- First, in calculating cost effectiveness, the rule allows transit agencies to ignore a wide range of alternatives to proposed projects.
- Second, the proposed rule not only fails to insure that proposed transit projects will lead to improvements in mobility and congestion reduction, it potentially rewards projects that do the opposite.
- Third, the rule illegally adds new criteria for justifying projects that are not authorized by law.
Based on these problems, the FTA should either stay with the existing rules or rewrite them following the guidelines presented in the Cato Institute’s July 15, 2010 comments on the Advance Notice of Proposed Rulemaking.
1. Cost Effectiveness of a Full Range of Alternatives
The law that the proposed rules are designed to implement requires transit agencies to do an alternatives analysis that develops “a wide range of public transportation alternatives” and “sufficient information to enable the Secretary to make the findings of project justification” (49 USC §5309(a)(1)(A) and (B)). The law adds that the Secretary can approve grants for a project “justified based on a comprehensive review of its mobility improvements, environmental benefits, cost effectiveness, operating efficiencies, economic development effects, and public transportation supportive land use policies and future patterns” (49 USC §5309(d)(2)(B)).
In other words, the law ties the “cost effectiveness” calculation and other project justification criteria to the development of “a wide range of public transportation alternatives.” As my July 15, 2010 comments on the Advance Notice of Proposed Rulemaking observed, “for a cost‐effectiveness analysis to work, it is vital that any proposed project be compared with a full range of alternative projects that can potentially produce similar benefits.” Yet, the comments noted, the “FTA’s existing cost‐effectiveness process for New Starts is inadequate because it fails to recognize the need to consider a full range of alternatives.”
Unfortunately, the proposed rules fail to correct this defect. The proposed rules superficially follow the process specified by law, repeating the definition of an alternatives analysis in §611.105 and describing the project justification criteria in §611.203 (New Starts) and §611.303 (Small Starts). In fact, however, Appendix A illegally separates the Alternatives Analysis from the Cost Effectiveness criteria.
Appendix A defines the Cost Effectiveness calculation as “(1) The annualized cost per trip on the project, where cost includes changes in capital, operating, and maintenance costs compared to: (i) The existing transit system in the current year, or (ii) At the discretion of the project sponsor, both the existing transit system in the current year and the no‐build transit system in the horizon year.” In other words, although transit agencies must consider a “wide range” of alternatives, when it comes to calculating cost effectiveness, the only alternative that need be considered is “the existing transit system in the current year.”
As I stated in my previous comments, a benefit‐cost analysis offers a clear threshold for making decisions: any project whose benefits are less than costs should be rejected. A cost‐effectiveness analysis offers no similar threshold. Thus, it only works when comparing a wide range of alternatives. Only the alternative with the highest cost effectiveness should be selected. By not requiring that the cost‐effective be done in the context of a wide range of alternatives, the proposed rules fail to both meet the requirements of the law and to insure an adequate analysis of proposed projects.
2. Mobility Improvements
The law states that grants must be justified base on “mobility improvements, environmental benefits, cost effectiveness, operating efficiencies, economic development effects, and public transportation supportive land use policies and future patterns” (49 USC §5309(d)(2)(B)). During project evaluation, the law adds, projects must be considered based on “factors such as (i) congestion relief; (ii) improved mobility; (iii) air pollution; (iv) noise pollution; (v) energy consumption; and (vi) all associated ancillary and mitigation costs necessary” (§5309(d)(3)(D)). Based on the listing of these factors, congestion reduction and mobility improvements are two of the most important criteria in justifying and evaluating projects.
The existing rules appropriately recognize these priorities. The rules require that cost‐effectiveness be calculated in terms of cost per “transportation system user benefits” (§611.11(b)(2)). These benefits, the rules say, are measured in “hours of perceived travel time … that accrue to all travelers,” not just transit riders (§611.5). The existing rules also specifically require transit agencies to evaluate the effect of projects on “mobility improvements for the general population … including congestion relief” (§611.11(b)(1)(i)).
In contrast, the proposed rules require that cost effectiveness be measured in terms of “the annualized cost per trip on the project” relative to the existing transit system (Appendix A, A(I)(d)(1)). The term “transportation system user benefit” is no longer in the rules, and references to congestion relief are also deleted. In other words, the focus is on gaining new transit riders no matter what the cost to non‐transit users.
Transit projects can potentially capture riders by making traffic congestion worse, for example by replacing general purpose lanes with transit‐only lanes or by operating frequent train service across important grade crossings. Such projects would be penalized by the existing rules, but the proposed rules would actually score them more highly if the increase in congestion, rather than a genuine improvement in transit service, led to increased transit ridership. Since such projects would actually represent a degradation, rather than an improvement, in mobility, this is counter to the first factor listed in 49 USC §5309(d)(2)(B) and the first two factors listed in §5309(d)(3)(D).
3. Other Project Justification Factors
As noted above, the law authorizes the Secretary to award grants based on six factors: “mobility improvements, environmental benefits, cost effectiveness, operating efficiencies, economic development effects, and public transportation supportive land use policies and future patterns” (49 USC §5309(d)(2)(B)). To these six, the proposed rules add, “Other factors. These may include additional factors relevant to local and national priorities and relevant to the success of the project, and are defined further in Appendix A” (§611.203(b)(7) for New Starts; similar language in §611.303(b)(4) for Small Starts).
Appendix A specifies that, “Others factor [sic] may include, but are not limited to: