule.
    Based on its past experience though, FTA has qualitatively 
evaluated the financial impact the NPRM would place on applicants if 
the adopted as proposed. The grant application requirements specified 
in law are substantial, but the major capital grant program makes 
available funds to defray project development costs. For example, 49 
U.S.C. 5309(m)(5) allows up to 8 percent of funds allocated for New 
Starts and Small Starts to be available for project development costs. 
Additionally, 49 U.S.C. 5339, as amended by SAFETEA-LU, makes funding 
available for the alternatives analysis phase of project development. 
Finally, the transit formula program under 49 U.S.C. 5303 and 5307 and 
flexible funds under Title 23 may also be used for planning and project 
development activities. Thus, the financial impact of this rule on the 
applicants is minimal given that a portion of their project development 
costs can be reimbursed with Federal funds.

C. Departmental Significance

    This rule is a ``significant regulation'' as defined by the 
Department's Regulatory Policies and Procedures, because it involves an 
important departmental policy and will probably generate a great deal 
of public interest. The purpose of this NPRM is to propose how FTA will 
process, rate and recommend for funding various major public 
transportation capital investment projects.

D. Regulatory Flexibility Act

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (RFA) requires the agency to ``prepare and make 
available for public comment an initial regulatory flexibility 
analysis,'' which will ``describe the impact of the proposed rule on 
small entities.'' (5 U.S.C. 603(a)). Section 605 of the RFA allows an 
agency to certify a rule, in lieu of preparing an analysis, if the 
proposed rulemaking is not expected to have a significant economic 
impact on a substantial number of small entities.
    As noted earlier, it is difficult for FTA to estimate the number 
and types of applications it may receive for major capital investment 
funds. Based on FTA's experience, however, major capital investments 
are not undertaken by small municipal entities. Even so, if small 
municipal entities were to apply for funding under this regulatory 
proposal, they would likely do so under the Small Starts program or the 
Very Small Starts program, for which the requirements have been 
streamlined. Based on this evaluation, FTA hereby certifies that the 
proposals for the New Starts program contained in this NPRM, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. FTA invites comment from members of the 
public who believe there will be a significant impact on small 
municipal entities.

E. Paperwork Reduction Act

    This NPRM proposes information collection requirements subject to 
the Paperwork Reduction Act. The calculation of the paperwork burden of 
this NPRM is provided in the docket. The agency has submitted a request 
for a Paperwork Reduction Act approval. FTA currently collects 
information under an approved Paperwork Reduction Act request (control 
2132-0529).

F. Executive Order 13132

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132. The proposed regulations 
would implement a discretionary grant program that would make funds 
available, on a competitive basis, to States, local governments, and 
transit agencies. The requirements only apply to those entities seeking 
funds under this chapter, and thus this action would have not 
substantial direct effects on the States, on the relationship between 
the Federal government and the States, or on the distribution of power 
and responsibilities among the various levels of government. FTA has 
also determined that this proposed action would not preempt any State 
law or regulation or affect the States' ability to discharge 
traditional State governmental functions. Based on this analysis, it 
has been determined that the proposed rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. Comment is solicited specifically on the Federalism 
implications of this proposal.

G. National Environmental Policy Act

    FTA has analyzed this proposed action for the purpose of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321), and has 
determined that this proposed action would not have any effect on the 
quality of the environment. This action qualifies for a categorical 
exclusion under FTA's NEPA regulations at 771.117(c)(20), which covers 
the ``[p]romulgation of rules, regulations, and directives.''

H. Energy Act Implications

    The proposals contained in this NPRM would likely have a positive 
effect on energy consumption because, through the Federal investment in 
public transportation projects, these projects would increase the use 
of public transportation.

I. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175 requires agencies to ensure meaningful and 
timely input from Indian tribal government representatives in the 
development of rules that ``significantly or uniquely affect'' Indian 
communities and that impose ``substantial and direct compliance costs'' 
on such communities. We invite Indian tribal governments to provide 
comments on the effect that adoption of specific proposals in this NPRM 
may have on Indian communities.

[[Page 43361]]

J. Unfunded Mandates Reform Act

    This rule will result in the expenditure by State, local, and 
tribal governments, in the aggregate, of $100,000,000 or more in any 
one year. However, this expenditure is voluntary, and not the result of 
a Federal, unfunded mandate.

K. Statutory/Legal Authority for This Rulemaking

    This rulemaking is issued under authority of section 3011 of the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act--A 
Legacy for Users (SAFETEA-LU), which requires the Secretary of 
Transportation to prescribe regulations for Small Starts capital 
investment projects funded under 49 U.S.C. 5309 with a Federal share of 
less than $75,000,000 and a total cost of less than $250,000,000. In 
addition, this NPRM implements changes made by section 3011 to the New 
Starts program for funding capital investment projects with a higher 
Federal share or total cost than that specified for the Small Starts 
program.

L. Regulation Identifier Number (RIN)

    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. The RIN 
number contained in the heading of this document may be used to cross-
reference this action with the Unified Agenda.

M. Privacy Act

    Anyone is able to search the electronic form for all comments 
received into any of our dockets by the name of the individual 
submitting the comments (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477) or you may visit http://dms.dot.gov.


List of Subjects in 49 CFR Part 611

    Government contracts; Grant programs--Transportation; Public 
Transportation.
    For the reasons stated in the preamble, the Federal Transit 
Administration proposes to revise 49 CFR part 611 to read as follows:

PART 611--MAJOR CAPITAL INVESTMENT PROJECTS

Subpart A--General Provisions
Sec.
611.1 Purpose and contents.
611.3 Applicability.
611.5 Definitions.
611.7 Measures of reliability in the Section 5309 Capital Investment 
evaluation and rating process.
Subpart B--New Starts
611.9 Eligibility.
611.11 Project justification criteria.
611.13 Local financial commitment criteria.
611.15 Overall project ratings.
611.17 Project development process.
Subpart C--Small Starts
611.19 Eligibility.
611.21 Project justification criteria.
611.23 Local financial commitment criteria.
611.25 Overall project ratings.
611.27 Project development process.
Subpart D--Very Small Starts
611.29 Eligibility.
611.31 Project justification criteria.
611.33 Local financial commitment criteria.
611.35 Overall project ratings.
611.37 Project development process.
Appendix A to Part 611--Model Project Development Agreement
Appendix B to Part 611--Project Evaluation Framework
Appendix C to Part 611--Section 5309 Capital Investment Program 
Categories

    Authority: 49 U.S.C. 5309; 49 CFR 1.51.

Subpart A--General Provisions


Sec.  611.1  Purpose and contents.

    (a) This part prescribes the process that applicants must follow to 
be considered eligible for capital investment funds for new fixed 
guideway systems, substantial investments in corridor-based bus 
systems, or extensions to existing systems under 49 U.S.C. 5309(d) and 
(e). Also, this part prescribes the rules that will be used by FTA to 
evaluate proposed Section 5309 Capital Investment projects as required 
by 49 U.S.C. 5309(d) and (e), and the scheduling of project reviews 
required by 49 U.S.C. 5328(a).
    (b) This part defines how the results of the evaluation described 
in paragraph (a) of this section will be used to:
    (1) Approve entry into preliminary engineering and final design, as 
required by 49 U.S.C. 5309(d)(5), for New Starts, or into project 
development as required by 49 U.S.C. 5309(e)(6), for Small Starts;
    (2) Rate projects as ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low,'' as required by 49 U.S.C. 5309(d)(5) and 49 
U.S.C. 5309(e)(6);
    (3) Assign individual ratings for each of the project justification 
and local financial commitment criteria specified in 49 U.S.C. 
5309(d)(2)(B) and (C) and 49 U.S.C. 5309(e)(2)(B) and (C);
    (4) Determine project eligibility for Federal funding commitments, 
in the form of Full Funding Grant Agreements as specified in 49 U.S.C. 
5309(g)(2) or Project Construction Grant Agreements as specified in 49 
U.S.C. 5309(e)(7);
    (5) Support funding recommendations for this program for the 
Administration's annual budget request; and
    (6) Fulfill the reporting requirements under 49 U.S.C. 5309(k)(1), 
Annual Report on Funding Recommendations.


Sec.  611.3  Applicability.

    (a) This part applies to all proposals for Federal Section 5309 
Capital Investment funds for new fixed guideway systems and extensions 
to existing fixed guideway systems, including substantial capital 
investments in corridor-based bus projects.
    (b) This part does not apply to projects approved into final design 
prior to [the effective date of final rule] unless the sponsor proposes 
project changes that warrant the project's return to preliminary 
engineering. Such projects will continue to be rated under the 
regulatory provisions in effect at the time the project was approved 
into final design until the Full Funding Grant Agreement is executed.
    (c) Projects that were exempt from the project evaluation and 
rating process (requesting under $25 million in Section 5309 Capital 
Investment funding), and were approved into project development prior 
to [the effective date of final rule], will receive the Section 5309 
Capital Investment funds that have been appropriated before [the 
effective date of final rule] without being evaluated and rated under 
the provisions of this part, as long as all grant requirements are met. 
To receive additional Section 5309 Capital Investment funds after [the 
effective date of the final rule], projects must be evaluated and rated 
according to the process defined in this part.


Sec.  611.5  Definitions.

    The definitions established by Titles 12 and 49 of the United 
States Code, the Council on Environmental Quality's regulation at 40 
CFR parts 1500-1508, and FHWA/FTA regulations at 23 CFR parts 450 and 
771 are applicable, unless a different definition is described below, 
in which case, the definition in this section will apply for purposes 
of this part. In addition, the following definitions apply:
    Alternatives analysis means a study conducted as part of the 
transportation

[[Page 43362]]

planning process required under 49 U.S.C. sections 5303 and 5304, that 
evaluates all reasonable mode and alignment alternatives for addressing 
a transportation problem in a corridor or subarea, and results in the 
selection of a locally preferred alternative by the chief executive 
officers or official boards of the sponsoring governmental agency(ies) 
and the metropolitan planning organization(s) with jurisdiction through 
a public process. An alternatives analysis also provides sufficient 
information to enable FTA to evaluate and rate the project 
justification and local financial commitment criteria as required by 
this regulation.
    Baseline Alternative means the alternative against which the 
proposed Section 5309 Capital Investment project is compared to develop 
project justification measures. Relative to the no-build alternative, 
it should include transit improvements lower in cost than the proposed 
Section 5309 Capital Investment project that represent the best that 
can be done to address mobility problems in the corridor without 
constructing a new fixed guideway. The baseline alternative is 
typically the Transportation System Management alternative or a Very 
Small Starts arterial bus project.
    Bus Rapid Transit (BRT) means a series of coordinated improvements 
in a transit system's infrastructure, equipment, operations, and 
technology that give preferential treatment to buses on urban roadways. 
The intention of BRT is to reduce bus travel time, improve service 
reliability, increase the convenience of users, and increase transit 
ridership.
    Fixed guideway system means a public transportation facility that 
utilizes and occupies a separate right-of-way or rail for the exclusive 
use of public transportation and other high occupancy vehicles for at 
least 50 percent of the length of the project, or uses a fixed catenary 
system and a right-of-way usable by other forms of transportation, or 
in the case of Small Starts, a corridor-based bus project where at 
least 50 percent of the project operates in a separate right-of-way 
during the peak period or the project represents a substantial 
investment in a defined corridor that includes at least the following 
elements: substantial transit stations; traffic signal priority/pre-
emption; low-floor buses or level boarding; branding of the proposed 
service; and 10 minute peak/15 minute off-peak headways or better for 
at least 14 hours per day. This includes, but is not limited to, rapid 
rail, light rail, commuter rail, automated guideway transit, people 
movers, ferry boat service, and dedicated facilities for buses (such as 
BRT) and other high occupancy vehicles. Additionally, a transportation 
facility shall be deemed a fixed guideway system solely for the 
purposes of funding eligibility under New Starts (49 U.S.C. 5309(d)) 
and Small Starts (49 U.S.C. 5309(e)) if the project is designed so that 
in any given month: transit vehicles utilize the transportation 
facility on a barrier-separated right-of-way; and by means of tolling 
or other enhancements, 95 percent of the transit vehicles using the 
facility will be able to maintain an average speed of not less than 5 
miles per hour below the posted speed limit for the time they are on 
the facility. This definition does not alter the definition of ``fixed 
guideway mile'' for purposes of calculating eligibility for formula 
programs administered by FTA, including Urbanized Area Formula Grants 
(49 U.S.C. 5307(b)) and Fixed Guideway Modernization.
    FTA means the Federal Transit Administration.
    Full Funding Grant Agreement (FFGA) means an instrument that 
defines the scope of a project, the Federal financial contribution, and 
other terms and conditions for funding New Starts projects as required 
by 49 U.S.C. 5309(d)(1) and (g)(2).
    Metropolitan transportation plan means the official multimodal 
transportation plan covering a period of no less than 20 years that is 
developed, adopted and updated by the metropolitan planning 
organization through the metropolitan transportation planning process 
under 23 CFR part 450.
    NEPA process means those procedures necessary to meet the 
requirements of the National Environmental Policy Act of 1969, as 
amended (NEPA), found at 23 CFR part 771. The NEPA process is completed 
when a Record of Decision (ROD) or Finding of No Significant Impact 
(FONSI) is issued by FTA, or when FTA agrees that the project is 
categorically excluded under 23 CFR part 771. Requirements under other 
Federal environmental laws should be integrated into the environmental 
review process per FTA's NEPA regulations at 23 CFR 771.113(a) and 23 
CFR 771.133.
    Planning horizon means the period used for forecasting costs and 
benefits. For New Starts the planning horizon must be at least 20 
years. For Small Starts the planning horizon is opening year.
    Project Construction Grant Agreement (PCGA) means an instrument 
that defines the scope of a project, the Federal financial 
contribution, and other terms and conditions for funding Small Starts 
projects as required by 49 U.S.C. 5309(e)(7).
    Project development refers to the activities and procedures that 
are to be conducted during preliminary engineering and final design 
before FTA can execute a Full Funding Grant Agreement or Project 
Construction Grant Agreement.
    Project Development Agreement means a signed agreement between FTA 
and a project sponsor for a New Starts project that sets forth the 
principal issues to be resolved, products to be completed, all 
significant cost and ridership uncertainties and the strategies to 
address them, and the schedule for reaching significant milestones 
during the course of project development The terms and conditions of a 
model PDA are set forth in Appendix A to this part.
    Secretary means the Secretary of Transportation.
    Section 5309 Capital Investment program means a program of 
assistance for new fixed guideway and certain corridor-based bus 
systems and extensions to such systems eligible for assistance under 49 
U.S.C. 5309(b)(1), (b)(4), (d), (e), and (m)(2)(A) and this part.
    Section 5309 Capital Investment means a new fixed guideway system 
or an extension to an existing fixed guideway system, but does not 
include rail modernization or non-corridor bus capital projects funded 
under 49 U.S.C. 5309. Projects eligible for Section 5309 Capital 
Investment program funding will be categorized as follows:
    (1) New Starts project refers to a project requesting Section 5309 
Capital Investment program funds of $75 million or more in Section 5309 
Capital Investment program funds or that has a total cost of $250 
million or more, both in year of expenditure dollars.
    (2) Small Starts project refers to a project requesting less than 
$75 million in Section 5309 Capital Investment program funds and that 
has a total cost of less than $250 million, both in year of expenditure 
dollars.
    (3) Very Small Starts project refers to a subset of Small Starts 
projects that cost less than $3 million per mile (excluding vehicles) 
and have a total cost of less than $50 million in year of expenditure 
dollars, and are composed entirely of demonstrably effective and cost-
effective project elements.
    Transportation System Management (TSM) alternative is a low-cost 
alternative compared to the fixed guideway alternatives considered. It

[[Page 43363]]

represents the best low-cost strategies that can be applied in a 
corridor to address identified problems without the construction of a 
fixed guideway system. At a minimum it must be more cost effective as 
compared to the no build alternative than the New or Small Start 
project compared to the no build alternative. It is usually the 
baseline against which all of the guideway alternatives are evaluated. 
Generally, the TSM alternative emphasizes upgrades in transit service 
through operational and small physical improvements, plus selected 
highway upgrades through intersection improvements, minor widenings, 
and other focused traffic engineering actions.
    User benefits refers to the transportation system benefits, 
expressed in hours of perceived travel time (travelers perceive wait 
and walk time as more onerous than in-vehicle time, so that perceived 
travel time converts wait and walk time into equivalent minutes of in-
vehicle time), that accrue to all travelers affected by the proposed 
Section 5309 Capital Investment project compared to a baseline 
alternative. User benefits include travel-time savings, out-of-pocket 
travel and parking costs, convenience, comfort, reliability, and other 
benefits that accrue to users of specific travel modes over the 
planning horizon forecast. Travelers include transit riders, highway 
users and pedestrians.


Sec.  611.7  Measures of reliability in the Section 5309 Capital 
Investment evaluation and rating process.

    In the evaluation of project justification and local financial 
commitment for Section 5309 Capital Investment projects, FTA shall 
consider the reliability of the estimates of ridership and costs as 
required by 49 U.S.C. 5309(d)(3)(B) and (4)(B)(i), as well as 49 U.S.C. 
5309(e)(4)(D).
    (a) The measures of reliability in the forecasts used to support 
the measures of project justification and local financial commitment 
will be published, subject to notice and comment, in policy guidance at 
least every two years or when substantial changes are made
    (b) Reliability measures will be applied by adjusting, either 
upward or downward, ratings for the specific project justification and 
local financial commitment criteria affected by the associated 
uncertainties.

Subpart B--New Starts


Sec.  611.9  Eligibility.

    (a) To be eligible for New Starts funding, a proposed project must 
meet the following prerequisites:
    (1) Be based on the results of planning and alternatives analysis 
as described in Sec.  611.17.
    (2) Have at least 50 percent or more of the total project length as 
a fixed guideway during the peak period or when congestion inhibits 
transit system performance.
    (3) Have a total project cost of $250 million or more or a 
requested Section 5309 Capital Investment share of $75 million or more, 
both in year of expenditure funds.
    (b) Projects that would otherwise qualify for funding as a New 
Starts project may not be subdivided into several Small Starts 
projects. Projects may be built in phases or a series of minimum 
operable segments, but all projects envisioned for a single corridor, 
for the purposes of establishing Small Starts program eligibility, will 
be evaluated together as a single project. If the combined cost or 
total requested funding amount, both expressed in year-of-expenditure 
dollars, is over the Small Starts limits, the projects will be 
evaluated as New Starts projects.


Sec.  611.11  Project justification criteria.

    In order to approve a grant for a proposed New Starts project and 
to approve entry into the preliminary engineering and final design 
phases as required by 49 U.S.C. 5309(d)(5), FTA must find that the 
proposed project is meritorious as described in 49 U.S.C. 5309(d)(3).
    (a) To make the statutory evaluations and assign ratings for 
project justification, FTA will evaluate information developed locally 
through alternatives analyses and refined through the project 
development phases.
    (1) The method used to make this determination will be a multiple 
measure approach in which the merits of candidate projects will be 
evaluated in terms of each of the criteria specified by this section.
    (2) The ratings for each of the criteria will be expressed in terms 
of descriptive indicators, as follows: ``high,'' ``medium-high,'' 
``medium,'' ``medium-low,'' or ``low.'' The application of these 
descriptors to each of these criteria will be published, subject to 
notice and comment, in policy guidance at least every two years or when 
substantial changes are made.
    (b) The evaluation criteria and weights assigned to each for New 
Starts project justification are as follows:
    (1) Effectiveness criteria (50 percent of the summary rating for 
project justification):
    (i) Mobility improvements for the general population (40 percent of 
the ratings for effectiveness), including congestion relief. Congestion 
relief shall be measured based on the degree to which the project 
reduces highway travel demand and the relative level of congestion in 
the corridor based on estimated delay.
    (ii) Economic development/land use (40 percent of the ratings for 
effectiveness). Economic development/land use shall be measured using 
factors that address the additional development expected around project 
stations as a result of the New Start project. These factors include 
the extent to which current land use is ripe for development, transit-
oriented plans and policies, the economic development climate in the 
project corridor, the increase in transit accessibility offered by the 
project, and the economic lifespan of the project.
    (iii) Environmental benefits (10 percent of the ratings for 
effectiveness).
    (iv) Mobility improvements for transit dependents (10 percent).
    (2) Cost effectiveness (50 percent of the summary rating for 
project justification) shall be calculated by dividing annualized 
capital and operating costs by transportation system user benefits. 
Cost effectiveness for New Starts will be evaluated based on the 
forecast made over the planning horizon. Annualized cost shall include 
all elements necessary for completion of the project with contingency 
amounts that are reasonable to cover unanticipated cost increases plus 
annual operating and maintenance costs. The breakpoints corresponding 
to the cost effectiveness ratings will be adjusted for inflation 
annually as part of the Reporting Instructions.
    (3) Other factors will be considered under the authority provided 
by 49 U.S.C. 5309(d)(3)(K).
    (i) All projects will be evaluated and rated on the severity of the 
transportation and economic development problem or opportunity in the 
corridor and consideration of the appropriateness of the proposed 
project as a response.
    (ii) Depending upon the applicability, also considered will be the 
following factors:
    (A) Identification of the project as a principal element of a 
congestion reduction strategy, in general and a pricing strategy, in 
particular;

[[Page 43364]]

    (B) Any factor which the New Start project sponsor believes 
articulates the benefits of the proposed major capital investment but 
which is not captured within the other project justification criteria; 
and
    (C) Other factors that the Secretary determines to be appropriate 
to carry out the evaluation.
    (c) In evaluating proposed New Starts projects under these 
criteria:
    (1) For the effectiveness and cost effectiveness criteria, the 
proposed New Starts project will be compared to the baseline 
alternative.
    (2) As a candidate project proceeds through project development, a 
greater degree of certainty is expected with respect to the scope of 
the project and a greater level of commitment is expected with respect 
to the funding strategy and the plans and policies intended to support 
economic development and transit supportive land use.
    (d) New Starts project sponsors will generally use traditional 
methods to estimate mobility benefits (user benefits and ridership). 
These methods are based on the traditional four-step regional travel 
demand modeling procedures, and project sponsors shall follow FTA 
guidelines in defining alternatives, operating plans, and other 
assumptions used to develop travel forecasts. Project sponsors that 
wish to use alternative technical methods to develop forecasts of 
ridership and project benefits must receive prior written approval from 
FTA.
    (e) The individual ratings for each of the criteria described in 
this section will be combined into a summary rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low'' for project 
justification using the weights provided for above. ``Other factors'' 
will be considered and applied by adjusting, either upward or downward, 
the summary project justification rating.


Sec.  611.13  Local financial commitment criteria.

    In order to approve a grant for a New Starts project under 49 
U.S.C. 5309, and to approve entry into the preliminary engineering and 
final design phases as required by 49 U.S.C. 5309(d)(5), FTA must find 
that the proposed project is supported by an acceptable degree of local 
financial commitment, as required by 49 U.S.C. 5309(d)(4).
    (a) The financial capability of the project sponsor to build, 
operate, and maintain the proposed project as well as the existing and 
planned system will be evaluated according to the following measures:
    (1) The proposed share of project capital costs to be met using 
funds from sources other than the Section 5309 Capital Investment 
program, including both the non-Federal match required by Federal law 
and any additional local, State or non-Section 5309 Capital Investment 
Federal funding (``overmatch''). Unless otherwise specified in Federal 
law, FTA will not take into account the non-Federal funds expended on a 
project other than the New Starts project being evaluated when 
computing the non-Federal share of that New Starts project. However, 
FTA will give priority to financing projects that include more non-5309 
funds than are required as local match under 5309(h). At the same time, 
FTA will take into consideration the fiscal capacity of State and local 
governments by not reducing the overall local financial commitment 
rating below ``medium,'' for projects that, due to state or local 
fiscal capacity constraints, propose a funding strategy with an 80 
percent Section 5309 Capital Investment funding.
    (2) The stability and reliability of the proposed capital funding 
plan for constructing all essential elements of the New Starts project 
and transit system, including the availability of contingency amounts 
that the Secretary determines to be reasonable to cover unanticipated 
cost increases.
    (3) The stability and reliability of the proposed operating funding 
plan to operate and maintain the entire transit system as planned, 
including local resources to recapitalize and operate the overall 
proposed public transportation system, including essential feeder bus 
and other services necessary to achieve the projected ridership levels 
without requiring a reduction in existing public transportation 
services or level of service to operate the proposed project, and 
including the existence of contractual arrangements that are designed 
to reduce and/or make more predictable the annualized cost of 
operations.
    (b) The capital and operating plans specified in paragraphs (a)(2) 
and (3) of this section will be evaluated over the planning horizon, 
consistent with the planning horizon used for travel forecasting 
purposes.
    (c) For each proposed project, ratings for paragraphs (a)(1), (2), 
and (3) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' The application of these descriptors to 
each of these criteria will be published, subject to notice and 
comment, in policy guidance at least every two years or when 
substantial changes are made.
    (d) The individual ratings for each measure described in this 
section will be combined into a summary rating of ``high,'' ``medium-
high,'' ``medium,'' ``medium-low,'' or ``low'' for local financial 
commitment. To develop the summary ratings, the rating for capital and 
operating financial plans will be given equal weights. The rating for 
the proposed share from other than the Section 5309 Capital Investments 
program will be used to assign a higher or lower rating should the 
weighting of the capital and operating financial plan ratings produce a 
rating which would otherwise fall between the summary rating levels 
specified in this section.


Sec.  611.15  Overall project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment, adjusted by the degree of reliability of 
estimates of ridership, costs, and funding sources (Sec. Sec.  611.7, 
611.11, and 611.13), will form the basis for the overall rating for 
each project.
    (b) FTA will assign overall ratings of ``high,'' ``medium-high,'' 
``medium,'' ``medium-low,'' or ``low'' as required by 49 U.S.C. 
5309(d)(5)(B) to each proposed project. To obtain an overall rating of 
``medium,'' a project must have at least a ``medium'' rating for 
project justification and local financial commitment. To obtain an 
overall rating of ``medium-high,'' a project must have at least a 
rating of ``medium-high'' for both project justification and for local 
financial commitment. To obtain a rating of ``high,'' a project must 
have a rating of ``high'' for both project justification and for local 
financial commitment.
    (1) These ratings will indicate the overall merit of a proposed 
project at the time of evaluation.
    (2) Ratings for individual projects will be updated annually for 
purposes of the annual report on funding levels and allocations of 
funds required by 49 U.S.C. 5309(k)(1), and as required for FTA 
approvals during the following project development steps:
    (i) Advancement of proposed New Starts projects into both 
preliminary engineering and final design;
    (ii) Decision to recommend New Starts projects for Full Funding 
Grant Agreements; and
    (iii) Projects that achieve an overall rating of ``medium'' or 
better will be allowed to advance into and through project development, 
and may be recommended for funding.

[[Page 43365]]

Sec.  611.17  Project development process.

    All New Starts projects must emerge from the metropolitan and 
statewide planning process, consistent with 23 CFR part 450, and be 
included in the metropolitan transportation plan. Proposed projects 
must be based on the results of alternatives analysis and proceed 
through the phases of project development before being recommended for 
New Starts program funding.
    (a) Alternatives Analysis. To be eligible for project funding under 
the New Starts program, local project sponsors must perform an 
alternatives analysis consistent with FTA guidance.
    (1) The alternatives analysis must develop information on the 
benefits, costs, and impacts of alternative strategies to address a 
transportation problem or opportunity in a given corridor, leading to 
the adoption of a locally preferred alternative.
    (2) The alternative strategies evaluated in an alternatives 
analysis should include a no-build alternative, at least one TSM 
alternative that is able to serve as the New Starts project baseline 
alternative, and a number of build alternatives that represent the full 
range of reasonable responses to the transportation problem or 
opportunity. The project baseline alternative represents the best that 
can be done without building a fixed guideway system. This generally 
means a bus alternative that addresses as effectively and cost-
effectively as possible the same transportation problem or opportunity 
as the build alternative. FTA will determine whether to require a 
separate baseline alternative on a case-by-case basis, if a project 
sponsor provides information intended to demonstrate that the no-build 
alternative (i.e., a continuation of existing transit service policies 
in the study area) fulfills the requirements for a baseline alternative 
(indicated by very high levels of existing transit service),
    (3) The locally preferred alternative must be selected from among 
the evaluated alternative strategies and formally adopted and included 
in the metropolitan transportation plan.
    (b) Project Development. Consistent with 49 U.S.C. 5309(d)(5) and 
49 U.S.C. 5328(a)(2), FTA will approve entry of proposed projects into 
project development. Project development will include FTA approval 
points for preliminary engineering and final design. Preliminary 
engineering and final design will proceed as described in paragraphs 
(c) and (d) of this section.
    (1) Consistent with 49 U.S.C. 5328(a)(2), FTA will complete the 
evaluation of a proposed project for approval into preliminary 
engineering within 30 days of receipt of a complete formal request from 
the project sponsor(s).
    (2) Consistent with 49 U.S.C. 5328(a)(3), FTA will complete the 
evaluation of a proposed project for approval into final design within 
120 days of receipt of a complete formal request from the project 
sponsor(s).
    (c) Preliminary Engineering.
    (1) The preliminary engineering phase of New Starts project 
development is the process of finalizing the project scope, cost, and 
the financial plan such that:
    (i) All environmental and community impacts are identified and 
adequate provisions made for their mitigation in accordance with 49 
U.S.C. 5324(b) and NEPA, with issuance of a Record of Decision (ROD) or 
Finding of No Significant Impact (FONSI);
    (ii) All major or critical project elements are designed to the 
level that no significant unknown impacts relative to their costs are 
likely; and
    (iii) All cost estimating is complete to the level of confidence 
necessary for the project sponsor to implement the financing strategy, 
including establishing the maximum dollar amount of the New Starts 
program financial contribution needed to implement the project.
    (iv) The project sponsor has used credible, relevant, identifiable 
and cost-effective industry or engineering practices that are uniformly 
and consistently applied in preparing for and making these 
determinations. The cost estimating process during preliminary 
engineering would specifically identify the main components of the 
project as identified in FTA's Standardized cost categories, including 
all essential project elements, and add sufficient contingencies to 
cover the remaining design and cost uncertainties that will be 
addressed in final design.
    (2) A proposed project can be considered for advancement into 
preliminary engineering only if:
    (i) Alternatives analysis has been completed;
    (ii) FTA has approved the alternative that will serve as the 
baseline alternative against which the proposed project will be 
compared in the evaluation and rating process;
    (iii) The NEPA scoping process has been completed or the project 
has been granted a categorical exclusion;
    (iv) The proposed project has been adopted as the locally preferred 
alternative in the metropolitan transportation plan;
    (v) The proposed financial strategies, planned funding sources, and 
amounts have been independently endorsed by those agencies identified 
as responsible for providing or approving the funding. Where future 
State and/or local government action or public referendum is required 
to establish (and commit) the proposed funding source, a letter of 
endorsement and a timeframe for implementation and commitment is 
required from the appropriate policy-making or decision-making body 
responsible for providing or approving the proposed funding;
    (vi) For project sponsors using traditional travel forecasting 
procedures (commonly referred to as four-step models) to estimate 
transportation system user benefits and ridership, the procedures have 
been rigorously validated using a survey of transit riders that has 
been completed not more than five years prior to a request to enter 
preliminary engineering;
    (vii) Project sponsors have demonstrated adequate technical 
capability to carry out preliminary engineering for the proposed 
project;
    (viii) FTA and the project sponsor have signed a Project 
Development Agreement (PDA) that identifies principal issues to be 
resolved, products to be completed during project development, all 
significant uncertainties and the strategies to address them, and 
schedules for reaching significant milestones during the course of 
project development. At a minimum, a PDA will include the steps and 
schedule to ensure the satisfactory completion of the NEPA process, the 
steps and schedule to complete preliminary engineering and final design 
including development of reliable cost estimates and ridership 
forecasts, a discussion of all significant uncertainties in the 
development of cost, benefit, and financial information, and the steps 
and schedule to secure funding commitments; and
    (ix) All other applicable Federal and FTA program requirements have 
been met.
    (3) Consistent with 49 U.S.C. 5309(g)(2)(C), project sponsors shall 
submit a preliminary plan for collection and analysis of information to 
identify the ``before and after'' impacts of the New Starts project and 
the accuracy of the forecasts prepared during development of the 
project. The project sponsor will also submit the initial information 
on project scope, service levels, capital costs, operating costs, and 
ridership of the project produced during alternatives analysis, 
identify the entity responsible for each in order to facilitate FTA's 
compliance with preparation of the Contractor Performance Assessment 
Report required by 49 U.S.C. 5309(l)(2),

[[Page 43366]]

and provide a discussion of the key uncertainties that may affect 
achievement of the forecasts.
    (4) FTA's approval will be based on the results of its evaluation 
as described in Sec. Sec.  611.11 through 611.15.
    (5) At a minimum, a proposed project must receive an overall rating 
of ``medium'' and be reasonably expected to continue to meet the 
requirements of this section to be approved for entry into preliminary 
engineering.
    (6) This part does not in any way revoke FTA approvals to enter 
preliminary engineering made prior to [effective date of the final 
rule]; however, in order to advance to final design, the project would 
be subject to the requirements of this part.
    (7) New Starts projects approved to advance into preliminary 
engineering receive blanket pre-award authority to incur project costs 
for preliminary engineering activities prior to grant approval.
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (d) Final Design. Consistent with 49 U.S.C. 5309(d)(5), FTA will 
evaluate a proposed New Starts project prior to approval into final 
design.
    (1) Final Design is the phase of project development during which 
the significant remaining uncertainties in the construction cost 
estimate that were specified at the end of preliminary engineering are 
mitigated, detailed specifications and bid documents are produced, all 
significant third party and relocation agreements are signed, all 
funding commitments needed to complete the project are finalized, and 
all remaining technical and regulatory issues relating to readiness to 
begin construction are completed.
    (2) A proposed project can be considered for advancement into final 
design only if:
    (i) The NEPA process has been completed with FTA's issuance of a 
ROD or FONSI, or FTA's concurrence in a categorical exclusion;
    (ii) All of the conditions described in Sec.  611.17(c)(1) and as 
further defined in FTA's policy guidance for completion of preliminary 
engineering have been met.
    (iii) The project is reaffirmed in its final configuration and 
costs (after NEPA and preliminary engineering) in the metropolitan 
transportation plan if significant changes have occurred in the project 
definition or cost compared to the project that was approved to enter 
preliminary engineering;
    (iv) FTA and the project sponsor have agreed on the final New 
Starts program funding amount that generally may not be exceeded in any 
subsequent Full Funding Grant Agreement. FTA will entertain requests 
for higher levels of New Starts funding when, during final design but 
prior to execution of the Full Funding Grant Agreement, FTA determines 
that the increase in costs is beyond the project sponsor's control. 
These cost increases are expected to be limited to unforeseen cost 
increases due to unusual occurrences. FTA will decide on a case-by-case 
basis whether these circumstances apply to a given project and what 
dollar amount is attributable to these occurrences. FTA would 
participate in these cost increases proportionate to the previously 
agreed-to percentage share between FTA and the project sponsor; 
likewise FTA would participate in any cost reductions identified during 
final design proportionate to the previously agreed-to percentage share 
between FTA and the project sponsor.
    (v) Project sponsors have demonstrated adequate technical 
capability to carry out final design for the proposed project; and
    (vi) All other applicable Federal and FTA program requirements have 
been met.
    (3) FTA's approval will be based on the results of its evaluation 
as described in Sec. Sec.  611.11 through 611.15.
    (4) At a minimum, a proposed project must receive an overall rating 
of ``medium'' and be reasonably expected to continue to meet the 
requirements of this section to be approved for entry into final 
design.
    (5) Consistent with 49 U.S.C. 5309(g)(2)(C), project sponsors 
seeking Full Funding Grant Agreements shall submit a complete plan for 
collection and analysis of information to identify the ``before and 
after'' impacts of the New Starts project and the accuracy of the 
forecasts prepared during development of the project. The project 
sponsor will also submit updated information on project scope, service 
levels, capital costs, operating and maintenance costs, and ridership 
of the project produced during preliminary engineering; identify the 
entity responsible for each in order to facilitate FTA's compliance 
with preparation of the Contractor Performance Assessment Report 
required by 49 U.S.C. 5309(l)(2); prepare an analysis of the changes 
between the current project information and the information prepared 
during alternatives analysis; and discuss the key remaining 
uncertainties that may affect achievement of the forecasts.
    (i) The plan shall finalize the preliminary ``before and after'' 
plan developed prior to entry into preliminary engineering. The plan 
will provide for: Collection of ``before'' data on the current transit 
system; documentation of the ``predicted'' scope, service levels, 
capital costs, operating and maintenance costs, and ridership of the 
project; collection of ``after'' data on the transit system two years 
after opening of the New Starts project; and analysis of the 
consistency of ``predicted'' project characteristics with the ``after'' 
data.
    (ii) The ``before'' data collection shall obtain information on 
transit service levels and ridership patterns, including origins and 
destinations, access modes, trip purposes, and rider characteristics. 
The ``after'' data collection shall consist of information comparable 
to the before data on transit service levels and ridership patterns, 
plus information on the as-built scope and capital costs of the New 
Starts project.
    (iii) The analysis of this information shall describe the impacts 
of the New Starts project on transit services and transit ridership, 
evaluate the consistency of ``predicted'' and actual project 
characteristics and performance, and identify sources of differences 
between ``predicted'' and actual outcomes.
    (iv) For funding purposes, preparation of the plan for collection 
and analysis of data is an eligible part of the proposed project.
    (6) Project sponsors shall collect data on the current system, 
according to the plan required under Sec.  611.17(c)(3) as approved by 
FTA, prior to the beginning of construction of the proposed New Starts 
project. Collection of this data is an eligible part of the proposed 
project for funding purposes.
    (7) Projects that are approved into final design are exempt from 
any changes in New Starts policy, guidance, and procedures.
    (8) This part does not in any way revoke prior FTA approvals to 
enter final design that were made prior to [the effective date of the 
final rule]; however, if the project has not already been recommended 
for a Full Funding Grant Agreement, in order to be so recommended the 
project would be subject to the requirements of this part.
    (9) Projects approved to advance into final design receive blanket 
pre-award authority to incur project costs for final design activities 
prior to grant approval. Pre-award authority to acquire real property 
and to relocate residents and businesses in accordance with the

[[Page 43367]]

Uniform Relocation and Real Property Acquisition Policies Act is 
granted upon completion of the NEPA process.
    (i) All other activities must receive a Letter of No Prejudice 
(LONP) to be eligible for Federal reimbursement.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (e) Full-Funding Grant Agreements (FFGAs).
    (1) FTA will determine whether to execute an FFGA for proposed New 
Starts projects based on:
    (i) The evaluations and ratings established by this regulation;
    (ii) The technical capability of project sponsors to complete the 
proposed New Starts project; and
    (iii) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed New 
Starts project.
    (2) FTA's funding decision is distinct from project evaluation and 
rating process. Projects that meet or exceed the criteria described in 
this section are eligible, but are not guaranteed, to be recommended 
for funding. FTA will recommend projects for funding in the annual 
Report on Funding Recommendations and President's Budget only if the 
project is rated at least ``medium'' overall and has a cost-
effectiveness rating of at least ``medium.''
    (3) An FFGA shall not be executed for a project that is not 
authorized for final design and construction in accordance with Federal 
law.
    (4) FFGAs may be executed only for those projects that:
    (i) Have an overall rating of ``medium'' or better;
    (ii) Have completed the appropriate steps in the project 
development process;
    (iii) Meet all applicable Federal and FTA program requirements; and
    (iv) Are ready to utilize New Starts funds, consistent with 
available program authorization.
    (5) In any instance in which FTA decides to provide financial 
assistance under the Section 5309 Capital Investment program for 
construction of a New Starts project, FTA will negotiate an FFGA with 
the grantee during final design of that project. Pursuant to the terms 
and conditions of the FFGA:
    (i) The maximum level of Federal financial contribution under the 
Section 5309 Capital Investment program will be consistent with the 
maximum New Starts share determined at the time the project entered 
final design as provided in paragraph (d)(2)(iv) of this section;
    (ii) The grantee will be required to complete construction of the 
project, as defined in the scope, to the point of initiation of revenue 
operations, and to absorb any additional costs incurred or necessitated 
using non-Section 5309 Capital Investment funds;
    (iii) FTA and the grantee will establish a schedule for 
anticipating Federal contributions; and
    (iv) Specific annual contributions under the FFGA will be subject 
to the availability of overall budget authority, Congressional 
appropriations, and the ability of the grantee to use the funds 
effectively.
    (6) If a project is completed using less than the total funding 
authorized in the FFGA, the project sponsor may request a grant 
amendment to spend the remaining funds on other system capital 
improvements.
    (7) Consistent with 49 U.S.C. 5309(h)(3), the FFGA may include an 
incentive clause that will provide a specified higher than requested 
New Starts funding share, not to exceed 80 percent, under the following 
conditions:
    (i) Actual opening year ridership is not less than 90 percent of 
the opening year ridership estimated at the time the project entered 
preliminary engineering for a project of equivalent scope; and
    (ii) The actual scope and construction cost of the project is not 
more than 10 percent higher than the construction cost estimated at the 
time the project entered preliminary engineering. The construction 
costs will be compared in constant dollars for the year the project 
entered preliminary engineering.
    (iii) The higher New Starts share will be in the form of an 
amendment to the FFGA to be used either to increase the Federal share 
for costs incurred in completing the project as agreed to in the FFGA, 
or for other agreed to system capital improvements, prior to closing 
out the FFGA.
    (8) The total amount of Federal obligations under FFGAs and 
potential obligations under Letters of Intent will not exceed the 
amount authorized for New Starts under 49 U.S.C. 5309.
    (9) FTA may also make a ``contingent commitment,'' which is subject 
to future congressional authorizations and appropriations, pursuant to 
49 U.S.C. 5309(g)(B) 5338(c), and 5338(f).
    (10) Consistent with 49 U.S.C. 5309(g)(2)(C), the FFGA will require 
implementation of the data collection plan prepared in accordance with 
Sec.  611.17(d)(5):
    (i) Prior to the beginning of construction activities the grantee 
shall collect the ``before'' data on the existing system, if such data 
has not already been collected as part of final design, and document 
the predicted characteristics and performance of the project.
    (ii) Two years after the project opens for revenue service, the 
grantee shall collect the ``after'' data on the transit system and the 
New Starts project, determine the impacts of the project, and analyze 
the consistency of the ``predicted'' performance of the project with 
the ``after'' data. A report on the findings and supporting data will 
be submitted to FTA no later than 30 months after the project opens for 
revenue service.
    (iii) For funding purposes, collection of the ``before'' data, 
collection of the ``after'' data, and the development and reporting of 
findings are eligible parts of the proposed project.
    (11) This part does not in any way alter, revoke, or require re-
evaluation of existing FFGAs that were issued prior to [the effective 
date of the final rule].

Subpart C--Small Starts


Sec.  611.19  Eligibility.

    (a) To be eligible for Small Starts funding, a proposed project 
must meet the following prerequisites:
    (1) Be based on the results of planning and alternatives analysis 
as described in Sec.  611.27.
    (2) Must include at least 50 percent of the total project in a 
fixed guideway during the peak period or when congestion inhibits 
transit system performance, or be a corridor bus project that includes 
at least the following elements:
    (i) Substantial transit stations;
    (ii) Traffic signal priority/pre-emption;
    (iii) Low-floor buses or level boarding;
    (iv) Branding of the proposed service; and
    (v) 10 minute peak/15 minute off peak headways or better for at 
least 14 hours per day.
    (3) Must have a total project cost of under $250 million and 
request less than $75 million in Section 5309 Capital Investment funds, 
both in year of expenditure funds. If the project exceeds either of 
these limits, it shall be considered and evaluated as a New Start under 
subpart B of this part.
    (b) Projects that would otherwise qualify for funding as a New 
Starts project may not be subdivided into several Small Starts 
projects. Projects may be built in phases or a series of minimum 
operable segments, but all potential Small Starts projects envisioned 
for a single corridor will be considered together as a single project 
for the purpose of determining Small Starts eligibility. If the 
combined cost or

[[Page 43368]]

total requested funding amount, both expressed in year-of-expenditure 
dollars, is over the Small Starts limits, the projects will be 
evaluated as New Starts projects.


Sec.  611.21  Project justification criteria.

    In order to approve a grant for a proposed Small Starts project, 
and to approve entry into the project development phase as required by 
49 U.S.C. 5309(e)(6), FTA must find that the proposed project is 
meritorious as described in 49 U.S.C. 5309(e)(4).
    (a) To make the statutory evaluations and assign ratings for 
project justification, FTA will evaluate information developed locally 
through alternatives analyses and refined through the project 
development phase.
    (1) The method used to make this determination will be a multiple 
measure approach in which the merits of candidate projects will be 
evaluated in terms of each of the criteria specified by this section.
    (2) The ratings for each of the criteria will be expressed in terms 
of descriptive indicators, as follows: ``high,'' ``medium-high,'' 
``medium,'' ``medium-low,'' or ``low.'' The application of these 
descriptors to each of these criteria will be published as policy 
guidance, subject to notice and comment, at least every two years or 
when substantial changes are made.
    (b) The evaluation criteria and weights assigned to each for Small 
Starts project justification are as follows:
    (1) Effectiveness criteria (50 percent of the summary rating for 
project justification):
    (i) Mobility improvements for the general population (40 percent of 
the ratings for effectiveness), including congestion relief. Congestion 
relief shall be measured based on the degree to which the project 
reduces highway travel demand and the relative level of congestion in 
the corridor based on estimated delay.
    (ii) Economic development/land use (60 percent of the ratings for 
effectiveness). Economic development/land use shall be measured using 
factors that address the additional development expected around project 
stations as a result of the New Start project. Such factors include the 
extent to which current land use is ripe for development, transit-
oriented plans and policies, the economic development climate in the 
project corridor, the increase in transit accessibility offered by the 
project, and the economic lifespan of the project.
    (2) Cost effectiveness (50 percent of the summary rating for 
project justification) shall be calculated by dividing annualized 
capital and operating costs by transportation system user benefits. 
Cost effectiveness for New Starts will be evaluated based on the 
forecast made over the planning horizon. Annualized cost shall include 
all elements necessary for completion of the project with contingency 
amounts that are reasonable to cover unanticipated cost increases plus 
annual operating and maintenance costs. The breakpoints corresponding 
to the cost effectiveness ratings will be adjusted for inflation 
annually as part of the Reporting Instructions.
    (3) Other factors will be considered under the authority provided 
by 49 U.S.C. 5309(d)(3)(K).
    (i) All projects will be evaluated and rated on the severity of the 
transportation and economic development problem or opportunity in the 
corridor and consideration of the appropriateness of the proposed 
project as a response.
    (ii) Depending upon the applicability, also considered will be the 
following factors:
    (A) Identification of the project as a principal element of a 
congestion reduction strategy, in general and a pricing strategy, in 
particular;
    (B) Any factor which the Small Start project sponsor believes 
articulates the benefits of the proposed project but which is not 
captured within the other project justification criteria; and
    (C) Other factors that the Secretary determines to be appropriate 
to carry out the evaluation.
    (c) In evaluating proposed Small Starts projects under these 
criteria:
    (1) For the effectiveness and cost effectiveness criteria, the 
proposed Small Starts project will be compared to the baseline 
alternative.
    (2) As a candidate project proceeds through project development, a 
greater degree of certainty is expected with respect to the scope of 
the project and a greater level of commitment is expected with respect 
to the funding strategy and the plans and policies intended to support 
economic development and transit supportive land use.
    (d) Simplified methods may be used for Small Starts projects with 
prior written approval from FTA. Depending on the scope and complexity 
of the proposed Small Starts project, information regarding user 
benefits and ridership could be estimated based on existing ridership, 
on-board surveys, calculations of stop-to-stop running time 
improvements, peer project experience, pivot-point and elasticity based 
methods, or other methods of estimating ridership and user benefits 
consistent with FTA guidance and industry practice.
    (e) The individual ratings for each of the criteria described in 
this section will be combined into a summary rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low'' for project 
justification using the weights provided for above. ``Other factors'' 
will be considered and applied by adjusting, either upward or downward, 
the summary project justification rating.


Sec.  611.23  Local financial commitment criteria.

    In order to approve a grant for a Small Starts project under 49 
U.S.C. 5309, and to approve entry into project development as required 
by 49 U.S.C. 5309(e)(6), FTA must find that the proposed project is 
supported by an acceptable degree of local financial commitment, as 
required by 49 U.S.C. 5309(e)(5). The financial capability of the 
project sponsor to build, operate and maintain the proposed project as 
well as the existing and planned system will be evaluated according to 
the following measures:
    (a) The proposed share of project capital costs to be met using 
funds from sources other than the Section 5309 Capital Investment 
Program, including both the non-Federal match required by Federal law 
and any additional local, State or non-Section 5309 Capital Investment 
Federal funding (``overmatch''). However, FTA will give priority to 
financing projects that include more non-Section 5309 Capital 
Investment funds than are required as local match under section 
5309(h). At the same time, FTA will take into consideration the fiscal 
capacity of State and local governments by not reducing the overall 
local financial commitment rating below ``medium,'' for projects that, 
due to state or local fiscal capacity constraints, propose a funding 
strategy with an 80 percent Section 5309 Capital Investment funding. 
Unless otherwise specified in Federal law, FTA will not take into 
account the non-Federal funds expended on a project other than the 
Small Starts project being evaluated when computing the non-Federal 
share of the Small Starts project.
    (b) The stability and reliability of the proposed capital funding 
plan for constructing all essential elements of the Small Starts 
project and transit system, including the availability of contingency 
amounts that the Secretary determines to be reasonable to cover 
unanticipated cost increases.
    (c) The stability and reliability of the proposed operating funding 
plan to operate and maintain the entire transit system as planned, and 
including the

[[Page 43369]]

existence of contractual arrangements, including public private 
partnership arrangements, that are designed to reduce and/or make more 
predictable the annualized cost of operations.
    (d) The capital and operating plans specified in paragraphs (b) and 
(c) of this section must include costs and revenues up to and including 
opening year.
    (e) For each proposed project, ratings for paragraphs (a), (b) and 
(c) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' The application of these descriptors to 
each of these criteria will be published, subject to notice and 
comment, in policy guidance at least every two years or when 
substantial changes are made.
    (f) The individual ratings for each measure described in this 
section will be combined into a summary rating of ``high,'' ``medium-
high,'' ``medium,'' ``medium-low,'' or ``low'' for local financial 
commitment. To develop the summary ratings, the rating for capital and 
operating financial plans will be given equal weights. The rating for 
the proposed share from other than the Section 5309 Capital Investments 
program will be used to assign a higher or lower rating should the 
weighting of the capital and operating financial plan ratings produce a 
rating which would otherwise fall between the summary rating levels 
specified above.


Sec.  611.25  Overall project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment, adjusted by the degree of reliability of 
estimates of ridership and costs, as provided in Sec. Sec.  611.7, 
611.21, and 611.23, will form the basis for the overall rating for each 
project.
    (b) FTA will assign overall ratings of ``high,'' ``medium-high,'' 
``medium,'' ``medium-low,'' or ``low'' as required by 49 U.S.C. 
5309(e)(6)(B), to each proposed project. To obtain an overall rating of 
``medium,'' a project must have at least a ``medium'' rating for 
project justification, and local financial commitment. To obtain an 
overall rating of ``medium-high,'' a project must have at least a 
rating of ``medium-high'' for both project justification and for local 
financial commitment. To obtain a rating of ``high,'' a project must 
have a rating of ``high'' for both project justification and for local 
financial commitment.
    (1) These ratings will indicate the overall merit of a proposed 
project at the time of evaluation.
    (2) Ratings for individual projects will be updated annually for 
purposes of the annual report on funding levels and allocations of 
funds required by 49 U.S.C. 5309(k)(1), and as required for FTA 
approvals during the following project development steps:
    (i) Advancement of proposed Small Starts projects into project 
development;
    (ii) Decision to recommend Small Starts projects for Project 
Construction Grant Agreements.
    (c) Projects that achieve an overall rating of ``medium'' or better 
will be allowed to advance into project development and may be 
recommended for funding.


Sec.  611.27  Project development process.

    All Small Starts projects must emerge from the metropolitan and 
statewide planning process, consistent with 23 CFR part 450, and be 
included in the metropolitan transportation plan. Proposed projects 
must be based on the results of alternatives analysis and proceed 
through project development before being recommended for Small Starts 
program funding.
    (a) Alternatives analysis. To be eligible for project funding under 
the Small Starts program, local project sponsors must perform an 
alternatives analysis consistent with FTA guidance.
    (1) The alternatives analysis must develop information on the 
benefits, costs, and impacts of alternative strategies to address a 
transportation problem or opportunity in a given corridor, leading to 
the adoption of a locally preferred alternative.
    (2) The alternative strategies evaluated in an alternatives 
analysis must include a no-build alternative, at least one 
Transportation System Management (TSM) alternative that is able to 
serve as the Small Starts project baseline alternative, and an 
appropriate number of build alternatives. If the alternatives analysis 
only considers projects that would qualify as Small Starts projects and 
does not include a new fixed guideway alternative, the Small Starts 
project already fits the definition of a TSM alternative. In this case, 
the no-build alternative will serve as the baseline in both the 
alternatives analysis and in the Small Starts evaluation and rating 
process.
    (3) The locally preferred alternative must be selected from among 
the evaluated alternative strategies and formally adopted and included 
in the metropolitan transportation plan.
    (b) Project development. Consistent with 49 U.S.C. 5309(e)(6) and 
5328(a)(2), FTA will evaluate proposed Small Starts projects for 
approval into project development. For Small Starts projects, project 
development combines the goals and activities of preliminary 
engineering and final design into a single phase with a single FTA 
approval point. However, under NEPA regulations (23 CFR part 771), 
final design activities may not commence prior to completion of the 
NEPA process.
    (1) The project development phase of Small Starts is the process of 
finalizing the project scope, cost, and the financial plan such that:
    (i) All environmental and community impacts are identified and 
adequate provisions made for their mitigation in accordance with 49 
U.S.C. 5324(b) and NEPA, with FTA's issuance of a Record of Decision 
(ROD) or Finding of No Significant Impact (FONSI), unless the project 
is found to be categorically excluded from the NEPA process by FTA 
under 23 CFR 771.117;
    (ii) All major or critical project elements are designed to the 
level that no significant unknown impacts relative to their costs will 
result; and
    (iii) All cost estimating is complete to the level of confidence 
necessary for the project sponsor to implement the financing strategy, 
including establishing the maximum dollar amount of the Small Starts 
program financial contribution needed to implement the project.
    (iv) The project sponsor has used credible, relevant, identifiable, 
and cost-effective industry or engineering practices that are uniformly 
and consistently applied in preparing for and making these 
determinations. The cost estimating process would specifically identify 
the main components of the project as identified in FTA's standardized 
cost categories, including all essential project elements, and add 
sufficient contingencies to cover unanticipated cost increases.
    (v) Detailed specifications and bid documents are produced, all 
funding commitments needed to complete the project are finalized, and 
all remaining technical and regulatory issues relating to readiness to 
begin construction are completed.
    (2) A proposed project can be considered for advancement into 
project development only if:
    (i) Alternatives analysis has been completed;
    (ii) FTA has approved the alternative that will serve as the 
baseline alternative against which the proposed project will be 
compared in the evaluation and rating process;
    (iii) The NEPA scoping process has been completed or the project 
has been granted a categorical exclusion;

[[Page 43370]]

    (iv) The proposed project has been adopted as the locally preferred 
alternative in the metropolitan transportation plan;
    (v) The proposed financial strategies, planned funding sources, and 
amounts have been independently endorsed by those agencies identified 
as responsible for providing or approving the funding. Where future 
State and/or local government action or public referendum is required 
to establish (and commit) the proposed funding source, a letter of 
endorsement and a timeframe for implementation and commitment is 
required from the appropriate policy-making or decision-making body 
responsible for providing or approving the proposed funding;
    (vi) For project sponsors using traditional travel forecasting 
procedures (commonly referred to as four-step models) to estimate 
transportation system user benefits and ridership, the procedures have 
been rigorously validated using a survey of transit riders that has 
been completed not more than five years prior to a request to enter 
project development;
    (vii) Project sponsors have demonstrated adequate technical 
capability to carry out project development for the proposed project; 
and
    (viii) All other applicable Federal and FTA program requirements 
have been met.
    (3) Consistent with 49 U.S.C. 5309(g)(2)(C), project sponsors shall 
submit a preliminary plan for collection and analysis of information to 
identify the ``before and after'' impacts of the Small Starts project 
and the accuracy of the forecasts prepared during development of the 
project. The project sponsor will also submit the initial information 
on project scope, service levels, capital costs, operating and 
maintenance costs, and ridership of the project produced during 
alternatives analysis, identify the entity responsible for each in 
order to facilitate FTA's compliance with preparation of the Contractor 
Performance Assessment Report required by 49 U.S.C. 5309(l)(2), and 
provide a discussion of the key uncertainties that may affect 
achievement of the forecasts.
    (4) FTA's approval will be based on the results of its evaluation 
as described in Sec. Sec.  611.7 and 611.21 through 611.25.
    (5) At a minimum, a proposed project must receive an overall rating 
of ``medium'' and be reasonably expected to continue to meet the 
requirements of this section to be approved for entry into project 
development.
    (6) This part does not in any way revoke prior FTA approvals to 
enter project development made prior to [the effective date of the 
final rule].
    (7) Small Starts projects entering project development receive 
blanket pre-award authority to incur project costs for preliminary 
engineering prior to grant approval. Pre-award authority for final 
design and to acquire real estate and to relocate residents and 
businesses in accordance with the Uniform Relocation and Real Property 
Acquisition Policies Act is automatically granted upon completion of 
the NEPA process as evidenced by FTA's issuance of a ROD or FONSI, or 
FTA's concurrence in a categorical exclusion. All other activities must 
receive a Letter of No Prejudice (LONP) to be eligible for Federal 
reimbursement.
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (c) Project Construction Grant Agreements (PCGAs).
    (1) FTA will determine whether to execute a PCGA for Small Starts 
projects based on:
    (i) The results of the evaluations and ratings process contained in 
this part;
    (ii) The technical capability of the project sponsor to complete 
the proposed Small Starts project;
    (iii) The NEPA process has been completed with FTA's issuance of a 
ROD or FONSI or FTA's concurrent in a categorical exclusion;
    (iv) The project is reaffirmed in its final configuration and costs 
(after NEPA and project development) in the metropolitan transportation 
plan if significant changes have occurred in the project definition or 
cost compared to the project that was approved to enter into project 
development; and
    (v) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed Small 
Starts project.
    (vi) Consistent with 49 U.S.C. 5309(g)(2)(C), project sponsors 
seeking PCGAs shall submit a complete plan for collection and analysis 
of information to identify the ``before and after'' impacts of the 
Small Starts project and the accuracy of the forecasts prepared during 
development of the project. The project sponsor will also submit 
updated information on project scope, service levels, capital costs, 
operating and maintenance costs, and ridership of the project produced 
during project development, an analysis of the changes between the 
current project information and the information prepared during 
alternatives analysis, and a discussion of the key remaining 
uncertainties that may affect achievement of the forecasts.
    (A) The plan shall finalize the preliminary plan developed prior to 
entering project development as required by Sec.  611.27(c)(3). The 
plan will provide for: Collection of ``before'' data on the current 
transit system; documentation of the ``predicted'' scope, service 
levels, capital costs, operating costs, and ridership of the project; 
collection of ``after'' data on the transit system one year after 
opening of the Small Starts project; and analysis of the consistency of 
``predicted'' project characteristics with the ``after'' data.
    (B) The ``before'' data collection shall obtain information on 
transit service levels and ridership patterns, including origins and 
destinations, access modes, trip purposes, and rider characteristics. 
The ``after'' data collection shall consist of comparable information 
on transit service levels and ridership patterns, plus information on 
the as-built scope and capital and operation and maintenance costs of 
the Small Starts project.
    (C) The analysis of this information shall describe the impacts of 
the Small Starts project on transit services and transit ridership, 
evaluate the consistency of ``predicted'' and actual project 
characteristics and performance, and identify sources of differences 
between ``predicted'' and actual outcomes.
    (D) For funding purposes, preparation of the plan for collection 
and analysis of data is an eligible part of the proposed project.
    (vii) Project sponsors shall collect data on the current system, 
according to the plan required under Sec.  611.27(b)(3) as approved by 
FTA, prior to the beginning of construction of the proposed Small 
Starts project. Collection of this data is an eligible part of the 
proposed project for funding purposes.
    (2) FTA's funding decision is distinct from project evaluation and 
rating process. Projects that meet or exceed the criteria described in 
this section are eligible, but are not guaranteed, to be recommended 
for funding. FTA will recommend projects for funding in the annual 
Report on Funding Recommendations and President's Budget only if the 
project is rated at least ``medium'' overall and has a cost-
effectiveness rating of at least ``medium.''
    (3) A PCGA shall not be executed for a project that is not 
authorized for construction by Federal law.
    (4) PCGAs may be executed only for those projects that:

[[Page 43371]]

    (i) Have an overall rating of ``medium'' or better;
    (ii) Have completed the appropriate steps in the project 
development process;
    (iii) Meet all applicable Federal and FTA program requirements; and
    (iv) Are ready to utilize Small Starts funds, consistent with 
available program authorization.
    (5) In any instance in which FTA decides to provide financial 
assistance under the Section 5309 Capital Investment program for 
construction of a Small Starts project, FTA will negotiate a PCGA with 
the grantee during project development. Pursuant to the terms and 
conditions of the PCGA:
    (i) The grantee will be required to complete construction of the 
project, as defined, to the point of initiation of revenue operations 
and to absorb any additional costs incurred or necessitated with local 
or other non-Section 5309 Capital Investment funds;
    (ii) FTA and the grantee will establish a schedule for anticipating 
Federal contributions; and
    (iii) Specific annual contributions under the PCGA will be subject 
to the availability of overall budget, authority, Congressional 
appropriations, and the ability of the grantee to use the funds 
effectively.
    (6) The total amount of Federal obligations under PCGAs and 
potential obligations under Letters of Intent will not exceed the 
amount authorized for Small Starts under 49 U.S.C. 5309.
    (7) FTA may also make a ``contingent commitment,'' which is subject 
to future congressional authorizations and appropriations, pursuant to 
49 U.S.C. 5309(g)(B) 5338(c), and 5338(f).
    (8) The PCGA will require implementation of the data collection 
plan prepared in accordance with paragraph (c)(1)(vi) of this section:
    (i) Prior to the beginning of construction activities, the grantee 
shall collect the ``before'' data on the existing system, if such data 
has not already been collected during project development, and document 
the predicted characteristics and performance of the project.
    (ii) One year after the project opens for revenue service, the 
grantee shall collect the ``after'' data on the transit system and the 
Small Starts project, determine the impacts of the project, analyze the 
consistency of the ``predicted'' performance of the project with the 
``after'' data, and report the findings and supporting data to FTA no 
later than 18 months after the project opens for revenue service.
    (iii) For funding purposes, collection of the ``before'' data, 
collection of the ``after'' data, and the development and reporting of 
findings are eligible parts of the proposed project.

Subpart D--Very Small Starts


Sec.  611.29  Eligibility.

    (a) To be eligible for Section 5309 Capital Investment funding for 
a Very Small Start, a proposed project must meet the following 
prerequisites:
    (1) Be based on the results of planning and alternatives analysis 
as described in Sec.  611.37.
    (2) Have at least 50 percent of the project in a fixed guideway 
during the peak period or when congestion inhibits transit system 
performance, or be a corridor bus project that includes at least the 
following elements:
    (i) Substantial transit stations;
    (ii) Traffic signal priority/pre-emption;
    (iii) Low-floor buses or level boarding;
    (iv) Branding of the proposed service; and
    (v) 10 minute peak/15 minute off peak headways or better for at 
least 14 hours per day.
    (3) Must have the following characteristics to qualify for pre-
approval of the project justification criteria:
    (i) Be in a corridor with a minimum of 3,000 existing transit 
riders who will benefit from the proposed project.
    (ii) Have a total project cost of less than $50 million and an 
average cost of less than $3 million per mile (exclusive of rolling 
stock). Projects that exceed the limits provided for in paragraph 
(a)(3) of this section will be considered and evaluated as a Small 
Starts project, described in Subpart C of this part.
    (b) Projects that would otherwise qualify for funding as a New 
Starts or Small Starts project may not be subdivided into several Very 
Small Starts projects. Projects may be built in phases or a series of 
minimum operable segments, but all projects envisioned for a single 
corridor will be considered together as a single project for the 
purpose of determining eligibility as a Very Small Starts project. If 
the combined cost or total requested funding amount, both expressed in 
year-of-expenditure dollars, is over the Very Small Starts limits, the 
projects will be evaluated as a New Starts or Small Starts project.


Sec.  611.31  Project justification criteria.

    In order to approve a grant for a proposed Very Small Starts 
project, and to approve entry into the project development phase as 
required by 49 U.S.C. 5309(e)(6), FTA must find that the proposed 
project is meritorious as described in 49 U.S.C. 5309(e)(4).
    (a) To make the statutory evaluations and assign ratings for 
project justification, FTA will evaluate information developed locally 
through alternatives analyses and refined through the project 
development phase.
    (b) For Very Small Starts projects, a single summary rating of 
project justification will be provided, based on the project's ability 
to meet the requirements in Sec.  611.29(a)(3) that takes into account 
the project's mobility improvements, economic development, land use 
impacts, and cost effectiveness.
    (c) Other factors will be considered under the authority provided 
by 49 U.S.C. 5309(d)(3)(K).
    (1) All projects will be evaluated and rated on the severity of the 
transportation and economic development problem or opportunity in the 
corridor and consideration of the appropriateness of the proposed 
project as a response.
    (2) Depending upon the applicability, also considered will be the 
following factors:
    (i) Identification of the project as a principal element of a 
congestion reduction strategy, in general and a pricing strategy, in 
particular;
    (ii) Any factor which the Very Small Start project sponsor believes 
articulates the benefits of the proposed project but which is not 
captured within the other project justification criteria; and
    (iii) Other factors that the Secretary determines to be appropriate 
to carry out the evaluation.
    (d) The procedures used to produce the information to support the 
project justification rating for Very Small Starts will be based on 
data supporting the existing ridership and average cost per mile 
required under Sec.  611.29(a)(3) .
    (e) Very Small Starts projects are composed of project elements 
described in Sec.  611.29(a)(3) that are warranted as both effective 
and cost-effective and shall be rated ``medium'' for project 
justification. Projects not composed of such elements do not qualify 
for evaluation as a Very Small Start, and are subject to the 
requirements of subpart C of this part.


Sec.  611.33  Local financial commitment criteria.

    In order to approve a Very Small Starts project into project 
development or for a grant under 49 U.S.C. 5309, FTA must find that the 
proposed project is supported by an acceptable degree of local 
financial commitment, as required by 49 U.S.C. 5309(e)(5). The 
financial capability of the project sponsor to build, operate and 
maintain the proposed project, as well as the existing

[[Page 43372]]

and planned system will be evaluated according to the following 
measures:
    (a) The proposed share of project capital costs to be met using 
funds from sources other than the Section 5309 Capital Investment 
program, including both the non-Federal match required by Federal law 
and any local, state or additional non-Section 5309 Capital Investment 
Federal funding (``overmatch''). However, FTA will give priority to 
financing projects that include more non-5309 funds than are required 
as local match under 5309(h). At the same time, FTA will take into 
consideration the fiscal capacity of State and local governments by not 
reducing the overall local financial commitment rating below 
``medium,'' for projects that, due to state or local fiscal capacity 
constraints, propose a funding strategy with an 80 percent Section 5309 
Capital Investment funding. Unless otherwise specified in Federal law, 
FTA will not take into account the non-Federal funds expended on a 
project other than the Very Small Starts project being evaluated when 
computing the non-Federal share of the Very Small Starts project.
    (b) The stability and reliability of the proposed capital funding 
plan for constructing all essential elements of the Very Small Starts 
project and transit system, including the availability of contingency 
amounts that the Secretary determines to be reasonable to cover 
unanticipated cost increases; and
    (c) The stability and reliability of the proposed operating funding 
plan to operate and maintain the entire transit system as planned and 
including the existence of contractual arrangements that are designed 
to reduce and/or make more predictable the annualized cost of 
operations.
    (d) The capital and operating plans specified in paragraphs (a), 
(b) and (c) of this section must include annual costs and revenues 
through opening year.
    (e) For each proposed project, ratings for paragraphs (a), (b) and 
(c) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' The application of these descriptors to 
each of these criteria, and the weights given to each criterion, will 
be published, subject to notice and comment, in policy guidance at 
least every two years or when substantial changes are made.
    (f) The individual ratings for each measure described in this 
section will be combined into a summary rating of ``high,'' ``medium-
high,'' ``medium,'' ``medium-low,'' or ``low'' for local financial 
commitment.


Sec.  611.35  Overall project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment, adjusted by the degree of reliability of 
estimates of ridership and costs (as described in Sec. Sec.  611.7, 
611.31, and 611.33), will form the basis for the overall rating for 
each project.
    (b) FTA will assign overall ratings of ``high,'' ``medium-high,'' 
``medium,'' ``medium-low,'' or ``low,'' as required by 49 U.S.C. 
5309(e)(6)(B), to each proposed project. To obtain an overall rating of 
``medium,'' a project must have at least a ``medium'' rating for both 
project justification and local financial commitment.
    (1) These ratings will indicate the overall merit of a proposed 
project at the time of evaluation.
    (2) Ratings for individual projects will be updated annually for 
purposes of the annual report on funding levels and allocations of 
funds required by 49 U.S.C. 5309(k)(1), and as required for FTA 
approvals during the following project development steps:
    (i) Advancement of proposed Very Small Starts projects into project 
development; and
    (ii) Decision to recommend Very Small Starts projects for Project 
Construction Grant Agreements.
    (c) Projects that achieve an overall rating of ``medium'' or better 
will be allowed to advance into project development and may be 
recommended for funding.


Sec.  611.37  Project development process.

    All Very Small Starts projects must emerge from the metropolitan 
and statewide planning process, consistent with 23 CFR part 450, and be 
included in the metropolitan transportation plan. Proposed projects 
must be based on the results of alternatives analysis and proceed 
through project development before being recommended for Section 5309 
Capital Investment program funding.
    (a) Alternatives analysis. To be eligible for project funding under 
the Section 5309 Capital Investment program, local project sponsors 
must perform an alternatives analysis consistent with FTA guidance.
    (1) The alternatives analysis must develop information on the 
benefits, costs, and impacts of alternative strategies to address a 
transportation problem or opportunity in a given corridor, leading to 
the adoption of a locally preferred alternative.
    (2) The alternative strategies evaluated in an alternatives 
analysis must include a no-build alternative and at least one Very 
Small Start alternative.
    (3) The locally preferred alternative must be selected from among 
the evaluated alternative strategies and formally adopted and included 
in the metropolitan transportation plan.
    (b) Project development. Consistent with 49 U.S.C. 5309(e)(6) and 
49 U.S.C. 5328(a)(2), FTA will evaluate proposed Very Small Starts 
projects for approval into project development. For Very Small Starts 
projects, project development combines the goals and activities of 
preliminary engineering and final design into a single phase with a 
single FTA approval point. However, under NEPA regulations (23 CFR Part 
771), final design activities may not commence prior to completion of 
the NEPA process.
    (c) Project Development.
    (1) The project development phase of Small Starts, including Very 
Small Starts, is the process of finalizing the project scope, cost, and 
the financial plan such that:
    (i) All environmental and community impacts are identified and 
adequate provisions made for their mitigation in accordance with 49 
U.S.C. 5324(b) and NEPA, which results in FTA's issuance of a Record of 
Decision (ROD) or Finding of No Significant Impact (FONSI), unless the 
project is found to be categorically excluded from the NEPA process by 
FTA under 23 CFR 771.17;
    (ii) All major or critical project elements are designed to the 
level that no significant unknown impacts relative to their costs will 
result; and
    (iii) All cost estimating is complete to the level of confidence 
necessary for the project sponsor to implement the financing strategy, 
including establishing the maximum dollar amount of the Small Starts 
program financial contribution needed to implement the project.
    (iv) The project sponsor has used credible, relevant, identifiable 
and cost-effective industry or engineering practices that are uniformly 
and consistently applied in preparing for and making these 
determinations. The cost estimating process would specifically identify 
the main components of the project as identified in FTA's standardized 
cost categories, including all essential project elements, and add 
sufficient contingencies to cover unanticipated cost increases.
    (v) Detailed specifications and bid documents are produced, all 
funding commitments needed to complete the project are finalized, and 
all remaining technical and regulatory issues relating to readiness to 
begin construction are completed.

[[Page 43373]]

    (2) A proposed project can be considered for advancement into 
project development only if:
    (i) Alternatives analysis has been completed;
    (ii) The NEPA scoping process has been completed, or the project 
has been granted a categorical exclusion;
    (iii) The proposed project has been adopted as the locally 
preferred alternative in the metropolitan transportation plan;
    (iv) The proposed financial strategies, planned funding sources, 
and amounts have been independently endorsed by those agencies 
identified as responsible for providing or approving the funding. Where 
future State and/or local government action or public referendum is 
required to establish (and commit) the proposed funding source, a 
letter of endorsement and a timeframe for implementation and commitment 
is required from the appropriate policy-making or decision-making body 
responsible for providing or approving the proposed funding;
    (v) Project sponsors have demonstrated adequate technical 
capability to carry out project development for the proposed project; 
and
    (vi) All other applicable Federal and FTA program requirements have 
been met.
    (3) Consistent with 49 U.S.C. 5309(g)(2)(C), project sponsors shall 
submit a preliminary plan for collection and analysis of information to 
identify the ``before and after'' impacts of the Very Small Starts 
project and the accuracy of the forecasts prepared during development 
of the project. The project sponsor will also submit the initial 
information on project scope, service levels, capital costs, operating 
and maintenance costs, and ridership of the project produced during 
alternatives analysis, as well as a discussion of the key uncertainties 
that may affect achievement of the forecasts.
    (4) FTA's approval will be based on the results of its evaluation 
as described in Sec. Sec.  611.21 through 611.25.
    (5) At a minimum, a proposed project must receive an overall rating 
of ``medium'' and be reasonably expected to continue to meet the 
requirements of this section to be approved for entry into project 
development.
    (6) This part does not in any way revoke prior FTA approvals to 
enter project development made prior to [the effective date of the 
final rule].
    (7) Very Small Starts projects entering project development receive 
blanket pre-award authority to incur project costs for preliminary 
engineering prior to grant approval. Pre-award authority for final 
design, to acquire real estate and to relocate residents and businesses 
in accordance with the Uniform Relocation and Real Property Acquisition 
Policies Act, is automatically granted upon completion of the NEPA 
process as evidenced by FTA's issuance of a ROD or FONSI or FTA's 
concurrence in a categorical exclusion. All other activities must 
receive a Letter of No Prejudice (LONP) to be eligible for Federal 
reimbursement.
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for the project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (d) Project Construction Grant Agreements (PCGAs).
    (1) FTA will determine whether to execute a PCGA for Very Small 
Starts projects based on:
    (i) The results of the evaluations and ratings process contained in 
this part;
    (ii) The technical capability of the project sponsor to complete 
the proposed Very Small Starts project;
    (iii) The NEPA process has been completed with FTA's issuance of a 
ROD or FONSI or FTA's concurrence in a categorical exclusion;
    (iv) The project is reaffirmed in its final configuration and costs 
(after NEPA and project development) in the metropolitan transportation 
plan if significant changes have occurred in the project definition or 
cost compared to the project that was approved to enter into project 
development; and
    (v) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed Small 
Starts project.
    (2) FTA's funding decision is distinct from project evaluation and 
rating process. Projects that meet or exceed the criteria described in 
this section are eligible, but are not guaranteed, to be recommended 
for funding.
    (3) A PCGA shall not be executed for a project that is not 
authorized for construction by Federal law.
    (4) PCGAs may be executed only for those projects that:
    (i) Have an overall rating of ``medium'' or better;
    (ii) Have completed the appropriate steps in the project 
development process;
    (iii) Meet all applicable Federal and FTA program requirements; and
    (iv) Are ready to utilize Small Starts funds, consistent with 
available program authorization.
    (5) In any instance in which FTA decides to provide Section 5309 
Capital Investment funding for construction of a Very Small Starts 
project, FTA will negotiate a PCGA with the grantee during project 
development. Pursuant to the terms and conditions of the PCGA:
    (i) The grantee will be required to complete construction of the 
project, as defined, to the point of initiation of revenue operations, 
and to absorb any additional costs incurred or necessitated with local 
or other non-Section 5309 Capital Investment funds;
    (ii) FTA and the grantee will establish a schedule for anticipating 
Federal contributions; and
    (iii) Specific annual contributions under the PCGA will be subject 
to the availability of budget authority and the ability of the grantee 
to use the funds effectively.
    (6) The total amount of Federal obligations under PCGAs and 
potential obligations under Letters of Intent will not exceed the 
amount authorized for Small Starts under 49 U.S.C. 5309.
    (7) FTA may also make a ``contingent commitment,'' which is subject 
to future congressional authorizations and appropriations, pursuant to 
49 U.S.C. 5309(g)(B), 5338(c), and 5338(f).
    (8) The PCGA will require implementation of the data collection 
plan prepared in accordance with paragraph 611.37(c)(3) of this 
section:
    (i) Prior to the beginning of construction activities, the grantee 
shall collect the ``before'' data on the existing system if such data 
has not already been collected during project development, and document 
the predicted characteristics and performance of the project.
    (ii) One year after the project opens for revenue service, the 
grantee shall collect the ``after'' data on the transit system and the 
Very Small Starts project, determine the impacts of the project, 
analyze the consistency of the ``predicted'' performance of the project 
with the ``after'' data, and report the findings and supporting data to 
FTA within eighteen months after the project opens for revenue.
    (A) The Before-and-After Study will consist of a very simple 
analysis of: A post-construction cost summary in FTA standardized cost 
categories compared to the cost estimate at the time of entry into 
project development; a comparison of actual ridership (on's and off's) 
in the corridor provided in the application to enter project 
development and new counts done one year after opening; and a 
comparison of transit schedules and frequencies between the transit 
services in the corridor as it existed at the time of entry into 
project development and one year after opening. The results of

[[Page 43374]]

this study shall be submitted within eighteen months after project 
opening.
    (B) For funding purposes, collection of the ``before'' data, 
collection of the ``after'' data, and the development and reporting of 
findings are eligible parts of the proposed project.

Appendix A to Part 611--Model Project Development Agreement

Project Development Agreement Between the Federal Transit 
Administration and the [Sponsor] for the [Name of Project]

1.0 Purpose

    The Federal Transit Administration (FTA) and the [Sponsor] are 
executing this Project Development Agreement (``Agreement'') to set 
forth their intentions for compliance with NEPA, the Metropolitan 
Planning requirements, and the Major Capital Investment (``New 
Starts'') requirements that will govern the [name of project]. FTA 
and [Sponsor] acknowledge that this Agreement may be modified from 
time to time to accommodate statutory or regulatory changes, changes 
to the project, or changes to [the Sponsor's] project management or 
financing plans, as necessary or appropriate.

2.0 Applicable Statutes, Regulations, and Program Requirements

    The [name of project] is a ``major federal action'' subject to 
the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et 
seq., and FTA's regulations at 23 CFR Part 771; a ``major 
metropolitan transportation investment'' subject to the Metropolitan 
Planning requirements at 23 CFR Part 450; a ``new fixed guideway 
system or extension of an existing fixed guideway system'' subject 
to the Major Capital Investment (``New Starts'') requirements at 49 
U.S.C. 5309 and 49 CFR Part 611; and a ``major capital project'' 
subject to the Project Management Oversight requirements at 49 
U.S.C. 5327 and 49 CFR Part 633.

3.0 Project Readiness for Preliminary Engineering

    As a prerequisite for FTA's approval of entry into Preliminary 
Engineering, [Sponsor] has identified an operable segment of fixed 
guideway that will be its candidate for Section 5309 New Starts 
funds under a Full Funding Grant Agreement. This operable segment is 
the product of an Alternatives Analysis that considered an 
appropriate range of alternative modes, alignments, and termini in 
terms of their likely costs, benefits, and environmental impacts. 
Specifically:

3.1 Alternatives Analysis

    In [month and year] [Sponsor] completed an Alternatives Analysis 
(``AA'') [or title of the study] consistent with FTA guidance, good 
practice, and the requirements of 49 CFR part 611, for the purpose 
of [* * * describe the transportation problem and name the 
corridor]. This AA evaluated a range of reasonable alternatives for 
that purpose: [* * * describe the number of alternatives, the modes 
considered, their varying alignments and lengths, and the range of 
costs]. FTA is satisfied that this AA presents reliable information 
on the benefits, costs, and impacts of these alternatives. Further, 
FTA is satisfied that all interested parties and the general public 
had ample opportunity to participate in this AA.

3.2 The Candidate Project for New Starts Funds

    As the result of this AA, [Sponsor] has identified a project 
that will be a candidate for Federal financial assistance for final 
design and construction under 49 U.S.C. 5309 (hereafter, [name of 
project] or the ``candidate project''). [Name of project] is a [* * 
* describe the project in terms of mode, length, location, and 
number of stations and rolling stock.] The candidate project is 
described in more detail in Attachment 8.1 to this Agreement 
(``Scope of the Project''). As of the date of this Agreement, the 
estimated total cost of the candidate project is $------, and 
[Sponsor] intends to seek $------ in Federal financial assistance 
under the Section 5309 New Starts program for Final Design and 
Construction of the candidate project. The estimated total cost is 
set forth in more detail in Attachment 8.2 to this Agreement (``Cost 
Estimate''). The anticipated sources of financing and relevant 
amounts of that financing are set forth in Attachment 8.3 to this 
Agreement (``Budget'').

3.3 Baseline Alternative

    In accordance with the requirements of 49 CFR part 611, FTA has 
approved a baseline alternative for further study that will be used 
for purposes of comparison during the NEPA and New Starts processes: 
[describe the baseline alternative].

3.4 Metropolitan Planning Organization's Plan and TIP

    The [name of MPO], the Metropolitan Planning Organization for 
metropolitan [name of city], has adopted a financially constrained 
long range metropolitan transportation plan (hereafter, the ``Plan'' 
or [name of the Plan]), and a four-year Transportation Improvement 
Program, (hereafter, the ``TIP'' or [name of the TIP]), in 
accordance with 23 CFR part 450. The [Sponsor's] [name of project] 
has been incorporated into [MPO's] Plan, and [describe the project 
activities to be accomplished during the four-year TIP] have been 
incorporated into [MPO's] TIP. Consistent with [MPO's] Plan, 
[Sponsor's] financial plan for the candidate project anticipates 
that [identify the funding sources other than the New Starts program 
and the relevant amounts].

3.5 Sponsor's Technical Capacity

    As a prerequisite to the execution of this Agreement, [Sponsor] 
has demonstrated its technical capacity and capabilities to carry 
out Preliminary Engineering for the candidate project in accordance 
with the milestones identified in Section 5.0 of this Agreement. 
Specifically, [describe whether the Sponsor will perform Preliminary 
Engineering with its in-house staff and resources or procure the 
necessary engineering expertise from consulting contractors or some 
combination thereof.]

4.0 Approach Towards Project Development

    As a prerequisite for FTA's approval of entry into Preliminary 
Engineering, [Sponsor] has agreed to take an approach towards 
project development that will ensure consistency in project scope 
and New Starts funding expectations throughout the successive phases 
of Preliminary Engineering, Final Design, and Construction. To 
expedite [Sponsor's] efforts, FTA will take a number of steps to 
help [Sponsor] comply with the pertinent Federal requirements. 
Specifically,

4.1 Environmental Impacts

    [Option One: If the candidate project has been identified prior 
to the preparation of a DEIS, use the following paragraph.] FTA and 
[Sponsor] will prepare an Environmental Impact Statement (EIS) [or 
Environmental Assessment (EA] that will evaluate a No Build 
alternative, a Baseline alternative described in Section 3.3 of this 
Agreement, the candidate project, and the following modal or 
alignment alternatives deemed worthy of study as a result of the 
scoping meeting held on [date]: [Describe the other alternatives.] 
FTA and [Sponsor] agree that the EIS [or EA] may incorporate by 
reference the AA data and information that support the elimination 
of certain other alternatives from further study. Should [Sponsor] 
retain consultants to assist in the preparation of the EIS [or EA], 
[Sponsor] will obtain and retain a statement from each such 
consultant that the consultant has no financial or other interest in 
the outcome of the alternatives under study. The EIS [or EA] will 
cover [specify whether the document will cover only the candidate 
project or potential extensions to the candidate project that lie 
within the same corridor]. Consistent with both NEPA and Federal 
transit law, the public will be given every opportunity to assist in 
the preparation of the EIS [or EA]. [Sponsor] acknowledges, however, 
that the EIS [or EA] will not be published unless and until FTA 
determines that the information to be presented on the costs, 
benefits, and impacts of the various alternatives is reliable.
    [Option Two: If the candidate project has been identified as the 
result of a combined AA/DEIS, use the following paragraph.]
    FTA and [Sponsor] published a Draft EIS [or EA] on [date] that 
led to the selection of the candidate project as the locally 
preferred alternative in accordance with the requirements of 49 CFR 
Part 611. FTA and [Sponsor] will now prepare a Final EIS that will 
complete the evaluation of the No Build alternative, the Baseline 
alternative described in Section 3.3 of this Agreement, the 
candidate project, and [identify any other modal or alignment 
alternatives to be carried forward]. The Final EIS will cover 
[specify whether the document will be limited to the candidate 
project or potential extensions to the candidate project that lie 
within the same corridor]. Currently, FTA and [Sponsor] expect to 
publish the Final EIS in or about [month, year] and FTA expects to 
issue a Record of Decision [or Finding of No Significant Impact] for 
the candidate project in or about [month, year]. [Sponsor] 
acknowledges, however, that the Final EIS

[[Page 43375]]

will not be published unless and until FTA determines that the 
information to be presented on the costs, benefits, and impacts of 
the various alternatives is reliable.

4.2 Project Scope, Cost Estimate, and Budget

    The fundamental purpose of Preliminary Engineering will be 
[Sponsor's] development of a definitive project scope, a reliable 
estimate of total project costs, and a viable financing plan for the 
candidate project which will be used to strictly limits the amount 
of Section 5309 New Starts funds that will be available at the time 
the project is approved for entry into Final Design. Attached to 
this Agreement are a preliminary project scope, a preliminary 
estimate of total project costs, and a preliminary budget for the 
candidate project (Attachments 8.1, 8.2, and 8.3, respectively).
    [Use the following paragraph if the NEPA document will cover 
both the candidate project and potential extensions to the candidate 
project that lie within the same corridor.]
    [Sponsor] acknowledges that only the candidate project is being 
approved for entry into Preliminary Engineering pursuant to 49 CFR 
part 611. [Sponsor] will perform engineering for potential 
extensions to the candidate project so far as necessary for 
compliance with NEPA--including the study of cumulative impacts and 
necessary mitigation--to disclose the implications of those 
extensions for Federal and local decisions on the candidate project 
and allow for acquisition of right-of-way upon completion of 
compliance with NEPA.
    At the conclusion of Preliminary Engineering--and as a condition 
precedent to FTA's approval of the candidate project for entry into 
Final Design--[Sponsor] will produce a Baseline Cost Estimate for 
the candidate project in Year Of Expenditure dollars in a level of 
detail sufficient for validation by FTA, its Project Management 
Oversight consultant, [MPO], and state and local agencies. [Sponsor] 
acknowledges that the maximum 5309 New Starts share will be set upon 
entry into final design.

4.3 Travel Forecasting

    During the course of Preliminary Engineering [Sponsor] will 
continually revise its travel forecasts to reflect any changes to 
the project scope and the most recent information on any matter 
pertinent to travel demand, such as newly adopted population and 
employment forecasts. [Sponsor] will be expected to use the most 
recent model enhancements available for travel forecasting. Any 
revisions to [Sponsor's] forecasts will be made consistent with good 
professional practice and FTA guidance.

4.4 Project Management Plan

    Critical to the success of [Sponsor's] further development of 
the candidate project will be [Sponsor's] own plan for managing that 
development, including, specifically, [Sponsor's] management of its 
contractors, budget, and schedule for Preliminary Engineering. 
[Sponsor's] draft Project Management Plan for Preliminary 
Engineering is set forth in Attachment 8.4 to this Agreement. 
[Sponsor] will revise and refine this Project Management Plan, as 
necessary or appropriate, throughout the course of Preliminary 
Engineering and again upon FTA's approval of the candidate project 
for entry into Final Design.

4.5 Project Financing Plan

    Consistent with Sections 4.2 of this Agreement, during the 
course of Preliminary Engineering [Sponsor] will develop a financing 
plan that supports the award of a maximum amount of Federal 
financial assistance under the Section 5309 New Starts program for 
Final Design and Construction of the candidate project. This 
Financing Plan will specify a schedule for securing the commitment 
of additional State, local, and private funding for the candidate 
project, as necessary or appropriate. This Financing Plan will also 
reflect the endorsement of any State, local, or private entity whose 
approval is necessary for securing the commitment of the funding 
sources identified by that schedule.

4.6 FTA Oversight

    As soon as practicable after the execution of this Agreement FTA 
will retain the services of a Project Management Oversight 
Contractor (PMOC) to assist FTA in its oversight of the candidate 
project. FTA will use the services of its PMOC during Preliminary 
Engineering and any subsequent phases of project development. In its 
discretion, FTA may also retain the services of a Financial 
Management Oversight Contractor (FMOC) during any phase of project 
development, for the purposes of obtaining an objective, independent 
evaluation of [Sponsor's] plans for financing both the capital costs 
of constructing the candidate project and the continuing operation 
and maintenance of [Sponsor's] bus and rail services.
    Additionally, in its discretion, FTA may retain the services of 
consultants in land use, financing, procurement systems management, 
environmental mitigation and monitoring, and other fields related to 
the development of transportation infrastructure, for the purposes 
of evaluating the candidate project and the other alternatives under 
study. [Sponsor] pledges its utmost cooperation in enabling FTA and 
its PMOC and FMOC to monitor [Sponsor's] adherence to its project 
management and financing plans, and to provide FTA and its PMOC and 
FMOC all records, data, and access to property as may be reasonably 
required for that purpose.

4.7 Risk Assessments

    Both [Sponsor] and FTA intend to assess the risks inherent in 
the candidate project during Preliminary Engineering and any 
subsequent phase of project development. Principally, [Sponsor] and 
FTA intend to assess the risks inherent in constructing the 
candidate project on schedule and within budget. Such risks may 
include, but are not limited to, property acquisitions, property and 
utility relocations, differing and unknown field and subsurface 
conditions, integration of pre-existing buildings and structures, 
availability of labor and materials, environmental impacts, adverse 
impacts on historic resources, and transactions of third party 
agreements. In its discretion, FTA may also choose to conduct 
baseline reviews of [Sponsor's] financial and procurement systems 
for the purpose of determining whether [Sponsor] has protocols in 
place to adequately manage the candidate project in compliance with 
applicable Federal law and regulation. [Sponsor] agrees that 
specific risks identified and prioritized by either [Sponsor] or FTA 
will be reported to FTA, mitigated, monitored, and updated on a 
continuous basis, as the candidate project progresses through 
Preliminary Engineering and any subsequent phase of project 
development. [Sponsor] also pledges its utmost cooperation in 
enabling FTA and its consulting contractors both to critique 
[Sponsor's] risk assessments and perform any separate risk 
assessments FTA may deem appropriate during the course of the 
candidate project.

4.8 Best Available Documents

    The project scope, cost estimate, and budget and the draft 
Project Management Plan attached to this Agreement are the best 
available documents at this stage of the candidate project. 
[Sponsor] expects to continually revise and refine these documents, 
however, as the candidate project progresses through Preliminary 
Engineering and any subsequent phase of project development. 
[Sponsor] pledges to promptly provide FTA and its consulting 
contractors all successive iterations of each of these documents 
throughout the course of the candidate project.

4.9 Review and Comment

    FTA and [Sponsor] will expedite one another's review and comment 
on the administrative drafts of NEPA documents, project management 
and financing plans, risk assessments, scopes of work, budgets, 
schedules, and the like by forwarding those documents to the 
appropriate persons in both agencies to allow for timely responses. 
FTA and [Sponsor] will make every reasonable effort to complete 
their reviews of study deliverables, technical reports, and the 
like, within thirty days of receiving the material for review.

4.10 Private Sector Participation

    FTA recognizes that [Sponsor] may choose to seek private sector 
participation in the engineering, design, construction, operation, 
maintenance, or financing of the candidate project. FTA will make 
every effort to facilitate [Sponsor's] public-private partnerships 
in the development of the candidate project.

4.11 Pre-Award Authority

    Upon the execution of this Agreement and FTA's approval of the 
candidate project for entry into Preliminary Engineering [Sponsor] 
will have pre-award authority for all reasonable and allocable costs 
of Preliminary Engineering for the candidate project. [Sponsor] 
acknowledges, however, that the pre-award authority to acquire real 
property that accompanies FTA's issuance of a Record of Decision is 
not an administrative, contractual, implied, or moral commitment of 
any kind towards the candidate project, nor is it any commitment to 
reimburse

[[Page 43376]]

[Sponsor] for any associated costs or to participate in any project 
on the acquired property. [Sponsor] will use its pre-award authority 
with discretion and with full knowledge of the risks in doing so.

4.12 Contacts

    FTA and [Sponsor] will each designate a contact person who has 
the authority to speak for and represent that person during 
Preliminary Engineering on the candidate project. The contact 
persons will be available, upon adequate notice, to attend and 
participate in coordination meetings or otherwise provide timely 
input into the preparation and review of all documents necessary to 
the development of the candidate project.

5.0 Milestones

    [Sponsor] intends to accomplish Preliminary Engineering as 
expeditiously as possible. FTA will measure [Sponsor's] progress in 
Preliminary Engineering against the following milestones:
     [Date]: FTA validation of [Sponsor's] travel demand and 
ridership forecast methodologies
     [Date]: Expected publication of a draft EIS or EA
     [Date]: Expected publication of a final EIS or EA
     [Date]: Expected issuance of a ROD or FONSI
     [Date]: FTA approval of [Sponsor's] Project Management 
Plan
     [Date]: PMO's completion of risk assessment
     [Date]: [Sponsor's] adoption of a definitive scope of 
work for the candidate project that will be the basis of [Sponsor's] 
request for entry into Final Design
     [Date]: [Sponsor's] adoption of a Baseline Cost 
Estimate for the candidate project, in Year of Expenditure dollars, 
which will be the basis for [Sponsor's] request for entry into Final 
Design
     [Date]: [Sponsor's] adoption of a Financing Plan for 
the candidate project that will be the basis of [Sponsor's] request 
for entry into Final Design
     [Date]: [State and local agency] commitments to help 
finance the candidate project
     [Date]: [Sponsor's] request for entry into Final Design

6.0 Rescission or Suspension of Preliminary Engineering

    [Sponsor] acknowledges that, in its discretion, FTA may rescind 
or suspend the candidate project's status in Preliminary Engineering 
if [Sponsor] fails to make adequate progress towards a request for 
entry into Final Design; there is any significant change to the 
scope or cost estimate for the candidate project; or the candidate 
project is not rated or rated ``not recommended'' in FTA's Annual 
Report on New Starts for two consecutive years.

7.0 Modifications

    Modifications to this Agreement may be proposed at any time 
during Preliminary Engineering on the candidate project and will 
become effective upon approval by both FTA and [Sponsor].

8.0 Attachments

    Each and every Attachment to this Agreement is incorporated by 
reference and made a part of this Agreement.
Dated:-----------------------------------------------------------------
-----------------------------------------------------------------------
[Name]
Regional Administrator [Title]
Federal Transit Administration
Dated:-----------------------------------------------------------------
[Name]
[Title]
[Sponsor]

Attachment 8.1 Scope

Attachment 8.2 Cost Estimate

Attachment 8.3 Budget

Attachment 8.4 Draft Project Management Plan

Appendix B to Part 611--Project Evaluation Framework 
[GRAPHIC] [TIFF OMITTED] TP03AU07.040


[[Page 43377]]



Appendix C to Part 611: Section 5309 Capital Investment Program 
Categories

----------------------------------------------------------------------------------------------------------------
                                              New starts              Small starts          Very small starts
----------------------------------------------------------------------------------------------------------------
Project Cost.........................  >=$250 million.........  <$250 million..........  <$50 million ($3
                                                                                          million/mile excluding
                                                                                          vehicles).
New Starts Funding Amount............  Or >=$75 million.......  And <$75 million.......  <$40 million.
Eligible Project Types...............  New or expanded fixed    New or expanded fixed    Small as Small Starts.
                                        guideway.                guideway or arterial
                                                                 bus with:
                                                                --Transit stations.
                                                                --Signal priority/pre-
                                                                 emption.
                                                                --Level boarding or low
                                                                 floor vehicles.
                                                                --Branded service.
                                                                --10 min peak/15 min
                                                                 off-peak service for
                                                                 at least 14 hours/day.
Minimum Benefiting Riders............  None...................  None...................  3,000 per average
                                                                                          weekday.
Project Development Steps............  2-Steps................  1-Step.................  1-Step
                                       --Preliminary            --Project development.   --Project development.
                                        Engineering.
                                       --Final Design.
Funding Mechanism....................  FFGA...................  PCGA...................  PCGA.
----------------------------------------------------------------------------------------------------------------


    Issued in Washington, DC this 19th day of July, 2007.
James S. Simpson,
Administrator, Federal Transit Administration.

 [FR Doc. E7-14285 Filed 8-2-07; 8:45 am]

BILLING CODE 4910-57-P