How to Finance More Rail and Bus Lines

There’s a saying that Transportation Secretaries who served as Federal Highway Administrators have actually taken a step down. As with many sayings, there’s more than a grain of truth there. The highway agency is the largest “modal administration” (smaller although still large ones include the Federal Transit Administration and the Federal Railroad Administration) and it has a lot of influence over federal transportation policy.

This is why I was ambivalent about the TIGER, or Transportation Investments Generating Economic Recovery, grant program when it was included in the Recovery Act in 2009. This $1.5 billion program was intended to invest in projects chose based on their merits, including these criteria:

  1. improving the condition of existing facilities and systems;
  2. contributing to the economic competitiveness of the U.S. over the medium- to long-term;
  3. improving the quality of living and working environments for people;
  4. improving energy efficiency, reduce dependence on foreign oil, reducing greenhouse gas emissions and benefit the environment;
  5. improving public safety.

Sounds pretty good, right? Well, my initial concern about this program is that Federal Highways might dominate the competition and in spite of laudable criteria some “highways to nowhere” might get funded. We don’t need more waste in the transportation program.

I’m happy to eat my words in public now (I've already done so with friends at DOT), as the Transportation Department announces its third round of investments under this impressive program. The official list is at the DOT site (pdf here) and a the Transportation for America coalition (NRDC is a member) has a great map showing the locations of all TIGER funding to date on a map:

First thing to note is just how much interest and innovation this initiative has spurred. As Streetsblog reports, this round was as oversubscribed as the first two. With just $511 million worth of funding available, DOT leveraged 828 applications totaling $14.1 billion. In the end, 46 projects in 33 states and Puerto Rico received funding. In this sense, the program has been effective in a way similar to the much-publicized “Race to the Top”. The winners have “think outside the box” by hewing to the criteria above in project development, but so have the many applicants who didn’t succeed. This is a virtuous competition which spurs broader and deeper consideration of future effects of transportation investments across the country.

Second is the split between modal projects, which is much more balanced than the overall transportation program. The OneRail coalition, which includes NRDC, notes that more than half the funding went to rail-related projects. A host of less expensive, cost-effective bicycle and pedestrian projects have received support too.

And last but not least, of note in this most recent round are TIFIA loan recipients. TIFIA (created by the Transportation Infrastructure Finance and Innovation Act) is a very popular program right now since it provides a vehicle for stretching scarce federal dollars. It provides credit financing for projects of regional and national significance, leveraging many private dollars for every public dollar invested. This is why the EPW transportation bill proposes increasing the size of the program nearly tenfold in its authorization bill, with areas such as Los Angeles proposing to take advantage of the financing to build new transit and road capacity sooner rather than later.

Three projects receive funding via the TIFIA program – high-occupancy toll lanes on I-95 in Virginia, express bus service on SR-91 in southern California, and a light-rail extension in Dallas. This last one is especially interesting, and hopefully augurs more of the same in the transit world. Transit projects can create a great deal of value, for example to property owners and businesses located near rail stations (here in D.C., Metro stops often help fuel development or redevelopment nearby). This value can theoretically be captured through taxation of property, or leasing of sites, or even the sale or leasing of “air rights” for valuable multi-story buildings above transit stops. Todd Litman has just co-written a handy bibliography of the growing literature on these opportunities (see pdf here). TIFIA financing can be the cornerstone of a package that includes such value capture with the help of private sector partners.

This is something for local transit agencies, as well as their national association (the American Public Transportation Association, which NRDC joined recently), to keep in mind. TIFIA is often touted as a program for building more road capacity, yet it may have even more leverage for building new transit projects. That could make a big difference to agencies looking to succeed in an era of tighter and tighter budgets.