Who will pay for this project?

It will take a combination of financing - from the Federal Government through the Federal Transit Administration (FTA), from the State of Maryland through the Department of Transportation's Consolidated Transportation Trust Fund, and possibly from local governments and the private sector.

While some initial money has come from various federal transit formula funding programs, the vast majority of federal support for the Red Line will come from the FTA's Capital Investment Program for "New Starts." Funds are available for construction of new fixed guideway systems or extensions to existing fixed guideway systems. In order to become eligible for funding, projects must complete the major capital investment planning and development process, which looks at the results of an Alternatives Analysis, a set of established criteria and the degree of local financial commitment.

The New Starts program is a $1.5 billion discretionary fund for construction of new fixed guideway systems. While the federal match can be as high as 80 percent, FTA generally only pays only 50 percent or less of total project costs because of the competitive nature of this program.

The balance of funds will have to come from the state's Transportation Trust Fund (TTF) and possible contributions from local governments and the private sector. Mass transit is one of many transportation modes competing for TTF dollars. The fund was created in 1971 as a source of dedicated revenues to support the Maryland Department of Transportation - the MTA, State Highway Administration, the Maryland Port Administration, Motor Vehicle Administration and the Maryland Aviation Administration. TTF revenue supports all of the department's activities, including debt service, agency operations and capital projects. TTF money comes from motor fuel taxes, motor vehicle titling taxes, motor vehicle fees, bond proceeds and the department's operating revenues, including transit farebox receipts.

Can Maryland afford to build a Red Line?

Demand for transportation projects in Maryland far outpaces available revenue. Priorities and goals are set in the six-year Consolidated Transportation Program (CTP). As part of a continuing statewide planning process, a Draft CTP is developed annually in concert with Maryland's 24 political subdivisions. This Draft CTP is presented to local elected officials and citizens for review and comment. The CTP is then revised and submitted for approval as part of the Governor's budget to the General Assembly in January.

Every year, priorities within the CTP are adjusted, based on local and regional needs and available revenue. If the Red Line gains federal approval, Maryland will have to revise priorities within the CTP or add additional funds to the Transportation Trust Fund.

Has money already been budgeted to build the Red Line?

In the current Consolidated Transportation Program (CTP), covering the six-year period 2007 to 2012 (state fiscal years) for all modes of transportation across the state, funding projected for the Red Line includes:

A portion of the federal funds shown above was provided to Maryland in the recently enacted federal surface transportation authorization bill known as SAFETEA-LU (Public Law 109-59). The majority of the $249.6 million, though, requires development of a Full Funding Grant Agreement. This is a special type of grant agreement the Federal Transit Administration uses when it makes a major investment in a new fixed guideway system.

 

Why can't this money be used to improve schools and community centers?

The two major sources of funding for the Red Line, the Federal Transit Administration's Capital Investment Program and the State of Maryland's Transportation Trust Fund, get their money from dedicated revenue accounts that can only be used for transportation projects. For instance, Transportation Trust Fund revenue supports all the activities of the Maryland Department of Transportation - debt service, maintenance, operations, administration and capital projects. By law, this money cannot be re-directed into other government programs, such as school construction or community centers. Similarly, dollars contributed by the federal government for the FTA's Capital Investment Program are designated for transportation purposes, specifically construction of new fixed guideway systems or extensions to existing fixed guideway systems. The money is not available for other purposes.

If the funding needs include payments from local governments will my taxes go up?

At this time there are no local government contributions to the Red Line. Should local funds be required to partially underwrite the project, both Baltimore City and Baltimore County would have to identify funding sources. This could be done by reducing local expenditures and redirecting that money into funding for the Red Line or by raising additional local revenue through new or higher fees or taxes. The choice of which road to follow will rest with Baltimore City and Baltimore County officials - if this contingency ever arises. So far, that has not been the case.

What requirements must be met to obtain federal funds for the Red Line?

The primary source of federal capital funds for transit projects is the Federal Transit Administration Section 53-09 New Starts program. This is a discretionary capital grant program where projects from throughout the country can request up to 80 percent federal share of the construction costs of major transit projects, such as a new rail transit line, extension of an existing line or construction of a bus or transit guideway. Because requests for these funds are so numerous, projects from around the country compete against one another. In recent years, Congress has limited the federal share to 50 percent and nearly all project requests for federal assistance are in the area of 50 percent.

The agency sponsoring a locally selected transit project submits a "New Starts Criteria" package to the Federal Transit Administration (FTA) as part of the process to get the project into the "funding pipeline." This package is developed after an Alternative Analysis is completed and a locally preferred alternative is selected. This happens prior to entering the Preliminary Engineering phase. The package provides information describing the proposed project as well as information on a number of criteria that are used to rate the project against others from around the country that are in competition for the limited pool of Section 53-09 New Starts funds. These criteria include:

• Mobility improvements (travel time savings; low-income households served)
• Environmental benefits (changes in pollutant and "greenhouse gas" emissions and regional energy consumption)
• Operating efficiencies (operating cost per mile)
• Cost-effectiveness (transportation system user benefits)
• Transit supportive land-use patterns, policies and programs
• Local financial commitment

Each project receives a rating in every category - high, high-medium, medium, medium-low, or low. The first five criteria constitute the "project justification group" and ratings from them are rolled up into an overall project justification rating (see figure below). The financial commitment criteria, constituting three sub-categories, is rated separately.

A project must receive a medium or better financial rating to be recommended for funding, regardless of the strength of the project justification rating.

Click to enlarge.

Importance of Cost-Effectiveness and Financial Commitment:

The two primary drivers of the rating process are cost effectiveness and financial commitment.

The lower the cost per hour of user benefit, the better the project's rating. The FTA sets thresholds for each rating level. Here is how this works. Cost effectiveness is measured in terms of cost per hour of user benefit. You take the annualized cost of the New Starts project compared to a "baseline" service level and combine that with the additional annual net operating cost, plus annual capital expenses. Then you divide that number by the transportation system user benefits as expressed in terms of hours of travel time saved relative to a baseline service level for all users of the transportation system: current transit riders; travelers who switch to transit from autos, and highway system users.

The local financial commitment rating focuses on the availability and reliability of local funding sources for capital construction, operating and maintenance costs as well as the overall amount and share of project costs sought from Washington. Maryland has historically rated very well in these areas. The third sub-category is the percent of the total project costs funded locally. Until recently, this category did not figure into the rating but now a project's financial plan must include 50 percent or more local funding of the capital cost in order to get a financial rating of medium or better.

In order to be eligible to submit a "Request to Initiate Preliminary Engineering," a project must emerge from the Alternative Analysis phase with a locally preferred alternative that is in the state's fiscally constrained long-range plan and has an FTA New Starts rating of at least a Medium.

During the Preliminary Engineering (PE) phase, the project will undergo detailed planning and preliminary engineering, complete federal and state environmental impact statements and prepare project management and financial plans. At the completion of the PE phase, the New Starts Criteria for the project is updated and re-submitted for a new rating and recommendation.

Once a project finishes the PE phase and receives a New Starts rating from FTA, it submits a "Request to Initiate Final Design." In this phase, final construction plans are developed, and property acquisition, construction and equipment procurement occur. A key element of this phase is negotiating a "Full Funding Grant Agreement" (FFGA) between the sponsoring agency and FTA on the amount and payout schedule for the federal share of funds. Then construction can commence.