[Federal Register Volume 65, Number 236 (Thursday, December 7, 2000)]
[Rules and Regulations]
[Pages 76864-76884]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 00-30921]



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Part VI





Department of Transportation





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Federal Transit Administration



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49 CFR Part 611



Major Capital Investment Projects; Final Rule

Federal Register / Vol. 65, No. 236 / Thursday, December 7, 2000 / 
Rules and Regulations

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DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR PART 611

[Docket No. FTA 99-5474]
RIN 2132-AA63


Major Capital Investment Projects

AGENCY: Federal Transit Administration (FTA), DOT.

ACTION: Final rule.

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SUMMARY: The Transportation Equity Act for the 21st Century (TEA-21) 
requires the Federal Transit Administration (FTA) to issue regulations 
on the manner in which candidate projects for capital investment grants 
and loans for new fixed guideway systems and extensions to existing 
systems (``new starts'') will be evaluated and rated. This rule 
describes the procedures that FTA will use in the project evaluation 
and rating process. This rule will enable FTA and Congress to identify 
those new starts projects that should be considered for funding, in 
part, by the Federal government.

DATES: This rule will become effective on February 5, 2001, except for 
paragraphs (a)(1)(i)-(ii) and (d) of Appendix A to Part 611 which will 
become effective on September 1, 2001. Affected parties do not have to 
comply with the information collection requirements until FTA publishes 
in the Federal Register the control numbers assigned by the Office of 
Management and Budget (OMB) to these information collection 
requirements.

FOR FURTHER INFORMATION CONTACT: For program issues, John Day, Office 
of Policy Development, FTA, (202) 366-4060. For legal issues, Scott A. 
Biehl, Assistant Chief Counsel, FTA, (202) 366-4063.

SUPPLEMENTARY INFORMATION:

Electronic Access

    Electronic access to this and other documents is available through 
FTA's home page on the World Wide Web, at http://www.fta.dot.gov.
    Internet users can access all comments received by the U.S. DOT 
Dockets, Room PL-401, via the Docket Management System (DMS) on the DOT 
home page, at http://dms.dot.gov. The DMS is available 24 hours each 
day, 365 days each year. Please follow the instructions online for more 
information and help.
    An electronic copy of this document may be downloaded using a modem 
and suitable communications software from the Government Printing 
Office's (GPO) Electronic Bulletin Board Service at (202) 512-1661. 
Internet users may reach the Federal Register's home page, at http://
www.nara.gov/fedreg, and the GPO database, at http://
www.access.gpo.gov/nara.

Table of Contents

I. Background

II. History

    A. The First Policy Statement (1976)
    B. Policy on Rail Transit (1978)
    C. Statement of Policy on Major Urban Mass Transportation 
Capital Investments (1984)
    D. Surface Transportation and Uniform Relocation Assistance Act 
of 1987 (STURAA)
    E. Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA)
    F. Executive Order 12893 (1994)
    G. Policy Discussion Paper (1994)
    H. The 1996 Statement of Policy
III. Transportation Equity Act for the 21st Century (TEA-21)
    A. Significant Changes
    B. Other Changes
IV. Government Performance and Results Act of 1993
V. Outreach
VI. Section-By-Section Analysis
VII. Response to Request for Comments on Particular Issues
VIII. Other Comments
IX. Regulatory Evaluation
X. Regulatory Process Matters

I. Background

    The Federal Transit Administration (FTA) is issuing this rule to 
carry out the requirements of section 3009(e)(5) of TEA-21. This rule 
defines the process FTA will use to evaluate candidate new starts 
projects proposed for funding under 49 USC Sec. 5309.
    The Notice of Proposed Rulemaking (NPRM) for this Rule was issued 
on April 7, 1999 (64 FR 17062). The period for public comment closed on 
July 6, 1999, though late-filed comments were accepted through July 19. 
See docket #FTA-99-5474.
    These procedures replace those in force since the December 19, 1996 
Federal Register Notice (61 FR 67093), and the November 12, 1997 
amendments to this Notice (62 FR 60756), which described the measures 
used by FTA to evaluate candidate projects for discretionary new starts 
funding under the statutory criteria in effect at that time.
    This rule, together with the FTA/Federal Highway Administration 
(FHWA) planning and environmental regulations at 23 CFR parts 450 and 
771, will flesh out the requirements of 49 USC 5309(e) under TEA-21. 
The statute now requires candidate projects to be ``(A) based on the 
results of an alternatives analysis and preliminary engineering, (B) 
justified based on a comprehensive review of its mobility improvements, 
environmental benefits, cost effectiveness, and operating efficiencies, 
and (C) supported by an acceptable degree of local financial 
commitment, including evidence of stable and dependable financing 
sources to construct, maintain, and operate the system or extension.'' 
This rule sets forth the approach FTA will use to evaluate candidate 
projects in terms of their justification and local financial 
commitment. Consistent with 49 USC 5309(e)(6), as amended by section 
3009(e) of TEA-21, these procedures will be used to approve candidate 
projects for entry into preliminary engineering and final design. These 
procedures will also be used to evaluate projects in order to make 
recommendations for funding in the annual report to Congress required 
by 49 USC 5309(o)(1).
    This rule describes the project evaluation and rating process; it 
does not define the process by which FTA determines annual project 
funding recommendations, nor does it define the process by which FTA 
enters into funding commitments through Full Funding Grant Agreements 
(FFGAs). These processes are beyond the scope of this rule. The ratings 
developed under this rule are intended to denote overall project merit, 
and will form the basis for such funding decisions; however, actual 
funding decisions will also involve consideration of the amounts of new 
starts funding available under section 5309 (both annually and over the 
authorization period), proposed projects' phase of project development, 
geographical factors, and any outstanding issues that may affect the 
viability of a proposed project. For purposes of annual budget 
recommendations to Congress, proposed new starts projects must also be 
likely to have completed enough of final design that cost estimates are 
firm and be likely to have in place a fully committed financial plan by 
the close of the fiscal year for which recommendations for new Full 
Funding Grant Agreements (FFGAs) are being made.

II. History

    Since the early 1970's, the Federal government has provided a large 
share of the Nation's capital investment in urban mass transportation, 
particularly for ``new starts'' (major new fixed guideway transit 
systems or extensions to existing fixed guideway systems). By the mid-
1970's, because of the magnitude of the new start commitments being 
proposed, the

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Department found it useful to publish a statement of Federal policy to 
ensure that the available resources would be used in the most prudent 
and effective manner.

A. The First Policy Statement (1976)

    The first policy statement was issued in 1976 (41 FR 41512 
(September 22, 1976)). It introduced a process-oriented approach with 
the requirement that new start projects be subjected to an analysis of 
alternatives, including a Transportation System Management (TSM) 
alternative that used no-capital and low-capital measures to make the 
best use of the existing transportation system. The Statement also 
required projects to be ``cost-effective.''

B. Policy on Rail Transit (1978)

    The original policy was supplemented in 1978 by a ``Policy on Rail 
Transit'' (43 FR 9428 (March 7, 1998)). This Statement reiterated the 
requirement for alternatives analysis, established requirements for 
local financial commitments to the project, established the concept of 
a contract providing for a multi-year commitment of Federal funds, with 
a maximum limit of Federal participation (the Full Funding Grant 
Agreement--FFGA), and required that local governments undertake 
supporting local land use actions. This was supplemented by a 1980 
policy statement that linked the alternatives analysis requirement to 
the Environmental Impact Statement development process (45 FR 71986 
(October 30, 1980.))

C. Statement of Policy on Major Urban Mass Transportation Capital 
Investments (1984)

    These principles were reiterated and refined in a May 18, 1984, 
Statement of Policy on Major Urban Mass Transportation Capital 
Investments (49 FR 21284). The major feature of this policy statement 
was the introduction of an approach for making comparisons between 
competing projects. To do so, a rating system was established under 
which projects were evaluated in terms of a cost effectiveness index of 
forecast incremental cost per incremental rider for the build 
alternative, compared with the TSM alternative as the base. Further, 
index threshold values were established which projects had to pass in 
order to be considered for funding. In addition, the criteria to be 
used to judge local financial commitment were spelled out.

D. Surface Transportation and Uniform Relocation Assistance Act of 1987 
(STURAA)

    The principles of the 1984 policy statement were later incorporated 
into law with enactment by Congress of the Surface Transportation and 
Uniform Relocation Assistance Act of 1987 (STURAA) (Pub. L. 100-17). 
This act established in law a set of criteria which new starts projects 
had to meet in order to be eligible for Federal discretionary grants. 
Specifically, projects had to be ``cost-effective'' and ``supported by 
an adequate degree of local financial commitment.'' STURAA also added a 
requirement for an annual report to Congress laying out the 
Department's recommendations for discretionary funding for new starts 
for the subsequent fiscal year.
    To effectuate the requirements set forth in STURAA, on April 25, 
1989 FTA (then the Urban Mass Transportation Administration) issued a 
Notice of Proposed Rulemaking (54 FR 17878). This Proposed Rule would 
have codified the requirements of the 1984 Policy Statement and made 
the ``Cost Per New Rider'' Index and threshold values regulatory. 
However, in the FY 1990 and FY 1991 Appropriations Acts, Congress 
directed that this rulemaking not be advanced (See the Department of 
Transportation and Related Agencies Appropriations Act, 1990 (Pub. L. 
101-164) and Department of Transportation and Related Agencies 
Appropriations Act, 1991 (Pub. L. 101-516)). Consequently, on February 
3, 1993, this proposed rulemaking was withdrawn (58 FR 6948).

E. Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)

    The Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) made substantial changes to the legislative basis for the 
criteria used to evaluate candidate projects. Specifically, the 
original requirement that a project be ``cost-effective'' was expanded; 
the new requirement specified that projects be ``justified, based on a 
comprehensive review of its mobility improvements, environmental 
benefits, cost-effectiveness, and operating efficiencies.'' In 
addition, certain ``considerations'' and ``guidelines'' were 
established that were to be taken into account in determining how well 
a project met the criteria.

F. Executive Order 12893 (1994)

    On January 26, 1994, the President issued Executive Order 12893 (59 
FR 4233), describing the principles which Federal agencies are to apply 
in determining how to invest in all forms of infrastructure, including 
transportation. The Executive Order requires a systematic analysis of 
the costs and benefits of proposed investments, and sets out the 
parameters for such analysis. It calls for efficient management of 
infrastructure, including a focus on the operation and maintenance of 
facilities, as well as the use of pricing to manage demand, and calls 
for comparison of a comprehensive set of options and consideration of 
quantifiable and qualitative measures of benefits for all programs.

G. Policy Discussion Paper (1994)

    Thereafter, in September 1994, FTA circulated a ``policy discussion 
paper'' to the transit industry and other stakeholders for comment. 
This paper detailed various approaches for evaluating proposed projects 
under the ISTEA criteria, and requested comment on nine specific 
issues. Interest was extensive, and a period of public comment, further 
analysis, additional industry input, and additional analysis ensued.

H. The 1996 Statement of Policy

    On December 19, 1996, FTA issued a Notice in the Federal Register 
that formally adopted the ISTEA project justification criteria (61 FR 
67093). This Notice defined the criteria, established the process, and 
described the measures that would be used to evaluate candidate 
projects for discretionary new starts funding. This Notice also 
established a multiple-measure method of project evaluation, in a 
manner consistent with Executive Order 12893.
    This Statement of Policy was amended on November 12, 1997, to 
incorporate Departmental guidance establishing a Department-wide 
standard for valuing travel time, and made other technical corrections 
(62 FR 60756).

III. Transportation Equity Act for the 21st Century (TEA-21)

    On June 9, 1998, the Transportation Equity Act for the 21st Century 
(TEA-21) (Pub. L. 105-178) was enacted. TEA-21 leaves much of past law 
and policy regarding new starts intact, including the basic project 
justification criteria and the multiple-measure method of project 
evaluation. However, a number of significant changes were introduced.

A. Significant Changes

     Integration of the Major Investment Study (MIS) 
requirement into the FTA/FHWA planning and environmental regulations 
(23 CFR part 450 and 23

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CFR part 771), elimination of the MIS as a separate requirement (see 
section 1308 of TEA-21), and required streamlining of the environmental 
process (see section 1309 of TEA-21);
     The requirement for FTA to establish overall project 
ratings of ``highly recommended,'' ``recommended,'' or ``not 
recommended;''
     The requirement for FTA approval for a project to advance 
to the final design stage of the project development process; and
     The requirement that FTA publish regulations on the manner 
in which proposed projects will be evaluated and rated (the purpose of 
this rule).

B. Other Changes

     Several additional statutory ``considerations'' have been 
added to the project evaluation process, including the cost of sprawl, 
infrastructure cost savings due to compact land use, population density 
and current transit ridership in a corridor, and the technical capacity 
of the grantee to undertake the project.
     TEA-21 expressly prohibits FTA from considering the dollar 
value of mobility improvements (see section 3010).
     The ISTEA exemptions from the FTA statutory project 
evaluation process, for proposed projects that require less than one-
third of the project funding from 49 U.S.C. 5309 or are part of a State 
Improvement Plan for air quality, were eliminated. The exemption 
remains for projects requiring less than $25 million in 49 U.S.C. 5309 
funding.
     For evaluating local financial commitment, the 
consideration for local funding beyond the required non-Federal share 
has been incorporated into statute.
     A second annual report to Congress, in addition to the 
existing Report on Funding Levels and Allocations of Funds, is now 
required. This new ``Supplemental New Starts Report,'' due each August, 
will include updated ratings for projects that have completed the 
alternatives analysis and preliminary engineering stages of development 
since the date of the last Report on Funding Levels and Allocations of 
Funds.

IV. Government Performance and Results Act of 1993

    The Government Performance and Results Act (GPRA) was enacted in 
1993 to provide for the establishment of strategic planning and 
performance measurement in the Federal Government. It is primarily 
intended to improve Federal program effectiveness and public 
accountability by promoting a new focus on results, service quality, 
and customer satisfaction.
    In the NPRM for this rule, FTA indicated an intent to develop 
performance measures to evaluate our administration of the new starts 
program, and to measure the performance of Federal new starts 
investments. Both of these measures would be incorporated into FTA's 
management of new starts projects. The NPRM invited specific comment on 
these issues, including recommendations as to which measures and 
indicators would be appropriate, as well as appropriate timeframes for 
evaluation.
    Comment. FTA received a total of three comments on the GPRA issues, 
from two interest groups and one transit industry trade association. On 
the subject of FTA's performance in administering the new starts 
program, two of the commenters recommended that performance be measured 
according to factors under FTA's control, such as timeliness in 
responding to grantee inquiries, reporting to Congress, uniformity of 
guidance, approval actions, and the extent to which funding 
recommendations are based on project ratings. One commenter saw no 
benefit to evaluating FTA's performance in this regard.
    Only two of the three commenters addressed the subject of new 
starts follow-up evaluations, the industry trade association and one of 
the two interest groups. Both supported the general concept of follow-
up evaluations, but provided little additional comment. The interest 
group recommended that reviews not occur until at least after the first 
year of revenue service, and not later than 15 years, suggesting 
ratings at 2 and 7 years. The trade association recommended that 
projects be evaluated against objectives set at time of the decision to 
implement the project; ratings should encompass a 5-10 year operating 
period, and should focus on overall performance, not ridership and 
cost.
    Response. The wording of the section on GPRA in the preamble to the 
NPRM may have led to confusion regarding what FTA intends to measure, 
which may account for the fact that few comments were submitted on this 
issue. In evaluating FTA's administration of the new starts program, 
the intent was to establish measures for determining the degree to 
which projects remain on schedule and on budget once a commitment to 
fund the project has been made (i.e., an FFGA has been executed), and 
to measure the success of new starts projects once they are in 
operation. This rule incorporates a two-step data collection process to 
meet both of these goals. For those new starts that are put under 
FFGAs, FTA will combine before-and-after data with planning projections 
to evaluate the project in terms of four areas of interest: Capital 
costs, operating costs, system utilization (including ridership levels, 
service levels, user characteristics, trip purposes, demographics, 
etc.), and external factors relevant to the project. These data 
collection activities will be considered an eligible part of the 
project for funding purposes. Prior to the execution of an FFGA, 
project sponsors, as part of their final design efforts, will have to 
submit a complete plan for collection of the ``before'' data to FTA. 
The actual collection of data by project sponsors will be required 
before construction begins. The FFGA will contain a requirement for the 
project sponsors to collect the ``after'' data, two years after the 
project opens for revenue service. FTA will then compare the ``after'' 
data with the ``before'' data, as well as with the projections of 
costs, ridership, and system utilization characteristics made during 
the project development process, to evaluate the success of the 
project. Project sponsors will also be asked to report on any external 
factors that might have influenced the costs, ridership, and 
utilization factors, such as unexpected increases or decreases in 
gasoline prices, employment trends, etc.
    The intent of this evaluation process is to help to develop a 
greater understanding of the actual benefits of new starts, and support 
improvements to the forecasting process. FTA recognizes that this 
evaluation will provide only a short-term ``snapshot'' of the 
performance of a new fixed-guideway system, and that many of the 
benefits, particularly in terms of land use, are long-term in nature. 
Project sponsors are of course encouraged to continue their data 
collection efforts beyond the period two years after opening. However, 
given the nature of the appropriations and authorization process, there 
is also a need for short-term data to provide an initial indication of 
the benefits of a project.

V. Outreach

    The development of this Rule began with a series of outreach 
sessions conducted during the months of September and October 1998. 
Three workshops were held around the country: One in Portland, Oregon, 
in conjunction with the RailVolution Conference on September 14, 1998; 
one

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in Washington, DC on September 25, 1998; and one in New York City, in 
conjunction with the Annual Meeting of the American Public Transit 
Association (APTA) on October 8, 1998.
    The purpose of these outreach sessions was to describe the changes 
made by TEA-21 to the new starts program, discuss how we plan to 
implement them, and solicit general comment on FTA's policies and 
procedures in managing the new starts program.
    The comments received during this outreach process were generally 
supportive of our proposed approach to this rule, including the 
retention of the basic principles of the 1996 Statement of Policy.
    The NRPM for this rule was issued on April 7, 1999. The docket was 
open for public comment through July 6, 1999, though late-filed 
comments were accepted through July 19, 1999. Comments were received 
from a total of 41 individuals and organizations. During the comment 
period, FTA held three additional public outreach workshops to solicit 
comment on the proposed rule; one in Toronto, Ontario on May 24, 1999, 
in conjunction with the 1999 American Public Transit Association's 
Commuter Rail/Rapid Transit Conference; one in Oakland, California on 
June 3, 1999; and one in Washington, DC on June 8, 1999. Notes from 
these workshops have been placed in the docket for this rule (#FTA-99-
5474-48).

VI. Section-by-Section Analysis

A. Section 611.1: Purpose and Contents

    This section states that this rule is issued to meet the statutory 
requirement of Title 49, United States Code, section 5309(e)(5).
    This rule establishes the methodology by which FTA will evaluate 
proposed new starts projects as required by 49 U.S.C. 5309(e). The data 
collected as part of the planning and project development processes and 
related regulations, conducted under 23 CFR part 450 and 23 CFR part 
771, will provide the basis for this evaluation. Applicants must follow 
these rules to be considered eligible for capital investment grants and 
loans for new fixed guideway systems or extensions (``new starts'').
    The results of this evaluation will be used by FTA to make the 
findings required by statute for proposed projects to advance into the 
preliminary engineering and final design stages of project development, 
and to develop funding recommendations for the President's annual 
budget request. They will also be used to determine which projects are 
eligible for funding commitments under Full Funding Grant Agreements.
    The information collected and ratings developed under this rule 
will form the basis for the annual Report on Funding Levels and 
Allocations of Funds, as required under 49 U.S.C. 5309(o)(1), and the 
``Supplemental Report on New Starts,'' as required by 49 U.S.C. 
5309(o)(2). The NPRM to this Rule proposed cutoff dates for information 
to be included in these reports; however, FTA has reconsidered the need 
for dates, as we strive for more real-time information. Thus, the 
cutoff dates for these reports have been dropped from this rule.

B. Section 611.3: Applicability

    This section states that this rule applies only to the evaluation 
of projects seeking Federal capital investment funds for new transit 
fixed guideway and extension projects (``new starts'') under 49 U.S.C. 
5309.
    It also states that proposed projects are exempt from evaluation 
under this rule if the total amount of funding under 49 U.S.C. 5309 is 
less than $25,000,000, or if they are specifically exempt by statute. 
Such projects must still meet the planning requirements under 23 CFR 
part 450 and environmental review requirements under 23 CFR part 771, 
as well as the project development process described in this rule.
    Title 49, U.S.C. 5309(e)(7) requires new starts projects to be 
carried out through a Full Funding Grant Agreement (FFGA), and also 
requires FTA to base the decision to issue an FFGA on the results of 
the evaluations and ratings process. Thus, any proposed project that is 
not evaluated will not be eligible for an FFGA. Sponsors of proposed 
projects that they believe to be exempt are therefore strongly urged to 
submit project evaluation information to FTA. FTA will carefully review 
projects for which sponsors are claiming exemptions under this rule. 
Such projects will still be approved for entry into preliminary 
engineering and final design, based on planning and project development 
requirements. If the proposed share of project funding from the section 
5309 new starts program passes the $25 million level at any time, FTA 
will expect the project sponsor to develop the information required to 
be evaluated under this rule, and will require that such a project be 
funded using an FFGA.
    This section also notes that projects for which an FFGA has already 
been executed are not subject to reevaluation under this rule. However, 
extensions and/or modifications to projects with existing FFGAs will be 
subject to evaluation and rating under this rule.
    Comment. FTA received six comments on the issue of project 
exemptions, expressing general confusion and opposition to FTA's 
position on exempt projects. One transportation consultant and one 
transit operator argued that all exempt projects should be assigned a 
default rating of ``medium,'' which could be raised by the submission 
of data for evaluation; the transit operator also expressed the opinion 
that small projects (i.e., $25 million in new starts funds) do not 
generate great benefits, and therefore should not be required to submit 
data for evaluation. One State DOT recommended that FTA simply set 
aside $500 million annually for exempt projects.
    Three commenters also expressed some degree of confusion regarding 
the treatment of exempt projects. One attendee at the Washington, DC 
workshop wondered whether project sponsors would attempt to ``cheat'' 
the process by claiming exemptions and another at the Oakland, CA 
workshop expressed confusion about continued eligibility of exempt 
projects for funding. One industry interest group commented that, since 
TEA-21 already contains language exempting projects under existing 
FFGAs from re-evaluation under the revised criteria, including the same 
language in the Final Rule would be confusing.
    Response. FTA is not prepared to set aside half (or any amount) of 
the annual new starts funding authorization for exempt projects, and 
rejects the assertion that Congress intended such projects to be exempt 
from the evaluation process because they have no measurable benefits. 
The Final Rule retains the NPRM language strongly encouraging sponsors 
of projects they believe to be exempt to submit data for project 
evaluation. This encouragement does not and is not intended to 
eliminate the provisions in TEA-21 exempting certain projects from the 
evaluation process, as many of the commenters seem to have surmised. 
Any proposed project that meets these provisions is still exempt from 
the evaluation and rating process; however, submitting data will give 
FTA an empirical basis on which to make funding recommendations to 
Congress. It will also maintain a proposed project's eligibility for an 
FFGA. Indeed, 49 U.S.C. 5309(e)(7) requires new starts projects to be 
carried out through a Full Funding Grant Agreement, and also requires 
FTA to base the decision to execute an FFGA on the results of the

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evaluations and ratings process. Thus, any proposed project that is not 
evaluated will not be eligible for an FFGA. FTA will of course allocate 
any funds appropriated by Congress for such projects. However, we 
believe project sponsors will find the more predictable and reliable 
funding provided through an FFGA to be to their advantage. Therefore, 
project sponsors are encouraged to submit data for evaluation to retain 
their eligibility for an FFGA.
    Finally, FTA acknowledges that there may be a temptation to 
circumvent the project evaluation process, as noted during the 
Washington, D.C. workshop. For example, it is conceivable that project 
sponsors may officially maintain a low level of section 5309 new starts 
funds throughout a project's development, only to ``discover'' that 
additional funds will be needed as the development process draws to a 
close. FTA also recognizes that not all such instances will result from 
deliberate attempts to manipulate the process; occasionally, further 
engineering and design will uncover a legitimate need for additional 
funds during the project development process, or local funding may not 
materialize as initially proposed. However, due to the fact that 
project evaluation is a condition of eligibility for an FFGA, and that 
an FFGA offers more stability in terms of funding than relying on 
annual Congressional appropriations, FTA believes that deliberate 
attempts to evade project evaluation will be few and far between.
    Although projects proposed as ``exempt'' are not subject to 
evaluation against the new starts project justification and local 
financial commitment criteria, such projects must still request FTA 
approval for entrance into preliminary engineering and final design. 
The decision to approve advancement in the project development process 
for such projects is based on compliance with basic planning, 
environmental, project management, and other requirements which apply 
to all projects pursuing section 5309 new starts funding, regardless of 
the amount. It is at the preliminary engineering and final design 
approval points that FTA works with the project sponsor to determine if 
the proposed ``exempt'' project appears to be at risk for requiring new 
starts funding at an amount greater that $25 million, and to seek 
assurances that local or other Federal formula funds will be pursued if 
a project's cost or funding strategy changes. Once again, in order to 
preserve maximum funding flexibility, FTA strongly encourages the 
sponsors of proposed projects that they believe to be exempt to 
nonetheless submit data for evaluation.

C. Section 611.5: Definitions

    This section defines key terms used in this part.
    Comment. Four commenters to the proposed rule expressed concern 
that the definition of ``fixed guideway'' was unnecessarily narrow, and 
may perhaps exclude many bus rapid transit (BRT), ferry boat, commuter 
rail and light rail systems that would operate along a shared right-of-
way.
    Response. FTA has re-examined the definition used in the NPRM, and 
agrees that it could be read as excluding some BRT and ferry projects 
that would otherwise be eligible under the new starts program. The 
definition used in this rule has been modified to address this 
uncertainty. Definitions for ``bus rapid transit'' and ``BRT'' have 
also been added, consistent with the definition used in FTA's Request 
for Participation in the Bus Rapid Transit Demonstration Program (63 FR 
68347 (December 10, 1998)).
    FTA has also added a definition for ``Transportation System User 
Benefits'' and removed the definition for the ``Transportation System 
Management alternative,'' as discussed later in the preamble to this 
Rule.

D. Section 611.7: Relation to Planning and Project Development 
Processes

    New start projects, like all transportation investments in 
metropolitan areas, must emerge from a regional multimodal 
transportation planning process in order to be eligible for Federal 
funding. In addition, 49 U.S.C. 5309(e)(1) specifies that discretionary 
grants or loans for new starts may only be approved if a proposed 
project is based on the results of alternatives analysis and 
preliminary engineering, and that certain project justification and 
financial criteria have been met.
    As part of the metropolitan planning process, local project 
sponsors must perform a corridor-level analysis of mode and alignment 
alternatives in corridors for which projects may be proposed for 
section 5309 new starts funding. This alternatives analysis will 
provide information on the benefits, costs, and impacts of alternative 
strategies, leading to the selection of a locally-preferred alternative 
to the community's mobility needs.
    The approach taken in this rule envisions alternatives analysis as 
a key planning tool to be undertaken within the multimodal metropolitan 
and statewide planning processes, supplemented by subsequent project 
development analyses, for determining appropriate solutions to 
transportation issues. FTA and FHWA are currently modifying their joint 
planning and environmental regulations to better reflect the planning 
and project development provisions of TEA-21. To the extent possible, 
the development of these regulations has been coordinated with the 
development of this final rule on major transit capital investments. 
However, FTA may amend this rule, if necessary, when the joint planning 
and environmental Final Rule is issued.
    Federal financial support for the planning process is derived from 
a number of sources, including the Metropolitan Planning Program under 
49 U.S.C. 5303, the State National Planning and Research Program under 
49 U.S.C. 5313, and planning programs administered by the Federal 
Highway Administration. FTA Urbanized Area Formula funds under 49 
U.S.C. 5307 and flexible funds under the Surface Transportation Program 
(STP) and the Congestion Mitigation and Air Quality (CMAQ) Program may 
also be used to support certain planning activities. Given the 
significant demands placed on the new start program, FTA does not 
support the use of 49 U.S.C. 5309 funds for initial planning 
activities. Moreover, as amended by TEA-21, 49 U.S.C. 5309(m)(2) limits 
the amount of new starts funding that can be used for purposes other 
than final design and construction to not more than 8 percent of funds 
appropriated. In evaluating the local financial commitment to a 
proposed project, FTA will consider the degree to which initial 
planning activities are conducted without funding from section 5309.
    The alternatives analysis study (also known as a major investment 
study--MIS--or multimodal corridor analysis) evaluates several modal 
and alignment options for addressing mobility needs in a given 
corridor. It is intended to provide information to local officials on 
the benefits, costs, and impacts of alternative transportation 
investments. Potential local funding sources for implementing and 
operating the investment are to be identified and studied, and 
information in response to the FTA new starts project evaluation 
criteria is to be developed. Involvement of a wide range of 
stakeholders--including the general public--in the alternatives 
analysis study process is strongly encouraged. At local discretion, the 
alternatives analysis may include the undertaking of a Draft 
Environmental Impact Statement (DEIS) or Environmental Assessment (EA). 
Alternatives analysis is considered

[[Page 76869]]

complete when a locally preferred alternative (LPA) is selected by 
local and regional decisionmakers and adopted by the metropolitan 
planning organization (MPO) in its financially-constrained metropolitan 
transportation plan.
    At this point, the local project sponsor may submit a request to 
the FTA regional office to initiate the preliminary engineering phase 
of project development. The request must provide information that 
demonstrates the readiness of the project to advance into preliminary 
engineering, including the adoption of the project into the 
metropolitan transportation plan and the programming of the preliminary 
engineering study in the Transportation Improvement Plan (TIP), and 
information demonstrating the technical capability of project sponsors 
to undertake the preliminary engineering effort. The request must also 
address the project justification and local financial commitment 
criteria outlined below. (This information is normally developed as 
part of an alternatives analysis.) FTA will then evaluate the proposed 
project as required by 49 U.S.C. 5309(e)(6) and determine whether or 
not to advance the project into preliminary engineering. FTA approval 
to initiate preliminary engineering is not a commitment to fund final 
design or construction.
    Where the sponsoring agency believes that a proposed project is 
exempt from evaluation under this rule, submission of project 
justification and financial commitment information to FTA is not 
required. However, exempt projects must still meet all planning, 
environmental, project management, and other requirements which 
demonstrate their readiness to advance into preliminary engineering. In 
addition, without information to support the justification of and local 
financial commitment to a proposed project, FTA will have no basis for 
decisions on whether to recommend Federal funding commitments. 
Therefore, sponsors of exempt projects are strongly encouraged to 
submit information on project justification and financial commitment.
    During the preliminary engineering phase, local project sponsors 
refine the design of the proposal, taking into consideration all 
reasonable design alternatives. Preliminary engineering results in 
estimates of project costs, benefits and impacts in which there is a 
much higher degree of confidence. A comprehensive preliminary 
engineering effort will also address the evaluation criteria described 
in this rule. In addition, NEPA requirements must be met (for new 
starts, this usually includes the completion of a Final Environmental 
Impact Statement), project management plans and fleet management plans 
are finalized, and local funding sources are committed to the project 
(if they have not already been committed). Information on project 
justification and the degree of local financial commitment will be 
updated and reported as appropriate. As part of their preliminary 
engineering activities, localities are encouraged to consider policies 
and actions designed to enhance the benefits of the project and its 
financial feasibility.
    Project sponsors should also ensure that safety considerations are 
weighed during the preliminary engineering phase. With regard to rail 
projects that will be subject to Federal Railroad (FRA) safety 
jurisdiction, FTA will notify FRA of pending new starts at the earliest 
date practicable, as important decisions affecting rail safety must be 
made at the outset of the planning and grant development process. FRA 
will forward any recommendations it has to FTA, which will forward them 
to the project sponsor.
    Preliminary engineering is typically financed with 49 U.S.C. 
Sec. 5303 and Sec. 5307 funds, local revenues, and flexible funds under 
the STP and CMAQ programs.
    Preliminary engineering is considered complete when FTA has issued 
a Record of Decision (ROD) or Finding of No Significant Impact (FONSI), 
as required by NEPA.
    Proposed projects that have completed preliminary engineering must 
request FTA approval to enter the final design phase of development. 
The request must provide information that demonstrates to FTA the 
technical capability and financial capacity of the local project 
sponsor to advance the project into final design. Like the approval to 
enter into preliminary engineering, this approval is based upon a 
review and evaluation of the costs, benefits, and impacts under the 
statutory project evaluation criteria. Final design is the last phase 
of project development, and includes right-of-way acquisition, utility 
relocation, and the preparation of final construction plans (including 
construction management plans), detailed specifications, construction 
cost estimates, and bid documents. Final design is typically eligible 
for 49 U.S.C. 5309 new start funds.
    Comment. In the NPRM to this rule, FTA asked for public comment on 
the relationship between the alternatives analysis requirement and the 
planning and project development processes. A total of nine comments 
addressed this issue. Two respondents, a transit industry trade 
association and a large transit operator, objected to the fact that an 
alternatives analysis is required for transit new starts, but not for 
highway projects. Another transit operator objected to alternatives 
analysis as ``outside'' of the ``normal'' corridor study process, 
topheavy and burdensome, and inconsistent with planning regulations.
    Response. It is in fact true that Federal highway programs do not 
require an analysis of alternatives in the same manner as the new 
starts program. However, this is a fact of law, not Departmental 
policy. The new starts program is a discretionary funding program; 
alternatives analyses are required to develop information for 
decisionmaking purposes. Conversely, the Federal highway program is a 
formula program; no Federal decisionmaking is required. Neither FTA nor 
DOT are at liberty to remove the requirement for alternatives analysis 
from the new starts program, or to impose a similar requirement on the 
Federal highway program. To do so would require a change in the law by 
Congress. As for the perceived inconsistency with planning regulations, 
the joint FTA/FHWA planning regulations are designed to be consistent 
for both agencies' major capital investment programs; they neither 
require FHWA-funded projects to undergo alternatives analysis, nor 
prevent FTA-funded new starts from meeting the statutory requirement 
that an alternatives analysis be conducted.
    Comment. One transit operator commented that the issuance of this 
rule should be delayed until the revisions required by TEA-21 to the 
FTA/FHWA planning and project development regulations have been issued.
    Response. This rule applies only to FTA's own evaluations of 
proposed new starts, which does not feed into the planning process; 
rather, FTA's new starts evaluations rely upon the data and information 
derived from the planning process. Therefore, FTA is not persuaded that 
formal implementation of the TEA-21 new starts provisions should be 
delayed further. Should the final planning rule require changes to the 
new starts project development process, however, this rule will be 
amended accordingly.
    Comment. Two commenters expressed confusion regarding the 
``demise'' of the Major Investment Study (MIS), and requested 
clarification.
    Response. Section 1308 of TEA-21 eliminated the separate 
requirement for an MIS and integrated its basic concepts into the joint 
planning and

[[Page 76870]]

environmental regulations issued by FTA and FHWA (23 CFR parts 450 and 
771). Existing MIS activities will still satisfy the requirement for an 
alternatives analysis, and project sponsors who wish to follow the 
principles of the multimodal MIS to conduct new alternatives analyses 
are encouraged to do so. The joint planning and environmental 
regulations will more fully describe how the MIS concepts will be 
integrated into the process.
    Comment. The NPRM noted that FTA does not support the use of 
section 5309 new starts funds for initial planning activities, given 
the demands placed on the program and the availability of funds from 
other FTA programs for this purpose, and stated that FTA would consider 
this when evaluating local financial commitment. Six comments were 
received on this issue. Four commenters objected to what they viewed as 
``penalizing'' project sponsors for using new starts funds for planning 
activities relating to proposed new starts projects; one commenter 
asked for clarification as to whether such projects would be penalized; 
and one (a transit operator) supported limiting the use of new starts 
funds for planning. One transit operator, citing the statutory 8 
percent limit on program funding for activities other than final design 
and construction, noted that Congress ``clearly intended'' for section 
5309 funds to be used for alternatives analysis and preliminary 
engineering. A local government entity claimed that there was no 
``statutory basis'' for including the use of section 5309 funds for 
planning purposes as part of the project evaluation process, and noted 
that it would be inappropriate to ``penalize'' projects that Congress 
saw fit to earmark. This same commenter suggested measuring such uses 
of funds against the 8% limit established in TEA-21.
    Response. The Final Rule retains the principle that FTA will 
consider the degree to which initial planning activities are conducted 
without funding from section 5309 as part of our evaluation of the 
local financial commitment. This is not intended as a ``penalty'' for 
project sponsors who seek and secure Congressional earmarks for these 
activities. Rather, it is intended to give a degree of recognition to 
the efforts of sponsors who make use of existing sources of Federal, 
State, and local planning funds, such as those noted above. Further, 
making such considerations is consistent with Congressional direction. 
The conference report to the FY 1999 appropriations act instructed FTA 
to consider the extent to which new starts project sponsors make use of 
the appreciable increases in formula funding for alternatives analysis 
and preliminary engineering, when evaluating the local financial 
commitment of proposed new starts.
    Comment. Twelve comments addressed the issue of the statutory 
requirement for FTA approval to advance into preliminary engineering 
and final design. Most expressed some degree of discomfort with the 
notion of such approvals, and noted a need for more guidance and better 
definitions of the stages of project development and the development 
process itself. The strongest objection was expressed by a transit 
operator who asserted the project development process is separate and 
distinct from the evaluation process, and that proposed new starts 
projects should therefore simply be permitted to proceed without FTA 
approval.
    Response. In most cases, the ``newness'' of this approval 
requirement seems to be responsible for much of the confusion. The 
requirement for FTA approval to enter final design was added to the new 
starts program by TEA-21; this rule simply implements that requirement. 
FTA is not at liberty to change the law through this or any other 
rulemaking process. FTA approval has long been required to enter into 
preliminary engineering, though the role of the project ratings process 
was not as large.
    Comment. Four of those commenting on the approval requirement, 
including a transit industry trade association, requested clarification 
of what is required to fulfill the requirements for completion of the 
various stages of development.
    Response. The language concerning alternatives analysis, 
preliminary engineering, and final design has been revised in both the 
text of this rule and the preamble to better describe these activities. 
In addition, FTA issued guidance in September 1999 which clarifies the 
project development and approval process.
    Comment. The industry trade association also suggested that local 
financial commitment not be considered for approval to enter the next 
stage, a comment echoed by a transit operator. Another transit operator 
and the trade association suggested that different requirements be 
established for approval to enter preliminary engineering than for 
final design. The apparent fear is that worthy projects may be denied 
approval to enter preliminary engineering simply because adequate 
information on costs and benefits is not available with a high level of 
certainty so early in the development process.
    Response. Section 5309(e)(6) clearly states that FTA may only 
approve the advancement of a proposed project to the next stage of 
development if it meets the statutory project evaluation criteria, and 
is likely to continue to do so. However, FTA recognizes that the level 
of information available and the degree of certainty varies according 
to the stage of project development; the earlier in the process a 
proposed project is, the less certain the forecasts and estimates. For 
this reason, FTA sets different standards for high, medium, and low 
ratings for preliminary engineering than for final design; the further 
a proposed project is in the process, the higher the standard. In the 
case of local financial commitment, for example, it may be sufficient 
to simply demonstrate a reasonable financial plan that identifies 
proposed sources of local funds needed to construct the project (i.e., 
to show that the sponsors have considered how they intend to pay for 
it) when seeking approval to enter preliminary engineering. It is not 
reasonable to expect ballot measures to have passed and funds to have 
been programmed at this stage. However, by the time a proposed project 
is ready to enter final design, most or all of the local funds should 
be committed, including provisions for cost overruns. It has been a 
longstanding FTA practice in the management of the new starts program 
and the project evaluation process to make such distinctions among the 
stages of project development; this practice has been discussed in the 
Annual Report on New Starts and its predecessor, the annual Report on 
Funding Levels and Allocations of Funds, since the May 1991 edition. 
Further, FTA cannot assign project ratings during alternatives 
analysis, as there is essentially no project to evaluate until the 
locally-preferred alternative is selected. Project sponsors need not 
worry that they will ``fail'' the evaluation process simply because 
their proposed project is still in the early development stages.
    Comment. The trade association and three other commenters also 
requested language clarifying that projects already in preliminary 
engineering at the time the final rule is issued have met the 
requirement for alternatives analysis, as have prior Major Investment 
Studies (MISs).
    Response. This rule in no way revokes prior FTA approvals for 
preliminary engineering (or final design). Language to this effect has 
been added to Sec. 611.7, Relation to planning and project development 
processes.

[[Page 76871]]

    Comment. One commenter requested a regulation to define ``major 
investment studies.''
    Response. The discussion of alternatives analysis earlier in the 
preamble to this rule has been revised to better address this issue. 
The pending joint FTA/FHWA planning and environmental regulations will 
more fully describe the integration of the MIS into the planning and 
environmental process under TEA-21.

E. Section 611.9: Project Justification Criteria

    Section 5309(e)(1)(B) requires the Secretary to determine that a 
proposed new starts project is justified based on a comprehensive 
review of its mobility improvements, environmental benefits, cost 
effectiveness, and operating efficiencies. To make this determination, 
FTA will evaluate information developed through the planning and 
project development processes. The method used to make these 
determinations is a multiple measure approach in which the merits of 
candidate projects will be evaluated against a set of measures. The 
ratings for each measure will be updated annually for purposes of the 
annual report on funding levels and allocations of funds required by 
section 5309(o)(1), the supplemental report required by section 
5309(o)(2), and as required for FTA approvals to enter into preliminary 
engineering, final design, or FFGAs. As a candidate project proceeds 
through the stages of the project development process, a greater degree 
of certainty is expected with respect to these measures. Measures have 
been established for each of the following criteria:
    1. Mobility improvements;
    2. Environmental benefits;
    3. Operating efficiencies;
    4. Transportation System User Benefits (Cost Effectiveness);
    5. Existing land use, transit supportive land use policies, and 
future patterns; and
    6. Other factors, including:
    (a) The degree to which the policies and programs (e.g., parking 
policies, etc.) are in place as assumed in the forecasts;
    (b) Project management capability; and
    (c) Additional factors relevant to local and national priorities 
and relevant to the success of the project.
    For each proposed project, FTA will assign one of five descriptive 
ratings (``high,'' ``medium-high,'' ``medium,'' ``low-medium,'' or 
``low'') for each of the first five criteria; information on ``other 
factors'' will be reported as appropriate.
    The measures for the project evaluation criteria are described in 
Appendix A to this rule. FTA may amend or modify these measures in 
response to the results of ongoing research into methods for evaluating 
the benefits of transit investments.
    Comment. In the NPRM for this Rule, FTA proposed that in all cases, 
the proposed new start would be evaluated against both a no-build and 
Transportation System Management (TSM) alternative. The retention of 
the TSM was the subject of substantial comment in response to the NPRM. 
A total of 13 comments were submitted on this issue, all of them 
opposed. Most of the commenters felt that it was unnecessarily 
burdensome to maintain a TSM alternative for what they viewed as solely 
FTA's purposes, noting that certain incremental system improvements 
will occur whether the new start is constructed or not; i.e., it is no 
longer appropriate to view the no-build alternative as a ``do nothing'' 
scenario. The most common suggestion was that, if the TSM requirement 
is retained, it should be dropped after alternatives analysis has 
resulted in the selection of a locally-preferred alternative.
    Response. FTA accepts the argument that it is no longer appropriate 
to assume that a no-build alternative presents a ``do nothing'' 
scenario. The realities of modern urban and suburban planning, 
transportation, and economic development make it virtually impossible 
to assume that no improvements will occur if a proposed new start is 
not implemented. At the same time, however, a consistent baseline is 
needed to ensure a fair evaluation of proposed new starts projects 
nationwide. The TSM alternative has served well in this regard.
    In response to comments submitted on this issue and in recognition 
of the desire to simplify the new starts process, this Rule eliminates 
the requirement for separate no-build and TSM alternatives, and instead 
requires that the proposed new start be evaluated against a single 
``baseline alternative.'' The baseline alternative is best described as 
transit improvements lower in cost than the proposed new start, which 
result in a better ratio of measures of transit mobility compared to 
cost than the no build alternative; the ``best you can do'' without the 
new start investment. The purpose of the baseline comparison is to 
isolate the costs and benefits of the proposed major transit 
investment. At a minimum, the baseline alternative must include in the 
project corridor all reasonable cost-effective transit improvements 
short of investment in the new start project.
    Depending on the circumstances and through prior agreement with 
FTA, the baseline alternative can be defined appropriately in one of 
three ways. First, where the adopted financially constrained regional 
transportation plan includes within the corridor all reasonable cost-
effective transit improvements short of the new start project, a the 
no-build alternative that includes those improvements may serve as the 
baseline. Second, where additional cost-effective transit improvements 
can be made beyond those provided by the adopted plan, the baseline 
will incorporate those cost-effective transit improvements as well. 
Third, where the proposed new start project is part of a multimodal 
alternative that includes major highway components, the baseline 
alternative will be the preferred multimodal alternative without the 
new start project and associated transit services. Prior to submittal 
of a request to enter preliminary engineering for the new start 
project, grantees must obtain FTA approval of the definition of the 
baseline alternative.
    Consistent with the requirement that differences between the new 
start project and the baseline alternative measure only the benefits 
and costs of the project itself, planning factors external to the new 
start project and its supporting bus service must be the same for both 
the baseline and new start project alternatives. Consequently, the 
highway and transit networks defined for the analysis must be the same 
outside the corridor for which the new start project is proposed. 
Further, policies affecting travel demand and travel costs, such as 
land use, transit fares and parking costs, must be applied consistently 
to both the baseline alternative and the new start project alternative.
    The Final Rule has been rewritten to substitute ``baseline 
alternative'' wherever ``no-build and TSM alternatives'' appeared in 
the NPRM, and a definition for ``baseline alternative'' has been added.
    ``Existing land use, transit supportive land use policies, and 
future patterns'' is not listed among the project justification 
criteria contained in 49 U.S.C. 5309(e)(1)(B), but is listed as one of 
the ``considerations'' under 49 U.S.C. 5309(e)(3) that FTA must take 
into account when determining a proposed project's ``justification.'' 
Consistent with past practice, we have included land use among the 
project justification

[[Page 76872]]

criteria for a number of reasons. Transit-supportive land use, whether 
it is a factor of existing patterns, existing local policies, or 
planned future development which targets development around the 
Federally-assisted project, has been an important indicator of future 
project success. Additionally, TEA-21 added two new land-use-related 
considerations to the project evaluation process: The reduction in 
local infrastructure costs achieved through compact land use 
development (49 U.S.C. 5309(e)(3)(B)), and the cost of suburban sprawl 
(49 U.S.C. 5309(e)(3)(C)). This appears to be a clear intent by 
Congress to give additional attention to this issue. The NPRM for this 
Rule labeled the land use criteria as ``transit supportive existing 
land use policies and future patterns.'' This has been changed to 
``existing land use, transit supportive land use plans, and future 
patterns'' in this Rule, to more accurately reflect FTA's practices in 
evaluating land use issues relating to proposed new starts. The 
underlying factors described in paragraph (e) of Appendix A to this 
rule have been revised in response to this change.
    In making the determination of project justification, 49 U.S.C. 
5309(e)(3) requires the FTA to consider a variety of factors, as 
follows:
    1. The direct and indirect costs of relevant alternatives;
    2. Factors such as congestion relief, improved mobility, air 
pollution, noise pollution, energy consumption, and all associated 
ancillary and mitigation costs necessary to carry out each alternative 
analyzed;
    3. Existing land use, mass transportation-supportive land use 
policies, future patterns, and the cost of suburban sprawl;
    4. The degree to which the project increases the mobility of the 
mass transportation dependent population or promotes economic 
development;
    5. Population density and current transit ridership in the 
corridor;
    6. The technical capability of the grant recipient to construct the 
project;
    7. Differences in local land, construction, and operating costs; 
and
    8. Other factors that the Secretary determines appropriate.
    This represents a modest expansion of the ``considerations'' 
established by ISTEA. Specifically, section 3009(e) of TEA-21 added the 
consideration for the cost of suburban sprawl noted in (3) above; for 
population density and current transit ridership in the corridor in (5) 
above; and for the technical capacity of the grantee to carry out the 
proposed project in (6) above. The ``considerations'' serve to 
illustrate the project justification criteria, providing further detail 
on specific information that should be collected and how the criteria 
should be evaluated. Much of the data required to consider these 
factors is already developed as part of the existing planning and 
project development processes, however, as required under 23 CFR part 
450 and 23 CFR part 771. FTA believes these considerations are already 
adequately addressed by the current project justification criteria and 
measures.
    When evaluating proposed new starts projects, FTA will apply these 
criteria to the project as proposed for Federal funding under 49 U.S.C. 
section 5309. This means that if local project sponsors are seeking new 
starts funding at this time for a segment of a larger planned transit 
investment, only that specific segment will be evaluated.
    Comment. FTA received 24 comments relating to the criteria for 
mobility improvements. Of these, 15 addressed the issue of mobility for 
low-income households. Ten commenters recommended revising the low-
income mobility measure to include destinations, such as employment 
areas, within \1/2\-mile of boarding points, in addition to the 
existing measure for households. Two commenters recommended expanding 
the low-income household measure to include other populations that tend 
towards transit-dependence, such as senior citizens, students, and 
persons with disabilities. One recommended accounting for discretionary 
riders, and another suggested eliminating the measure for low-income 
mobility, perceiving that it perpetuated an image of transit as a 
carrier of poor people that persons of middle-class status would not 
want to ride. One commenter suggested that low-income mobility be 
separated from the measure for mobility improvements.
    Other comments on this measure included two recommendations to 
incorporate a consideration for congestion, two requests to incorporate 
a measure for delays and ``incidents'' on the transit system, various 
calls for ``better measures,'' and recommendations that different 
measures be applied to different modes of transit (i.e., light rail 
versus commuter rail).
    Response. FTA recognizes that a system that is located near low-
income households is of little use to residents unless it can also 
provide access to employment centers and other activity centers. 
Therefore, a factor for destinations within a \1/2\-mile radius of new 
stations has been added to the measure for mobility improvements.
    FTA is required by section 5309(e)(3)(D) to ``consider the degree 
to which the (proposed) project increases the mobility of the mass 
transportation dependent population, or promotes economic 
development.'' For a variety of reasons, low-income households were 
chosen as a surrogate for measuring the transit dependent population. 
Chief among these is the fact that transit dependence is often a factor 
of income. Many people rely on transit service for basic mobility--some 
by necessity, and some by economic choice; many residents of upscale 
central city neighborhoods simply choose not to own an automobile. 
There is value in considering all of these people in the measure for 
basic mobility; however, were transit service suddenly eliminated, 
those riders with an economic choice would find other alternatives 
available to them. Further, many of those riders who ride transit by 
choice do so because it permits them to bypass congestion on highways 
and city streets. These benefits would already be accounted for in the 
measure for travel time savings. The focus on low income households 
provides a clearer--though still imperfect--assessment of how well the 
proposed project would serve those who do not have the ability to 
choose; i.e., the mass transit dependent population specified in the 
statute.
    The comments calling for better measures to assess the mobility 
improvements of a proposed project are well taken; unfortunately, no 
recommendations for new measures or methodologies accompanied those 
comments. FTA is as interested as the transit industry in advancing the 
state of the art of transit planning, and is conducting research into 
better ways to measure the various benefits of transit service, 
particularly high-quality rail systems. Beginning on September 1, 2001, 
this Rule employs a revised measure of travel benefits based on a 
multimodal measure of perceived travel times faced by all users of the 
transportation system. As new measures and methods become available, 
FTA may amend or modify this rule.
    Comment. Ten comments were received on the criterion for 
environmental benefits; no two were alike. One interest group suggested 
that impacts on areas where energy is generated (i.e., the location of 
a remote generating plant) be incorporated into the evaluation, and 
that energy comparisons be made on a passenger-mile basis. One transit 
operator recommended incorporating ``non-scientific `quality of life 
''' factors. Two interest groups objected to the use of BTUs, with one 
suggesting the use of

[[Page 76873]]

vehicle miles traveled (VMT) instead and the other suggesting that if 
it is retained, the measure should be limited to non-renewable energy 
sources and should include energy used in construction. Two commented 
that greater weight should be given to proposed projects in 
nonattainment areas, and one individual commenter recommended that 
other benefits should be included, such as reduced parking demand which 
would reduce parking lot runoff. One local government recommended that 
the evaluation consider wetlands and endangered species habitats.
    Response. It should be noted that this evaluation does not 
represent the only relationship between the new starts process and 
environmental considerations. All proposed new starts projects must 
meet NEPA requirements as a condition of eligibility for funding. Thus, 
factors such as runoff, wetlands, and the habitat of endangered species 
are already considered. In addition, EPA classifications for 
attainment/nonattainment are also considered as part of the evaluation 
of environmental benefits for all proposed new starts projects.
    To the extent that ``greater weight'' can be given to proposed 
projects in nonattainment areas, 49 USC 5309(e)(8)(B) provides 
expedited procedures for FTA decisionmaking and prohibits any 
limitations on the simultaneous evaluation of proposed projects in at 
least two corridors in such cases. This is reflected in paragraph (c) 
under Sec. 611.3 of this rule. It should be noted that previously, 
these projects were also exempt from evaluation under the new starts 
criteria; this provision was among those eliminated by TEA-21.
    Quality of life issues, to the extent that they can be identified 
and defined for individual projects, are more appropriately addressed 
in the ``other factors'' criteria than as part of the measures for 
environmental benefits.
    BTUs were chosen as the measure for reporting energy consumption 
because they represent a universal and universally-accepted measure of 
energy. While it may be possible to evaluate changes in energy 
consumption in terms of gallons of gasoline, gallons of diesel fuel, 
barrels of crude oil, kilowatt-hours of electricity, or tons of coal, a 
universal measure is needed to compare these energy sources to each 
other and to evaluate the benefits of one project in comparison to 
others.
    Comment. Three comments were submitted on the measures for 
evaluating operating efficiencies. One operator of a major northeastern 
transit system commented that the change in operating cost per 
passenger mile would give high marks for crowding and penalize proposed 
projects that would mitigate crowding, a topic that was raised by 
others in comments relating to the measure for cost effectiveness. One 
interest group recommended no changes to the measure, but suggested 
that the TSM alternative be dropped after entry into preliminary 
engineering and proposed language for incorporation into the rule. One 
individual commenter opined that cost per passenger mile is easily 
manipulated, costs vary across the country, and recommended the 
establishment of thresholds for number of peak and off-peak passengers, 
with a pass/fail rating.
    Response. Concerns regarding the ``ease'' with which information 
for this measure might be ``manipulated'' are noted, but they are 
ultimately not relevant to the process. Project sponsors are required 
to certify to FTA that the information submitted under the project 
evaluation criteria is developed in compliance with FTA's technical 
guidance. Any attempt at manipulation of data would likely be 
discovered during the evaluation and approval process. This measure is 
but one of the many criteria under which proposed new starts are 
evaluated, and will not by itself ``make or break'' a project. The 
other comments are addressed elsewhere in the preamble to this rule.
    Comment. FTA received a total of 32 comments on the measure for 
cost effectiveness. The NPRM for this rule solicited comment on the 
retention of FTA's historical ``cost per new rider'' (or more properly, 
incremental cost per incremental rider) measure to indicate cost 
effectiveness, and asked if there were other measurements. Twenty-three 
comments were submitted in response this request. An additional nine 
commenters addressed this issue as part of their general comments on 
the NPRM. All were unanimous in their assertion that the cost 
effectiveness measure should ``roll up'' additional benefits beyond 
incremental cost per incremental rider. The consensus was that focusing 
on new riders alone ignores benefits to other riders, and thus biases 
the measure against older cities with ``mature'' transit systems where 
the focus of a proposed new start would be on improving service, not 
attracting new riders. Most recommended a measure based on ``cost per 
benefiting rider'' or simply ``cost per rider.'' The most common 
examples of benefits given in comments were reductions in crowding and 
travel time savings. A trade group representing the transit industry 
recommended the formation of a committee to study the issues. One 
transit operator recommended a ``full-cost accounting approach'' 
incorporating the full range of societal impacts, including local 
policy decisions on land use and parking; another operator recommended 
a measure based on transit system throughput. Others recommended 
including cost per new trip, new riders attracted to the existing 
system by the new start, total annualized cost per rider, travel time 
savings, and accounting for the conversion of multimodal trips to 
transit trips, and single-occupant vehicle (SOV) trips to multimodal 
trips.
    Response. It is important to note that the measure for cost 
effectiveness is not intended to be a single, stand-alone indicator of 
the merits of a proposed new starts project. It is but one part of the 
multiple measure method that FTA uses to evaluate project justification 
under the statutory criteria. While cost effectiveness is an important 
consideration, so are mobility improvements, environmental benefits, 
and the other factors described both in TEA-21 and elsewhere in this 
rule.
    However, FTA is aware that the cost effectiveness measure is often 
interpreted by project sponsors, State and local decisionmakers, and 
even elsewhere within the Executive and Legislative branches of the 
Federal government as ``the'' measure that will ``make or break'' a 
proposed new start. In light of this, and in response to the unanimous 
call by commenters for a ``better'' measure of cost effectiveness, FTA 
has developed a measure of ``transportation system user benefits'' to 
more accurately address the criteria for cost effectiveness. In simple 
terms, the basic goal of any major transportation investment is to 
reduce the amount of travel time and out-of-pocket costs that people 
incur for taking a trip; the cost of mobility. The new Transportation 
System User Benefits measure of cost effectiveness measures the change 
in these costs, and accounts for changes to transit, highway, and other 
modes of travel.
    This new cost effectiveness measure replaces the current ``dollars 
per new rider'' figure that can be--and often is--perceived as 
``subsidy per new rider.'' This approach de-emphasizes new riders and 
measures not only the benefits to people who change modes, but also 
accounts for benefits within modes (i.e., benefits to existing riders 
and highway users).
    The Transportation System User Benefits measure is not new to FTA 
or to the new starts project evaluation process. A similar combination 
of cost

[[Page 76874]]

and travel time savings for new and existing riders was identified as a 
measure for cost effectiveness in the 1984 Statement of Policy on Urban 
Mass Transportation Major Capital Investments.
    User benefits are a good measure of the effectiveness of a major 
transit investment; however, the Transportation System User Benefits 
measure should not be interpreted as a single measure of all of the 
expected benefits of a new starts project. Those in search of a single 
measure that ``rolls up'' the overall benefits expected of a proposed 
new start should direct their attention towards the overall rating for 
project justification; the Transportation System User Benefits measure 
of cost effectiveness is but a single component.
    This rule has been revised to reflect this new approach. In 
addition, FTA will publish guidance describing how project sponsors 
should calculate and report the new cost effectiveness measure for 
evaluation purposes. The new Transportation System User Benefits 
measure of cost effectiveness will be phased in over time, becoming 
effective on September 1, 2001.
    Comment. FTA received a total of 19 comments relating to the land 
use criterion. In general, the comments reflected a general concern 
over how land use will be measured and used as a factor for project 
evaluation.
    While there was no clear pattern to the comments, a number of 
recurring themes were apparent. One of these themes was 
``flexibility.'' A transit industry trade association and a new starts 
interest group supported the measure in general, but noted that its 
application should be flexible enough to account for regional 
differences, and that guidance would be essential; one recommended that 
FTA undertake a study of the ``cost of sprawl'' and suggested 
alternative language for the final rule. One transit operator submitted 
comments in support of the trade association.
    The second theme that arose from the comments concerned the 
application of the land use measure. Five commenters expressed 
confusion or concern over a perceived vagueness of the land use 
criterion, terming it ``nebulous,'' ``vague'' and ``ambiguous.'' Two 
commenters noted that land use issues would already be captured by 
other project justification measures or through the modeling process, 
and two others expressed concerns over a perceived reporting burden. 
Two more commented that land use would vary greatly by alternative and 
alignment. One transit operator in a major northeastern city and one 
commenter at the Oakland, CA workshop expressed concern that the 
measure for land use would bias the new starts process in favor of 
suburban projects. One transit operator in a southwestern city that 
does not have zoning ordinances recommended incorporating a 
consideration for voluntary actions by the community to coordinate 
station area development, and objected to the elevation of land use 
considerations to the ``status'' of the other statutory criteria. An 
operator in another southwestern city in the same State commented that 
ratings should be based only on factors over which transit operators 
have control, and noted that similar evaluation criteria should be 
applied to FHWA funds. In contrast, a council of governments from a 
city in the Pacific Northwest recommended that FTA give significant 
weight to regions with a history of containing sprawl.
    The final common theme among some of the commenters was to question 
the connection between land use and transportation planning. One 
commenter noted that the criterion assumes coordination between 
transportation and planning, and two questioned or flatly rejected any 
correlation between transportation and land use.
    Response. This rule does not represent a substantial change from 
existing FTA policy or practice. Even prior to TEA-21, FTA included 
land use among the primary evaluation criteria. As noted earlier in 
this preamble, while land use is not one of the project justification 
criteria specified in Federal transit law, it is included among the 
factors that FTA is to consider when applying those criteria. 
Additionally, TEA-21 added two new land use considerations to the 
evaluation process; a clear intent by Congress to give additional 
attention to this issue. Contrary to those comments that questioned the 
link between transportation and land use, FTA has found that transit 
supportive local land use policies have been an important indicator of 
the future success of Federally-assisted new starts projects.
    In response to the comment that highway projects should be subject 
to a similar evaluation of land use, FTA is tempted to agree. However, 
as noted in response to a similar comment on the alternatives analysis 
requirement, highway projects are funded under a formula program and 
are not subject to the same evaluation process as transit new starts, 
which are funded under a discretionary program, and FTA is not at 
liberty to change the law or otherwise impose such a requirement.
    Finally, in terms of flexibility in the application of the land use 
criteria, FTA finds that the existing process, which will continue 
under this rule, offers an acceptable balance between the need for 
comparability among proposed projects and the desire to permit project 
sponsors in each region to highlight their own successes in linking 
transit and land use planning. This can and often does include 
privately-sponsored transit-oriented development. A new starts 
investment requires a regional commitment by a variety of State and 
local agencies, as well as the community at large; those who have a 
stake in the financing and construction of a new start also have a 
stake in its ultimate success. Thus, it is not unreasonable to expect 
the same degree of commitment to regional planning as to project 
funding.
    Reflecting that same concept of local commitment, this Rule also 
incorporates an element for pedestrian mobility into the land use 
measure. Pedestrian mobility has been a component of FTA's land use 
evaluation, as described in guidance issued each year at the beginning 
of the data collection process. This Rule formalizes that approach. 
Pedestrian facilities represent the basic, common link among all modes 
of transportation; therefore, a regional emphasis on pedestrian 
facilities and systems as part of land use planning will enhance the 
mobility of the population and the utility of the planned transit 
investment. Language has been added to appendix A of this Rule to 
specify that the land use measure will include consideration of 
existing and planned pedestrian facilities, which are expected to 
reflect curb ramp transition plans and milestones as required under 28 
CFR 35.150(d)(2).

F. Section 611.11: Local Financial Commitment

    Section 5309(e)(1)(C) requires that proposed projects also be 
supported by an acceptable degree of local financial commitment, 
including evidence of stable and dependable financing sources to 
construct, maintain and operate the system or extension. This proposed 
rule retains the following measures for evaluation of the local 
financial commitment to a proposed project:
    1. The proposed share of total project costs from sources other 
than the section 5309 new starts program, including Federal formula and 
flexible funds, the local match required by Federal law, any additional 
capital funding (``overmatch''), and the degree to which initial 
planning activities have

[[Page 76875]]

been carried out without relying on funds from Sec. 5309.
    Comment. Three commenters expressed confusion over whether ``non-
5309 funds'' included only local funds, or whether other Federal funds 
would be counted as part of ``local'' funding.
    Response. Paragraph (a) under the heading, ``Local Financial 
Commitment'' in Appendix A to this rule has been revised to specify 
that the proposed local share of project costs is defined as the 
percentage of capital costs to be met using funds from sources other 
than the new starts program under 49 U.S.C. 5309. Thus, the use of 
flexible funds from other Federal sources will not be considered as 
part of the ``Federal share'' for purposes of evaluation under this 
Rule (though for purposes of funding eligibility the statutory ratio of 
at least 20 percent local funding must still be met using other than 
Federal funds).
    2. The stability and reliability of the proposed capital financing 
plan (rated ``high,'' ``medium-high,'' ``medium,'' ``low-medium,'' or 
``low'').
    3. The stability and reliability of the sponsoring agency to fund 
the operating needs of the entire transit system as planned once the 
guideway project is built. Ratings of ``high,'' ``medium-high,'' 
``medium,'' ``low-medium,'' or ``low'' will be used to describe 
stability and reliability of operating revenue.
    The measures for these criteria are carried over intact from those 
used previously, and are more fully explained in Appendix A. The only 
changes are that ``overmatch'' was added as a statutory consideration 
by TEA-21, and an acknowledgement was added that FTA will consider 
whether adequate provisions have been made to fund the capital needs of 
the entire transit system as planned, including key station plans and 
milestones as required by the Americans with Disabilities Act.
    Comment. Eleven commenters expressed varying opinions and made 
numerous recommendations on the local financial commitment criteria, 
but no clear theme emerged. A transit industry trade group urged FTA to 
consider not only the strength of the funding plan, but also the degree 
of commitment, the level of policy commitment to the project and funds 
already secured, and recommended addressing the level of commitment to 
the overall capital program. One transit operator from the mid-Atlantic 
region expressed support for the trade association's position. An 
industry interest group requested more detailed, prescriptive 
requirements. One State DOT that is also a Statewide transit operator 
wrote in support of their trust-fund-supported Statewide intermodal 
system, and stated that projects in such States should not be judged 
inferior to those that rely on project-specific ballot measures.
    Response. The existing project evaluation and rating process, 
already accounts for factors such as the strength of the local 
commitment, the level of policy commitment to the proposed project, the 
level of commitment to the overall capital program. This practice would 
continue under this rule. Contrary to the comment implying that 
Statewide trust funds would be judged ``inferior'' to other financing 
plans, such dedicated funding sources offer a distinct advantage in the 
rating process. It should be noted, however, that the mere existence of 
a dedicated Statewide funding source is not sufficient to achieve a 
high rating; as a project proceeds through preliminary engineering and 
final design, evidence that sufficient funds have been committed and 
programmed to the project will also be required. The comment that this 
Rule is not prescriptive enough is puzzling; Federal agencies are more 
often criticized for being too prescriptive and inflexible. This Rule 
is intended to strike a balance between the need to apply a consistent 
standard, and the need to allow for the differences inherent in 
locally-derived projects.

G. Section 611.13: Overall Project Ratings

    Perhaps the most significant change to this process brought by TEA-
21 is the requirement that FTA establish summary recommendations for 
each project, in addition to the ratings for each of the project 
justification criteria. Section 5309(e)(6) requires FTA to ``evaluate 
and rate (each) project as `highly recommended,' `recommended,' or `not 
recommended,' '' based on the results of the project evaluation 
process. It also requires that ratings be assigned to each of the 
individual evaluation criteria.
    FTA will combine the ratings for each of the financial rating 
factors and project justification criteria into overall ``finance'' and 
``justification'' ratings of ``high,'' ``medium-high,'' ``medium,'' 
``low-medium,'' or ``low.'' These ratings will then be combined into 
the single, overall project ratings required by TEA-21. For a proposed 
project to be rated as ``recommended,'' it must be rated at least 
``medium'' in terms of both finance and justification. To be ``highly 
recommended,'' a proposed project must be rated at least ``medium-
high'' for both finance and justification. Proposed projects not rated 
at least ``medium'' in both finance and justification will be rated as 
``not recommended.'' These ratings will be used both to approve entry 
into preliminary engineering and final design, as input to recommend 
proposed projects for Federal funding commitments, and for purposes of 
the Annual and Supplemental Reports on New Starts under section 
5309(o)(1) and (2). A proposed project must receive a rating of at 
least ``recommended'' in order to be approved for any of these 
purposes.
    Comment. A total of 14 comments addressed the overall project 
ratings. Virtually all of them expressed discomfort with the terms, 
particularly the term, ``not recommended.'' The most common concern was 
that a meritorious project would be rated ``not recommended'' simply 
because it had not been sufficiently developed to be rated. Nine 
commenters suggested renaming the ``not recommended'' rating or 
creating a separate rating such as ``not ready for recommendation,'' 
``not rated,'' ``not ready,'' ``incomplete,'' or ``not currently 
recommended.'' One commenter at the Washington, DC workshop noted that 
proposed projects that ``fail'' should be provided with information 
explaining the rationale for the ratings. There was also substantial 
discussion at all three workshops concerning the permanence of the 
ratings, opportunities to change ratings, and so forth.
    Response. The terms used for the overall project ratings--``highly 
recommended,'' ``recommended'' and ``not recommended'' `` are 
established in law by TEA-21, and FTA is not at liberty to change them. 
We can, however, elaborate. While the names used for the overall 
ratings will continue to be given as ``highly recommended,'' 
``recommended'' and ``not recommended,'' in the case of the ``not 
recommended'' rating we will indicate the reason for the rating. In 
order to be rated at least ``recommended,'' a proposed new starts 
project must be rated at least ``medium'' for both project 
justification and local financial commitment. In order to be rated at 
least ``medium'' for local financial commitment, a proposed project 
must be rated at least ``medium'' in terms of the stability and 
reliability of operating funds, and the stability and reliability of 
capital funding. When a proposed project is rated ``not recommended,'' 
FTA will indicate which of these areas requires improvement: ``J'' for 
project justification, ``O'' for the operating funding plan, and ``C'' 
for the capital funding plan. Thus, a proposed new

[[Page 76876]]

start that was found to need improvement in the capital plan would be 
rated ``not recommended (C).'' This will provide project sponsors, 
State, local, and Federal decisionmakers, and the public at large with 
a simple means to identify the basis for the project rating. In 
addition, the Annual and Supplemental Reports on New Starts, as well as 
all project-specific FTA correspondence, will contain language that 
discusses the reasoning behind the rating and note that all ratings are 
subject to change.
    Comment. Three commenters recommended that the ratings be tied to a 
proposed project's stage of development; i.e., different standards for 
preliminary engineering and final design.
    Response. FTA has historically applied different rating standards 
for different stages of project development, recognizing that it is not 
possible to expect the same level of detail or degree of certainty for 
proposed projects that are in preliminary engineering as for those 
nearing the end of final design and contemplating FFGAs. Each edition 
of the Annual Report on New Starts contains tables describing the 
standards applied for each of the criteria at each stage of 
development. This Rule does not change FTA's historical approach.
    It is important to note that a rating of ``recommended'' does not 
translate directly into a funding recommendation in any given fiscal 
year. Rather, the overall project ratings are intended to reflect 
overall project merit. Proposed projects that are rated ``recommended'' 
or ``highly recommended,'' and have been sufficiently developed for 
consideration of a Federal funding commitment (i.e., FFGA), will be 
eligible for funding recommendations in the Administration's proposed 
budget for a given fiscal year.
    Comment. A transit industry trade association expressed concern 
that proposed projects in the early stages of development would be 
rated ``not recommended'' because sufficient information has not been 
developed to address the justification criteria, and/or local funding 
is not in place. This, they advise, would compromise the future of such 
projects. They therefore suggested that the statutory ratings of 
``highly recommended,'' ``recommended,'' and ``not recommended'' be 
used only in the context of annual funding recommendations to Congress.
    Response. The distinction between a rating of ``recommended'' and a 
funding recommendation continues to be the subject of much confusion. 
The comments submitted by the trade association are most illustrative 
of this confusion. They are concerned that projects that are ``not 
ready'' to be rated will be unfairly given a ``not recommended'' rating 
simply because they are still early in the development process. They 
therefore suggest that the overall ratings be used only for purposes of 
FTA's annual funding recommendations to Congress, and not as an 
indicator of overall merit. Were FTA to adopt this suggestion, however, 
it would guarantee that all projects for which FTA did not recommend 
funding in the President's budget request would receive a summary 
rating of ``not recommended,'' regardless of merit; i.e., it would 
actually cause the effect the trade association wishes to avoid, and 
would increase, not decrease, the degree of confusion over these 
ratings. FTA is convinced that Congress intended for the overall 
ratings to be used to denote project merit, and that FTA's practice of 
applying different rating standards at different stages of project 
development already prevents the difficulties imagined by the trade 
association. Further, FTA would like to remind the transit industry, 
Federal, State and local decisionmakers, and the public at large that 
proposed new starts projects are re-rated at least annually for the 
Annual Report on New Starts, as well as at the time approval is sought 
for entry into preliminary engineering, final design, and entry into an 
FFGA. The overall ratings are not permanent judgements of project 
worth.
    Comment. One transit operator objected to the statutorily-required 
approval to enter preliminary engineering and final design, urging that 
proposed projects be permitted to proceed regardless of funding 
recommendations. This same operator also objected to the requirement 
that proposed projects be rated at least ``medium'' for both finance 
and justification, claiming that one category should be sufficient.
    Response. This comment also reflects confusion regarding the annual 
funding recommendations versus a rating of ``recommended.'' Neither 
FTA's project funding recommendations nor annual appropriations 
earmarks have any bearing on FTA's approval for a proposed project to 
enter the next phase of development. FTA is not persuaded by the 
argument that a rating of at least ``medium'' for either justification 
or finance is sufficient, and will continue to require both. To do 
otherwise would be to suggest that enough money can offset a poorly 
justified project, or that the inability of project sponsors to secure 
adequate funding would not be a barrier if the proposed project is 
``good enough.'' Clearly neither is the case. It takes a worthy project 
with a sound local financial commitment to ensure a successful new 
start.

VII. Response to Request for Comments on Particular Issues

    The NPRM specifically solicited comment on four issues: (1) Should 
FTA establish ``threshold'' or ``pass/fail'' values for evaluating each 
of the project evaluation criteria, and if so, what values would be 
appropriate; (2) Are there other means for measuring cost effectiveness 
than the current ``cost per new rider'' measure; (3) How should FTA 
evaluate the ``technical capability'' of project sponsors, and what 
``other factors'' might be appropriate; and (4) How much relative 
attention should be given to each of the criteria in establishing the 
overall project ratings. A total of 31 individuals or organizations 
submitted comments on one or more of these questions.
    Question 1: Threshold Values. Consistent with FTA's 1996 Statement 
of Policy and prior practice, this proposed rule does not establish 
``threshold'' values for the statutory project justification criteria. 
Instead, we rate each project as ``high,'' ``medium-high,'' ``medium,'' 
``low-medium,'' or ``low'' according to its individual merits under 
each of the measures. Should FTA establish ``threshold'' or ``pass/
fail'' values for evaluating each of these criteria? If so, what 
thresholds are appropriate for each criterion?
    Comment. Of the 16 responses received on this issue, 12 opposed the 
establishment of any type of threshold or pass/fail values for the 
criteria. One interest group and one local government entity dissented, 
supporting such requirements. One transit operator supported 
thresholds, but only on the condition that FTA revise the cost 
effectiveness measure to account for additional benefits such as travel 
time savings. One commenter at the Oakland, CA workshop commented that 
any thresholds would have to account for geographic differences. One 
operator noted that if thresholds are deemed necessary, they should be 
based on the mean or lowest value for prior ``recommended'' projects, 
or ranges should be established.
    Response. This rule does not establish threshold values for rating 
purposes.
    Question 2: Cost Effectiveness. FTA has historically relied on the 
measure of ``cost per new rider'' (more precisely, incremental cost per 
incremental rider) to indicate cost effectiveness, an approach retained 
in this proposed rule. Are there other means for measuring the cost 
effectiveness of a proposed new starts project?

[[Page 76877]]

    Comment. The 23 comments that specifically addressed this question 
were unanimous in the assertion that the cost effectiveness measure 
should ``roll up'' additional benefits beyond incremental cost per 
incremental rider. The consensus was that focusing on new riders alone 
ignores benefits to other riders, and thus biases the measure against 
older cities with ``mature'' transit systems where the focus of a 
proposed new start would be on improving service, not attracting new 
riders. Most recommended a measure based on ``cost per `benefiting' 
rider'' or simply ``cost per rider.'' The most common examples of 
benefits given in comments were reductions in crowding and travel time 
savings. A trade group representing the interests of the transit 
industry recommended the formation of a committee to study the issues. 
One transit operator recommended a ``full-cost accounting approach'' 
incorporating the full range of societal impacts, including local 
policy decisions on land use and parking; another operator recommended 
a measure based on transit system throughput.
    Response. In response to the near-universal call for a new measure 
of cost effectiveness, FTA has developed a new Transportation System 
User Benefits measure. This measure is described more fully in the 
section of the preamble to this rule that discusses comments to the 
cost effectiveness measure. It should be repeated, however, that the 
Transportation System User Benefits Measure will be used to evaluate 
cost effectiveness; the overall measure for project justification 
represents the ``roll-up'' of anticipated benefits.
    Question 3: Technical Capability/Other Factors. 49 U.S.C. 
5309(e)(3) establishes a number of ``factors'' that FTA must consider 
when evaluating proposed projects under the justification criteria. In 
particular, 49 U.S.C. 5309(e)(3)(F) directs us to ``consider the 
technical capability of the grant recipient to construct the project,'' 
and 49 U.S.C. 5309(e)(3)(H) directs FTA to consider ``other factors'' 
as ``appropriate.'' How should FTA evaluate the ``technical 
capability'' of project sponsors? What ``other factors'' might be 
appropriate?
    Comment. Of the 18 commenters who responded to this question, 14 
recommended that technical capacity be based on factors related to the 
project sponsor's experience or ``track record'' with prior new starts, 
the strength of the project's management plan, or some combination of 
these factors. One interest group and one transit operator noted that 
most project sponsors lack the technical expertise to implement a new 
start, which is why they hire contractors; one of these commenters 
asserted that any technical capacity measure would therefore favor 
existing systems with their own technical staff. However, seven 
commenters recommended that the experience of contractors, management 
teams, and/or other agency resources be considered. Two commenters 
recommended an evaluation including sponsors' prior success in 
obtaining local funds. One commenter at the Oakland workshop expressed 
confusion regarding the difference between a measure for technical 
capacity and the triennial review process.
    Response. FTA intends to use the technical capacity factor as an 
indicator of the ability of the project sponsor(s) to successfully 
implement a proposed new start, as well as an indicator of project 
``readiness.'' To successfully implement a new starts project, the 
project sponsor(s) must meet the same basic legal, financial, and 
eligibility requirements for all FTA grants; have an adequate project 
management plan in place, and have adequate resources available to 
carry out the project management plan. By ``readiness,'' we mean that 
there are no outstanding issues that remain to be resolved before a 
funding commitment can be considered. Such outstanding issues might 
include unresolved environmental or mitigation issues, outstanding 
engineering or right-of-way issues, upcoming referenda or board actions 
that are crucial to the financing plan, and issues relating to other 
basic requirements including Title IV of the Civil Rights Act; 
Environmental Justice; key station, fleet accessibility, complimentary 
paratransit, and other requirements under the Americans with 
Disabilities Act of 1990; and consistency with National Intelligent 
Transportation Systems Architecture.
    Comment. Six commenters offered suggestions regarding ``other 
factors'' that should be considered. Two of these recommended 
incorporating a factor for ``smart growth'' or ``livable communities,'' 
with one further recommending that forecasts used for such a measure be 
grounded in MPO forecasts and that ``extra credit'' be given to 
projects which support national priorities. One transit industry trade 
group recommended that ``other factors'' be open-ended. Other 
recommendations included measures for new ridership, ``willingness to 
commit funds,'' and advancement of multimodal choice.
    Response. Many of the suggestions submitted by commenters to the 
NPRM, such as smart growth, livable communities, and ``willingness to 
commit funds,'' are already captured in the primary criteria. FTA 
intends for the ``other factors'' category to be used as a means of 
portraying factors about a proposed project that the other evaluation 
criteria do not adequately address. Each new start is unique, each has 
its own ``story;'' the ``other factors'' category will permit project 
sponsors and FTA to consider elements of the proposed project that may 
otherwise be ignored in the evaluation process. FTA has therefore taken 
a more ``open-ended'' approach to the use of ``other factors'' in this 
Rule, and has not defined specific factors for this category.
    Question 4: Relative Attention to Criteria. FTA also seeks comment 
on how much relative attention should be given to each of the project 
justification criteria (mobility improvements, environmental benefits, 
operating efficiencies, cost effectiveness, land use and other factors) 
to establish the overall project ratings.
    Comment. Of the 16 comments received on this issue, nine supported 
some kind of weighting of the criteria in general, but few were 
specific as to which should be weighted more or less, or what those 
specific weights should be. Two commenters noted that the relative 
importance of the criteria should vary over time, either over the 
course of project development or as national priorities change. Three 
indicated that different weights should apply according to geographic 
area or local conditions; the citizens' advisory committee from a 
transit operator in a major northeastern city recommended that cost 
effectiveness not be considered at all in that city. Only two comments, 
one from a State DOT and one from an individual member of the public, 
recommended specific weights for specific criteria. Four comments 
specifically stated that there should be no weighting at all, with one 
major northeastern transit operator stating that the ``weights'' 
already used by FTA, as reported in a recent GAO report, be 
discontinued.
    Response. This rule does not establish specific weights for 
specific project evaluation criteria.

VIII. Other Comments

    Additional comments were submitted to the docket concerning a 
variety of issues that are not easily categorized. These included 
issues such as concerns regarding definitions of terms used in the 
NPRM, to regional concerns, to the relationship with the pending FTA/
FHWA joint planning rule, to objections

[[Page 76878]]

regarding the differences between FTA and FHWA capital programs.
    Comment. Four commenters expressed concerns that the FTA new starts 
process complicates the design-build or ``turnkey'' approach. Two 
additional, related comments recommended that FTA approve FFGAs as 
early as possible in final design, or perhaps late in preliminary 
engineering.
    Response. Nothing in this rule prevents project sponsors from 
proceeding with a new start under a design-build approach. No existing 
FFGA requirements will be changed or waived to accommodate the design-
build process. FTA will provide guidance to project sponsors to clarify 
how the design-build process can be integrated with the new starts 
project development process and the FFGA requirements.
    Comment. Two transit operators, one large and one small, commented 
that the approach proposed in the NPRM biases the process against 
``established systems in mature cities,'' calling again for more 
emphasis on benefits to existing riders and ``preservation of high 
market shares.''
    Response. The Transportation System User Benefits measure for cost 
effectiveness moves away from the perceived emphasis on new riders and 
takes a much broader view of the benefits of transit. In addition, 
project sponsors are reminded that the cost effectiveness measure was 
not and is not intended as a single indicator of project merit. 
Established systems in mature cities may not be able to claim as many 
new riders as a brand-new system may expect, for example, but they have 
a distinct advantage under the land use criteria.
    Comment. One large operator objected to the evaluation of 
``segments'' as separate projects, recommending that segments also be 
considered in relation to an entire proposed system. Another operator 
recommended consideration of how well a proposed new start would 
complement other Federal investments.
    Response. In many cases, local project sponsors propose an 
extensive regional fixed guideway transit system that must be 
implemented in phases over time, as Federal, State, and local funding 
permits. To ascribe all of the projected benefits of an entire such 
system to an initial segment overstates the benefits of that segment 
and prevents equitable comparison with other proposed new starts. Taken 
to its logical conclusion, it could be argued that measuring the same 
systemwide benefits for subsequent segments would double-count those 
benefits. FTA will continue to evaluate new starts projects as they 
have been proposed to us for funding. This Rule retains the existing 
requirement that segments be evaluated as individual projects.
    Comment. One interest group claimed that alternatives analyses lack 
independence and objectivity, recommending that the process instead 
require a vote on options or an independent poll upon circulation of 
the Draft Environmental Impact Study (DEIS).
    Response. Alternatives analysis is intended to be a means whereby 
the local community identifies a transportation problem and evaluates 
alternative solutions, eventually selecting one that best meets local 
needs--the locally-preferred alternative. It is incumbent upon the 
community to ensure that adequate opportunity for public involvement is 
provided, and to take advantage of those opportunities to be part of 
the process.
    Comment. One small transit operator recommended that the final rule 
include a schedule of deadlines for approval of proposed projects to 
advance, and a list of FTA contacts.
    Response. The comment regarding schedules and deadlines for 
approval assumes that all proposed new starts projects in TEA-21 will 
be implemented, will all be found to be justified and rated as 
``recommended'' or higher, and will all proceed at the same rate of 
progress. FTA understands the desire by one commenter for a list of FTA 
contacts to be published as a part of this rule. However, to do so 
would require an amendment to this rule, including issuance of an NPRM 
and a minimum 60-day period for public comment, for each change in 
personnel. Project sponsors are instead encouraged to contact the 
appropriate FTA Regional Office for their area, as follows:
     Region 1 (ME, VT, NH, MA, RI, CT): Volpe National 
Transportation Systems Center, Kendall Square, 55 Broadway, Suite 920, 
Cambridge, MA 02142-1093. Phone 617-494-2055.
     Region 2 (NY, NJ): One Bowling Green, Room 429, New York, 
NY, 10004-1415. Phone 212-668-2170.
     Region 3 (PA, MD, WV, VA, DC): 1760 Market Street, Suite 
500, Philadelphia, PA, 19103-4124. Phone 215-656-7100.
     Region 4 (KY, TN, NC, SC, GA, FL, AL, MS, PR): Atlanta 
Federal Center, 61 Forsyth Street, SW, Suite 17T50, Atlanta, GA, 30303. 
Phone 404-562-3500.
     Region 5 (MN, WI, MI, IL, IN, OH): 200 West Adams Street, 
24th Floor, Suite 2410, Chicago, IL, 60606-5232. Phone 312-353-2789.
     Region 6 (NM, TX, OK, AR, LA): Fritz Lanham Federal 
Building, 819 Taylor Street, Room 8A36, Fort Worth, TX, 76102. Phone 
817-978-0550.
     Region 7 (NE, IA, KS, MO): 901 Locust Street, Suite 404, 
Kansas City, MO, 64106. Phone 816-329-3920.
     Region 8 (MT, ND, SD, WY, UT, CO): Columbine Place, 216 
16th Street, Suite 650, Denver, CO, 80202-5120. Phone 303-844-3242.
     Region 9 (CA, NV, AZ, HI, AS, GU): 201 Mission Street, 
Suite 2210, San Francisco, CA, 94105-1831. Phone 415-744-3133.
     Region 10 (WA, OR, ID, AK): Jackson Federal Building, 915 
Second Avenue, Suite 3142, Seattle, WA, 98174-1002. Phone 206-220-7954.
    Comment. An advisory committee to a large northeastern transit 
operator recommended that the criteria account for ``Congressional 
funding anomalies.''
    Response. ``Congressional funding anomalies,'' such as annual 
appropriations for new starts projects that do not follow the amounts 
committed under the FFGA for a particular project in a given year, are 
only a factor in the case of projects for which FFGAs have already been 
issued. The execution of an FFGA represents the conclusion of the 
project rating process. Therefore, appropriations shortfalls do not 
affect the project rating process. When making annual funding 
recommendations for new starts, FTA attempts to adjust its funding 
requests to account for prior year shortfalls, but this requires no 
changes to the project rating criteria, measures, or process. No change 
to this rule has been made in response to this comment.

IX. Regulatory Evaluation

    The Federal Transit Administration (FTA) has evaluated the 
industry-wide costs and benefits of the rule, Major Capital Investment 
Projects, which is required by section 3009(e) of TEA-21. This rule 
sets forth the process that FTA will use to evaluate and rate major 
capital investments under the statutory criteria in 49 U.S.C. section 
5309(e), which requires FTA to establish overall project ratings of 
``highly recommended,'' ``recommended,'' or ``not recommended,'' and to 
consider new criteria elements. The changes required by TEA-21 to FTA's 
pre-existing statutory criteria are relatively minor and affect FTA 
program management operations more than a recipient's operations. The 
final regulatory evaluation is available for public inspection in the 
docket established for this rulemaking.

[[Page 76879]]

X. Regulatory Process Matters

A. Executive Order 12688

    The FTA has evaluated the industry costs and benefits of the major 
capital investments rule and has determined that it is a significant 
rule under E.O. 12688 because of the significant policy issues involved 
in federally funding major capital investments. This rule will not, 
however, have an impact on the economy of $100 million or more.
    FTA estimates the costs associated with this Rule to be minimal. 
This Rule implements specific changes required under TEA-21 in the 
administration of the new starts program under 49 U.S.C. 5309.
    The following tables show the costs associated with this Rule. The 
first table indicates the costs associated with the collection, 
reporting and analysis of data for the project evaluation and rating 
process. These costs are associated with activities that are already 
required as part of the new starts project development process; they do 
not represent new costs associated with this Rule. Costs are based on 
estimates of the number of proposed new starts projects that are 
expected to perform each task listed in the table below.

----------------------------------------------------------------------------------------------------------------
   New starts data submission, evaluation and       Estimated total cost         Total project sponsor cost
                    ratings                     ----------------------------------------------------------------
------------------------------------------------                             Avg. hrs
                      Task                         Hours           $           per       Hours           $
----------------------------------------------------------------------------------------------------------------
(A) PE Request.................................      7,590        $632,028        450      6,750        $337,500
(B) Annual New Starts Report...................      8,480         622,416        150      6,000         300,000
(C)Supplemental Report.........................  .........  ..............          0  .........  ..............
(D) Final Design Request.......................      2,424         204,221        150      1,800          90,000
(E) FFGA Approval..............................        370          16,004         50        250          12,500
                                                ----------------------------------------------------------------
    Subtotal...................................     18,864       1,474,669  .........     14,800        740,000
----------------------------------------------------------------------------------------------------------------
Note: Difference between Total Cost and Project Sponsor Cost is FTA Cost.

    The second table indicates the costs associated with the GPRA data 
collection requirements contained in this rule. As these requirements 
are new to the new starts process, the associated costs represent 
additional costs to FTA and to new starts project sponsors. The 
estimated total costs include costs to both FTA and to new starts 
project sponsors who enter into FFGAs. The total project sponsor costs 
are based on projections that five new FFGAs will be issued per year, 
and represents the total of the costs to all five project sponsors 
(i.e., the average cost to each project sponsor is expected to be 
$1,670,000 / 5, or $334,000).

----------------------------------------------------------------------------------------------------------------
           GPRA-FFGA data collection                Estimated total cost         Total project sponsor cost
----------------------------------------------------------------------------------------------------------------
                                                                             Avg. hrs
                      Task                         Hours           $           per       Hours           $
----------------------------------------------------------------------------------------------------------------
(A) Data Collection Plan.......................        480         $42,336         80        400         $40,000
(B) Before Data Collection.....................     15,200         755,840       3000     15,000         750,000
(C) Documentation of Forecasts.................        880          42,336        160        800          40,000
(D) After Data Collection......................     15,200         755,840       3000     15,000         750,000
(E) Analysis and Reporting.....................      1,600         101,680        240      1,200          90,000
                                                ----------------------------------------------------------------
    Subtotal...................................  .........       1,698,032  .........     32,400      1,670,000
----------------------------------------------------------------------------------------------------------------
Note: Difference between Total Cost and Project Sponsor Cost is FTA Cost.

    The third table sums the total costs for both the project 
evaluation and rating data collection and analysis process, and the 
GPRA data collection and analysis process.

----------------------------------------------------------------------------------------------------------------
  All data collection and analysis activities       Estimated total cost         Total project sponsor cost
----------------------------------------------------------------------------------------------------------------
                                                                             Avg. hrs
                      Task                         Hours           $           per       Hours           $
----------------------------------------------------------------------------------------------------------------
New Starts Data Submission, Evaluation and          18,864      $1,474,669  .........     14,800        $740,000
 Ratings.......................................
GPRA-FFGA Data Collection......................  .........       1,698,032  .........     32,400       1,670,000
                                                ----------------------------------------------------------------
    Total......................................  .........       3,172,701  .........     47,200      2,410,000
----------------------------------------------------------------------------------------------------------------
Note:Difference between Total Cost and Project Sponsor Cost is FTA Cost.

B. Departmental Significance

    This rule is a ``significant regulation'' as defined by the 
Department's Regulatory Policies and Procedures. Because the purpose of 
this rule is to establish how the Secretary will rate various major 
capital investment projects, it concerns an important departmental 
policy and will likely generate a great deal of public interest.

C. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 
Sec. 601 et seq., the FTA has evaluated the effects of this rule on 
small entities. Based on this evaluation, the FTA hereby certifies that

[[Page 76880]]

this action will not have a significant economic impact on a 
substantial number of small entities because this rule concerns only 
major capital investments in new fixed-guideway transit systems and 
extensions, which are not typically undertaken by small entities.

D. Paperwork Reduction Act

    FTA will publish an estimate of the paperwork burden required by 
this Rule in the Federal Register, providing a sixty-day period for 
interested parties to submit comments on FTA's proposed information 
collection methods. Upon completion of the sixty-day period, FTA will 
submit its summary of the comments received and any resulting change in 
the information collection methods to OMB. Upon submission to OMB, FTA 
will provide an additional thirty days to provide comments on FTA's 
finalized methods to OMB. Once OMB has reviewed this data for 
compliance with the Paperwork Reduction Act, OMB will provide FTA with 
a control number authorizing FTA to collect the requested information. 
Affected parties will not have to comply with the information 
collection requirements of this Rule until FTA publishes the OMB 
control number in the Federal Register.

E. Executive Order 13132

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 and it has been determined 
that the proposed rule will not have federalism implications that 
impose substantial direct compliance costs on state and local 
governments.

F. National Environmental Policy Act

    The agency has determined that this proposed rule, if adopted, will 
have positive effects on the environment by encouraging the use of mass 
transit, which may reduce the use of single occupancy vehicles.

G. Energy Act Implications

    This regulation should have a positive effect on energy consumption 
because, through the Federal investment mass transit projects, it would 
increase the use of mass transit.

H. 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.

List of Subjects in 49 CFR Part 611

    Government contracts; Grant programs--Transportation; Mass 
transportation

    A new part 611 is added to read as follows:

PART 611--MAJOR CAPITAL INVESTMENT PROJECTS

Sec.
611.1   Purpose and contents.
611.3   Applicability.
611.5   Definitions.
611.7   Relation to planning and project development processes.
611.9   Project justification criteria for grants and loans for 
fixed guideway systems.
611.11   Local financial commitment criteria.
611.13   Overall project ratings.
Appendix A to Part 611--Description of Measures for Project 
Evaluation.

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


Sec. 611.1  Purpose and contents.

    (a) This part prescribes the process that applicants must follow to 
be considered eligible for capital investment grants and loans for new 
fixed guideway systems or extensions to existing systems (``new 
starts''). Also, this part prescribes the procedures used by FTA to 
evaluate proposed new starts projects as required by 49 U.S.C. 5309(e), 
and the scheduling of project reviews required by 49 U.S.C. 5328(a).
    (b) This part defines how the results of the evaluation described 
in paragraph (a) of this section will be used to:
    (1) Approve entry into preliminary engineering and final design, as 
required by 49 U.S.C. 309(e)(6);
    (2) Rate projects as ``highly recommended,'' ``recommended,'' or 
``not recommended,'' as required by 49 U.S.C. 5309(e)(6);
    (3) Assign individual ratings for each of the project justification 
criteria specified in 49 U.S.C. 5309(e)(1)(B) and (C);
    (4) Determine project eligibility for Federal funding commitments, 
in the form of Full Funding Grant Agreements;
    (5) Support funding recommendations for this program for the 
Administration's annual budget request; and
    (6) Fulfill the reporting requirements under 49 U.S.C. 5309(o)(1), 
Funding Levels and Allocations of Funds, Annual Report, and 5309(o)(2), 
Supplemental Report on New Starts.
    (c) The information collected and ratings developed under this part 
will form the basis for the annual reports to Congress, required by 49 
U.S.C. 5309(o)(1) and (2).


Sec. 611.3  Applicability.

    (a) This part applies to all proposals for Federal capital 
investment funds under 49 U.S.C. 5309 for new transit fixed guideway 
systems and extensions to existing systems.
    (b) Projects described in paragraph (a) of this section are not 
subject to evaluation under this part if the total amount of funding 
from 49 U.S.C. 5309 will be less than $25 million, or if such projects 
are otherwise exempt from evaluation by statute.
    (1) Exempt projects must still be rated by FTA for purposes of 
entering into a Federal funding commitment as required by 49 U.S.C. 
5309(e)(7). Sponsors who believe their projects to be exempt are 
nonetheless strongly encouraged to submit data for project evaluation 
as described in this part.
    (2) Such projects are still subject to the requirements of 23 CFR 
part 450 and 23 CFR part 771.
    (3) This part does not apply to projects for which a Full Funding 
Grant Agreement (FFGA) has already been executed.
    (c) Consistent with 49 U.S.C. 5309(e)(8)(B), FTA will make project 
approval decisions on proposed projects using expedited procedures as 
appropriate, for proposed projects that are:
    (1) Located in a nonattainment area;
    (2) Transportation control measures as defined by the Clean Air Act 
(42 U.S.C. 7401 et seq.); and
    (3) Required to carry out a State Implementation Plan.


Sec. 611.5  Definitions.

    The definitions established by Titles 12 and 49 of the United 
States Code, the Council on Environmental Quality's regulation at 40 
CFR parts 1500-1508, and FHWA-FTA regulations at 23 CFR parts 450 and 
771 are applicable. In addition, the following definitions apply:
    Alternatives analysis is a corridor level analysis which evaluates 
all reasonable mode and alignment alternatives for addressing a 
transportation problem, and results in the adoption of a locally 
preferred alternative by the appropriate State and local agencies and 
official boards through a public process.
    Baseline alternative is the alternative against which the proposed 
new starts project is compared to develop project justification 
measures. Relative to the no build alternative, it should include 
transit improvements lower in cost than the new start which result in a 
better ratio of measures of transit mobility compared to cost than the 
no build alternative.
    BRT means bus rapid transit.
    Bus Rapid Transit refers to coordinated improvements in a transit

[[Page 76881]]

system's infrastructure, equipment, operations, and technology that 
give preferential treatment to buses on fixed guideways and urban 
roadways. The intention of Bus Rapid Transit is to reduce bus travel 
time, improve service reliability, increase the convenience of users, 
and ultimately, increase bus ridership.
    Extension to existing fixed-guideway system means a project to 
extend an existing fixed guideway system.
    FFGA means a Full Funding Grant Agreement.
    Final Design is the final phase of project development, and 
includes (but is not limited to) the preparation of final construction 
plans (including construction management plans), detailed 
specifications, construction cost estimates, and bid documents.
    Fixed guideway system means a mass transportation facility which 
utilizes and occupies a separate right-of-way, or rail line, for the 
exclusive use of mass 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 system means a newly-constructed fixed guideway system 
in a corridor or alignment where no such system exists.
    FTA means the Federal Transit Administration.
    Full Funding Grant Agreement means an instrument that defines the 
scope of a project, the Federal financial contribution, and other terms 
and conditions.
    Major transit investment means any project that involves the 
construction of a new fixed guideway system or extension of an existing 
fixed guideway system for use by mass transit vehicles.
    NEPA process means those procedures necessary to meet the 
requirements of the National Environmental Policy Act of 1969, as 
amended (NEPA), at 23 CFR part 771; the NEPA process is completed when 
a Record of Decision (ROD) or Finding of No Significant Impact (FONSI) 
is issued.
    New start means a new fixed guideway system, or an extension to an 
existing fixed guideway system.
    Preliminary Engineering is the process by 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 
local funding commitments are put in place.
    Secretary means the Secretary of Transportation.
    TEA-21 means the Transportation Equity Act for the 21st Century.


Sec. 611.7  Relation to Planning and Project Development Processes

    All new start projects proposed for funding assistance under 49 USC 
5309 must emerge from the metropolitan and Statewide planning process, 
consistent with 23 CFR part 450. To be eligible for FTA capital 
investment funding, a proposed project must be based on the results of 
alternatives analysis and preliminary engineering.
    (a) Alternatives Analysis. (1) To be eligible for FTA capital 
investment funding for a major fixed guideway transit project, local 
project sponsors must perform an alternatives analysis.
    (2) The alternatives analysis develops information on the benefits, 
costs, and impacts of alternative strategies to address a 
transportation problem in a given corridor, leading to the adoption of 
a locally preferred alternative.
    (3) The alternative strategies evaluated in an alternatives 
analysis must include a no-build alternative, a baseline alternative, 
and an appropriate number of build alternatives. Where project sponsors 
believe the no-build alternative fulfills the requirements for a 
baseline alternative, FTA will determine whether to require a separate 
baseline alternative on a case-by-case basis.
    (4) The locally preferred alternative must be selected from among 
the evaluated alternative strategies and formally adopted and included 
in the metropolitan planning organization's financially-constrained 
long-range regional transportation plan.
    (b) Preliminary Engineering. Consistent with 49 USC 5309(e)(6) and 
5328(a)(2), FTA will approve/disapprove entry of a proposed project 
into preliminary engineering within 30 days of receipt of a formal 
request from the project sponsor(s).
    (1) A proposed project can be considered for advancement into 
preliminary engineering only if:
    (i) Alternatives analysis has been completed
    (ii) The proposed project is adopted as the locally preferred 
alternative by the Metropolitan Planning Organization into its 
financially constrained metropolitan transportation plan;
    (iii) Project sponsors have demonstrated adequate technical 
capability to carry out preliminary engineering for the proposed 
project; and
    (iv) All other applicable Federal and FTA program requirements have 
been met.
    (2) FTA's approval will be based on the results of its evaluation 
as described in Secs. 611.9-611.13.
    (3) At a minimum, a proposed project must receive an overall rating 
of ``recommended'' to be approved for entry into preliminary 
engineering.
    (4) This part does not in any way revoke prior FTA approvals to 
enter preliminary engineering made prior to February 5, 2001.
    (5) Projects approved to advance into preliminary engineering 
receive blanket pre-award authority to incur project costs for 
preliminary engineering activities prior to grant approval.
    (i) This pre-award authority does not constitute a commitment by 
FTA that future Federal funds will be approved for this project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (c) Final Design. Consistent with 49 USC 5309(e)(6) and 5328(a)(3), 
FTA will approve/disapprove entry of a proposed project into final 
design within 120 days of receipt of a formal request from the project 
sponsor(s).
    (1) A proposed project can be considered for advancement into final 
design only if:
    (i) The NEPA process has been completed;
    (ii) Project sponsors have demonstrated adequate technical 
capability to carry out final design for the proposed project; and
    (iii) All other applicable Federal and FTA program requirements 
have been met.
    (2) FTA's approval will be based on the results of its evaluation 
as described in Parts Secs. 611.9-611.13 of this Rule.
    (3) At a minimum, a proposed project must receive an overall rating 
of ``recommended'' to be approved for entry into final design.
    (4) Consistent with the Government Performance and Results Act of 
1993, project sponsors seeking FFGAs shall submit a complete plan for 
collection and analysis of information to identify the impacts of the 
new start project and the accuracy of the forecasts prepared during 
development of the project.
    (i) The plan shall provide for: Collection of ``before'' data on 
the current transit system; documentation of the ``predicted'' scope, 
service levels, capital costs, operating costs, and ridership of the 
project; collection of ``after'' data on the transit system two years 
after opening of the new start project; and analysis of the consistency

[[Page 76882]]

of ``predicted'' project characteristics with the ``after'' data.
    (ii) The ``before'' data collection shall obtain information on 
transit service levels and ridership patterns, including origins and 
destinations, access modes, trip purposes, and rider characteristics. 
The ``after'' data collection shall obtain analogous information on 
transit service levels and ridership patterns, plus information on the 
as-built scope and capital costs of the new start project.
    (iii) The analysis of this information shall describe the impacts 
of the new start project on transit services and transit ridership, 
evaluate the consistency of ``predicted'' and actual project 
characteristics and performance, and identify sources of differences 
between ``predicted'' and actual outcomes.
    (iv) For funding purposes, preparation of the plan for collection 
and analysis of data is an eligible part of the proposed project.
    (5) Project sponsors shall collect data on the current system, 
according to the plan required under Sec. 611.7(c)(4) as approved by 
FTA, prior to the beginning of construction of the proposed new start. 
Collection of this data is an eligible part of the proposed project for 
funding purposes.
    (6) This part does not in any way revoke prior FTA approvals to 
enter final design that were made prior to February 5, 2001.
    (7) Projects approved to advance into final design receive blanket 
pre-award authority to incur project costs for final design activities 
prior to grant approval.
    (i) This pre-award authority does not extend to right of way 
acquisition or construction, nor does it constitute a commitment by FTA 
that future Federal funds will be approved for this project.
    (ii) All Federal requirements must be met prior to incurring costs 
in order to retain eligibility of the costs for future FTA grant 
assistance.
    (d) Full funding grant agreements. (1) FTA will determine whether 
to execute an FFGA based on:
    (i) The evaluations and ratings established by this rule;
    (ii) The technical capability of project sponsors to complete the 
proposed new starts project; and
    (iii) A determination by FTA that no outstanding issues exist that 
could interfere with successful implementation of the proposed new 
starts project.
    (2) An FFGA shall not be executed for a project that is not 
authorized for final design and construction by Federal law.
    (3) FFGAs will be executed only for those projects which:
    (i) Are rated as ``recommended'' or ``highly recommended;''
    (ii) Have completed the appropriate steps in the project 
development process;
    (iii) Meet all applicable Federal and FTA program requirements; and
    (iv) Are ready to utilize Federal new starts funds, consistent with 
available program authorization.
    (4) In any instance in which FTA decides to provide financial 
assistance under section 5309 for construction of a new start project, 
FTA will negotiate an FFGA with the grantee during final design of that 
project. Pursuant to the terms and conditions of the FFGA:
    (i) A maximum level of Federal financial contribution under the 
section 5309 new starts program will be fixed;
    (ii) The grantee will be required to complete construction of the 
project, as defined, to the point of initiation of revenue operations, 
and to absorb any additional costs incurred or necessitated;
    (iii) FTA and the grantee will establish a schedule for 
anticipating Federal contributions during the final design and 
construction period; and
    (iv) Specific annual contributions under the FFGA will be subject 
to the availability of budget authority and the ability of the grantee 
to use the funds effectively.
    (5) The total amount of Federal obligations under Full Funding 
Grant Agreements and potential obligations under Letters of Intent will 
not exceed the amount authorized for new starts under 49 U.S.C. 
Sec. 5309.
    (6) FTA may also make a ``contingent commitment,'' which is subject 
to future congressional authorizations and appropriations, pursuant to 
49 U.S.C. 5309(g), 5338(b), and 5338(h).
    (7) Consistent with the Government Performance and Results Act of 
1993 (GPRA), the FFGA will require implementation of the data 
collection plan prepared in accordance with Sec. 611.7(c)(4):
    (i) Prior to the beginning of construction activities the grantee 
shall collect the ``before'' data on the existing system, if such data 
has not already been collected as part of final design, and document 
the predicted characteristics and performance of the project.
    (ii) Two years after the project opens for revenue service, the 
grantee shall collect the ``after'' data on the transit system and the 
new start project, determine the impacts of the project, analyze the 
consistency of the ``predicted'' performance of the project with the 
``after'' data, and report the findings and supporting data to FTA.
    (iii) For funding purposes, collection of the ``before'' data, 
collection of the ``after'' data, and the development and reporting of 
findings are eligible parts of the proposed project.
    (8) This part does not in any way alter, revoke, or require re-
evaluation of existing FFGAs that were issued prior to February 5, 
2001.


Sec. 611.9  Project justification criteria for grants and loans for 
fixed guideway systems

    In order to approve a grant or loan for a proposed new starts 
project under 49 U.S.C. 5309, and to approve entry into preliminary 
engineering and final design as required by section 5309(e)(6), FTA 
must find that the proposed project is justified as described in 
section 5309(e)(1)(B).
    (a) To make the statutory evaluations and assign ratings for 
project justification, FTA will evaluate information developed locally 
through alternatives analyses and refined through preliminary 
engineering and final design.
    (1) The method used to make this determination will be a multiple 
measure approach in which the merits of candidate projects will be 
evaluated in terms of each of the criteria specified by this section.
    (2) The measures for these criteria are specified in Appendix A to 
this rule.
    (3) The measures will be applied to the project as it has been 
proposed to FTA for new starts funding under 49 U.S.C. 5309.
    (4) The ratings for each of the criteria will be expressed in terms 
of descriptive indicators, as follows: ``high,'' ``medium-high,'' 
``medium,'' ``low-medium,'' or ``low.''
    (b) The criteria are as follows:
    (1) Mobility Improvements.
    (2) Environmental Benefits.
    (3) Operating Efficiencies.
    (4) Transportation System User Benefits (Cost-Effectiveness).
    (5) Existing land use, transit supportive land use policies, and 
future patterns.
    (6) Other factors. Additional factors, including but not limited 
to:
    (i) The degree to which the programs and policies (e.g., parking 
policies, etc.) are in place as assumed in the forecasts,
    (ii) Project management capability, including the technical 
capability of the grant recipient to construct the project, and
    (iii) Additional factors relevant to local and national priorities 
and relevant to the success of the project.
    (c) In evaluating proposed new starts projects under these 
criteria:
    (1) As a candidate project proceeds through preliminary engineering 
and

[[Page 76883]]

final design, a greater degree of certainty is expected with respect to 
the scope of the project and a greater level of commitment is expected 
with respect to land use.
    (2) For the criteria under Sec. 611.9(b)(1)-(4), the proposed new 
start will be compared to the baseline alternative.
    (d) In evaluating proposed new starts projects under these 
criteria, the following factors shall be considered:
    (1) The direct and indirect costs of relevant alternatives;
    (2) Factors such as congestion relief, improved mobility, air 
pollution, noise pollution, energy consumption, and all associated 
ancillary and mitigation costs necessary to carry out each alternative 
analyzed, and recognize reductions in local infrastructure costs 
achieved through compact land use development;
    (3) Existing land use, mass transportation supportive land use 
policies, and future patterns;
    (4) The degree to which the project increases the mobility of the 
mass transportation dependent population or promotes economic 
development;
    (5) Population density and current transit ridership in the 
corridor;
    (6) The technical capability of the grant recipient to construct 
the project;
    (7) Differences in local land, construction, and operating costs; 
and
    (8) Other factors as appropriate.
    (e) FTA may amend the measures for these criteria, pending the 
results of ongoing studies regarding transit benefit evaluation 
methods.
    (f) The individual ratings for each of the criteria described in 
this section will be combined into a summary rating of ``high,'' 
``medium-high,'' ``medium,'' ``low-medium,'' or ``low'' for project 
justification. ``Other factors'' will be considered as appropriate.


Sec. 611.11  Local financial commitment criteria.

    In order to approve a grant or loan under 49 U.S.C. 5309, FTA must 
find that the proposed project is supported by an acceptable degree of 
local financial commitment, as required by section 5309(e)(1)(C). The 
local financial commitment to a proposed project will be evaluated 
according to the following measures:
    (a) The proposed share of project capital costs to be met using 
funds from sources other than the section 5309 new starts program, 
including both the non-Federal match required by Federal law and any 
additional capital funding (``overmatch''), and the degree to which 
planning and preliminary engineering activities have been carried out 
without funding from the section 5309 new starts program;
    (b) The stability and reliability of the proposed capital financing 
plan for the new starts project; and
    (c) The stability and reliability of the proposed operating 
financing plan to fund operation of the entire transit system as 
planned over a 20-year planning horizon.
    (d) For each proposed project, ratings for paragraphs (b) and (c) 
of this section will be reported in terms of descriptive indicators, as 
follows: ``high,'' ``medium-high,'' ``medium,'' ``low-medium,'' or 
``low.'' For paragraph (a) of this section, the percentage of Federal 
funding sought from 49 U.S.C. Sec. 5309 will be reported.
    (e) The summary ratings for each measure described in this section 
will be combined into a summary rating of ``high,'' ``medium-high,'' 
``medium,'' ``low-medium,'' or ``low'' for local financial commitment.


Sec. 611.13  Overall project ratings.

    (a) The summary ratings developed for project justification local 
financial commitment (Sec. Sec. 611.9 and 611.11) will form the basis 
for the overall rating for each project.
    (b) FTA will assign overall ratings of ``highly recommended,'' 
``recommended,'' and ``not recommended,'' as required by 49 U.S.C. 
5309(e)(6), to each proposed project.
    (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 updated annually for 
purposes of the annual report on funding levels and allocations of 
funds required by section 5309(o)(1), and as required for FTA approvals 
to enter into preliminary engineering, final design, or FFGAs.
    (c) These ratings will be used to:
    (1) approve advancement of a proposed project into preliminary 
engineering and final design;
    (2) Approve projects for FFGAs;
    (3) Support annual funding recommendations to Congress in the 
annual report on funding levels and allocations of funds required by 49 
U.S.C. 5309(o)(1); and
    (4) For purposes of the supplemental report on new starts, as 
required under section 5309(o)(2).
    (d) FTA will assign overall ratings for proposed new starts 
projects based on the following conditions:
    (1) Projects will be rated as ``recommended'' if they receive a 
summary rating of at least ``medium'' for both project justification 
(Sec. 611.9) and local financial commitment (Sec. 611.11);
    (2) Projects will be rated as ``highly recommended'' if they 
receive a summary rating higher than ``medium'' for both local 
financial commitment and project justification.
    (3) Projects will be rated as ``not recommended'' if they do not 
receive a summary rating of at least ``medium'' for both project 
justification and local financial commitment.

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

Project Justification

    FTA will use several measures to evaluate candidate new starts 
projects according to the criteria established by 49 U.S.C. 
5309(e)(1)(B). These measures have been developed according to the 
considerations identified at 49 U.S.C. 5309(e)(3) (``Project 
Justification''), consistent with Executive Order 12893. From time 
to time, FTA has published technical guidance on the application of 
these measures, and the agency expects it will continue to do so. 
Moreover, FTA may well choose to amend these measures, pending the 
results of ongoing studies regarding transit benefit evaluation 
methods. The first four criteria listed below assess the benefits of 
a proposed new start project by comparing the project to the 
baseline alternative. Therefore, the baseline alternative must be 
defined so that comparisons with the new start project isolate the 
costs and benefits of the major transit investment. At a minimum, 
the baseline alternative must include in the project corridor all 
reasonable cost-effective transit improvements short of investment 
in the new start project. Depending on the circumstances and through 
prior agreement with FTA, the baseline alternative can be defined 
appropriately in one of three ways. First, where the adopted 
financially constrained regional transportation plan includes within 
the corridor all reasonable cost-effective transit improvements 
short of the new start project, a no-build alternative that includes 
those improvements may serve as the baseline. Second, where 
additional cost-effective transit improvements can be made beyond 
those provided by the adopted plan, the baseline will add those 
cost-effective transit improvements. Third, where the proposed new 
start project is part of a multimodal alternative that includes 
major highway components, the baseline alternative will be the 
preferred multimodal alternative without the new start project and 
associated transit services. Prior to submittal of a request to 
enter preliminary engineering for the new start project, grantees 
must obtain FTA approval of the definition of the baseline 
alternative. Consistent with the requirement that differences 
between the new start project and the baseline alternative measure 
only the benefits and costs of the project itself, planning factors 
external to the new start project and its supporting bus service 
must be the same for both the baseline and new start project 
alternatives. Consequently, the highway and transit networks defined 
for the analysis must be the same outside the corridor for which the 
new start project is proposed. Further, policies affecting travel 
demand and travel costs, such as land use, transit fares and parking 
costs,

[[Page 76884]]

must be applied consistently to both the baseline alternative and 
the new start project alternative. The fifth criterion, ``existing 
land use, transit supportive land use policies, and future 
patterns,'' reflects the importance of transit-supportive local land 
use and related conditions and policies as an indicator of ultimate 
project success.
    (a) Mobility Improvements.
    (1) The aggregate travel time savings in the forecast year 
anticipated from the new start project compared to the baseline 
alternative. This measure sums the travel time savings accruing to 
travelers projected to use transit in the baseline alternative, 
travelers projected to shift to transit because of the new start 
project, and non-transit users in the new start project who would 
benefit from reduced traffic congestion.
    (i) After September 1, 2001, FTA will employ a revised measure 
of travel benefits accruing to travelers.
    (ii) The revised measure will be based on a multi-modal measure 
of perceived travel times faced by all users of the transportation 
system.
    (2) The absolute number of existing low income households 
located within \1/2\-mile of boarding points associated with the 
proposed system increment.
    (3) The absolute number of existing jobs within \1/2\-mile of 
boarding points associated with the proposed system increment.
    (b) Environmental Benefits.
    (1) The forecast change in criteria pollutant emissions and in 
greenhouse gas emissions, ascribable to the proposed new investment, 
calculated in terms of annual tons for each criteria pollutant or 
gas (forecast year), compared to the baseline alternative;
    (2) The forecast net change per year (forecast year) in the 
regional consumption of energy, ascribable to the proposed new 
investment, expressed in British Thermal Units (BTU), compared to 
the baseline alternative; and
    (3) Current Environmental Protection Agency designations for the 
region's compliance with National Ambient Air Quality Standards.
    (c) Operating Efficiencies. The forecast change in operating 
cost per passenger-mile (forecast year), for the entire transit 
system. The new start will be compared to the baseline alternative.
    (d) Transportation System User Benefits (Cost-Effectiveness).
    (1) The cost effectiveness of a proposed project shall be 
evaluated according to a measure of transportation system user 
benefits, based on a multimodal measure of perceived travel times 
faced by all users of the transportation system, for the forecast 
year, divided by the incremental cost of the proposed project. 
Incremental costs and benefits will be calculated as the differences 
between the proposed new start and the baseline alternative.
    (2) Until the effective date of the transportation system user 
benefits measure of cost effectiveness, cost effectiveness will be 
computed as the incremental costs of the proposed project divided by 
its incremental transit ridership, as compared to the baseline 
alternative.
    (i) Costs include the forecast annualized capital and annual 
operating costs of the entire transit system.
    (ii) Ridership includes forecast total annual ridership on the 
entire transit system, excluding transfers.
    (e) Existing land use, transit supportive land use policies, and 
future patterns. Existing land use, transit-supportive land use 
policies, and future patterns shall be rated by evaluating existing 
conditions in the corridor and the degree to which local land use 
policies are likely to foster transit supportive land use, measured 
in terms of the kinds of policies in place, and the commitment to 
these policies. The following factors will form the basis for this 
evaluation:
    (1) Existing land use;
    (2) Impact of proposed new starts project on land use;
    (3) Growth-management policies;
    (4) Transit-supportive corridor policies;
    (5) Supportive zoning regulations near transit stations;
    (6) Tools to implement land use policies;
    (7) The performance of land use policies; and
    (8) Existing and planned pedestrian facilities, including access 
for persons with disabilities.
    (f) Other factors. Other factors that will be considered when 
evaluating projects for funding commitments include, but are not 
limited to:
    (1) Multimodal emphasis of the locally preferred investment 
strategy, including the proposed new start as one element;
    (2) Environmental justice considerations and equity issues,
    (3) Opportunities for increased access to employment for low 
income persons, and Welfare-to-Work initiatives;
    (4) Livable Communities initiatives and local economic 
activities;
    (5) Consideration of alternative land use development scenarios 
in local evaluation and decision making for the locally preferred 
transit investment decision;
    (6) Consideration of innovative financing, procurement, and 
construction techniques, including design-build turnkey 
applications; and
    (7) Additional factors relevant to local and national priorities 
and to the success of the project, such as Empowerment Zones, 
Brownfields, and FTA's Bus Rapid Transit Demonstration Program.

Local Financial Commitment

    FTA will use the following measures to evaluate the local 
financial commitment to a proposed project:
    (a) The proposed share of project capital costs to be met using 
funds from sources other than the 49 U.S.C. 5309 new starts program, 
including both the local match required by Federal law and any 
additional capital funding (``overmatch''). Consideration will be 
given to:
    (i) The use of innovative financing techniques, as described in 
the May 9, 1995, Federal Register notice on FTA's Innovative 
Financing Initiative (60 FR 24682);
    (ii) The use of ``flexible funds'' as provided under the CMAQ 
and STP programs;
    (iii) The degree to which alternatives analysis and preliminary 
engineering activities were carried out without funding from the 
Sec. 5309 new starts program; and
    (iv) The actual percentage of the cost of recently-completed or 
simultaneously undertaken fixed guideway systems and extensions that 
are related to the proposed project under review, from sources other 
than the section 5309 new starts program (FTA's intent is to 
recognize that a region's local financial commitment to fixed 
guideway systems and extensions may not be limited to a single 
project).
    (b) The stability and reliability of the proposed capital 
financing plan, according to:
    (i) The stability, reliability, and level of commitment of each 
proposed source of local match, including inter-governmental grants, 
tax sources, and debt obligations, with an emphasis on availability 
within the project development timetable;
    (ii) Whether adequate provisions have been made to cover 
unanticipated cost overruns and funding shortfalls; and
    (iii) Whether adequate provisions have been made to fund the 
capital needs of the entire transit system as planned, including key 
station plans as required under 49 CFR 37.47 and 37.51, over a 20-
year planning horizon period.
    (c) The stability and reliability of the proposed operating 
financing plan to fund operation of the entire transit system as 
planned over a 20-year planning horizon.

    Issued: November 29, 2000.
Nuria I. Fernandez,
Acting Administrator.
[FR Doc. 00-30921 Filed 12-6-00; 8:45 am]
BILLING CODE 4910-57-P