Surface Transportation
Many Factors Affect Investment Decisions Gao ID: GAO-04-744 June 30, 2004Passenger and freight traffic are expected to grow substantially in the future, generating additional congestion and requiring continued investment in the nation's surface transportation system. Over the past 12 years, the federal government has provided hundreds of billions of dollars for investment in surface transportation projects through the Intermodal Surface Transportation Efficiency Act of 1991 and its successor legislation, the Transportation Equity Act for the 21st Century. Reauthorization of this legislation is expected to provide hundreds of billions of dollars more in federal funding for surface transportation projects. For this investment to have the greatest positive effect, agencies at all levels of government need to select investments that yield the greatest benefits for a given level of cost. This report provides information about the processes that state and regional transportation decisionmakers use to analyze and select transportation infrastructure investments. GAO identified (1) key federal requirements for planning and deciding on such investments, (2) how benefit-cost analysis facilitates sound decisionmaking, and (3) other factors that decision-makers consider in evaluating and deciding on investments.
Federal requirements specify the overall approach that states and regional organizations should use in planning transportation infrastructure projects, but generally do not specify what analytical tools planners should use to evaluate projects. These key requirements include developing strategic goals and objectives; considering a wide range of environmental and economic factors; preparing long- and short-range plans; and ensuring an inclusive process that involves many stakeholders. The Office of Management and Budget, the Department of Transportation (DOT), and GAO have identified benefit-cost analysis as a tool to help decision-makers identify projects with the greatest net benefits. The systematic process of benefit-cost analysis helps decision-makers organize information about, and determine trade-offs between, alternatives. Researchers also acknowledged challenges in applying benefit-cost analysis, including quantifying some benefits and costs, defining the scope of the project, and ensuring the precision of estimates used in the analysis. Ongoing research by DOT and others is aimed at improving and expanding state and regional decision-makers' application of benefit-cost analysis. Many of the transportation planners we interviewed said that factors other than the analyses developed during the planning process often influenced final investment decisions. For example, state and regional decision-makers must consider the structure of federal funding sources. Since federal funding often is tied to a single transportation mode, it may be difficult to finance projects that do not have dedicated funding, such as railroad improvement projects. In addition, decision-makers must ensure that wideranging public participation is reflected in their deliberations and that their choices take into account numerous views. In some cases, voter support through referenda is required before a project may proceed or financing can be secured. The physical constraints of an area may also affect investment choices. Difficulties in expanding capacity and limits on existing infrastructure may direct investments to preserving and maintaining existing facilities or improving operations. Finally, multistate transportation corridors present special challenges in coordinating investment decisions.
GAO-04-744, Surface Transportation: Many Factors Affect Investment Decisions
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Report to the Ranking Minority Member, Committee on Commerce, Science,
and Transportation, U.S. Senate:
United States General Accounting Office:
GAO:
June 2004:
Surface Transportation:
Many Factors Affect Investment Decisions:
GAO-04-744:
GAO Highlights:
Highlights of GAO-04-744, a report to the Ranking Minority Member,
Committee on Commerce, Science, and Transportation, U.S. Senate
Why GAO Did This Study:
Passenger and freight traffic are expected to grow substantially in the
future, generating additional congestion and requiring continued
investment in the nation‘s surface transportation system. Over the past
12 years, the federal government has provided hundreds of billions of
dollars for investment in surface transportation projects through the
Intermodal Surface Transportation Efficiency Act of 1991 and its
successor legislation, the Transportation Equity Act for the 21st
Century. Reauthorization of this legislation is expected to provide
hundreds of billions of dollars more in federal funding for surface
transportation projects. For this investment to have the greatest
positive effect, agencies at all levels of government need to select
investments that yield the greatest benefits for a given level of cost.
This report provides information about the processes that state and
regional transportation decision-makers use to analyze and select
transportation infrastructure investments. GAO identified (1) key
federal requirements for planning and deciding on such investments,
(2) how benefit-cost analysis facilitates sound decision-making, and
(3) other factors that decision-makers consider in evaluating and
deciding on investments. We provided copies of this report to the
Department of Transportation for its review. The Department generally
agreed with the report‘s contents and provided technical comments,
which we incorporated as appropriate.
What GAO Found:
Federal requirements specify the overall approach that states and
regional organizations should use in planning transportation
infrastructure projects, but generally do not specify what analytical
tools planners should use to evaluate projects. These key requirements
include developing strategic goals and objectives; considering a wide
range of environmental and economic factors; preparing long- and
short-range plans; and ensuring an inclusive process that involves many
stakeholders.
The Office of Management and Budget, the Department of Transportation
(DOT), and GAO have identified benefit-cost analysis as a tool to help
decision-makers identify projects with the greatest net benefits. The
systematic process of benefit-cost analysis helps decision-makers
organize information about, and determine trade-offs between,
alternatives. Researchers also acknowledged challenges in applying
benefit-cost analysis, including quantifying some benefits and costs,
defining the scope of the project, and ensuring the precision of
estimates used in the analysis. Ongoing research by DOT and others is
aimed at improving and expanding state and regional decision-makers‘
application of benefit-cost analysis.
Many of the transportation planners we interviewed said that factors
other than the analyses developed during the planning process often
influenced final investment decisions. For example, state and regional
decision-makers must consider the structure of federal funding sources. Since federal funding often is tied to a single transportation mode, it may be difficult to finance projects that do not have dedicated funding, such as railroad improvement projects. In addition, decision-makers must ensure that wide-ranging public participation is reflected in their deliberations and that their choices take into account numerous views. In some cases, voter support through referenda is required before a project may proceed or financing can be secured. The physical constraints of an area may also affect investment choices. Difficulties in expanding capacity and limits on existing infrastructure may direct investments to preserving and maintaining existing facilities or improving operations. Finally, multistate transportation corridors present special challenges in coordinating investment decisions.
Key Factors Affecting Transportation Planning Decisions:
[See PDF for image]
[End of figure]
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To view the full product, including the scope and methodology, click on
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[End of section]
Contents:
Letter:
Results in Brief:
Background:
Federal Requirements Specify an Approach for Planning and Deciding on
Transportation Projects:
Benefit-Cost Analysis Is a Method for Evaluating Alternatives and
Improving Transportation Infrastructure Decision-Making:
Many Other Factors Shape Transportation Investment Choices:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Summary of Three Types of Economic Analyses for Comparing
Investment Alternatives:
Appendix III: Overview of Benefit-Cost Analysis:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Potential Stakeholders Involved during the Metropolitan and
Statewide Planning Process:
Table 2: Key Factors To Be Considered in Planning and Deciding on
Transportation Investments, as Identified in Federal Requirements:
Table 3: Key Elements for Benefit-Cost Analysis:
Figures:
Figure 1: Federally Required Elements of Metropolitan and Statewide
Transportation Plans:
Figure 2: Comparison of Three Types of Economic Analyses:
Abbreviations:
AASHTO: American Association of State Highway and Transportation
Officials:
APTA: American Public Transportation Association:
CALTRANS: California Department of Transportation:
CMAQ: Congestion Mitigation and Air Quality Improvement Program:
CREATE; Chicago Regional Environmental and Transportation Efficiency:
DOT: Department of Transportation:
EIS: Environmental Impact Statement:
EPA: Environmental Protection Agency:
FAF: Freight Analysis FrameworK:
FHWAFederal Highway Administration:
FTAFederal Transit Administration:
ISTEA: Intermodal Surface Transportation Efficiency Act of 1991:
ITS: Intelligent Transportation Systems:
MPO: Metropolitan Planning Organization:
NCHRP: National Cooperative Highway Research Program:
OMB: Office of Management and Budget:
NEPA: National Environmental Policy Act:
SCAG: Southern California Association of Governments:
STIP: State Transportation Improvement Program:
STP: Surface Transportation Program:
TCRP: Transit Cooperative Research Program:
TEA-21: Transportation Equity Act for the 21st Century:
TIP: Transportation Improvement Program:
TRB: Transportation Research Board:
United States General Accounting Office:
Washington, DC 20548:
June 30, 2004:
The Honorable Ernest Hollings:
Ranking Minority Member:
Committee on Commerce, Science and Transportation:
United States Senate:
Dear Mr. Hollings:
The scope of the U.S. surface transportation system--which primarily
includes roads, mass transit systems, and railroads--is vast and
increasingly congested.[Footnote 1] Passenger and freight traffic are
expected to grow substantially in the future, requiring continued
investment in the surface transportation system. For example, from 2000
to 2010, passenger travel on roads is expected to grow by about 25
percent, and passenger travel on transit systems is expected to
increase by about 17 percent, according to U.S. Department of
Transportation (DOT) forecasts. DOT also estimates that freight traffic
will increase by 43 percent from 1998 to 2010.
Over the past 12 years, the federal government has provided hundreds of
billions of dollars for investment in surface transportation projects
through the Intermodal Surface Transportation Efficiency Act of 1991
(ISTEA) and its successor legislation, the Transportation Equity Act
for the 21st Century (TEA-21), which expired in 2003 but has been
subsequently extended.[Footnote 2] Reauthorization of this
legislation--an issue currently before Congress--is expected to provide
hundreds of billions of dollars more in federal funding for surface
transportation projects over the next 6 years. For this investment to
have the greatest positive effect on emerging transportation problems,
agencies at all levels of government will need to select projects that
provide the greatest benefits for a given level of cost. Making cost-
effective investment choices will become even more critical if, as some
experts believe, the nation faces a sustained period of deficits and
fiscal imbalance, resulting from growing mandatory commitments for
Social Security and Medicare and increased homeland security and
defense commitments. These challenges require the nation to think
critically about existing government programs and commitments and
implement decision-making processes that will provide the most cost-
beneficial outcomes.
The federal government has established a framework of planning
requirements and processes designed to improve the quality of decisions
about investing in transportation infrastructure investments. ISTEA and
TEA-21 specified much of this planning and decision-making framework.
Various analytical approaches have been refined over time to better
calculate the benefits and costs of transportation investments and
provide decision-makers with the tools to make better-informed choices.
This report responds to your request for information about the
processes that transportation decision-makers at all levels of
government use to analyze and select surface transportation
infrastructure investments. As agreed with your office we identified
(1) key federal requirements for planning and deciding on surface
transportation infrastructure investments, (2) how benefit-cost
analysis facilitates sound transportation investment decisions, and (3)
other factors that transportation decision-makers consider in
evaluating and deciding on investments.
To identify the key processes for transportation infrastructure
planning and decision-making, we reviewed existing federal laws,
regulations, and guidance on the transportation planning process and
interviewed federal, state, regional, and local transportation agency
officials to gain their perspective on the different federal
requirements. To identify how benefit-cost analysis facilitates sound
transportation investment decisions, we analyzed the existing economics
literature and transportation planning studies containing evaluations
of benefit-cost analysis, and we interviewed academics and
representatives of a broad range of transportation organizations to
gain their perspective on issues, including the generalizability of
benefit-cost analysis and the feasibility of comparisons among various
transportation modes. To identify other factors that decision-makers
consider in evaluating and deciding on investments, we (1) analyzed
pertinent research on transportation planning and decision-making, as
identified by our own review of the research and by transportation
researchers we interviewed; (2) reviewed planning documents and
analyses used by state, regional, and local transportation decision-
makers; and (3) interviewed federal, regional, state, and local
transportation officials; representatives of private sector and civic
organizations; and other transportation experts involved in the
planning and decision-making processes. Many of these interviews and
document reviews were part of site visits that we conducted in three
metropolitan areas that are major centers of passenger and freight
traffic--Chicago, IL; Los Angeles, CA; and San Francisco, CA--to
understand how investment decisions were actually made in those
locations. To ensure the reliability of information presented in this
report, we relied to a large extent on studies from the economics and
transportation literature that were reviewed by peers prior to
publication; and we corroborated much of the testimonial information
provided during our three site visits by obtaining documentation of
investment decision-making processes and results. We conducted our work
from September 2003 through June 2004 in accordance with generally
accepted government auditing standards. (See app. I for more
information about our scope and methodology.)
Results in Brief:
Federal laws and requirements specify an overall approach for
transportation planning and decision-making that states and regional
agencies must follow in order to receive federal funds. This approach
includes involving numerous stakeholders, identifying state and
regional goals, developing long-and short-range state and metropolitan
planning documents, and ensuring that a wide range of transportation
planning factors are considered. The many stakeholders include not only
state, regional, and local agencies, but also private industry and the
public. The planning process begins with the definition of overall
state and regional goals and objectives. As part of this process,
states and Metropolitan Planning Organizations (MPO)[Footnote 3] must
collect and analyze data to help evaluate project priorities. These
priorities are specified in state and metropolitan long-range plans and
short-range programs. Long-range plans identify transportation needs
for the next 20 years or more, and short-range programs identify
specific projects to be initiated in the near future, usually about 3
years. Both state and metropolitan short-range programs must specify
funding sources and be financially constrained.[Footnote 4] In
selecting projects for the plan, states and MPOs must consider a wide
range of planning factors specified by the federal government, such as
conformity with environmental and civil rights laws, preservation of
existing systems, and increasing accessibility and mobility, among
others. While federal requirements specify a wide range of these
specific factors, they generally do not specify what analytical tools-
-such as benefit-cost analysis--planners should use to evaluate these
factors. Instead, states and MPOs are largely responsible for selecting
the methods used to analyze these factors.
The Office of Management and Budget (OMB), DOT, and GAO have identified
benefit-cost analysis as a useful tool for integrating the social,
environmental, economic, and other effects of investment alternatives
and for helping decision-makers identify projects with the greatest net
benefits. In addition, the systematic process of benefit-cost analysis
helps decision-makers organize and evaluate information about, and
determine trade-offs between, alternatives. Research and best practices
indicate key steps of the analysis to ensure that the analyst defines
the project objectives, identifies all reasonable alternatives, and
systematically evaluates and compares the projected effects of each
alternative. Challenges of benefit-cost analysis include difficulties
in identifying the distribution of benefits and costs of alternative
projects across affected locations and population groups, quantifying
and assigning a dollar value to some effects, defining the scope of the
alternative projects, and ensuring the precision of estimates used in
the analysis. Notwithstanding these challenges, benefit-cost analysis
remains an important and useful tool in helping select transportation
infrastructure projects. DOT agencies and the National Research
Council's Transportation Research Board have initiatives under way to
improve benefit-cost analysis done by planners and to expand its use.
Transportation planners with whom we talked, particularly at the
regional level, said that other factors, many of which are recognized
in existing transportation legislation, can play a major role in final
investment decisions. For example, transportation decision-makers
consider the availability of federal funding sources, which are largely
structured to direct funds to highways and transit systems, rather than
railroads or intermodal projects. Also, transportation decision-makers
are aware that they must achieve a consensus on improvements while
incorporating public participation into the process. In some cases,
achieving support from the voters through referenda is required before
projects may proceed or financing can be secured. This need for voter
support is an especially important factor in California, where sales
taxes have become a primary source of funding new transportation
infrastructure. Furthermore, physical limitations also affect choices
of transportation investments. Difficulties in expanding capacity and
limits on existing infrastructure may direct available investments
toward preserving and maintaining facilities or improving operations
rather than building new infrastructure. Nationwide, spending on system
preservation--as a share of highway capital spending--from all sources
increased from 45 percent to 52 percent from 1993 to 2000. In Chicago,
transportation planners cited system preservation as a primary
consideration in making decisions about projects and in the Los Angeles
and San Francisco regions, fully 80 percent of transportation funds are
spent on system preservation, maintenance, and operations. Finally,
long, multistate transportation corridors may present special planning
and coordination challenges. Achieving cooperation and coordination
among multiple agencies, communities, and transportation modes--each
with its own priorities--makes the planning and implementation of
multistate and multiregion projects difficult. In some cases, ad hoc
state coalitions have emerged to try to meet this need, especially in
coordinating intelligent transportation system technologies.[Footnote
5] However, planning for intrastate transportation corridors fits more
easily into the framework of state planning.
We provided copies of this report to the Department of Transportation
for its review and comment. The department generally agreed with the
report's contents and also provided technical comments, which we
incorporated as appropriate.
Background:
The nation's federal surface transportation investment policy has
become increasingly complex, changing from a narrow focus on completing
the nation's interstate highway system to a broader emphasis on
maintaining and more efficiently operating our highways, supporting
mass transit, protecting the environment, and encouraging innovative
technologies. With the interstate system largely completed in the
1980s--and continuing with the passage of ISTEA in 1991 and TEA-21 in
1998--the federal government has shifted its focus toward preserving
and enhancing the capacity of the transportation system by supporting a
large network of highway, mass transit, and other surface
transportation programs and projects.
The funding for transportation plans and projects comes from a variety
of sources including federal, state, and local governments; special
taxing authorities and assessment districts; and user fees and tolls.
While metropolitan areas receive transportation funds from state and
local sources, the federal government also is a significant funding
source, using revenues from federal highway tax receipts and
supplemented by general fund revenues. ISTEA and TEA-21 continued the
use of the federal Highway Trust Fund--which is divided into a Highway
Account and Mass Transit Account--as the mechanism to account for
federal highway user tax receipts that fund various surface
transportation programs. The Federal Highway Administration (FHWA)
distributes highway program funds to state transportation departments
that, in turn, allocate the funds to urban and rural areas on the basis
of local priorities and needs.[Footnote 6] The Federal Transit
Administration (FTA) sends most urban transit funds directly to local
transit operators while state transportation departments administer
rural transit funds. In some cases, Congress may designate specific
transportation projects for funding. For example, TEA-21 allocated $9.4
billion over 6 years to 1,850 congressionally designated projects.
Finally, ISTEA and TEA-21 also allowed the use of certain federal
highway program funds for either highway or transit projects, referred
to as flexible funding.[Footnote 7]
Key issues--such as traffic congestion, air pollution, land use and
sprawl, the economic viability of neighborhoods and commercial areas,
and facilitating national economic growth--are significantly affected
by decisions about how federal transportation funds are spent. These
decisions grow out of an overall transportation planning and decision-
making process involving states, MPOs, local governments, and other
stakeholders.
Federal Requirements Specify an Approach for Planning and Deciding on
Transportation Projects:
Federal laws and requirements specify an overall approach for
transportation planning agencies to use in planning and deciding on
projects. State, regional, and local government agencies must operate
within these requirements to receive federal funds. The laws and
requirements--which include ISTEA, TEA-21, and their associated
regulations--establish certain requirements governing the way states
and local governments plan and decide upon transportation projects. In
particular, the requirements describe various planning tasks that
states and MPOs must perform, including (1) involving a wide range of
stakeholders in the process; (2) identifying overall goals and
objectives and data to support transportation investment choices; (3)
developing long-and short-range transportation programs and plans; (4)
specifying financing for the transportation programs and projects; and
(5) ensuring that the transportation planning and decision-making
process reflects a variety of planning factors, such as environmental
concerns. States and MPOs must consider a wide range of planning
factors laid out in federal statutes and regulations. However, federal
planning requirements generally do not provide specific guidance on how
transportation planners should evaluate these factors.
Transportation Planning Involves Multiple Stakeholders:
ISTEA and TEA-21 provided stakeholders with greater control over
transportation decisions in their own regions than was done in the past
and recognized that multiple agencies were responsible for planning,
operating, and maintaining the entire transportation system. For this
reason, the laws established a planning process that emphasizes
cooperation and coordination among transportation stakeholders in the
investment decision-making process. To achieve this goal, both ISTEA
and TEA-21 sought to strengthen planning practices and coordination
between states and metropolitan areas and between the private and
public sectors and to improve connections between different forms of
transportation. To foster involvement by all interested parties, states
and MPOs are expected to provide opportunities for notice and public
involvement throughout the planning and project selection process. For
stakeholders and other interested parties (see table 1), federal
regulations require a formal public involvement process that includes
reasonable access to technical and policy information used in
developing transportation plans as well as adequate periods for public
comment.
Table 1: Potential Stakeholders Involved during the Metropolitan and
Statewide Planning Process:
Potential stakeholders:
* Elected officials;
* Public transit operators;
* Affected public agencies;
* Representatives of transportation agency employees;
* Freight shippers;
* Providers of freight transportation services;
* Private providers of transportation;
* Representatives of users of public transit;
* Citizens, and
* Other interested parties.
Source: GAO analysis of federal metropolitan and statewide
transportation planning statutes and regulations.
[End of table]
State departments of transportation--working with transportation
organizations, local governments, and the public--develop state
transportation goals and plans. Local governments, such as cities and
counties, and regional entities, such as MPOs, carry out additional
transportation planning and project implementation functions,
especially for highway projects. Transit agencies, in addition to
operating transit services such as bus, subway, light rail, commuter
railroad, and other forms of mass transit, also plan and implement
capital projects. Other organizations, such as nonprofit,
environmental, and community organizations, are involved in
transportation decision-making through the public participation
process. Finally, private sector firms also may participate as advisors
in the planning and decision-making process, especially when public
decisions directly affect their interests.
MPOs, which are regional transportation policy bodies composed of
representatives from various governmental and other organizations, are
key players in the coordination of transportation plans and projects.
MPOs are designed to provide a setting for impartial transportation
decision-making by facilitating evaluation of alternatives,
development of long-and short-range planning documents, and public
involvement. In particular, MPOs provide the forum for the various
providers of transportation facilities[Footnote 8] to come together to
develop a more comprehensive approach to meeting regional
transportation needs. Finally, DOT oversees state and metropolitan
transportation planning and provides advice and training on
transportation issues.
Transportation Planning Requires Identifying an Overall Vision and
Analyzing Alternatives before Deciding on Projects:
In initiating the transportation planning process, states and MPOs are
expected to have a long-term vision that articulates broad goals for
the future of the transportation systems in the state or region. DOT
guidance states that in developing the long-term vision, states and
regions are to consider several factors, including projected population
growth and economic changes, current and future transportation needs,
maintenance and operation of existing transportation facilities,
preservation of the human and natural environment, and projected land
uses. States and MPOs may also conduct investment and planning studies
to identify major transportation corridors in the state or region.
In deciding which proposed transportation projects meet the needs and
reflect the long-range vision of the state or region, states and MPOs
are required to establish a process for collecting and analyzing data
to evaluate different transportation alternatives and using the
resulting information to establish priorities for improving the area's
transportation assets. As part of this process, transportation planners
may develop performance measures and transportation models to evaluate
existing or proposed projects. Performance measures are important
indicators of how well the transportation system is operating. Some
examples of user-oriented performance measures are average trip travel
time, length of delay, and reliability of trip making. Transportation
models are simulations of the "real world" that can be used to show the
impact of changes in a metropolitan area on the transportation system
(such as addition of a new road or transit line or increases in
population or employment). Specific types of transportation models are
not required by federal planning regulations.
Federal Laws Require That Transportation Needs and Proposed Projects Be
Documented in Long-Range Plans and Short-Range Programs:
After articulating a vision of overall transportation goals and
considering alternative ways of reaching those goals, federal laws and
regulations require that states and metropolitan areas document their
decisions about future transportation needs and their selection of
federally funded surface transportation projects through long-range
transportation plans and short-range programs.[Footnote 9] A
metropolitan long-range transportation plan identifies transportation
needs for at least the next 20 years, but does not necessarily identify
specific projects. It is expected to include a description of
congestion management strategies as well as capital investments and
other measures necessary to (1) ensure the preservation of the existing
transportation system and (2) make the most efficient use of existing
transportation facilities to relieve congestion and enhance the
mobility of people and goods. A state long-range plan is expected to be
developed in cooperation with MPOs in the state and to be intermodal
and statewide in scope. (see fig. 1).
Figure 1: Federally Required Elements of Metropolitan and Statewide
Transportation Plans:
[See PDF for image]
[End of figure]
In contrast to the long-range plan, a short-range program covers a more
limited time frame--usually about 3 years--and describes specific
transportation projects or phases of an included project, including the
scope and estimated costs of those projects. In a metropolitan short-
range Transportation Improvement Program (TIP), MPOs are required to
identify the criteria and process for prioritizing proposed
transportation projects, including the extent to which comparisons
among modes were considered. In addition, all surface transportation
projects that are to receive federal funding must be included in the
metropolitan and state programs to receive federal funds. At the state
level, each state DOT is expected to work cooperatively with its MPOs
to develop a single State Transportation Improvement Program (STIP),
which is an intermodal program of projects encompassing all the areas
of the state. The STIP incorporates TIPs developed by the MPOs within
the state, and a project in a metropolitan region must be included in
the TIP before it may be included in the state program. Once adopted by
the state, the STIP is concurrently submitted to FHWA and FTA for
approval at least once every 2 years. In addition to approving the
STIP, FHWA and FTA are also responsible for certifying that the state
planning processes are conducted in accordance with all applicable
federal requirements.
Under federal requirements, states and MPOs must specify funding
amounts and sources for transportation programs and projects. States
and MPOs must consider funding needs for both new projects and the
maintenance and operation of the existing transportation system.
Financial planning is part of both the short-and long-range planning
processes and includes identification of resources that are reasonably
expected to be available. Projects in the TIP and STIP are specifically
linked to funding sources and additional strategies for securing funds
are included in the plan.
While federal requirements specify that all MPOs have an analytical
process in place to help prioritize and select projects, how projects
originate and are selected for inclusion in transportation plans and
programs may vary in different regions. In some instances, state DOTs
are heavily involved in the metropolitan planning process. For example,
the Illinois DOT heavily influences the planning process in
metropolitan Chicago. In contrast, by state law, California has chosen
to give more planning and decision-making power to counties by directly
allocating a greater share of transportation funds to the
counties.[Footnote 10] Another defining characteristic of
transportation project development in the sites we visited in
California is direct citizen involvement in selecting transportation
projects through local ballot initiatives.
Many Factors To Be Considered Throughout the Planning and Decision-
Making Process:
Federal legislation has identified many factors that states and
metropolitan areas are to consider in planning and deciding on surface
transportation investments. As shown in table 2, these factors include
environmental compliance, safety, system maintenance and operations,
and land use, among others.[Footnote 11]
Table 2: Key Factors To Be Considered in Planning and Deciding on
Transportation Investments, as Identified in Federal Requirements:
Key factors:
* Ensure compliance with provisions of the National Environmental
Policy Act, Clean Air Act, and Civil Rights Act;
* Support the economic vitality of the metropolitan area, especially
by enabling global competitiveness, productivity, and efficiency[A];
* Increase the safety and security of the transportation system for
motorized and nonmotorized users[A];
* Increase the accessibility and mobility options available to people
and for freight[A];
* Protect and enhance the environment, promote energy conservation,
and improve quality of life[A];
* Enhance the integration and connectivity of the transportation
system, across and between modes, for people and freight[A];
* Promote efficient system management and operation[A];
* Emphasize the preservation of the existing transportation system[A];
* Promote congestion relief and prevention through management
strategies/ systems;
* Consider the likely effect of transportation policies on land use
and development;
* Consider using innovative mechanisms for financing projects;
* Expand, enhance, and increase use of transit services;
* Examine the overall social, economic, energy, and environmental
effects of transportation decisions;
* Consider access to ports, airports, and intermodal transportation
facilities;
* Preserve rights-of-way access for future transportation projects;
* Consider connectivity of roads in areas outside MPO planning
boundaries and in other states; and;
* Consider recreational travel and tourism needs.
Source: GAO analysis of federal regulations governing metropolitan and
statewide transportation planning.
[A] Planning factors designated in TEA-21.
[End of table]
For example, transportation planners and decision-makers must develop
alternatives and select projects that conform to the requirements of a
variety of laws, such as the National Environmental Policy Act (NEPA)
of 1969 and Title VI of the Civil Rights Act.[Footnote 12] Under NEPA,
federal agencies must assess the impact of major federal actions
significantly affecting environmental quality. Agencies document these
analyses in environmental impact statements. This analysis serves two
principal purposes: (1) to ensure that agencies have available detailed
information concerning potentially significant environmental impacts
to inform their decision-making, and (2) to ensure that the public has
this information so that it may play a role in both the decision-making
process and the implementation of the decision.
In analyzing the effects of a proposed action and alternatives,
agencies must assess a variety of effects--including ecological,
economic, and social. Agencies may include or refer to benefit-cost
analyses in environmental impact statements. However, for purposes of
complying with NEPA, the weighing of the merits and the drawbacks of
the various alternatives need not be displayed in a monetary benefit-
cost analysis and should not be when there are important qualitative
considerations.[Footnote 13] When it is uncertain whether the proposed
action would have significant environmental effects, agencies use
environmental assessments to determine whether the proposed action
would have such effects and therefore whether an environmental impact
statement is necessary. Environmental assessments are relatively brief
documents that need not include detailed effects analyses. Most
transportation projects do not require the preparation of the more
detailed environmental impact statement. In addition to requirements
for environmental assessments or environmental impact statements, in
metropolitan regions that have significant air quality problems,
transportation plans and programs must conform to the State Air Quality
Plans, which outline strategies for reaching compliance with air
quality standards established by the U.S. Environmental Protection
Agency (EPA).[Footnote 14] To meet these standards, states and MPOs in
these designated regions must identify transportation projects that
will help reduce motor vehicle emissions.
Title VI of the Civil Rights Act of 1964 prohibits discrimination on
the basis of race, color, or national origin in programs and activities
that receive federal financial assistance. To comply with Title VI, DOT
issued regulations requiring recipients of federal transportation funds
to provide assurances of compliance, periodic compliance reports, and
access to relevant information about compliance. The regulations
require that each MPO state that its planning process is in compliance
with Title VI, as well as other statutory requirements. Both Title VI
and NEPA require involvement and input from the public, interest
groups, resource agencies, and local governments throughout the
transportation planning and project development process.
Transportation Planners Generally Have Discretion in Selecting
Analytical Tools:
Other than the NEPA requirements for environmental analyses, federal
requirements give states and MPOs considerable flexibility in selecting
specific analytical tools and elements used to evaluate projects and
make investment decisions. For most surface transportation projects,
current planning regulations require only that states (in coordination
with MPOs) establish a process to conduct data analyses and evaluate
alternatives for transit and highway projects. In defining the factors
to be included in such an analysis, the requirements specify in general
terms that states should consider identified social, economic, energy,
and environmental effects of transportation decisions. Federal planning
requirements also state that the metropolitan planning process should
consider the cost-effectiveness and financing of alternative
investments to meet transportation demand, support efficient
transportation system performance, and consider the related impacts on
social and economic development, housing, and employment goals.
However, the requirements do not provide guidance to the states and
MPOs on the types of analyses that are required or how they are to be
prepared.
An exception to this approach applies to major transit system projects
eligible for capital investment grants and loans under FTA's New Starts
program. Under this program, FTA identifies and funds fixed guideway
transit projects, including heavy, light, and commuter rail, ferry, and
certain bus projects (such as bus rapid transit). In contrast to other
FHWA and FTA programs where funds are distributed through statutory
formulas, funding commitments for the New Starts program are made for
specific projects, and projects are evaluated at various stages in the
development process. For New Starts projects, federal requirements are
more specific in terms of the types of data to be collected, the
criteria for conducting an analysis, and the factors involved in
evaluating a proposed project. For example, to be considered for
possible New Starts funding, local project sponsors must prepare an
alternatives analysis on the benefits, costs, and impacts of
alternative strategies to address a transportation problem in a given
corridor.[Footnote 15]
While FHWA and FTA guidance does provide some technical assistance on
the use of various analytical tools and models, neither FHWA nor FTA
advocates the use of any particular set of analytical tools, except for
the New Starts program. In addition, according to a 1999 National
Cooperative Highway Research Program report, decision-makers are often
uncertain about the appropriate use of analytic tools, including their
usefulness, reliability, and data requirements.[Footnote 16]
Furthermore, FHWA officials note that there currently is no minimum set
of elements that are required to be included in an analytical model. In
fact, FHWA officials point out the difficulty of establishing a
consensus on modeling standards, especially since the use of tools or
models varies from one region to the next. As a result, states and MPOs
have largely been responsible for identifying and performing their own
analyses during the planning process.
Benefit-Cost Analysis Is a Method for Evaluating Alternatives and
Improving Transportation Infrastructure Decision-Making:
Although the federal framework does not require the use of any
particular tool, federal guidance advocates using benefit-cost analysis
to evaluate investments. Benefit-cost analysis facilitates sound
transportation investment decisions by integrating the effects of a
potential alternative into a common monetary measure for comparison
with other alternatives. In assessing the relative benefits and costs
of each alternative, the analyst attempts to integrate social,
economic, energy, and environmental impacts, in accordance with federal
guidance, directly into the benefit-cost analysis. Research and best
practices indicate that key steps of the analysis include defining the
project objectives, identifying all reasonable alternatives, and
systematically evaluating and comparing the projected effects of each
alternative. Upon completion of the analysis, the decision-maker can
derive useful information about the trade-offs among alternatives and
identify the alternative that results in the greatest estimated net
social benefit to society. Researchers acknowledge several practical
challenges of benefit-cost analysis, such as difficulties in
quantifying some benefits and costs and defining the scope of the
project. However, major transportation groups, such as DOT and the
National Research Council's Transportation Research Board (TRB),
continue to work on guidance and provide resources to improve and
simplify benefit-cost analysis and other analytic tools for
practitioners.
Federal Guidance Supports the Use of Benefit-Cost Analysis:
While federal planning regulations for transportation generally do not
require the use of specific analytical models, several federal sources
have identified benefit-cost analysis as a useful tool to help
decision-makers determine trade-offs between alternatives and identify
projects with the greatest estimated net social benefits. For example,
Executive Order 12893 states that expected benefits and costs should be
quantified and monetized to the maximum extent practicable when
evaluating federal infrastructure investments in the areas of
transportation, water resources, energy and environmental
protection.[Footnote 17] Moreover, guidance from OMB on the planning of
federal capital assets suggests that the selection of alternatives
should be based on a systematic analysis of expected benefits and
costs.[Footnote 18] DOT encourages and provides guidance on the use of
benefit-cost analyses in decision-making for transportation
planning.[Footnote 19] In addition, in the past, we have encouraged the
use of benefit-cost analysis in other areas such as freight
transportation.[Footnote 20]
Benefit-Cost Analysis Integrates Multiple Effects Using a Systematic
Approach to Evaluate Alternatives:
Unlike most other types of analysis, benefit-cost analysis allows
analysts to integrate multiple effects into a common monetary measure
for assessment of a wide variety of alternatives. As discussed earlier
in this report, federal guidelines encourage decision-makers to
consider the potential social, environmental, and safety effects of
transportation projects. Many tools and methods exist to analyze these
effects separately, including models that forecast travel demand,
emissions measurement tools, and other types of analyses. (See app. II
for a comparison of benefit-cost analysis to other economic analyses.)
However, benefit-cost analysis integrates and monetizes the
quantifiable benefits and costs of each alternative, including the
results of some of these other models. Therefore, benefit-cost analysis
provides a more thorough assessment of the alternatives than an
analysis of any single impact area.
Benefit-cost analysis is a systematic approach to evaluating
alternative investments that attempts to quantify and monetize benefits
and costs accruing to society from an investment. This analysis
examines the immediate effects of the investment on the people using
the investment and the effects that accrue to nonusers as a result of
the investment. Examples of effects on users of transportation
investments are reduced travel time and improved safety for drivers and
transit passengers. An example of an effect on a nonuser is a change in
pollution levels. From research and guidance on transportation
investment analysis and our own previous work, we identified 10 steps
that an analyst should perform for sound benefit-cost analysis, as
shown in table 3.[Footnote 21] (See app. III for a detailed discussion
of each of the key elements of the analysis.):
Table 3: Key Elements for Benefit-Cost Analysis:
Key elements:
* Define project objectives;
* Establish the base case for comparison;
* Identify alternative projects;
* Define a time frame for analysis;
* Identify impacts of alternatives;
* Quantify and monetize impacts as benefits and costs to the extent
possible;
* Discount benefits and costs to present values;
* Compare benefits and costs of each project, using a common monetary
measure;
* Assess the sensitivity of the analysis to changes in assumptions and
forecasted inputs; and
* Identify the alternative that results in the estimated greatest net
social benefit.
Source: GAO Analysis of economic literature and federal guidance
documents.
[End of table]
Benefit-Cost Analysis Can Yield Valuable Information for Decision-
Makers:
In addition to assigning a single monetary value to each potential
project, benefit-cost analysis provides decision-makers with valuable
information for comparing investment alternatives. Specifically,
benefit-cost analysis informs decision-makers about the relative merit
of alternatives by systematically assessing and placing monetary value
on the favorable and unfavorable effects of various investment options.
That is, researchers state that benefit-cost analysis can help
decision-makers better understand the implications of each alternative
and make trade-offs between investment options more transparent. This
process encourages objective analysis and can expose possible biases in
decision-making.
The systematic process of benefit-cost analysis also helps decision-
makers because it organizes information about the alternatives and
converts dissimilar values, such as hours of travel time and number of
accidents, to a comparable dollar measure. Researchers highlight
benefit-cost analysis as a useful organizational tool because it
aggregates key information relevant to the investment decision in a
meaningful way. In addition, benefit-cost analysis offers a comparison
of the benefits and costs that might accrue over time--including
projected future operating costs and benefits to society that might not
materialize immediately--and converts them to values in a single time
period for more accurate comparison. In commenting on a draft of this
report, FHWA noted that the discipline of going through the steps of
benefit-cost analysis also could disclose important, timely information
for public officials, planners, designers, and the public, even if the
data and methods used in the analysis are imperfect. Such timely
information can facilitate decision-making.
During our site visit to Chicago, railroad officials noted the value of
benefit-cost analysis in a practical application. The Chicago Regional
Environmental and Transportation Efficiency project (CREATE) is a $1.5
billion plan that includes more than 70 infrastructure improvement
projects to increase the efficiency and reliability of freight and
passenger rail service, reduce highway congestion, and provide safety
and environmental benefits in the Chicago area.[Footnote 22] Benefit-
cost analysis was key in the decision to proceed with this public-
private partnership, according to several railroad executives. Project
sponsors used an extensive model of the Chicago regional railroad
network to help determine the effects of various upgrades to the
network. The model showed the extent to which CREATE would resolve
freight rail congestion problems--rather than merely pushing them to
another location in the regional railroad network. Using the results of
this model, benefit-cost analysis was critical in identifying the
highest return on investment for individual project segments across the
Chicago rail system and helping to illustrate public and private
benefits. Benefit-cost analysis also helped provide a calculation of
the level of benefits that private railroads would receive from the
project, thus providing an estimate of the level of financial
contribution that the railroads should make.
While the results of benefit-cost analysis aid decision-makers in
selecting between alternatives, guidance on benefit-cost analysis
advises decision-makers to augment the results of the analysis by
considering other factors when weighing investment alternatives. Such
other factors, like public participation and equitable distribution of
benefits, are those that cannot be quantified or incorporated directly
into the analysis due to practical challenges of benefit-cost analysis
or limitations of the underlying information.
Benefit-Cost Analysis Has Practical Challenges:
Although guidance from many federal agencies encourages the use of
benefit-cost analysis as a useful tool for assessing the potential
effects of transportation projects, such analysis has several practical
challenges. One challenge is that while benefit-cost analysis evaluates
the net benefits of projects, it does not usually consider the
distribution of benefits across locations or populations or other
equity concerns that may exist with transportation investment
projects.[Footnote 23] Moreover, the outcome of benefit-cost analysis
is a net value and therefore inherently eliminates any distinction
between groups of citizens to whom benefits accrue. By summing the
individual gains and losses to determine the effect on society as a
whole, benefit-cost analysis assumes that each individual's gains or
losses should be valued equally with any other individual's gains or
losses.[Footnote 24] For example, FHWA guidance notes that benefit-cost
results might disproportionately rank projects in urban areas over
those in rural areas because of the higher level of benefits urban
projects may generate.
Another practical challenge of benefit-cost analysis is monetizing some
impacts of transportation improvements, such as reductions in
emissions, travel time saved, and increased safety and reductions in
fatalities. Although agency guidance exists, researchers do not always
agree on the appropriate methods and assumptions for valuing these
effects. For example, a report by the National Cooperative Highway
Research Program (NCHRP) cites several outstanding issues in placing
economic value on the time people spend traveling, such as (1) the
fraction of the wage rate that should be used for work-related travel
and personal travel, (2) whether to apply the same time value for very
short periods of time saved as for longer periods, and (3) how to
account for variation of travel time.[Footnote 25] Furthermore, debate
surrounds the appropriate value of saving one statistical life through
an improvement in safety; some advocates assert that human life is
priceless and cannot be measured in monetary terms, while some
researchers state that monetizing the impact of a reduction in
fatalities leads to more complete analysis.[Footnote 26] In commenting
on a draft of this report, FHWA said that although there is some debate
about the monetary value of some impacts of transportation
improvements, there is also much about the valuation of impacts that
economists can agree on. For example, FHWA noted that monetary values
available in agency guidance can be assigned to the performance
measures--such as travel time saved--that are already calculated by
regional models in order to aid the evaluation of proposed
transportation projects.
Another challenge of implementing benefit-cost analysis is properly
scoping the alternatives to analyze. Benefit-cost analysis is typically
practiced as a way to compare one project against one or more
individual projects rather than evaluating a system of projects. FHWA
guidance cautions against evaluating a project that is actually a
combination of two or more independent projects because an inefficient
project might be hidden in the aggregate result. If multiple projects
are aggregated and the net benefits of the group of projects are
calculated, the result might indicate that the group of projects
results in greater total benefits than the total costs incurred.
However, one or more of the individual projects might not result in
benefits greater than its costs if it were analyzed separately. Other
research shows that analyzing each project independently and selecting
projects without regard to the interrelation of the project outcomes
can lead to selection of a combination of projects that do not maximize
net benefits to society.[Footnote 27] In other words, one project, such
as traffic signal coordination, might complement another project, such
as a dedicated bus lane. In such a case, independent assessment of each
project would not reveal the full benefits of implementing both
projects. According to FHWA, in cases where projects are significantly
interrelated, but not dependent on each other to produce net benefits
to society, the effects of one project on another (e.g., changes in
traffic) should be included in the analysis.
Finally, because benefit-cost analysis integrates the effects of many
different impact areas, it carries with it the challenges of
forecasting and measuring the effects in those areas. For example,
travel demand models forecast future use of the transportation system;
therefore, their outputs become inputs to benefit-cost analysis.
According to a TRB report, though travel demand models have been
commonly used for 4 decades, few universally accepted guidelines or
standards of practice exist for these models or their
application.[Footnote 28] Practitioners' views on appropriate methods
vary because each organization conducting analysis tailors the
forecasting approach to its region's characteristics, available data,
and the preferences and knowledge of the staff doing the analysis. The
resulting uncertainty over the best approach to forecasting is an
important challenge because such uncertainty can lead to imprecise or
inaccurate inputs, which can severely affect the outcome of the
analysis. For example, research on an emissions model highlights
uncertainties in the data used to estimate reductions in vehicle
emissions from congestion mitigation and concludes that these
uncertainties lead to large uncertainties in the model
outputs.[Footnote 29]
Research Studies Are Available to Improve Benefit-Cost Analysis and
Other Analytic Tools:
Several major transportation organizations--TRB, FHWA, FTA, the
Association of Metropolitan Planning Organizations, the American
Association of State Highway and Transportation Officials (AASHTO), and
the American Public Transportation Association (APTA)--conduct
research to help MPOs address some of the practical challenges of
implementing benefit-cost analysis, as well as other analytic tools.
For example, FHWA has developed a "Toolbox for Regional Policy
Analysis" that offers guidance on a variety of techniques, including
benefit-cost analysis, that MPOs can use to evaluate investment
alternatives. MPOs also may adopt best practices developed by other
MPOs or use consultants to assist with analysis and modeling.
Initiatives such as the Transportation Planning Capacity Building
Program--sponsored by FHWA and FTA--offer peer exchanges, roundtables,
and workshops to facilitate such information sharing. In addition, many
studies that are relevant to analysis and decision-making come from two
major applied, user-oriented research programs--the NCHRP, which
focuses on highway research and the Transit Cooperative Research
Program (TCRP).[Footnote 30] In both programs, practitioners and other
potential users of research results are involved in identifying their
research needs, participating in selecting projects, and helping guide
projects. When research is complete, TRB publishes and widely
disseminates the research findings.
Several experts have indicated that while transportation researchers
have devoted considerable attention to developing detailed guidance on
analysis and modeling, they anticipate an increasing emphasis on this
issue. They emphasized that TRB is likely to lead a major analysis to
review and improve the state of the practice in modeling transportation
impacts, benefit-cost analysis, and other tools.
Many Other Factors Shape Transportation Investment Choices:
While transportation decision-makers consider analyses, such as
benefit-cost analyses, in investing resources to meet transportation
needs, analyses often do not have a decisive impact on the final
investment choices made by states and MPOs. According to transportation
research, planning officials, and our prior work, other factors play a
greater role in shaping decisions. For example, the federal funding
structure for surface transportation and federal program incentives
tend to focus decision-makers' attention on highway and transit
projects and stakeholders rather than on railroads or other freight
concerns. Moreover, there are relatively few instances in which
decisions involve trade-offs among the various transportation modes to
meet passenger and freight mobility needs, according to local planning
officials. Decision-makers also are required to seek public input and
involve a wide range of public and private stakeholders in reaching a
consensus on investments. Ensuring that investment choices will
maintain the existing infrastructure or improve its operation, rather
than expand the transportation system's capacity, also appears to be an
important priority for decision-makers. Finally, decision-makers are
recognizing the importance of longer, multistate transportation
corridors and the special challenges that they pose for investment
decisions.
Analysis Assists, but Does Not Drive, Many Transportation Decisions:
MPOs, especially in major metropolitan areas, produce a substantial
amount of analysis and modeling, according to transportation experts we
interviewed. The results of such analyses can be a factor in
transportation investment decision-making. For example, as noted
previously in this report, transportation decision-makers in Chicago
stated that the results of benefit-cost analysis had factored into
their decision to implement the CREATE project. However, such analyses
do not appear to play a decisive role in many investment decisions,
although they may help rule out bad investments and point out serious
problems.[Footnote 31] For example, planners in Los Angeles noted that
the projects selected for the TIP were not necessarily the ones with
the highest benefit-cost ratios, although their analysis showed that
every project in the plan did generate more benefits than costs. In
addition to the limitations of benefit-cost analysis we discussed
previously in this report, decision-makers may not be relying upon
analyses, in part, due to various concerns about the usefulness and
reliability of the analyses, according to the transportation research
literature and our interviews with experts and officials in Chicago,
Los Angeles, and San Francisco.
State DOTs and MPOs have expressed uncertainty about the usefulness of
analytical tools in guiding their transportation planning and decision-
making. For example, states and MPOs view existing analytical tools as
having limited usefulness in comparing investment alternatives among
transportation modes and between passenger and freight investments.
TRB's applied research programs are trying to address this need through
development of specific tools to help in making multimodal trade-offs.
In addition, understanding how and when to use analysis is challenging
for decision-makers.[Footnote 32] During our site visits, we found few
instances in which investment decisions involved direct cross-modal
trade-offs, such as railroad versus highway. According to a NCHRP
survey published in 2001,[Footnote 33] 88 percent of state DOT
respondents and 85 percent of MPO respondents reported that more useful
guidelines--such as a guidebook for agency use in applying methods and
analytic techniques--was either badly needed or would help to enhance
the agency's ability to evaluate the social and economic effects of
transportation system changes. Accordingly, the study concluded that
decision-makers need to be able to better select when, how, and why to
use particular analytic tools in investment decisions.
There are also concerns about data used in the analyses. Insufficient
state and local data--particularly freight-related data--limits the
quality and amount of analysis and modeling, according to NCHRP
research and our December 2003 report.[Footnote 34] The lack of
metropolitan level data, which is needed to analyze investment
alternatives, has been a continuing concern in transportation research.
For example, data needed to identify heavily traveled highways and
freight bottlenecks, and to develop and evaluate alternative solutions
for addressing such congestion (e.g., comparing the benefits of
improving highway operations to the benefits of adding new road
capacity), is not always available. Furthermore, data needed to apply a
specific analytic tool may not be available or funds may not be
sufficient to acquire or collect needed data. Compounding the problem,
existing modeling software cannot always successfully accommodate the
data limitations to yield results that are credible and usable. In the
NCHRP survey of state DOTs and MPOs published in 2001, 82 percent of
state DOT respondents and 97 percent of MPO respondents reported that
better data to analyze social and economic effects either were needed
badly or would help enhance the agency's ability to evaluate the social
and economic effects of transportation system changes.
Freight data pose special challenges because shifting product mix,
trade patterns, and consumer demands make freight a fast-changing area.
The U.S. Bureau of Transportation Statistics reported in 2003 that
there is a consensus that existing freight data often are too outdated
to capture current freight status, many data elements are missing, and
data often cannot be compared across modes.[Footnote 35] TRB and we
have made recommendations to improve freight data. TRB recommended that
resources be focused on developing a national freight data program that
targets the needs of transportation analysts and planners.[Footnote 36]
We recommended in our December 2003[Footnote 37] report that DOT
facilitate the collection of freight-relevant data, which would allow
state and local planners to develop and use better evaluation methods
such as demand forecasts, modal diversion forecasts, and estimates of
the impacts of investments on congestion and pollution, thus providing
a better basis for making transportation investment choices. FHWA has
developed a Freight Analysis Framework (FAF) designed to estimate the
flows of commodities and related freight transportation among states,
substate regions, and major international gateways. The FAF also
forecasts changes in the flows due to changes in economic conditions,
transportation facilities, or other factors. FHWA is currently working
to improve the FAF by improving the accuracy of freight flows, updating
sources used in the model, and possibly incorporating new data sources
and forecasting methods.
Other considerations affect decision-makers use of analyses, such as
how competently the analyses are interpreted and how well analyses are
communicated, according to a transportation researcher. TRB and we have
expressed a concern about impending shortages of skilled transportation
professionals with expertise to choose and use analytic tools and
communicate their results. Timing also can have an impact on the use of
analysis. A local official observed that analyses that come later in
the decision-making process may be viewed as the most relevant because
they reflect the most current information available as projects are
being considered.
Concerns also have been raised about the ability of MPOs to produce and
disseminate quality analyses that aid investment decision-making, given
their broad scope of responsibilities and current funding levels. A
recent study of metropolitan decision-making in
transportation[Footnote 38] concluded that although MPOs have been
given new planning responsibilities in areas such as environmental
justice, job access, freight planning, and systems operations, highway
program funding for metropolitan planning has not increased. DOT
officials also told us that local budget constraints complicate the
ability of MPOs to deliver quality data analysis because analysis is
usually the first thing to be cut. During our Chicago site visit, a
transportation consultant expressed concern that the MPO for that area
is very thinly funded for the work that it is being asked to perform.
Federal Financing Structure and Other Factors Limit Intermodal
Investment Decision-Making:
In evaluating and deciding on investments, the structure of federal
funding and the lack of freight stakeholder involvement are important
factors that focus decision-making principally on highways and transit
and on stakeholders associated with these modes. In addition, during
our site visits, we found few instances where investment decisions
considered direct trade-offs between modes or between passenger and
freight issues.
ISTEA, TEA-21, and federal planning guidance all emphasize the goal of
establishing a system wide, intermodal approach to addressing
transportation needs. However, the reality of the federal funding
structure--which directs most surface transportation spending to
highways and transit, rather than railroad infrastructure--plays an
important role in shaping MPO investment choices. In fiscal year 2001,
for example, federal transportation grants to state and local
governments totaled about $27.8 billion for highway programs, $7.0
billion for transit programs, and $37 million for railroad programs.
The federal financial support for highways and transit systems comes
mainly from federal highway user fees (i.e., fuel taxes deposited into
the Highway Trust Fund), with the revenue generated from these fees
generally targeted for highway or transit projects. While most federal
funding sources and programs are linked to highway or transit uses,
some funding flexibility between highway and transit is allowed under
programs such as the National Highway System, Surface Transportation
Program (STP), and Congestion Mitigation and Air Quality Improvement
(CMAQ) programs. Federal programs provide limited support for
investment in railroad infrastructure, with railroad investments
largely financed by the private sector.
In addition to the federal transportation grants to state and local
governments discussed above, the federal government also provides some
support to Amtrak for intercity passenger rail service. For example, in
fiscal year 2003, the federal government appropriated about $1 billion
to Amtrak to cover operating and capital expenses. However, the role of
the federal government in providing financial support to Amtrak is
currently under review amid concerns about the corporation's financial
viability and discussions about the future direction of federal policy
toward intercity rail service.[Footnote 39] Regarding freight rail
projects, the private sector owns, operates, and provides almost all of
the financing for freight railroads, with the public sector providing
the supporting infrastructure--such as highways, ports, and intermodal
facilities. Innovations in ISTEA and TEA-21 allowed states more
flexibility to use federal funds for freight projects, established
public-private partnerships, and allowed the expenditure of federal aid
on nonhighway freight projects in certain circumstances.[Footnote 40]
A number of concerns have been raised about the availability of funding
for railroad infrastructure, particularly for intermodal investments
that could improve freight mobility. For example, AASHTO has reported
that, although the railroad industry's return on investment has
improved, it still is below the cost of capital, a factor that might
adversely affect future railroad infrastructure investment
levels.[Footnote 41] In addition, we reported in December 2003 that
access to funding sources for freight railroads--such as the National
Corridor Planning and Development Program and the Coordinated Border
Infrastructure Program--has been limited because, according to FHWA,
these programs are oversubscribed and much of the funding for these
programs has been allocated to congressionally designated
projects.[Footnote 42] In addition, National Corridor Planning and
Development Program funds may not be used for improvements on
railroads' heavy-use "mainline" tracks. Furthermore, given the
intermodal nature of freight projects, the overall lack of flexibility
for using federal transportation funding across modes limits the
availability of funding for improving railroad and freight
infrastructure. For example, the eligibility criteria under the
Transportation Infrastructure Finance and Innovation Act do not allow
assistance to privately owned facilities, such as privately owned rail
infrastructure. Local planning officials we interviewed expressed
concerns that limited public funding for freight railroad investments
might limit regional options for addressing infrastructure
requirements. For example, one local planning official told us that the
lack of flexible funding limited that city's ability to address
freight-related problems. A regional planning official noted that while
CMAQ money has some flexibility, the federal funding structure narrows
the ability to make optimal intermodal choices.
Our December 2003 report[Footnote 43] on freight transportation pointed
to another concern about freight decision-making--that state and local
transportation planning and financing is not well suited to addressing
freight improvement projects. At the local level, planning is oriented
to projects that clearly produce public benefits, such as passenger-
oriented projects. While freight projects also may produce public
benefits by reducing freight congestion, they often can have difficulty
securing public funds because they may generate substantial private
sector benefits. For example, in California, local planning officials
told us that State Transportation Improvement Program (STIP) funds
could not be used for freight railroad improvements unless there were
distinct benefits for passenger movement. Unlike passenger projects, it
may be more difficult to identify clear-cut public benefits associated
with freight railroad projects and balance them with private benefits.
In California, local planning officials said they consider railroad
improvements to be at a disadvantage in public referenda on
transportation improvements because public support for freight and
railroads is lacking. Chicago officials acknowledged that the lack of
federal funds for freight projects limits the region's investment
options and local governments' interest in spending their own funds on
freight projects, such as the CREATE project. Finally, railroad
industry investment criteria are not always aligned with the goals of
the states and MPOs. While freight railroad industry investments may
meet the internal industry tests of providing revenues, profits, and
financial feasibility, they may not deal adequately with national
transportation concerns, such as improving mobility, reducing
nationally significant chokepoints, and enhancing system capacity.
Several other considerations limit freight stakeholder involvement in
local investment decisions--potentially affecting the MPOs' ability to
take a system wide, intermodal approach to addressing transportation
needs. Although MPOs are required to consider freight needs, reflecting
the concerns of freight stakeholders--such as freight railroads--in
decision-making has proven challenging. For example, the Chicago region
has been particularly active in involving freight railroads in the
MPO's Intermodal Advisory Task Force. But a railroad official, who
described the railroad companies' interaction with the MPO,
nevertheless saw the need to modify the long-standing, local decision-
making process so that freight railroads have a clearer role in
investment decisions. Railroad officials in Chicago also cited the
unfamiliarity of planners and decision-makers with freight operations
as an obstacle to freight investments. They noted that many local
officials and transportation agencies do not have a clear understanding
of how freight operates, including the complexities of a consumer goods
distribution system that typically starts in Asia or other areas of the
world. However, several Chicago officials believed that the CREATE
project may help change this situation by providing a plan to improve
freight rail efficiency and freight rail's interface with passenger
transportation, and by giving freight more visibility with local
officials.
The freight industry may face other challenges in participating in
transportation decision-making. For example, freight railroad
companies operate in many states--each with numerous MPOs in their
borders. A railroad executive noted that if all MPOs were serious about
freight issues, companies could not handle the demands on their
resources to participate. The freight industry also has long-standing
concerns about working with the public sector. A railroad official we
interviewed said that federal rail regulation left a lingering legacy
of industry distrust of the government. In addition, freight railroads
have long made their own investment decisions and supplied their own
capital--with no public sector influence. As private entities that own
most of the nation's railroad infrastructure, freight railroads
typically have not worked with the public sector because of concern
about requirements and regulations that are tied to federal funds,
unless a proposed infrastructure project will yield financial returns
for the company. In addition, the lengthy planning and construction
time associated with public infrastructure projects does not match the
shorter planning and investment horizons of private companies.
In addition to the focus on highways and transit over railroad
investment choices, during our site visits we also found that cross-
modal comparisons play a limited role in transportation investment
decisions. We found limited instances in which investment decisions
involved direct trade-offs in choices between modes or users--such as
railroad versus highway or passenger versus freight. Officials in
Chicago indicated that railroad and highway investments, and passenger
and freight projects, rarely are in direct competition--perhaps because
railroads and highways often serve different needs or markets. An
official in Los Angeles commented that planners there avoid making
modal comparisons because they view them as comparing "apples to
oranges." In Chicago, an official described only a few situations that
posed modal choices and trade-offs for decision-makers, for example,
deciding between a transit alternative versus adding lanes to an
existing tollway.
Several researchers told us that whether planners and decision-makers
make cross-modal and passenger-freight comparisons may be a moot point
because local conditions, such as the physical environment often
dictate modal choices. For example, metropolitan areas that are
adjacent to a seaport may have few choices about whether to use
highways or railroads to move products to and from the port. Space
constraints and existing infrastructure, as well as the characteristics
of freight (i.e., ports that handle bulk commodities such as coal or
grain usually use railroads, while ports that handle computers usually
use trucks), foreclose choices. Overall, moving freight usually offers
fewer transportation choices than moving passengers, an expert noted.
In addition, the demographic or other characteristics of specific
transportation markets--such as a growing area with many transit
commuters--also may determine modal choice.
Public Input and Other Political Considerations Shape Investment
Decisions:
Metropolitan decision-making is designed to be a collaborative process
that involves the public and its diverse concerns in identifying
actions to improve transportation system performance. MPOs are required
to seek public comment and have clear federal guidance on involving the
public--it is integral to their mission and one of their core
functions. Moreover, the definition of the public is wide ranging--
virtually all private and public individuals and organized groups that
are potentially affected by transportation decisions in a given
area.[Footnote 44] Federal regulations also state that MPOs must
cooperate with the state and local transportation providers such as
transit agencies, airport authorities, maritime operators, rail-
freight operators, Amtrak, port operators, and others. MPOs are
directed to provide the public with meaningful opportunities to provide
input on transportation decisions and are expected to consider public
input on the full range of financial, social, economic, and
environmental consequences of their investment alternatives.
Public participation can introduce considerations such as quality of
life and other issues that are difficult to quantify in making
transportation choices. It also puts decision-makers in the position of
balancing different public agendas about funding and values, according
to a transportation researcher. Funding conflicts may arise between
modes or from concerns about spreading benefits across the metropolitan
area. Value conflicts may result from public concern about a potential
project's impacts on a neighborhood or the environment.
As we observed in our site visits, public participation can play an
influential role in transportation investment decisions. In California,
public views often are expressed in county-level ballot box initiatives
on the sales taxes and municipal bonds that finance transportation
projects. Whether voters approve these initiatives is a significant
factor in the investment decision-making process because of the growing
prominence of local sales taxes in funding transportation projects.
Local sales taxes have surpassed user fees as the primary source of
funding for new transportation project construction in California
because fuel tax revenues have not kept pace with travel volume and
systems costs. The need for voter support may result in a greater
number of transportation investment proposals that clearly identify
public benefits for local constituents. In Chicago, an official noted
that when an expressway extension with a High Occupancy Vehicle lane
was proposed, attendees at public meetings opposed the project and
endorsed additional mass transit service instead.
Besides public input, other political considerations also shape
investment decisions. The metropolitan planning process emphasizes the
importance of achieving stakeholder agreement on the set of projects
that constitute the MPO's plan. One researcher said that achieving
consensus often is difficult--especially with regard to completing
large-scale projects--even when decision-makers are like-minded
professionals. Arriving at a consensus puts a premium on how well local
elected and appointed officials negotiate and build coalitions to
obtain support for projects. Several researchers noted that this need
for consensus may elevate the importance of certain political
considerations--such as ensuring a rough equity in use of local and
state funds for the distribution of transportation projects throughout
a metropolitan area--in selecting projects for funding.
In addition, state and metropolitan transportation politics may make
some organizations, such as state DOTs, large units of local government
such as cities and counties, or large transit agencies more influential
in planning and project selection than others. This uneven influence
may mean that a project's priority can be determined by which agency
sponsors the project. Our site visits also suggest that the relative
influence of decision-makers varies across locations. For example,
officials in Chicago described the Illinois DOT as having strong
influence on metropolitan planning. Furthermore, a recent study
indicated that federal and state agency decisions can be very important
in determining the scope and composition of key decisions in the
Chicago area. By contrast, officials in Los Angeles and San Francisco
described local planning agencies, especially county-level Congestion
Management Agencies, as most influential.
Finally, state decisions to distribute funds across the state may shape
investment decisions. For example, California state law requires that
75 percent of State Transportation Improvement Program funds be
directly allocated to counties, who work through the county Congestion
Management Agencies. However, according to CALTRANS officials, the
total funding allocated to the counties is first divided between the
counties of northern and southern California, with the 13 southern
counties receiving 60 percent of the funds and the balance of
California counties receiving 40 percent of the funds. Thus, while
modal choices are primarily made at the regional or county level, the
choices are constrained by state funding splits, according to CALTRANS
officials.
Investments to Preserve Existing Infrastructure Are a Priority:
Due to infrastructure and space concerns, and time lags associated with
new construction projects, state and regional transportation decision-
makers are increasingly giving priority to highway investments that
preserve, enhance, and maintain the existing infrastructure over
investments in new construction. According to FHWA data, of the $64.6
billion spent nationally in 2000 on highway capital improvements, 52
percent ($33.6 billion) of all funds were spent on system preservation,
40 percent ($25.9 billion) on new roads and expansion of existing
roads, and 8 percent ($5.1 billion) on the installation of system
enhancements, such as safety enhancements.[Footnote 45] The amount
spent on system preservation rose from 45 percent of capital
improvements nationally in 1993 to 52 percent in 2000.[Footnote 46] In
addition to the money spent on system preservation, all levels of
government spent $24.2 billion on routine maintenance in 2000.
In our site visits, we found that system preservation and operations
and maintenance activities were high priorities for local
transportation officials. For example, in Chicago, planners told us
that in the space-constrained Chicago area, the primary strategy has
been to periodically rebuild existing infrastructure rather than build
new infrastructure. In California, both the Southern California
Association of Governments (SCAG) and the Metropolitan Transportation
Commission in Northern California spend approximately 80 percent of
their regional budgets on maintenance and operations. SCAG officials
pointed out that regions such as Los Angeles and San Francisco tend to
focus less on capital improvements due to capacity and infrastructure
limitations. Some situations offer few alternatives for expansion from
the onset. Infrastructure that is old and inadequate, such as
underpasses or tunnels with insufficient clearance, often has limited
expansion potential.[Footnote 47] Further complicating new
construction is the limited supply of available land. Densely populated
urban areas, where space is at a premium, offer few alternatives for
expansion due to geographic constraints on the surrounding
development.[Footnote 48] In addition, land-use planning and zoning
issues can be highly contested in a space constrained real estate
market. Capacity constraints and costs of new construction are forcing
decision-makers to look at alternate solutions and place a premium on
maintaining and improving the existing transportation system.[Footnote
49]
System preservation and maintenance and operations improvements are
also preferred because they offer quicker remedies than new capital
projects, which can take almost 20 years to plan and build. A key
reason for the length of time to complete projects is the set of
federal and state requirements, which include clean air, water quality,
historical preservation, New Starts reporting, and public input
requirements that were discussed earlier.[Footnote 50] However, the
length of time for project development is also influenced by the
diffusion of authority over transportation decisions and the resulting
complexity of the decision-making process. Changes in local priorities,
lack of local matching funds, and locally driven changes in project
scope are often associated with project longevity. Requirements for
benefit-cost and other economic analyses could extend the length of
time for project development. One local planning official noted that
the long lag time for new projects acts as a disincentive for planners
and officials when considering capacity expansion projects.
Transportation decision-makers operate in an environment where they
must consider preexisting factors and needs when making transportation
investment decisions.
Planning for Longer Transportation Corridors Presents Additional
Challenges and Opportunities:
Finally, corridors that extend across multiple state and local
boundaries pose challenges for intermodal transportation decision-
making due to coordination and cross-jurisdictional issues. A majority
of investment decisions are made at the state and local levels, with
local planners tending to focus on local and regional planning needs,
as opposed to larger corridor needs. Getting the cooperation of and
coordinating with multiple agencies, communities, and transportation
modes--each with its own priorities--makes the planning and
implementation of multistate and multiregion projects
difficult.[Footnote 51] Further complicating this type of planning is
the variety of approaches used by the local and regional agencies in
analyzing projects. The type of transportation modeling used in one
location may not be available or used in another.
Particularly problematic are interstate corridors that do not provide
clear-cut benefits for all states that the proposed corridor crosses,
but require that the costs be borne by all states involved. Although
state DOTs work to address freight mobility challenges on a statewide
basis, many corridors cross state boundaries; and unless states are
part of a multistate coalition, states may not address projects that
involve multijurisdictional corridors.[Footnote 52] For example, an
Illinois transportation official explained that developing high-speed
rail service to the east of Illinois is contingent on whether other
states will share the costs. To date, only one other state has been
willing to contribute. Similarly, freight infrastructure needs may
involve projects along a freight corridor that cuts across the
jurisdictions of several transportation-planning agencies and, in some
cases, states.
For the most part, planning for longer multistate corridors is
conducted by ad hoc state coalitions. In the past, the impetus for
creating such multistate coalitions has come from state departments of
transportation, and the federal government's role in making these
interstate decisions is limited. Generally these ad hoc groups do not
receive federal funding. However two groups, the Interstate 95 Corridor
Coalition and the Chicago-Gary-Milwaukee Coalition, did receive funding
in TEA-21. The Interstate 95 Corridor Coalition, which runs from Maine
to Florida, was initially created to examine ITS systems along the
corridor but has now widened its focus to include intermodal issues.
The coalition developed a railroad operations study for the region,
which identified deteriorating transportation system performance in the
mid-Atlantic region, noted that all modes of transportation needed to
be improved to deal with the situation, and suggested that railroads
could play a larger role in meeting the region's transportation
needs.[Footnote 53] Studies such as this one illustrate the
opportunities for these multistate coalitions to analyze problems in a
larger corridor.
Other such state groupings exist. For example, state DOTs along
Interstate 10 have organized an I-10 partnership to conduct research on
managing freight movement along the corridor running from California to
Florida. The I-10 partnership group developed a transportation planning
study based on vehicle volume, traffic flow, and alternative scenario
testing for freight movement. Rather than focusing on one particular
mode, the study included highways, railroads, and barges in its
analysis of freight traffic, and explicitly attempted to be mode
neutral. While the partnership study projected the effects of different
possible infrastructure improvements along the corridor, individual
states are ultimately responsible for deciding whether to implement the
study's findings.
In contrast to these multistate groupings, planning for intrastate
projects fits more easily into the framework of state planning. For
example, in the case of passenger rail corridor development in
California, intrastate passenger rail is funded primarily by the state
DOT and the localities and operated by state and local joint powers
authorities. In some cases, Amtrak serves as the operator for these
state-supported routes. Some of these routes are Amtrak's most heavily
traveled outside the Northeast Corridor, including the Capitol Route in
Northern California, the San Joaquin Route in Central California, and
the Pacific Surfliner Route in Southern California. Planning for
proposed routes, such as high-speed and passenger railroad, is
facilitated when the route remains within a single state because such
projects fit readily into the existing state planning framework.
However, many of the corridors that would benefit from such projects
involve more than one state.
Concluding Observations:
ISTEA and TEA-21 both articulated a goal of moving from a traditional
focus on single transportation modes to a more efficient, integrated
system that draws upon each mode to enhance passenger and freight
mobility. These key pieces of legislation also provided MPOs and states
discretion in selecting projects to address local needs and conditions.
In exchange, MPOs and states are expected to follow federal planning
and program requirements to reflect the national public interest in
their decisions. The approach for investment planning and decision-
making that emerged from ISTEA and TEA-21 provides guidance on a
systematic process for making transportation investment choices and a
host of factors to consider, while generally allowing MPOs and states
considerable discretion in choosing the analytical methods and tools
that will be used to evaluate and select projects.
Our work has shown that while much analysis is done by states and MPOs,
the results of those analyses do not appear to play a decisive role in
many investment decisions, except to rule out the most problematic
projects. Instead, other factors play a major role in shaping
investment choices, including the federal government's funding
structure that provides incentives for investing in highway or transit
projects rather than railroad infrastructure or intermodal projects,
public or political support for certain projects, and the practical
realities of simply preserving the existing infrastructure. In
addition, the data and other limitations associated with using
analytical tools, such as benefit-cost analysis, may discourage their
use by decision-makers. DOT, TRB, and other major transportation
organizations are doing research to improve analytical tools and
methods and to help states and MPOs use them to better evaluate
investment alternatives. In a prior report, we also encouraged the use
of benefit-cost analysis in freight transportation decision-making and
recommended that DOT facilitate the collection of freight data that
would allow state and local planners to develop better methods for
evaluating investments. It is possible that overcoming the challenges
of using analytical tools would make them more attractive to decision-
makers, thus leading to improved investment decision-making.
Agency Comments and Our Evaluation:
We provided copies of this report to the Department of Transportation
for its review and comment. The department generally agreed with the
report's content and said that the report provided a useful overview of
the literature and practice involving transportation investment
decisions. The department also provided technical comments, which we
incorporated into this report as appropriate.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter. At that time, we will send copies of
this report to congressional committees with responsibilities for
surface transportation programs; DOT officials, including the Secretary
of Transportation and the administrators of FHWA, Federal Railroad
Administration, and FTA; and the President of Amtrak. We will make
copies available to others on request. This report will also be
available on our home page at no charge at http://www.gao.gov.
If you have any questions about this report, please contact me at
siggerudk@gao.gov or by telephone at (202) 512-2834. GAO contacts and
acknowledgments are listed in appendix IV.
Sincerely Yours,
Signed by:
Katherine Siggerud:
Director:
Physical Infrastructure Issues:
[End of section]
Appendix I: Scope and Methodology:
Our scope of work included reviewing the processes that decision-makers
at all levels of government use to analyze and select surface
transportation infrastructure investments. Our overall approach was to
review and synthesize federal requirements, Department of
Transportation (DOT) guidance, and the economics literature and
transportation planning studies; interview federal transportation
officials, national association representatives, and transportation
experts to obtain their perspectives; and conduct site visits in three
major metropolitan regions to understand how investment decisions are
actually made in those regions.
To identify the key federal requirements for planning and
transportation infrastructure decision-making, we reviewed federal
laws and regulations relating to the metropolitan and state planning
and funding process, as well as federal guidance provided by the
Federal Highway Administration (FHWA) and Federal Transit
Administration (FTA) to states and Metropolitan Planning Organizations
(MPO) on the transportation planning process. We interviewed
transportation officials in the following U.S. DOT offices: Federal
Railroad Administration, FHWA, FTA, and the Office of Intermodalism. We
also interviewed national stakeholders including Amtrak, the
Association of American Railroads, the Association of Metropolitan
Planning Organizations, the American Public Transportation
Association, and the American Association of State Highway and
Transportation Officials. To get regional perspectives on the federal
requirements and guidance for transportation planning, we interviewed
state and regional transportation officials in California and Illinois.
To identify how benefit-cost analysis facilitates sound transportation
investment decisions, we reviewed the economics literature, academic
research, and transportation planning studies containing evaluations of
various economic analytical tools, with an emphasis on benefit-cost
analysis. A GAO economist read and reviewed these studies, which we
identified by searching economics literature databases and consulting
with researchers in the field, and found their methodology and economic
reasoning to be sound and sufficiently reliable for our purposes. We
interviewed researchers and consultants from the National Research
Council's Transportation Research Board (TRB), DOT, university research
centers, national transportation organizations, and selected state DOTs
to get their perspective on these analytical tools, the general
applicability of benefit-cost analysis, and the feasibility of cross-
modal comparisons. In addition, we reviewed our previous studies that
had key findings relating to the use of analytical tools in investment
decision-making and consulted with our Chief Economist regarding the
value of benefit-cost analysis and its challenges.
To identify other factors transportation decision-makers consider in
evaluating and deciding on investments, we interviewed federal
transportation officials and the other national stakeholders identified
above. We interviewed transportation researchers from the TRB and,
based on their input and that of federal transportation officials,
interviewed additional researchers from university research centers--
and other think tanks--as well as representatives from civic and
private sector organizations who are knowledgeable about transportation
investment issues. We also conducted site visits in three major
metropolitan regions: Chicago, IL; Los Angeles, CA; and San Francisco,
CA. These sites are major centers of passenger and freight traffic and
contain a wide variety of planning agencies, transportation issues, and
modes. During our site visits, we conducted semistructured interviews
with officials from state, regional and local transportation planning
agencies, including state departments of transportation, MPOs, city or
county transportation planning agencies, and organizations involved in
railroad investment issues. From these interviews, we obtained
information on each region's planning and decision-making processes,
the factors that drove decision-making in that region, the extent to
which analytical tools were used, and other issues affecting the
planning and decision-making processes. In addition, we also analyzed
planning documents and analytical tools used by these regional
decision-makers. The information collected and analyzed from our site
visits was intended to illustrate how investment decisions were made in
those areas.
To ensure the reliability of information presented in this report, we
relied to a large extent on studies from the economics and
transportation literature that were reviewed by peers prior to
publication. A GAO economist reviewed these studies and found them
methodologically sound. We also corroborated much of the testimonial
information provided during our three site visits by obtaining
documentation of investment decision-making processes and results,
although we did not test the reliability of specific data contained in
reports prepared by officials from those three sites. Additionally, we
obtained statistics presented in the introduction of this report about
passenger and freight travel growth from DOT; because this information
is included as background only, we did not assess its reliability. We
conducted our work from September 2003 through June 2004 in accordance
with generally accepted government accounting standards.
[End of section]
Appendix II: Summary of Three Types of Economic Analyses for Comparing
Investment Alternatives:
While benefit-cost analysis aims to monetize and compare all direct
benefits and costs to identify the alternative that results in the
greatest net social benefit, other types of analysis consider different
types of impacts to yield different criteria for comparison. Two common
types of analysis are economic impact analysis and cost-effectiveness
analysis. Figure 2 illustrates the differences between benefit-cost
analysis, economic impact analysis and life-cycle cost analysis, a
special case of cost effectiveness analysis.
Figure 2: Figure 2. Comparison of Three Types of Economic Analyses:
[See PDF for image]
[End of figure]
Economic impact analysis assesses how some direct benefits and costs of
investment alternatives convert to indirect effects on the local,
regional, or national economy or on a particular sector of the
economy.[Footnote 54] Examples of indirect impacts are changes in wages
and employment, purchases of goods and services, land use, and changes
in property values. These impacts result from increased or decreased
levels of economic activity caused by the investment and can accrue
within or outside of the immediate area of the investment. Economic
impact analysis often includes a number of factors other than those
that meet the stricter criteria for inclusion in a benefit-cost
analysis. As a result, advocates or opponents of a project can use this
type of analysis to illustrate implications of an investment other than
the estimated net social benefit.
However, economic impact analysis is not an appropriate technique for
identifying which alternative provides society with the greatest net
benefit because often the values of benefits to society are counted
twice in different forms in this analysis. Guidance from both TRB and
FHWA states that the net direct user benefits included in benefit-cost
analysis have the same monetary value as the net indirect benefits and
caution that the two are not additive when analyzing an investment for
economic efficiency. In other words, indirect impacts are not included
in benefit-cost analysis because economists generally agree that they
are market transformations of direct benefits. Thus, while economic
impact analysis can provide interesting information for policy makers
regarding the effects of potential investments on the local, regional,
or national economy as well as on specific industries, researchers
state that economic impact analysis can be considered complementary to,
but different from benefit-cost analysis.
Cost-effectiveness analysis is similar to, but less comprehensive than,
benefit-cost analysis. This type of analysis attempts to systematically
quantify the costs of alternatives. However, cost-effectiveness
analysis does not attempt to quantify the benefits of alternatives.
Rather, it assumes that each alternative results in achieving the same
stream of benefits. Thus, cost-effectiveness analysis identifies the
lowest cost option for achieving a given level of benefits rather than
identification of the alternative that achieves the greatest benefit
per dollar of cost to society.
Life-cycle cost analysis, essentially a subset of benefit-cost
analysis, is a specific example of cost-effectiveness analysis. Life-
cycle cost analysis involves several of the same steps included in
benefit-cost analysis, but excludes any assessment of benefits because
each of the alternatives compared is expected to result in the same
level of benefits. The key elements of life-cycle cost analysis are
identifying alternatives, defining a time frame for analysis,
identifying and quantifying the costs of each alternative, discounting
costs to present values, assessing the sensitivity of the analysis to
changes in assumptions, and identifying the alternative that results in
the lowest cost over the life-cycle of the project. When identifying
and quantifying the costs of each alternative for transportation
projects, best practices indicate that analysts should consider
construction, rehabilitation, and maintenance costs as well as costs to
users associated with work zones during construction and
maintenance.[Footnote 55] Like benefit-cost analysis, these user costs
include travel time costs, costs associated with crashes, and vehicle
operating costs.
[End of section]
Appendix III: Overview of Benefit-Cost Analysis:
From our review of research and best practices on transportation
investment analysis, we identified 10 elements integral to sound
benefit-cost analysis. Analysts include these steps to ensure a
thorough evaluation of the social benefits and costs of investment
alternatives and to systematically assess the trade-offs between
investment alternatives. Using benefit-cost analysis, as described
below, analysts determine the project that will result in the greatest
benefit to society for a given level of cost.
Analysts first should identify the project objectives to ensure a clear
understanding of the desired outcome and to aid in determining
appropriate alternative projects to be considered. Reports from TRB and
FHWA identify several possible surface transportation project
objectives including addressing an existing congestion problem,
investing to accommodate expected future demand, generating economic
development, improving safety in an area, or increasing mobility for
disadvantaged citizens. Identifying the intended outcome at the outset
leads to analysis focused on alternative projects that can achieve the
stated objectives. For example, if the primary objective were to ease
congestion, adding a highway lane or new transit option might be
reasonable alternatives to consider; however, if the objective were to
improve safety in an area, perhaps other alternatives would be more
appropriate. Federal Aviation Administration (FAA) guidance on benefit-
cost analysis cautions that the analyst should be careful not to
identify the objective in a way that prejudges the alternatives for
achieving the objective. For example, an objective stated as
construction to address an existing congestion problem ignores the
possibility of nonbuild alternatives that might improve the use of the
existing system.
Establishing a realistic base case provides a reference point against
which the incremental benefits and costs of alternatives will be
measured. According to FAA guidance, the base case is the best course
of action that would be pursued in the absence of a major initiative to
meet the investment objectives identified.[Footnote 56] In other words,
the base case should represent existing infrastructure, including
improvements that are already planned, as well as on-going maintenance.
FHWA guidance states that the base case should be realistically defined
including, for example, allowances for changes in traffic patterns with
congestion. Failure to allow for such changes in the base case can lead
to overly pessimistic assessments of the base case in comparison to
alternatives.
Given the project objectives and the base case, analysts should
identify the investment alternatives capable of achieving the stated
objectives to define the scope of the analysis. In generating the list
of possible alternatives, analysts should consider options across
different transportation modes. For example, alternatives for a
congested metropolitan route could include adding a lane to the
existing highway, providing new or better bus service, or building a
light rail line. Moreover, passenger alternatives for a congested
intercity corridor could include high-speed rail, new or expanded air
travel, or a new or expanded highway. In addition to evaluating
multiple modes, low-cost noncapital intensive alternatives should be
considered. These alternatives include Intelligent Transportation
Systems (ITS) and demand management approaches. ITS solutions are
designed to enhance the safety, efficiency, and effectiveness of the
transportation network and are relatively low-cost options for
maximizing the capacity of the existing infrastructure.[Footnote 57]
ITS solutions include coordinating traffic signals to improve traffic
flow, improving emergency management responses to crashes, and using
electronic driver alert boards to notify drivers of congested routes.
Similarly, demand management alternatives can relieve congestion
without major infrastructure investments. Demand management
alternatives are ways of reducing the number of vehicles traveling on a
congested route during the most congested times or peak periods. Demand
management alternatives encourage drivers to drive during less
congested times, or on less congested routes, or to ride together in
carpools or vanpools. Charging single occupancy vehicles a toll during
congested times on congested routes, providing free or discounted
convenient parking for persons riding in carpools or vanpools, and
subsidizing transit usage are possible demand management
alternatives.[Footnote 58] Finally, both passenger and freight options
for addressing congestion should be considered. Our past work on
freight transportation shows that truck use significantly affects
highway congestion. For example, officials at the Ports of Los Angeles
and Long Beach estimate that truck traffic accounts for about 30 to 60
percent of the total traffic on two particularly congested major
highways, which serve as connectors to the two ports.[Footnote 59]
Moreover, independent studies report that shifting greater amounts of
freight from highways to rail could relieve highway
congestion.[Footnote 60]
Following the identification of alternative projects, analysts should
list the relevant impacts of each alternative to ensure that all
aspects of a project are considered in the analysis. As previously
stated, benefit-cost analysis considers all direct user impacts and
externalities, but it does not consider indirect impacts because these
are transfers of direct impacts and their inclusion would constitute
double counting. Transportation economics research and government
agency guidance we reviewed identified the following list of direct
user impacts that should be considered for transportation investment
decisions: construction, operations and maintenance costs; travel time
savings and construction travel time cost; vehicle operating costs;
safety improvements; and environmental impacts, such as noise pollution
and air pollution. Tolls, fares, or any other user fees should not be
included as impacts of the projects, because these are payments made by
consumers to receive the benefits already counted in the list above.
After identifying the user impacts for each alternative, the analyst
must define a single time frame or life cycle for all alternatives over
which the benefits and costs will be compared. This element of the
analysis is necessary for equal comparison of projects with differing
expected future streams of benefits and costs from current investment.
Typically, a region constructing major infrastructure investments
incurs a majority of the costs of the project within the first years of
the life cycle and reaps the majority of the benefits later in the life
cycle of the project; therefore, the analyst should choose a time frame
that allows for the measurement of benefits and costs expected to
materialize throughout the useful life of the investment.
The impacts of each alternative should be quantified and monetized as
benefits and costs to the greatest extent possible to enable the
analyst to compare the value of each project to the alternatives. In
addition to compiling the obviously quantitative impacts, like
construction and operations costs, the analyst must quantify other
identified impacts of alternatives, like emissions reduction. The
analyst must then convert those values to dollars so the impacts are
expressed in common units. Forecasting tools and benefit-cost analysis
models facilitate the process of quantifying and monetizing benefits
and costs. Forecasting tools predict future behavior of system users,
like travel demand and ridership, for the investment alternatives.
Values from the forecasts are used as inputs into a larger model that
quantifies and monetizes direct user impacts and quantifiable
externalities. Therefore, the accuracy of the forecasts directly
affects the accuracy of the analysis. Several widely accessible models
of highly varying complexities measure and quantify predicted benefits
and costs.[Footnote 61] These models rely on some assumptions, but also
require users to enter location and project specific data to generate
estimates, which are used to assess the overall net benefit of
alternatives. Therefore, the outcome of the analysis depends, in part,
on the quality of the model used for calculations of benefits and
costs.
After monetizing the direct user benefits and costs, the analyst
converts all values to present dollar values to allow an accurate
comparison of projects with different levels of future benefits and
costs. The dollar values of the benefits and costs of each alternative
cannot simply be summed over the life of the project to calculate the
total. Benefits and costs incurred in the future have lower values than
those incurred in the present because, in the case of benefits, the
benefits cannot be enjoyed now and, in the case of costs, the resources
do not need to be expended now. In other words, benefits and costs are
worth more if they are experienced sooner because of the time value of
money. Therefore, analysts must convert future values into their
present equivalents to compare benefits and costs expected in the
future with benefits and costs incurred in the present. This conversion
requires the use of a discount rate, which represents the interest rate
that could be earned on alternative uses of the resources. Researchers
explain that the discount rate can have a strong influence on the
outcome of the analysis and note that higher discount rates tend to
favor short-term projects and lower rates favor long-term projects.
Thus, analysts should use care in choosing a discount rate that will
not bias the outcome of the analysis and will accurately account for
the benefits and costs expected in the future. Office of Management and
Budget (OMB) provides guidance on choosing appropriate discount rates
for different types of investments.[Footnote 62]
After all benefits and costs have been discounted to present values,
the analyst should evaluate the benefits and costs of each project
using a common measure to allow for comparison across different
alternatives. Net present value and benefit-cost ratio are two useful
measures for project comparison. Net present value is the discounted
sum of all benefits less the discounted sum of all costs associated
with an alternative and is generally the preferred measure. If the net
present value is positive, then the project is economically efficient
in that the gainers from the project could potentially compensate those
who incur costs and still benefit from the project. That is, the
benefits throughout the life cycle of the project exceed the costs
incurred in the same time frame. A benefit-cost ratio is the discounted
sum of benefits divided by the discounted sum of costs. If the benefit-
cost ratio is greater than one, benefits outweigh costs and the project
is economically efficient. In essence, the benefit-cost ratio indicates
whether $1 invested in one project earns a higher rate of return than
$1 invested in a different project. Researchers and government agency
guidance caution analysts to assign costs and benefits consistently
when calculating benefit-cost ratios because inconsistency can result
in incorrect comparisons between alternatives. For example, if
maintenance costs are included in the cost component, the denominator
of the fraction, for one project, but are netted out of the benefits,
the numerator of the fraction, for a different project, the two
benefit-cost ratios will not be comparable.
Due to the inherent uncertainty in calculating the inputs to benefit-
cost analysis, a critical element of investment analysis is assessing
the sensitivity of the analysis to changes in the assumptions and
forecasts. In addition, uncertainty can also affect the economically
suggested choice of the project resulting in the greatest net benefit
to society. Several methods, which vary in their complexity, exist for
conducting sensitivity analysis including simple sensitivity analysis
and Monte Carlo simulation. Simple sensitivity analysis involves
recalculating the net present values or benefit-cost ratios after
adjusting uncertain inputs to reflect alternative values, as well as
the expected value typically used in the original analysis. Using this
approach, the analyst can determine whether or not the alternative
would still be economically efficient if the actual values were
different from their predicted values. For example, transportation
researchers widely accept that ridership forecasts for transit projects
can be very uncertain. An analyst using simple sensitivity analysis can
determine if the net present value of a transit alternative would still
be positive even, if ridership in the future were lower than predicted.
Monte Carlo simulation or probabilistic-based risk assessment is a more
comprehensive and preferred approach to sensitivity analysis. With
Monte Carlo simulation, the analyst assesses the probability
distribution of each uncertain input and recalculates the benefit-cost
analysis multiple times while drawing values that fall within the
probability distribution for each of the uncertain inputs. The results
are examined in the context of their probability distribution covering
all potential outcomes of the analysis as well as reporting the average
or other values. This approach allows the analyst to judge alternatives
not only on their average net present value, given multiple possible
input value combinations, but also on the likelihood that the project
will achieve outcomes such as a positive net present value.
Real options analysis incorporates uncertainty directly into benefit-
cost valuation. It acknowledges and internalizes both the cost of
making irreversible investments under uncertain conditions and the
value of option-creating actions.[Footnote 63] This type of analysis
incorporates timing of the decision as a factor rather than assuming
investments are now or never decisions that cannot be delayed. In
addition, real options analysis recognizes that a cost is associated
with making decisions when the information that decision-makers use as
a basis for the decision is uncertain and may change in the future. The
analysis attempts to quantify the inherent opportunity cost of making
an investment decision. In other words, real options analysis accounts
for the lost opportunity to make a different decision at a later time
when more or better information is available. For an investment to be
advisable under real options analysis, the net present value of the
investment must exceed the value of keeping the investment option alive
until more certain information is available.
While the real options approach is becoming more common in private
sector investment decision-making, research suggests that this approach
is not widely used in the public sector. Researchers have highlighted
several ways that public sector transportation investment decision-
makers could use real options analysis. First, decision-makers can use
incremental planning and staged implementation of phases of projects to
maintain the option to defer a decision and wait for new information or
to terminate a partially-completed project if new information reveals
that the investment is no longer beneficial to society. Decision-makers
can also actively create flexible options by taking steps like
acquiring a right-of-way but not building until more is known about the
potential project, including demand conditions, potential costs, and
expected benefits of alternatives. Finally, planners can use options to
take incremental actions that increase learning. One study uses the
case of San Diego's conversion of a high-occupancy vehicle (HOV) lane
to a high-occupancy toll (HOT) lane as an example of taking incremental
action that increases learning. By using existing infrastructure and
adding a pricing component, decision-makers tested users' reactions to
optional congestion pricing before implementing a congestion-pricing
model that would affect all drivers.
Finally, after the analysis has been completed and the results have
been checked for sensitivity to uncertain inputs, analysts should use
the results of the analysis to compare alternatives and identify the
project that results in the greatest estimated net social benefit. As
stated above, any project that has a positive net present value or
benefit-cost ratio greater than one is expected to provide net benefits
to society. However, transportation decision-makers have budget
constraints and typically cannot implement all projects resulting in
net benefits. Rather, they must rank alternatives and identify the best
project that can be implemented given the budget constraint. In
general, projects with higher net present values or benefit-cost ratios
should be chosen over projects with lower net present values or
benefit-cost ratios. If projects are not mutually exclusive, then a
combination of projects, the total cost of which does not exceed the
budget constraint, might lead to the greatest net social benefit. In
this case, the decision-maker should examine all feasible combinations
of projects, sum the net present values for each combination, and
identify the combination that yields the highest total net present
value. In addition, according to Executive Order 12893, OMB guidance,
and our past research, in the likely event that not all benefits and
costs could be quantified and monetized when developing the benefit-
cost analysis, the decision-maker should consider the nonquantifiable
factors in addition to the numeric results of the analysis when
evaluating alternatives.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Katherine Siggerud, (202) 512-2834 Rita Grieco, (202) 512-9047:
Acknowledgments:
In addition to those named above, Christine Bonham, Jay Cherlow, Robert
Ciszewski, Lindy Coe-Juell, Sarah Eckenrod, Colin Fallon, Scott Farrow,
Peter Guerrero, Libby Halperin, Hiroshi Ishikawa, Sara Ann Moessbauer,
Stacey Thompson, and Dorothy Yee made key contributions to this report.
FOOTNOTES
[1] In this report, we specifically included highways, mass transit
systems, intercity passenger railroads, commuter railroads, and freight
railroads in our definition of surface transportation modes.
[2] State and local governments provide an even greater share of the
funding for surface transportation investments than the federal
government. For example, in fiscal year 1999, state and local
governments contributed 75 percent of the total public sector spending
for public roads and 85 percent of total public spending for transit
systems.
[3] MPOs are regional transportation policy bodies made up of
representatives from various governmental and other organizations. The
Federal Highway Act of 1970 required the development of such agencies
in areas with populations of 50,000 or greater to carry out cooperative
planning at the metropolitan level. These organizations were created to
ensure that federal funds would be spent through a transportation
planning process that was based on continuing, comprehensive, and
cooperative planning.
[4] To be financially constrained, state and MPO short-range programs
must include a financial plan that demonstrates which projects can be
implemented using existing revenue sources and which projects are to be
implemented using projected revenue sources.
[5] Intelligent Transportation Systems are technology-based systems
intended to improve the safety, efficiency, and effectiveness of
transportation facilities.
[6] A portion of the Surface Transportation Program funds is allocated
directly to Transportation Management Areas, which are urbanized areas
over 200,000 in population.
[7] Flexible funding is primarily available in FHWA's National Highway
System, Surface Transportation Program, Congestion Mitigation and Air
Quality Improvement Program, and for FTA's Urban Formula Funds.
[8] Transportation facilities refers to all of the fixed physical
assets of a transportation system, such as roads, train stations, bus
terminals, bridges, and bike paths.
[9] 23 U.S.C. 134 (metropolitan planning); 23 U.S.C. 135 (statewide
planning); 23 C.F.R. 450 (planning assistance and standards).
[10] California state law requires that 75 percent of state
transportation funds be allocated directly to counties under the
Regional Transportation Program, with the remaining 25 percent
allocated to the state transportation planning agency for its
interregional transportation program. Counties within the MPO region do
the actual project planning.
[11] See Federal Highway Administration and Federal Transit
Administration, The Metropolitan Planning Process: Key Issues,
(Washington, D.C.: November 2001).
[12] The Civil Rights Act of 1964: 42 U.S.C. 2000(d).
[13] See 40 C.F.R. 1502.23 dealing with Environmental Impact Statements
and Cost-Benefit Analysis.
[14] The Clean Air Act of 1990 and Title 23 of the U. S. Code both
require that transportation and air quality planning be integrated in
areas designated by EPA as air quality nonattainment or maintenance
areas. Nonattainment areas are geographic areas that do not meet the
federal air quality standards, and maintenance areas are areas that
formerly violated but currently meet the federal air quality standards.
[15] FTA proposes New Starts projects to the Congress for funding on an
annual basis, based on an evaluation of their technical merits,
including mobility improvements and cost effectiveness, and the
stability of the local financial commitment.
[16] Transportation Research Board, Guidance on Using Existing Economic
Analysis Tools for Evaluating Transportation Investments, prepared for
the National Cooperative Highway Research Program, NCHRP 2-19 (2)
(Washington, D.C.: October 1999).
[17] Executive Order 12893, Principles for Federal Infrastructure
Investments (Washington, D.C.: Jan. 26, 1994).
[18] See Office of Management and Budget, Capital Programming Guide,
Supplement to Office of Management and Budget Circular A-11, Part 3:
Planning, Budgeting and Acquisition of Capital Assets (Washington,
D.C.: July 1997).
[19] For example, see FHWA Toolbox for Regional Policy Analysis, FHWA
Economic Analysis Primer.
[20] See U.S. General Accounting Office, Freight Transportation:
Strategies Needed to Address Planning and Financing Limitations,
GAO-04-165 (Washington, D.C.: Dec. 19, 2003).
[21] See U.S. General Accounting Office, Consumer Product Safety
Commission: Better Data Needed to Help Identify and Analyze Potential
Hazards, GAO-HEHS-97-147 (Washington, D.C.: Sept. 29, 1997).
[22] Chicago's rail system is the nation's largest freight hub, and the
region also handles 73 million railroad passenger trips annually. Major
bottlenecks have developed as a result of the region's need to move
1,200 trains each day.
[23] Analysts could address these distributional problems within benefit-
cost analysis by mathematically weighting the benefits and costs to a
disadvantaged group differently than the benefits and costs to other
segments of the population. However, in practice, it is very difficult
to determine appropriate weights and equitably assign them to different
population groups.
[24] GAO-HEHS-97-147.
[25] Transportation Research Board, Assessing the Social and Economic
Effects of Transportation Projects, NCHRP B25-19 (Washington, D.C.:
February 2001).
[26] For additional discussion on this topic, see OMB, Economic
Analysis of Federal Regulations Under Executive Order 12866
(Washington, D.C.: Jan. 11, 1996).
[27] Hof, John G. and Douglas B. Rideout, "Limitations of the With and
Without Principle in Benefit-Cost Analysis," Public Finance Quarterly
(17, 2) April 1989, pp. 216-226; and Cohn, Elchanan, "Benefit-Cost
Analysis: A Pedagogical Note," Public Finance Review (31, 5) September
2002, pp. 534-549.
[28] Transportation Research Board, First Report of the Transportation
Research Board's Committee for Review of Travel Demand Modeling by the
Metropolitan Washington Council of Governments, (Washington, D.C.:
Sept. 8, 2003).
[29] Committee to Review EPA's Mobile Source Emissions Factor (MOBILE)
Model, Modeling Mobile-Source Emissions, (Washington, D.C.: 2000).
[30] TRB administers both programs. State transportation departments
that are AASHTO members have sponsored NCHRP in cooperation with FHWA
since 1962 and make about $30 million available annually to sponsor its
projects. FTA provides about $8 million annually and has worked with
APTA's nonprofit education and research organization since 1992 to
sponsor TCRP research.
[31] For example, financial analysis and air quality conformity
analysis might reveal concerns that would play an important role in
some investment decisions.
[32] Transportation Research Board, Guidance on Using Existing Economic
Analysis Tools for Evaluating Transportation Investments, NCHRP 2-19
(2), (Washington, D.C.: October 1999).
[33] Transportation Research Board, Assessing the Social and Economic
Effects of Transportation Projects, NCHRP B25-19, (Washington, D.C.:
February 2001).
[34] GAO-04-165.
[35] U.S. Department of Transportation/Bureau of Transportation
Statistics, Transportation Statistics Annual Report 2003 (Washington,
D.C.: October 2003).
[36] Transportation Research Board, Letter Report on the Freight
Analysis Framework (Washington, D.C.: Feb. 9, 2004).
[37] GAO-04-165.
[38] Bruce Katz, Robert Puentes, and Scott Bernstein, The Brookings
Institution Series on Transportation Reform, Improving Metropolitan
Decision Making in Transportation: Greater Funding and Devolution for
Greater Accountability, (Washington, D.C.: October 2003).
[39] The Amtrak Reform and Accountability Act of 1997 prohibited Amtrak
from using federal funds for operating expenses, except an amount equal
to excess Railroad Retirement Tax Act payments, after 2002. However,
Congress specifically appropriated funds for Amtrak to cover operating
expenses in fiscal year 2003 (see the Consolidated Appropriations
Resolution, 2003, P.L. 108-7).
[40] Federal programs that can support railroad-related infrastructure
that meet eligibility requirements include the Transportation
Infrastructure Finance and Innovation Act, Railroad Rehabilitation and
Improvement Financing, and the Rail-Highway Grade Crossing Program.
[41] American Association of State Highway and Transportation
Officials, Transportation: Invest in America: Freight-Rail Bottom Line
Report (Washington, D.C.: 2002).
[42] GAO-04-165.
[43] GAO-04-165.
[44] FHWA, FTA, AASHTO, APTA, The Association of Metropolitan Planning
Organizations, The Metropolitan Transportation Planning Process: Key
Issues (Washington, D.C.: November 2001).
[45] Capital expenditures on highways include those for (1) system
preservation, which includes capital improvements on existing roads and
bridges, intended to preserve the existing infrastructure, but does not
include routine maintenance; (2) system enhancements, which are traffic
operations improvements, such as the installation of intelligent
transportation systems (ITS) and environmental enhancements; and (3)
system expansion, which includes construction of new roads and bridges,
as well as additional lanes on roads. Noncapital expenditures are for
maintenance and operations of highways, including functions necessary
for day-to-day operations, such as keeping roads free of obstacles,
performing pavement and shoulder maintenance, operating ITS, and
performing incident management (the quick removal of incapacitated
vehicles from the highway) to improve safety and traffic flow.
[46] FHWA and FTA, Status of the Nation's Highways, Bridges, and
Transit: Conditions and Performance Report, 2002 Report to Congress
(Washington, D.C.: 2002).
[47] GAO-04-165.
[48] GAO-04-165.
[49] American Society of Civil Engineers, Statement of American Society
of Civil Engineers Before the Banking, Housing and Urban Affairs
Committee, U.S. Senate (Washington, D.C.: Oct. 8, 2002).
[50] U.S. General Accounting Office, Highway Infrastructure:
Preliminary Information on the Timely Completion of Highway
Construction Projects, GAO-02-1067T (Washington, D.C.: Sept. 19, 2002).
[51] C.F.R. 450.310 requires "planning agreements" between the state
and MPOs, between MPOs in the same metropolitan area, and between MPOs
and designated air quality agencies.
[52] GAO-04-165.
[53] Cambridge Systematics Inc., Parsons Brinkerhoff Quade and Douglas,
Inc., and the I-95 Corridor Coalition, Mid-Atlantic Rail Operations
Study (Mid-Atlantic: April 2002).
[54] The use of the terms "direct" and "indirect" to classify types of
benefits and costs is common in transportation economics literature but
might not apply generally to economic analysis in other fields.
[55] See appendix III for a description of best practices for the other
steps, as the procedures for these are consistent with their parallel
steps in benefit-cost analysis.
[56] The base case is sometimes referred to as the "do nothing" or "no-
build" scenario; however, a more accurate name is the "do minimal"
alternative.
[57] U.S. General Accounting Office, Surface and Maritime
Transportation: Developing Strategies for Enhancing Mobility,
GAO-02-775 (Washington, D.C.: Aug. 30, 2002).
[58] GAO-02-775.
[59] GAO-04-165.
[60] American Association of State Highway and Transportation
Officials, Transportation Invest in America: Freight-Rail Bottom Line
Report (Washington, D.C.) and Brown, Thomas R. and Anthony B. Hatch,
Rail Intermodal: On the Fast Track http://www.tomorrowsrailroads.org/
industry/railstudies.cfm.
[61] For a listing and evaluation of some models, see National
Cooperative Highway Research Program, Guidance on Using Existing
Economic Analysis Tools for Evaluating Transportation Investments
(Washington, D.C.: October 1999).
[62] OMB, Circular A-94 Guidelines and Discount Rates for Benefit-Cost
Analysis of Federal Programs (Washington, D.C.: 2002).
[63] Option-creating actions are steps that decision-makers can take to
improve the information available for making a decision, including
resolving uncertainty, enabling flexibility, and uncovering new and
relevant information. For example, if existing levels of demand do not
support a light rail line for a planned new highway corridor but
planners expect that such demand might materialize in the future, an
option-creating action would be to build the highway compatible with
the possibility of constructing a light rail line in the median. Brand,
Daniel, Shomik Raj Mehndiratta and Thomas E. Parody, "Options Approach
to Risk Analysis in Transportation Planning," Transportation Research
Record 1706, Paper No. 00-1075.
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