February 14, 2018

This week, the White House once again proposed a budget that would eliminate the Federal Transit Administration’s Capital Investment Grants program that funds new subway and light rail (and the occasional bus rapid transit) systems.

The detailed FTA budget estimates and the New Starts Annual Report were released yesterday.

The bulk of annual funding for FTA is Highway Trust Fund contract authority provided by multi-year authorization acts, which are not changed by this proposed budget – the plan would allow $9.939 billion from the Trust Fund for the Formula Grants account in 2019, the exact same amount called for by the FAST Act of 2015. That money will be spent entirely as directed by the FAST Act. But all other FTA programs are funded by annual appropriations from the general fund of the Treasury, and are subject to annual funding negotiations.

The budget proposes $111.7 million for FTA overhead in 2019 ($1.5 million less than enacted in 2017, but not a massive cut by any means. The budget proposes to zero out the Technical Assistance and Training appropriation, which received $5 million in 2017 and would be zeroed out in the pending 2018 Senate appropriation bill (the budget documents do not give any rationale for this decision).

And while the Washington Post reported earlier this month that the budget would zero out the special annual appropriation for the Washington DC Metro system, the budget does request funding, albeit at a reduced level of $120 million instead of the usual $150 million. Again, the budget documents do not give any specific rationale for cutting $150 million to $120 million but it does say that $120 million will “support: completing the outstanding required safety actions from FTA and the NTSB; continuing investments in the Radio Infrastructure Replacement project; continuing replacement of Automatic Train Control infrastructure; funding additional overhauls and replacing elevators and escalators; and continuing track component replacement, and railcar overhauls focused on safe operations.” The budget documents also emphasize that WMATA already receives about $310 million per year out of the Transit Formula Grants account.

But the gigantic discrepancy is with the CIG (new starts) program. As in the 2018 budget request, the Administration is proposing to kill the program – enough funding is requested to pay the FY 2019 required installments of systems which have a signed full funding grant agreement (FFGA) and which are already under construction, but the Administration does not propose that any new projects be approved – ever.

Justification for this decision is lacking in the budget documents prepared by USDOT, but in the main budget message prepared by the White House, we see:

The Budget also proposes to wind down the Federal Transit Administration’s Capital Investment Grant program (known as New Starts), by limiting funding to projects with existing full funding grant agreements only. The President’s Infrastructure Initiative is designed to incentivize States and localities to raise new revenue and funding dedicated for infrastructure investment, via competitive Federal grant awards and other incentives. Those new State and local funds would be available for transportation projects prioritized by those communities, which are better equipped to understand their infrastructure needs. The Federal Government would continue to be a partner in advancing large, regionally- or nationally-significant projects via expanded Federal credit support.

There are currently ten projects with signed FFGAs that the Administration proposes to fund with its appropriation of $1 billion in fiscal 2019 and (presumably) with another $3.7 billion in future fiscal years until construction of those projects is completed. (The amount of future federal appropriations promised for those projects by the FFGAs is $5.8 billion but if the Senate version of the pending fiscal 2018 appropriations bill is enacted it will reduce that by $1.05 billion.)

However, there is a long (long) list of projects waiting to get into this program that won’t be able to do so if the Administration’s proposal is agreed to. Under the statute, projects apply to entire the project development phase while they complete permitting paperwork and get fully fleshed out. If the project justification and local financial commitment rating process required by 49 U.S.C. §5309 and implemented by 49 CFR Part 611 rates the project overall as at least “medium” (on the 1 to 5 scale of low, medium-low, medium, medium-high, and high), the project can pass into the engineering phase, and if the rating stays at least as medium and the project moves forward, it can be recommended for a FFGA so that construction can begin.

(We didn’t bother to count all the one-off “small start” projects that have a simplified evaluation process, but there are a lot of them coming, too.)

The latest version of the New Starts Annual Report shows that there are currently seven projects in the engineering phase and another thirteen projects in the project development phase. All told, the sponsors of those projects want at least $20 billion from the CIG program in 2018 and future years (the number for the San Jose BART extension isn’t in yet but should be at least $1.5 billion on top of $18.9 billion in firmer numbers). And the updated project profiles indicate that most of these projects anticipate getting a FFGA signed in calendar 2018 or 2019.

Congress is unlikely to agree to the “shutdown level” budget request for the CIG program. A year ago, the White House proposed $1.2 billion for the program, which was enough to fund the FY18 installments of signed FFGA projects but little more. The House bill provides $1.75 billion and the Senate bill $2.1 billion (and we expect the final omnibus bill next month to be at least as generous as the Senate bill because the just-signed two-year budget deal is flooding the Appropriations Committees with money).

But the authors of the CIG statute probably did not anticipate that there might come a day when the Department of Transportation just refused to advance projects along the PD –> Eng. –> FFGA pipeline. Or, if they did, they probably figured that Congress would just earmark the money for the projects that were in the engineering phase and sufficiently well-rated and awaiting a FFGA.

However, Congress unilaterally disarmed itself in the spending wars in 2011 by creating internal bans on earmarks. And as much as the Appropriations Committees like the CIG program, it has proven difficult for them to write bill language to keep the program going and force USDOT to fund specific projects that are awaiting FFGAs without violating that earmark ban.

The pending Senate bill made funds specifically available based on the FTA ratings evaluation:

The Committee’s recommendations also includes for new projects that received at least a “medium” overall rating in the fiscal year 2018 annual report: $454,000,000 for New Starts FFGAs, $145,700,000 for Core Capacity FFGAs, and $168,400,000 for Small Starts grant agreements.

But efforts to use the ratings process as a way around the earmark ban hit a snag this week when the new FTA ratings gave the first two projects of the Gateway Program (the $30-plus billion portfolio of passenger rail and transit projects in New Jersey and New York, centered around a new tunnel under the Hudson River) overall medium-low ratings, meaning that under the current regulations, they are not eligible to proceed to engineering or to get a FFGA and start construction.

In last year’s ratings, the non-tunnel project, the Portal North Bridge, got a medium-high rating, but since then, New Jersey changed the way it was proposing to issue bonds to support the project, and the new bond agreements have not yet been structured, so FTA was forced to assume that the money isn’t there yet. Last year the Hudson River Tunnel was not ready to be rated.

The tunnel and the other parts of the Gateway program are the top priorities of both Senate Minority Leader Chuck Schumer (D-NJ) and outgoing House Appropriations Committee chairman Rodney Frelinghuysen (R-NJ), the latter of whom managed to direct $900 million in the House appropriations bill towards Gateway projects without violating the earmark ban. (The language he put in his bill may not force USDOT to actually spend the money but would ensure that it couldn’t be spent on anything else anytime soon.)

Even if the Gateway projects can have their local financial commitment plans improved and then re-rated so that the overall projects score at least a “medium,” there is a real question as to whether or not the CIG program is the right place to fund the Hudson River Tunnel in particular. The CIG account is only authorized at $2.3 billion per year. As mentioned above, the projects with signed FFGAs are committed to $4.7 billion of that money starting in the not-yet-complete FY18 (two full years of the entire program’s worth of appropriations).

The other nineteen projects in engineering and PD stages (not counting the Hudson River Tunnel) want about $13.7 billion from the CIG program, which added to the $4.7 billion in current commitments gives $18.4 billion, which is eight years worth of CIG program funding at the authorized level of $2.3 billion per year.

Then the sponsors of the Hudson River Tunnel want another $6.7 billion from the CIG program just for that project – it would be more than twice as big as the previous biggest CIG commitment (which was the ARC tunnel that Governor Christie canceled, for which the new proposal is a replacement). Such an amount may be too big for the CIG program as currently constituted – FTA tells project sponsors not to request much more than $100 million per year in FFGA installment payments, and few projects have ever peaked at much more than $200 million in a year. The Hudson River Tunnel would demand far more than that. And, practically speaking, given how Congress likes to spread money around the country in terms of geographic fairness, if the Hudson Tunnel and the Portal North Bridge get funded quickly, it could mean years of delays in the other NYC mega-project, the Second Avenue Subway, since Congress is unlikely to give NYC $6.7 billion for a tunnel and $2 billion for a subway (far more money than any other subway project in the pipeline) at the same time.

Reminder: all budget documents can be found at www.enotrans.org/fy19.