Major Capital Investment Projects, 1991-2037 [2012-31540]

Agencies

• Federal Transit Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 78, Number 6 (Wednesday, January 9, 2013)]
[Rules and Regulations]
[Pages 1991-2037]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31540]



[[Page 1991]]

Vol. 78

Wednesday,

No. 6

January 9, 2013

Part III





Department of Transportation





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Federal Transit Administration





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49 CFR Part 611





Major Capital Investment Projects; Notice of Availability of Proposed 
New Starts and Small Starts Policy Guidance; Final Rule and Proposed 
Rule

Federal Register / Vol. 78 , No. 6 / Wednesday, January 9, 2013 / 
Rules and Regulations

[[Page 1992]]


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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 611

[Docket No. FTA-2010-0009]
RIN 2132-AB02


Major Capital Investment Projects

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Final rule.

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SUMMARY: This final rule sets a new regulatory framework for FTA's 
evaluation and rating of major transit capital investments seeking 
funding under the discretionary ``New Starts'' and ``Small Starts'' 
programs. This final rule is being published concurrently with a Notice 
of Availability of revised proposed policy guidance that provides 
additional detail on the new measures and proposed methods for 
calculating the project justification and local financial commitment 
criteria specified in statute and this final rule. FTA seeks public 
comment on the revised proposed policy guidance referenced in the 
Notice of Availability published today. Because of the recent enactment 
of the Moving Ahead for Progress in the 21st Century Act (MAP-21), 
subsequent interim guidance and rulemaking will be forthcoming to 
address provisions not covered in this final rule.

DATES: This rule will become effective on April 9, 2013.

FOR FURTHER INFORMATION CONTACT: Elizabeth Day, Office of Planning and 
Environment, (202) 366-5159 or Elizabeth.Day@dot.gov; for questions of 
a legal nature, Scott Biehl, Office of Chief Counsel, (202) 366-0826 or 
Scott.Biehl@dot.gov. FTA is located at 1200 New Jersey Avenue SE., 
Washington, DC 20590. Office hours are from 9:00 a.m. to 5:30 p.m., 
EST, Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    This final rule is being issued to amend the regulation (Part 611 
of Title 49 of the Code of Federal Regulations) under which the Federal 
Transit Administration (FTA) evaluates and rates major transit capital 
investments seeking funding under the discretionary ``New Starts'' and 
``Small Starts'' programs authorized by Section 5309 of Title 49, U.S. 
Code. The New Starts and Small Starts programs are FTA's primary 
capital funding programs for new or extended fixed guideway and 
corridor-based bus systems across the country, including rapid rail, 
light rail, commuter rail, bus rapid transit, and ferries. This final 
rule was the subject of an Advance Notice of Proposed Rulemaking 
(ANPRM) published on June 3, 2010 (75 FR 31383), which posed a series 
of questions about the current regulation and three of the criteria 
used to assess project justification, in particular. Following the 
ANPRM, FTA published a Notice of Proposed Rulemaking (NPRM) on January 
25, 2012 (77 FR 3848), that proposed changes to the regulatory text. 
FTA also published on January 25, 2012, a Proposed New Starts/Small 
Starts Policy Guidance that provided additional detail on the proposed 
new measures and methods for calculating the project justification and 
local financial commitment criteria specified in statute. On July 8, 
2012, President Obama signed into law the Moving Ahead for Progress in 
the 21st Century Act (MAP-21), which made changes in FTA's New Starts 
and Small Starts programs under Section 5309 of Title 49, United States 
Code. However, because significant portions of the project evaluation 
and rating requirements for major capital investments were not changed 
by MAP-21, FTA is proceeding with this final rule that covers the 
features of the NPRM that are consistent with the new law.
    Accordingly, this final rule puts into place the following 
features:
     The regulatory structure that was proposed in the NPRM
     The New and Small Starts evaluation criteria and rating 
process defined in MAP-21 (including the five of the six evaluation 
criteria which were not changed by MAP-21); and
     The before and after study requirements for New Starts 
projects.
    Subsequent guidance and rulemaking will cover new items included in 
MAP-21 that have not yet been the subject of a rulemaking process. 
These include
     The ``congestion relief'' evaluation criterion;
     The core capacity evaluation and rating process;
     The program of interrelated projects evaluation and rating 
process;
     The pilot program for expedited project delivery;
     The process for an expedited technical capacity review for 
project sponsors that have recently and successfully completed at least 
one new fixed guideway or core capacity project; and
     The revised New Starts and Small Start processes including 
eliminating the requirement that a New Starts or Small Starts project 
be the result of an alternatives analysis and instead relying on 
evaluations performed as part of the Metropolitan Transportation 
Planning process and the environmental review process conducted in 
accordance with the National Environmental Policy Act (NEPA); and
     The reduced number of defined steps in the process when 
FTA must evaluate and rate proposed projects.
    MAP-21 created a step in the process called ``project development'' 
during which a local project sponsor will conclude the review required 
under NEPA, select a locally preferred alternative (LPA), adopt that 
LPA into the fiscally constrained regional long range transportation 
plan and develop sufficient information for FTA to evaluate and rate 
the project. Once ``project development'' is complete, if the project 
meets the criteria for advancement, the project will begin the 
``engineering'' phase. Upon completion of ``engineering'' a project 
will be eligible for a construction funding commitment. While the final 
rule includes the names of the steps in the New and Small Starts 
process as defined in MAP-21, further detail on how those steps will be 
implemented will be the subject of future interim policy guidance and 
rulemaking. An important aspect of this subsequent guidance and 
rulemaking will be better defining the relationship of these changes in 
the New Starts process and the requirements for concluding the NEPA 
process during project development.
    MAP-21 amends 49 U.S.C. Sec.  5309(g)(5) to require the issuance of 
interim policy guidance describing how FTA will implement the 
requirements of MAP-21 on an interim basis. Additionally, Section 
5309(g)(6), as amended by MAP-21, calls for a new regulation. 
Accordingly, as a next step in implementing MAP-21, FTA will issue 
draft interim policy guidance for public comment covering the MAP-21 
changes which are not addressed in this final rule. FTA's new 
rulemaking on these subjects will follow.
    In developing this final rule, FTA has been guided by two broad 
goals, outlined in the NPRM. First, FTA intends, as noted in the NPRM, 
to measure a wider range of benefits transit projects provide. Second, 
FTA desires to do so while establishing measures that support 
streamlining the New Starts and Small Starts process. In balancing 
these goals, FTA is seeking to continue a system in which well-
justified projects are funded. At the same time, FTA seeks to ensure 
that it does not perpetuate a system in which the measures used to 
determine the project justification or local financial commitment are 
so

[[Page 1993]]

complex that they unnecessarily burden projects sponsors and FTA, or 
are difficult to understand.
    First, to streamline the process, FTA has adopted measures of both 
mobility benefits and cost-effectiveness that are simplified yet 
reliably objective metrics. Second, FTA is expanding the ability of 
projects to pre-qualify based on the characteristics of the project or 
the corridor in which it is located. As with the current ``Very Small 
Starts'' category, FTA will determine, at some point in the future, 
what characteristics would be sufficient, without further analysis, to 
warrant a satisfactory rating of ``medium'' on one or more of the 
evaluation criteria. Third, FTA is adopting ways the data submitted by 
project sponsors and the evaluation methods employed by FTA could be 
simplified. Fourth, FTA is greatly simplifying the process for 
developing a point of comparison for incremental measures (i.e., 
measures that are based on a comparison between two different 
scenarios, such as a comparison of vehicle miles of travel (VMT) in the 
corridor without the project and VMT in the corridor with the project). 
Fifth, FTA is clarifying the local financial commitment criteria to 
address more clearly the strong interaction between capital and 
operating funding plans. To address more explicitly the broad range of 
benefits that transit projects provide, FTA has adopted several ways 
such benefits will be incorporated into the evaluation process. FTA is 
including more meaningful measures of the environmental benefits and 
additional measures on economic development effects of projects, as 
well as providing for equal weights for all of the project 
justification criteria. While FTA is streamlining the New Starts and 
Small Starts processes, nothing in this rule is intended to subvert or 
diminish the quality and rigor of the existing NEPA process.

II. What This Final Rule Contains

    FTA also is publishing a notice in the Federal Register today that 
announces the availability of revised proposed policy guidance related 
to the provisions in this final rule for public review and comment. The 
regulation acts as a framework for the project evaluation process, and 
the policy guidance provides non-binding interpretations for 
implementing the regulations. Under both prior law and MAP-21, FTA is 
required to issue such policy guidance for public comment at least 
every two years and whenever major changes in policy are proposed. FTA 
believes that this approach allows FTA to make improvements in the 
measures used for the criteria as new techniques become available. FTA 
published proposed policy guidance along with the NPRM, and as promised 
in the NPRM, has revised that proposed policy guidance in response to 
comments received. In the revised proposed policy guidance made 
available today, FTA is providing more specificity on the measures and 
analytical techniques needed to calculate those measures. FTA 
encourages comment on the revised proposed policy guidance. Prior to 
the effective date of this final rule, FTA will publish final policy 
guidance on these issues. As noted above, at a later date, FTA will 
publish interim policy guidance on the items in MAP-21 under the major 
capital investment program that are not addressed in this rulemaking.
    The Executive Summary that follows describes the purpose of this 
rule, discusses its major provisions, and summarizes its benefits and 
costs. The section that follows the Executive Summary includes a 
detailed summary of the comments received on the NPRM and FTA's 
responses to those comments. FTA received approximately 1,000 
individual comments from over 103 respondents to the NPRM. FTA chose to 
categorize the comments by topical area, group them, and summarize them 
to assure all relevant comments received consideration in the 
development of this final rule and accompanying revised proposed policy 
guidance. The responses to comments help elucidate the provisions 
adopted by this final rule and provide additional context to the 
proposals in the accompanying revised proposed policy guidance. The 
provisions adopted by this final rule are more specifically detailed in 
the ``Section-by-Section'' analysis that directly follows the comment 
summaries and responses.
    The Section-by-Section analysis is intended to do two things: (1) 
Explain the changes to the regulatory text found at the end of this 
final rule; and (2) explain what is in the related revised proposed 
policy guidance being published for comment today. FTA must strictly 
comply with the authorization statute, 49 U.S.C. 5309, in setting the 
regulatory process the agency will use to evaluate, rate, and approve 
funding for New Starts and Small Starts projects, and the criteria the 
agency will use to evaluate those projects. FTA is taking the occasion 
of this rulemaking, however, to introduce a number of administrative 
steps consistent with MAP-21, that will help to streamline the New 
Starts and Small Starts process.
    Following the Section-by-Section analysis is the ``Regulatory 
Evaluation'' section of this final rule, which includes descriptions of 
the requirements that apply to the rulemaking process and information 
on how this rulemaking effort complies with those requirements.
    The final rule concludes with the actual regulatory text FTA is 
adopting for its New Starts and Small Starts programs. This is the 
language that will govern the way New Starts and Small Starts projects 
are evaluated, rated, and funded. The language is binding, which means 
that FTA's future policy guidance documents must be consistent with the 
regulatory text. As noted earlier, while the regulatory text being 
adopted today includes the revised regulatory structure proposed in the 
NPRM and additional features consistent with the changes to the program 
made by MAP-21, further rulemaking will be needed to address the 
aspects of the major capital investment program in MAP-21 that were not 
included in the NPRM. Such changes require further public comment 
before being made final and thus will be the subject of a subsequent 
interim policy guidance and rulemaking.

III. Executive Summary

A. Purpose of Rule

    The New Starts and Small Starts programs, established in Section 
5309 of Title 49, U.S. Code, as amended by MAP-21, are FTA's primary 
capital funding programs for new or extended transit systems across the 
country, including rapid rail, light rail, commuter rail, bus rapid 
transit, and ferries. Under this discretionary program, proposed New 
and Small Starts projects are evaluated and rated as they seek FTA 
approval for a Federal funding commitment to finance project 
construction. Overall ratings for proposed New Starts and Small Starts 
projects are based on summary ratings for two categories of criteria: 
project justification and local financial commitment. Within these two 
categories, projects are evaluated and rated against several criteria 
specified in law. A summary of the current New Starts and Small Starts 
evaluation and rating process can be found at https://www.fta.dot.gov/documents/FY13_Evaluation_Process.pdf.
    It is important to distinguish the purpose of this rule from other 
requirements which must be met as a prerequisite for funding of Major 
Capital Investments. This rule covers the process by which FTA rates 
and evaluates candidates for grants under the Major Capital Investments 
program.

[[Page 1994]]

Thus, it focuses on the criteria which FTA will use for this purpose. 
Candidate projects must still meet the other requirements, in 
particular, those laid out to address the National Environmental Policy 
Act (NEPA). Because of the changes made by MAP-21, these requirements 
will have to be met first, in particular for New Starts projects to 
advance into the newly defined ``engineering'' stage. Only once these 
requirements are met will projects be subject to evaluation and rating 
against the criteria laid out in this final rule. For example, through 
the NEPA process (including the use of linking planning and NEPA as 
provided for in 23 CFR 450.318), all environmental impacts will be 
evaluated, reasonable alternatives will be examined, and measures 
necessary to mitigate any adverse environmental impacts will be 
developed and included in the scope of the project. Only once these 
environmental effects are analyzed through the NEPA process, will the 
``environmental benefits'' be evaluated using the measures established 
under this rule and the New Starts/Small Starts evaluation will focus 
on a more limited range of environmental criteria then the NEPA 
analysis.
    This final rule is issued pursuant to the requirements first 
outlined in SAFETEA-LU and continued in MAP-21 that the Secretary 
promulgate regulations to implement the Small Starts program. The final 
rule and accompanying revised proposed policy guidance change FTA's 
implementation of the major capital investment program, primarily by 
giving the project justification criteria specified in law 
``comparable, but not necessarily equal weights'' as required by 
Sections 5309 (g)(2)((B)(ii) and (h)(6), improving the measures FTA 
uses for each of the evaluation criteria specified in law, and 
streamlining and simplifying the means by which project sponsors 
develop the data needed by FTA.
    In addition, this rule implements an initiative in the Department 
of Transportation's (DOT) Plan for Implementation of Executive Order 
13563: Retrospective Review and Analysis of Existing Rules (https://regs.dot.gov/docs/RRR-Planfinal-8-20.pdf). Executive Order 13563 calls 
on agencies to identify rules that may be ``outmoded, ineffective, 
insufficient, or excessively burdensome, and to modify, streamline, 
expand, or repeal them[hellip]'' This rule streamlines and simplifies 
the various means by which project sponsors may obtain the information 
needed by FTA for its evaluation and rating of projects. For example, 
FTA is allowing project sponsors to use a simplified FTA-developed 
national model, once available, to estimate ridership rather than 
standard local travel forecasting models; to use a series of standard 
factors in a simple spreadsheet to calculate vehicle miles traveled 
(VMT) and environmental benefits; to no longer require the development 
of a baseline alternative for calculation of incremental measures; and 
to expand the use of warrants whereby a project may be able to 
automatically qualify for a rating if it meets parameters established 
by FTA. By doing so, this final rule achieves two broad goals--
measuring a wider range of benefits that transit projects provide while 
at the same time establishing measures that support streamlining of the 
New Starts and Small Starts process. In balancing these goals, FTA is 
seeking to continue a system in which well-justified projects are 
funded. At the same time, FTA seeks to ensure that it does not 
perpetuate a system in which the measures used are so complex that they 
are difficult to understand or unnecessarily burdensome to project 
sponsors.

B. Major Provisions in This Final Rule

    This section describes the most significant changes being adopted 
in this final rule. These adopted changes, some of which are altered in 
this final rule from the proposals made in the NPRM, are the result of 
FTA's review of the comments received on the ANPRM and NPRM and further 
evaluation of its proposals based on those comments.
1. Cost-effectiveness
    Cost-effectiveness is currently evaluated and rated based on the 
incremental annualized capital and operating cost of the project 
divided by the incremental hour of travel time savings (i.e., the cost 
of the project divided by how much time it would save travelers). 
Changes in cost and travel time are estimated by comparing forecast 
data for the proposed project with forecast data for a baseline 
alternative (typically a lower-cost bus alternative referred to as the 
Transportation System Management alternative). FTA's thresholds for 
assigning ratings from ``low'' to ``high'' are based on U.S. DOT 
guidance on the value of time. To establish these thresholds, benefits 
other than travel time savings are not estimated directly, but are 
assumed to be equal to the value of the travel time savings. MAP-21 
defined cost-effectiveness as ``cost per rider.''
    With this final rule, FTA is adopting the significantly streamlined 
and simpler approach for measuring cost-effectiveness as proposed in 
the NPRM and consistent with the change in law in MAP-21. The measure 
of cost-effectiveness for New Starts project will now be annualized 
capital cost and operating cost per trip taken on the project, with 
some allowances for project ``enrichments'' to be excluded from the 
cost side of the equation. For Small Starts projects, the measure of 
cost-effectiveness will be annualized Federal share per trip taken on 
the project in accordance with the MAP-21 requirement that FTA base 
Small Starts ratings on the ``evaluation of the benefits of the project 
as compared to the Federal assistance to be provided.''
    FTA will allow the cost of ``enrichments'' (referred to in the NPRM 
as ``betterments'') to be excluded from the cost side of the cost-
effectiveness calculation for New Starts projects. Enrichments are 
those items above and beyond the items needed to deliver the mobility 
benefits of the project. Enrichments may include, for example, features 
needed to obtain LEED certification for the transit facilities, 
additional features to provide extra pedestrian and bicycle access to 
surrounding development, aesthetically-oriented design features, or 
joint development expenses. This will remove a disincentive to include 
such features in the design of projects. FTA received numerous helpful 
comments on the kinds of enrichments that should be excluded from the 
calculation and as a result was able to adopt a simple approach to 
identify how to define and assign a value to these features.
    FTA is adopting the proposal in the NPRM to develop pre-
qualification approaches that would allow for a project to 
automatically receive a satisfactory rating on a given criterion based 
on its characteristics or the characteristics of the project corridor. 
In Section 5309(g)(3), the use of such warrants is required for 
projects where: (1) The Section 5309 share either does not exceed 
$100,000,000 or is 50 percent or less of the project cost; and (2) the 
applicant seeks the use of warrants and certifies that the existing 
public transportation system is in a state of good repair. The text of 
the final rule will allow use of warrants for all projects, but the 
final warrants to be specified in subsequent policy guidance will be 
mindful of this statutory structure. The approach for pre-qualification 
would be developed by analyzing how certain projects or corridor 
characteristics would contribute to producing a satisfactory rating on 
the criterion in question. In this way, a project whose characteristics 
meet or exceed a certain threshold value

[[Page 1995]]

could be automatically rated without further project-specific analysis. 
Proposed pre-qualification values (``warrants'') would be proposed in 
future policy guidance with a period for public comment before being 
made final. The revised proposed policy guidance published along with 
this final rule does not propose any pre-qualification values at this 
time. However, FTA is interested in receiving suggestions about 
specific factors and values which could be adopted as pre-qualification 
thresholds.
2. Environmental Benefits
    To evaluate and rate environmental benefits, FTA currently uses the 
EPA air quality designation for the metropolitan area in which a 
proposed project is located. Thus, FTA assigns projects located in 
nonattainment areas (areas that EPA has designated as having poor air 
quality) with a ``high'' rating; all other projects receive a 
``medium'' rating.
    FTA is adopting the proposal in the NPRM to expand the measure for 
environmental benefits to include direct and indirect benefits to the 
natural and human environment. These benefits will be based on 
estimated changes in highway and transit VMT resulting from an 
estimated change in mode from highway to transit due to the 
implementation of the project. FTA will evaluate changes in air quality 
based on changes in total emissions of EPA criteria pollutants, changes 
in energy use, changes in total greenhouse gas emissions, and safety 
improvements based on reductions in the amount of accidents, 
fatalities, and property damage. Changes in public health, such as 
benefits associated with long-term activity levels that would result 
from changes in development patterns, would be included once better 
methods for calculating this information are developed.
3. Economic Development
    Currently, FTA evaluates and rates the economic development effects 
of major transit investments on the basis of the transit-supportive 
plans and policies in place and the demonstrated performance and impact 
of those policies. FTA adopts the proposal in the NPRM to continue to 
use this measure and to add a consideration of whether policies 
maintaining or increasing affordable housing are in place. The number 
of domestic jobs related to design, construction, and operation of the 
project will also be reported but not considered in the rating, as 
proposed in the NPRM.
    FTA is also adopting the proposal in the NPRM to allow project 
sponsors, at their option, to also estimate indirect changes in VMT 
resulting from changes in development patterns that are anticipated to 
occur with implementation of the proposed project. The resulting 
environmental benefits from these changes in VMT would be calculated, 
monetized, and for New Starts projects compared to the annualized 
capital and operating cost of the project and for Small Starts projects 
compared to the Federal share. The resulting estimate would be 
evaluated under the economic development criterion. For New Starts 
projects, the final rule includes a provision that would subtract the 
costs of ``enrichments'' from the costs used in this calculation, just 
as in the measures of cost-effectiveness and environmental benefits. It 
is anticipated that the project sponsor at its option would undertake 
an analysis of the economic conditions in the project corridor, the 
mechanisms by which the project would improve those conditions, the 
availability of land in station areas for development and 
redevelopment, and a pro forma assessment of the feasibility of 
specific development scenarios to calculate the VMT changes.
4. Streamlining
    Aside from changes that will improve FTA's measures for evaluating 
projects, FTA is adopting the changes proposed in the NPRM that are 
intended to streamline the process.
    First, FTA will allow project sponsors to forgo a detailed analysis 
of benefits that are unnecessary to justify a project. For example, if 
a project rates ``medium'' overall based on benefit calculations 
developed using existing conditions in the project corridor today, the 
project sponsor would not be required to do the analysis necessary to 
forecast benefits out to some future year (i.e., a ``horizon'' year). 
In response to comments received on the NPRM, if a sponsor chooses to 
prepare future year forecasts, FTA will allow the project sponsor to 
use either a 10-year horizon, as proposed in the NPRM, or a 20-year 
horizon (which is consistent with metropolitan transportation planning 
requirements). Similarly, FTA is developing methods that can be used to 
estimate benefits using simple approaches. Only when a project sponsor 
feels it is necessary to further identify benefits beyond a simplified 
method would more elaborate analysis be undertaken, and only at the 
project sponsor's option.

C. Benefits and Costs

    FTA believes that the benefits of this rule will far exceed its 
costs. FTA estimates that implementation of this final rule will have a 
one-time cost of $306,200 due to the need for projects sponsors and 
contractors to become familiar with the changes made by this final rule 
and another one-time cost of $306,200 for the development of the 
additional information required by this rule.
    FTA estimates an annual savings of $423,750 in reduced paperwork 
burden arising from project sponsors being given the option of 
replacing the costly and time consuming application of local travel 
demand models with a simplified national model, the elimination of the 
requirement that project sponsors develop and analyze a baseline 
alternative, and the expanded use of automatic, pre-qualification 
(``warrants'') for certain projects. FTA believes that this is a 
conservative estimate. FTA believes some of the streamlining changes 
made in this final rule could result in much larger savings, including 
savings that may result from projects being able to be constructed 
sooner because of the reduced time it may take them to comply with 
Federal requirements.
    FTA also estimates that because of the changes in evaluation 
criteria incorporated in this final rule, implementation of the final 
rule may result in the selection for a recommended commitment of Major 
Capital Investment program funding of one different New Starts or Small 
Starts project than under the current final rule each fiscal year, with 
an average Major Capital Investments program contribution of 
$250,000,000. However, because of the large number of factors which go 
into the selection of recommended projects beyond those being revised 
by this final rule (such as project readiness), there is a considerable 
degree of uncertainty to FTA's estimate of the number of different 
projects which may be recommended as a result of the changes made by 
this final rule. To put this figure in context, the Major Capital 
Investments program provides a total of just under $2,000,000,000 per 
year for New Starts and Small Starts projects.
    The following table summarizes the costs, benefits, and changes in 
Federal transfers (Major Capital Investments grants) of this final rule 
over a ten year period, discounted at three and seven percent:

[[Page 1996]]



  Total Benefits and Costs Summary for Major Capital Investments Final
                       Rule Over Ten Years, 2012$
------------------------------------------------------------------------
                                          3% Discount      7% Discount
                                              rate             rate
------------------------------------------------------------------------
Total Monetized Benefits..............          $3.7 M           $3.2 M
Total Cost............................           0.6 M            0.6 M
Total Net Impact (Benefit--Costs).....           3.1 M            2.6 M
Changes in Transfer Payments..........           2.2 B            1.8 B
------------------------------------------------------------------------

IV. Response to Comments

    The following is a summary of the comments received in response to 
the proposals in the NPRM, FTA's response to the comments received, and 
how FTA has responded in this final rule to the issues raised. FTA 
received approximately 103 comment submissions from a wide-range of 
organizations and individuals that provided approximately 1,000 
individual comments. Comments were received from: operators of public 
transportation; State departments of transportation; other departments 
of State government; metropolitan planning organizations (MPO) and 
regional councils of governments; local governments or entities; trade 
organizations; national non-profit organizations; lobbyists; research 
institutions; universities; local or regional community organizations; 
private citizens; and businesses.
    Please note that FTA attempted to respond to all relevant comments 
received on the NPRM. In the section below, FTA summarizes and responds 
to a variety of general comments, comments on the project justification 
criteria, comments on the local financial commitment criteria, comments 
on the process for developing New Starts and Small Starts projects, and 
comments on eligibility for funding under these programs.

A. General Comments

1. General Support or Opposition
    Comment: FTA received a total of 53 comments providing either 
general support or opposition to the NPRM. Of these comments, 51 
expressed strong support for the proposed rule, citing the streamlined 
analytical approaches, use of a multiple measure approach, elimination 
of the baseline alternative as the point of comparison, use of a 
simplified measure for cost-effectiveness, improvements in the measures 
of environmental benefits, enhanced consideration of affordable 
housing, consideration of the mobility of transportation disadvantaged 
persons, the proposed approach for economic development, and the 
ability for projects to pre-qualify under certain conditions.
    Two comments were generally opposed to the proposals in the NPRM. 
One of these comments objected to assessing projects on other than 
mobility impacts, and the other comment suggested use of a qualitative 
``make the case'' approach focused primarily on how a project supports 
local goals and objectives.
    Response: FTA appreciates the strong support for the ideas in the 
NPRM and thus is adopting much of what was proposed. FTA believes there 
are multiple reasons to make public transportation investments, and 
that they should be taken into account when evaluating and rating 
projects, not just the mobility benefits provided by the project. The 
statute requires FTA to evaluate six project justification criteria and 
to weight them comparably, but not necessarily equally. As this is a 
discretionary program in which projects across the United States 
compete with one another for a limited amount of federal financial 
assistance, FTA must explicitly consider more than just local goals and 
must be able to address project merit based on how well projects do 
against quantitative criteria.
2. Horizon Year
    Comment: FTA received 41 comments on the horizon year to be used 
when a project sponsor chooses to prepare an optional future year 
forecast. In the NPRM, FTA proposed that a project sponsor would be 
required to provide forecasts of ridership on the proposed project 
using current year inputs. If the project sponsor was comfortable with 
how the project rated under the evaluation criteria based on the 
current year data, no further analysis would be required. FTA proposed 
that, at a project sponsor's option, it could choose to make a future 
year forecast, but that it would be based on a 10 year time horizon. 
Although many comments supported the concept of having a future year 
forecast be optional, only one agreed entirely with FTA's proposal to 
use a horizon year 10 years in the future. Another agreed with the 10-
year time horizon, but suggested that funding be provided to project 
sponsors to do the analysis because it is not consistent with the 
normal time frame used in long range planning. Two comments asked for 
further clarification on the issue, and the remaining comments 
suggested that FTA retain its current practice of using a 20-year time 
horizon. These comments suggested that continuing to use a 20-year time 
horizon would be consistent with the requirements of the metropolitan 
planning process, which requires a 20-year fiscally constrained long-
range transportation plan, and with the NEPA process. Comments 
suggested that it would be burdensome to have to do a 10-year forecast 
given that most MPO's forecast demographic data and develop 
transportation networks for a 20-year time horizon.
    Response: FTA is not requiring project sponsors to prepare future 
year forecasts but is rather making them optional. FTA agrees that 
there is merit to using a 20-year time horizon for consistency with 
long-range planning requirements in the metropolitan transportation 
planning process. Nonetheless, FTA believes there is also merit in 
using a 10-year time horizon given that it allows for use of a 
simplified model to estimate trips on the project and a simpler point 
of comparison for estimating incremental measures. Additionally, FTA 
notes there is less uncertainty in 10-year forecasts than in 20-year 
forecasts and that 10-year forecasts are used for conformity purposes 
in non-attainment areas. Accordingly, FTA is adopting an approach that 
will require all project sponsors to prepare a current year forecast, 
and will make preparation of future year forecasts optional. FTA 
believes that current year data is a good basis for the evaluation of 
project merits in the opening year. Project sponsors may choose to 
prepare future year forecasts using either a 10-year or a 20-year time 
horizon. FTA cannot provide additional funding for sponsors that choose 
the 10-year time horizon to do additional analysis that would be 
needed. Also, FTA notes that project reviews pursuant to NEPA do not 
necessarily require any particular time horizon, but rather must be 
structured to evaluate impacts that are reasonably foreseeable.

[[Page 1997]]

3. Basis for Comparison
    Comment: FTA received a total of 32 comments on the point of 
comparison to be used in calculating incremental measures. Of these 
comments, 29 supported FTA's proposal to use a no-build alternative 
while three supported continued use of the ``baseline alternative'' 
required under the current regulation (defined as the best that can be 
done in the absence of a major investment, typically the 
``Transportation System Management (TSM) alternative''. Those 
supporting use of the no-build alternative cited the burden involved in 
developing a baseline alternative and the fact that it is often an 
artificial alternative not under active consideration locally for 
implementation. Those in support of continued use of the baseline or 
TSM alternative as the point of comparison noted the importance of 
isolating the effects of the proposed investment and the need for a 
level playing field between differing systems.
    Response: FTA agrees that although there is some technical merit in 
the use of the baseline or TSM alternative for isolating the effect of 
the major investment versus less costly investments, the burden of 
developing the baseline alternative is significant as it requires an 
iterative process. FTA has found that it can take as much as a year to 
develop an adequate baseline alternative due to the difficulty in FTA 
and the project sponsor reaching agreement on what constitutes ``the 
best that can be done without a major investment'' since that is often 
a matter of judgment. FTA believes that consideration of lower cost 
alternatives should remain an integral part of the ongoing metropolitan 
planning and NEPA processes that occur prior to and during the project 
development phase. Once a locally preferred alternative has been chosen 
through completion of the metropolitan planning and NEPA processes, FTA 
does not believe it is necessary to continue examining other 
alternatives, including a baseline or TSM, after entering the 
engineering phase of the New Starts and Small Starts program. In 
addition, MAP-21 explicitly calls for use of the ``no-action'' 
alternative as the point of comparison for Small Starts projects. 
Accordingly, FTA is adopting use of a no-build alternative as the point 
of comparison for incremental measures.
    Comment: Of the 29 comments supporting use of a no-build 
alternative, 12 commented further that it should be defined based on 
various products of the metropolitan planning process appropriate to 
the horizon year selected. Most supported a no-build alternative that 
includes projects in the Transportation Improvement Program (TIP), 
while others supported a no-build alternative that includes projects in 
the fiscally constrained long-range transportation plan.
    Response: As noted above, FTA will require all project sponsors to 
prepare a current year forecast in which case the no-build alternative 
is simply the existing transportation system. FTA will allow project 
sponsors to choose either a 10-year or a 20-year time horizon if they 
wish to prepare a future year forecast that describes the environment 
to be affected by the proposed project. When a sponsor chooses to 
prepare a future year forecast based on a 10-year horizon, FTA is 
adopting its proposal to define the no-build alternative as the current 
transportation system plus projects included in the TIP in place at the 
time the sponsor seeks entry into the ``engineering'' phase. If 
forecasts are updated later, as required when there is a significant 
change in the project, the point of comparison would include projects 
in the TIP at that time. When a sponsor chooses to prepare a future 
year forecast based on a 20-year horizon, FTA is adopting a definition 
of the no-build alternative that includes all projects included in the 
fiscally constrained long-range transportation plan. Thus, sponsors 
choosing to prepare a forecast using a 20-year horizon should do so 
recognizing that development of the point of comparison (the no-build 
alternative) will require additional work beyond that required if they 
choose to prepare only a current year forecast or a 10-year forecast.
    Regardless of which horizon years are used for purposes of the 
evaluation process under New Starts and Small Starts, FTA still expects 
that during the NEPA process, project sponsors will evaluate all 
reasonably foreseeable impacts of the proposed project and reasonable 
alternatives to the project as appropriate. As has always been the 
case, the horizon involved in evaluating those impacts could 
potentially vary depending on the type of impact and how reasonably 
foreseeable a particular impact type is determined to be.
    Comment: FTA received two comments on how to weight the current and 
horizon year forecasts if a project sponsor chooses to do a horizon 
year forecast. FTA proposed that the current and future forecasts be 
weighted equally. One comment suggested that the current year forecast 
receive a higher weight (75 percent), citing the greater reliability of 
estimates based on known current year inputs of population and 
employment. The other comment suggested that the horizon year receive a 
higher weight (80 percent), noting that these are long term investments 
that should address future growth in population and employment.
    Response: FTA believes that weighting estimates based on current 
year data and future year data equally is a reasonable trade-off 
between the increased reliability of current year estimates and the 
fact that major capital investment projects covered by this rule are 
long-lived investments with benefits that extend well out into the 
future. Under the current regulation, FTA evaluates only a 20-year time 
horizon, favoring investments whose benefits accrue in the longer term 
and giving no additional credit to projects that will accrue 
substantial benefits immediately after implementation. While many 
projects may need to use future year forecasts in order to be fully 
justified, FTA believes that because of the large demand for funds from 
this program, giving additional credit to projects whose benefits occur 
sooner is reasonable. FTA believes equally weighting estimates based on 
current year data with those based on horizon year data to develop a 
rating should appropriately balance the increased reliability that 
comes with using current year data and at the same time give adequate 
consideration to projects in fast growing areas and the long term 
benefits of the project.
4. Weighting of Project Justification Criteria
    Comment: FTA received a total of 22 comments on the use of a 
multiple measure approach. All of these comments supported use of a 
multiple measure approach. A total of eight comments supported FTA's 
proposal to weight each project justification criterion equally. Three 
comments suggested weighting cost-effectiveness more heavily, assigning 
it as much as forty percent of the total weight. Two comments suggested 
allowing project sponsors to set their own weights.
    Response: FTA is adopting its proposal to weight each of the 
project justification criteria equally. The statute requires 
``comparable, but not necessarily equal'' weights. FTA believes each of 
the project justification criteria provides important information about 
project merit and, thus, feels that equal weights are appropriate. 
Although cost-effectiveness is important, it remains only one 
legislatively mandated criterion among several. Thus to give it a 
higher weight would undervalue some of the other significant benefits. 
FTA does not believe a weight of 40 percent would be consistent with 
the

[[Page 1998]]

requirement in the law that the weights of the project justification 
criteria be ``comparable.'' Given that this is a competitive, national 
discretionary grant program, FTA believes that consistent weights must 
be applied to all projects to assure fair evaluations.
5. Pre-Qualification and Establishing Breakpoints
    Comment: FTA received a total of 25 comments about its proposal to 
allow projects to pre-qualify based on characteristics of the project 
or the corridor in which it is located (also called ``warrants''). Of 
these comments, 17 expressed general support for the concept. Many of 
these comments indicated that warrants could be applied to several of 
the criteria, not just to cost-effectiveness. The remaining eight 
comments provided general support, but expressed some concerns. Several 
of these expressed the concern that warrants not be developed in such a 
way as to be biased in favor of a specific mode. These comments noted 
that FTA's existing Very Small Starts warrants appear to strongly favor 
bus rapid transit. Others indicated that FTA needs to justify the 
warrants that it promulgates by describing exactly how a project with 
the FTA-specified characteristics would rate against the various 
criteria. Several suggestions were provided on specific warrants.
    Response: FTA appreciates the support for the pre-qualification or 
``warrants'' concept and is adopting it in the final rule. FTA notes 
that MAP-21 explicitly calls for the use of warrants for projects 
requesting $100 million or less in New Starts funds or requesting a 
Federal share of 50 percent or less. FTA agrees that warrants should be 
mode-neutral and will work to assure that when FTA proposes them in 
future policy guidance. FTA will provide the justification as each 
warrant is proposed. FTA will not be publishing warrants in the revised 
proposed policy guidance being published along with this final rule, 
but plans to do so in the near future once the criteria are established 
and additional data are gathered. Even though the changes made by MAP-
21 focus warrants only on a certain set of projects, FTA believes it is 
appropriate to consider using warrants for as many kinds of projects as 
possible, in order to allow for additional streamlining of the process. 
Nonetheless, FTA will be mindful of the strictures placed on warrants 
by MAP-21 when it proposes warrants in the future.
    Comment: FTA received 15 comments on how breakpoints should be 
established for the various quantitative criteria. Two of these 
comments suggested using different breakpoints for different modes. One 
comment provided a suggestion that several Transit Cooperative Research 
Program (TCRP) projects could provide input on how breakpoints should 
be established. A total of 12 comments were received on FTA's proposal 
that breakpoints should be established to recognize that a small amount 
of positive benefits is not bad, just small. Of these comments, eight 
opposed FTA's proposal to give a medium rating to projects that had 
small but positive benefits, citing the need to be able to more fully 
distinguish between projects. Four comments supported FTA's proposal.
    Response: FTA appreciates the suggestions on how to establish 
breakpoints. FTA believes the breakpoints should be mode-neutral, as 
projects of various modes are competing for a single source of funds. 
Further, the intrinsic value of a particular benefit is not based on 
the mode of the project being considered. FTA agrees that assigning 
projects with small but positive benefits a medium rating will create a 
problem of not being able to adequately differentiate between projects. 
Thus, FTA is not adopting its proposal in this area. Instead, FTA will 
develop breakpoints that use all five rating levels. FTA is publishing 
proposed breakpoints for the criteria in the revised proposed policy 
guidance accompanying this final rule and requests comments on those 
breakpoints.
6. Use of Standard Factors To Calculate Benefits
    Comment: FTA received a total of nine comments regarding the use of 
standard factors to calculate the value of the various evaluation 
criteria. Although four of the comments provided general support for 
the concept, citing the reduced burden on project sponsors, concern was 
expressed about the need to allow for some variation based on local 
conditions. Two comments suggested that establishment of the factors 
should await completion of ongoing TCRP projects. Three comments 
opposed the proposal, citing the wide variety in local conditions.
    Response: FTA believes that use of standard factors can 
significantly streamline the process, but understands the need for 
flexibility. FTA is publishing the proposed standard factors in the 
revised proposed policy guidance accompanying this final rule and is 
seeking comments. FTA notes that certain factors, such as the value of 
time or of a statistical life, are established in policy that applies 
throughout the programs administered by the U.S. Department of 
Transportation (DOT). In these cases, FTA will use those set values.
7. Program Administration
    Comment: FTA received eight comments suggesting the importance of 
cooperation with other Federal agencies in administering the New Starts 
and Small Start program. Specifically identified were the U.S. 
Department of Housing and Urban Development (HUD) on issues related to 
affordable housing and sustainable communities, other DOT modal 
administrations on alternative project delivery, and the Centers for 
Disease Control and Prevention (CDC) of the U.S. Department of Health 
and Human Services on issues related to public health.
    Response: FTA agrees with the need to work with other agencies on a 
variety of issues. In particular, FTA has sought support and technical 
guidance from HUD on issues related to affordable housing. FTA will 
continue to work with other DOT agencies and agencies such as CDC to 
improve the process.
    Comment: FTA received three comments supporting the proposal to 
have the measures and weights included in policy guidance, with the 
regulation itself providing a broader outline of the process and other 
required features. These comments supported the idea due to the 
increased flexibility allowing changes to be made through policy 
guidance subject to a public comment period as more information about 
various measures becomes available.
    Response: FTA is adopting the approach of having measures and 
weights specified in policy guidance.
    Comment: FTA received four comments noting the importance of 
developing clearly defined deliverables and schedules for the various 
steps in the process for developing New Starts and Small Starts 
projects. Similarly, FTA received one comment calling for as much 
streamlining as possible for Small Starts projects.
    Response: FTA agrees that clearly defined deliverables and 
schedules are particularly important and notes that FTA already has 
clearly defined checklists of deliverables required of the project 
sponsor for each phase of the process and develops ``roadmaps'' for 
every project outlining a planned schedule. FTA plans to continue to 
make efforts along these lines as well as to assure that the process is 
as streamlined as possible. FTA continues to refine its reporting 
instructions and other information about the program to provide as much 
clarity as possible.

[[Page 1999]]

Further, FTA has found that the establishment of project roadmaps has 
been extremely effective in clearly identifying what must be done, who 
is responsible for it, and when deliverables are expected. FTA 
continues to look for ways to streamline the process.
    Comment: FTA received three comments about the relationship of the 
New Starts and Small Starts project development process and the NEPA 
process.
    Response: FTA continues to work to ensure that the New Starts and 
Small Starts process is coordinated with requirements under NEPA. FTA 
notes that MAP-21 calls for completion of the NEPA process during a 
newly-defined phase called ``project development.'' FTA notes that the 
evaluation criteria defined in this final rule are applied subsequent 
to the completion of the NEPA process for approval of entry in the 
``engineering'' phase. In subsequent guidance and rulemaking, FTA will 
provide additional information on how a project sponsor will gain entry 
into the newly defined phase of ``project development'' and what must 
be completed during the phase before entry into the subsequent 
``engineering'' phase will be granted.
    Comment: FTA received seven comments about how the New Starts and 
Small Starts process should be structured to assure compliance with 
fair housing requirements, the Americans with Disabilities Act (ADA), 
FTA's requirements for Environmental Justice, Title VI of the Civil 
Rights Act, and private sector participation in New Starts and Small 
Starts projects, consistent with FTA's requirements for third-party 
contracting.
    Response: FTA believes that fair housing issues are addressed by 
the inclusion under the economic development criterion of an assessment 
of local plans and policies to maintain or increase affordable housing, 
but that enforcement of fair housing practices is under the authority 
of HUD. The DOT and FTA regulations under the ADA prescribe the rules 
for grantee compliance with the ADA. In addition, FTA has published 
guidance for compliance with Title VI of the Civil Rights Act and the 
Executive Order on Environmental Justice. FTA is fully supportive of 
private sector involvement in New Starts and Small Starts projects, and 
will continue to explore opportunities to promote innovative project 
delivery methods. MAP-21 provides for a pilot program to test how to 
utilize such methods. FTA will more fully define this pilot program in 
subsequent interim policy guidance and rulemaking.
8. Definitions of Eligible Projects
    Comment: FTA received two comments expressing general support for 
the definition of eligible projects proposed in the NPRM. Three 
comments suggested limiting bus rapid transit (BRT) to projects that 
operate on an exclusive guideway along at least half of the project 
length, while two other comments suggested broadening the definition of 
BRT to clearly include service operating on high occupancy or managed 
lanes. Another commenter suggested using a standard recently proposed 
by the Institute for Transportation Development Policy in order to 
define BRT. Another commenter suggested that the service standards for 
BRT clearly be limited to the ``trunk'' segment of a proposed route. 
One commenter suggested that eligibility be expanded to cover a variety 
of ``alternative modes,'' while another commenter suggested expanding 
eligibility to cover ``core capacity'' projects.
    Response: In MAP-21, Small Starts BRT projects may include 
``corridor-based bus projects'' not operating on exclusive rights of 
way. Accordingly, FTA must continue to define Small Starts BRT projects 
without specifying a requirement for an exclusive right-of-way. BRT 
projects proposed to operate on managed lanes may be eligible for 
funding through the Small Starts program, but only if the project 
otherwise meets the parameters for ``corridor-based bus projects'' 
defined by FTA. Under current law, managed lanes cannot be counted as 
exclusive lanes since they are not for the exclusive use of high 
occupancy vehicles. FTA's current approach, which it is continuing, 
allows a project to qualify as a corridor-based bus project if the 
frequency of service requirements defined by FTA are met on at least 
the core segment of the bus route, sometimes called the trunk. Services 
operated off the trunk may be part of the overall project. FTA is 
limited by law to fund only public transportation projects, not any 
``alternative mode.'' Further, MAP-21 limits New Starts funding to new 
fixed guideways and extensions to existing fixed guideways. MAP-21 
allows core capacity projects as eligible projects for funding through 
the Section 5309 major capital investments program. FTA will define the 
requirements for core capacity projects in subsequent interim policy 
guidance and rulemaking.
9. Incremental Funding and Programs of Projects
    Comment: Thirteen comments recommended defining a project in such a 
way as to allow it to be evaluated and rated, but then have funding and 
construction of that project provided on a segment-by-segment basis 
incrementally. Another commenter suggested more clearly defining 
allowable programs of projects.
    Response: FTA can undertake programs of projects, and can fund 
projects incrementally. In general, FTA believes it is appropriate to 
evaluate each segment of a project being proposed for funding 
independently, consistent with the requirement in law to fund 
``operable segments.'' Thus, FTA is not adopting the suggestions to 
evaluate and rate a project as a whole and then fund it on a segment-
by-segment basis. However, FTA will define the requirements for 
``programs of interrelated projects'' in subsequent interim policy 
guidance and rulemaking.
10. Other General Issues
    Comment: FTA received a total of 21 comments on other general 
issues. Three comments provided information related to the merits of 
specific local projects. Four comments expressed general support for 
comments received from other commenters. One comment opposed 
continuation of the New Starts and Small Starts program, while several 
comments provided general support for investment in public 
transportation. Several additional comments pointed out clerical or 
typographical errors or suggested editorial changes. One comment 
suggested that project sponsors be required to report the uncertainty 
involved in their forecasts.
    Response: FTA appreciates the general comments and suggestions. FTA 
notes that this rulemaking concerns the process by which a specific 
grant funding program specified in law is implemented. The merits of 
investing in public transportation in general are a subject for other 
forums. FTA agrees it is important to have reliable forecasts and notes 
MAP-21 requires FTA to consider ``the reliability of the forecasting 
methods used to estimate costs and utilization'' on the project when 
developing the project justification rating.

B. Project Justification Criteria

1. Mobility Improvements
a. General Comments
    Comment: Twelve comments supported FTA's proposed approach of 
measuring mobility improvements

[[Page 2000]]

solely in terms of trips. Eight comments disagreed with the proposed 
approach. Of these eight, three comments suggested that FTA retain 
passenger miles as part of the measure, three others recommended that 
the current measure be retained as is, and one requested that an 
alternative approach submitted in response to the Advance Notice of 
Proposed Rulemaking be adopted. The alternative approach suggested that 
FTA create a five-step process that would require project sponsors to: 
(1) Identify the full range of alternative projects; (2) identify key 
non-monetizable benefits of those alternative projects including 
benefits to mobility, the environment, and economic development; (3) 
estimate the costs and monetizable benefits of each alternative 
project, (4) estimate the non-monetary benefits of each alternative 
project, and (4) rank the alternative projects in terms of dollars of 
net cost per unit of each key non-monetary benefit. The suggested 
alternative indicated that FTA should fund only those projects that are 
the highest or near-highest ranked alternative by each of the non-
monetary measure but did not provide specifics on how mobility benefits 
should be determined. This same commenter suggested that it is 
important to assess how a transit project may affect other modes, such 
as in the case where a general purpose lane is converted to exclusive 
transit use, thus increasing highway congestion.
    Response: FTA is adopting its proposed trip-based mobility 
improvements measure. Use of a trip-based measure will permit use of a 
simplified national model. Furthermore, a trips measure is more easily 
understood by the public and decision-makers than is transportation 
system user benefits. Additionally, using fewer and simpler measures 
for the mobility criterion supports FTA's streamlining goal.
    FTA believes that travel time savings can be an important benefit 
of a major transit investment, but notes they have been challenging to 
estimate. The proposed trips measure is easier to forecast and still 
provides a good indication of the mobility benefits provided by the 
project. FTA is not adopting the suggestion that the mobility measure 
include passenger miles travelled since that measure gives an advantage 
to projects serving longer trips. FTA believes that credit should be 
given to projects that serve the most riders, regardless of trip 
distance. FTA is also not adopting the suggested alternative approach 
to consider under the mobility measure the impact implementation of a 
transit project may have on other modes since it would be cumbersome to 
do so and be inconsistent with the goal of streamlining the process. 
FTA believes the impact of a transit project on other modes is 
adequately considered in the environmental process, where the 
mitigation of such negative effects is addressed. FTA does not believe 
it is necessary to assess such effects as part of the evaluation of 
mobility benefits.
    Comment: Two comments suggested that FTA develop the mobility 
improvements criterion's breakpoints according to project mode or type. 
Three comments requested that FTA clarify whether a trip is equivalent 
to a boarding.
    Response: FTA has developed a single set of mobility improvements 
breakpoints that will apply to all New and Small Starts projects 
regardless of mode. Mode-specific breakpoints would imply that a trip 
made on one mode is worth more or less than a trip made on another mode 
or that one mode is preferred over another. FTA has clarified in the 
revised proposed policy guidance being published concurrently with this 
final rule that a trip is equivalent to a ``linked trip using the 
project.''
b. Weighting of Trips by Transit Dependent Passengers
    Comment: Fourteen comments supported FTA's proposal to assign a 
weight of two to project trips made by transit dependent passengers in 
the mobility improvements measure. Fourteen additional comments 
supported additional weight for transit dependent trips but requested 
that FTA provide a clear definition of ``transit dependent persons'' in 
final policy guidance. Of the comments that requested clarity on the 
definition of ``transit dependent persons,'' one commenter suggested 
that the elderly be included in the definition, one recommended that 
persons with disabilities be included, two commented that all zero-car 
households be included regardless of income level, and two proposed 
that FTA define transit dependent persons in terms of automobile 
ownership as a function of household size.
    Eighteen comments disagreed with the proposal to assign extra 
weight to trips made by transit dependent persons. Of these, nine 
suggested that trips by transit dependent persons be reported as an 
``other factor'' in project evaluation rather than included in the 
mobility improvements criterion. Three comments suggested that the 
measure count transit dependent households within one-half mile of 
stations rather than trips by transit dependent persons. Two comments 
proposed assigning additional weight to other types of trips instead, 
with one suggesting that FTA assign more weight to work trips than non-
work trips and the other suggesting that FTA give credit to projects 
that offer travel options to ``highway dependent'' users.
    Response: FTA is adopting its proposal to weight trips made by 
transit dependent persons twice that of trips made by non-transit 
dependent persons in the calculation of mobility improvements. FTA 
believes the mobility improvements criterion is the appropriate place 
to incorporate equity considerations into the New and Small Starts 
project evaluation and rating process given that populations that lack 
other travel options have a particularly strong need for mobility 
improvements. To keep data collection requirements manageable, in the 
simplified national model FTA is developing, trips made by ``transit 
dependent persons'' will be defined as trips made by individuals 
residing in households that do not own a car. Project sponsors that 
choose to continue to use their local travel model rather than the 
simplified national model to estimate trips will use trips made by 
individuals in the lowest socioeconomic stratum in the local model as 
the measure of trips made by transit dependent persons. Local models 
classify trips either by household auto ownership or by income level. 
Thus, trips made by transit dependent persons would be either trips 
made by individuals residing in households that do not own a car or 
trips made by individuals in the lowest income category. FTA feels that 
this proposed approach offers a relatively simple way to incorporate 
equity considerations into the mobility improvements measure and is 
consistent with other streamlining proposals included in this final 
rule. FTA believes that a weight of two on transit dependent trips is 
appropriate based on data from the National Household Travel Survey, 
which show that persons in zero-car households make up approximately 
8.7 percent of households but make only 4.3 percent of all trips. FTA 
believes increasing mobility for these transit dependent persons should 
be considered in the evaluation. FTA notes that MAP-21 eliminated 
``other factors'' as a consideration in the evaluation and rating 
process.
c. Simplified National Model
    Comment: Ten comments supported the option of using an FTA-
developed simplified national model to estimate trips for the purposes 
of the cost-

[[Page 2001]]

effectiveness and mobility improvements criteria. Three comments 
opposed the use of a simplified national model due to concerns that the 
model would not be adequately calibrated to the particularities of each 
region. One of the three felt that the model may be reasonable for 
Small Starts or Very Small Starts projects, but not robust enough for 
New Starts projects.
    Several comments expressed concerns about the simplified national 
model without indicating support or opposition. Eleven comments 
indicated a preference for using travel forecasting approaches already 
in place in their localities. Seven comments stressed that the national 
model's approach should be transparent, tested by project sponsors, and 
neutral in its assumptions. Six comments (beyond the three that opposed 
the use of the simplified national model) indicated that the model may 
not replicate local conditions. Finally, four comments anticipated that 
FTA's proposal would require more effort because many project sponsors 
would likely feel compelled to prepare forecasts using both the 
simplified national model and their local travel model.
    Response: FTA is making use of the simplified national model 
optional. The simplified national model is currently being developed by 
FTA and will only be made available to project sponsors after it is 
calibrated against completed transit projects in a range of 
environments. The model is intended to reduce the effort required by 
project sponsors to develop the data needed for the cost-effectiveness 
and mobility improvements criteria. Thus, it fits with FTA's 
streamlining goals. Moreover, FTA believes that it will allow project 
sponsors and/or metropolitan planning organizations the option of not 
expending significant time and resources on modeling refinements when 
ample data on the performance of transit projects in a wide range of 
environments would be available through the simplified national model. 
Regardless of the approach that project sponsors opt to pursue, FTA 
will continue to work with sponsors to assure that the models used are 
appropriate and the results as accurate as possible.
2. Environmental Benefits
a. General
    Comment: One comment supported FTA's proposal in the NPRM to 
measure the direct and indirect benefits to human health, safety, 
energy, and air quality in the environmental benefits criterion. Two 
comments were concerned about FTA making the environmental benefits 
criterion a ``catch-all'' measure. Seventeen comments supported FTA's 
proposal to broaden the measures used in the environmental benefits 
criterion and suggested that FTA look at both direct and indirect 
benefits to the natural and human environment. Fourteen comments 
expressed support for including the change in air quality in the 
environmental benefits criterion. Four comments expressed support for 
including estimates of the change in greenhouse gas emissions as a 
measure under the environmental benefits criterion. Nine comments 
expressed support for including the change in energy use as a measure 
under the environmental benefits criterion. One comment agreed with the 
quantitative approach proposed by FTA instead of a simple checklist 
approach. This comment also agreed with FTA's proposal to specify the 
details of the approach in policy guidance as opposed to the final 
rule.
    Response: FTA agrees that a new approach to evaluating and rating 
environmental benefits is required and is adopting the approach to 
quantify benefits to human health, safety, energy, and air quality. FTA 
believes this approach is appropriately focused on the benefits related 
to human health and the natural environment. As new information or 
methods for calculating environmental benefits data become available, 
FTA can propose alternate methodologies in future policy guidance.
    Comment: One comment stated that the proposed environmental 
benefits measures appeared to favor transit agencies with a variety of 
fleet vehicles, corridors with high population density, corridors with 
strong existing transit service, and longer projects due to its use of 
change in vehicle miles of travel (VMT) as the basis for the various 
benefit calculations. One comment made a statement about data 
collection for environmental benefits and stated that a one-size-fits-
all approach does not work in an urban setting. This comment also 
suggested that FTA should consider quality of life issues under the 
environmental benefits criterion.
    Response: FTA agrees that by using VMT as a basis for the 
calculation of environmental benefits, longer projects or those 
projects with a high potential for acquiring new transit riders will 
generate a greater change in VMT and thus get a higher amount of 
environmental benefits. This advantage will be somewhat moderated 
because for New Starts projects environmental benefits will be compared 
to the annualized capital and operating cost of the project and for 
Small Starts projects environmental benefits will be compared to the 
Federal share. FTA does not expect transit agencies with a variety of 
fleet vehicles, strong existing service, and in areas with higher 
population density to have an advantage over other transit agencies.
b. Complexity and Suggestions for Simpler Approaches
    Comment: One comment stated that the proposed measures for 
environmental benefits appeared to be somewhat complex, but went on to 
say that these types of analyses seem consistent with goals for 
environmental improvement. Another comment encouraged FTA to keep in 
mind the desire to simplify the project justification criteria and 
reduce the subjective measures that require FTA review. A third comment 
stated there were too many environmental measures proposed and that FTA 
should simplify the measures and consider warrants. One comment 
suggested a more qualitative analysis be used to evaluate environmental 
benefits given that it is difficult to combine and quantify 
environmental benefits. Another comment stated that because of the 
breadth and complexity of the measures proposed, they may not be in 
place at the time the final rule is published. This comment encouraged 
FTA to continue with the multi-measure approach.
    Response: In choosing measures to use under the environmental 
benefits criterion, FTA's goal was to ensure that calculation of the 
measures would not impose an undue burden on project sponsors. FTA is 
adopting measures that are based on data coming directly from the 
project analysis methods normally used by project sponsors during 
project planning, as well as adopting simplified approaches for 
calculating environmental benefits. Through revised proposed policy 
guidance being published concurrently with the final rule, FTA is 
requesting public comment on a simple spreadsheet tool that will allow 
project sponsors to input only a few key data. The spreadsheet will use 
standard factors to calculate the various environmental benefits and 
monetize them, including air quality, greenhouse gas emissions, energy, 
and safety. The factors are shown in the revised proposed policy 
guidance.
    FTA agrees it can be difficult to quantify environmental benefits 
and combine the measures into a meaningful value. To overcome this 
difficulty, FTA is using DOT-standard economic values or other 
published environmental and health economic research to monetize

[[Page 2002]]

the various measures of environmental benefits. By converting the 
environmental benefits into dollar values, they can easily be combined. 
FTA anticipates it may be necessary at some point in future proposed 
policy guidance to update the measures or modify the spreadsheet tool 
as new information and research becomes available.
c. Additional Information Sources
    Comment: One comment recommended that FTA wait for the publication 
of the TCRP Report on Environmental Benefits before advancing measures 
and data sources. Another comment suggested that, in addition to using 
U.S. Environmental Protection Agency (EPA) and TCRP guidance to develop 
its measures, FTA should examine American Public Transportation 
Association (APTA) Sustainability Commitment metrics. This comment also 
suggested FTA create a system of data collection to enable project 
sponsors to use more specific environmental data when available (e.g., 
utility electricity emission factors vs. EPA regional grid factors).
    Response: FTA agrees that information from TCRP's Report on 
Environmental Benefits was a helpful resource in defining the 
environmental benefits measures. FTA wrote the problem statement for 
that TCRP study and served as part of the review panel for the study. 
FTA has considered the research and findings in the development of the 
final rule and revised proposed policy guidance. If new or revised 
information on calculation methodologies becomes available they could 
be incorporated into the environmental benefits criterion in the future 
by FTA through policy guidance.
d. Monetization of Environmental Benefits
    Comment: Two comments stated support for the monetization of 
environmental benefits, and one comment added that monetization of 
benefits ``can be good public policy.''
    Thirteen comments expressed concern that monetizing environmental 
benefits would cause people to view it as a cost-benefit analysis when 
it is not attempting to capture all benefits. One comment added that 
environmental benefits do not need to be monetized because several 
other project justification criteria include cost considerations. 
Another comment stated it is appropriate to evaluate the environmental 
benefits of a project against the project's size or cost, but the 
environmental benefits themselves should not be monetized. One comment 
recommended, instead of monetizing environmental benefits, creating a 
second part to the cost-effectiveness criterion that would compare 
environmental benefits to the cost of the project.
    Response: One of FTA's goals is to streamline the evaluation and 
rating process to the extent possible while maintaining sufficient 
rigor in the process to inform decision-making on whether taxpayer 
dollars should be invested in a project or not. FTA believes a detailed 
analysis of the net impacts of certain environmental factors, as may be 
required to support a cost-benefit analysis, is unnecessarily 
complicated. Instead, FTA is focusing on relevant environmental 
benefits that are most easily addressed, such as changes in air quality 
pollutant and greenhouse gas emissions, energy use, and safety. FTA 
notes that a complete review of all environmental effects, is still 
required as a part of the NEPA process (including through the use of 
linking planning and NEPA as provided for in 23 CFR 450.318), performed 
prior to entering into the engineering phase and independent of the 
particular variables chosen as part of the environmental benefits 
measures. FTA believes that at a later date it may be possible to 
develop an approach for assessing public health benefits. Monetizing 
these environmental benefits using existing economic methods and 
research is the simplest and most transparent way to combine the 
results into a single measure of environmental benefits. FTA is 
adopting the proposal to compare the combined monetized value of 
environmental benefits to the annualized capital and operating cost of 
a proposed New Starts project or to the Federal share of a proposed 
Small Starts project in order to ensure fair comparison of 
environmental benefits across widely variant projects. FTA believes it 
is best to compare the benefits to cost in the environmental benefits 
criterion, rather than combining environmental benefits into the cost-
effectiveness criterion, because combining the two would not comport 
with the requirement in law that there be a separate environmental 
benefits criterion and that it be given ``comparable, but not 
necessarily equal weight'' in the evaluation process.
    Comment: Three comments stated that a reliable tool does not exist 
that can accurately capture the full monetary value of environmental 
benefits. One comment felt monetizing environmental benefits would work 
against streamlining the process. Two comments suggested environmental 
benefits are subjective and that regions of the country do not have 
uniform environmental needs. These comments went on to say that 
attempting to monetize or uniformly quantify all environmental benefits 
for a national ranking may prove contrary to the overall goal of 
encouraging projects that provide environmental benefits as one of 
their key elements. These comments added that FTA should take a 
measured approach to monetization. One commenter recommended that FTA 
conduct an analysis of the ``impact'' of the monetization approach on 
projects that have successfully received New Starts and Small Starts 
funds in the past before finalizing the environmental benefits 
measures.
    Response: FTA is not proposing and does not believe that it is 
necessary to capture the full monetary value of all environmental 
benefits generated by implementation of a major transit investment as 
would be necessary for a cost-benefit analysis. Instead, FTA is 
focusing on the potential environmental benefits most relevant and 
easily calculated on a national scale, such as changes in air quality 
pollutant and greenhouse gas emissions, energy use, and safety. FTA 
believes that at a later date it may also be possible to develop an 
approach for assessing public health benefits. FTA is using established 
methods and research to quantify and appropriately monetize these 
environmental benefits.
    FTA recognizes the diversity of environmental settings throughout 
the country and that transit projects may have different, specialized 
effects on the human and natural environment depending on the 
environmental setting. FTA believes it is best to evaluate and 
mitigate, as appropriate, these specialized effects through the NEPA 
process. But FTA believes that the evaluation of changes in air quality 
pollutants and greenhouse gas emissions, energy use, safety, and, 
potentially some point in the future, public health benefits, is 
appropriate. These can be evaluated fairly and uniformly across the 
country to identify the merits of individual transit projects.
    FTA believes transit projects are developed to meet numerous goals, 
one of which is to improve the environment. Similarly, the 
environmental benefits criterion is just one of six project 
justification criteria in the New and Small Starts evaluation process. 
FTA disagrees that the proposed environmental benefits measures would 
change or discourage environmental goals.

[[Page 2003]]

    FTA is currently testing the environmental benefits measures with 
data from existing transit projects and will continue to do so prior to 
issuing final policy guidance. As expected, transit projects that 
reduce the greatest amount of VMT and New Starts projects with 
relatively lower costs or Small Starts projects with relatively lower 
Federal shares perform better than projects that do not result in 
substantial changes in VMT or have a very high cost or Federal share. 
FTA recognizes the primary goals and objectives of some projects 
seeking New or Small Starts funds are to make the transit system 
network run more efficiently and to improve mobility of existing 
transit riders. Although these types of projects would not result in 
substantial reductions in VMT and might, therefore, receive a lower 
environmental benefits rating, they would likely perform well under 
some of the other project justification criteria.
    Comment: One comment suggested that instead of monetizing 
environmental benefits FTA develop warrants for evaluating 
environmental benefits related to development densities and land use 
patterns. Another comment suggested that, in lieu of monetization of 
environmental benefits, FTA use a checklist approach to allow projects 
to more easily demonstrate environmental improvements across an array 
of areas. This comment went on to suggest that the checklist include 
improvements to the natural environment through restoration of degraded 
wetlands, the clean-up of contaminated sites, and reductions in 
accidents at pedestrian crosswalks or railroad crossings. Another 
comment stated that, in lieu of monetization of environmental benefits, 
FTA use a checklist that would ask project sponsors if certain 
environmental benefits are expected from the proposed project and/or 
whether the project sponsor participates in a third-party verified 
environmental program.
    Response: FTA does not agree that a checklist evaluating 
environmental improvements would be simpler or more advantageous over 
relatively simple quantitative measures of environmental benefits. In 
addition, the restoration of wetlands and the clean-up of contaminated 
sites are actions that are typically governed by or required by federal 
or state laws and, therefore, would not be an appropriate measure to 
evaluate the merits of an individual transit project. Also, all transit 
projects should be designed to avoid accidents at pedestrian crosswalks 
or railroad crossings to the maximum extent possible. FTA notes that 
the various environmental issues described in the comments are the 
kinds of issues that should be addressed through the metropolitan 
planning and NEPA processes, which would develop mitigation measures to 
be included in the proposed action in the event there are negative or 
adverse environmental impacts as a result of the proposed project.
    FTA agrees that warrants can be useful in streamlining project 
evaluation. Such approaches, however, should be based primarily on the 
evaluation measures being used. In future proposed policy guidance, FTA 
may propose warrants for the environmental benefits criterion, but is 
not doing so at this time.
e. Use of VMT Change as Basis for Environmental Benefits
    Comment: One comment stated the current approach of basing the 
rating simply on the air quality attainment status of the metropolitan 
area in which the project is located is not related to a project's 
effects on the environment and supported FTA's proposal for evaluating 
environmental benefits based on a reduction in VMT instead. The comment 
also stated that future changes to air quality standards for ozone may 
cause much of the country to be in nonattainment status, thereby making 
the current measure even less effective in differentiating between 
projects.
    Response: FTA agrees that the existing measure, which examines only 
the EPA air quality conformity designation for the area in which the 
proposed project is located and does not look at any specific 
environmental benefits, does not provide a useful basis for decision-
making.
    Comment: Two comments did not support evaluating and rating 
environmental benefits from estimates of changes in VMT based on the 
idea that VMT-based calculations may not capture all environmental 
benefits or result in scores that fairly recognize the full 
environmental benefit of a given project. One comment noted that VMT 
assessed at a regional level would not capture localized health impacts 
or benefits of projects on ``hot spots'' of changes in air quality. The 
comment noted that, with respect to air quality, technology to assess 
intra-regional exposure variation and project level pollutant 
concentrations now exists with computational modeling approaches such 
as dispersion modeling and land use regression. It went on to say these 
tools can be used to create maps of cumulative air pollution 
concentrations within regions. The commenter noted the example of the 
San Francisco Department of Public Health (SFDPH), which has developed 
and routinely applies tools to assess local impacts that are being 
employed in the San Francisco Community Risk Reduction Plan to evaluate 
whether infill residential development needs additional ventilation 
system protections. Another comment stated that measuring the change in 
air quality criteria pollutants would be better for the proposed 
transit corridor than for the region. Two comments stated that 
environmental benefits should include changes in VMT for all roadways, 
not just ``highways.'' One comment suggested that FTA include 
environmental benefits due to the future predicted VMT changes 
resulting from projected development around stations instead of the 
economic development measure.
    Response: FTA does not believe it is necessary in the New and Small 
Starts evaluation process to attempt to do a full cost-benefit analysis 
and capture all of the environmental benefits a transit project may 
produce as this would conflict with FTA's streamlining objectives. FTA 
also believes it is unnecessarily complicated to use computational 
modeling approaches to assess localized ``hot spots'' changes in air 
quality for the purposes of the New and Small Starts evaluation and 
rating process. FTA believes focusing on the most relevant 
environmental benefits that are more easily estimated and evaluated on 
a national scale is appropriate, such as changes in air quality 
pollutant and greenhouse gas emissions, energy use, safety, and at some 
point in the future human health. These can be derived from estimated 
changes in VMT and they allow FTA to fairly compare the merits of 
proposed projects. FTA conducts ``hot spot'' analyses as part of the 
NEPA process, as needed, in order to support transportation air quality 
conformity determinations required by the Clean Air Act.
    FTA intends to look at the change in VMT for all roadways and not 
just changes in highway VMT. Estimates of VMT change will be based on 
the results of the simplified national model FTA is currently 
developing, or at the option of the project sponsor, from the results 
of their local travel forecasting models. FTA intends to continue the 
current practice of evaluating only the first order effects that come 
when transportation system users choose to change modes, rather than 
attempting to quantify higher order effects that might come from 
changes in land use patterns and increased densities that may lead to 
changes in destinations. Further, FTA

[[Page 2004]]

does not intend to quantify any induced or latent demand on the highway 
system that could result. FTA believes that while more accurate 
forecasts of overall transportation system usage might be possible by 
applying more complex analytical techniques, the increased precision is 
not worth the additional burden on project sponsors and that a metric 
relying on first order changes in VMT is sufficient to accurately 
determine the relative environmental benefits of candidate projects.
    FTA believes that the best location to capture the benefits 
associated with dense, more compact development is in the economic 
development criterion rather than the environmental benefits criterion. 
FTA believes it is appropriate to focus the environmental benefits 
measure on the direct environmental effects that result from changes in 
mode use as a result of the project. The environmental benefits that 
might come as a result of changes in development patterns are a 
secondary impact of the economic development effects of the project.
    Comment: Five comments suggested FTA consider total auto trips 
reduced given that ``cold starts'' of vehicles have a disproportionate 
impact on emissions and fuel consumption.
    Response: FTA agrees cold starts can have a disproportionate effect 
on emissions and fuel consumption, but they are already included in the 
average emissions factors.
    Comment: Five comments suggested FTA develop warrants for 
evaluating environmental benefits. Specifically, two comments stated 
many transit projects in dense urban areas do not result in VMT 
reduction, but do support existing dense development and energy-
efficient land use patterns leading to walkable and bike-able 
communities and are still important for air quality emission 
reductions. These comments suggested that the environmental benefits of 
these projects should be counted. One of the comments went on to 
mention this linkage is currently being studied in a TCRP project 
entitled Quantifying Transit's Impact on GHG Emissions and Energy Use: 
The Land Use Component. Another comment stated transit projects located 
in corridors within or near the freeway system would experience more 
safety benefits based on VMT reduction than would transit projects 
located away from freeway systems.
    Response: FTA recognizes the primary goals and objectives of some 
projects seeking New and Small Starts funds are to make the transit 
system network run more efficiently and to improve mobility for 
existing transit riders. FTA also recognizes these projects are 
environmentally beneficial because they sustain or improve transit 
service and are important components to maintaining regional air 
quality standards. While these types of projects would not result in 
substantial reductions of VMT and thereby would receive a lower 
environmental benefits rating, FTA anticipates they would perform well 
under the other New and Small Starts project justification criteria.
    FTA agrees warrants can be useful in streamlining the New and Small 
Starts project evaluation process. Such approaches, however, should be 
based primarily on the evaluation measures being used. In future 
proposed policy guidance, FTA may propose warrants for the 
environmental benefits criterion, but is not doing so at this time.
f. Use of a National Model To Assess Environmental Benefits
    Comment: Five comments stated concerns or did not support use of a 
simplified national model for deriving changes in highway VMT to be 
used when calculating environmental benefits. Three comments did 
support the flexibility to use a standard local travel forecasting 
method at the sponsor's option.
    Response: Because streamlining is one of the main objectives 
associated with this rulemaking, FTA is proposing that project 
sponsors, at their option, may choose to use a simplified national 
model for estimating the number of trips on the project. The 
information from the simplified national model would be used to 
estimate the change in VMT, which would then be used to calculate 
environmental benefits. FTA recognizes estimating VMT in this manner 
may result in a higher margin of error than estimating VMT through 
standard travel forecasting tools, but believes the results will be 
fair estimates of environmental benefits attributable to the transit 
project. Given the streamlining benefits this approach will allow, FTA 
believes it will be an attractive option for many project sponsors. FTA 
will continue to allow project sponsors the flexibility of calculating 
VMT from their standard local travel forecasting models if they so 
choose. Project sponsors choosing this approach should recognize that 
FTA will need to verify the calculations.
g. Valuing Energy and Greenhouse Gas (GHG) Reductions and Recognizing 
GHG Performance Targets
    Comment: One comment did not support evaluating and rating 
environmental benefits based on both the change in energy use and the 
change in greenhouse gas emissions. Another comment suggested that 
states or regions with GHG performance targets for their regional 
transportation plans should be acknowledged in the scoring for 
environmental benefits.
    Response: FTA recognizes a significant part of the benefits that 
come from reducing energy use are accounted for by the resulting 
reduction in pollutant and greenhouse gas emissions. To avoid the 
double counting, the monetary value of energy conservation will be 
factored down to account for this, and will count only the public 
benefits related to energy security and will also not include the 
private benefits which accrue to transportation system users who do not 
have to purchase fuel. Because there is wide variation in the use of 
GHG performance targets in regional transportation plans and in the 
requirements and methods for achieving these targets, FTA could not 
acknowledge the use of these plans in the scoring for environmental 
benefits.
h. Inclusion of Health and Safety Benefits in Environmental Benefits
    Comment: Twelve comments expressed support for the inclusion of 
changes in health in the environmental benefits criterion and nine 
comments expressed support for the inclusion of safety in the 
environmental benefits criterion.
    One comment acknowledged FTA's efforts to keep the environmental 
benefits calculations as simple as possible. But this comment 
recommended FTA limit the evaluation of environmental benefits to only 
the impacts on air quality and greenhouse gas emissions, which are 
direct environmental impacts. This comment stated that calculation of 
change in energy use and health benefits would add time and uncertainty 
to project evaluations, would not help to distinguish between projects, 
and would dilute the importance of the direct environmental benefits, 
which are required to be evaluated under the current statute.
    Two comments stated that although reduction in traffic accidents is 
important, it is not an environmental benefit and is captured in other 
project justification criteria. One comment went on to say FTA should 
avoid the complication of trying to measure health and safety 
separately under the environmental benefits criterion. Another comment 
suggested the best location to evaluate safety is within ``other 
factors'' or within the economic development criterion. Another comment 
added that safety is captured through the local financial commitment 
evaluation, which considers funding for

[[Page 2005]]

core state of good repair of the transit system. One comment suggested 
FTA distinguish between transit systems that operate in mixed traffic 
verses those operating on exclusive guideways.
    Response: FTA disagrees that health and safety are not 
environmental benefits and believes that some safety and health 
benefits, in addition to the health benefits that come from improved 
air quality, should be included in the evaluation. FTA believes it is 
appropriate to highlight explicitly the safety and public health 
benefits of transit. Once a methodology becomes available for doing so, 
FTA believes it will measure public health benefits coming from 
implementation of a project based on the additional walking and other 
physical activity that would be expected. FTA notes that MAP-21 
eliminates the consideration of ``other factors'' in the development of 
a project justification rating.
i. Valuation of Environmental Benefits in Areas of Nonattainment and 
Maintenance Areas
    Comment: Five comments suggested while reductions in VMT and 
emissions are a benefit of many transit projects, emission reductions 
have greater value in metropolitan areas that are in nonattainment of 
the National Ambient Air Quality Standards. Three of these comments 
stated FTA's environmental benefit rating should continue to take into 
account a metropolitan area's nonattainment status. These comments 
further recommended FTA either increase the environmental benefit 
rating by one or two levels for projects located in metropolitan areas 
with the most severe air quality conditions or give a higher monetary 
value to emission reductions in these areas. One comment felt the New 
and Small Starts process should favor projects that support regional 
air quality objectives. Three comments said it is unclear how air 
quality maintenance areas would be treated and recommended they be 
treated like nonattainment areas when evaluating environmental 
benefits.
    Response: FTA believes any reduction in the emission of criteria 
pollutants would be beneficial to public health. FTA agrees that 
reductions in pollutant emissions in metropolitan areas in 
nonattainment or maintenance of the National Ambient Air Quality 
Standards have greater value than reductions of emissions in areas that 
are in attainment of those air quality standards. FTA is reflecting 
these differences in how environmental benefits will be monetized 
rather than raising a rating by one or two levels.
j. Electric Vehicles and Fleet Energy Use
    Comment: One comment stated electrically powered transit has a 
significant advantage because the vehicles do not produce any air 
pollution at the source, adding that the air pollution is generated at 
power plants, which are usually located away from population centers 
and employ advanced emission control technologies. The comment also 
stated that electric vehicles run more efficiently because of faster 
acceleration. In addition, the comment observed that bus fleets usually 
use a combination of new and older technologies and the effectiveness 
of new technologies such as hybrid vehicles in reducing air emissions 
is uncertain. The comment said it was unclear whether FTA would 
consider the increase in transit VMT from the new project or whether 
FTA would also look at system-wide changes. Another comment observed 
that in some parts of the country the electric generation mix is 
significantly different from the national average. This comment 
suggested the factors used by FTA to calculate emissions should be 
adjusted in these cases and should consider changes to the energy mix 
in the future.
    Response: FTA does not believe electric vehicles will necessarily 
have a significant advantage in the environmental benefits measure 
because some emissions generated from power plants will still be 
calculated. FTA intends that the environmental benefits measure will 
consider both changes in automobile and truck VMT and changes in 
transit VMT to calculate changes in air quality, safety, greenhouse gas 
emissions, and energy. For transit VMT, FTA will consider changes in 
VMT associated with the proposed project and changes in ancillary 
service that may feed into the project. At this time, FTA plans to use 
national factors based on the national electric generation mix rather 
than adjusting the energy mix region by region. FTA may consider using 
regional electric generation mixes in future policy guidance.
k. Health Benefits
    Comment: One comment suggested NEPA may be the more appropriate 
venue for assessing environmental impacts of a proposed project, and 
said ideally the New and Small Starts evaluation and rating process 
would be consistent with NEPA with respect to health findings and 
analysis.
    Another comment recommended the environmental benefits measure for 
changes in health focus on the air quality of the Community Planning 
Association (CPA) district where the transit project is located based 
on the idea that minority and lower-income communities experience the 
poorest air quality and the highest rates of asthma.
    Another comment commended FTA for recognizing the impacts poor 
transportation decisions have on public health (based on impacts they 
have on air quality, etc.) This comment suggested FTA find ways to 
evaluate how transit investments can foster better health through 
improved environments for accessing transit on foot and related 
physical activity. It went on to say this is an important step for FTA 
toward encouraging local and regional decision-makers to prioritize 
projects seeking to maximize public health benefits and reduce health 
disparities in the community where a transit project is to be built.
    One comment recommended an evaluation tool--such as the Healthy 
Development Measurement Tool or a health impact assessment--should be 
used in order to determine the health impact of the transit project. 
This comment also stated FTA should recommend that project sponsors use 
health impact assessments as a means of prioritizing transit projects 
that could reduce health disparities across race and income and achieve 
more equitable outcomes.
    Response: FTA agrees the results of the NEPA process and the New 
and Small Starts evaluation and rating process should be consistent 
with respect to health findings and analysis. During the NEPA process 
and during evaluations of New and Small Starts projects, FTA works 
closely with project sponsors to ensure that project descriptions and 
assumptions that go into each process are consistent with each other 
and with fiscally constrained long-range transportation plans. FTA is 
continuing this approach with the implementation of this final rule.
    FTA is implementing environmental benefit measures that examine 
changes in air quality, changes in safety, and, as soon as a 
methodology becomes available to assess public health benefits, 
including changes in public health potentially related to walking and 
other physical activity. FTA recognizes that changes in air quality and 
changes in safety help with public health, but the measure of health 
would be focused on items not already captured under the other 
environmental benefit measures so as to avoid double counting. In 
monetizing the benefits from changes in air quality, the published 
literature being used by FTA to develop the factors considers the 
relationship of pollutants emissions and incidences of disease such as 
asthma

[[Page 2006]]

and other chronic illnesses linked to air quality. FTA does not agree 
with the suggestion to evaluate health benefits of transit projects at 
the Community Planning Association district scale as it would add 
complexity and conflict with FTA's streamlining goals. FTA is including 
in the final rule an environmental benefits measure of public health 
benefits associated with walking or physical activity, but is not 
implementing it until a relatively simple methodology for calculating 
it can be developed. FTA will consider evaluation tools such as the 
Healthy Development Measurement Tool as it continues its research.
3. Cost-Effectiveness
a. General Comments
    Comment: Six comments supported FTA's proposed simplification of 
the cost-effectiveness measure in general. Two comments objected to the 
proposed simplification, stating the proposed changes would prioritize 
non-transportation objectives. Of these two comments, one recommended 
an alternative approach that had been submitted in response to the 
ANPRM, which is discussed above in the section on mobility benefits. 
Two comments suggested the cost-effectiveness criterion be renamed 
``Mobility Cost-effectiveness,'' because other types of benefits are 
not explicitly included.
    Response: FTA is adopting its proposed changes to cost-
effectiveness with the exception that FTA will no longer assign 
additional weight under the cost-effectiveness criterion to trips made 
by transit dependent persons. Further, as required by MAP-21, for Small 
Starts projects, the cost-effectiveness calculation will be based only 
on the Federal share rather than the total project cost. As noted 
earlier, MAP-21 specifies cost-effectiveness should be measured as 
``cost per trip''. FTA believes it is important in the mobility 
criterion to consider trips made by transit dependent persons, but that 
the cost-effectiveness evaluation should focus instead on total trips 
on the project without giving extra credit to a particular type of 
passenger. As noted above, FTA is not adopting the alternative approach 
received in a comment that was described in the earlier section of this 
document under the mobility measure since it was not fully described, 
it would appear to involve a cumbersome process, and it would not meet 
some of the streamlining goals intended by this final rule.
    FTA notes major transit capital projects may serve worthwhile 
purposes beyond maximizing travel time savings, including improving 
accessibility to transit dependent persons, providing additional travel 
alternatives to the automobile, supporting changes in land development 
patterns around stations that may help to reduce sprawl and slow 
further congestion in the future, and improving environmental outcomes. 
The measure for the cost-effectiveness criterion is established in 
statute, and FTA is not proposing to change it as part of the 
rulemaking process, but rather is describing how the measure will be 
calculated, evaluated, and rated in Appendix A of the regulation. In 
addition, FTA is requesting comments in the revised proposed policy 
guidance published today on the method for calculating cost per trip. 
FTA notes that projects that produce significant travel time savings 
are likely to attract many riders since travel time is a major 
determinant of a traveler's choice of mode. Hence, the selected measure 
of cost-effectiveness does in fact account for reductions in travel 
time even if travel time savings, per se, is no longer the measure 
being utilized. FTA also notes that the calculation of net travel time 
savings is significantly more complex and subject to error compared to 
the calculation of estimated trips.
    Comment: Three comments raised points related to the travel demand 
models used to forecast trips on the project that is used in the cost-
effectiveness calculation. One comment stated no empirical evidence 
exists for the mode-specific constants used in travel forecasts. 
Another requested clarification on how special-event ridership would be 
treated under the proposed cost-effectiveness measure. The third 
comment encouraged FTA to continue to allow the use of spreadsheets and 
other travel model alternatives in developing ridership estimates for 
short streetcar segments.
    Response: As described in the NPRM, FTA notes that it is all the 
attributes of a mode that cause riders to change modes, but that some 
cannot be modeled. Thus, FTA believes that mode-specific constants 
remain a good proxy for such un-modeled factors in travel demand 
models. FTA currently allows inclusion of special-event trips in 
ridership totals and will continue to do so. Sponsors of projects may 
propose use of simplified ridership estimating approaches to FTA. As 
outlined in FTA's Reporting Instructions, project sponsors should 
contact FTA to discuss potential alternate analytical techniques when 
beginning an alternatives analysis. If a sponsor uses a simplified 
ridership estimating approach, FTA will review the reasonability of the 
approach and the resulting ridership projections as it does today.
    Comment: One comment requested FTA reconsider its decision not to 
allow regional differences in calculating project costs. Another 
comment recommended FTA require project sponsors to analyze baseline 
causes of delay and to compare current transit travel speeds with 
estimated free-flow travel speeds.
    Response: As stated in the NPRM, FTA believes it is necessary to 
evaluate projects consistently rather than based on regional 
differences since this is a national program with greater demand for 
funds then there is supply of funds. Regarding travel speeds, FTA 
believes it is more appropriate to focus on total usage of the project 
in the cost-effectiveness calculation rather than travel time saved. 
The state of the art for reliably estimating travel time saved is not 
sufficiently advanced to make that method more appropriate than 
estimating total usage. Moreover, comfort, convenience, frequency of 
service, and travel time reliability will produce increased ridership, 
and thus will be captured in the number of trips on the project.
b. Discount Rate
    Comment: Nine comments supported FTA's proposal to use a two 
percent discount rate for calculation of annualized capital costs for 
use in the measures of cost-effectiveness and environmental benefits. 
One comment stated two percent is too low and recommended a three 
percent discount rate.
    Response: FTA is adopting the proposed two percent discount rate 
based on the fact that these are long term investments.
c. Cost per Trip Measure
    Comment: Twenty-five comments supported FTA's proposed change to a 
cost-per-trip measure of cost-effectiveness. Nine of these comments 
requested FTA clarify that a trip is defined as an ``unlinked passenger 
trip'' or ``boarding'' for the purposes of the measure. Two comments 
proposed defining a trip as a ``passenger riding on the proposed 
project,'' but one of these comments made reference to Small Starts 
projects only. One comment made a series of suggestions, summarized 
earlier in this document for the horizon year, discount rate, and other 
values that should be used in the cost-per-trip calculation.
    Seven comments opposed the replacement of the current cost-
effectiveness measure with the proposed

[[Page 2007]]

cost-per-trip measure. Of these, five requested travel time savings be 
retained as part of the measure, one requested benefits gained by 
reducing congestion for existing users of the transit system be 
considered, and one requested the current measure be retained as is.
    Response: FTA is adopting the proposed cost-per-trip measure of 
cost-effectiveness, except that no additional weight will be assigned 
to trips made by transit dependent persons. MAP-21 requires the use of 
cost per trip as the measure of cost-effectiveness. The definition of a 
trip in this measure is ``linked trip using the project,'' which FTA 
defines in the revised proposed policy guidance being published 
concurrently with this final rule. To support the streamlining of New 
and Small Starts procedures, FTA will not use multiple measures of 
cost-effectiveness.
    FTA believes travel time savings can be an important benefit of a 
major transit investment, but observes they have been challenging to 
estimate reliably. The proposed trip-based measure is intended to be 
easier to forecast while still providing a good indication of project 
merit.
    FTA has addressed comments on the horizon year, discount rate, and 
other parameters of the cost-per-trip measure elsewhere in this final 
rule.
d. Factor-Specific Breakpoints
    Comment: Three comments recommended FTA develop cost-effectiveness 
breakpoints according to the objectives and characteristics of 
projects, such as mode-specific breakpoints.
    Response: FTA is using a set of cost-effectiveness breakpoints that 
will apply to all New Starts projects and different set of breakpoints 
that will apply to all Small Starts projects. Because MAP-21 specifies 
the benefits of Small Starts project must be compared to the Federal 
share, the breakpoints will be different than for New Starts where the 
benefits are compared to the annualized capital and operating cost of 
the project. Having mode- or characteristic-specific breakpoints would 
imply that FTA weights trips and allocates funds according to these 
factors, which it does not.
e. Elimination of Baseline Alternative Requirement
    Comment: Thirty-eight comments supported FTA's proposal to 
eliminate the requirement for a baseline alternative for the purposes 
of calculating cost-effectiveness. Two comments opposed the proposal.
    Response: FTA is adopting its proposal to eliminate the baseline 
alternative requirement because of the streamlining benefits it will 
achieve for the New Starts and Small Starts process. Further, MAP-21 
explicitly calls for use of the ``no-action'' alternative for Small 
Starts projects. Project sponsors have had to spend a significant 
amount of time, money, and effort to develop a baseline alternative. 
Often the baseline alternative is one that is never under serious 
consideration locally for actual construction because it is not desired 
by local leaders. Thus, developing the baseline alternative becomes 
simply a cumbersome exercise necessary to meet Federal requirements. 
The NEPA process requires project sponsors to consider a reasonable 
range of alternatives, so eliminating the development of a baseline 
alternative in no way eliminates the need for sponsors to look at 
various alternatives when making investment decisions. FTA required the 
development of a baseline alternative because of the use of incremental 
measures, particularly cost-effectiveness, and the need to help level 
the playing field for evaluation of a wide variety of projects 
nationwide. However, developing a baseline alternative was found to be 
a burdensome process and confusing to many, with the resulting 
calculation of cost-effectiveness not readily understood by the general 
public. By moving to a cost-effectiveness measure based on cost per 
trip as required in law, which is not an incremental measure, 
developing the baseline alternative as the point of comparison is no 
longer necessary. Furthermore, FTA believes it is the responsibility of 
local decision makers to balance the costs, benefits, and risks of 
various alternatives. Local officials are closest to the unique 
circumstances of their area and are in the best position to consider 
all relevant factors when developing alternatives for consideration. 
These analyses can be conducted as part of the metropolitan 
transportation planning and NEPA processes. Under MAP-21, only once a 
project has cleared both processes and a Locally Preferred Alternative 
is adopted into the Long Range Transportation Plan is a project ready 
to be evaluated for entry into the newly defined ``engineering'' stage 
for a New Starts project.
f. Pre-Qualification--Cost-Effectiveness-Specific
    Comment: Three comments supported FTA's proposal to develop 
warrants that would allow projects to pre-qualify as cost-effective. 
One comment suggested a project be able to qualify for the same cost-
effectiveness rating as an earlier project in the same corridor if its 
annualized cost per trip is equal to or less than that of the earlier 
project. Another comment requested that warrants not favor a particular 
mode.
    Response: FTA is adopting in this final rule the ability to develop 
warrants. More information on warrants will be proposed in future 
policy guidance.
g. Betterments/Enrichments
    Comment: Forty-five comments supported the proposal to exclude 
certain items, originally defined as ``betterments,'' from the 
calculation of cost-effectiveness. Of the comments that supported this 
proposal, nine supported excluding the costs of pedestrian and bicycle 
facilities and six supported excluding the costs of LEED design 
elements. Twelve of the comments stated that allowable ``betterments'' 
should be defined by FTA in policy guidance, and four suggested FTA use 
the same definition of ``betterments'' used in Circular 5010.D. Ten 
comments requested FTA be flexible in the definition of betterments to 
reflect local conditions. Most of the comments that supported excluding 
``betterments'' provided lists of various elements to be considered as 
``betterments,'' including items needed for climate adaptation, energy 
efficiency measures, safety improvements, noise mitigation, acquiring 
land for affordable housing, energy reduction elements comparable to 
LEED certification, structured parking instead of surface parking, off-
site pedestrian and bicycle improvements, storm-water management, and a 
variety of other activities. Three comments opposed the inclusion of 
parking. Two comments were opposed to excluding the cost of 
``betterments'' from cost-effectiveness altogether. One of these two 
comments suggested that categorizing elements as ``betterments'' may 
result in them becoming ineligible for funding in the future. The other 
suggested that ``betterments'' such as LEED certification would be more 
appropriately captured under the environmental benefits measure rather 
than the cost-effectiveness measure. Several comments suggested using a 
different term than ``betterments'' to reduce confusion with the 
definition of ``betterments'' listed in Circular 5010.D. Two comments 
proposed capping the cost-reduction of ``betterments'' at 10 percent of 
project cost.
    Response: As suggested by several comments, FTA is adopting the 
term ``enrichments'' rather than the term ``betterments'' to avoid 
confusion with ``betterments'' defined in Circular

[[Page 2008]]

5010.1D. FTA believes allowing clearly defined ``enrichments'' (those 
elements that go beyond what is needed for the basic functioning of the 
project) to be excluded from the cost part of the cost-effectiveness 
calculation for New Starts projects is reasonable and can help to 
remove disincentives from including higher cost elements whose benefits 
would not be captured by the final rule's limited number of measures. 
For example, since the environmental benefits measure is focused on 
those impacts that come from a reduction in VMT, the environmental 
benefits of LEED certification of the transit facilities would not be 
captured in that measure. Likewise, most local travel models around the 
country are not sensitive enough to account for the number of trips 
that would be induced by bicycle improvements included in a project 
such as bike racks or lockers. FTA agrees with the comment received 
stating that New Starts cost-effectiveness should include only the 
costs necessary to produce the benefits examined in the cost-
effectiveness calculation rather than include all costs. FTA is 
proposing to define the concept of ``enrichments'' in the Appendix to 
this final rule and to provide a list of the ``enrichments'' it will 
allow to be excluded from the New Starts cost-effectiveness calculation 
in the revised proposed policy guidance being published today 
concurrently with this final rule. Items being proposed as 
``enrichments'' include artwork, landscaping, pedestrian and bicycle 
improvements, sustainable building design elements, alternative fueled 
vehicles, and joint development costs. FTA agrees the benefits of such 
features are not often captured in the primary benefits being evaluated 
in the cost-effectiveness criterion, but that these features 
nonetheless produce desirable outcomes such as reduced facility energy 
use, increased ridership, and/or improved aesthetics and quality of 
life factors. Although there is merit to the list of concurrent non-
project activities or ``betterments'' described in Circular 5010.D, FTA 
proposes to limit the number of scope elements that may be considered 
``enrichments'' to only those items non-integral for the planned 
functioning of the proposed project. Many comments expressed support 
for maintaining flexibility in what can be considered an 
``enrichment,'' but a similar number of comments expressed concerns 
about prolonged negotiations with FTA over what may be considered as an 
``enrichment.'' Thus, FTA is proposing a definition of ``enrichments'' 
in the Appendix to this final rule, and providing a list of allowable 
``enrichments'' in the revised proposed policy guidance made available 
for comment today. FTA believes the list of ``enrichments'' that has 
been developed is generally consistent with the proposals suggested in 
the comments on the NPRM. The list of enrichments can be revisited in 
future proposed policy guidance, however, as more information becomes 
available. Further, FTA believes its approach for considering 
``enrichments'' is consistent with its streamlining goals in that it 
will not require significant discussion or ``back and forth'' 
verification between project sponsors and FTA. FTA is not including 
parking in the list of proposed ``enrichments'' because some parking is 
clearly integral to some projects. FTA does not believe the 
``enrichments'' it is proposing in the policy guidance would exceeded 
10 percent of a proposed New Starts project's total cost.
    For Small Starts projects, MAP-21 explicitly calls for FTA to 
establish ratings based on ``an evaluation of the benefits of the 
project as compared to the Federal assistance to be provided.'' 
Accordingly, FTA will adopt in this final rule a cost-effectiveness 
measure for Small Starts that compares the Federal share requested to 
trips taken on the project. FTA will not subtract the cost of 
``enrichments'' from the Federal share considered in the cost-
effectiveness measure for Small Starts.
4. Operating Efficiencies
    Comment: Five of the nineteen comments received agreed with the 
proposed ``operating cost per place-mile'' measure for evaluating 
operating efficiencies. Three agreed without any comment and one 
commented that the project sponsor could lower operating cost per place 
mile artificially by adding more capacity than warranted. The same 
comment suggested consideration of efficiency factor adjustments to the 
measure to allow closer analysis of large and small systems. Another 
comment suggested FTA implement a spreadsheet or simple tracking tool 
to calculate the measure and requested that the vehicles and transit 
services currently in a corridor not have a bearing on how vehicles and 
transit services for a proposed project are defined for the purposes of 
calculating place-miles.
    Of the fourteen comments that disagreed with the new measure, most 
preferred using the current measure, which is operating cost per 
passenger mile. The reason most often cited for not liking the proposed 
measure was that it considers only service provided and not the level 
of service utilization. Thus, the comments stated the new measure seems 
to reward transit projects that simply provide more capacity by 
increasing frequencies even if those frequencies are not warranted 
based on estimated ridership levels. Several comments also stated the 
proposed measure could favor larger systems over smaller systems. One 
of the comments stated concerns with how FTA would consider standing 
capacity when calculating place-miles and suggested that FTA would 
allow certain modes such as bus and heavy rail to assume standing 
capacity but not commuter rail. Another comment stated that in the 
determination of place-miles, peak loads should not exceed identified 
levels of service from TCRP Report 100 (``Transit Capacity and Quality 
of Service''). A third comment suggested FTA use ``operating cost per 
place-hour'' instead given that it measures service provided as 
``operating cost per place-mile'' but does not reward projects in areas 
where commute distances have ballooned due to sprawl and insufficient 
planning for growth.
    Response: MAP-21 eliminates ``operating efficiencies'' as a project 
justification criterion and instead calls for including a ``congestion 
relief'' criterion Accordingly, FTA will no longer include a measure 
for operating efficiencies. Because a measure for ``congestion relief'' 
was not proposed in the NPRM, FTA is proposing in the revised policy 
guidance published concurrently with this final rule to assign a medium 
rating for congestion relief for all projects seeking New and Small 
Starts funds until such time as subsequent interim policy guidance and 
rulemaking can be completed to allow for public comment on a proposed 
measure for the criterion.
5. Economic Development Effects
a. General Comments
    Comment: Forty-two general comments were offered on the proposed 
economic development criterion, which was that FTA would evaluate and 
rate the extent to which a proposed project is likely to enhance 
additional, transit-supportive development based on the existing plans 
and policies to support economic development proximate to the project. 
Twenty-six of these agreed with the proposed economic development 
criterion. Of these, 10 offered general support for including economic 
development in project evaluations; three suggested broader measures 
for economic development and consideration of scenario-based analysis 
of direct changes to VMT; two supported the use of more qualitative 
measures; one suggested the inclusion

[[Page 2009]]

of the track record of jobs created; one recommended additional 
research; one suggested assessing how local and regional plans and 
policies would allow for future transit-oriented development; and eight 
did not make specific recommendations.
    Six comments disagreed with the proposed economic development 
criterion. Two of these comments suggested additional research. One 
comment stated there is a contradiction between corridor-level versus 
regional-level analysis. One comment asserted that FTA's proposal does 
not adequately distinguish between economic development and land use. 
One comment stated that transit's ability to reduce transaction costs 
and increase productivity is not sufficient to cluster or intensify 
development. One comment stated that transit agencies have little land 
use authority.
    Ten of the comments received were neutral about the proposed 
economic development criterion or did not offer a clear position. Five 
of these comments pertained to jobs. They mentioned evaluating the 
percent of jobs accessible via transit before and after project 
implementation, consideration of job growth policies and job creation 
and potential, and the use of a warrant-based approach based on current 
levels of employment density. Two comments stated higher land values 
could be a negative effect of transit. One of the two comments 
recommended more attention to value capture. Three comments suggested 
consideration of plans and policies or proactive measures such as 
funding committed through public-private partnerships.
    Response: FTA appreciates the general support of the improved 
economic development criterion. FTA believes the clustering of 
development around a transit investment is a key measure of the value 
of the project. Transit projects can help local areas improve the 
livability and sustainability of their communities by increasing 
transportation choices and access to transportation services; improving 
energy efficiency, reducing greenhouse gas emissions and improving the 
environment; and improving the environmental sustainability of the 
communities they serve. Improved access to jobs and activity centers 
can contribute to local economic growth. FTA agrees with the comments 
that suggest additional research for this measure.
b. Affordable Housing
    Comment: Thirty-nine comments were received in response to FTA's 
proposal to examine the plans and policies in place to maintain or 
increase affordable housing in the project corridor under the economic 
development criterion.
    Twenty-six of the comments agreed with including affordable housing 
plans and policies in the evaluation of economic development. Of these 
comments, the majority gave general support for evaluating affordable 
housing and transit-oriented development. Several recommended FTA 
define affordable housing and provide further guidance about how it 
would be evaluated. Suggestions provided by several comments included 
examining plans and policies related to employer-assisted housing, 
community land trusts, inclusionary zoning, programs to preserve 
subsidized housing, and programs for attracting workforce and market-
rate housing. Two comments suggested FTA examine affordable housing 
funding per track mile. A few comments stated FTA should coordinate 
with other agencies on developing how it would evaluate plans and 
policies to support affordable housing, including the U.S. Department 
of Housing and Urban Development (HUD) and the Partnership for 
Sustainable Communities. One comment stated FTA should examine the 
affordability of new residential development near transit stations.
    Three comments disagreed with including plans and policies to 
maintain or increase affordable housing under the economic development 
criterion. One comment stated affordable housing should be addressed 
through public policy, rather than transit policy. One comment 
suggested it should be considered under the land use criterion, not the 
economic development criterion. Another comment stated plans and 
policies should not be included because transit agencies can only 
support, not mandate, plans and policies.
    Ten of the comments received about the proposal to evaluate plans 
and policies to maintain or increase affordable housing were neutral or 
did not offer a clear position. Two of these comments suggested giving 
greater weight to proposals that exceed a minimum number of accessible 
units and that maximize three-bedroom family-sized units. One comment 
recommended that FTA develop strategies that communities can use to 
preserve affordable housing. Another comment recommended including 
``workforce housing.'' One comment suggested rewarding areas that 
minimize displacement. One comment proposed ``affordability of new 
residential development near transit stations.'' One comment stated 
that townhouses should meet ICC-ANSI Type C unit requirements for 
``visitable'' housing. One comment supported more FTA efforts to 
collaborate with others. Finally, one comment recommended FTA focus on 
projects that reduce combined housing and transportation costs.
    Response: FTA is expanding its current practice of evaluating 
transit supportive plans and policies under economic development by 
including an examination of the plans and policies to maintain or 
increase the supply of affordable housing in the project corridor 
because FTA believes that maintaining affordable housing near transit 
creates more inclusive communities and helps to ensure lower income 
families have ready access to transit. FTA has outlined in the revised 
proposed policy guidance published today how it proposes to examine 
affordable housing plans and policies. The revised proposed policy 
guidance has been developed in coordination with HUD and is subject to 
public comment. FTA appreciates the suggestions provided and has taken 
them into consideration. In addition, FTA will evaluate the amount of 
existing affordable housing in the project corridor under the land use 
criterion.
    FTA disagrees with comments stating affordable housing should not 
be addressed through transit policy based on the idea that affordable 
housing is a land use issue and not an economic development issue, and 
the comments stating that affordable housing plans and policies should 
not be included because transit agencies cannot mandate these plans and 
policies. Affordable housing is an economic development and land use 
issue because transportation access to affordable housing has great 
potential to stimulate new development and foster the future economic 
growth of an area. FTA recognizes transit agencies cannot mandate these 
plans and policies and they are instead developed by localities. But 
FTA believes the nature of the area surrounding transit has a great 
impact on its success, and, thus, through these requirements FTA 
encourages transit agencies to coordinate and form partnerships with 
localities to guide transit-supportive development and affordable 
housing.
c. Job Creation
    Comment: Six comments were received in response to FTA's proposal 
to report under the economic development criterion the number of 
domestic jobs created by the design,

[[Page 2010]]

construction, and operation of the proposed project. Four of the 
comments agreed with including job creation as a measure of economic 
development. One of these suggested ``full-time equivalent jobs'' as 
the measure. Another recommended reviewing the track record of local 
transit supportive policies and domestic jobs created. One comment 
disagreed with the consideration of job creation, stating any figures 
would be based on industry averages and not on specific work plans for 
constructing the project. Thus, the commenter felt such a measure was 
likely to correlate directly with project cost and did not need to be 
reported separately. Another comment neither agreed or disagreed, but 
suggested FTA develop a methodology for calculating indirect jobs based 
on a measurement of a station area.
    Response: FTA believes the number of domestic jobs related to the 
design, construction, and operation of a project is one indicator of 
how the transit investment contributes to local and regional economic 
development. FTA is not specifying a methodology for estimating job 
creation, but rather is allowing project sponsors to determine how to 
calculate the figure. FTA would not use the estimated number of 
domestic jobs in development of the economic development rating, but 
would simply report the number for the project as an informational 
item. FTA acknowledges that these jobs do not necessarily reflect net 
increases to overall U.S. employment. A net increase would result to 
the extent that these workers would otherwise be unemployed or 
underemployed. When the economy is at full employment, jobs related to 
New Starts and Small Starts projects are unlikely to have an impact on 
net overall U.S. employment; instead, labor would primarily be shifted 
from one sector to another. On the other hand, during a period of high 
unemployment, jobs related to New Starts and Small Starts projects may 
affect net overall U.S. employment because the labor market is not in 
equilibrium.
d. Optional Quantitative Analysis
    Comment: Thirty-five comments were received in response to FTA's 
proposal to allow project sponsors, at their option, to perform a 
quantitative analysis that would estimate the change in indirect VMT 
resulting from changes in development patterns anticipated with 
implementation of the proposed project and then monetize the resulting 
benefits for comparison with the same annualized capital and operating 
cost of the project as used in the cost-effectiveness measure.
    Twenty-one of the comments agreed with allowing an optional 
quantitative analysis to be prepared and submitted for evaluation under 
the economic development criterion. Several suggested FTA continue 
research in this area and develop guidance or a specific methodology 
for undertaking the analysis. Two comments supported the optional 
quantitative analysis, but were concerned with monetizing the benefits 
and comparing them to cost, stating it could give the impression the 
measure is a cost-benefit calculation that intends to capture all 
benefits when it does not. One comment supported an analysis of 
workforce access for New Starts projects only and not for Small Starts 
projects. One comment agreed with an optional quantitative scenario 
analysis but felt that VMT evaluation should be kept under the 
environmental benefits criterion.
    Nine comments disagreed with the proposal to allow an optional 
quantitative analysis. Three of these comments asserted such an 
analysis is not well linked with economic development. Three of the 
comments stated the methodology is unclear and offered an alternative 
approach. One such suggested approach was to use direct measures such 
as increased density, job density, affordable housing, and property tax 
records. Another suggested approach was to consider past regional 
performance. One comment stated that increased density does not 
translate to less VMT or job creation. Several of the comments that 
disagreed with the proposal expressed concern with monetizing the 
benefits.
    Five of the comments received were neutral or did not offer a clear 
position in agreement or disagreement. Four of these comments wanted 
the analysis to examine job accessibility such as change in station 
area access to the regional work force within 40 minutes of transit 
travel time. One stated that FTA should acknowledge that the purpose of 
many projects is to retain existing development levels.
    Response: FTA believes allowing project sponsors the opportunity to 
do scenario analyses and estimate indirect changes in VMT resulting 
from changes in development patterns provides additional insight into 
the potential economic development effects of the proposed project. 
Such studies can assess whether denser land use patterns in the 
corridor that may result from implementation of the project will 
produce fewer VMT than if the development occurred elsewhere in the 
region at lower densities. Such analyses are not expected to produce 
results suggesting that the project is likely to induce additional 
growth in a region as a whole, but instead are likely to focus 
primarily the impacts of redirecting land development in the region. 
FTA notes that a recent Transit Cooperative Research Program (TCRP) 
report--``TCRP Web Only Document 56--Methodology for Determining the 
Economic Development Impacts of Transit Projects''--may provide useful 
insight into how such studies could be conducted. Such studies could 
lead localities and metropolitan planning organizations to reexamine 
growth plans and policies to reinforce transit-supportive development. 
FTA already uses direct measures such as existing population and 
employment densities to rate projects under the land use criterion. 
Similarly, FTA already considers past demonstrated regional performance 
in implementing transit supportive plans and policies under the 
economic development criterion and plans to continue to do so.
    For some time, FTA has been researching methodologies for 
estimating economic development benefits resulting from implementation 
of transit projects. FTA sought comment on one potential approach it 
developed for undertaking such an analysis, but was told in the public 
comments received that the approach was too cumbersome and time 
consuming. Through the ANPRM, FTA again sought ideas on how to examine 
the economic development effects of transit projects. Again, no clear, 
consistent methodology was suggested that could be implemented 
nationwide using readily available and verifiable data. Thus, FTA is 
not prescribing an approach, but allowing project sponsors to undertake 
the analysis only at their option and only with a methodology they 
believe makes sense. FTA will continue to research better ways to 
measure economic development and perhaps propose a specific methodology 
in future policy guidance.
    FTA understands the concerns noted with monetizing the benefits 
resulting from the change in indirect VMT and comparing them to the 
annualized capital and operating cost of the project, but believes 
under the multiple measure evaluation approach specified in law no 
single measure will be interpreted as a full cost-benefit analysis.
6. Policies and Land Use Patterns That Support Public Transportation
a. General Comments
    Comment: Twenty comments were offered on FTA's proposal to base the

[[Page 2011]]

land use criterion on the existing population and employment densities 
in the corridor and the amount of existing publically-supported housing 
in the corridor today. Twelve of these comments agreed with the 
proposed land use criterion. One of these emphasized that parking 
management and pricing policies are key contributors to making transit 
effective and suggested giving credit to communities that develop 
parking strategies that complement transit mobility goals. One of the 
comments in favor of the proposed approach suggested the breakpoints 
for the land use measures be geared to the cost of the project and the 
level of population density. Another in favor of the proposed approach 
expressed appreciation for publically supported housing terminology 
that permits consideration of both traditional federally-supported 
public housing as well as other affordable housing developments subject 
to long-term affordability restrictions. This comment recommended FTA 
define the term ``publically supported housing'' in its policy guidance 
and provided thoughts on what it should include. One comment suggested 
adding a review of bicycle and local transit-friendliness of the 
project area under land use.
    Four comments disagreed with the proposed land use criterion. Two 
suggested that rather than looking at existing land use only under this 
criterion, FTA should also examine regional and local planning 
documents and policies to support transit-oriented development. Another 
comment noted FTA does not explain why it proposed to focus on existing 
conditions only under the land use criterion rather than also looking 
at future conditions. One comment stated transit agencies have little 
land use authority and cannot control what is built.
    Four of the comments received on the proposed land use criterion 
were neutral or did not offer a clear position. One of these 
recommended FTA clarify how it will evaluate non-central business 
district parking. One suggested adding to the evaluation the number of 
existing jobs within a corridor. One recommended a higher weight for 
the land use criterion given that existing patterns in corridors 
provide strong indicators of project success for environmental 
benefits, economic development, mobility, and operating efficiencies. 
One advocated that poor pedestrian accessibility reduce a land use 
rating.
    Response: FTA stated previously on numerous occasions that it is 
difficult to separate land use and economic development when evaluating 
proposed projects. Thus, for quite some time, FTA chose to evaluate and 
rate them together. But the SAFETEA-LU Technical Corrections Act 
required FTA to give each of the six project justification criteria 
comparable, but not necessarily equal, weight, which required FTA to 
evaluate land use and economic development separately and give them 
distinct ratings. Consequently, FTA chose to look only at existing land 
use under the land use criterion and to examine the potential the 
project has of leading to economic development by evaluating transit 
supportive plans and policies under the economic development criterion. 
MAP-21 renames this criterion slightly to ``Policies and Land Use 
Patterns That Support Public Transportation'' and continues to require 
that the evaluation criteria be given comparable, but not necessarily 
equal weights. Thus, land use and economic development must be 
differentiated. To evaluate land use, FTA will continue to examine 
existing corridor and station area development, including population 
and employment within one-half mile of station areas. FTA will also 
continue to examine corridor and station area parking supply, costs, 
and parking strategies that support transit-supportive development. 
Evaluation of pedestrian accessibility will remain a corridor 
characteristic that FTA examines under the land use criterion as well. 
Existing site and urban design and the mix of uses serve as key 
features for evaluating the station area development character under 
the land use criterion. Lastly, FTA believes examining the amount of 
affordable housing in the corridor today makes sense given the higher 
propensity of lower income individuals to take transit. FTA will 
evaluate the existing amount of affordable housing in the project 
corridor under the land use criterion. Use of this broader terminology 
in the Appendix to the regulation will ensure that consideration is 
given to more than just federally-supported public housing. In this 
measure, FTA is assessing the current situation with regard to 
affordable housing. In contrast, the economic development measure is 
assessing the local plans and policies in place to help ensure 
affordable housing in the corridor is maintained or increased.
    FTA does not agree the breakpoints for the various measures under 
the land use criterion should be based on the cost of the project or 
the level of population density. Effective transit service requires 
sufficient densities of people and destinations to make it affordable 
and efficient, regardless of project cost.
    FTA agrees transit agencies often have little or no authority over 
land use decisions. But FTA believes that sufficiently dense land uses 
are a significant factor in the success of a transit project, and thus 
FTA expects that transit agencies can engage in discussions with the 
localities that have decision-making authority over land use in the 
project corridor.
b. Publically Supported Housing
    Comment: Twenty-two comments were offered in response to FTA's 
proposal to include an examination of the amount of publically 
supported housing under the land use criterion.
    Nineteen of these comments agreed with the proposal. Most of the 
comments supported this approach because of the link between 
transportation and housing policy and the fact that lower income 
families tend to use transit more frequently than higher income 
families and provide stable transit ridership and revenue. Several of 
the comments expressed concern that using HUD data only in the 
evaluation might underrepresent publically supported housing, and 
suggested a more expansive approach be used. Some comments recommended 
a broad definition of publically supported housing that includes 
housing supported by low-income housing tax credits, housing supported 
by other affordable housing programs, and housing that includes rent-
restricted or income-restricted units per a government program. One 
comment suggested using the term ``publically assisted housing'' rather 
than ``publically supported housing.''
    Three comments disagreed with the consideration of publically 
supported housing. One of these comments suggested that the proposed 
approach would duplicate the consideration given under the mobility 
measure (double weight for transit-dependent trips). One comment 
suggested FTA consider all housing units in the measure.
    Response: FTA agrees that transportation and housing policy should 
be linked. FTA appreciates the comments and suggestions received for 
how FTA should examine affordable housing in the corridor. Although FTA 
recognizes there may be other methods for calculating the amount of 
publically supported or affordable housing in the project corridor, our 
goals for developing a streamlined and simplified evaluation process 
require that FTA stick with measures that are easily calculated based 
on available data. Thus, FTA is outlining in the revised

[[Page 2012]]

proposed policy guidance being published today how it will evaluate the 
amount of existing affordable housing in the project corridor using 
data obtained from local housing agencies and the Census. Use of this 
broader terminology in the Appendix to the regulation will ensure that 
consideration is given to more than just federally-supported public 
housing. FTA notes that the measure being used focuses on housing units 
defined as affordable and does not consider the possible use of housing 
vouchers.
    FTA does not believe an evaluation of the extent of affordable 
housing in the corridor is duplicative of the trips made by transit 
dependent persons considered under the mobility measure, just as trips 
on the project used in the mobility criterion is not the same as total 
population and employment in the corridor evaluated under the land use 
criterion. The numbers are correlated but not the same. Thus, FTA 
believes it is prudent to examine them. The mobility criterion 
evaluates estimated usage of the project, while the land use criterion 
evaluates the transit supportive nature of the corridor in which the 
project is being located.
6. Other Factors
    Comment: FTA received a total of 16 comments related to ``other 
factors.'' One comment suggested project sponsors be given the 
opportunity to define the key features of their projects that might 
qualify as an ``other factor.'' Several comments made specific 
suggestions of possible other factors including: user benefits, if that 
measure is no longer used for mobility improvements and cost-
effectiveness; multimodal connections; livable communities; other 
public investments; innovative construction or procurement methods; 
consistency with Regional Sustainability Plans; and unusually large 
amounts of health, energy use, or traffic impacts. One comment 
suggested that consideration of other factors is not authorized in law. 
One comment suggested that the ``trip not taken'' be included as an 
``other factor.'' Two comments suggested that adequate facilities 
should be provided to transit dependent users, particularly those with 
disabilities. Two comments suggested that project sponsors should be 
given incentives to ensure adequate consideration of fair and 
affordable housing and environmental justice. On the other hand, one 
comment questioned why environmental justice was included as an ``other 
factor.'' Two comments suggested trips by transit dependent persons be 
counted as an ``other factor,'' rather than being treated as part of 
the mobility and cost-effectiveness criteria. One comment suggested 
high gasoline price scenarios be explicitly considered. Another comment 
suggested projects in areas with a strong transit riding culture or in 
areas where consideration is given to communities of concern be given 
priority.
    Response: MAP-21 eliminates ``other factors'' as a separate 
consideration in the evaluation process. Accordingly, this final rule 
does not include ``other factors.''

C. Local Financial Commitment

    Comment: Thirty comments were received on FTA's proposal to 
evaluate local financial commitment by examining: current capital and 
operating condition (25 percent of rating); commitment of capital and 
operating funds (25 percent of rating); reasonableness of capital and 
operating cost estimates and planning assumptions/capital funding 
capacity (50 percent of rating); and the non-New Starts share of the 
proposed project (can raise the overall local financial commitment 
rating one level if greater than 50 percent). Of these, twenty-one 
agreed with the proposed approach, two disagreed with the proposed 
approach, and six neither agreed nor disagreed but opined on alternate 
approaches for evaluating some of the metrics.
    Of the comments that agreed with the proposed approach, several 
stated that combining the evaluation of the capital and operating plans 
made sense given their interdependency. A majority were in favor of 
FTA's proposed approach of encouraging overmatch by using the share of 
non-New Starts funding contributed to the project as a way to boost the 
overall local financial commitment rating one level. These comments 
suggested further that FTA consider overmatch provided on the project 
sponsor's entire capital program. One of these suggested that rather 
than giving a one rating level boost to projects with significant 
overmatch, that FTA instead develop a graduated scale of rating 
improvements that could be possible based on the amount of overmatch.
    A majority of the comments that agreed with the proposed approach 
also supported the expansion of pre-qualification or warrants to the 
local financial commitment rating of New Starts projects. Specifically, 
these comments suggested the same warrant that applies to Small and 
Very Small Starts projects be applied to New Starts projects. In other 
words, the comments suggested that if the estimated operating and 
maintenance cost of the proposed New Starts project is five percent or 
less of current system-wide operating and maintenance costs, the 
project should qualify for an automatic local financial commitment 
rating of medium without having to submit a detailed financial plan for 
evaluation and rating.
    Several comments received in support of FTA's proposed approach for 
evaluating local financial commitment suggested FTA allow additional 
flexibility as to when funds need to be committed and in what shares 
under the commitment of funds subfactor. A few of these comments made 
specific reference to clarifying the commitment of funds necessary for 
design-build projects. Another comment suggested FTA be flexible when 
evaluating the current condition of project sponsors that have had to 
cut service due to extenuating circumstances. Another suggested that 
FTA's consideration of fleet age under the current condition subfactor 
take into account future vehicle purchases programmed in the long-term 
financial plan as well as reasonable vehicle life-cycles.
    Another comment received in support of FTA's proposed approach 
suggested FTA ensure nationwide consistency, while considering 
geography, local economic conditions, and the age of the local transit 
system in its evaluation.
    Of the comments received on the NPRM that disagreed with FTA's 
proposed approach to evaluating local financial commitment, one 
suggested FTA not use fleet age as a metric under the current condition 
subfactor. Instead, the comment suggested FTA use mean distance between 
failures as the metric. The comment felt using fleet age alone does not 
take into consideration aggressive preventative maintenance and 
rehabilitation programs that may be in place to extend the useful lives 
of vehicles.
    Another comment that disagreed with FTA's proposed approach 
suggested FTA eliminate the examination of whether there have been 
significant service cutbacks in recent years when evaluating the 
current condition of the project sponsor. This comment felt service 
cuts do not necessarily reflect an agency's financial condition and the 
other metrics identified in FTA's proposal for evaluating current 
condition provide a more accurate representation.
    Of the comments received on the NPRM that neither agreed nor 
disagreed with FTA's proposed approach, one suggested extra credit 
should be given in the evaluation process to project sponsors that are 
able to secure private contributions to the project. This same comment 
suggested FTA include

[[Page 2013]]

measures that will encourage states or regions to implement new taxes 
or user fees. Another comment suggested instead of evaluating the 
commitment of capital and operating funds for the project and the 
entire transit system, FTA instead look at ``the commitment of capital 
and operating funds for the project and for maintenance of effort 
towards its own local transit system(s) as well as toward any regional 
system which the project sponsor is obligated to support financially.'' 
Another urged FTA to recognize that state law or enabling legislation 
may limit a project sponsor's ability to make local financial 
commitments. Similarly, a separate comment stated that local 
legislative limitations may exist that would prevent a project sponsor 
from making capital commitments beyond a five-year timeframe. Lastly, 
one comment mentioned value capture should be used to evaluate local 
financial commitment.
    Response: FTA believes the approach outlined in the NPRM and being 
adopted with this final rule reflects the interaction between capital 
and operating budgets and, therefore, reduces redundancy in the current 
evaluation process. MAP-21 specifies that the proposed New Starts or 
Small Starts share of a proposed project can only help the local 
financial commitment rating and not hurt it. Thus, FTA believes it is 
appropriate to evaluate the share only to the extent that significant 
overmatch is provided. Although FTA understands the reasoning behind 
the comments that suggest FTA consider overmatch on a project sponsor's 
entire capital program rather than simply the proposed project, FTA 
believes such an approach would be difficult to put into practice as 
there would be no way for FTA to verify the data on overmatch submitted 
by project sponsors. Additionally, it is likely such an approach would 
lead to all projects receiving an artificially high local financial 
commitment rating simply because of overmatch provided for ongoing 
capital rehabilitation and repair projects rather than because of the 
strength of the financial plan for constructing and operating the 
proposed project.
    The metrics used to evaluate current condition of the project 
sponsor have worked well for FTA over the past decade to differentiate 
among projects, including fleet age, recent bond ratings, the ratio of 
current assets to current liabilities, and whether there have been 
significant service cuts in the recent past. FTA does not agree that 
service cuts are an ineffective indicator of the current condition of 
the project sponsor. Although service adjustments to improve efficiency 
are routinely made by project sponsors, these do not typically include 
significant service reductions. Significant reductions in service 
generally are not undertaken unless a transit agency is facing a 
sizeable budget shortfall. FTA agrees fleet age in and of itself does 
not reflect the current capital condition of the project sponsor as 
different agencies have difference preventative maintenance and 
rehabilitation cycles for their vehicles. But there is no single 
definition used by the industry for mean distance between failures, and 
FTA would have no way to verify such data, whereas fleet age can be 
verified against what is reported in the National Transit Database. 
Thus, FTA believes fleet age is the best metric to use at this time. 
FTA does not agree that examination of fleet age should take into 
consideration future vehicle purchases. Fleet age is used by FTA to 
evaluate the current condition of the project sponsor, not a future 
condition.
    With regard to the evaluation of the amount of funds committed to a 
project, FTA believes it has clear guidance on how it defines committed 
versus budgeted versus planned funds. These definitions already take 
into consideration unique local circumstances or legislation that may 
make commitment of funds beyond a given timeframe difficult. The law 
requires FTA to evaluate the degree of local financial commitment, 
including evidence of stable and dependable financing sources to 
construct, maintain, and operate the transit system or extension, and 
maintain and operate the entire public transportation system without 
requiring a reduction in existing services. FTA does not believe 
design-build projects should operate under a different set of rules 
with regard to the level of committed funds required at the various 
stages of project development.
    In evaluating the strength of a project sponsor's financial plan, 
FTA believes private contributions and value capture mechanisms should 
be considered in the same way other sources of funds are considered. 
FTA does not believe it is the role of the Federal government to 
encourage states or regions to implement new taxes or user fees.
    In this rule, FTA is including the opportunity for projects to pre-
qualify for various criteria based on project characteristics or the 
characteristics of the corridor in which a project is located. At this 
time, FTA is implementing a pre-qualification or warrant for the 
overall local financial commitment rating for Small Starts and Very 
Small Starts projects only and not for New Starts projects. In future 
policy guidance, FTA may decide to expand local financial commitment 
warrants to New Starts projects. Such guidance would be subject to a 
public comment process.

D. Process for Developing and Overseeing New Starts and Small Starts 
Projects

1. Pre-Award Authority
    Comment: FTA received 18 comments on its proposal to codify current 
practice with respect to those activities for which pre-award authority 
is given and at what points in time, meaning when project sponsors are 
given approval to begin certain activities prior to award of a grant 
but retain eligibility of those activities for future Federal 
reimbursement should a future grant be awarded. All of these comments 
agreed that codification of the practice was desirable, with 12 of the 
comments suggesting that FTA expand the list of activities eligible for 
pre-award authority at various stages of the process. In addition, 
three of the comments suggested that pre-award authority for Small 
Starts be explicitly included.
    Response: Because of the changes made to the steps in the New 
Starts and Small Starts processes by MAP-21, FTA is not finalizing the 
parts of this regulation concerning these steps at this time. This 
includes the provisions related to pre-award authority and letters of 
no prejudice. This will be the subject of subsequent interim policy 
guidance and rulemaking.
2. Alternatives Analysis
    Comment: FTA received six comments suggesting modification of the 
definition of the Locally Preferred Alternative (LPA) selected at the 
conclusion of the alternatives analysis to be the ``locally preferred 
mode and general alignment.'' In addition, four comments suggested the 
regulation be clarified to indicate that alternatives analysis can be 
conducted concurrently with the NEPA requirements and two comments 
suggested that the alternatives analysis requirement can be met during 
the systems planning phase. FTA received one comment suggesting that 
``Suspended Monorail Automated Rapid Transit'' be included in 
alternatives analyses and one comment suggesting that streetcar 
projects should be exempt from the alternatives analysis requirement. 
One comment suggested that lower cost alternatives should be included 
in alternatives analyses and another suggested that pre-screening

[[Page 2014]]

approaches be used in the alternatives analysis process.
    Response: MAP-21 removes the requirement for a separate 
alternatives analysis as a prerequisite for entry into the New Starts 
or Small Starts program. Instead, project sponsors will undertake a 
step called ``project development,'' during which the NEPA process is 
to be completed, a locally preferred alternative is to be adopted and 
included in the region's long range transportation plan, and 
information is to be developed for evaluation and rating of the project 
by FTA. FTA notes that during the NEPA process project sponsors are 
required to consider a reasonable range of alternatives. Thus, while 
the New Starts Alternatives Analysis step is eliminated, project 
sponsors are still required to consider a reasonable range of 
alternatives prior to selection of a locally-preferred alternative, 
based on consideration of a wide range of local goals and objectives in 
the context of the environmental review process. Thus, much of the same 
analysis now undertaken during New Starts Alternatives Analysis will be 
accomplished before a project is identified for advancement into the 
New Starts process. MAP-21 creates a single subsequent step called 
``engineering,'' at which time FTA must evaluate and rate the proposed 
project. In this final rule, FTA is finalizing some of the definitions 
proposed in the NPRM that are consistent with MAP-21. However, FTA 
believes there are a significant number of items that were not included 
in the NPRM related to these new steps that cannot be finalized at this 
time. FTA will issue subsequent interim proposed policy guidance and 
rulemaking to address these matters to allow for public comments.
3. Preliminary Engineering and Final Design
    Comment: FTA received 16 comments stating that FTA should assure 
the definitions of preliminary engineering and final design do not 
interfere with the possible use of alternative project delivery methods 
such as design-build.
    Response: While FTA believed the definitions for preliminary 
engineering and final design in the NPRM were sufficiently flexible to 
account for use of a wide variety of project delivery methods including 
design-build, MAP-21 eliminates these as separate steps in the process 
and instead creates a single step called ``engineering.'' FTA believes 
this change will further facilitate use of alternative project delivery 
methods. In this final rule, FTA is merging the current definitions of 
preliminary engineering and final design into a single definition for 
``engineering.'' FTA will continue to work with project sponsors to 
make sure that their procedures and their engineering and design 
contract structures allow progress on the project to continue while FTA 
performs the statutorily required evaluation and rating for entry into 
engineering, and consideration of a full funding grant agreement. The 
concerns noted by the industry with stalled work while FTA performs its 
reviews most often occur because of the way the contracts have been 
structured by the project sponsor.
4. Before and After Studies
    Comment: FTA received five comments on the requirements for 
``Before and After'' studies. Of these comments, three were in general 
support of the proposals made in the NPRM to clarify the Before and 
After study requirements. Two comments addressed the question raised in 
the NPRM about the appropriate time frame for when the ``after'' data 
should be collected, supporting using three years after project opening 
rather than two years after opening as in the current regulation.
    Response: FTA appreciates the support for its efforts to clarify 
the ``Before and After'' study requirements and is adopting them in 
this final rule. MAP-21 includes the same requirements for Before and 
After Studies as in SAFETEA-LU. FTA appreciates the input on when the 
``after'' data should be collected. The two year timeframe is specified 
in law, so it cannot be changed at this time.
5. Ratings Updates
    Comment: FTA received 14 comments supporting the concept of rating 
projects at entry into each step in the process, and updating those 
ratings only if a project has material changes in cost or scope.
    Response: FTA is adopting this concept in the final rule.
6. Timing of Applicability of the New Final Rule Criteria
    Comments: FTA received 11 comments on when the new criteria should 
be applied to projects already in the process. All of the comments 
suggested a flexible approach where a project sponsor could choose to 
be rated under the new criteria or continue to be rated under the 
criteria in effect prior to this final rule.
    Response: FTA agrees with the need for flexibility. New Starts and 
Small Starts projects already in receipt of a full funding grant 
agreement or project construction grant agreement will not be subject 
to this final rule. New Starts projects approved into final design 
prior to the effective date of this rule and Small Starts projects 
approved into project development prior to the effective date of this 
rule will not be subject to this final rule unless they request to be 
evaluated under the new procedures. Projects in New Starts preliminary 
engineering prior to the effective date of this rule can continue to be 
covered by the former evaluation approach during engineering unless the 
project sponsor requests to be covered by the new evaluation approach. 
But when these projects seek a full funding grant agreement, the new 
procedures outlined in this final rule will apply. This approach will 
allow project sponsors time during engineering to complete the analysis 
needed for the new criteria. Because the new criteria generally require 
less analysis, or are derived from data normally produced during what 
was formerly preliminary engineering, this will require little if any 
additional effort.
7. Other Process Related Comments
    Comment: FTA received one comment supporting establishment of a new 
Subpart C for Small Starts. One comment suggested the use of ``interim 
cooperative agreements'' to cover project development for streetcar and 
other Small Starts projects prior to identification of a public agency 
sponsor for a project being developed by a non-profit organization. One 
comment suggested the need for reimbursement of project costs 
proportional with spending on capital construction. Another comment 
suggested that projects be judged on their own merit rather than 
against other projects in the process. One comment suggested that a 
project in a corridor with a recently funded project be given the same 
rating as the initial project. FTA received one comment requesting more 
flexibility in the estimation of project costs.
    Response: FTA appreciates the comment on establishing a separate 
subpart for Small Starts and is adopting that approach. FTA believes it 
is necessary to identify the public agency sponsor at the beginning of 
the process as only public bodies are eligible for funding. Without 
identification of the entity that will be the grant recipient, FTA 
cannot adequately judge the technical, legal, and financial capacity of 
the sponsor to carry out the project as required by law. FTA notes that 
project construction costs are already reimbursed as they are incurred 
based on the relative local and Federal shares for the project. FTA 
agrees that projects should be judged on their own merits

[[Page 2015]]

and has structured the process to do so. But given that the demand for 
New Starts and Small Starts funding exceeds supply of funds, projects 
will inevitably be compared to one another. FTA does not believe it is 
appropriate to grant automatic ratings to projects with existing New 
Starts projects in the corridor. FTA believes each project needs to be 
evaluated on its own merits. Further, FTA would be concerned with a 
project sponsor seeking to implement a second major capital investment 
in the same corridor and would question whether the projects might 
compete with one another unnecessarily. Although FTA understands 
project costs change during engineering and design of the project, FTA 
believes estimates should be as accurate as possible given the level of 
engineering completed.

V. Section-by-Section Analysis

Reorganization

    In the final rule, as proposed in the NPRM, FTA is rewriting and 
reorganizing 49 CFR Part 611 by dividing it into three subparts. The 
comments received are supportive of this approach. Subpart A includes 
general provisions (purpose and contents, applicability, definitions, 
and a description of how the provisions of this regulation relate to 
the requirements of the transportation planning process). Subpart B 
provides the process and project evaluation requirements applicable to 
New Starts projects. Subpart C provides the process and project 
evaluation requirements applicable to Small Starts projects. The 
current Appendix describing the evaluation measures remains, but is 
amended significantly to reflect the changes in the measures being made 
final. This distribution table shows the changes to the organization 
structure of Part 611 by section:

                           Distribution Table
------------------------------------------------------------------------
                                           New Part 611 as set forth by
            Current Part 611                     this final rule
------------------------------------------------------------------------
611.1 Purposes and contents............  Subpart A--611.101 Purpose and
                                          contents
611.3 Applicability....................  Subpart A--611.103
                                          Applicability
611.5 Definitions......................  Subpart A--611.105 Definitions
611.7 Relation to planning and project   Subpart A--611.107 Relation to
 development processes.                   the planning processes
                                         Subpart B--611.209 New Starts
                                          process
                                         Subpart C--611.309 Small Starts
                                          process
                                         Subpart B--611.211 New Starts
                                          Before and after study.
611.9 Project justification criteria     Subpart B--611.203 New Starts
 for grants and loans for fixed           Project justification criteria
 guideway systems.
                                         Subpart C--611.303 Small Starts
                                          Project justification
                                          criteria.
611.11 Local financial commitment        Subpart B--611.205 New Starts
 criteria.                                Local financial commitment
                                          criteria
                                         Subpart C--611.305 Small Starts
                                          Local financial commitment
                                          criteria
611.13 Overall project ratings.........  Subpart B--611.207 Overall New
                                          Starts project ratings
                                         Subpart C--611.307 Overall
                                          Small Starts project ratings
Appendix A--Description of Measures      Appendix A--Description of
 Used for Project Evaluation.             Measures Used for Project
                                          Evaluation
------------------------------------------------------------------------

    Although much of the regulation remains the same, FTA is making a 
series of changes to better comport with the requirements of Section 
5309, Title 49, U.S. Code (Section 5309), as had been amended by 
SAFETEA-LU and the SAFETEA-LU Technical Corrections Act, and which are 
still in effect pursuant to MAP-21. Other changes made to the major 
capital investment program by MAP-21 that had not been in SAFETEA-LU or 
the NPRM, will be the subject of subsequent interim policy guidance and 
rulemaking.
    First, and foremost, as noted above, FTA is creating a new subpart 
to formally establish the process and evaluation requirements for Small 
Starts, which was a newly created category in the major capital 
investment program in SAFETEA-LU that is continued in MAP-21. This 
final rule specifically adds eligibility of corridor-based bus systems 
for Small Starts funding as provided by MAP-21. In addition, this final 
rule does not include the exemption from the evaluation and rating 
process for projects requesting less than $25 million in Section 5309 
funding that was allowed under SAFETEA-LU.
    Second, as proposed in the NPRM, FTA is changing the project 
justification criteria, especially for cost-effectiveness, mobility 
benefits, environmental benefits, and economic development benefits. 
These changes respond to the comments received in response to the 
questions asked in the ANPRM issued on June 3, 2010, and the comments 
received on the NPRM. Further, FTA is replacing ``operating 
efficiencies'' with ``congestion relief,'' as required by MAP-21, 
although the specific measure used to evaluate congestion relief will 
be the subject of subsequent interim policy guidance and rulemaking.
    Third, as proposed in the NPRM, FTA is putting in place a process 
whereby details related to evaluation measures and processes are 
included in policy guidance issued periodically for notice and comment, 
but not less than every two years as specified in MAP-21. This policy 
guidance will supplement the current Appendix to the regulation and 
provide a formal process, linked to this regulation, whereby changes in 
the technical details of the New Starts and Small Starts project 
development and evaluation processes can be specified and changed over 
time as needed. FTA made available a draft of its initial proposed 
policy guidance together with the NPRM and requested comment on it. In 
response to the comments received on the draft policy guidance 
published with the NPRM, FTA is publishing more detailed revised 
proposed policy guidance for further comment concurrently with this 
final rule. The effective date for this final rule has been established 
so that comments can be received and the policy guidance finalized in 
response to those comments before the final rule will go into effect.
    Fourth, as proposed in the NPRM, FTA is changing the point of 
comparison for incremental measures from the ``baseline'' alternative 
(typically a Transportation Systems Management or TSM alternative) to a 
no-build alternative to be defined in the policy guidance. MAP-21 
requires this change for Small Starts projects, and FTA believes it is 
also appropriate for New Starts projects.
    Fifth, as proposed in the NPRM, FTA is establishing a process 
whereby projects may pre-qualify based on their characteristics or the 
characteristics of the corridor in which they are located for automatic 
ratings of ``medium'' or better on one or more project justification or 
local financial

[[Page 2016]]

commitment criteria. This is similar to the automatic ratings allowed 
under the ``Very Small Starts'' category that FTA had established 
through interim policy guidance. As proposed in the NPRM, this process 
will be included for both New Starts and Small Starts projects, with 
details and specific pre-qualification values (``warrants'') specified 
in future policy guidance that will be subject to a public comment 
period prior to finalization. MAP-21 provides for ``warrants'' for 
projects seeking $100 million or less in New Starts funds or a 50 
percent or less New Starts share if the project sponsor requests the 
use of warrants and certifies that its existing transit system is in a 
state of good repair. FTA believes it is also appropriate to allow for 
the use of warrants for a wider range of projects than those allowed 
for in MAP-21, including Small Starts projects, but will be mindful of 
the strictures for ``warrants'' in MAP-21 as they are established in 
future proposed policy guidance.
    Sixth, as proposed in the NPRM, FTA will re-rate projects only if 
there have been material changes in scope or estimated costs as they 
proceed through the process. FTA will continue to use its current 
practice, as provided in its reporting instructions, to define what 
constitutes a material change.
    Finally, as proposed in the NPRM, FTA is adopting a series of 
language changes to clarify various requirements and definitions and to 
alter the references to law to be consistent with changes made by MAP-
21. In addition, FTA has made changes in this final rule in a number of 
provisions to improve readability and clarity. Where such changes have 
been made from the NPRM they are not intended to have a material effect 
on the substance of the provision.

Subpart A--General Provisions

Section 611.101 Purpose and Contents
    This section, like Section 611.1 in the current regulation, 
describes the purpose and contents of this regulation, which is to 
guide the development and evaluation of projects seeking to receive 
discretionary major capital investment funding under Section 5309 of 
Title 49, U.S. Code. Those projects can include fixed guideway 
projects, either completely new systems or extensions to existing 
systems (``New Starts'' or ``Small Starts'' depending on total project 
cost and the amount of Section 5309 funding sought) and corridor-based 
bus systems (under ``Small Starts''), as specifically added by SAFETEA-
LU and continued in MAP-21. As part of a subsequent rulemaking, FTA 
will propose amendments to this section to add the eligibility for core 
capacity projects, as provided in MAP-21.
    This section also specifically allows for separate procedures 
(described in a new subpart C) for ``Small Starts'' projects, which are 
projects that have a total cost of less than $250 million and are 
seeking less than $75 million in major capital investment funding under 
Section 5309. For New Starts projects, as in the current regulation, 
this section indicates that projects will be evaluated and rated at 
several steps during the New Starts process, including advancement into 
engineering and prior to entering into a full funding grant agreement. 
Ratings for each project are shown in the Annual Report on Funding 
Recommendations that FTA is required to submit to Congress each year. 
New language also indicates that this process will be used for Small 
Starts projects for advancement into engineering and prior to entering 
into a single year construction grant or expedited grant agreement. The 
language has also been changed to reflect that overall ratings will now 
be assigned on a five-level scale from ``high'' to ``low,'' instead of 
``highly recommended,'' ``recommended,'' or ``not recommended,'' as was 
required by amendments to Section 5309 made by SAFETEA-LU, and is 
continued under MAP-21.
Section 611.103 Applicability
    As in the current regulation, this section specifies that Part 611 
would apply to all projects that are candidates for discretionary major 
capital investment funding under Section 5309. As in the current 
regulation, it would apply to new fixed guideway projects and 
extensions to existing fixed guideway projects. But the section is also 
amended to add the eligibility of corridor-based bus systems as Small 
Starts projects as was authorized by SAFETEA-LU and is continued under 
MAP-21. At a later time, FTA will propose amendments to this section to 
address core capacity projects made eligible under MAP-21.
    The evaluation process in this regulation would not apply to New 
Starts projects that have already received a full funding grant 
agreement and to Small Starts projects that have already received a 
project construction grant agreement. As proposed in the NPRM, this 
section clarifies that the previous regulation would continue to apply 
to those projects. In response to comments received on the NPRM, the 
section has been clarified to indicate that New Starts projects already 
approved into final design, or Small Starts projects already approved 
into project development, would not be covered by this rule and the 
previous regulation would continue to apply. But in response to 
comments received on the NPRM, the section clarifies that these project 
sponsors may opt to be evaluated under this regulation if they so 
desire. New Starts projects currently approved into preliminary 
engineering and that have completed the NEPA process may continue in 
the newly defined step called engineering without being re-rated under 
this regulation If material changes to project scope or cost occur (as 
defined in policy guidance) while these projects are in engineering, 
these projects will be re-rated under this regulation. Additionally, 
when these projects seek a full funding grant agreement, they will be 
subject to the requirements of this rule. Projects currently approved 
into preliminary engineering that have not yet completed the NEPA 
process will be considered to be in the newly defined step called 
project development. They will need to be rated under this regulation 
to be admitted into the newly defined engineering stage after the 
completion of NEPA. When these projects seek to move from engineering 
to a full funding grant agreement, they will be subject to the 
requirements of this rule. As in the NPRM and consistent with MAP-21, 
FTA is modifying this section to eliminate the exemption from the New 
and Small Starts process in the current regulation for projects seeking 
less than $25 million in major capital investment funding from Section 
5309. In addition, FTA is removing the provision for expedited 
procedures for projects that are air-quality transportation control 
measures, because that provision was deleted from the law by SAFETEA-
LU.
Section 611.105 Definitions
    This section provides definitions that apply to terms used 
throughout Part 611. As proposed in the NPRM, FTA is keeping most of 
the definitions in the current regulation and adding a number of new 
definitions.
    A new definition is provided for a ``corridor-based bus rapid 
transit project.'' This definition is the same as it is now in the law 
at 49 U.S.C. 5309(a)(3), as amended by MAP-21 and is consistent with 
how FTA has defined it in policy guidance, except that it now covers 
only projects which do not have a fixed guideway component. Bus 
projects operating for a majority of the project on a guideway 
exclusively for use by public transportation vehicles are now covered 
by the definition for fixed

[[Page 2017]]

guideway projects, as called for by MAP-21. FTA expects to continue to 
define the term more specifically through policy guidance, which can be 
updated and revised as needed without the need for rulemaking. This 
definition essentially replaces the definition of ``bus rapid transit'' 
in the current regulation.
    FTA is adopting the proposal in the NPRM to most often use the 
existing system as a point of comparison when calculating incremental 
measures (i.e., measures that need some other alternative as a point of 
comparison so that the change in that measure can be shown), but to use 
the no-build alternative when a project sponsor chooses to forecast 
benefits in a future year. MAP-21 requires use of the no-action 
alternative for Small Starts projects, and FTA believes it is 
appropriate to apply this change to New Starts projects, as proposed in 
the NPRM. In response to comments received on the NPRM, if a project 
sponsor chooses to forecast benefits in a future year, FTA is allowing 
the sponsor the option to choose either a 10-year horizon or a 20-year 
horizon. As proposed in the NPRM, FTA is deleting the definition of 
``baseline alternative'' and adding a definition of ``no-build 
alternative.'' If a project sponsor opts to prepare a 10-year horizon 
forecast, the no-build alternative is the existing transportation 
system as well as those transportation investments committed in the 
Transportation Improvement Plan (TIP). If a project sponsor opts to 
prepare a 20-year horizon forecast, the no-build alternative is the 
existing transportation system plus the projects included in the 
fiscally constrained long-range transportation plan.
    FTA is also adopting a number of changes to definitions that relate 
to the New Starts and Small Starts processes. First, FTA is deleting 
the definition of ``alternatives analysis'' in the regulation since an 
alternatives analysis is no longer required as a result of the changes 
made to section 5309 by MAP-21. Second, FTA is providing a definition 
for ``early systems work agreement'' by expanding on language added in 
SAFETEA-LU and continued in MAP-21. Third, FTA is expanding slightly 
that part of the definition of ``engineering'' which was proposed to be 
included in the definition of ``final design'' to indicate that all 
funding commitments must be obtained during engineering. This 
definition has been reworded slightly from that proposed in the NPRM to 
improve readability. Finally, FTA is adding definitions of ``long-range 
transportation plan'' and ``locally preferred alternative'' that are 
consistent with the metropolitan planning regulations located in 23 CFR 
part 450. Note that, rather than include a definition of ``metropolitan 
transportation plan'' as proposed by the NPRM, FTA is adopting instead 
a definition of ``long-range transportation plan,'' which will allow 
for the possibility of a project located outside of metropolitan 
planning areas covered by a long-range statewide transportation plan 
rather than by a metropolitan transportation plan.
    While several comments suggested that FTA modify the definition of 
``final design'' to account better for the use of alternative project 
delivery methods such as design-build, FTA did not do so because MAP-21 
eliminates the preliminary engineering and final design steps and 
instead creates a single step called engineering.
    As proposed in the NPRM, FTA is expanding the definition of ``major 
capital investment project'' to include corridor-based bus rapid 
transit projects as they are eligible in MAP-21 as Small Starts 
projects. The revision to the definition of ``NEPA process'' clarifies 
that NEPA is complete when a project is approved as a categorical 
exclusion or if it has received a Record of Decision or a Finding of No 
Significant Impact. FTA is also amending the definition of ``New 
Starts'' to account for the funding thresholds added by SAFETEA-LU and 
continued under MAP-21 and is accordingly adding a definition of 
``Small Starts.'' ``Small Starts'' is defined as projects for new or 
extended fixed guideways or corridor-based bus rapid transit projects 
with a capital cost of less than $250 million that seek less than $75 
million in major capital investment funding from Section 5309. FTA is 
also providing definitions for New Starts funds and Small Starts funds 
to improve the readability of the regulation.
    The definition for ``project development'' accounts for the 
addition of the Small Starts program by SAFETEA-LU and continued by 
MAP-21, as that is the primary phase of development for Small Starts 
projects. The definition for TEA-21 is deleted given that it is no 
longer necessary.
    In response to comments received on the NPRM, and the changes made 
by MAP-21, FTA is replacing the added definition that had been proposed 
in the NPRM for project construction grant agreement (PCGA) and instead 
using that definition for expedited grant agreement (EGA). The 
definition is consistent with that for full funding grant agreement, 
but recognizes that an EGA is the funding instrument specified in MAP-
21 for a Small Starts project.
    In addition, FTA is adding a definition for ``horizon year.'' This 
term is used in several places in the final rule, and given the 
comments received on the NPRM about this issue, FTA believes it should 
be explicitly defined in the regulation. At the option of the project 
sponsor, the horizon year may be either 10 or 20 years in the future.
    In the NPRM, FTA proposed that the costs of ``betterments'' not be 
included in the cost portion of the cost-effectiveness calculation. A 
significant number of comments received on the NPRM suggested that this 
term be defined in the final rule. Other comments suggested that the 
use of the term ``betterments'' might be confusing given it is used in 
other contexts in other FTA program guidance. To avoid this problem, 
FTA is using the term ``enrichments'' to refer to the kinds of 
activities that would not be included in the cost portion of the cost-
effectiveness calculation for New Starts projects. Because the term 
``enrichments'' is not used in the final rule, and only in the 
Appendix, FTA has decided to include the definition for ``enrichments'' 
in the Appendix along with several other terms used only in the 
Appendix and not in the final rule itself.
    In response to comments, FTA is adding a definition for ``transit 
dependent person'' in the Appendix. A number of comments on the NPRM 
indicated that a formal definition was needed because FTA proposed to 
weight trips by transit dependent persons more heavily in the measures 
for mobility and cost-effectiveness.
Section 611.107 Relation to the Planning Process
    As in the current regulation, this section requires that projects 
seeking New Starts funds emerge from and be consistent with the 
metropolitan and statewide planning processes required by 23 CFR part 
450. As proposed in the NPRM and as provided for by MAP-21, it adds 
Small Starts projects to this requirement. It no longer requires, as in 
the current regulation, that a project be based on the results of an 
alternatives analysis, since this is no longer a requirement pursuant 
to MAP-21. As proposed in the NPRM, the section removes the requirement 
for a specified baseline alternative (which often was required to be 
the ``Transportation System Management'' or ``TSM'' alternative.) The 
point of comparison for the various incremental measures will hereafter 
be defined in Appendix A and the policy guidance as the existing system 
(for comparisons with current travel patterns) or the no-build 
alternative (for comparisons with travel

[[Page 2018]]

patterns in a horizon year in the future.) The no-build alternative is 
defined as the existing transportation system as well as those 
transportation investments committed in the Transportation Improvement 
Plan (TIP) if the project sponsor chooses a 10-year horizon or the 
existing system plus the projects included in the fiscally constrained 
long-range transportation plan if the project sponsor chooses a 20-year 
horizon. The section is also modified slightly to note that the locally 
preferred alternative (LPA) must be adopted into the fiscally 
constrained long-range transportation plan, as required by MAP-21.
    The project development process included in the current regulation 
is modified and moved to the separate subparts for New Starts and Small 
Starts, allowing them to be customized for each of the programs. 
However, because MAP-21 made substantial changes to the process, these 
sections are not made final by this final rule but will be the subject 
of subsequent interim policy guidance and rulemaking.

Subpart B--New Starts

Section 611.201 New Starts Eligibility
    As proposed in the NPRM, this is a new section designed to clarify 
the basic requirements of what must be accomplished to be eligible for 
approval of grants at various stages of the New Starts process. The 
requirement for an alternatives analysis to be completed has been 
removed because MAP-21 no longer requires it. FTA approval of entry 
into final design is deleted, consistent with the change made by MAP-21 
to replace the preliminary engineering and final design steps with one 
step called engineering. To make explicit a requirement already in 
place, FTA is adding a new Section 611.201(b)(2) to note that a project 
must be approved into each phase of the New Starts process in order to 
receive funding for that phase.
Section 611.203 New Starts Project Justification Criteria
    As in the NPRM, many of the topics in this section of the final 
regulation are specified in Appendix A and, in far greater detail, 
described in the revised proposed policy guidance made available for 
public comment today. Thus, the section analysis for Section 611.203 
contains one portion that describes the changes to the regulation and 
another portion that discusses what FTA is adopting in the Appendix and 
is proposing in more detail in the revised proposed policy guidance.
A. Final Regulation
    Although Section 611.203 is a new section in the regulation, as 
proposed in the NPRM, much of the content is taken from the current 
regulation at 49 CFR 611.9. As in the current regulation, FTA is 
stating that project justification will be evaluated based on a 
multiple measure approach that takes into account each of the criteria 
specified in Section 5309(d). The measures for the criteria are 
included in Appendix A and described further in the revised proposed 
policy guidance, which may be modified and re-issued periodically by 
FTA whenever significant changes are proposed, but not less frequently 
than every two years, as required by Section 5309(g)(5) of Title 49, 
U.S. Code. This policy guidance supplements Appendix A of the 
regulation. FTA has found the process of notice and comment for this 
policy guidance first established by SAFETEA-LU and continued by MAP-
21, to be an extremely effective way of continuing the improvement of 
the New Starts project evaluation process by providing flexibility to 
make changes to recommended technical methods as new methods become 
available.
    As in the current regulation and as proposed in the NPRM, 
individual project justification criteria are assigned ratings on a 
five-level scale from ``high'' to ``low.'' The final rule implements 
the changes first made by SAFETEA-LU and continued in MAP-21, which 
added economic development to the project justification criteria. It 
also implements the changes made by MAP-21 to eliminate the operating 
efficiencies criterion and add the congestion relief criterion, and to 
rename ``public transportation supportive land use policies and future 
patterns'' to ``policies and land use patterns that promote public 
transportation * * * '' In response to comments received on the NPRM, 
the terms that will be used for these criteria will be changed to 
``existing land use'' and ``economic development'' as FTA is focusing 
the land use criterion on current socio-economic data for the corridor 
including population, employment, and affordable housing and focusing 
the economic development criterion on the local plans and policies in 
place to support economic development in future, including plans and 
policies related to transit supportive development and affordable 
housing. In addition, as proposed in the NPRM, and consistent with the 
changes made by MAP-21, the final rule eliminates transportation system 
user benefits from the cost-effectiveness measure and eliminates 
``other factors'' in current 611.9(b)(6).
    The final rule indicates that any incremental project justification 
measures would be evaluated against a point of comparison specified in 
Appendix A and policy guidance. This language replaces the current 
requirement that a baseline alternative, usually in the form of a TSM 
alternative, be used as a point of comparison. As in the current 
regulation, it would be expected that as a project advances through the 
New Starts process, a greater degree of specificity would be required 
with respect to project scope and costs, that commitments made to 
public transportation supportive land use plans and policies would be 
expected to increase, and that a project sponsor's technical capacity 
would be expected to improve. A proposal in the NPRM that described 
FTA's expectation that the level of local financial commitment would 
also increase as a project moves through the process has been moved 
from the project justification section where it was inadvertently 
placed to the section on local financial commitment instead.
    As proposed in the NPRM, FTA is not including the 
``considerations'' listed in 49 U.S.C. 5309(d)(3) since these were 
eliminated by MAP-21.
    As proposed in the NPRM, the section includes a provision that 
would allow for a process by which a project could pre-qualify to 
receive an automatic rating of ``medium'' or better on one or more of 
the project justification criteria based on its characteristics or the 
characteristics of the corridor in which it is being planned. Use of 
such pre-qualification tests or ``warrants'' is specifically called for 
by MAP-21 for projects requesting $100 million or less in New Starts 
funds or a 50 percent or less New Starts share. FTA believes that it 
may be able to specify such characteristics, as it currently does for 
``Very Small Starts'' in policy guidance, for a range of larger 
projects and a wider range of corridor types. The pre-qualification 
values would be established by FTA by determining how projects rate on 
the criteria based on an analysis at the national level. Proposed pre-
qualification values would be published in future policy guidance for 
public comment before finalization and would be consistent with the 
requirements in MAP-21, although a wider range of project 
characteristics would be covered. In this way, a project sponsor would 
not be required to conduct forecasts of various factors, as the project 
itself would be deemed to have sufficient merit to proceed for purposes 
of any such criterion.

[[Page 2019]]

    As first required by the SAFETEA-LU Technical Corrections Act, and 
continued by MAP-21, FTA is adopting the proposal in the NPRM to 
combine the ratings on each of the project justification criteria using 
``comparable, but not necessarily equal'' weights into a summary rating 
of project justification. FTA is adopting the proposal that the process 
for this, and the specific weights, will be described in policy 
guidance. Future changes to the policy guidance will be subject to 
public notice and comment.
B. Appendix A and Proposed Guidance
As noted above, FTA made available proposed policy guidance for public 
review and comment when it published the NPRM. That proposed policy 
guidance provided greater detail on the proposed project justification 
measures specified in statute and proposed in regulation. As noted in 
that draft policy guidance, however, there were a number of issues on 
which further detail would be forthcoming. Accordingly, FTA is 
publishing today revised proposed policy guidance that responds to a 
number of comments made on the earlier proposed policy guidance 
published at the same time as the NPRM. It proposes additional detail 
and specificity on many of the key matters raised in the comments. Once 
FTA has received and reviewed comments on this revised proposed policy 
guidance, FTA will finalize it. The effective date for this final rule 
has been developed to allow FTA time to receive and review comments on 
the revised proposed policy guidance and finalize the policy guidance 
before the final rule goes into effect.
    Appendix A defines the measure of mobility benefits as the number 
of trips using the project, with extra weight given to trips that would 
be made on the project by transit dependent persons. This is consistent 
with the requirement in MAP-21 that the measure of cost-effectiveness 
be defined as cost per trip. In response to comments, a definition of 
``transit dependent persons'' is included in the Appendix. For those 
project sponsors choosing to use the simplified national model FTA is 
developing, trips made by ``transit dependent persons'' will be defined 
as trips made by individuals residing in households that do not own a 
car. Project sponsors that choose to continue to use their local travel 
model rather than the simplified national model to estimate trips will 
use trips made by individuals in the lowest socioeconomic stratum in 
the local model as the measure of trips made by transit dependent 
persons. Local models classify trips either by household auto ownership 
or by income level. Thus, trips made by transit dependent persons would 
be either trips made by individuals residing in households that do not 
own a car or trips made by individuals in the lowest income category. 
Since some local travel demand models use zero-car households as the 
lowest socio-economic stratum and others use income based strata, to 
require use of one metric or the other would pose an unnecessary burden 
on project sponsors. FTA believes that this approach gives a reasonable 
indication of how well a proposed project supports access for transit 
dependent persons.
    In response to comments seeking clarity, a definition of ``trips'' 
is provided in the Appendix as ``linked trips using the project.'' This 
is actually a larger number than ``boardings,'' as suggested in the 
comments, because, for example, a trip would be counted when a user of 
the proposed project rides through the project but boards and alights 
elsewhere in the transit system. Project sponsors would not need to 
compare the estimated number of trips generated by the proposed project 
to the estimated number of trips generated by a ``baseline 
alternative'' because, consistent with MAP-21, this rule eliminates the 
requirement to produce a baseline alternative. As noted in the NPRM, 
this change may have an impact on the kinds of projects that receive 
favorable ratings on the mobility and cost-effectiveness criteria. 
Under the former approach, which used ``transportation system user 
benefits'' (essentially travel time savings) as the measure of 
effectiveness, projects that involved longer trips were advantaged 
because there is more of an opportunity to save time. The revised 
measure is likely to rate projects with shorter trips better than they 
would have been rated under the former measure. On the other hand, 
projects with longer trips that may no longer do as well under the new 
mobility or cost-effectiveness measures because of the change from 
travel time savings to trips are more likely to reduce vehicle miles 
traveled (VMT), and thus are more likely to rate better on the new 
measure for environmental benefits.
    As noted in the NPRM, to facilitate the estimation of project 
trips, FTA is planning to provide a simplified forecasting model that 
uses Census data and ridership experience on existing fixed-guideway 
systems. In response to comments, the revised proposed policy guidance 
proposes that use of the simplified model will be optional. Thus, 
project sponsors able to obtain a satisfactory overall rating based on 
estimates prepared with the simplified model will not be required to 
provide to FTA estimates of project trips prepared using traditional 
local travel forecasting models. As noted in the NPRM, if at the 
project sponsors' option they choose to instead estimate project trips 
prepared with traditional methods, FTA will continue to require that 
those methods be tested for their understanding of local transit 
ridership patterns using recent data adequate to the support the tests. 
FTA notes that if project sponsors choose at their option to submit 
future year forecasts in addition to those required to be submitted 
based on current year patterns, they may choose to use either a 10-year 
horizon or a 20-year horizon. If they choose a 10-year horizon (that 
requires use of the no-build alternative plus projects committed in the 
TIP as the background network), use of the FTA-developed simplified 
model may still be feasible and the scrutiny that FTA will apply will 
be reduced significantly. If the project sponsor instead chooses to 
submit a future year forecast based on a 20-year horizon (that requires 
use of the no-build alternative plus the projects included in the 
fiscally constrained long-range transportation plan as the background 
network), then the project sponsor must understand that FTA will be 
required to perform a similar level of scrutiny to the forecasts as 
under the current procedures and use of the simplified model may not be 
possible. Thus, the project sponsor would be choosing to obviate some 
of the streamlining benefits this new rule is intended to realize.
    As proposed in the policy guidance published with the NPRM, FTA is 
adopting, in Appendix A, the ability for project sponsors to consider 
the project trips measure in the current year or in both the current 
year and the horizon year. The estimate of project trips for the 
current year puts all proposed projects in a consistent near-term 
timeframe for the evaluation. The estimate of project trips for the 
horizon year captures the increases in trips on the project that would 
be associated with population and employment growth and increasing 
congestion in the future. A definition for ``horizon year'' has been 
included in the regulation for clarity. In addition, in response to 
comments received, the Appendix defines the ``current year'' as the 
most recent year for which data on current transit use and demographic 
factors are available. As proposed in the policy guidance published 
with the NPRM, sponsors of projects that can obtain a satisfactory 
mobility, cost-effectiveness, and project justification rating 
(``medium'' or better) based on

[[Page 2020]]

current-year estimates of project trips may choose to forego the 
preparation of horizon year estimates. As proposed in the policy 
guidance published with the NPRM, if a project sponsor chooses to 
submit both current-year and horizon-year estimates, the two estimates 
will be weighted equally.
    FTA is also adopting the proposal that the mobility rating be based 
on the number of trips estimated to use the project with extra weight 
given to trips made on the project by transit dependent persons. As 
proposed in the NPRM, FTA is again proposing in the revised proposed 
policy guidance to give a weight of 2.0 to estimated trips made on the 
project by transit dependent persons. FTA believes it is appropriate to 
give a higher weight to such travelers because of their greater 
mobility needs. Use of a weight of 2.0 is based on information from the 
National Household Travel Survey that indicates while households owning 
no cars make up 8.7 percent of total households they make only 4.3 
percent of total trips. In the revised proposed policy guidance being 
published today, FTA is proposing mobility breakpoints based on an 
assessment of the values calculated for projects now in the pipeline. 
These breakpoints may be changed in future policy guidance that would 
be subject to public comment.
    FTA is adopting the proposal in the NPRM to evaluate and rate the 
economic development criterion based on the likely future development 
outcomes resulting from the project because of local plans and policies 
in place (the land use criterion would focus on existing land use 
densities of population, employment, and affordable housing as well as 
current parking availability and pedestrian amenities). Accordingly, 
FTA will assess economic development benefits based on: (1) Local plans 
and policies to support economic development proximate to the project; 
and (2) at the option of the project sponsor, indirect changes in VMT 
resulting from changes in development patterns may also be estimated, 
and the resulting environmental benefits calculated, monetized, and 
compared to the annualized capital and operating cost of the project. 
FTA will evaluate the local plans and policies in a manner that is 
similar to current practice with the addition of an examination of 
local plans and policies in place to maintain or increase affordable 
housing in the corridor. As proposed in the policy guidance published 
with the NPRM, project sponsors may choose whether or not to perform 
the optional economic development quantitative analysis based on 
whether they believe it will help improve the economic development 
benefit rating for the project. Because of the absence of tools to 
predict development changes associated with transit projects, FTA is 
not specifying an approach but rather notes that quantification would 
involve an examination by the project sponsor of economic conditions in 
the project corridor, the mechanisms by which the project would improve 
those conditions, the availability of land in station areas for 
development and redevelopment, and a pro forma assessment of the 
feasibility of specific development scenarios. As proposed in the 
policy guidance published with the NPRM, the environmental benefits 
stemming from such changes in development patterns would be estimated, 
monetized, and compared to the annualized capital and operating cost of 
the proposed project. FTA would review the analysis before assigning a 
rating.
    As proposed in the NPRM in Appendix A, FTA will measure 
environmental benefits by considering the dollar value of changes in: 
(1) Air-pollutant emissions, estimated using changes in VMT, with 
recognition of the air-quality attainment status of the metropolitan 
area; (2) greenhouse gas emissions estimated using VMT changes; (3) 
transportation energy use estimated using VMT changes; and (4) 
transportation fatalities and injuries estimated using changes in VMT 
and transit-passenger miles of travel. These dollar values would be 
summed and compared to the annualized capital and operating cost of the 
proposed project. In response to comments received, FTA has clarified 
that the cost of project ``enrichments'' would not be included in the 
annualized capital cost of the project for the New Starts environmental 
benefits criterion, just as they are excluded in the measure for cost-
effectiveness. Changes in public health costs associated with long-term 
activity levels would be considered once better methods for calculating 
the information are developed. In the revised proposed policy guidance 
published with this final rule, FTA is proposing breakpoints for the 
environmental benefits rating.
    FTA is not adopting the proposal in the NPRM to measure operating 
efficiencies as the change in operations and maintenance cost per 
``place-mile'' compared to the existing transit system in the current 
year or to the no-build transit system (as defined in this final rule) 
in the horizon year. MAP-21 deleted the operating efficiencies 
criterion and replaced it with a congestion relief criterion. Because a 
measure for congestion relief was not proposed in the NPRM and related 
proposed policy guidance, FTA will propose a measure in subsequent 
interim policy guidance and rulemaking to allow for public comment. The 
revised proposed policy guidance being published concurrently with this 
final rule indicates that all projects will be assigned an automatic 
medium rating for congestion relief until such time as a measure is 
identified and the subsequent interim policy guidance and rulemaking 
are complete.
    FTA adopts the proposal in Appendix A to the NPRM to measure cost-
effectiveness of New Starts projects as the annualized cost per trip on 
the project, not including the costs of project enrichments. The 
Appendix defines annualized costs as the sum of: (1) The annualized 
capital cost of the project and (2) the change in annual operating and 
maintenance costs between the proposed project and the existing system 
or the no-build alternative if a horizon year forecast is prepared. In 
response to comments received, annual trips on the project used in the 
cost-effectiveness calculation would not include the additional weight 
applied to project trips made by transit dependents. FTA believes it is 
appropriate to consider the mobility provided to transit dependent 
persons under the mobility measure but focus cost-effectiveness on the 
anticipated usage of the project by all individuals. The annualized 
capital cost of the New Starts project used to compute the cost-
effectiveness measure would exclude the costs of certain project 
enrichments. In the proposed policy guidance made available with the 
NPRM, the concept of ``betterments'' was introduced as project features 
that foster economic development and environmental benefits (e.g., the 
incremental cost of obtaining LEED certifications, station-access 
provisions beyond those required by the ADA, and station-design and 
station-access elements that would enhance development impacts) but 
that do not contribute directly to the measures of benefits used in 
cost-effectiveness. In response to comments received, this concept has 
been adopted, but the terminology has been changed from ``betterments'' 
to ``enrichments'' to avoid confusion with other FTA program guidance 
as suggested by the comments. This should make clear that these 
features, while not counted in the calculation of cost-effectiveness 
for New Starts projects, are eligible to be included in the scope of 
the project for federal funding.

[[Page 2021]]

    Finally, FTA is adopting in Appendix A its proposal to measure 
existing land use generally as it does today based on existing 
population and employment density in the corridor with the addition of 
the amount of affordable housing in the project corridor. As proposed 
in the NPRM, the project justification rating would continue to be a 
weighted combination of the six criteria, which in accordance with the 
changes made by MAP-21 would be: (1) Mobility, (2) economic 
development, (3) environmental benefits, (4) congestion relief, (5) 
cost-effectiveness, and (6) land use. As specified in the proposed 
policy guidance published with the NPRM, FTA will give equal weights to 
each measure.
Section 611.205 New Starts Local Financial Commitment Criteria
    Some of the topics in this section were proposed to be included in 
Appendix A and were described in far greater detail in the proposed 
policy guidance made available for public comment along with the NPRM. 
This final rule adopts the same approach. Thus, the section analysis 
for Section 611.205 will contain one portion that describes the changes 
adopted in the regulation and another portion that discusses what FTA 
is including in Appendix A and in revised proposed policy guidance 
being published concurrently with the final rule.
A. Final Regulation
    As under the current regulation, FTA is adopting the proposal in 
the NPRM that a New Starts project must be supported by an acceptable 
degree of local financial commitment. FTA is adopting the proposal to 
continue to rate commitment of the proposed share of funding for the 
project provided by non-New Starts funds. In accordance with language 
in MAP-21, however, a project's overall local financial commitment 
rating cannot be downgraded based on this criterion (i.e., 
``overmatch'' can only help the summary local financial commitment 
rating). FTA is reorganizing the rating of the other local financial 
commitment criteria to better reflect the strong interaction between 
capital and operating funding. FTA has found that the current process, 
which produces ratings on the capital and operating plans separately, 
is duplicative in many ways. Thus, in addition to the non-New Starts 
share of the project, the remaining measures used to evaluate local 
financial commitment are: (1) The current capital and operating 
financial condition of the agency that would operate the project; (2) 
the commitment of capital and operating funds for the project including 
an examination of private contributions as required by MAP-21; and (3) 
the reliability of the capital and operating cost and revenue estimates 
prepared by the project sponsor and the resulting financial capacity of 
the project sponsor.
    As with the project justification criteria, FTA is adopting the 
proposal in the NPRM to allow for the possible use of pre-qualification 
standards for the local financial commitment criteria that would allow 
a project to receive an automatic rating of ``medium'' or better based 
on the characteristics of the project and the project sponsor. These 
thresholds or ``warrants'' would be established in future proposed 
policy guidance for New Starts projects. A reference to the requirement 
that FTA expects a greater degree of local financial commitment as a 
project proceeds through the New Starts process, which previously was 
included inappropriately under the project justification criteria 
section, has now been moved to this section. A new provision has been 
added, similar to that included in the project justification section, 
which indicates the measures for evaluation of local financial 
commitment may be amended through the issuance of policy guidance made 
available for public comment.
    As in the current regulation, each of the local financial 
commitment criteria will be rated on a five-level scale from ``low'' to 
``high'' and a summary local financial commitment rating will be 
established combining the individual ratings. The process and weights 
used to develop the summary rating will be established in policy 
guidance, just as under the current regulation.
B. Appendix A and Policy Guidance
    As noted above, FTA made available with publication of the NPRM 
proposed policy guidance for public review and comment. That proposed 
policy guidance provided greater detail on the proposed local financial 
commitment measures specified in statute and proposed in regulation, as 
described above. In the NPRM and proposed policy guidance, FTA proposed 
to restructure the examination of local financial commitment to better 
reflect the interdependency of capital and operating financial plans 
submitted by project sponsors. Currently, FTA examines a project 
sponsor's financial plan and evaluates and rates: (1) The non-New 
Starts share of the project; (2) the strength of the capital financial 
plan (based on the current capital condition, the commitment of capital 
funds, and the reasonableness of the estimates used in the financial 
plan and the resulting financial capacity of the project sponsor); and 
(3) the strength of the operating financial plan (based on the current 
operating condition, the commitment of operating funds, and the 
reasonableness of the estimates used in the financial plan and the 
resulting financial capacity of the project sponsor). FTA is adopting 
the proposal in the NPRM to instead examine the project sponsor's 
financial plan and evaluate and rate it based on: (1) The non-New 
Starts share of the project; (2) the current financial condition of the 
project sponsor (both capital and operating); (3) the commitment of 
capital and operating funds for the project including an examination of 
private contributions to the project as required by MAP-21; and (4) the 
reasonableness of the estimates used in the financial plan and the 
resulting capital and operating financial capacity of the project 
sponsor. The individual measures are described in Appendix A with more 
detail and breakpoints provided in the revised proposed policy guidance 
made available today for public comment. These have been modified 
slightly from those included in the proposed policy guidance made 
available with the NPRM to accommodate the elimination in MAP-21 of 
separate preliminary engineering and final design steps.
Section 611.207 Overall New Starts Project Ratings
    Because of the changes made by MAP-21 to the evaluation and rating 
process for major capital investments, which were not subject to 
comment in the NPRM, FTA is not adopting at this time the details of 
the process for combining ratings on the various criteria into an 
overall project rating . The approach for doing so will be the subject 
of subsequent rulemaking. As a result, Section 611.207(a) will be 
reserved for this purpose. However, in the revised proposed policy 
guidance being published concurrently with the final rule, FTA is 
proposing an interim approach for combing ratings on the various 
criteria into an overall project rating until subsequent rulemaking on 
this topic can be completed. As proposed in the NPRM, the final rule 
assigns an overall rating on a five-level scale from ``low'' to 
``high'' in line with the changes made by SAFETEA-LU and continued by 
MAP-21, which replaced ratings of ``highly recommended,'' 
``recommended,'' and ``not recommended.'' These overall ratings will be 
assigned when a project seeks approval into engineering and approval of 
a full funding grant agreement. In

[[Page 2022]]

contrast to the current regulation, however, FTA is adopting the 
proposal to not require re-rating of the project for each Annual Report 
to Congress as long as there have been no material changes to the scope 
or cost of the project since the previous rating. FTA will continue to 
use its current practice, defined in its reporting instructions, to 
identify material changes that will trigger a re-rating. These include 
design and construction scope of work changes, planning context 
changes, schedule changes of six months or more, or a change in a 
funding source or financing method. If there are no material changes, 
the rating developed at the earlier step will continue in force. 
Because of the changes made by MAP-21, FTA is not adopting the proposal 
that the overall rating be established by averaging the summary ratings 
obtained on project justification and local financial commitment and 
that the rating be rounded up when there is a one-level rating 
difference for the two summary ratings. Section 611.207(d) is being 
reserved for finalization in a subsequent rulemaking. In addition, FTA 
is not adopting in this final rule the requirement that both the 
summary project justification rating and the summary local financial 
commitment rating be at least ``medium'' to receive an overall rating 
of ``medium'' or better or that a project rated ``low'' on either the 
summary project justification rating or the summary local financial 
commitment rating will be rated ``low'' overall. Instead, these 
considerations will be part of a subsequent rulemaking process.
Section 611.209 New Starts Process
    In response to comments received on the NPRM, the final rule 
renames this section ``New Starts Process,'' instead of ``project 
development process,'' as ``project development'' refers to a specific 
step in the process by statute. Because of the significant changes in 
the process in MAP-21, FTA is not finalizing this section at this time. 
The details on the steps in the New Starts Process will be covered in 
subsequent interim policy guidance and rulemaking. As a result, Section 
611.209 is being reserved for such rulemaking. This section will 
include requirements for the New Starts process now included in 
paragraphs (b) through (d) of Section 611.7 in the current rule. For 
clarity, provisions related to the ``Before and After'' study have been 
moved to Section 611.211 in the final rule.
Section 611.211 New Starts Before and After Study
    This section provides the requirements for the ``Before and After'' 
study required by statute. In the current regulation, these 
requirements appear in Section 611.7(c)(4) and (5) and in Section 
661.7(d)(7). FTA is adopting the proposal to include in this section a 
consolidation of these requirements in one place and makes certain 
other changes to improve clarity. As in the current regulation and as 
proposed in the NPRM, the purpose of the study in the regulatory 
language is to assess the impacts of the New Starts project and to 
compare the costs and impacts of the project with costs and impacts 
forecast during the planning, engineering, and design of the project. 
Also in the current regulation and in the NPRM, the regulation requires 
that a project sponsor produce a plan for the ``Before and After'' 
study during engineering. New language adopted from the NPRM specifies 
in more detail the kind of information to be collected as part of the 
study, including information on the characteristics of the project and 
other related changes in the transit system (such as service levels and 
fares), the capital and operating costs of the project, and the impacts 
of the project on transit service quality, ridership, and fare levels.
    As is generally required by the current regulation and as proposed 
in the NPRM, the final rule requires that the plan developed during 
engineering provide for preservation of data on the predicted scope, 
costs, and ridership; collection of ``before'' data on the transit 
system and ridership patterns and travel behavior; documentation of 
capital costs as the project is built; collection of ``after'' data two 
years after the project opens on actual project scope, costs, and 
ridership; an analysis of the project costs and impacts; and an 
assessment of the consistency of the forecasts of costs and ridership 
between those forecast and those actually achieved. FTA received a 
number of comments on the NPRM suggesting that three years after 
opening of revenue service would be a more appropriate timeframe to 
conduct the ``after'' part of the study. MAP-21 explicitly calls for 
review after two years, and thus the final rule continues this 
requirement. The final rule adopts the proposal in the NPRM that the 
final ``Before and After'' study report be submitted to FTA within 
three years of project opening. As in the current regulation, and as 
proposed in the NPRM, the costs of carrying out the ``Before and 
After'' study, including the necessary data collection, are an eligible 
expense of the proposed project.
    A new requirement that FTA is adopting provides that, before 
execution of the full funding grant agreement, there must have been 
satisfactory progress on carrying out the ``Before and After'' study 
plan. As in the current regulation and as proposed in the NPRM, the 
full funding grant agreement would include a requirement that the 
``Before and After'' study plan be carried out during the construction 
of the project and that FTA may condition receipt of annual funding 
during a full funding grant agreement on satisfactory execution of the 
``Before and After'' study.

Subpart C--Small Starts

    As proposed in the NPRM, Subpart C is a completely new subpart 
laying out the requirements for Small Starts projects. These are 
projects for new fixed guideways or extensions to existing fixed 
guideways, or new or extended corridor-based bus rapid transit projects 
meeting the definitions in law. Small Starts projects must have a 
capital cost of less than $250 million and seek less than $75 million 
in Small Starts funds.
    Because the regulatory framework for Small Starts projects in 
Subpart C is quite similar to that of the framework in Subpart B for 
New Starts, this portion of the section-by-section analysis will only 
highlight differences between Subpart B and Subpart C.
Section 611.301 Small Starts Eligibility
    As proposed in the NPRM, this section as adopted in the final rule 
is designed to clarify the basic requirements of what must be 
accomplished for a project to achieve award of an expedited grant 
agreement (EGA). This section is nearly identical to Section 611.201 
for New Starts in Subpart B, except that this section expands 
eligibility to corridor-based bus rapid transit systems, requires that 
a project be a Small Starts project rather than a New Starts project, 
references the Small Starts evaluation criteria rather than the New 
Starts evaluation criteria, references an expedited grant agreement 
rather than a full funding grant agreement, and provides details on 
project development (rather than on engineering).
Section 611.303 Small Starts Project Justification Criteria
    This section of the final regulatory text provides that the 
evaluation of project justification for Small Starts be based on a 
multiple measure approach

[[Page 2023]]

that takes into account each of the criteria specified in law. As now 
required by MAP-21, this section is similar to Section 611.203 for New 
Starts in that Small Starts projects are now to be rated on the same 
six project justification criteria. In addition, Small Starts projects 
are more likely to be able to take advantage of pre-qualification 
standards that could lead to automatic ratings given that such 
automatic ratings would more likely be applicable to smaller projects. 
That said, the regulatory language on that point is the same as in 
Section 611.203. As in the parallel Section 611.203 for New Starts, 
details concerning project justification criteria, the point of 
comparison for certain incremental measures, and the weights given to 
the criteria in Section 611.303 for Small Starts can be found in 
Appendix A and in the revised proposed policy guidance made available 
today for public review and comment. Thus, it is not necessary to 
repeat the details on Appendix A and the proposed policy guidance 
located above in Section 611.203, as the same details apply to Small 
Starts projects, only to slightly different evaluation criteria.
Section 611.305 Small Starts Local Financial Commitment Criteria
    As proposed in the NPRM, and adopted in this final rule, this 
section is nearly identical to the parallel section for New Starts 
projects in Section 611.205 except that references are made to Small 
Starts and to the statutory language for Small Starts rather than for 
New Starts; and (2) the local financial commitment is evaluated based 
on the year the project is put into operation rather than based on a 
20-year planning horizon, as provided for in statute.
    As with the parallel section for New Starts, details concerning its 
proposals for evaluating local financial commitment were contained in 
proposed policy guidance made available with the NPRM and in revised 
proposed policy guidance made available for comment today. This process 
is similar to that of New Starts, so there is no need for a fuller 
explanation of the revised proposed policy guidance here.
Section 611.307 Overall Small Starts Project Ratings
    Because MAP-21 did not make significant changes in the approach for 
developing an overall Small Starts project rating, this section is made 
final. In this section: (1) References are made to Small Starts and to 
the statutory language for Small Starts; (2) references focus on 
project development; and (3) references are made to expedited grant 
agreements.
Section 611.309 Small Starts Process
    As noted above with the New Starts process, MAP-21 made significant 
changes to the process for developing Small Starts projects. 
Accordingly, FTA is not finalizing this section at this time. The 
changes made by MAP-21 will be the subject of subsequent interim policy 
guidance and rulemaking. This section is being reserved for that 
rulemaking.

VI. Regulatory Analysis and Notices

A. Executive Orders 13563 and 12866

    Executive Orders and 13563 and 12866 direct agencies to propose or 
adopt a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); tailor its regulations to impose the least 
burden on society; and assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 also emphasizes the 
importance of harmonizing rules and of promoting flexibility. This 
final rule has been drafted and reviewed in accordance with the 
principles set forth in Executive Orders 13563 and 12866.
    FTA has determined that this is an ``economically significant'' 
rule under Executive Order 12866, as it would affect transfer payments 
totaling more than $100 million annually. However, FTA is unable to 
estimate with precision just how much of the New Starts and Small 
Starts programs' roughly $2 billion in annual transfer payments will be 
affected by this rule. FTA provides a discussion below of the changes 
to the types, characteristics, and locations of projects it anticipates 
due this rule. Separate from its effects on transfer payments, and also 
discussed in more detail below, this rule makes significant changes to 
the information that sponsors must provide to FTA so that FTA can 
evaluate and rate projects. For example, the rule adopts a streamlined 
and simplified measure for justifying a proposed project's cost-
effectiveness, and it eliminates the requirement to develop a 
``baseline alternative.'' These and other similar changes will enable 
sponsors to develop the information required by FTA for proposed 
projects in less time and with fewer resources. The following table 
summarizes the monetized costs, benefits, and changes in transfers of 
this rule. The table does not include benefits which may arise due to 
the potential for accelerated project delivery due to process 
streamlining or reduced costs due to use of simplified forecasting 
techniques:

  Total Benefits and Costs Summary for Major Capital Investments Final
                       Rule Over Ten Years, 2012$
------------------------------------------------------------------------
                                   3% Discount rate    7% Discount rate
------------------------------------------------------------------------
Total Monetized Benefits........              $3.7 M              $3.2 M
Total Cost......................               0.6 M               0.6 M
Total Net Impact (Benefit--                    3.1 M               2.6 M
 Costs).........................
Changes in Transfer Payments....               2.2 B               1.8 B
------------------------------------------------------------------------

    In the NPRM, however, FTA stated that it does not know precisely 
how much transfer payments would be affected by this rule. The NPRM 
noted that due to changes in the evaluation criteria, the projects 
selected for funding by the FTA may change. For example, by adding 
quantified measures for environmental benefits, projects that have 
relatively large amounts of such benefits may be advantaged. On the 
other hand, the change to the cost-effectiveness measure from cost per 
hour of travel time savings to cost per trip could advantage projects 
serving shorter trips and more densely developed areas. For the 
purposes of the initial regulatory impact analysis in the NPRM, FTA 
estimated that the proposals in the rule could affect the allocation of 
about $250 million of annual New Starts and Small Starts grant funds. 
FTA requested public comments on this estimate, as well as specific 
methods for more precisely estimating the impact of the rule.

[[Page 2024]]

    FTA received no public comment in response to the NPRM on its 
preliminary estimate of likely impacts or on the methods for estimating 
such impacts. Accordingly, and given that the changes made by this 
final rule to the proposals in the NPRM are unlikely to have a 
substantial effect on the allocation, FTA adopts $250 million in annual 
New Starts and Small Starts allocations as its estimate of likely 
allocation effects. This is the average value of Federal funding for 
one New Starts or Small Starts project. FTA believes that the changes 
in evaluation criteria might result in one different project being 
recommended for funding each fiscal year.

B. Need for Regulation

    This final rule is issued pursuant to the requirements first 
outlined in SAFETEA-LU and continued in MAP-21 that the Secretary 
promulgate regulations to implement the Small Starts program. The final 
rule and accompanying revised proposed policy guidance change FTA's 
implementation of the major capital investment program, primarily by 
giving the project justification criteria specified in law 
``comparable, but not necessarily equal weights'' as required by 
Sections 5309 (g)(2)(B)(ii) and (h)(6), improving the measures FTA uses 
for each of the evaluation criteria specified in law, and streamlining 
and simplifying the means by which project sponsors develop the data 
needed by FTA.
    The final rule, combined with the revised proposed policy guidance 
being made available concurrently for public comment, would improve the 
evaluation of project outcomes in mobility improvements, cost-
effectiveness, environmental benefits, land use, economic development, 
and local financial commitment. The final rule provides for simplified 
measures of mobility improvements and cost-effectiveness which, while 
being much less burdensome to calculate than under the former 
regulation, will still provide for sufficient information about project 
merit on these metrics. The final rule provides for more detailed 
quantification of environmental benefits and makes clearer how projects 
will be evaluated in terms of land use, economic development, and local 
financial commitment. In addition, the final rule provides for optional 
quantification of the economic development benefits of projects.
    In addition, this rule implements an initiative in the Department 
of Transportation's (DOT) Plan for Implementation of Executive Order 
13563: Retrospective Review and Analysis of Existing Rules (https://regs.dot.gov/docs/RRR-Planfinal-8-20.pdf). Executive Order 13563 called 
on agencies to identify rules that may be ``outmoded, ineffective, 
insufficient, or excessively burdensome, and to modify, streamline, 
expand, or repeal them * * *.'' This rule streamlines and simplifies 
the various means through which project sponsors obtain the information 
they need to provide to FTA for its evaluation and rating of projects. 
For example, FTA is allowing project sponsors to use a simplified FTA-
developed national model, once available, to estimate ridership rather 
than standard local travel forecasting models; to use a series of 
standard factors in a simple spreadsheet to calculate vehicle miles 
traveled (VMT) and environmental benefits; to no longer require the 
development of a baseline alternative for calculation of incremental 
measures; and to expand the use of warrants whereby a project may be 
able to automatically qualify for a rating if it meets parameters 
established by FTA.

C. Regulatory Evaluation

1. Overview
    This regulatory evaluation examines the likely effects of this 
final rule and the revised proposed policy guidance. The NPRM asked the 
public for information to help FTA quantify the benefits and costs of 
the proposed provisions. No such information was provided in the public 
comments on the NPRM. Nevertheless, FTA has made its best efforts to 
meet the directive in Executive Order 13563 which states that agencies 
must ``use the best available techniques to quantify anticipated 
present and future benefits and costs as accurately as possible * * 
*.'' For provisions in which FTA is unable to provide quantified 
estimates of benefits and costs due to a lack of information, FTA 
provides a qualitative discussion of their likely effects.
    FTA believes this rule will affect transfer payments totaling at 
least $100 million annually. In the NPRM, FTA stated that it did not 
know precisely how much transfer payments would be affected by the 
proposed rule and policy guidance. Nevertheless, FTA estimated in the 
NPRM that the proposals could affect the allocation of about $250 
million of annual New Starts and Small Starts grant funds. FTA 
requested public comments on this estimate, as well as specific methods 
for more precisely estimating the impact of the rule. FTA received no 
public comments in response to the NPRM on its preliminary estimate of 
likely impacts or on the methods for estimating such impacts. 
Accordingly, and given that the changes made by this final rule to the 
proposals in the NPRM are unlikely to have a substantial effect on the 
allocation, FTA adopts $250 million in annual New Starts and Small 
Starts allocations as its estimate of likely allocation effects. This 
is the average value of Federal funding for one New Starts or Small 
Starts project. FTA believes that the changes in evaluation criteria 
might result in one different project being recommended for funding 
each fiscal year.
    Due to changes in the evaluation criteria adopted by this rule and 
the policy guidance, the projects selected for funding by FTA may 
change. For example, by adding quantified measures for environmental 
benefits, projects that have relatively large amounts of such 
benefits--which tend to be projects that provide transportation over 
longer distances--may be advantaged. On the other hand, the change to 
the cost-effectiveness measure from travel time savings to cost per 
trip could advantage projects serving shorter trips and more densely 
developed areas. Since there is so much variation from project to 
project it is difficult to predict which will be the stronger effect.
    In addition, the rule may have the effect of altering the pattern 
or timing of major transit capital expenditures and changing the 
allocation of funds by transit agency size. Because smaller scale 
projects are eligible for funding under Small Starts, smaller transit 
agencies may now be able to obtain funding from the program where prior 
to passage of SAFETEA-LU they could not. For example, SAFETEA-LU first 
made corridor-based bus projects eligible for Small Starts funding when 
previously only fixed guideway projects were eligible for major capital 
investment program funding, and MAP-21 continued this eligibility. 
Fixed guideway projects tend to be costlier than corridor-based bus 
projects. This eligibility change allows smaller transit agencies with 
smaller scale projects to obtain funding from the program.
    Cost-effectiveness. As proposed in the NPRM, this final rule 
includes several features designed to assure equity in the distribution 
of benefits to groups of concern to the Federal government. First, the 
final rule weights trips taken by transit dependent persons more 
heavily in the measure for mobility. In that way, projects that provide 
enhanced accessibility to transit dependent persons will be favored. 
Second, by replacing travel time savings with trips in the measure of 
cost-effectiveness, projects that serve more

[[Page 2025]]

riders, rather than those that reduce more travel time for riders 
(which are generally projects serving people making longer trips) are 
likely to be favored. Riders making longer trips tend to be riders from 
higher-income suburban communities. Third, by including an assessment 
of existing affordable housing in the project corridor as a subfactor 
examined under the land use criterion, projects serving larger numbers 
of affordable housing units will be advantaged. Finally, by including 
an assessment under the economic development criterion of local plans 
and policies to support the maintenance of or an increase in affordable 
housing in the corridor, the evaluation and rating process recognizes 
that increasing land values around transit projects can sometimes 
result in a loss of affordable housing in proximity to the project, 
thereby reducing the accessibility of the people most in need of 
service.
    Finally, as mentioned above, the rule will reduce the amount of 
time and resources needed by project sponsor to prepare information for 
FTA for evaluation and rating. For example, as discussed above, the 
rule adopts a simplified cost-effectiveness measure allowing for 
simplified methods for estimating trips on the project and it 
eliminates the requirement to develop a ``baseline alternative'' for 
use as a point of comparison for incremental measures. Also, project 
sponsors are given the latitude to forego the analysis of benefits that 
are not relevant to individual projects, which will simplify the 
project evaluation process, eliminating unnecessary analytical effort 
on the part of project sponsors. The final rule and revised proposed 
policy guidance achieve this by allowing for the use of default methods 
and assumptions whenever possible. The final rule and revised proposed 
policy guidance defer to project sponsors' decisions to pursue 
estimation of additional benefits and better ratings through more 
elaborate analysis.
2. Covered Entities
    Eligible applicants under the major capital investment program are 
public entities (transit authorities and other state and local public 
bodies and agencies thereof) including states, municipalities, other 
political subdivisions of states; public agencies and instrumentalities 
of one or more states; and certain public corporations, boards, and 
commissions established under state law. The majority of applicants to 
the major capital investment program are transit agencies and other 
state and local public bodies such as metropolitan planning 
organizations or units of city or state governments located in areas 
with greater than 50,000 in population. These would be the entities 
most affected by the final rule. Over the past four years, FTA has 
received approximately 60 applications for entry into one of the 
various phases of the New and Small Starts process, roughly 40 of which 
were New Starts projects and 20 of which were Small Starts projects. 
New Starts projects have tended to be proposed primarily in medium- to 
large-sized urbanized areas with greater than 500,000 in population. 
Small Starts projects have been proposed in cities of varying size, 
including some of the largest urbanized areas in the country, as well 
as in areas with less than 500,000 in population.
    The final rule would affect few, if any, local governments with 
populations of less than 50,000 people, as jurisdictions proposing New 
Starts and Small Starts projects are usually much larger in size with 
more extensive transit service already in place. Transit capital and 
operating funding for areas with populations less than 50,000 people is 
generally provided by FTA under a separate formula funding program to 
the states, which decide how to allocate the funds to the local areas 
within the state. Yet smaller jurisdictions are not prohibited from 
applying for major capital investment program funding. To date, FTA has 
funded only one project in an area under 50,000 in population through 
the major capital investment program.
    Public entities often contract with private entities to prepare the 
information for ratings of project justification for a proposed 
project. Private entities, however, are not eligible for New Starts or 
Small Starts funds.
3. Cost-Effectiveness
    The FTA regulation for the major capital investment program being 
replaced by this final rule, and still in effect for the next 90 days, 
defined cost-effectiveness as the incremental annualized capital and 
operating cost per incremental hour of transportation system user 
benefits (essentially travel time savings). The cost and travel time 
savings of the proposed project were compared to a baseline alternative 
(usually a lower cost bus project serving similar travel pattern in the 
corridor).
    The breakpoints that FTA used to assign cost-effectiveness ratings 
under the existing regulation were based on the value of time with a 20 
percent upward adjustment to account for congestion benefits and a 100 
percent adjustment to account for non-mobility benefits. U.S. 
Department of Transportation (USDOT) guidance (Departmental Guidance 
for the Valuation of Travel Time in Economic Analysis, April 9, 1997) 
describes, in detail, the derivation of the standard values of time to 
be used by all U.S. DOT Administrations in the economic evaluation of 
proposed projects. Consistent with this departmental guidance, FTA 
valued travel time-savings at 50 percent of Median Household Income 
published by the Census Bureau, divided by 2,000 hours. FTA 
acknowledged, however, that the time savings for transit users alone 
does not capture the full range of benefits of major transit projects. 
Pending improved reliability of the estimates of highway congestion 
relief, FTA assumed that congestion relief adds about 20 percent to the 
travel time savings generated by the project. Further, indirect 
benefits (economic development, safety improvements, pollutant 
reductions, energy savings, etc.) increase that value. By assuming that 
indirect benefits were approximately equal to the direct transportation 
benefits, FTA increased the value of each hour of transit travel time 
by a factor of two. FTA inflated the breakpoints annually based on the 
Gross Domestic Product Index (also known as the GDP deflator).
    This final rule adopts the NPRM proposal to use a simplified cost-
effectiveness measure: Annualized capital and operating cost per trip 
for New Starts projects and Federal share per trip for Small Starts 
projects. It also eliminates the requirement for a ``baseline 
alternative'' For New Starts projects, project elements that provide 
benefits not captured in whole by the other New Starts measures would 
not count as project costs, but would rather be excluded from the cost-
effectiveness calculation as ``enrichments.'' Enrichments would include 
items that are above and beyond the items needed to deliver the 
mobility benefits and that would not contribute to other benefits such 
as operating efficiencies. For example, enrichments could include 
features needed to obtain LEED certification for transit facilities or 
additional features to provide extra pedestrian access to surrounding 
development or aesthetically-oriented design features. Finally, to 
further streamline the evaluation and rating process, FTA is adopting 
the proposal to allow use of ``warrants'' to pre-qualify New and Small 
Starts projects as cost-effective based on their characteristics and/or 
the characteristics of the corridor

[[Page 2026]]

in which they are located. For example, if there is a certain level of 
transit ridership in the corridor today, and the proposed project falls 
within total cost and cost per mile parameters defined by FTA, then it 
would be ``warranted'' by FTA as cost-effective, it would receive an 
automatic medium rating on the cost-effectiveness criterion, and the 
project sponsor would not need to undertake or submit the results of 
certain analyses.
    The net effect of these changes is to reduce the reporting and 
analytical burden on project sponsors. For example, the analytical 
design of a hypothetical alternative project is a costly effort that is 
eliminated in this final rule. Any increased burden would result from 
project sponsors electing to perform optional additional analysis in 
support of their projects entirely at their option.
    The simplified cost-effectiveness measure proposed may result in 
different kinds of projects receiving more favorable ratings than under 
the current approach, which could lead to transfer payments totaling 
more than $100 million annually. Some examples are described below:
    (a) Under the current approach, which uses ``transportation system 
user benefits'' (essentially travel time savings) as the measure of 
effectiveness, projects that involve longer trips are advantaged 
because there is more of an opportunity to save time. The revised 
measure values all trips equally, whether short or long. Thus, projects 
with shorter trips are likely to fare better than they do under the 
current measure.
    (b) Under the current approach, which requires comparing the 
project to a baseline alternative to calculate cost-effectiveness, many 
project sponsors have had difficulty demonstrating sufficient travel 
time savings as compared to project cost. Further, as noted above, many 
project sponsors considered the baseline alternative a redundant 
requirement, since an assessment of alternatives is required in the 
NEPA process. One result of requiring a baseline alternative, was that 
project sponsors eliminated stations, shortened platforms, reduced 
parking, purchased only the number of vehicles needed to meet near term 
demand rather than longer term demand, etc. to reduce the cost of the 
build alternative in relation to the baseline alternative. Often such 
changes were made in a way that resulted in travel time savings for 
some riders, but only at the expense of accessibility for other riders. 
In such cases, this resulted in disproportionate impacts to minority 
and low-income populations and led to litigation that delayed the 
projects and caused further cost increases. To add deferred project 
scope at a later date is far more costly than if it had been 
constructed as part of the original project. FTA believes the new 
measure will help reduce these instances of nearsighted scope changes, 
given its emphasis on trips rather than travel time savings and its 
elimination of the baseline alternative point of comparison. FTA notes 
that excluding ``enrichments'' from the cost part of the cost-
effectiveness calculation does not in and of itself address these 
issues, since ``enrichments'' are generally project elements whose 
benefits do not get adequately captured by the criteria.
4. Economic Development
    Currently, FTA evaluates economic development based on the local 
plans and policies in place to enhance transit oriented development in 
proximity to the proposed transit stations. In other words, FTA 
examines through a qualitative assessment, the likelihood the project 
will foster economic development based on the transit supportive plans 
and policies in place, including whether increased densities are 
encouraged in station areas, whether there is a plan for pedestrian and 
non-motorized travel, whether zoning and parking requirements are in 
place that would support transit-friendly development, etc. FTA does 
not specify or require local plans and policies to include specific 
measures or requirements, but rather examines what the local area has 
included to see if it is generally transit supportive.
    As proposed in the NPRM, the final rule continues to evaluate 
economic development based on a qualitative assessment of the local 
transit supportive plans and policies in place, but adds a qualitative 
assessment of local affordable housing plans and policies to encourage 
maintenance of or an increase in affordable housing in the corridor. As 
proposed in the NPRM, FTA is also requiring that project sponsors 
report under economic development the number of domestic jobs related 
to project design, construction, and operation, although this figure 
would not be used for evaluation purposes. Lastly, as proposed in the 
NPRM and implemented with this final rule, project sponsors have the 
option of using a scenario approach to characterize and estimate the 
quantitative impacts of economic development resulting from 
implementation of the project, including the environmental benefits 
that would result from such economic development due to agglomeration 
effects.
    The added cost of the additions to the economic development 
criterion will likely be marginal because most sponsors already develop 
this information as part of the local planning process, with the 
exception of the affordable housing data perhaps. Many project sponsors 
are pursuing major capital investment projects to facilitate efforts to 
induce economic development, thus, information pertaining to economic 
development scenarios and job creation are typically developed during 
the planning process. With regard to the cost of developing the 
affordable housing data, it is difficult to be any more precise than to 
provide a qualitative description. Most studies that have examined the 
impact of transit lines on affordable housing are largely in line with 
the general consensus that improving accessibility through the addition 
of public transit increases housing costs in most, but not all, cases 
(https://ctod.org/pdfs/2007TODCaseStudies.pdf, https://ctod.org/pdfs/2011R2R.pdf, and https://www.ctod.org/portal/node/2163). It is difficult 
to generalize the magnitude of the impact. As a result, FTA believes 
examining the local plans and policies in place to mitigate rising 
rents and property taxes, and help preserve existing or increase 
affordable housing near transit, is appropriate to ensure that a share 
of new development is affordable to low- and moderate-income families.
5. Environmental Benefits
    Currently, the environmental benefits of New Start projects are 
evaluated on the basis of the EPA air quality designation for the 
metropolitan area. Small Starts projects have not been required to 
estimate environmental benefits because SAFETEA-LU did not include it 
as a criterion for Small Starts projects. However, MAP-21 now requires 
that Small Starts projects be evaluated on environmental benefits as 
well as New Starts projects.
    The NPRM proposed to examine under the environmental benefits 
criterion the direct and indirect benefits to the natural and human 
environment, including air quality improvement from changes in 
vehicular emissions, reduced energy consumption, reduced greenhouse gas 
emissions, reduced accidents and fatalities, and improved public health 
(once a measure is developed). The final rule adopts this proposal. The 
direct benefits are calculated using standard factors from changes in 
VMT and assigned a dollar value. The dollar value of the benefits is 
then compared to the annualized capital and operating cost of the 
project for New Starts projects and, in accordance with MAP-21 
requirements,

[[Page 2027]]

to the Federal share for Small Starts projects. Project sponsors 
customarily calculate environmental benefits for transit projects to 
meet local political needs and for the purpose of the review required 
by the National Environmental Policy Act. FTA is adopting the 
simplified approach proposed in the NPRM for developing the newly 
required information needed for the environmental benefits evaluation 
and rating--a simple spreadsheet that would perform the calculations 
using a series of standard factors with only a few pieces of data 
required as input. Therefore, the proposed calculations will likely not 
measurably change the analytical and reporting burdens of project 
sponsors. As noted earlier, quantitative evaluation of environmental 
benefits is likely to be advantageous to projects that produce 
significant amounts of VMT reduction. These are likely to be projects 
that serve longer trips, often suburban commuter trips now made by 
automobile.
6. Mobility Improvements
    Currently, five measures are applied to estimate mobility 
improvements for New Starts projects: (1) The number of transit trips 
using the project; (2) the transportation system user benefits per 
passenger mile on the project; (3) the number of trips by transit 
dependent riders using the project; (4) the transportation system user 
benefits of transit dependents per passenger mile on the project; and 
(5) the share of transportation system user benefits received by 
transit dependents compared to the share of transit dependents in the 
region. Transportation system user benefits reflect the improvements in 
regional mobility (as measured by the weighted in- and out-of-vehicle 
changes in travel-time to users of the regional transit system) caused 
by the implementation of the proposed project. The measures are 
calculated by comparing the proposed project to a baseline alternative, 
which is usually the ``Transportation System Management'' (TSM) 
alternative. Small Starts projects have not been required to estimate 
mobility improvements because SAFETEA-LU did not include it as a 
criterion for Small Starts projects. However, MAP-21 now requires that 
Small Starts projects be evaluated on mobility improvements as well as 
New Starts projects.
    In the NPRM, FTA proposed to use total trips on the project as the 
measure of mobility, with extra weight given to trips made by transit 
dependents. Because it is not an incremental measure, no comparison to 
a baseline alternative is required. FTA is adopting this proposal.
    Under the current approach, which uses ``transportation system user 
benefits'' (essentially travel time savings), projects that involve 
longer trips are advantaged because there is more of an opportunity to 
save time. The revised measure values all trips equally, whether short 
or long. Thus, projects with shorter trips are likely to fare better 
than they do under the current mobility improvements measure. As noted 
earlier, the quantification of the environmental benefits is likely to 
favor projects with longer trips. Given the wide variety of projects 
being evaluated, it is difficult to say with any certainty which effect 
would be more dominant. Because transit dependent trips are given 
higher weight in the adopted approach than they are given in the 
current approach, however, not all projects with shorter trips may fare 
better.
    FTA notes that this change focuses the measure on an assessment of 
the transit project itself. Under the existing regulation, the cost-
effectiveness measure was designed to take into account travel time on 
both the highway and transit system. However, FTA was unable to 
effectively include highway user travel times in its analyses because 
of shortcomings in local travel forecasting models in common use. Thus, 
in concept, the approach in the existing regulation could have 
accounted for changes in the transportation system as a whole, 
including the possible negative impacts of a transit project on highway 
users, but it could not do so in practice. The change made by this 
final rule will thus not be any different than the current approach in 
considering impacts on the transportation system as a whole.
    The reporting burden for the mobility improvements measure for New 
Starts project sponsors will be significantly lowered under the 
approach adopted by this final rule as compared to the current approach 
because FTA is developing a simplified national model that would 
calculate trips rather than having project sponsors spend significant 
time and effort adjusting their local travel forecasting model to 
estimate trips on the project. Local models are typically developed by 
the metropolitan planning organization to forecast regional trips and 
are not often honed to adequately perform corridor-level analyses. In 
addition, because development of the baseline alternative is no longer 
required under the new measure, significant time developing that 
alternative is no longer required if it is not an alternative local 
decisions-makers wish to pursue. For local decision-making purposes, 
the number of trips made on the project is typically calculated, so the 
data required by FTA is not considered onerous for either New Starts or 
Small Starts project sponsors.
7. Operating Efficiencies
    The current measure for operating efficiencies is the incremental 
difference in system-wide operating cost per passenger mile between the 
proposed project and the baseline alternative. In the NPRM, FTA 
proposed instead that the measure of operating efficiencies be the 
change in operating and maintenance cost per ``place-mile'' compared to 
either the existing transit system in the current year or, 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. 
MAP-21 eliminated the operating efficiencies criterion. Thus, FTA is 
not adopting the measure proposed in the NPRM.
8. Congestion Relief
    MAP-21 includes a new project justification criterion for New and 
Small Starts projects called congestion relief. The final rule includes 
reference to this criterion, but reserves information on it until 
future interim proposed policy guidance and rulemaking can be 
undertaken since it was not included in the NPRM. The burden associated 
with collecting the information necessary for this new criterion will 
be discussed in that future rulemaking.
9. Regulatory Evaluation
    FTA considered the industry-wide costs and benefits of the NPRM in 
preparing this final rule. Each is discussed below.
a. Costs
    Regulatory Familiarization--Although FTA believes the rule will 
have overall net benefits, project sponsors and their contractors will 
need to expend resources to read and understand the final rule and 
policy guidance, and may need to make changes to their existing 
systems, programs, and procedures in response to the changes made by 
the rule. FTA estimates it will take project sponsors and their 
contractors 40 hours on average to perform these tasks. Assuming 100 
project sponsors and 100 contractors, and an average hourly wage 
(including benefits) of $39.04 for project sponsors and $37.51 for 
contractors, FTA estimates a cost of $306,200 for regulatory 
familiarization. The hourly wage rates assumed came from the Bureau of 
Labor Statistics' 2010

[[Page 2028]]

National Compensation Survey and represent the median rates for civil 
engineers in local government and in private industry, respectively. 
Civil engineers were chosen as the reference point for simplification 
purposes and also because that hourly rate was higher than the rate for 
urban planners, but they are just two of the many professions involved 
in planning and project development of New and Small Starts projects. 
FTA expects project sponsors and their contractors to incur these 
regulation familiarization costs one time only. FTA requested comments 
on these assumptions and estimates and received no comments. Hence, FTA 
is adopting these estimates as included in the NPRM.
    Project Information--The final rule will require project sponsors 
to submit information on project characteristics that they have not 
previously been required to submit to FTA. This includes the number of 
jobs resulting from implementation of the project, the change in 
environmental benefits resulting from the expected change in VMT, the 
amount of affordable housing existing in the corridor, and the plans 
and policies to maintain or increase affordable housing in the future. 
In general, FTA believes this information can be gathered and estimated 
rather quickly and easily, and will not require significant additional 
cost, time, or effort. The number of jobs created is information that 
project sponsors typically estimate for local decision-makers. FTA 
expects the data needed for the evaluation of the amount of existing 
affordable housing in the project corridor will come from census data 
and the local housing agency. FTA will develop spreadsheets with a 
number of standard factors to estimate environmental benefits. Project 
sponsors will be asked only to input a few key variables. FTA estimated 
the time to prepare the additional information proposed in the NPRM to 
be at most 40 hours per project, and received no public comment on this 
estimate. Using the same estimates of the value of time used above, FTA 
estimates this onetime cost at a total of $306,200. Therefore, FTA is 
adopting this estimate in this final rule.
    The optional scenario analysis allowed under the economic 
development criterion may require some time and effort to prepare. But 
project sponsors may choose to forgo this analysis.
    Disbenefits of Streamlining--The elimination of the requirement for 
a baseline alternative and the change in the measures could have 
disbenefits if the changes resulted in assignment of inappropriate or 
inaccurate project ratings. However, FTA believes that the measures 
being proposed are equally as good as the current measures at providing 
an accurate and appropriate understanding of the merits of proposed 
projects. A New Starts ratings process has been in place since 1984, 
and FTA has gained considerable experience in distinguishing between 
projects and determining those worthy of Federal assistance. Based on 
this experience, FTA believes that project utilization is as good, if 
not better, a metric for assessing project worthiness, than travel time 
savings, particularly since it involves substantially less resources to 
develop. Further, the current measure requires comparing the results of 
two estimates of future system characteristics (the proposed project 
and the proposed baseline alternative), thereby increasing the 
opportunity for additional imprecision.
b. Benefits
    The costs to project sponsors associated with familiarizing 
themselves with the new regulation and providing FTA additional 
information for some of the criteria under the final rule compared to 
the former regulations will likely be counterbalanced by the 
simplification of methods for generating some of the information 
needed, as provided in the appendix to the final regulation and the 
revised proposed policy guidance made available today for public 
comment. Simplifying rules is a principle in Executive Order 13563. As 
examples of such simplification:
    (a) Under the current rule, project sponsors are required to use 
local travel forecasts to obtain the information needed for FTA's 
evaluation of the various project justification criteria. The final 
rule adopts a number of simpler measures for project justification that 
will allow project sponsors to use a simplified national model once it 
is developed by FTA. After the simplified national model is in place, 
project sponsors may continue to use information generated by local 
travel forecasts if they believe it will result in a more favorable 
rating for the proposed project, but it is at the project sponsors' 
discretion (i.e., not required by regulation or suggested in guidance). 
FTA expects this change will save project sponsors significant time and 
resources. It often costs project sponsors from several hundreds of 
thousands of dollars up to millions of dollars in consultant help and 
six months or longer to adjust local travel forecasting models to 
obtain acceptable ridership results for FTA's evaluation and rating 
purposes. This information is based on anecdotal reporting by project 
sponsors to FTA as they complete their analyses. Because of the wide 
variety of project types, project sponsor experience, the state of 
local travel demand forecasting models, and other local factors, it is 
difficult to estimate and summarize these costs into a single 
annualized value.
    (b) Project sponsors would no longer be required to develop a 
baseline alternative. The process of defining a baseline alternative is 
an iterative one. By eliminating the need to develop a baseline 
alternative (which is often not an alternative local decision-makers 
wish to implement), FTA estimates that up to six months of time could 
be saved. The cost of this time savings is difficult to estimate, and 
FTA has not seen any particular data on the estimation, but project 
sponsors have suggested that each month of delay in implementing a 
project is roughly $1 million in additional cost. Delay costs would 
depend on the size of the project. But even for smaller projects, these 
increases would come from the need to keep project management staff in 
place during the extended period of project development as well as 
increases in project construction costs above inflation.
    (c) The expanded use of warrants (a process by which a project can 
qualify for an automatic rating if it can meet certain FTA defined 
parameters) would eliminate the need for project sponsors to undertake 
certain analyses and submit that data to FTA. This can save significant 
time and money because project sponsors often hire consultants to help 
undertake the analyses required to develop the data for FTA.
    FTA believes the improved measures for cost-effectiveness, 
environmental benefits, and economic development will reduce the 
influence of a ``one size fits all'' evaluation approach that, 
historically, has favored some transit benefits over others and thereby 
has minimized locally preferred benefits. For example, by focusing on 
travel time savings, the current process tends to favor projects in 
areas with extreme congestion over areas that do not currently have 
extreme congestion but are planning future transit to keep from 
becoming mired in extreme congestion. This is because projects in areas 
with extreme congestion today may be able to show significant travel 
time savings simply because an additional travel option is offered that 
may operate on an exclusive guideway separate and apart from the 
roadway congestion. A similar exclusive guideway project in a non-
congested area would not show as much travel time savings when compared 
to

[[Page 2029]]

the baseline alternative (a lower cost bus option) because that 
baseline bus would not be operating in as congested traffic. Similarly, 
the focus on travel time savings does not acknowledge that some areas 
undertake transit projects to encourage development rather than to 
address mobility challenges. Such projects are often tailored to 
smaller areas where increasing the number of trips on transit in higher 
density environments can be much more conducive to encouraging 
development around such stations. The final rule, with its focus on 
trips rather than travel time savings as the measure of mobility, 
acknowledges more varied purposes for undertaking these projects and a 
different ``basket'' of transit benefits.
    FTA estimates the paperwork burden on project sponsors involved 
with developing and reporting the information to FTA will be lowered as 
a result of this final rule based on the above mentioned benefits. FTA 
estimates a reduction of paperwork burden of $423,750 in benefits on an 
annual basis. This estimate is only for the reduced reporting of 
information resulting from the changes made to the criteria in this 
rule and does not include the difficult to quantify reduction in burden 
that would come from use of the FTA developed national simplified model 
if a sponsor opted to use it.

D. Departmental Significance

    This final rule is a ``significant regulation'' as defined by the 
Department's Regulatory Policies and Procedures because it implements 
the Departmental initiative to revise, simplify, and streamline the New 
Starts and Small Starts processes. The NPRM generated interest from 
sponsors of major transit capital projects, the general public, and 
Congress.

E. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., FTA evaluated the likely effects of the proposals contained in 
this final rule on small entities. Based on this evaluation, FTA 
believes that the proposals contained in this final rule will not have 
a significant economic impact on a substantial number of small entities 
because the proposals concern only New Starts and Small Starts which, 
by their scale and nature, are not usually undertaken by small 
entities. FTA sought public comment on this assessment in the NPRM and 
received no comments.

F. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), a Federal agency may not conduct or sponsor the collection of 
information without first obtaining approval and a control number from 
the Office of Management and Budget (OMB). FTA has been collecting 
project evaluation information from project sponsors under the existing 
OMB approval for this program (OMB No. 2132-0561) entitled ``49 CFR 
Part 611 Major Capital Investment Projects.''
    FTA has a longstanding requirement to evaluate proposed projects 
against a prescribed set of statutory criteria at specific points 
during the projects' development. In addition, FTA is required by law 
to report on its project evaluations and ratings annually to Congress. 
The Surface Transportation and Uniform Relocation Assistance Act of 
1987 (STURAA) established in law a set of criteria that proposed 
projects had to meet in order to be eligible for federal funding. The 
requirement for summary project ratings has been in place since 1998. 
Thus, the requirements for project evaluation and data collection for 
New Starts projects are not new. However, one change to the program 
included in SAFETEA-LU, and continued by MAP-21, is the Small Starts 
program. The Small Starts program enables smaller cost projects with a 
smaller requested share of Section 5309 major capital investment funds 
to be eligible for funding. Additionally, MAP-21 reduces the number of 
steps in the New and Small Starts process, which reduces the number of 
times project sponsors must submit information to FTA for evaluation 
and rating purposes. MAP-21 also increases the number of evaluation 
criteria for Small Starts projects over what had been included in 
SAFETEA-LU, but with the streamlined approaches FTA is implementing in 
this final rule for calculating the criteria, the additional burden 
associated with those additional criteria is somewhat mitigated.
    In general, the information used by FTA for New Starts and Small 
Starts project evaluation and rating should arise as a part of the 
normal planning process. But due to modifications in the project 
evaluation criteria and FTA evaluation and rating procedures in the 
final rule, some information may be beyond the scope of ordinary 
planning activities.
    Eligible applicants under the major capital investment program are 
public bodies and agencies (transit authorities and other state and 
local public bodies and agencies thereof) including states, 
municipalities, other political subdivisions of states; public agencies 
and instrumentalities of one or more states; and certain public 
corporations, boards, and commissions established under state law. 
Private corporations and private non-profit entities are not eligible 
for funding under the program; private corporations such as consulting 
and engineering and construction firms, however, could be affected by 
the regulation if they are hired by project sponsors to assist in the 
development of the data needed by FTA.
    FTA evaluates and rates projects in order to: (1) Decide whether 
proposed projects may advance into certain phases of the process; (2) 
assign ratings to proposed projects for the Annual Report on Funding 
Recommendations; and (3) develop funding recommendations for the 
President's budget. The law also requires that FTA evaluate the 
performance of the projects funded through the New Starts program in 
meeting ridership and cost estimates two years after they are opened 
for service, through implementation of a ``Before and After'' study 
requirement. This also helps to evaluate the success of the grant 
program itself for purposes of the Government Performance and Results 
Act.
    MAP-21 requires New and Small Starts project sponsors to seek 
approval into the project development phase from FTA, which is the 
initial step in the process. The contents of the application that will 
be required with a project sponsor's request to enter project 
development and the type of review FTA will perform before giving 
approval into that phase is not covered in this final rule and will 
instead be discussed in subsequent rulemaking. However, unlike the 
requirements of SAFETEA-LU whereby FTA had to evaluate and rate a 
project before it would be approved into the first phase of the 
process, MAP-21 does not require that FTA evaluate and rate a project 
when a sponsor requests entry into project development. Thus, the 
burden hours associated with developing the application for the initial 
step in the process will be reduced. While a detailed estimate of the 
burden hours involved in preparing the materials for entry into project 
development will be prepared during the subsequent rulemaking process, 
FTA has included some rough estimates of the burden hours in the 
analysis included in this final rule, since a good part of the 
reduction will come from adoption of the revised evaluation criteria, 
rather than from the changes in the process under MAP-21. FTA will 
ensure that it does not double count burden hour reductions and cost 
savings when it produces the regulatory evaluation for the subsequent 
rulemaking needed to

[[Page 2030]]

put into effect the procedural changes made by MAP-21.
    MAP-21 requires New Starts project sponsors to submit information 
to FTA for evaluation and rating purposes when the projects wish to 
enter the engineering phase of development and when they seek a Full 
Funding Grant Agreement. Small Starts project sponsors must submit 
information to FTA for evaluation and rating purposes when the project 
seeks an Expedited Grant Agreement. Both New and Small Starts project 
sponsors must submit updated information to FTA if the project scope 
and cost have changed materially since the last rating was assigned.
    FTA needs to have accurate information on the status and projected 
benefits of proposed New Starts and Small Starts projects on which to 
base its decisions regarding funding recommendations in the President's 
budget. As discretionary programs, both the New Starts and Small Starts 
programs require FTA to identify proposed projects that are worthy of 
federal investment, and are ready to proceed with project development 
and construction activities.
    FTA has tried to minimize the burden of the collection of 
information, and requests that project sponsors submit project 
evaluation data by electronic means. FTA has developed standard format 
templates for project sponsors to complete that automatically populate 
data used in more than one form. FTA then uses spreadsheet models to 
evaluate and rate projects based on the information submitted. FTA is 
adopting project justification measures in this final rule that will 
allow for the use of a simplified national model once it is developed 
to estimate project trips on a project based on simple inputs including 
census data and project characteristics. Where and when possible, FTA 
makes use of the information already collected by New Starts and Small 
Starts project sponsors as part of the planning process. As each 
proposed project develops at a different pace, however, FTA has a duty 
to base its funding decisions on the most recent information available. 
Project sponsors often find it necessary to develop updated information 
specifically for purposes of the New Starts or Small Starts program. 
This is particularly true for the Annual Report on Funding 
Recommendations, which is a supporting document to the President's 
annual budget request to Congress. To reduce the reporting burden on 
project sponsors, however, FTA has instituted a policy that Annual 
Report submissions are only required of projects that are seeking a 
funding recommendation or have changed significantly in cost or scope 
from the last evaluation.
    FTA estimates current overall New Starts and Small Starts annual 
paperwork burden hours to be approximately 275 hours for each of the 
estimated 135 respondents, totaling 37,070 hours and annual costs 
totaling $2,780,250. The changes made by MAP-21 to the steps in the 
process, as well as the changes to the evaluation and rating criteria 
made in this final rule and accompanying policy guidance reflecting 
comments received on the NPRM, will modify the time required by project 
sponsors to prepare and submit applications to FTA. FTA now estimates 
burden hours would be approximately 242 hours for each of the estimated 
130 respondents totaling 31,420 hours and annual costs totaling 
$2,356,500. Thus, FTA estimates this rule will reduce annual paperwork 
burden hours by 5,650 hours and paperwork costs by $423,750.
    As discussed above, MAP-21 includes fewer steps in the process and 
reduced information at the initial step. Additional information will be 
required of project sponsors due to the revised measures included in 
the final rule, but FTA has also adopted simplified methods of data 
collection and data estimation (e.g., FTA will no longer require 
sponsors to model a baseline alternative; will allow estimation of 
project trips using a simplified national model, once developed, rather 
than local travel forecasting models; and will use standard factoring 
approaches). Thus, the changes made by MAP-21 and by FTA in this final 
rule and accompanying policy guidance are estimated to reduce the net 
paperwork burden for project sponsors. These and other paperwork 
requirement trade-offs were an express objective in developing this 
final rule and accompanying policy guidance. The amount of paperwork 
burden is partially proportionate to the scale of the project and the 
determination by the project sponsor whether it will choose to develop 
detailed forecasts of project benefits (instead of the simplified 
default methods FTA allows in its policy guidance). Such increased 
burdens are at the sponsor's discretion, rather than a requirement of 
this final rule or the accompanying policy guidance. Most of the 
estimated paperwork reduction would be realized when project sponsors 
are preparing the materials that allow FTA to evaluate and rate the 
project for the first time, which occurs when a New Starts project 
sponsor seeks entry into the engineering phase and when a Small Starts 
project sponsor seeks an expedited grant agreement.
    The table below shows the annual project paperwork burden across 
sponsors of New Starts and Small Starts projects.

                                      Total Project Sponsor Cost and Hours
----------------------------------------------------------------------------------------------------------------
                                                     
                      Task                            Annual      Aver hours per    Total hours       Total $
                                                    occurrences     occurrence
----------------------------------------------------------------------------------------------------------------
                                    Data Submission, Evaluation, and Ratings
----------------------------------------------------------------------------------------------------------------
NEW STARTS
    (A) Project Development Request.............              30              20             600         $45,000
    (B) Engineering Request.....................              15             152           2,280         171,000
    (C) Annual Report...........................              20              40             800          60,000
    (D) FFGA Approval...........................               5              50             250          18,750
        Subtotal................................  ..............  ..............           3,930         294,750
SMALL STARTS
    (A) Project Development.....................              15              25             375          28,125
    (B) Annual Report...........................              15              25             375          28,125
    (C) EGA Approval............................              10              82             820          61,500
        Subtotal................................  ..............  ..............           1,570         117,750
                                                                                 -------------------------------
        Data Sub, Eval, and Ratings Total.......  ..............  ..............           5,500         412,500
----------------------------------------------------------------------------------------------------------------

[[Page 2031]]

 
                                        Before and After Data Collection
----------------------------------------------------------------------------------------------------------------
NEW STARTS
    (A) Data Collection Plan....................               4              80             320          24,000
    (B) Before Data Collection..................               4           3,000          12,000         900,000
    (C) Documentation of Forecasts..............               4             160             640          48,000
    (D) After Data Collection...................               4           3,000          12,000         900,000
    (E) Analysis and Reporting..................               4             240             960          72,000
                                                                                 -------------------------------
        Before and After Total..................  ..............  ..............          25,920       1,944,000
                                                                                 -------------------------------
            TOTAL...............................  ..............  ..............          31,420       2,356,500
----------------------------------------------------------------------------------------------------------------

    The estimates for total number of annual submissions are based on 
projected annual workload. The estimated average number of hours per 
task is based on professional judgment of FTA staff. Estimated hourly 
costs are based on information informally shared by project sponsors 
and the professional judgment of FTA staff.
    Interested parties were invited in the NPRM to send comments 
regarding any aspect of this information collection, including: (1) The 
necessity and utility of the information collection for the proper 
performance of the functions of the FTA; (2) the accuracy of the 
estimated burden; (3) ways to enhance the quality, utility, and clarity 
of the collected information; and (4) ways to minimize the collection 
burden without reducing the quality of the collected information. No 
comments were received on this analysis.

G. Executive Order 13132

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132. The final rule implements 
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 
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 final rule does 
not have sufficient Federalism implications to warrant the preparation 
of a Federalism Assessment. Comment was solicited specifically on the 
Federalism implications of this proposal in the NPRM and no comments 
were received.

H. National Environmental Policy Act

    FTA has analyzed this action for the purpose of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321), and has determined 
that this action would not have any potentially significant 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.''

I. Energy Act Implications

    The changes made in this final rule and accompanying guidance 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.

J. 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. In the NPRM, we invited Indian tribal governments 
to provide comments on the effect that adoption of specific proposals 
in the NPRM and accompanying guidance may have on Indian communities. 
No comments were received on this issue.

K. Unfunded Mandates Reform Act

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, of $100,000,000 or more in any 
one year.

L. Statutory/Legal Authority for This Rulemaking

    This rulemaking is issued under authority of 49 U.S.C. 5334(a)(11), 
which provides that the Secretary may ``issue regulations as necessary 
to carry out the purposes of [Chapter VI of Title 49, U.S. Code],'' and 
49 U.S.C. 5309(g)(6), which requires the Secretary to issue regulations 
''establishing an evaluation and rating process'' for new fixed 
guideway capital projects funded under 49 U.S.C. 5309. The Secretary's 
authority to issue these regulations is delegated to the Federal 
Transit Administrator through 49 CFR 1.19(a), the delegation from the 
Secretary to the Administrator to ``carry out'' the Federal transit 
programs authorized by 49 U.S.C. chapter 53.

M. 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.

List of Subjects in 49 CFR Part 611

    Government contracts, Grant programs-transportation, Mass 
transportation.

VII. Regulatory Text

    For the reasons set forth in the preamble, and under the authority 
of 49 U.S.C. 5309(g)(6) and 5334(a)(11), and the delegations of 
authority at 49 CFR 1.51, FTA hereby amends Chapter VI of Title 49, 
Code of Federal Regulations, by revising part 611 as set forth below:

[[Page 2032]]

PART 611--MAJOR CAPITAL INVESTMENT PROJECTS

Subpart A--General Provisions
Sec.
611.101 Purpose and contents
611.103 Applicability
611.105 Definitions
611.107 Relation to the planning processes
Subpart B--New Starts
611.201 New Starts eligibility
611.203 New Starts project justification criteria
611.205 New Starts local financial commitment criteria
611.207 Overall New Starts project ratings
611.209 New Starts process
611.211 New Starts Before and After study
Subpart C--Small Starts
611.301 Small Starts eligibility
611.303 Small Starts project justification criteria
611.305 Small Starts local financial commitment criteria
611.307 Overall Small Starts project ratings
611.309 [Reserved]
Appendix A--Description of Measures Used for Project Evaluation

    Authority:  Sec.  49 U.S.C. 5309(g)(6) and 5334(a)(11); 49 CFR 
1.51.

Subpart A--General Provisions


Sec.  611.101  Purpose and contents.

    (a) This part prescribes the process that applicants must follow to 
be considered eligible for fixed guideway capital investment grants for 
a new fixed guideway, an extension to a fixed guideway, or a corridor-
based bus rapid transit system (known as New Starts and Small Starts). 
Also, this part prescribes the procedures used by FTA to evaluate and 
rate proposed New Starts projects as required by 49 U.S.C. 5309(d) and 
Small Starts projects as required by 49 U.S.C. 5309(h).
    (b) This part defines how the results of the evaluation described 
in paragraph (a) of this section will be used to:
    (1) Rate projects as ``high,'' ``medium-high,'' ``medium,'' 
``medium-low'' or ``low'' as required by 49 U.S.C. 5309(g)(2)(A) and 49 
U.S.C. 5309(h)(6);
    (2) Assign individual ratings for each of the project justification 
criteria specified in 49 U.S.C. 5309(d)(2)(B) and 49 U.S.C. 5309(h)(6);
    (3) Determine project eligibility for Federal funding commitments, 
in the form of full funding grant agreements (FFGA) for New Starts 
projects and expedited grant agreements (EGA) for Small Starts 
projects; and
    (4) Support funding recommendations for the New Starts and Small 
Starts programs for the President's annual budget request.
    (c) The information collected and ratings developed under this part 
will form the basis for the Annual Report on Funding Recommendations, 
required by 49 U.S.C. 5309(o)(1).


611.103   Applicability.

    (a) This part applies to all proposals for Federal major capital 
investment funds under 49 U.S.C. 5309 for new fixed guideways, 
extensions to fixed guideways, and corridor-based bus rapid transit 
systems.
    (b) This part does not apply to projects for which an FFGA or PCGA 
has already been executed, or to projects that have been approved into 
final design or project development unless the project sponsor requests 
to be covered by this part. The regulations in existence prior to the 
effective date of this rule will continue to apply to projects for 
which an FFGA or PCGA has already been executed and to projects 
approved into final design or project development unless a project 
sponsor requests to be covered by this part. New Starts projects 
approved for entry into final design shall be considered to be in the 
engineering phase of the New Starts process.
    (c) A New Starts project which has been approved for entry into 
preliminary engineering under the regulations in existence prior to the 
effective date of this rule shall be considered to be in the 
engineering phase of the New Starts process. For the purpose of 
completing engineering, the regulations in existence prior to the 
effective date of this rule will continue to apply to a New Starts 
project approved into preliminary engineering until such time as the 
sponsor requests an FFGA unless the project sponsor requests to be 
covered by this part prior to an FFGA.


Sec.  611.105  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. In addition, the following definitions apply:
    Corridor-based bus rapid transit project means a bus capital 
project where the project represents a substantial investment in a 
defined corridor as demonstrated by features such as park-and-ride 
lots, transit stations, bus arrival and departure signage, intelligent 
transportation systems technology, traffic signal priority, off-board 
fare collection, advanced bus technology, and other features that 
support the long-term corridor investment.
    Current year means the most recent year for which data on the 
existing transit system and demographic data are available.
    Early system work agreement means a contract, pursuant to the 
requirements in 49 U.S.C. 5309(k)(3), that allows some construction 
work and other clearly defined elements of a project to proceed prior 
to execution of a full funding grant agreement (FFGA). It typically 
includes a limited scope of work that is less than the full project 
scope of work and specifies the amount of New Starts funds that will be 
provided for the defined scope of work included in the agreement.
    EGA means an expedited grant agreement.
    Engineering is a phase of development for New Starts projects 
during which the scope of the proposed project is finalized; estimates 
of project cost, benefits, and impacts are refined; project management 
plans and fleet management plans are developed; and final construction 
plans (including final construction management plans), detailed 
specifications, final construction cost estimates, and bid documents 
are prepared. During engineering, project sponsors must obtain 
commitments of all non-New Starts funding.
    ESWA means early system work agreement.
    Extension to fixed guideway means a project to extend an existing 
fixed guideway or planned fixed guideway.
    FFGA means a full funding grant agreement.
    Fixed guideway means a public transportation facility that uses and 
occupies a separate right-of-way or rail line for the exclusive use of 
public transportation and other high occupancy vehicles, or uses a 
fixed catenary system and a right of way usable by other forms of 
transportation. This includes, but is not limited to, rapid rail, light 
rail, commuter rail, automated guideway transit, people movers, ferry 
boat service, and fixed-guideway facilities for buses (such as bus 
rapid transit) and other high occupancy vehicles. A new fixed guideway 
means a newly-constructed fixed guideway in a corridor or alignment 
where no such guideway exists.
    FTA means the Federal Transit Administration.
    Full funding grant agreement means a contract that defines the 
scope of a New Starts project, the amount of New Starts funds that will 
be contributed, and other terms and conditions.
    Horizon year means a year roughly 10 years or 20 years in the 
future, at the

[[Page 2033]]

option of the project sponsor. Horizon years are based on available 
socioeconomic forecasts from metropolitan planning organizations, which 
are generally prepared in five year increments such as for the years 
2020, 2025, 2030, and 2035.
    Locally preferred alternative means an alternative evaluated 
through the local planning process, adopted as the desired alternative 
by the appropriate State and/or local agencies and official boards 
through a public process and identified as the preferred alternative in 
the NEPA process.
    Long-range transportation plan means a financially constrained 
long-range plan, developed pursuant to 23 CFR Part 450, that includes 
sufficient financial information for demonstrating that projects can be 
implemented using committed, available, or reasonably available revenue 
sources, with reasonable assurance that the Federally supported 
transportation system is being adequately operated and maintained. For 
metropolitan planning areas, this would be the metropolitan 
transportation plan and for other areas, this would be the long-range 
statewide transportation plan. In areas classified by the Environmental 
Protection Agency as ``nonattainment'' or ``maintenance'' of air 
quality standards, the long-range transportation plan must have been 
found by DOT to be in conformity with the applicable State 
Implementation Plan.
    Major capital transit investment means any project that involves 
the construction of a new fixed guideway, extension of an existing 
fixed guideway, or a corridor-based bus rapid transit system for use by 
public transit vehicles.
    NEPA process means those procedures necessary to meet the 
requirements of the National Environmental Policy Act of 1969 (NEPA), 
as amended, at 23 CFR Part 771; the NEPA process is completed when the 
project receives a categorical exclusion, a Finding of No Significant 
Impact (FONSI) or a Record of Decision (ROD).
    New Starts means a new fixed guideway project, or a project that is 
an extension to an existing fixed guideway, that has a total capital 
cost of $250,000,000 or more or for which the project sponsor is 
requesting $75,000,000 or more in New Starts funding.
    New Starts funds mean funds granted by FTA for a New Starts project 
pursuant to 49 U.S.C. 5309(d).
    No-build alternative means an alternative that includes only the 
current transportation system as well as the transportation investments 
committed in the Transportation Improvement Plan (TIP) (when the 
horizon year is 10 years in the future) or the fiscally constrained 
long-range transportation plan (when the horizon year is 20 years in 
the future) required by 23 CFR Part 450.
    Secretary means the Secretary of Transportation.
    Small Starts means a new fixed guideway project, a project that is 
an extension to an existing fixed guideway, or a corridor-based bus 
rapid transit system project, with a total capital cost of less than 
$250,000,000 and for which the project sponsor is requesting less than 
$75,000,000 in Small Starts funding.
    Small Starts funds mean funds granted by FTA for a Small Starts 
project pursuant to 49 U.S.C. 5309(h).
    Small Starts project development is a phase in the Small Starts 
process during which the scope of the proposed project is finalized; 
estimates of project costs, benefits and impacts are refined; NEPA 
requirements are completed; project management plans and fleet 
management plans are further developed; and the project sponsors 
obtains commitment of all non-Small Starts funding. It also includes 
(but is not limited to) the preparation of final construction plans 
(including construction management plans), detailed specifications, 
construction cost estimates, and bid documents.


Sec.  611.107  Relation to the planning processes.

    All New Starts and Small Starts projects proposed for funding 
assistance under this part must emerge from the metropolitan and 
Statewide planning process, consistent with 23 CFR part 450, and be 
included in the fiscally constrained long-range transportation plan 
required under 23 CFR part 450.

Subpart B--New Starts


Sec.  611.201  New Starts eligibility.

    (a) To be eligible for an engineering grant under this part for a 
new fixed guideway or an extension to a fixed guideway, a project must:
    (1) Be a New Starts project as defined in Sec.  611.105; and
    (2) Be approved into engineering by FTA pursuant to Sec.  611.209.
    (b) To be eligible for a construction grant under section 5309 for 
a new fixed guideway or extension to a fixed guideway, a project must:
    (1) Be a New Starts project as defined in Sec.  611.105;
    (2) Have completed engineering;
    (3) Receive a ``medium'' or better rating on project justification 
pursuant to Sec.  611.203;
    (4) Receive a ``medium'' or better rating on local financial 
commitment pursuant to Sec.  611.205;
    (5) Meet the other requirements of 49 U.S.C. 5309.


Sec.  611.203  New Starts project justification criteria.

    (a) To perform the statutorily required evaluations and assign 
ratings for project justification, FTA will evaluate information 
developed locally through the planning and NEPA processes.
    (1) The method used by FTA to evaluate and rate projects will be a 
multiple measure approach by which the merits of candidate projects 
will be evaluated in terms of each of the criteria specified by this 
section.
    (2) The measures for these criteria are specified in appendix A to 
this part and elaborated on in policy guidance. This policy guidance, 
which is subject to a public comment period, is issued periodically by 
FTA whenever significant changes to the process are proposed, but not 
less frequently than every two years, as required by 49 U.S.C. 
5309(g)(5).
    (3) The measures will be applied to projects defined by project 
sponsors that are proposed to FTA for New Starts funding.
    (4) The ratings for each of the criteria in Sec.  611.203(b)(1) 
through (6) will be expressed in terms of descriptive indicators, as 
follows: ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low.''
    (b) The project justification criteria are as follows:
    (1) Mobility improvements.
    (2) Environmental benefits.
    (3) Congestion relief.
    (4) Economic development effects.
    (5) Cost-effectiveness, as measured by cost per rider.
    (6) Existing land use.
    (c) In evaluating proposed New Starts projects under these project 
justification criteria:
    (1) As a candidate project proceeds through engineering, a greater 
level of commitment will be expected with respect to transit supportive 
plans and policies evaluated under the economic development criterion 
and the project sponsor's technical capacity to implement the project.
    (2) For any criteria under paragraph (b) of this section that use 
incremental measures, the point for comparison will be the no-build 
alternative.
    (d) FTA may amend the measures for these project justification 
criteria. Any such amendment will be included in

[[Page 2034]]

policy guidance and subject to a public comment process.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the project 
justification criteria outlined in this section.
    (f) The individual ratings for each of the criteria described in 
this section will be combined into a summary project justification 
rating of ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low,'' through a process that gives comparable, but not necessarily 
equal, weight to each criterion. The process by which the project 
justification rating will be developed, including the assigned weights, 
will be described in policy guidance.


Sec.  611.205  New Starts local financial commitment criteria.

    In order to approve a grant under 49 U.S.C. 5309 for a New Starts 
project, 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)(iv). The local financial commitment to a proposed 
project will be evaluated according to the following measures:
    (a) The proposed share of the project's capital costs to be funded 
from sources other than New Starts funds, including both the non-New 
Starts match required by Federal law and any additional state, local or 
other Federal capital funding (also known as ``overmatch'');
    (b) The current capital and operating financial condition of the 
project sponsor;
    (c) The commitment of capital and operating funds for the project 
and the entire transit system including consideration of private 
contributions; and
    (d) The accuracy and reliability of the capital and operating costs 
and revenue estimates and the financial capacity of the project 
sponsor.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the local financial 
commitment criteria outlined in this section.
    (f) As a candidate project proceeds through engineering, a greater 
level of local financial commitment will be expected.
    (g) FTA may amend the measures for these local financial commitment 
criteria. Any such amendment will be included in policy guidance and 
subject to a public comment process.
    (h) For each proposed project, ratings for paragraphs (a) through 
(d) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' For paragraph (a) of this section, the 
percentage of New Starts funding sought from 49 U.S.C. 5309 will be 
rated and used to develop the summary local financial commitment 
rating, but only if it improves the rating and not if it worsens the 
rating.
    (i) The ratings for each measure described in this section will be 
combined into a summary local financial commitment rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low.'' The process by 
which the summary local financial commitment rating will be developed, 
including the assigned weights to each of the measures, will be 
described in policy guidance.


Sec.  611.207  Overall New Starts project ratings.

    (a) [Reserved]
    (b) FTA will assign overall project ratings to each proposed 
project of ``high,'' ``medium-high, ``medium,'' ``medium-low,'' or 
``low'' as required by 49 U.S.C. 5309(g)(2)(A).
    (1) These ratings will indicate the overall merit of a proposed New 
Starts project at the time of evaluation.
    (2) Ratings for individual projects will be developed upon entry 
into engineering and prior to an FFGA. Additionally, ratings may be 
updated while a project is in engineering if the project scope and cost 
have changed materially since the most recent rating was assigned.
    (c) These ratings will be used to:
    (1) Approve or deny advancement of a proposed project into 
engineering ;
    (2) Approve or deny projects for ESWAs and FFGAs; and
    (3) Support annual funding recommendations to Congress in the 
Annual Report on Funding Recommendations required by 49 U.S.C. 
5309(o)(1).
    (d) [Reserved]


Sec.  611.209  [Reserved]


Sec.  611.211  New Starts Before and After study.

    (a) During engineering, project sponsors shall submit to FTA a plan 
for collection and analysis of information to identify the 
characteristics, costs, and impacts of the New Starts project and the 
accuracy of the forecasts prepared during development of the project.
    (1) The Before and After study plan shall consider:
    (i) Characteristics including the physical scope of the project, 
the service provided by the project, any other changes in service 
provided by the transit system, and the schedule of transit fares;
    (ii) Costs including the capital costs of the project and the 
operating and maintenance costs of the transit system in appropriate 
detail; and
    (iii) Impacts including changes in transit service quality, 
ridership, and fare levels.
    (2) The plan shall provide for:
    (i) Documentation and preservation of the predicted scope, service 
levels, capital costs, operating costs, and ridership of the project;
    (ii) Collection of ``before'' data on the transit service levels 
and ridership patterns of the current transit system including origins 
and destinations, access modes, trip purposes, and rider 
characteristics;
    (iii) Documentation of the actual capital costs of the as-built 
project;
    (iv) Collection of ``after'' data two years after opening of the 
project, including the analogous information on transit service levels 
and ridership patterns, plus information on operating costs of the 
transit system in appropriate detail;
    (v) Analysis of the costs and impacts of the project; and
    (vi) Analysis of the consistency of the predicted and actual 
characteristics, costs, and impacts of the project and identification 
of the sources of any differences.
    (vii) Preparation of a final report within three years of project 
opening to present the actual characteristics, costs, and impacts of 
the project and an assessment of the accuracy of the predictions of 
these outcomes.
    (3) For funding purposes, preparation of the plan for collection 
and analysis of data is an eligible part of the proposed project.
    (b) The FFGA will require implementation of the plan prepared in 
accordance with paragraph (a) of this section.
    (1) Satisfactory progress on implementation of the plan required 
under paragraph (a) of this section shall be a prerequisite to approval 
of an FFGA.
    (2) 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.
    (3) FTA may condition receipt of funding provided for the project 
in the FFGA upon satisfactory submission of the report required under 
this section.

[[Page 2035]]

Subpart C--Small Starts


Sec.  611.301  Small Starts eligibility.

    (a) To be eligible for a project development grant under this part 
for a new fixed guideway, an extension to a fixed guideway, or a 
corridor-based bus rapid transit system, a project must:
    (1) Be a Small Starts project as defined in Sec.  . 611.105; and
    (2) Be approved into project development by FTA pursuant to Sec.  
611.309.
    (b) To be eligible for a construction grant under this part for a 
new fixed guideway, an extension to a fixed guideway, or a corridor-
based bus rapid system, a project must:
    (1) Be a Small Starts project as defined in Sec.  611.105;
    (2) Receive a ``medium'' or better rating on project justification 
pursuant to Sec.  611.303;
    (3) Receive a ``medium'' or better rating on local financial 
commitment pursuant to Sec. 611.305; and
    (4) Meet the other requirements of 49 U.S.C. 5309.


Sec.  611.303  Small Starts project justification criteria.

    (a) To perform the statutorily required evaluations and assign 
ratings for project justification, FTA will evaluate information 
developed locally through the planning, NEPA and project development 
processes.
    (1) The method used by FTA to evaluate and rate projects will be a 
multiple measure approach by which the merits of candidate projects 
will be evaluated in terms of each of the criteria specified by this 
section.
    (2) The measures for these criteria are specified in Appendix A and 
elaborated on in policy guidance. This policy guidance, which is 
subject to a public comment period, is issued periodically by FTA 
whenever significant changes are proposed, but not less frequently than 
every two years, as required by 49 U.S.C. 5309(g)(5).
    (3) The measures will be applied to projects defined by project 
sponsors that are proposed to FTA for Small Starts funding.
    (4) The ratings for each of the criteria in Sec.  611.303(b)(1) 
through (6) will be expressed in terms of descriptive indicators, as 
follows: ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low.''
    (b) The project justification criteria are as follows:
    (1) Cost-effectiveness, as measured by cost per rider.
    (2) Economic development effects.
    (3) Existing land use.
    (4) Mobility improvements.
    (5) Environmental benefits.
    (6) Congestion relief.
    (c) In evaluating proposed Small Starts projects under these 
criteria:
    (1) As a candidate project proceeds through project development, a 
greater level of commitment will be expected with respect to transit 
supportive land use plans and policies and the project sponsor's 
technical capacity to implement the project.
    (2) For any criteria under paragraph (b) of this section that use 
incremental measures, the point for comparison will be the no-build 
alternative.
    (d) FTA may amend the measures for these project justification 
criteria. Any such amendment will be included in policy guidance and 
subject to a public comment process.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or corridors to be 
served. If a proposed project can meet the established standards, FTA 
may assign an automatic rating on one or more of the project 
justification criteria outlined in this section.
    (f) The individual ratings for each of the criteria described in 
this section will be combined into a summary project justification 
rating of ``high,'' ``medium-high,'' ``medium,'' ``medium-low,'' or 
``low'' through a process that gives comparable, but not necessarily 
equal, weight to each criterion. The process by which the project 
justification rating will be developed, including the assigned weights, 
will be described in policy guidance.


Sec.  611.305  Small Starts local financial commitment criteria.

    In order to approve a grant under 49 U.S.C. 5309 for a Small Starts 
project, 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(h)(3)(c). The local financial commitment to a proposed 
project will be evaluated according to the following measures:
    (a) The proposed share of the project's capital costs to be funded 
from sources other than Small Starts funds, including both the non-
Small Starts match required by Federal law and any additional state, 
local, or other Federal capital funding (known as ``overmatch'');
    (b) The current capital and operating financial condition of the 
project sponsor;
    (c) The commitment of capital and operating funds for the project 
and the entire transit system including consideration of private 
contributions; and
    (d) The accuracy and reliability of the capital and operating costs 
and revenue estimates and the financial capacity of the project 
sponsor.
    (e) From time to time FTA may publish through policy guidance 
standards based on characteristics of projects and/or the corridors to 
be served. If a proposed project can meet the established standards, 
FTA may assign an automatic rating on one or more of the local 
financial commitment criteria outlined in this section.
    (f) FTA may amend the measures for these local financial commitment 
criteria. Any such amendment will be included in policy guidance and 
subject to a public comment process.
    (g) As a candidate project proceeds through project development, a 
greater level of local financial commitment will be expected.
    (h) For each proposed project, ratings for paragraphs (a) through 
(d) of this section will be reported in terms of descriptive 
indicators, as follows: ``high,'' ``medium-high,'' ``medium,'' 
``medium-low,'' or ``low.'' For paragraph (a) of this section, the 
percentage of Small Starts funding sought from 49 U.S.C. 5309 will be 
rated and used to develop the summary local financial commitment 
rating, but only if it improves the rating and not if it worsens the 
rating.
    (i) The ratings for each measure described in this section will be 
combined into a summary local financial commitment rating of ``high,'' 
``medium-high,'' ``medium,'' ``medium-low,'' or ``low.'' The process by 
which the summary local financial commitment rating will be developed, 
including the assigned weights to each of the measures, will be 
described in policy guidance.


Sec.  611.307  Overall Small Starts project ratings.

    (a) The summary ratings developed for project justification and 
local financial commitment (Sec. Sec.  611.303(f) and 611.305(i)) will 
form the basis for the overall rating for each project.
    (b) FTA will assign overall project ratings to each proposed 
project of ``high,'' ``medium-high, ``medium,'' ''medium-low,'' or 
``low,'' as required by 49 U.S.C. 5309(e)(8).
    (1) These ratings will indicate the overall merit of a proposed 
Small Starts project at the time of evaluation.
    (2) Ratings for individual projects will be developed prior to an 
EGA.
    (c) These ratings will be used to:
    (1) Approve or deny projects for EGAs; and
    (2) Support annual funding recommendations to Congress in the

[[Page 2036]]

Annual Report on Funding Recommendations required by 49 U.S.C. 
5309(k)(1).
    (d) FTA will assign overall ratings for proposed Small Starts 
projects by averaging the summary ratings for project justification and 
local financial commitment. When the average of these ratings is 
unclear (e.g., summary project justification rating of ``medium-high'' 
and summary local financial commitment rating of ``medium''), FTA will 
round up the overall rating to the higher rating except in the 
following circumstances:
    (1) A ``medium'' overall rating requires a rating of at least 
``medium'' on both project justification and local financial 
commitment.
    (2) If a project receives a ``low'' rating on either project 
justification or local financial commitment, the overall rating will be 
``low.''


Sec.  611.309  [Reserved]

Appendix A to Part 611--Description of Measures Used for Project 
Evaluation

Project Justification

New Starts

New Starts Project Justification

    FTA will evaluate candidate New Starts projects according to the 
six project justification criteria established by 49 U.S.C. 
5309(d)(2)(A)(iii). From time to time, but not less frequently than 
every two years as directed by 49 U.S.C. 5309(g)(5), FTA publishes 
for public comment policy guidance on the application of these 
measures, and the agency expects it will continue to do so. 
Moreover, FTA may choose to amend these measures, pending the 
results of ongoing studies regarding transit benefit and cost 
evaluation methods. In addition, FTA may establish warrants for one 
or more of these criteria through which an automatic rating would be 
assigned based on the characteristics of the project and/or its 
corridor. FTA will develop these warrants based on analysis of the 
features of projects and/or corridor characteristics that would 
produce satisfactory ratings on one or more of the criteria. Such 
warrants would be included in policy guidance issued for public 
comment before being finalized.
    (a) Definitions. In this Appendix, the following definitions 
apply:
    (1) Enrichments mean certain improvements to the transit project 
desired by the grant recipient that are non-integral to the basic 
functioning of the project, whose benefits are not captured in whole 
by other criteria, and are carried out simultaneous with grant 
execution and may be included in the Federal grant. Enrichments 
include but are not limited to artwork, landscaping, and bicycle and 
pedestrian improvements such as sidewalks, paths, plazas, site and 
station furniture, site lighting, signage, public artwork, bike 
facilities, and permanent fencing. Enrichments also include 
sustainable building design features of up to 2.5 percent of the 
total cost of the facilities (when such facilities are designed to 
achieve a third-party certification or to optimize a building's 
design to use less energy, water and reduce greenhouse gas emissions 
that may not lead directly to an official certification).
    (2) Transit dependent person as used in this context means 
either a person from a household that owns no cars or a person whose 
household income places them in the lowest income stratum of the 
local travel demand model. For those project sponsors choosing to 
use the simplified national model ``transit dependent persons'' will 
be defined as individuals residing in households that do not own a 
car. Project sponsors that choose to continue to use their local 
travel model rather than the FTA developed simplified national model 
to estimate trips will define transit dependent persons as 
individuals in the lowest socioeconomic stratum as defined in the 
local model, which is usually either households with no cars or 
households in the lowest locally defined income bracket.
    (3) Trips mean linked trips riding on any portion of the New 
Starts or Small Starts project.
    (b) Mobility Improvements. (1) The total number of trips using 
the proposed project. Extra weight may be given to trips that would 
be made on the project by transit dependent persons in the current 
year, and, at the discretion of the project sponsor, in the horizon 
year. The method for assigning extra weight is set forth in policy 
guidance. (2) If the project sponsor chooses to consider project 
trips in the horizon year in addition to the current year, trips 
will be based on the weighted average of current year and horizon 
year.
    (c) Environmental Benefits. (1) The monetized value of the 
anticipated direct and indirect benefits to human health, safety, 
energy, and the air quality environment that are expected to result 
from implementation of the proposed project compared to: (i) The 
existing environment with the transit system in the current year or, 
(ii) at the discretion of the project sponsor, both the existing 
environment with the transit system in the current year and the no-
build environment and transit system in the horizon year. The 
monetized benefits will be divided by the annualized capital and 
operating cost of the New Starts project, less the cost of 
enrichments.
    (2) Environmental benefits used in the calculation would 
include:
    (i) Change in air quality criteria pollutants,
    (ii) Change in energy use,
    (iii) Change in greenhouse gas emissions and
    (iv) Change in safety,
    .(3) If the project sponsor chooses to consider environmental 
benefits in the horizon year in addition to the current year, 
environmental benefits will be based on the weighted average of 
current year and horizon year.
    (d) Congestion Relief. [Reserved]
    (e) Cost-effectiveness. (1) The annualized cost per trip on the 
project, where cost includes changes in capital, operating, and 
maintenance costs, less the cost of enrichments, 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.
    (2) If the project sponsor chooses to consider cost-
effectiveness in the horizon year in addition to the current year, 
cost-effectiveness will be based on the weighted average of current 
year and horizon year.
    (f) Existing Land Use. (1) Existing corridor and station area 
development;
    (2) Existing corridor and station area development character;
    (3) Existing station area pedestrian facilities, including 
access for persons with disabilities;
    (4) Existing corridor and station area parking supply; and
    (5) Existing affordable housing in the project corridor.
    (g) Economic Development. (1) The extent to which a proposed 
project is likely to enhance additional, transit-supportive 
development based on a qualitative assessment of the existing local 
plans and policies to support economic development proximate to the 
project including:
    (i) Growth management plans and policies;
    (ii) Local plans and policies in place to support maintenance of 
or increases to affordable housing in the project corridor; and
    (iii) Demonstrated performance and impact of policies.
    (2) At the option of the project sponsor, an additional 
quantitative analysis (scenario-based estimate) of indirect changes 
in VMT resulting from changes in development patterns that are 
anticipated to occur with implementation of the proposed project. 
The resulting environmental benefits from the indirect VMT would be 
calculated, monetized, and compared to the annualized capital and 
operating cost of the New Starts project in a manner similar to that 
under the environmental benefits criterion. Such benefits are not 
included in the environmental benefits measure.

New Starts Local Financial Commitment

    From time to time, but not less than frequently than every two 
years as directed by U.S.C. 5309(g)(5), FTA publishes policy 
guidance on the application of these measures, and the agency 
expects it will continue to do so. Moreover, FTA may choose to amend 
these measures, pending the results of ongoing studies. In addition, 
FTA may establish warrants for one or more of these criteria through 
which an automatic rating would be assigned based on the 
characteristics of the project and/or its corridor. FTA will develop 
these warrants based on analysis of the features of projects and/or 
corridor characteristics that would produce satisfactory ratings on 
one or more of the criteria. Such warrants would be included in 
draft policy guidance issued for comment before being finalized.
    FTA will use the following measures to evaluate the local 
financial commitment of a proposed New Starts project:
    (a) The proposed share of total project costs from sources other 
than New Starts funds,

[[Page 2037]]

including other Federal transportation funds and the local match 
required by Federal law;
    (b) The current financial condition, both capital and operating, 
of the project sponsor;
    (c) The commitment of funds for both the proposed project and 
the ongoing operation and maintenance of the existing transit system 
once the project is built including consideration of private 
contributions.
    (d) The reasonableness of the financial plan, including planning 
assumptions, cost estimates, and the capacity to withstand funding 
shortfalls or cost overruns.

Small Starts

Small Starts Project Justification

    FTA will evaluate candidate Small Starts projects according to 
the six project justification criteria established by 49 U.S.C. 
5309(h)(4), From time to time, but not less than frequently than 
every two years as directed by 49 U.S.C. 5309(g)(5), FTA publishes 
for public comment policy guidance on the application of these 
measures. Moreover, FTA may choose to amend these measures, pending 
the results of ongoing studies regarding transit benefit and cost 
evaluation methods. In addition, FTA may establish warrants for one 
or more of these criteria through which an automatic rating would be 
assigned based on the characteristics of the project and/or its 
corridor. Such warrants would be included in the policy guidance so 
that they may be subject to public comment.
    (a) Mobility Improvements. (1) The total number of trips using 
the proposed project with extra weight given to trips that would be 
made on the project by transit dependent persons in the current 
year, and, at the discretion of the project sponsor, in the horizon 
year.
    (2) If the project sponsor chooses to consider project trips in 
the horizon year in addition to the current year, trips will be 
based on the weighted average of current year and horizon year.
    (b) Environmental Benefits. (1) The monetized value of the 
anticipated direct and indirect benefits to human health, safety, 
energy, and the air quality environment that are expected to result 
from implementation of the proposed project compared to:
    (i) The existing environment with the transit system in the 
current year or,
    (ii) At the discretion of the project sponsor, both the existing 
environment with the transit system in the current year and the no-
build environment and transit system in the horizon year. The 
monetized benefits will be divided by the annualized federal share 
of the project.
    (2) Environmental benefits used in the calculation would 
include:
    (i) Change in air quality criteria pollutants,
    (ii) Change in energy use,
    (iii) Change in greenhouse gas emissions, and
    (iv) Change in safety.
    (3) If the project sponsor chooses to consider environmental 
benefits in the horizon year in addition to the current year, 
environmental benefits will be based on the weighted average of 
current year and horizon year.
    (c) Congestion Relief. [Reserved]
    (d) Cost-effectiveness. (1) The annualized federal share per 
trip on the project where federal share includes funds from the 
major capital investment program as well as other federal funds, 
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.
    (2) If the project sponsor chooses to consider cost-
effectiveness in the horizon year in addition to the current year, 
cost-effectiveness will be based on the weighted average of current 
year and horizon year.
    (e) Existing Land Use. (1) Existing corridor and station area 
development;
    (2) Existing corridor and station area development character;
    (3) Existing station area pedestrian facilities, including 
access for persons with disabilities;
    (4) Existing corridor and station area parking supply; and
    (5) Existing affordable housing in the project corridor.
    (f) Economic Development. (1) The extent to which a proposed 
project is likely to enhance additional, transit-supportive 
development based on the existing plans and policies to support 
economic development proximate to the project including:
    (i) Growth management plans and policies;
    (ii) Policies in place to support maintenance of or increases to 
the share of affordable housing in the project corridor; and
    (iii) Demonstrated performance and impact of policies.
    (2) At the option of the project sponsor, an additional 
quantitative analysis (scenario-based estimate) to estimate indirect 
changes in VMT resulting from changes in development patterns that 
are anticipated to occur with implementation of the proposed 
project. The resulting environmental benefits would be calculated, 
monetized, and compared to the annualized federal share of the 
project.

Small Starts Local Financial Commitment

    If the Small Starts project sponsor can demonstrate the 
following, the project will qualify for a highly simplified 
financial evaluation:
    (a) A reasonable plan to secure funding for the local share of 
capital costs or sufficient available funds for the local share;
    (b) The additional operating and maintenance cost to the agency 
of the proposed Small Starts project is less than 5 percent of the 
project sponsor's existing operating budget; and
    (c) The project sponsor is in reasonably good financial 
condition, as demonstrated by the past three years' audited 
financial statements.
    Small Starts projects that meet these measures and request 
greater than 50 percent Small Starts funding would receive a local 
financial commitment rating of ``Medium.'' Small Starts projects 
that request 50 percent or less in Small Starts funding would 
receive a ``High'' rating for local financial commitment.
    FTA will use the following measures to evaluate the local 
financial commitment to a proposed Small Starts project if it cannot 
meet the conditions listed above:
    (a) The proposed share of total project costs from sources other 
than Small Starts funds, including other Federal transportation 
funds and the local match required by Federal law;
    (b) The current financial condition, both capital and operating, 
of the project sponsor;
    (c) The commitment of funds for both the proposed project and 
the ongoing operation and maintenance of the project sponsor's 
system once the project is built.
    (d) The reasonableness of the financial plan, including planning 
assumptions, cost estimates, and the capacity to withstand funding 
shortfalls or cost overruns.


    Issued on: December 27, 2012.
Peter Rogoff,
Administrator, Federal Transit Administration.
[FR Doc. 2012-31540 Filed 1-3-13; 11:15 am]
BILLING CODE 4910-57-P