Funding Streetcar Projects

For communities seeking to build streetcar projects, the past 16 months were filled with hope as federal funding was provided to build streetcars in several cities, and policies adverse to streetcars adopted by the Bush Administration were rescinded or revised by the Obama Administration. Looking to the future, though, many concerns remain about sustaining that funding. The Federal Transit Administration (FTA) New Starts/Small Starts project approval process has proven challenging for streetcar projects, yet changes may make the pathway to funding more favorable. Congress is also likely to consider the surface transportation authorization bill in the 112th Congress that provides an opportunity to remove barriers in the FTA New Starts/Small Starts project approval process and to provide funding for additional projects to be built. Yet, the pressure to address future federal spending and disputes over defining the federal interest in transit in general, and streetcars in particular, heighten the challenges for securing sustainable federal funding.

Major Policy Changes

Projects evaluated under the New Starts program (projects exceeding $250 million in total project cost and seeking $75 million or more in New Starts funding) are evaluated based on six justification criteria: cost effectiveness, mobility benefits, public transit-supportive land use, environmental benefits, operating efficiencies and economic development. The Small Starts projects (less than $250 million in project cost and seeking less than $75 million in New starts monies) are evaluated under three project evaluation criteria: cost effectiveness, public transit-supportive land use and economic development. In response to industry concerns, Congress changed section 5309 in the SAFETEA-LU Technical Corrections Act (P.L. 110-241) that required FTA to “give comparable, but not necessarily equal consideration” to each of these criteria.

On July 29, 2009 the Obama Administration announced new policy guidance for New Starts projects that responded to the SAFETEA-LU Technical Corrections Act and assigned 20 percent weight each to cost effectiveness, land use, economic development and mobility benefits and 10 percent each to operating efficiencies and environmental benefits. For Small Starts, equal weight was assigned to each of the three project evaluation criteria. On January 13, 2010 Department of Transportation (DOT) Secretary Ray LaHood rescinded the March/April 2005 FTA Dear Colleague letters that assigned 50 percent weight to cost effectiveness and required a project to have a “medium” rating in order to be recommended for funding. Further, the rescission of the letters returned to the use of “multiple measure” approach, which allows a “medium-low” cost effectiveness rating to be offset by a “medium” or higher rating for land use and/or economic development.

Federal Funding for Streetcars

Beginning with the February 17, 2010 DOT announcement regarding the funding provided under the American Recovery and reinvestment Act (ARRA) for the Transportation Investment Generating Economic Recovery (TIGER) program, the Obama Administration has provided $309.5 million for streetcar projects. In addition to the funding in TIGER I, DOT has also provided funding in the Urban Circulator grant program announced on July 8, 2010 and the TIGER II program funded in the FY 2010 Transportation, Housing and Urban Development Act with project announcements made on October 20, 2010. These are very positive developments as the Obama Administration recognizes that transit investments can serve to revitalize metropolitan areas, attract economic development, expand housing and transportation choices and generate community benefits such as lowering energy consumption and reducing greenhouse gas emissions.