The Antiplanner

LaHood Eliminates Cost-Efficiency Rules

18th January 2010

LaHood Eliminates Cost-Efficiency Rules

posted in News commentary, Transportation |

Last week, Transportation Secretary Ray LaHood announced that federal transit grants would now focus on “livability.” Buried beneath this rhetoric is LaHood’s decision to eliminate the only efforts anyone ever made to make sure transit money isn’t wasted on urban monuments that contribute little to transportation.

Back in 2005, then-Secretary Mary Peters stunned the transit world when she adopted a “cost-effictiveness” rule for federal transit grants to new rail projects. In order to qualify, transit agencies had to receive a “medium” cost-effectiveness rating from the FTA, meaning they had to cost less than about $24 for every hour they would save transportation users (either by providing faster service to transit riders or by reducing congestion to auto drivers). This wasn’t much of a requirement: a true cost-efficiency calculation would rank projects that cost $0.50 per hour much higher than projects that cost $23.50 per hour; under Peters’ rule, they were all ranked the same. But any projects that went over the $24 threshold (which varied with inflation — by 2009 it was up to $24.50) were ruled out.

After throwing various temper tantrums, transit agencies responded in one of four ways. Those close to the $24 threshold went back and cooked their books to either slightly reduce the cost or slightly increase the amount of time the project was supposed to save. Those that were hopelessly far away from the $24 threshold, but had powerful representatives in Congress, obtained exemptions from the rule. These included BART to San Jose, the Dulles rail line, and Portland’s WES commuter train. Those that didn’t have the political clout either shelved their projects or, in a few cases, tried to fund them without federal support.

In 2007, when Congress created a fund for “small starts”, Peters imposed a new rule that transit agencies would have to show that streetcars were more cost-effective than buses. This led to further temper tantrums because the the money was “supposed to be for streetcars” (the provision had been written by Portland Representative Earl Blumenauer), but streetcars would never be as cost-efficient as buses. This meant that, except for Portland, virtually every agency that had wanted to waste federal money on streetcars shelved their plans.

Until now. LaHood’s announcement means that cost is not longer an issue. If your project promotes “livability” (which almost by definition means anything that isn’t a new road) or “economic development” (meaning it will be accompanied by subsidies to transit-oriented developments), LaHood will consider funding it, no matter how much money it wastes.

Transit agencies are naturally elated. Cities from Boise to Minneapolis to Houston now see that their wacko projects that defy common sense now have a chance of getting funded.

The bad news for transit agencies is that this change alone doesn’t mean there will be any more money for transit. Instead, there will be more competition for the same pot of money. Not to worry: House Democrats plan to open the floodgates to more transit spending as soon as they can get federal transportation funding reauthorized. This means taxpayers can expect to see more of their money wasted and commuters can expect congestion to get worse as more of their gas taxes are funneled into inane rail projects.

This entry was posted on Monday, January 18th, 2010 at 12:00 am and is filed under News commentary, Transportation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

There are currently 10 responses to “LaHood Eliminates Cost-Efficiency Rules”

Please feel free to submit comments. Constructive debate is welcome. Ad hominem attacks and name-calling will reveal the shallowness of the author. Foul language may be deleted. Your first comment will require moderation; after that, all comments will be approved unless they contain too many links in which case the software may hold them for approval as potential spam.

  1. 1 On January 18th, 2010, Dan said:

    Wow, here’s a shock.

    What Randal claimed:

    Transportation Secretary Ray LaHood announced that federal transit grants would now focus on “livability” …[meaning] LaHood’s decision to eliminate [cost control would] contribute little to transportation. LaHood’s announcement means that cost is [no] longer an issue

    What was actually said:

    In a dramatic change from existing policy, U.S. Transportation Secretary Ray LaHood today proposed that new funding guidelines for major transit projects be based on livability issues such as economic development opportunities and environmental benefits, in addition to cost and time saved</b<, which are currently the primary criteria.

    the FTA will now evaluate the environmental, community and economic development benefits provided by transit projects, as well as the congestion relief benefits from such projects.

    IOW: triple bottom line. Just like businesses do it.

    Shocking, surely, that upon checking the facts on the claim, it was found to be…um…if not a lie, then a steaming pile of road apples.

    DS

    posted on January 18th, 2010 at 9:08 am

  2. 2 On January 18th, 2010, prk166 said:

    From what I’ve seen this isn’t about cost no longer being an issue. From what I’ve seen the talk about taking “livability” and “economic development” into account is classic politics at work and really code for “dumping what little criteria we have”.

    On the other hand, there are some issues with the current approach that this could help address. It doesn’t make sense to spending billions to build LRT to haul people 20, 30 miles one-way, especially when we already have buses to do that relatively well and it’s serving areas that are unlikely to develop much of any density. This at least increases the chances for getting rail into more dense areas.

    posted on January 18th, 2010 at 9:14 am

  3. 3 On January 18th, 2010, javaplace said:

    I’m all for this new inclusion in FTA New Starts guidelines. It appears to emanate from a push for streetcars, e.g. Portland streetcar that revitalized Pearl District. When you consider the potential economic aspect of transit investments, as opposed to ‘how fast can I get from A to B with the lowest capital cost’, it makes sense!

    posted on January 18th, 2010 at 4:24 pm

  4. 4 On January 18th, 2010, Andy said:

    Why is it that planners blame Walmart (i.e. a public negative) because it takes business from other stores, but when they subsidize streetcars and dense development that creates some artificial store and restaurant business, they say it is a public gain?

    Street cars, like sports stadiums, don’t get people to eat out more. They just influence where people eat when they decide to eat out. So why should we subsidize restaurants in the street car district and not Olive Garden in the suburbs? When did city government become Gordon Ramsay?

    Unless, of course, the influential crowd likes certain restaurants better than others, and can’t wait to spend public money to get more of the restaurants they like but somehow aren’t profitable.

    posted on January 18th, 2010 at 7:51 pm

  5. 5 On January 18th, 2010, msetty said:

    Andy:
    Why is it that planners blame Walmart (i.e. a public negative) because it takes business from other stores, but when they subsidize streetcars and dense development that creates some artificial store and restaurant business, they say it is a public gain?

    Not any more “artificial” than developers getting their elected buddies to get a new freeway interchange funded, right? Or new tax subsidies for new roads to allow continued construction of dispersed, sprawling exurban development projects? RIGHT?

    posted on January 18th, 2010 at 10:51 pm

  6. 6 On January 19th, 2010, Mike said:

    Setty,

    Two wrongs do not make a right. You should have picked this wisdom up sometime around kindergarten.

    posted on January 19th, 2010 at 10:32 am

  7. 7 On January 20th, 2010, the highwayman said:

    LaHood is just cleaning up SOME of the mess that Peters made.

    posted on January 20th, 2010 at 3:12 am

  8. 8 On January 20th, 2010, Spokker said:

    “Two wrongs do not make a right.”

    But you and your crew only seem to be going after one wrong. Reason and Cato are known for going after trains and transit. Their highway bashing is much less apparent.

    I think subsidies for both should be stopped.

    posted on January 20th, 2010 at 3:36 pm

  9. 9 On February 18th, 2010, Bringing an Old Voice to the Debate » The Antiplanner said:

    [...] a lot of red tape. But scrutiny? Not hardly, especially since Transportation Secretary Ray LaHood eliminated cost-effectiveness requirements that themselves were very weak. The remaining evaluation process is subjective in many [...]

    posted on February 18th, 2010 at 12:01 am

  10. 10 On June 4th, 2010, FTA Wants Your Comments » The Antiplanner said:

    [...] January, Transportation Secretary Ray LaHood announced that he was replacing rules that required that federal transit grants had to be “cost [...]

    posted on June 4th, 2010 at 12:01 am

Leave a Reply

You must be logged in to post a comment.