Public Transit Program Issues in Surface Transportation Reauthorization

Public Transit Program Issues in
Surface Transportation Reauthorization
Updated March 28, 2008
William J. Mallett
Specialist in Transportation Policy
Resources, Science, and Industry Division

Public Transit Program Issues in
Surface Transportation Reauthorization
Summary
As enacted in the Safe, Accountable, Flexible, Efficient Transportation Equity
Act — A Legacy for Users (SAFETEA), federal public transit programs are currently
authorized through September 2009. Reauthorization of the transit programs this
time around, along with other major surface transportation programs, may take place
in a constrained funding environment due to the inadequacy of receipts into the Mass
Transit Account of the Highway Trust Fund (HTF), the source of approximately 80%
of transit program monies. In the past three surface transportation authorizations, by
contrast, federal transit programs received substantial funding increases. In nominal
terms, SAFETEA authorized a 46% increase in transit spending over the
Transportation Equity Act for the 21^st Century (TEA-21), and more than double the
amount authorized in the Intermodal Surface Transportation Efficiency Act of 1991
(ISTEA).
The two major transit funding programs are the Urbanized Area Formula Grants
Program and the Capital Investment Program, which includes the “New Starts”
program, the Rail Modernization program, and the Bus and Bus Facility Capital
program. Of the nearly $53 billion authorized by SAFETEA for transit programs
from FY2004 through FY2009, the Urbanized Area Formula Program accounts for
42% of the total ($22.2 billion), and the Capital Investment Program accounts for
43% ($22.7 billion). The remaining 15% ($7.7 billion) authorized by SAFETEA
funds several other programs, such as the Rural Formula Program, state and
metropolitan planning, research, and FTA operations.
With looming fiscal difficulties but growing demand on the transportation
system, there may be significant debate about the overall funding level, the structure
of the current transit program, its priorities, and the resulting distribution of federal
support geographically and by transit mode. Three among many possible alternatives
for restructuring federal public transit programs are outlined in this report: 1)
focusing more resources on major capital expenses for rehabilitation and expansion
of transit services; 2) supporting and rehabilitating existing services rather than major
capital expansion; and 3) the elimination of capital improvement programs altogether
to be replaced by a simple “block grant” that could be distributed based on transit
ridership or population. Debate is likely to be particularly intense over the size and
structure of the New Starts program that provides federal funding for expanding
transit capacity and accounts for about 18% of total transit program funding.
This report begins with a brief background on the characteristics of the transit
sector and ridership trends. This is followed by a description of the current structure
of the federal transit program. The next sections focus on potential reauthorization
issues: the overall funding and structure of the transit program; the size and shape
of the New Starts program including funding level, types of transit modes funded,
project evaluation criteria, the share of local matching funds, and distribution of New
Starts funding; issues with the Fixed Guideway Modernization program; distribution
of federal funds to rural and small cities; and federal support for paratransit.

Contents
In troduction ......................................................1
Background ......................................................2
Current Program Structure...........................................3
Urbanized Area Formula Grants Program (49 USC §5307).............4
Capital Investment Program (49 USC §5309)........................4
New Starts...............................................5
Fixed-Guideway (Rail) Modernization.........................5
Bus and Bus Facility Capital.................................5
Other Programs...............................................5
Rural Formula Program.....................................5
Elderly Individuals and Individuals with
Disabilities Formula Program............................6
New Freedom Program.....................................6
Job Access and Reverse Commute Program (JARC)..............6
Transit Program Issues..............................................6
Overall Transit Funding Level....................................6
Federal Transit Priorities and Program Restructuring.................10
Transit Expansion and the New Starts Program.....................12
Funding Level...........................................13
Transit Mode............................................14
Project Evaluation Criteria..................................16
Share of Local Matching Funds..............................18
Funding Distribution......................................19
Fixed-Guideway Modernization Program..........................19
Treatment of Small City and Rural Transit in Formula Programs........20
Rate of Return...........................................21
Paratransit Funding...........................................22

Public Transit Program Issues in
Surface Transportation Reauthorization
Introduction
Federal public transit programs are currently authorized through September
2009 as enacted in the Safe, Accountable, Flexible, Efficient Transportation Equity
Act — A Legacy for Users (SAFETEA), P.L. 109-59. Their reauthorization this time
around, along with other major surface transportation programs, may take place in
a constrained funding environment due to the inadequacy of receipts into the Mass
Transit Account of the Highway Trust Fund (HTF), the source of approximately 80%
of transit program monies. A recent estimate by the Congressional Budget Office
(CBO) suggests that with spending at current authorized levels, the Highway Account
of the HTF likely will go into deficit in FY2009 and the Transit Account likely will
go into deficit in FY2012.¹ In the past three surface transportation authorizations, by
contrast, federal transit programs received substantial funding increases. In nominal
terms, SAFETEA authorized a 46% increase in transit spending over the^st
Transportation Equity Act for the 21 Century (TEA-21), as amended, P.L. 105-178
and P.L. 105-206, and more than double the amount authorized in the Intermodal
Surface Transportation Efficiency Act of 1991 (ISTEA), P.L. 102-240.
With looming fiscal difficulties and growing demands on the various parts of
the transportation system, there may be significant debate about the overall level of
transit funding, the structure of the current federal transit program, its priorities, and
the resulting distribution of support geographically and by transit mode. Debate is
likely to be particularly intense around the discretionary elements of the program,
such as the New Starts program. The New Starts program is a major source of federal
funding for the development of new fixed guideway (typically rail) transit systems
and the extensions of existing systems. New Starts funding has been in great demand
nationwide, and the program underwent several significant changes in SAFETEA.
Moreover, New Starts, more than any other federal transit program, embodies the
overall federal stance toward transit and its future in the United States. Other
program changes that may be of issue are distribution by formula of currently
discretionary Bus and Bus Facility Capital Program funds, the distribution of funds
for transit rail rehabilitation through the Fixed-Guideway Modernization Program,
and federal support for transit in rural and small cities and paratransit nationwide.
This report begins with some brief background on the characteristics of the
transit sector and ridership trends. This is followed by a description of the current
structure of the federal transit program. The remaining sections focus on potential
reauthorization issues: the overall funding and structure of the transit program; the

¹ Estimates provided to CRS by the Congressional Budget Office, February 29, 2008.

size and shape of the New Starts program including funding level, the types of transit
modes funded, project evaluation criteria, the share of local matching funds, and the
distribution of New Starts funding; issues with the Fixed Guideway Modernization
program; the distribution of federal funds to rural and small cities; and federal
support for paratransit.
Background
Public transit (also known as mass transit, mass transportation, and public
transportation) is defined in federal law as “transportation by a conveyance that
provides regular and continuing general or special transportation to the public, but
does not include school bus, charter, or sightseeing transportation” (49 U.S.C. §53).
The main forms of transit service are bus, heavy rail (subway and elevated),
commuter rail, light rail, paratransit (also known as demand response), and ferryboat.
About 60% of transit trips are made by bus, followed by heavy rail (29%), commuter
rail (4%), and light rail (4%). Demand response accounts for a little more than 1%²
of all transit trips, and ferryboat a little less than 1%.
Since the end of the Second World War transit providers have struggled to
maintain ridership due to a number of interrelated factors, particularly rising incomes,
growing automobile availability and use, and residential and employment
suburbanization. Despite these trends, transit ridership has risen over the past
decade, topping 10 billion trips nationwide in 2006, a level not seen since 1957,
when the population was about 60% the current size.³ Nevertheless, transit accounts⁴
for only about 2% of all daily trips. Even for commuting, which accounts for nearly
40% of all transit trips,⁵ transit’s share in 2005 was a modest 4.7%. Moreover, these
transit commuters, like transit riders in general, are heavily concentrated in a few
large cities. Half of all transit commuters live in 10 large cities — Baltimore, Boston,
Chicago, Houston, Los Angeles, New York, Philadelphia, San Francisco, Seattle, and
Washington, DC — a figure that does not include the outlying jurisdictions of these⁶
areas. Together, these cities and their suburbs account for approximately 70%
percent of all transit trips in the United States. The New York City urbanized area

² American Public Transportation Association, Public Transportation Fact Book 2007
(Washington, DC, 2007), table 6. [http://www.apta.com/research/stats/factbook/documents/
factbook07.pdf].
³ American Public Transportation Association, “Americans Take More Than 10 Billion
Trips on Public Transportation for the First Time in Almost Fifty Years,” Transit News,
March 12, 2007. [http://www.apta.com/media/releases/documents/070312_ten_billion.pdf].
⁴ U.S. Department of Transportation, Bureau of Transportation Statistics, NHTS 2001
Highlights Report, BTS03-05 (Washington, DC, 2003), figure 6.
⁵ U.S. Department of Transportation, Federal Highway Administration, Summary of Travel
Trends: 2001 National Household Travel Survey (Washington, DC, 2004), table 9.
[http://nhts.ornl.gov/2001/pub/ST T .pdf].
⁶ U.S. Census Bureau, “Most of Us Still Drive to Work Alone: Public Transportation
Commuters Concentrated in a Handful of Large Cities,” U.S. Census Bureau News, June 13,

2007.

alone, an area that includes parts of New Jersey and Connecticut, accounts for almost
four of every 10 transit trips nationally.⁷
Current Program Structure
There are two major transit funding programs administered by the Federal
Transit Administration (FTA): the Urbanized Area Formula Grants Program and the
Capital Investment Program. Of the nearly $53 billion authorized by SAFETEA for
transit programs from FY2004 through FY2009, the Urbanized Area Formula
Program accounts for 42% of the total ($22.2 billion), and the Capital Investment
Program accounts for 43% ($22.7 billion). The remaining 15% ($7.7 billion)
authorized by SAFETEA funds several other programs, such as the Other Than
Urbanized Area Formula Program (commonly referred to as the Rural Formula
Program), state and metropolitan planning, research, and FTA operations.
In addition to federal funding for transit from the transit programs themselves,
federal funding is also available from several surface transportation programs that
allow highway money to be spent on transit projects and vice versa. Most funds
“flexed” to the transit programs come from the Surface Transportation Program
(STP) and the Congestion Mitigation and Air Quality Improvement Program
(CMAQ). Flexing funds is largely the decision of state decision-makers; hence the
amount transferred can vary widely from year to year. In 15 years, from FY1992
through FY2006, a total of $13.1 billion has been flexed from highways to transit,
ranging from $0.3 billion in FY1992 to $1.6 billion in FY2000.⁸ Very little transit
funding has been flexed from transit to highways.
Paratransit is another area in which funding is available from the federal
government outside the transit program. Paratransit, also known as demand response
or dial-a-ride, is non-fixed route service for people with disabilities and the elderly,
and typically involves the use of small buses, vans, or passenger cars. In a 2003
report, the General Accounting Office (now the Government Accountability Office),
or GAO, found 56 federal programs in seven federal agencies other than DOT that⁹
funded transportation services to transportation-disadvantaged populations. The
same report could not estimate the transportation spending in these programs because
the money was often not tracked separately from other types of spending. Because
of the complexity and overlapping responsibilities, the President issued Executive
Order (EO) 13330 on Human Service Transportation Coordination on February 24,

⁷ CRS calculation based on U.S. Department of Transportation, Research and Innovative
Technology Administration, Bureau of Transportation Statistics, State Transportation
Statistics 2006 (Washington, DC, 2006), table 4-3. [http://www.bts.gov/publications/state_
transportation_statistics/state_transportation_statistics_2006/index.html ].
⁸ APTA, 2007, table 44; American Public Transportation Association, Public Transportation
Fact Book 2006 (Washington, DC, 2006), table 44.
⁹ U.S. General Accounting Office (now the Government Accountability Office),
Transportation-Disadvantaged Populations: Some Coordination Efforts Among Programs
Providing Transportation Services, but Obstacles Persist, GAO-03-697 (Washington, DC,

2003). [http://www.gao.gov/new.items/d03697.pdf].

2004, directing 10 federal agencies to examine and improve the coordination of
federal programs supporting paratransit.¹⁰
Urbanized Area Formula Grants Program (49 USC §5307)
The Urbanized Area Formula Grants Program provides funding to urbanized
areas, places designated by the Census Bureau to have a population of 50,000 or
more. Apportionments are determined by a number of different formulas, known as
formula “tiers.” Most of the tiers apply to urbanized areas with a population of
200,000 or more. These formulas are based on several factors including bus revenue
vehicle miles, bus passenger miles, fixed-guideway revenue vehicle miles, fixed-
guideway route miles, operating costs, population, and population density. In
urbanized areas with a population of less than 200,000, funds are generally
distributed according to population and population density.
In TEA-21 there were six formula tiers, to which SAFETEA added a seventh
tier and two new programs that function as an eighth tier.¹¹ The seventh tier added
by SAFETEA is the Small Transit Intensive Cities Formula program, which,
beginning in FY2006, distributes 1% of Urbanized Area funds to urbanized areas
with a population of less than 200,000 that provide a high level of service in relation
to population size (49 USC §5336(j)). The two new programs added by SAFETEA
that function as an eighth tier are the Growing States and High Density States
Formula Programs (49 USC §5340). Both of these were also enacted to begin in
FY2006. The Growing States apportionment is based on forecasted state population
growth, and the High Density apportionment is to states with a population density
greater than 370 persons per square mile. Most of the funds from the Growing States
and High Density States programs are distributed as part of the Urbanized Area
apportionment, but some funds are distributed through the Rural Formula Program,
discussed below.
Capital Investment Program (49 USC §5309)
The Capital Investment Program is designed to help transit agencies fund large
projects that cannot be met through the regular formula programs. The Capital
Investment Program has three main elements: (1) Fixed-Guideway New Starts and
Extensions, typically known as “New Starts”; (2) Fixed-Guideway Modernization;
and (3) Bus and Bus Facility Capital. In TEA-21, the ratio of funding in the overall
Capital Investment Program was 40% New Starts, 40% Fixed-Guideway
Modernization, and 20% Bus and Bus Facility Capital. In SAFETEA, there was a
slight shift toward the New Starts and Bus and Bus Facility Capital elements of the
program, with 40.6% and 22.1%, respectively. Fixed-Guideway Modernization is
authorized for 37.4% of Capital Investment Program funds.

¹⁰ The President, “Executive Order 13330: Human Services Transportation Coordination,”

69 Federal Register, 9185-9187, February 26, 2004. [http://a257.g.akamaitech.net/7/257/

2422/14mar20010800/edocke t.access. gpo.gov/2004/pdf/04-4451.pdf].

¹¹ American Public Transportation Association, APTA Primer on Transit Funding
(Washington, DC, 2007). [http://www.apta.com/government_affairs/policy/documents/
primer_safetea_lu_long_06_02_22.pdf].

New Starts. New Starts funding is available primarily on a competitive basis
for new fixed-guideway systems and extensions. While the majority of funding from
this program over the years has gone to transit rail projects, the New Starts program
has funded projects for busways and bus rapid transit, ferries, automated guideway¹²
systems, and vintage trolleys. Congress enacted a new “Small Starts” program in
SAFETEA to fund projects with a total cost of $250 million or less in which the
federal share is $75 million or less. Small Starts projects are funded with $200
million annually from the New Starts authorization beginning in FY2007. In carving
out Small Starts from the New Starts program, Congress also intended for these less
costly projects to be subject to a less cumbersome approval process.
Fixed-Guideway (Rail) Modernization. Often referred to as Rail
Modernization or “Rail Mod,” these funds are for modernizing and rehabilitating
infrastructure in all types of transit rail systems and exclusive busways. Funds are
made available by formula to two different groups of systems: old areas and new
areas. Old areas are the 11 urbanized areas with systems built largely without federal
funding: Baltimore (commuter rail only), Boston, Chicago/northwestern Indiana,
Cleveland, New Orleans, New York, northeastern New Jersey, Philadelphia/southern
New Jersey, Pittsburgh, San Francisco, and southwestern Connecticut. The new
areas are places with fixed guideways that are at least seven years old, other than
those classified as old areas. In FY2006 this included 48 areas. SAFETEA authorized
approximately 69% of Fixed-Guideway Modernization funds to go to old areas and

31% to new areas.¹³

Bus and Bus Facility Capital. Funds are provided to purchase buses and
bus-related equipment, including the construction of buildings such as administrative
and maintenance facilities, transfer facilities, bus shelters, and park- and-ride stations.
Most of these funds are earmarked by Congress each year during the appropriations
process.
Other Programs
Rural Formula Program. Formally known as the Other Than Urbanized
Area Formula Program, this program provides funding to states for transit outside of
urbanized areas. Federal funds may be used for both capital and operating expenses.
This program was funded at $2.1 billion over the six years of SAFETEA, a
significant boost in funding over TEA-21. Some of the Growing States Formula
Funding is also apportioned through the Rural Formula Program. In FY2004 and
FY2005, the formula to apportion funds is the rural population in a state as a
percentage of the U.S. rural population. But beginning in FY2006, 20% of funds are
distributed according to rural land area in state as a share of U.S. rural land area, and
80% by rural population. Rural Formula funds are provided to the state, and funding
decisions within a state are made at the discretion of the governor.

¹² Ibid.
¹³ Ibid., pp. 24-25.

Elderly Individuals and Individuals with Disabilities Formula
Program. This program provides funds to states to provide transit for these groups.
Funds are apportioned to each state according to its share of the elderly and disabled
populations. Federal funds under the program may be used by public agencies or
non-profit corporations. SAFETEA authorized a total of $674.7 million for this
program over six years.
New Freedom Program. This new program provides funds by formula for
the provision of new transit services for the disabled beyond those required by the
Americans with Disabilities Act. Funds are apportioned according to the disabled
population in a state, with 60% of funds directed to large urbanized areas (population
of 200,000 or more), 20% to small urbanized areas (population of less than 200,000),
and 20% to rural areas. SAFETEA requires these new services to be coordinated
with similar activities funded by other federal agencies, such as those administered
by the Department of Health and Human Services. Authorized funding for this new
program began in FY2006, with a total of $339 million authorized for FY2006
through FY2009.
Job Access and Reverse Commute Program (JARC). This program
is designed to help fund innovative transit service for low-income workers to get to
jobs that are hard to reach by transit because of location, work hours, or other
barriers. Formerly an allocated program, SAFETEA made JARC a formula program
beginning in FY2006. Apportionments are based on the number of low-income
residents and welfare recipients in a state, with 60% of funds going to large urbanized
areas, 20% to small urbanized areas, and 20% to rural areas. The program is
authorized at $851.5 million over six years.
Transit Program Issues
A key concern for Congress in the reauthorization of the transit programs will
be the overall level of transit funding. Large increases in funding, as some are calling
for, might allow Congress to continue the programs without substantial changes.
However, no growth in the overall funding or even a funding decline might sharpen
calls for program restructuring in order to focus on federal transit priorities. This
section begins with a discussion of the overall funding level and broad options for
program restructuring. That is followed by a more detailed examination of issues
with the major funding programs, particularly the New Starts and Fixed Guideway
Modernization programs, the distribution of federal funds to rural and small cities,
and federal support for paratransit.
Overall Transit Funding Level
A number of interest groups, including the American Association of State
Highway and Transportation Officials (AASHTO), the U.S. Chamber of Commerce,
and the American Society of Civil Engineers, argue that America is underinvesting

in transportation infrastructure, including public transit infrastructure.¹⁴ These groups
contend that the physical condition and operational performance of public transit are
suffering and will continue to suffer unless there is an increase in funding levels. In
their view, federal infrastructure investment should be significantly increased to deal
with the existing backlog of projects and future needs.
This view is bolstered, to some degree, by the most recent highway and transit
“needs assessment” by DOT, which suggests that the capital cost to maintain the
current condition and operational performance of transit systems in the United States
from 2005 through 2024 is 25% more annually than is currently being spent by all
levels of government.¹⁵ DOT makes no recommendation about the shares of capital
spending made by different levels of government in its estimates of capital needs.
In the current ratio of capital spending, however, $6.2 billion annually of federal
spending would be needed to maintain the system. In 2004, the federal government
provided $4.9 billion for capital expenses (the remaining $2 billion in federal
spending went for operating expenses).
It should be pointed out, however, as with any attempt to estimate current and
future system conditions and performance, there are a host of simplifying
assumptions, omissions, and data problems that influence the results. Nevertheless,
this analysis suggests that if total government spending is not increased above current
levels, the physical condition and operational performance of system elements may
decline.
The congressionally created National Surface Transportation Policy and
Revenue Study Commission (NSTPRSC), created under Section 1909 of SAFETEA,
estimated significantly greater needs than DOT in its December 2007 report to
Congress.¹⁶ In comparison with current transit capital spending by all levels of
government of about $13 billion (in 2006 dollars), the NSTPRSC estimated middle-
and high-range capital spending estimates over 15-year, 30-year, and 50-year periods.
The middle-range capital spending for transit by all levels of government over the
next 30 years (2006 through 2035) was estimated to be in the range of $17 billion to
$25 billion per year (in constant 2006 dollars) (an increase of between 31% and

¹⁴ See, for instance, American Society of Civil Engineers, “Report Card for America’s
Infrastructure 2005,” [http://www.asce.org/reportcard/2005/page.cfm?id=34]; American
Association of State Highway and Transportation Officials (AASHTO), Surface
Transportation Policy Recommendation (Washington, DC, March 2007), [http://www.
transportation1.org/tif2report/]; National Chamber Foundation, Future Highway and Public
Transportation Financing, Executive Summary (Washington, DC, 2005), [http://www.
uschamber.com/ ncf/publications/default.htm] .
¹⁵ In 2004, transit capital spending by all levels of government in 2004 was $12.6 billion,
$3.2 less than the $15.8 billion that DOT estimates will be needed annually over the next
20 years. See U.S. Department of Transportation, Federal Highway Administration and
Federal Transit Administration, 2006 Status of the Nation’s Highways, Bridges, and Transit:
Conditions and Performance (Washington, DC, 2007), p. 8-8.
¹⁶ National Surface Transportation Policy and Revenue Study Commission, Transportation
for Tomorrow (Washington, DC, 2007). [http://www.transportationfortomorrow.org/final_
report/].

92%), and the high range was estimated to be $23 billion to $34 billion (in constant

2006 dollars) (an increase of 78% to 162%).¹⁷

An alternative view of the overall level of government transportation spending
in general, and transit spending in particular, is that it has not been dramatically
deficient. In terms of the nation’s transit systems, the DOT needs analysis shows that
total government spending on capital and operations (excluding farebox and other
revenue) grew by approximately 80% between 1980 and 2004 (in real terms), much
faster than passenger trips and passenger miles, which grew by 12% and 24%,
respectively.¹⁸ However, it is true that federal spending grew relatively slowly over
this period, particularly compared with state and local spending, 4% and 129%,
respectively (in real terms). Consequently, the federal share of total spending
declined from 42% to 25%. The federal share of capital spending has also declined,
from approximately 50% in the mid-1990s to 39% in 2004. Since 1995, federal
spending has slightly outpaced state and local spending, growing by 43% and 39%,
respect i v el y.¹⁹
As a result of this increase in overall government spending, transit service has
grown and the condition and performance of transit systems have generally improved
over the past decade. Transit system capacity, measured in capacity-equivalent
revenue miles, increased 30% between 1995 and 2004. With the opening of several
new systems and extensions, light rail capacity more than doubled over this period.
Bus capacity grew by a more modest 15%. The growth in ridership, on average, has
generally lagged the growth in capacity; hence capacity utilization has slipped.
Between 1995 and 2004, utilization, as measured in terms of passenger miles per
capacity-equivalent vehicle, increased for heavy rail, decreased for commuter rail and
light rail, and remained about the same for motorbus.²⁰ The overall physical condition
of transit systems is a more complex picture. Nonetheless, conditions have generally
improved, particularly in the bus fleet.²¹
A third view on the overall level of transit funding is that governments,
including the federal government, spend too much on public transit relative to the

¹⁷ Ibid., Volume II, p. 4-12.
¹⁸ U.S. Department of Transportation, Federal Highway Administration and Federal Transit
Administration, 2007, exhibit 6-22; American Public Transportation Association, “Unlinked
Passenger Trips by Mode, 1890-2004,” [http://www.apta.com/research/stats/ridership/
trips.cfm]; U.S. Department of Transportation, Research and Innovative Technology
Administration, Bureau of Transportation Statistics, National Transportation Statistics 2007
(Washington, DC, 2007), table 1-3, [http://www.bts.gov/publications/national_
transportation_statistics/html/table_01_37.html ].
¹⁹ CRS calculation using GDP implicit price-deflator based on U.S. Department of
Transportation, Federal Highway Administration and Federal Transit Administration, 2007,
exhibits 6-20, 6-23.
²⁰ Ibid., exhibit 4-17.
²¹ Ibid., chapter 3.

benefits it provides.²² It is often pointed out that while transit spending amounts to
about 16% of all government highway and transit spending and about 14% of federal
highway and transit capital expenditure (in 2004),²³ only about 2% of all trips are
made by this mode.²⁴ Even for commuting trips, for which transit is better suited,
transit accounts for only 5% nationwide, a share that has changed little over the past
two decades. Only in two cities, New York and Chicago, does the transit share rise
above 10%.²⁵ The effect, according to transit critics, is to shortchange highway
spending, thereby causing highway conditions and performance, including highway
congestion, to be worse than they would be otherwise.²⁶
A corollary to this view is that a significant proportion of transit funding comes
from taxes paid by highway users. Currently, about 80% of federal transit spending
is derived from the HTF, with the rest coming from the general fund. At the state and
local levels combined, fuels taxes account for only 3% of transit funding (excluding
system-generated revenue), with the biggest shares coming from sales taxes, general
funds, and other public funds such as vehicle licensing and registration fees and
lottery and casino proceeds.²⁷
A counter-argument to these critics, and one in favor of increased transit
spending, is that transit’s worth must be analyzed in terms of economic value, not
just transportation value.²⁸ The economic value argument includes economic
development as well as mobility, such as mobility for non-drivers and congestion
management. By this measure, according to proponents, transit investment is highly
productive and often more productive than an alternative highway investment. The
implication for transit’s detractors is that “the reality that transit cannot as a rule
make it financially seems to have created a belief in some quarters that it cannot
make it economically either.”²⁹

²² Cox, W., “Transit’s Limited Capability and Promise,” in Wendell Cox, Alan Pisarski, and
Ronald D. Utt, Eds., 21^st Century Highways: Innovative Solutions to America’s
Transportation Needs (Washington, DC, Heritage Foundation, 2005).
²³ U.S. Department of Transportation, Federal Highway Administration and Federal Transit
Administration, 2007, exhibits 6-8, 6-20, 6-23.
²⁴ U.S. Department of Transportation, Bureau of Transportation Statistics, NHTS 2001
Highlights Report, BTS03-05 (Washington, DC, 2003), figure 6.
²⁵ U.S. Census Bureau, June 13, 2007.
²⁶ Cox, W. and R. O’Toole, “The Contribution of Highways and Transit to Congestion
Relief: A Realistic View,” Heritage Foundation Backgrounder, No. 1721, January 24, 2004.
[http://www.heritage .org/ Resear ch/UrbanIssues/bg1721.cfm].
²⁷ U.S. Department of Transportation, Federal Highway Administration and Federal Transit
Administration, 2007, exhibit 6-16.
²⁸ Lewis, D. and F.L. Williams, Policy and Planning as Public Choice: Mass Transit in the
United States (Brookfield, VT, Ashgate, 1999).
²⁹ Testimony of David Lewis, Consultant, in U.S. Congress, House Subcommittee on
Highways and Transit, Implementation of New Starts and Small Starts Program, May 10,

2007.

Federal Transit Priorities and Program Restructuring
If federal funding for transit remains flat or possibly even declines over the next
decade, Congress may want to cut programs across the board. Alternatively,
Congress may want to restructure the programs based on a reexamination of its
priorities. Of course, transit funding may grow if the federal fuels tax is raised and
some of this new revenue is dedicated to transit, if other types of dedicated revenues
are created, or if Congress decides to fund transit programs at a higher level from the
general fund.³⁰ Moreover, funding growth does not preclude Congress from making
changes in the way the federal government supports public transit provision. Three
broad ways of restructuring federal transit programs are suggested here, followed by
a brief discussion of the Administration’s proposal for changes during the last
reauthorization that were predicated on a modest (nominal) increase in federal transit
funding.
One way to reorder federal priorities would be to focus more resources on major
capital expenses for the rehabilitation and expansion of transit service in places that
are best served by this mode, primarily the densely populated parts of large and often
heavily congested cities. This would require expansion of the programs that make
up the Capital Investment Program — the New Starts Program, the Rail
Modernization Program, and the Bus Capital Program — and cutting back on the
grants that are spread more broadly and go for smaller and more routine types of
expenses under the Urbanized and Non-Urbanized Formula Programs. This change
would likely result in a concentration of resources in a few large cities where transit
usage is already relatively high.
Alternatively, Congress may decide that the era of retrofitting large and
medium-sized cities with new transit rail systems is largely over, and that resources
should now go to supporting and rehabilitating existing services. This could entail
a reduction in spending on the New Starts program, currently about 18% of the
federal transit program, and more support for the other capital programs and the
formula grants programs. The effect of these changes on the distribution of funds is
likely to be more mixed, and would depend on the share of funds dedicated to the
Rail Modernization program, a program that includes relatively few cities, and the
share dedicated to buses and formula programs that include a much larger number of
places.
A third alternative would be to eliminate the capital programs altogether, to be
replaced with a simple “block grant” that could be distributed based on transit
ridership or population. This would allow state and local governments to decide how
best to allocate transit funding support among existing and new services. Funds
distributed according to transit ridership would reward areas that commit their own
resources successfully to providing transit service. The distribution of funding in this
way would again depend on how this new program is structured, but it might also
depend on how states and localities react to the changes in terms of how aggressively
they promote transit ridership.

³⁰ For more information, see CRS Report RL34183, Public Transit Program Funding Issues
in Surface Transportation Reauthorization, by William J. Mallett.

The Administration’s proposal in the reauthorization of TEA-21 for
restructuring the transit programs was a mixture of these three broad alternatives. It
may prove instructive during the reauthorization of SAFETEA, partly because it
envisioned a constrained federal funding level. In terms of overall funding, the
Administration proposed $46 billion over six years for public transit programs.
Although this represented a 28% nominal increase in funding from the $36 billion
authorized in TEA-21, some estimates at the time suggested that this represented no
real increase when the amount was adjusted for inflation.³¹ In the end, SAFETEA
authorized approximately $53 billion in public transit spending, more than the
Administration sought but less than others such as AASHTO and the American
Public Transportation Association (APTA) had proposed. APTA’s reauthorization
proposal, for instance, totaled $66 billion.³²
Program changes in the Administration’s proposal included folding the Fixed
Guideway Modernization program into the Urbanized Area Formula Program,
eliminating the Bus and Bus Facility Capital program and distributing some of these
funds by formula, and using the remaining funds to expand the New Starts program,
whose criteria would be expanded to include all transit modes. The Administration
argued that this would simplify the transit program, make the flow of federal funds
more equitable and reliable, and their use more flexible. None of these major changes
was undertaken, except for some broadening of the eligibility of the New Starts
criteria. A relatively minor change that was enacted was the distribution of funds in
the much smaller JARC program by formula rather than by the discretion of FTA.
This, too, may be reexamined, given recent statements by the House Appropriations
Committee.
With fixed guideway modernization funds already distributed by formula, the
main argument for distributing these funds through the Urbanized Area Formula
program is that it would give transit agencies more flexibility in how to use them.
Although urbanized area formula funds are apportioned on the basis of modal
characteristics such as miles of fixed-guideway infrastructure, among other things,
these funds can be used for any transit mode. The main argument against this change,
a position advocated by APTA, is that making rail modernization funds more flexible
might divert funding from rail transit systems where the unmet funding needs are the
greatest due to the age of the infrastructure and the number of passengers carried.
Distributing some of the Bus and Bus Facility Capital program funds by
formula, the Administration argued, would make their distribution more equitable
and allow communities to rely on some funds every year, instead of at irregular
intervals through earmarking in the appropriations process. Regular and predictable
apportionments, they argued, would allow transit providers to be able to make
longer-term investment plans. Again, APTA argued against this proposal, noting that

³¹ U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Hearing on
The Administration’s Proposal for Reauthorization of the Federal Public Transportation
Program, [http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_senate_
hearings&docid=f:96194.pdf], June 10, 2003.
³² American Public Transportation Association, “TEA-21 Reauthorization
Recommendations.” [http://www.apta.com/government_affairs/tea21/tea21nov.cfm].

the Bus and Bus Facility Capital program serves an important role in periodic bus
purchases that cannot be met with formula funding.³³ Moreover, the House
Appropriations Committee in the 109^th Congress argued against distributing Bus and
Bus Facility Capital program funds by formula, noting that this would not necessarily
make their distribution more equitable and would shift the control of federal funds
from Congress.³⁴
In the case of the JARC, the Administration similarly proposed to distribute
program monies by formula to make it a more stable and reliable source of funds, of
which every state would get something every year. As noted above, SAFETEA did
remake the allocated JARC program as a formula program. The House
Appropriations Committee in the 110^th Congress, however, has expressed concerns
about this change, arguing that this may have damaged the effectiveness of the
program because funds are no longer “targeted on low income and transit reliant
communities.”³⁵ These concerns echo some of those made during the reauthorization
debates, including those by APTA and labor groups. The committee has asked FTA
to examine the issue and report to Congress in 2008.
Transit Expansion and the New Starts Program
A major focus of federal transit policy over the past few decades has been to
support the development of new transit rail systems and extensions to existing
systems. Much of this support has come through the New Starts program. In
SAFETEA, New Starts authorizations amount to about 18% of all transit program
spending. With federal support, a number of cities have opened entirely new transit
rail systems. Since 1985, new rail systems have been opened in a number of cities,
including Baltimore, Charlotte, Dallas, Denver, Los Angeles, Miami, Minneapolis,
Portland (OR), Sacramento, Salt Lake City, San Jose, and St. Louis.³⁶ Several other
cities are in the process of building new rail systems (e.g., Phoenix) or are in the
planning stages (e.g., Norfolk, VA). Consequently, by 2005, rail transit route-mileage
had almost doubled, with light rail mileage tripling, commuter rail mileage doubling,
and subway mileage growing by 25%.³⁷

³³ Ibid.
³⁴ U.S. Congress, House Committee on Appropriations, Department of Transportation and
Treasury and Independent Agencies Appropriations Bill, 2004, H.Rept. 108-243, July 30,

2003.

³⁵ U.S. Congress, House Committee on Appropriations, Department of Transportation, and
Housing and Urban Development, and Related Agencies Appropriations Bill, 2008, H.Rept.

110-238, July 18, 2007.

³⁶ Richmond, J., “A Whole-System Approach to Evaluating Urban Transit Investments,”
Transport Reviews, 2001, Vol. 21, No. 2, pp. 141-179; Baum-Snow, N. and M.E. Kahn,
“The Effects of Urban Rail Transit Expansions: Evidence from Sixteen Cities, 1970 to

2000,” Brookings-Wharton Papers on Urban Affairs, 2005.

³⁷ U.S. Department of Transportation, Research and Innovative Technology Administration,
Bureau of Transportation Statistics, National Transportation Statistics, 2007 (Washington,
DC), table 1-1. [http://www.bts.gov/publications/national_transportation_statistics/].

A number of issues surrounding the New Starts program may emerge in the
reauthorization of SAFETEA. These issues include funding level, transit mode,
project evaluation criteria, local matching shares, and funding distribution.
Funding Level. A number of transportation and transit advocates believe that
the federal government ought to increase New Starts funding to deal with highway
congestion, environmental problems, and growing transit demand. In its most recent
policy statement on national transportation infrastructure, AASHTO argues that the
current growth in highway travel is financially unsustainable, and thus a national
policy goal should be to double transit ridership over the next 20 years. By
AASHTO’s estimate, this would require increasing overall federal transit assistance
from $10.3 billion in FY2009, the amount authorized in the final year of SAFETEA,
to $17.3 billion by FY2015, possibly the last year of the next authorizing
legislation.³⁸ One way to boost ridership, according to AASHTO, is to provide more³⁹
funding for the New Starts program. By AASHTO’s estimate, $35 billion is needed
to fund the 36 projects that have moved beyond the initial planning stages. GAO, in
a survey of transit project sponsors, found that there are another 141 projects planned,
of which three-quarters are likely to request federal New Starts funding.⁴⁰ Under
SAFETEA, the New Starts program is authorized at $1.8 billion in FY2009.
By contrast, a number of analysts contend that federal funds should no longer
support the building of new transit rail systems.⁴¹ Some have argued that most cities
without rail systems are either too small or have residential and employment densities
that are too low to make rail a viable option. Moreover, proposals to extend existing
rail systems, often into the lower-density suburbs, may also suffer from such
problems. In this view, the New Starts program ought to dramatically shrink or be
redirected to smaller, mostly non-rail projects as partly begun under the Small Starts
program instituted in SAFETEA. Another possibility is that New Starts funding be
redirected to rehabilitating the existing transit rail systems. Those who advocate
shrinking the transit program often suggest that resources be redirected to elements⁴²

of the highway program that hold more promise for congestion mitigation.
³⁸ American Association of State Highway and Transportation Officials (AASHTO), Surface
Transportation Policy Recommendation (Washington, DC, March 2007), p. 36.
[http://downloads.transportation.org/tif2-1.pdf].
³⁹ AASHTO, Future Needs of the Transportation System (Washington, DC, February 2007),
p. 45. [http://www.transportation1.org/tif1report/TIF1-1.pdf].
⁴⁰ U.S. Government Accountability Office, Public Transportation: Future Demand is Likely
for New Starts and Small Starts Programs, but Improvements Needed to the Small Starts
Application Process, GAO-07-917 (Washington, DC, 2007). [http://www.gao.gov/
new.items /d07917.pdf].
⁴¹ Orski, K., “The Future Federal Role in Transit Investment,” Innovation Briefs, Vol. 17,
No. 5, September/October 2006.
⁴² Cox, W. and R. O’Toole, “The Contribution of Highways and Transit to Congestion
Relief: A Realistic View,” Heritage Foundation Backgrounder, Number 1721, January 24,

2004. [http://www.heritage.org/Research/UrbanIssues/bg1721.cfm].

Transit Mode. A major and continuing controversy surrounding the federal
transit program, and the New Starts program in particular, has been between those
who favor support for rail transit and those who favor bus and bus rapid transit
(BRT).
Several rationales have been advanced by supporters for building new fixed-
guideway transit systems with substantial federal support. First, fixed-guideway
transit, particularly rail transit, provides the higher-quality service in terms of comfort
and speed that is needed to attract discretionary transit users, travelers who have the
option of driving. Attracting discretionary transit users is important because it is only
by having travelers switch modes that transit can have an effect on highway
congestion, parking problems, air pollution, and energy use. Second, advocates argue
that fixed-guideway transit has the greatest potential for desirable land use effects and
economic development. Rail transit supporters argue that, over the long term, rail
stations encourage compact, mixed-use development, thereby counteracting urban
sprawl and reducing motor vehicle travel. Third, supporters argue that where transit
demand is high, the operating costs of rail are lower than those of bus transit, and
with higher capital costs taken into account, the total cost of rail per passenger-mile
is favorable. Fourth, rail advocates argue that it is easier to gain local public support
for rail transit projects than comparable improvements in bus service.⁴³
Critics of federal support for new rail transit systems contend that such systems
are expensive to build and maintain, less flexible compared with regular bus transit,
and ill-suited to today’s low-density, dispersed metropolitan areas. Rail transit, these
critics contend, may be worth the cost only in high-density corridors, and that few of
these remain without rail service.⁴⁴ Moreover, critics contend that the building of
new rail systems in search of discretionary riders, primarily suburban commuters,
have been implemented to the detriment of bus-dependent populations in the central
city. Overall, these critics argue, the effect has been to switch those riding buses to
riding rail with little net gain in transit patronage.⁴⁵ Even the environmental benefits
of new rail lines have been called into question because many new rail riders must
drive to a station to access the system. Consequently, the reduction in emissions from⁴⁶
building new rail lines has been found to be negligible in many cases.
In the view of some, federal support for new transit capacity would be better
spent on buses and, in some cases, BRT, in which express buses run over roads with
some sort of priority system ranging from signal preemption to an exclusive busway.
The main argument for BRT is its cost-effectiveness compared with new rail systems.
GAO, for instance, found that although capital costs varied enormously from place
to place depending on local conditions, on average, the capital cost per mile for BRT

⁴³ Henry, L. and T. A. Littman, “Evaluating New Start Transit Program Performance:
Comparing Rail and Bus,” Victoria Transport Policy Institute, September 1, 2006.
[ h t t p : / / www.vt pi .or g/ bus_r ai l .pdf ] .
⁴⁴ Wachs, M., “U.S. Transit Subsidy Policy: In Need of Reform,” Science, Vol. 244, pp.

1545-1549.

⁴⁵ Richmond, 2001.
⁴⁶ Ibid.

compared with light rail was 39% for buses run on exclusive busways, 26% for buses
on HOV, and 2% for buses on city streets. GAO’s analysis of operational costs
showed no consistent advantage for BRT or light rail.⁴⁷ Another argument in favor
of BRT is that it is more flexible, as starting, stopping, and modifying BRT service
is a lot easier than with a fixed-in-place rail system. Detractors argue that this
flexibility is the main reason why the economic development benefits around BRT
stations and stops will be lower than those around transit rail stations. Because of the
limited experience with BRT, no firm conclusion about its economic development
benefits in comparison with transit rail can be drawn at this time. Some have
suggested that with similar service characteristics and proper planning, there is no
reason why the economic development benefits could not be similar to those of
transit rail.⁴⁸
Congress and FTA have made a number of efforts over the past decade to
stimulate proposals for BRT, including a demonstration project that began in 1999.
However, in 2001, the GAO found that, for a number of reasons, New Starts funding
for BRT had been limited.⁴⁹ First, many communities had already built and operated
rail systems that provided a wealth of experience with them and generated a number
of proposals for expansion. Second, the New Starts program at that time tended to
favor larger, more capital-intensive projects that could garner for a community
significant capital funding from the federal government. Third, at that time, under
TEA-21, the program required that, to be eligible, BRT projects had to operate on a
separate right-of-way for the use of transit and high-occupancy vehicles. SAFETEA
initiated several changes in the New Starts program that seem to have improved the
environment for BRT, including setting aside funding for Small Starts and expanding
the definition of fixed-guideway to include more BRT projects. Consequently, in
FY2008, BRT projects became the most numerous in the New Starts funding
pipeline, projects in preliminary engineering or final design, although they represent
only 13% of the cost of those projects.⁵⁰ BRT projects in the New Starts pipeline
include the New Britain-Hartford Busway in Connecticut, two projects in Houston,
Texas, and phase 3 of the Silver Line in Boston, Massachusetts.⁵¹ Some have

⁴⁷ U.S. General Accounting Office (now the Government Accountability Office), Bus Rapid
Transit Shows Promise, GAO-01-984 (Washington, DC, September 2001). [http://www.gao.
gov/ new.items /d01984.pdf].
⁴⁸ Transportation Research Board, Bus Rapid Transit Practitioner’s Guide, Transit
Cooperative Research Program, Report 118 (Washington, DC, 2007). [http://onlinepubs.trb.
org/ onlinepubs/tcrp/tcrp_rpt_118.pdf].
⁴⁹ Ibid.
⁵⁰ Siggerud, K., Director Physical Infrastructure, U.S. Government Accountability Office,
Preliminary Analysis of Changes To and Trends in FTA’s New Starts and Small Starts
Programs, Statement Before House Subcommittee on Highways and Transit, May 10, 2007,
GAO-07-812T. [http://www.gao.gov/new.items/d07812t.pdf].
⁵¹ U.S. Department of Transportation, Federal Transit Administration, Annual Report on
Funding Recommendations: Proposed Allocations of Funds for Fiscal Year 2008, New
Starts, Small Starts, Alternative Transportation in Parks and Public Lands (Washington,
DC, 2007). [http://www.fta.dot.gov/documents/FY2008_Entire_NS_Report.pdf].

suggested going even further to make projects for express toll lanes as part of a BRT
network eligible for New Starts funding.⁵²
Detractors argue that BRT projects, while cheaper than rail systems, are still
more expensive and less effective than conventional bus service. For instance, one
analyst contended that “modest improvements to basic bus services combined with
an attractive fares policy have shown they can secure substantially greater ridership
increases than capital-intensive projects involving either light rail or busway
construction.”⁵³ Others note that BRT projects favor suburban commuters over more
centrally located transit such as streetcars, which are a lighter, cheaper, but slower
type of light rail.⁵⁴ This may be an issue in reauthorization in terms of the evaluation
criteria by which New Starts projects are selected.
Project Evaluation Criteria. In SAFETEA, Congress directed FTA to add
both supportive land use policies and economic development effects as specific
criteria in the project evaluation process. Mobility improvements, environmental
benefits, operating efficiencies, and cost-effectiveness are some of the other main
criteria. The main rationale for these additional criteria is that the benefits of transit
service go beyond mobility and the minimization of environmental damage, and
include the economic benefits of development around transit stations. Moreover, the
benefits of transit are maximized if supported by appropriate land use policies that
allow for high density around transit stations.⁵⁵ To date, land use has been added in
the evaluation process, but economic development has not, as FTA considers the
most appropriate way to measure this variable.⁵⁶ In a hearing on implementing
changes in the New Starts program, the staff of the House Subcommittee on
Highways and Transit noted that there is concern that FTA has not fully implemented
the wishes of Congress as enacted in SAFETEA, a view shared by the House
Appropriations Committee.⁵⁷
Another concern expressed by some is that in the Small Starts evaluation
process, cost-effectiveness is still considered a determining criteria, and thus the

⁵² Orski, 2006.
⁵³ Richmond, 2001, p. 161.
⁵⁴ Siggerud, 2007; Herrick, T. “A Streetcar Named Aspire: Lines Aim to Revive Cities, Wall
Street Journal, June 20, 2007, B1.
⁵⁵ Lewis, D. and F.L. Williams, Policy and Planning as Public Choice: Mass Transit in the
United States (Brookfield, VT, Ashgate, 1999).
⁵⁶ GAO, 2007.
⁵⁷ U.S. Congress, House Subcommittee on Highways and Transit, Hearing on the Federal
Transit Administration’s Implementation of the New Starts and Small Starts Programs:
Summary of Subject Matter, May 10, 2007, [http://transportation.house.gov/Media/File/
Highways/20070510/SSM_HT_5-10-07.pdf]; U.S. Congress, House Committee on
Appropriations, Departments of Transportation, and Housing Development, and Related
Agencies Appropriations Bill, 2008, H.Rept. 110-238.

program is biased against streetcars and toward BRT and traditional buses.⁵⁸ Cost-
effectiveness is defined as the cost per hour of user benefits (that is, time saved) of
a project added to the regional transit system. Because streetcar trips tend to be short
and do not save significant amounts of time, even compared with traditional buses,
streetcar projects tend score low on this important variable.⁵⁹
Support for adding economic development and relaxing the focus on cost-
effectiveness in the Small Starts process as justifications for federal funding support,
however, is not universal. In the 109^th Congress, the House Appropriations
Committee expressed concern that these “positive secondary benefits” often provide
justification for projects that are not cost-effective in transportation terms alone. In
the view of the committee, the most important criteria for New Starts projects should
be the potential of a new transit option to transport the most travelers at a lower cost
in comparison with other transportation alternatives and to reduce highway
congestion. As the committee noted “in evaluating projects, the direct transportation
benefits need to be the most significant measurements.”⁶⁰ Additionally, the
Appropriations Committee expressed concern that the Small Starts program will
divert resources toward “small, economic development type projects” and away from
those that “will have a greater impact on congestion mitigation, environmental
quality, and travel time.”⁶¹
Concern has also been expressed about the complexity of the New Starts
evaluation process that transit agencies must follow to gain federal support.⁶² The
New Starts process requires the preparation of a large number of detailed reports and
other documents that are reviewed extensively by FTA. These requirements have
been developed over the years to ensure that federal funding supports the best
projects that are judged fairly, taking into consideration the differences in project
location, type, and scope. However, some argue that these rules have become so
onerous that many communities are willing to forego federal support if at all
possible. One transit agency estimates that federal involvement can add an extra one
to two years to a project and 10% to 15% extra in project costs.⁶³ Some have argued
that the process for justifying new transit projects is much more onerous than that for

⁵⁸ Testimony of P. Varga, Executive Director, Interurban Transit Partnership, in U.S.
Congress, House Subcommittee on Highways and Transit, May 10, 2007.
⁵⁹ Testimony of R. Gustafson, Executive Director, Portland Streetcar, Inc., in U.S. Congress,
House Subcommittee on Highways and Transit, May 10, 2007.
⁶⁰ U.S. Congress, House Committee on Appropriations, Departments of Transportation and
Treasury and Independent Agencies Appropriations Bill, 2005, H.Rept. 108-671, p. 91.
⁶¹ U.S. Congress, House Committee on Appropriations, Departments of Transportation,
Treasury, and Housing and Urban Development, the Judiciary, District of Columbia, and
Independent Agencies Appropriations Bill 2007, H.Rept. 109-495, pp. 76-77.
⁶² GAO, 2007.
⁶³ Testimony of R. Snoble, Chief Executive Officer, Los Angeles County Metropolitan
Transportation Authority, in U.S. Congress, House Subcommittee on Highways and Transit,
May 10, 2007.

highway projects.⁶⁴ Congress may want to consider using the rigorous New Starts
process as a model for other transportation programs, something GAO has
suggested.⁶⁵ Alternatively, Congress may want to consider ways to simplify the
evaluation process without undercutting the goal of a fair process that funds the best
projects.
Share of Local Matching Funds. From very early on, federal funding for
highway and, later, transit infrastructure was conceived as providing support to
programs run by state and local government. Consequently, most “federal aid” must
be matched with state or local money in a ratio determined by federal law. These
matching shares vary from program to program, and have occasionally been adjusted
according to the goals of federal policy.
The oversubscription to federal funding in the New Starts program has led some
to argue for lowering the cap on the federal share for such projects. Currently, the
maximum federal share is 80%, equivalent to the federal matching share for most
highway projects. Supporters of this view argue that lowering the cap would allow
federal funding to be shared among more worthwhile projects. Moreover, supporters
argue that a lower cap would encourage states and localities with more of their own
money at stake to advance only the strongest projects. GAO found that more
economic analysis of the costs and benefits of a project is typically done when more
local funding is required.⁶⁶ In addition, supporters point out that although the
maximum share prior to SAFETEA was 80%, it was FTA policy to rate a project as
low if it sought a federal share of more than 60%. This policy was a response to
Appropriations Committee reports that a lower share was warranted because demand
for funding help was outstripping the available resources.⁶⁷ Provisions in SAFETEA
now prohibit the Secretary of Transportation from requiring more than 20%, and
FTA’s policy, beginning in FY2007, no longer downgrades a project that seeks more⁶⁸
than 60%. Nevertheless, projects approved or with pending New Starts funding in
FY2007 have a federal share ranging from 34% to 80%.⁶⁹ In FY2008, the federal

⁶⁴ Beimborn, E. and R. Puentes, “Highways and Transit: Leveling the Playing Field in
Federal Transportation Policy,” in Bruce Katz and Robert Puentes, Eds., Taking the High
Road: A Metropolitan Agenda for Transportation Reform (Washington, DC, Brookings
Institution Press, 2005).
⁶⁵ GAO, 2007.
⁶⁶ U.S. Government Accountability Office, Highway and Transit Investments: Options for
Improving Information on Projects’ Benefits and Costs for Increasing Accountability for
Results, GAO-05-172 (Washington, DC, January 2005). [http://www.gao.gov/new.items/
d05172.pdf].
⁶⁷ See, for example, House Appropriations Report, Department of Transportation and
Treasury and Independent Agencies Appropriations Bill, 2004, 108-243.
⁶⁸ U.S. Government Accountability Office, “New Starts Program Is in a Period of
Transition,” GAO-06-819 (Washington, DC, 2006). [http://www.gao.gov/new.items/d06819.
pdf].
⁶⁹ Ibid., p. 13.

share of New Starts projects range from 28% to 80%, and in FY2009 the range is
from 30% to 80%.⁷⁰
Opponents of lowering the maximum federal share argue that lowering the cap
might bias state and local decision-makers to favor highway projects that have an
80% match.⁷¹ Others contend that lowering the match will result in a wider
distribution of federal transit new starts investment, which will have the effect of
diluting its effectiveness. Some also advocate reducing the federal share for both
highways and transit, say to 50%, to encourage states and localities to focus on the
most productive projects.⁷²
Funding Distribution. A number of changes in the New Starts program,
particularly the creation of the Small Starts program and a more favorable climate for
BRT projects, are viewed as being likely to lead to the wider distribution of smaller
grants. Some may view this as an appropriate transition away from the creation of
new rail systems in large cities to the consolidation and enhancement of existing⁷³
transit systems in a wider variety of settings. Others may argue that this will dilute
the effectiveness of the New Starts program at a time when many of the policy
problems to which the transit program is directed — mobility for the poor and infirm,
highway congestion, air quality and other environmental problems — are highly
concentrated geographically. For example, the 10 largest urban areas by population
account for nearly one-half of total highway congestion delay, though only about one-
quarter of the U.S. population and the 20 largest urban areas account for about two-
thirds of total delay and one-third of the population.⁷⁴ However, FTA has announced
that it plans to give preference to projects that are a principal part of a congestion
management strategy, particularly one that includes highway congestion pricing.⁷⁵
This may boost the chances of New Start proposals for federal funding from large
cities.
Fixed-Guideway Modernization Program
The near doubling of fixed-guideway infrastructure over the past two decades
undergirds concern with funding for rehabilitation and replacement provided through
the Fixed-Guideway Modernization (or “Rail Mod”) formula funds. For FY2008,

⁷⁰ U.S. Department of Transportation, Federal Transit Administration, 2007; U.S.
Department of Transportation, Federal Transit Administration, Annual Report on Funding
Recommendations: Proposed Allocations of Funds for Fiscal Year 2009, New Starts, Small
Starts, Alternative Transportation in Parks and Public Lands (Washington, DC, 2008).
[ h t t p : / / www.f t a.dot .gov/ publ i cat i ons/ r epor t s / r epor t s _t o_congr e s s / publications_7753.html ].
⁷¹ Beimborn, E. and R. Puentes, 2005.
⁷² Luberoff, D., “ The Triumph of Pork Over Purpose,” Blueprint Magazine, September 10,

2001. [http://www.ndol.org/ndol_ci.cfm?contentid=3765&kaid=141&subid=299].

⁷³ Orski, 2006.
⁷⁴ See CRS Report RL33995, Surface Transportation Congestion: Policy and Issues, by
William J. Mallett.
⁷⁵ U.S. Department of Transportation, Federal Transit Administration, 72 Federal Register,

30907-30914, June 4, 2007.

about 71% of “Rail Mod” funding, or about $1.1 billion, was apportioned to systems
in 11 areas with older transit systems, with the remaining funds going to systems that
are at least seven years old. The share of rail modernization funding apportioned to
the older areas has declined from 92% in FY1996, although this represented
approximately $600 million in that year.⁷⁶ This declining share of available funds
may continue with time as the rehabilitation needs of the newer systems grow and,
as currently structured, more of the systems built recently become eligible for Fixed-
Guideway Modernization funding.
If program funding does not grow in the next reauthorization, then the amount
of funds going to the older systems, as well as the share, may decline over time.
Congress could decide to leave the current apportionment formula unchanged.
Congress has several options, on the other hand, if it decides that funding for the
older systems through this program should not shrink. First, it could decide to change
the eligibility criteria or the program formula to restore funding to the older systems.
Second, it could decide to expand program funds in an expansion of overall transit
funding. Third, Congress may decide to divert funds from the other capital programs,
such as the New Starts and Bus and Bus Facility Capital program, the Urbanized
Area Formula Program, or the other smaller transit programs.
Treatment of Small City and Rural Transit
in Formula Programs
With the concentration of transit ridership in a few large cities, most formula
funding goes to the largest urbanized areas. Through the Urbanized Area Formula
Grants Program in FY2008, for instance, $3.0 billion was apportioned to urbanized
areas of 1 million people or more, $0.8 billion to urbanized areas of between 200,000
and 1 million, and $0.4 billion to urbanized areas of between 50,000 and 200,000.
The same year, $0.5 billion was apportioned to rural areas through the Other Than
Urbanized Area (Rural) Formula Program. Using population data from the 2000
Census, this amounts to federal assistance of approximately $26 per capita annually
in the largest urbanized areas, $16 in medium urbanized areas, $15 in small
urbanized areas, and $6 per capita in rural areas.⁷⁷
Because of these disparities, small city and rural advocates argued for a boost
in funding in SAFETEA and, despite some success, may do so again in the
reauthorization of the programs. During the reauthorization debates, rural advocates
focused on the fact that rural areas have a larger share of poor, elderly, and disabled
residents than urban areas for whom public transit provides very important trips for
work, social, and medical purposes. These advocates also pointed out that
approximately 40% of rural counties have no access to transit, and that many other
rural counties have very limited service. As a result of these efforts, the share of

⁷⁶ U.S. Department of Transportation, Federal Transit Administration, “Annual
Apportionments.” [http://www.fta.dot.gov/funding/grants_financing_38.html].
⁷⁷ Calculated by CRS based on FTA FY2008 apportionment and 2000 Census data. While
these data are indicative of the relative level of per capita federal assistance, it should be
noted that there a number of other formula and discretionary programs that would need to
be included to arrive at a complete assessment.

funds going to the Urbanized Area Formula program declined from 47.9% in TEA-21
to 44% in SAFETEA, and funds going to the Rural Formula program increased from

3.3% to 5.2%.⁷⁸

Advocates for small cities, places that usually have transit service, focused on
the fact that some small urbanized areas provide a relatively high level of transit
service, but are not rewarded appropriately for their efforts, as are large urbanized
areas. This resulted in the creation of the Small Intensive Cities program that shifted
approximately 1% of Urbanized Area Formula funding from urbanized areas over

200,000 to urbanized areas under 200,000.⁷⁹

Despite the perceived need for public transit in small cities and rural areas,
providing service in those places is relatively costly when measured per trip or per
passenger-mile. In 2006, for instance, federal capital and operating assistance per
trip in large urbanized areas (1 million or more) was $0.81, compared with $1.15 in
medium-sized urbanized areas (200,000 to 1 million) and $1.66 in small urbanized
areas (less than 200,000).⁸⁰ Comparative data for rural areas is not available, but
would most likely show a federal operating subsidy greater than $1.66 per trip.
Consequently, some argue that transit funding needs to be concentrated in large urban
areas where ridership is concentrated and where transit provides a relatively cost-
effective mode of transportation. In addition, they argue that these also tend to be the
places where highway congestion and air quality issues predominate, and the
economic development benefits of transit investment are highest.
Rate of Return. In a somewhat related issue, reauthorization of the transit
programs may also involve greater debate about each state’s “rate of return” from the
Highway Trust Fund (HTF), the so-called “donor-donee” issue. This issue concerns
the amount of funds each state receives from the HTF relative to the amount paid in
by the state’s drivers. A state that pays in more than it receives is known as a donor
state; a state that pays in less than it receives is known as a donee state. Highway
legislation at least as far back as the Surface Transportation Assistance Act of 1982,
P.L. 97-424, has been marked by such concerns. Transit funding, on the other hand,
has generally been immune to this issue, mainly because of the heavy concentration
of transit service and ridership in just a few states, and because such concerns have
been assuaged with relatively large increases in transit spending. In an era of fiscal
austerity, however, the debate surrounding each state’s share of transit funding may
appear as an issue.

⁷⁸ CRS Report RL33119, Safe, Accountable, Flexible, Efficient Transportation Equity Act
— A Legacy for Users: Selected Major Provisions, coordinated by John W. Fischer.
⁷⁹ Ibid.
⁸⁰ Calculated by CRS based on data from U.S. Department of Transportation, Federal
Transit Administration, National Transit Database 2006, tables 3, 7, 19. [http://www.
ntdprogram.gov/ ntdprogram/ data.htm] .

Paratransit Funding
SAFETEA reauthorized the Elderly Individuals and Individuals with Disabilities
Formula Program with a total of $675 million over six years, and created the New
Freedom program, which authorized another $339 million over four years. However,
as service demand rises and costs rise even more, transit agencies are likely to ask for
more federal help in providing paratransit service.
Paratransit, also known as demand response or dial-a-ride, as noted earlier, is
non-fixed route service for people with disabilities and the elderly, and typically
involves the use of small buses, vans, or passenger cars. Because of the specialized
nature of paratransit, the cost per passenger mile is the highest of any type of transit,
and farebox recovery the lowest. In 2004, operating expenditure per passenger mile
for paratransit was $2.70 per passenger mile compared with $0.73 for motor buses,
and $0.55 for transit service on average.⁸¹ The same year, farebox recovery was only

10%, compared with 27% for buses and an overall average of 35%.⁸²

The demand for paratransit has grown relatively rapidly since the passage of the
Americans with Disabilities Act of 1990, P.L. 101-336, required that transit agencies
with fixed route service provide “complementary paratransit” to people unable to use
fixed-route service due to a disability. Between 1995 and 2004, paratransit ridership
increased by 30% and passenger miles by 58%.⁸³ Over the same period, operating
expenditures for paratransit more than doubled, growing at an annual average rate of

11% (in nominal terms).⁸⁴ As a result, by 2004, demand response constituted 7.5%

of total transit operating expenditures, up from 4.6% in 1995.
Despite the growth in service provision and costs, research on people with
disabilities has found that there remain significant gaps in paratransit service
provision and large unmet needs, due, it is argued, to “a chronic lack of funding.”⁸⁵
Additionally, many believe that the demand for paratransit service will grow, partly
as a result of the general aging of the population. Advocates for paratransit funding
argue that good transportation provides the opportunity for people to engage in a full
range of economic and social activities, including work, and for many a chance to
live at home. This, advocates believe, provides a higher quality of life and less
reliance on government funding because of a reduced demand for income support and
institutional care. It is hard to argue against better transportation for those with few,
if any, other mobility options. However, some have noted that the growth in funding

⁸¹ U.S. Department of Transportation, Federal Highway Administration and Federal Transit
Administration, 2007, exhibit 6-30. [http://www.fhwa.dot.gov/policy/2006cpr/index.htm].
⁸² Ibid., 6-31.
⁸³ American Public Transportation Association, 2007 Public Transportation Fact Book
(Washington, DC, 2007). [http://www.apta.com/research/stats/factbook/index.cfm].
⁸⁴ U.S. Department of Transportation, 2007, exhibit 6-26.
⁸⁵ National Council on Disability, The Current State of Transportation for People with
Disabilities in the United States (Washington, DC, 2005), p. 13. [http://www.ncd.gov/
newsroom/publications/2005/pdf/current_state.pdf].

for paratransit is reaching a level where it may significantly affect resources for
fixed-route service.⁸⁶
A number of ideas on how to rein in the costs of paratransit without affecting
the quantity or quality of service have been proposed. These include making fixed-
route service as accessible as possible; improving the coordination of all paratransit
and human services transportation; encouraging greater privatization, such as
increasing the number of wheelchair accessible taxicabs; and greater use of advanced
technologies, such as computer-aided scheduling and dispatch.⁸⁷ It is thought that
fixed-route transit could be made more accessible by making vehicles and stops as
accessible as possible, using paratransit as a feeder service in some circumstances,
providing in-depth training on disability issues to all transit employees, and allowing
disabled riders to use the fixed-route system for free. As it currently stands, however,
it is not clear, if fully implemented, what effect these changes will have on funding
requirements over the long term. Consequently, governments at all levels will likely
be grappling with this issue for some time to come.

⁸⁶ Parker, T. “Paratransit Funding: Is There A Silver Bullet?,” Mass Transit, July/August

2007.

⁸⁷ Transportation Research Board, Guidebook for Attracting Paratransit Patrons to Fixed-
Route Services, TCRP Report 24 (Washington, DC, 1997), [http://onlinepubs.trb.org/
onlinepubs/tcrp/tcrp_rpt_24-a.pdf]; Metropolitan Washington Council of Governments,
Improving Demand Responsive Services for People with Disabilities in the Washington
Region (Washington, DC, 2006), [http://www.mwcog.org/uploads/pub-documents/9FpbXQ

20060221102158.pdf].