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Report to Congressional Committees: 

January 2005: 

HIGHWAY AND TRANSIT INVESTMENTS: 

Options for Improving Information on Projects' Benefits and Costs and 
Increasing Accountability for Results: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-172]: 

GAO Highlights: 

Highlights of GAO-05-172, a report to congressional committees

Why GAO Did This Study: 

Mobility is critical to the nation’s economy. Projections of future 
passenger and freight travel suggest that increased levels of 
investment may be needed to maintain the current levels of mobility 
provided by the nation’s highway and transit systems. However, calls 
for greater investment in transportation come amid growing concerns 
about fiscal imbalances at all levels of the government. As a result, 
careful decisions will need to be made to ensure that transportation 
investments maximize the benefits of each federal dollar invested.

In this report GAO identifies (1) the categories of benefits and costs 
that can be attributed to new highway and transit investments and the 
challenges in measuring them; (2) how state, local, and regional 
decision makers consider the benefits and costs of new highway and 
transit investments when comparing alternatives; (3) the extent to 
which investments meet their projected outcomes; and (4) options to 
improve the information available to decision makers. To address these 
objectives, we convened an expert panel, surveyed state departments of 
transportation and transit agencies, and conducted site visits to five 
metropolitan areas that had both a capacity-adding highway project and 
transit project completed within the last 10 years. DOT generally 
agreed with the report’s findings and offered technical comments, which 
were incorporated as appropriate.

What GAO Found: 

A range of direct and indirect benefits, such as savings in travel time 
and positive land-use changes, and costs can result from new highway 
and transit investments. The extent to which any particular highway or 
transit investment will result in certain benefits and costs, however, 
depends on the nature of the project and the local economic and 
transportation conditions where the investment is being made. In 
addition, measuring project benefits and costs can be challenging and 
is subject to several sources of error. For example, some benefit-cost 
analyses may omit some benefits or double-count benefits as they filter 
through the economy. 

Officials we surveyed and visited said they considered a project’s 
potential benefits and costs when considering project alternatives but 
often did not use formal economic analyses to systematically examine 
the potential benefits and costs. Even when economic analyses are 
performed, the results are not necessarily the most important factor 
considered in investment decision making. Rather, our survey responses 
indicate that a number of factors, such as public support or the 
availability of funding, shape transportation investment decisions. 
Officials we interviewed indicated that they often based their decision 
to select a particular alternative on indirect benefits that were often 
not quantified in any systematic manner, such as desirable changes in 
land use or increasing economic development. 

Available evidence indicates that highway and transit projects do not 
achieve all projected outcomes; in addition, our case studies and 
survey show that evaluations of the outcomes of completed projects are 
not frequently conducted. A number of outcomes and benefits are often 
projected for highway and transit investments, including positive 
changes to land use and increased economic development. These projected 
outcomes were often cited as reasons why the projects were pursued. 
However, because evaluations of the outcomes of completed highway and 
transit projects are not typically conducted, officials have only 
limited or anecdotal evidence as to whether the projects produced the 
intended results. 
 
Several options exist to improve the information available to decision 
makers about new highway and transit investments and to make analytic 
information more integral to decision making. These options, such as 
improving modeling techniques and evaluating the outcomes of completed 
projects, focus on improving the value this information can have to 
decision makers and holding agencies accountable for results. Even if 
steps are taken to improve the analytic information available to 
decision makers, however, overarching issues, such as the structure of 
the federal highway and transit programs, will affect the extent to 
which this information is used. Nevertheless, the increased use of 
economic analysis, such as benefit-cost analysis, could improve the 
information available, and ultimately, lead to better-informed 
transportation investment decision making.

www.gao.gov/cgi-bin/getrpt?GAO-05-172.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Katherine Siggerud, (202) 
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[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

Benefits and Costs of Highway and Transit Investments Depend on Local 
Circumstances, Though Measuring and Properly Counting Some Benefits and 
Costs Can Prove Difficult: 

Analysis of Benefits and Costs Not Usually Systematic, and Results of 
Analysis Are Only One Factor Among Many Considered in Investment 
Decision Making: 

Costs and Usage Outcomes of Highway and Transit Investments Are Often 
Different from Projected; and Other Expected Outcomes Are Not Usually 
Evaluated: 

Options for Increasing Use of Information on Project Benefits and Costs 
to Better Inform Decisions and Instill Accountability: 

Concluding Observations: 

Agency Comments: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Survey Results: 

Appendix III: Panelists: 

Appendix IV: Trends in Highway and Transit Expenditures, Usage, and 
Capacity: 

Appendix V: Information on Benefits Attributable to Highway and Transit 
Investments: 

Direct and Social Benefits: 

Indirect Benefits: 

Appendix VI: GAO Contacts and Acknowledgments: 

GAO Contacts: 

Acknowledgments: 

Tables Tables: 

Table 1: Types and Purposes of Economic Analysis: 

Table 2: Types of Direct Benefits and Costs to Use in Evaluating 
Proposed Highway and Transit Projects: 

Table 3: Types of Indirect Benefits to Use in Evaluating Proposed 
Highway and Transit Projects: 

Table 4: Description of Five Highway and Five Transit Projects Selected 
for Review: 

Table 5: Summary of Key Projected and Observed Outcomes of Highway and 
Transit Projects: 

Table 6: Experts' Suggestions for Improving the Quality and Utility of 
Economic Analysis: 

Table 7: Description of Five Highway and Five Transit Projects Selected 
for Review: 

Figures: 

Figure 1: Survey Responses of Frequency of Economic Analysis Completed 
for Proposed Project Alternatives by State DOTs and Transit Agencies: 

Figure 2: Survey Responses of Completed Economic Analyses When 
Evaluating Project Alternatives: 

Figure 3: State DOTs' Survey Responses of Factors of Great or Very 
Great Importance in the Decision to Recommend a Highway Project: 

Figure 4: Transit Agencies' Survey Responses of Factors of Great or 
Very Great Importance in the Decision to Recommend a Transit Project: 

Figure 5: Total Public Spending on Highways, 1982-2002: 

Figure 6: Total Public Spending for Transit, 1982-2002: 

Figure 7: Public Highway Capital Expenditures, 1982-2002: 

Figure 8: Public Transit Capital Expenditures, 1995-2002: 

Figure 9: Cost to Maintain and Improve Highways and Transit, 2001-2020: 

Figure 10: Level of Usage of Public Highways by Mode, 1982-2002: 

Figure 11: Level of Usage of Public Transit, Rail/NonRail 1982-2002: 

Figure 12: Level of Usage of Rail Transit, 1984-2001: 

Abbreviations Abbreviations: 

AASHTO: American Association of State Highway and Transportation 
Officials: 

AMPO: Association of Metropolitan Planning Organizations: 

BEA: Bureau of Economic Analysis: 

DOT: Department of Transportation: 

FHWA: Federal Highway Administration: 

FTA: Federal Transit Administration: 

ISTEA: Intermodal Surface Transportation Efficiency Act: 

MPO: Metropolitan Planning Organization: 

NAS: National Academy of Sciences: 

NEPA: National Environmental Policy Act: 

OMB: Office of Management and Budget: 

TEA-21: Transportation Equity Act for the 21ST Century: 

TCRP: Transit Cooperative Research Program: 

TRB: Transportation Research Board: 

ROW: Right-of-way: 

Letter January 24, 2005: 

The Honorable Thad Cochran:  
Chairman: 
The Honorable Robert C. Byrd: 
Ranking Member: 
Committee on Appropriations: 
United States Senate: 

The Honorable Jerry Lewis: 
Chairman: 
The Honorable David R. Obey: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives:


Mobility--that is, the movement of passengers and goods through the 
transportation system--is critical to the nation's economic vitality 
and the quality of life of its citizens. Mobility provides people with 
access to goods, services, recreation, and jobs; provides businesses 
with access to materials, markets, and people; and promotes the 
movement of personnel and material to meet national defense needs. 
However, increasing passenger and freight travel has led to growing 
congestion in the nation's transportation system; and projections of 
future passenger and freight travel suggest that this trend is likely 
to continue. Several strategies exist for addressing this congestion, 
including improving operations and system management, or managing 
system use through pricing or other techniques. One of the key 
strategies is to invest in new capacity in the transportation system. 
In 2002, capital outlay from all levels of government for highways was 
about $68.2 billion, with $26.5 billion specifically for new or 
expanded capacity. For transit, 2002 capital outlay was about $12.3 
billion from all levels of government, with $8.7 billion specifically 
for new capacity. The Department of Transportation (DOT) estimated that 
about $90 billion in capital spending on average will be required each 
year to maintain the condition and performance of the nation's highway 
and transit systems through 2020 and approximately $127 billion in 
capital spending to improve the conditions of these systems.[Footnote 
1]

Calls for increased transportation investments come amid growing 
concerns about the size of federal and state budget deficits, the long-
term viability of financing the nation's highway and transit systems 
through motor-fuel taxes, and the future mandatory commitments to 
Social Security and Medicare that will consume a greater share of the 
nation's resources. Given these fiscal challenges, careful decisions 
will need to be made to ensure that transportation investments maximize 
the benefits of each federal dollar invested and achieve projected 
outcomes. As we have noted previously, there are no mechanisms in the 
federal-aid highway program that link federal funding to project 
performance.[Footnote 2]

The House Appropriations Committee report, accompanying the fiscal year 
2004 Departments of Transportation and Treasury and Independent 
Agencies Appropriations Bill, requires that we review the costs and 
benefits of the different modes of transportation.[Footnote 3] We 
limited our review to the costs and benefits of new highway and transit 
investments. Accordingly, this report (1) describes the categories of 
benefits and costs that can be attributed to new highway and transit 
investments and the challenges in measuring these benefits and costs; 
(2) identifies how state, local, and regional decision makers consider 
the benefits and costs of new highway and transit investments when 
comparing alternatives; (3) examines the extent to which select 
capacity-adding highway and transit investments meet their projected 
outcomes; and (4) describes options to improve the information 
available to decision makers about new highway and transit investments.

To address these objectives, we convened, in collaboration with the 
National Academy of Sciences, an expert panel of transportation 
economists and practitioners, conducted an extensive literature review, 
and interviewed officials from the Federal Transit Administration (FTA) 
and Federal Highway Administration (FHWA) as well as representatives 
from various industry associations, think tanks, and academic 
institutions. We also surveyed all 50 state DOTs and the 30 largest 
transit agencies about the type of economic analysis they use when 
considering transportation alternatives and how such analysis is used 
in decision making, and we received responses from 43 state DOTs and 20 
transit agencies.[Footnote 4] In addition, we developed case studies by 
conducting site visits to five metropolitan areas across the nation 
that had both a capacity-adding highway project and transit project 
completed within the last 10 years.[Footnote 5] During these site 
visits, we reviewed project documents and interviewed officials from 
the respective transit agency, metropolitan planning organization, and 
state DOT. We conducted our work from February 2004 through January 
2005 according to generally accepted government auditing standards.
[Footnote 6]

Results in Brief: 

The categories of benefits that transit and highway projects may 
produce include two types of direct benefits--those to users, such as 
savings in travel time, and those to users and nonusers alike, such as 
reductions in the adverse environmental impacts of transportation. 
These direct benefits can in turn produce indirect benefits, such as 
economic development, although indirect benefits are harder to 
accurately estimate. For example, by creating changes in how nearby 
land is used or developed, such projects can increase productivity or 
spur economic growth, but some of this benefit may represent a transfer 
of economic activity from one area to another. Although transfers can 
represent real benefits for the jurisdiction making the transportation 
improvement, from a national perspective, they do not represent net 
benefits. The costs against which these direct and indirect benefits 
must be weighed are likewise varied. They include costs to build, 
operate, and maintain the project, as well as less obvious items such 
as traffic delays caused by the project's construction or the effects 
of unmitigated changes to the environment. These benefits and costs can 
vary greatly, depending on the specifics of the project and on local 
economic and transportation conditions. Experts and practitioners 
identified several challenges in measuring these benefits and costs. 
One set of challenges involves limitations in the methods themselves--
for example, limitations in the ability of forecasting models to 
anticipate changes in traveler behavior or changes in land use. Another 
set of challenges involves sources of error that can be introduced into 
benefit-cost calculations, such as omitting some benefits or double-
counting benefits as they filter through the economy. These challenges 
can make it difficult to comprehensively and accurately consider all 
the various benefits and costs associated with a project.

The majority of local, regional, and state transportation officials we 
surveyed and interviewed told us they consider various benefits and 
costs of projects when evaluating transportation alternatives; but they 
often do not use formal economic analytical tools, such as a formal 
benefit-cost analysis, to do so. If they use formal analyses, they tend 
to do so more often on transit projects than on highway projects. Local 
and state officials noted that these formal analyses are done more 
often for transit projects because of the New Starts requirements. For 
example, the New Starts program requires that project sponsors 
calculate the cost-effectiveness of their proposed transit projects. In 
contrast, there are no similar federal requirements for economic 
analysis of highway projects, because highway projects are funded under 
a formula program, and there is no federal approval of project economic 
worthiness. However, regardless of the type of project, our survey 
responses indicated that such analyses were just one factor considered 
and not necessarily the most important factor in deciding whether to 
proceed with a project. Similarly, officials at the locations we 
visited indicated that they often based their decision about whether to 
proceed primarily on the project's perceived indirect benefits, such as 
desirable changes in land use or economic development, which are 
difficult to forecast and were generally not quantified or 
systematically analyzed in the planning documents we reviewed.

The available evidence indicates that highway and transit projects 
often do not meet projected outcomes such as cost and usage, while 
other projected outcomes such as economic development or land-use 
impacts are not regularly evaluated. Results from our case studies, as 
well as analyses conducted by others, show that completed highway and 
transit investments often result in higher than expected costs and 
usage that are different from what was projected. For example, a study 
of over 250 transportation projects found that costs were 28 percent 
higher on average than projected costs.[Footnote 7] FTA has implemented 
a number of measures to improve usage and cost estimates for New Starts 
projects, including holding senior executives accountable for project 
cost overruns and assessing the risks related to the project schedules 
and budgets. In addition to projections about usage, a number of other 
outcomes and benefits were projected for the 10 highway and transit 
projects we reviewed, including positive changes to land use, increased 
economic development, improved travel time, and reduced emissions. 
According to transportation officials we interviewed, these projected 
outcomes were important reasons that the projects were pursued. 
However, we found that evaluations of the outcomes of completed highway 
and transit projects are typically not conducted. Because these 
evaluations are not regularly conducted, officials only have limited or 
anecdotal evidence of whether the projects produced the intended 
results. For example, in several areas we visited, transportation 
officials discussed development occurring in the area around the 
transportation improvement, although the benefit of such development 
was not quantified; and it is unclear whether such development would 
have occurred in the area or elsewhere if the project was not 
constructed. Because outcome evaluations are not usually completed, 
transportation agencies miss an opportunity to learn from the successes 
and shortcomings of past projects to better inform future planning and 
decision making and increase accountability for results. To identify 
lessons learned for future projects and hold transit agencies 
accountable for results, FTA recently instituted a new requirement for 
before and after studies of transit projects funded under its New 
Starts program.

There are several options to improve the information available to 
decision makers about new highway and transit investments and to make 
analytic information more integral to decision making. These options 
focus on improving the value that this information has to decision 
makers and holding agencies accountable for results. They range from 
improving the quality of data, modeling, and analytic tools to 
evaluating the results of completed transportation projects. These 
options could be implemented through incentives or mandates, although 
each of these approaches has its own degree of difficulty in 
implementation, time required, and impacts on federal programs and 
resources. Any attempt to implement these options, however, needs to be 
tempered with the knowledge that overarching issues, such as the 
structure of the federal programs or legislative earmarks, will affect 
the extent to which this information is used. For example, the 
Transportation Equity Act for the 21st Century (TEA-21) requires local, 
regional, and state transportation agencies to consider a number of 
factors in their planning, such as economic vitality, safety, 
accessibility, and environmental issues. Consequently, these 
statutorily defined factors can be more important than the results of a 
benefit-cost analysis in selecting a transportation project for 
funding. These overarching issues could also steer decision makers away 
from the most cost-beneficial projects. Nevertheless, the increased use 
of economic analytical tools, such as benefit-cost analysis, could 
improve the information available to decision makers and, ultimately, 
lead to better-informed transportation investment decision making.

We provided copies of the draft report to DOT, including FTA and FHWA. 
Overall, DOT said that the report presented a clear and useful 
assessment of the status of economic analysis in its application to 
evaluating transportation projects. DOT offered a number of technical 
comments, which were incorporated as appropriate.

Background: 

The scope of the nation's transportation system is vast and 
increasingly congested. Two key components of the transportation 
network are the nation's highways and transit system. There are 
approximately 4 million miles of highway in the United States, which 
serve to provide mobility to millions of passengers and millions of 
tons of freight each day. In addition, over 600 transit agencies 
provide a range of transit services to the public, including rail and 
bus service.[Footnote 8] Each workday, about 14 million Americans use 
some form of transit.

Over the last 20 years, all levels of government, including the federal 
government, have spent hundreds of billions of dollars on the nations' 
highways and transit systems to enhance mobility as well as meet other 
needs. Despite these expenditures, increasing passenger and freight 
travel has led to growing congestion. For instance, annual delays per 
traveler during rush hour have almost tripled, increasing from 16 hours 
in 1982 to 46 hours in 2002.[Footnote 9] According to DOT forecasts, 
passenger and freight travel will continue to increase in the 
future.[Footnote 10] There are a number of strategies, such as 
preventive maintenance, improving operations and system management, and 
managing system use through pricing or other techniques, which can be 
taken to help address the nation's mobility challenges. One of the key 
strategies is to invest in new physical capacity in the transportation 
system. While such investment is the subject of this report, as we have 
noted in the past, a targeted mix of these strategies is needed to help 
control congestion and improve access.[Footnote 11] (See app. IV for 
additional information about the level of usage of and investment in 
the nation's highway and transit systems.) 

The funding for new transit and highway projects comes from a variety 
of sources, including federal, state, and local governments; special 
taxing authorities and assessment districts; and user fees and tolls. 
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) 
and TEA-21 continued the use of the federal Highway Trust Fund as the 
mechanism to account for federal highway user-tax receipts that fund 
various highway and transit programs.[Footnote 12] Once Congress 
authorizes funding, FHWA makes federal-aid highway funds available to 
the states annually, at the start of each fiscal year, through 
apportionments based on formulas specified in law for each of the 
several formula grant programs. Ninety-two percent of the federal-aid 
highway funds apportioned to the states in fiscal year 2003 were 
apportioned by formula.[Footnote 13] According to DOT officials, the 
majority of federal-aid highway funds are used for maintenance 
purposes, not new investments. FTA also uses formulas to distribute 
federal urbanized and nonurbanized funds for capital and operating 
assistance to transit agencies and/or states. FTA also has 
discretionary transit programs, including the New Starts program. The 
New Starts program provides funds to transit providers for constructing 
or extending certain types of transit systems and is the primary source 
of funding for new transit capacity.

FTA generally funds New Starts projects through full-funding grant 
agreements, which establish the terms and conditions for federal 
participation in a project, including the maximum amount of federal 
funds available for the project. To compete for a full-funding grant 
agreement, a transit project must emerge from a regional planning 
process. The first two phases of the New Starts process--systems 
planning and alternatives analysis--address this requirement. The 
systems planning phase identifies the transportation needs of a region, 
while the alternatives analysis phase provides information on the 
benefits, costs, and impacts of different corridor-level options, such 
as rail lines or bus routes. The alternatives analysis phase results in 
the selection of a locally preferred alternative--which is intended to 
be the New Starts project that FTA evaluates for funding. After a 
locally preferred alternative is selected, the project is eligible for 
entry into the New Starts process. FTA oversees the management of 
projects from the preliminary engineering phase through construction 
and evaluates the projects for advancement into each phase of the 
process,[Footnote 14] as well as annually for the New Starts report to 
Congress. FTA's New Starts evaluation process assigns ratings on the 
basis of a variety of statutorily defined criteria, such as mobility 
improvements, and determines an overall rating. FTA uses the evaluation 
and ratings process, along with its consideration of the state of 
development of the New Starts projects, to decide which projects to 
recommend to Congress for a full-funding grant agreement.[Footnote 15]

ISTEA and TEA-21 also established an overall approach for 
transportation planning and decision making that state, regional, and 
local transportation agencies must follow to receive federal funds. 
This approach includes involving numerous stakeholders, identifying 
state and regional goals, developing long-and short-range state and 
regional planning documents, and ensuring that a wide range of factors 
are considered in the planning and decision-making process. For 
example, transportation officials must consider safety, environmental 
impacts, system connectivity, and accessibility, among other things. 
While the federal requirements specify a wide range of factors that 
must be considered when selecting a project from alternatives,[Footnote 
16] they generally do not specify what analytical tools, such as 
benefit-cost analysis, transportation officials should use to evaluate 
these factors. Instead, local, regional, and state agencies are largely 
responsible for selecting the methods used to analyze these factors. 
Federal requirements also do not mandate that local, regional, and 
state agencies choose the most cost-beneficial project. Rather, 
transportation officials at these agencies have the flexibility to 
select projects on the basis of their communities' priorities and 
needs. Even in the more structured New Starts program, state, regional, 
and local agencies have discretion in selecting the preferred 
alternative, although, according to FTA, these agencies are likely to 
consider New Starts requirements in the decision making process.

Various analytical approaches, including benefit-cost, cost-
effectiveness, and economic impact analyses, have been refined over 
time to better calculate the benefits and costs of transportation 
investments and provide decision makers with tools to make better-
informed decisions. (Table 1 describes the purposes of the different 
economic analyses.) 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.

Table 1: Types and Purposes of Economic Analysis: 

Type of analysis: Benefit-cost analysis; 
Purpose: To identify the alternative with the greatest net benefit to 
the locality, region, or nation by comparing the monetary value of 
benefits and costs of each alternative.

Type of analysis: Cost-effectiveness analysis; 
Purpose: To identify the lowest cost alternative for achieving a level 
of benefit by comparing the costs of each alternative.

Type of analysis: Economic impact analysis; 
Purpose: To identify the impact of alternatives on the local, regional, 
or national economy by measuring the effects derived from each 
alternative.

Source: GAO.

[End of table]

Because the federal-aid highway program is funded under a formula 
program and projects are therefore not subject to an evaluation process 
at the federal level, there are no federal requirements for economic 
evaluation of highway investment costs and benefits--except that FHWA 
does ensure that federal highway funding is being spent on an eligible 
roadway for eligible purposes.[Footnote 17] In contrast, FTA's New 
Starts program is discretionary, and FTA is authorized to establish 
various requirements that sponsors of transit capital investments need 
to meet in estimating a project's benefits and costs, including 
calculating the cost-effectiveness of a proposed project and providing 
information on expected land-use effects, to obtain federal 
funding.[Footnote 18] However, transit agencies are not required to 
conduct a formal benefit-cost analysis, and FTA is prohibited by TEA-21 
from considering the dollar value of mobility improvements in 
evaluating projects, developing regulations, or carrying out any other 
duties.[Footnote 19] FTA officials noted that the New Starts evaluation 
process results in greater federal oversight and scrutiny for New 
Starts projects, compared with the level of federal oversight for 
federally funded highway projects.

Benefits and Costs of Highway and Transit Investments Depend on Local 
Circumstances, Though Measuring and Properly Counting Some Benefits and 
Costs Can Prove Difficult: 

The types of direct benefits that transit and highway projects may 
produce include user benefits, such as travel-time savings, and 
benefits that accrue to users and nonusers alike, such as reductions in 
the adverse environmental impacts of transportation. These direct 
benefits can in turn produce indirect benefits, such as economic 
development and employment that affect the regional or local economy; 
however, these indirect benefits may constitute transfers of economic 
activity from one area to another or are a result of the direct 
benefits filtering through the economy. Although these indirect 
benefits represent real benefits for the jurisdiction making the 
transportation improvement, they represent transfers and not real 
economic benefits, from a national perspective. Transportation 
investments also produce costs, including the direct costs to 
construct, operate, and maintain the project as well as other potential 
social costs resulting from the construction and use of the facility, 
such as unmitigated environmental effects. The potential benefits and 
costs of any specific highway or transit investments will depend on the 
specifics of the project being considered and the local economic and 
transportation conditions. However, measuring all the potential 
benefits and costs of proposed highway and transit investments can be 
challenging and subject to several limitations and sources of error. 
For example, in current practice, benefit-cost analysis and economic 
impact analysis may not include all potential benefits. In addition, 
there are many limitations in being able to accurately predict changes 
in traveler behavior, land use, or the use of nearby roadways or 
alternative travel options resulting from a new investment. Sources of 
error can also include double counting of benefits and not comparing a 
project to a viable alternative or improperly defining the "do-nothing" 
case for comparison.

Highway and Transit Investments Can Result in a Range of Benefits and 
Costs: 

The key categories of potential direct user benefits from highway 
investments include travel-time savings, reductions in accidents, and 
reductions in vehicle operating costs.[Footnote 20] These user benefits 
are historically included in benefit-cost analysis of such investments. 
The User Benefit Analysis for Highways Manual developed by the American 
Association of State Highway and Transportation Officials (the AASHTO 
Manual) provides guidance on how these benefits should be 
estimated.[Footnote 21] In addition to benefits that accrue solely to 
users, social benefits such as reductions in environmental costs--
including reduced emissions, noise, or other impacts--are also 
potential sources of direct benefits of highway projects. However, 
these benefits are more difficult to quantify and value; and as a 
result, they are less often included in benefit-cost analyses of 
transportation investments. Guidance from FHWA's Office of Asset 
Management, the Economic Analysis Primer, discusses these benefits 
along with user benefits.[Footnote 22] Experts we consulted also cited 
improvements in travel-time reliability as a major source of potential 
direct-user benefits, particularly for freight transportation, 
although officials at FHWA stated that this benefit is complex and the 
best means to incorporate it into benefit-cost evaluations has not been 
resolved.[Footnote 23]

For transit investments, direct benefits include improving travel times 
for existing transit users, improving travel times for autos and trucks 
on alternative roadways, lowering user and environmental costs of auto 
use by attracting riders out of their vehicles, and providing a back-up 
or future option for nonusers of transit. These types of benefits are 
described in guidance on conducting benefit-cost analysis for transit 
projects published by the Transit Cooperative Research Program (TCRP) 
(this report is known as the Transit Manual).[Footnote 24] Another TCRP 
report on transit benefits describes other types of potential benefits, 
which may result from the project but may be more difficult to include 
in a benefit-cost analysis, such as improved job accessibility for 
individuals who are dependent on transit and those who do not or cannot 
drive a car.[Footnote 25] See Table 2 for the categories of direct 
benefits described in the AASHTO Manual, the Economic Analysis Primer, 
and the TCRP reports.

Table 2: Types of Direct Benefits and Costs to Use in Evaluating 
Proposed Highway and Transit Projects: 

Type of investment: Highway investments; Source of guidance: AASHTO 
User Benefit Analysis for Highways; 
Direct benefits: 
* Savings in travel time; 
* Savings in user operating expenses; 
* Reductions in injury, morbidity, and mortality; 
Costs: 
* Project costs; 
* Costs of operating and maintaining the project; 
* User travel delay incurred during project construction.

Source of guidance: FHWA Economic Analysis Primer; 
Direct benefits: 
* Reductions in travel time and delay; 
* Reduction in costs of crashes; 
* Reductions in vehicle-operating costs; 
* Reduction in emissions; 
* Reductions in noise and other impacts; 
Costs: 
* Project costs; 
* Costs of operating and maintaining the project; 
* Mitigation (e.g., noise barriers); 
* User costs associated with work zone.

Type of investment: Transit investments; Source of guidance: TCRP 
Report 78 (the Transit Manual)[A]; 
Direct benefits: 
* Reductions in transit travel times, including waiting and transfer 
time; 
* Reductions in transit accident and crime costs; 
* Reductions in travel times for autos and trucks; 
* Reductions in vehicle operating and ownership costs (including 
parking costs); 
* Transit option value[B]; 
* Reductions in environmental impacts from improvement, such as air and 
water quality; 
* Reductions in roadway accidents; 
Costs: 
* Any changes in fare costs to users; 
* Project construction costs; 
* Costs of operating and maintaining the project; 
* Increases in transportation support services.

Source of guidance: TCRP Report 35; 
Direct benefits: 
* User benefits, such as travel time reductions; 
* External benefits, such as reduced environmental costs; 
* Job accessibility benefits; 
* Reduced parking costs; 
Costs: Costs are not discussed in this report. 

Source: FHWA, AASHTO, TCRP.

[A] The Transit Manual breaks down what we refer to as direct benefits 
into primary and secondary benefits. The manual classifies reductions 
in transit travel times, transit accident and crime costs, travel times 
for autos and trucks, and vehicle operation and ownership costs as 
primary benefits. The remaining three direct benefits are classified as 
secondary benefits.

[B] Option value refers to the benefit that some nontransit users 
receive by having transit service as an option for the future or in 
certain circumstances.

[End of table]

In addition to direct benefits, a number of indirect benefits are also 
attributed to highway and transit investments. Lowering transportation 
costs for users and improving access to goods and services enables new 
and increased economic and social activity. Over time, individuals, 
households, and firms adjust to take advantage of those benefits, 
leading to several indirect impacts. These indirect impacts include 
changes in land use and development, changes in decisions to locate 
homes and businesses in areas where housing and land are less expensive 
or more desirable, and changes in warehousing and delivery procedures 
for businesses in order to take advantage of improved speed and 
reliability in the transportation system. These impacts then lead to 
increased property values, increased productivity, employment, and 
economic growth. Economic impact analysis is generally used to estimate 
the extent to which direct benefits translate into indirect economic 
impacts. Table 3 shows the types of indirect benefits that are included 
in economic impact analysis.

Table 3: Types of Indirect Benefits to Use in Evaluating Proposed 
Highway and Transit Projects: 

Type of investment: Highway investments; 
Source of guidance: FHWA Economic Analysis Primer; 
Indirect benefits: 
* Economic productivity and growth; 
* Changes in property values and employment; 
* Multiplier effects on the regional economy from transportation 
spending.

Source of guidance: AASHTO User Benefit Analysis for Highways; 
Indirect benefits: According to the manual, while these types of 
effects are important to consider, they are outside the scope of the 
manual.

Type of investment: Transit investments; 
Source of guidance: TCRP Report 78 (the Transit Manual); 
Indirect benefits: 
* Increases in regional productivity and benefits of urbanization; 
* Enhanced employment accessibility; 
* Increases in property values; 
* Employment, output, and income effects due to construction.

Source of guidance: TCRP Report 35; 
Indirect benefits: Generative Impacts:  
* Higher density development, resulting in agglomeration and 
urbanization benefits, i.e., clustering of offices, retail shops, 
hotels, entertainment centers, and other land uses around rail-transit 
stops that enable higher productivity; 
Indirect benefits: Redistributive Impacts: 
* Land development; 
* Employment and income growth; 
Indirect benefits: Transfer Impacts: 
* Regional employment and economic growth related to construction, 
operation, and maintenance of the transit system; 
* Joint development income; 
* Property tax income. 

Source: FHWA, AASHTO, TCRP.

[End of table]

The extent to which these indirect benefits are relevant depends to 
some degree on whether the project is viewed from a local or a broader 
perspective. These economic impacts may represent transfers of economic 
activity from one area to another; and, while such a transfer may 
represent real benefits for the jurisdiction making the transportation 
improvement, it is not a real economic benefit from a national 
perspective because the economic activity is simply occurring in a 
different location. For example, a highway improvement in one county 
may induce businesses to relocate from a neighboring county, bringing 
increased tax revenue and providing jobs; but the neighboring county 
then loses that tax revenue and employment.

Indirect benefits may also represent capitalization of the direct user 
and social benefits, and therefore should not be added to the direct 
benefits. For example, a project's transportation benefits, in terms of 
improved travel times, can lead to increased demand for more remote 
properties, and thus lead to increases in those property values. In 
this instance, the users are transferring their travel benefits to 
property owners through a higher purchase price. Including the 
increased property value and the travel-time benefit in an overall 
project evaluation would constitute counting the same benefit twice. 
However, some experts we consulted and literature we reviewed indicated 
that there could be some residual benefit from these indirect effects 
that is not accounted for in travel-time benefits or other direct 
impacts and argue that this portion should be incorporated into a 
comprehensive estimation of project benefits and costs.[Footnote 26]

Transportation investments also produce costs--such as the costs to 
construct, operate, and maintain the project; traffic delay costs 
during construction of the project; and other potential social costs, 
resulting from the construction and use of the facility--such as 
unmitigated environmental effects or community disruption. For example, 
while a project may have an indirect benefit of increasing some land 
values, it may also reduce land values elsewhere due to negative 
impacts from noise and emissions that may result from the improved 
roadway or transit line. In addition, a transportation improvement can 
entail costs for some regions if it diverts economic activity away from 
a particular area.

Benefits and Costs Depend on the Local Conditions and the Type of 
Improvement: 

The size and type of benefits and costs that will manifest from highway 
and transit investments depend critically on local conditions, such as 
existing travel conditions and the extent of congestion, economic 
conditions and development patterns, and the extent of the existing 
road and transit networks. In addition, the type of project, its 
design, and other specifics will also affect the types of benefits and 
costs the project may produce. Each particular project must be 
evaluated on its own merits, in comparison with any other viable 
alternatives to address the transportation and other goals of the 
region.

For example, research indicates that transit projects can result in 
peak period, travel-time savings for users of alternative roadways when 
those roadways are heavily congested, the transit project has a 
separate ROW and a fixed schedule, and door-to-door travel times on the 
transit line are competitive or lower than door-to-door travel times on 
the roadway in peak periods for some road users.[Footnote 27] Building 
a rail line alongside a road that is not frequently traveled will 
clearly not result in similar benefits. Similarly, the extent to which 
a highway investment will result in reductions in travel times and the 
extent to which new travelers will return the highway to previous 
levels of congestion and delay, depend on the level of congestion on 
alternative routes, the extent of the local transit system, and local 
economic conditions.

Research further indicates that to realize desired land-use changes and 
higher density development, transit investments need to be coordinated 
with supportive local land-use policies and that impacts need to occur 
more readily in rapidly growing regions with demand for high-density 
development.[Footnote 28] In a similar fashion, the extent to which 
highway investments will result in improvements in freight productivity 
will depend on economic conditions; the amount of freight traffic on 
the local network; the presence of alternative freight modes, such as 
rail or waterways; and various other locally specific factors. In 
addition, specific projects will also affect different areas and groups 
differently. A transportation project that is projected to produce 
large benefits may cut through one neighborhood and provide excellent 
access to another, thereby imposing costs on one area and creating 
benefits for another or providing service to wealthy areas at the 
expense of lower income areas.

The costs of highway investments and various transit alternatives can 
vary significantly, based on the location and specifics of the project. 
For example, according to a 2002 report from the Washington State DOT, 
average construction costs for a lane mile of highway range from $1 
million to over $8 million across 25 states the department 
surveyed,[Footnote 29] with some projects costing far more than these 
averages suggest.[Footnote 30] In a recent study on different transit 
modes, we found that light rail construction costs vary from $12.4 
million per mile to $118 million per mile.[Footnote 31] As with 
construction costs, the costs to operate and maintain highway and 
transit systems also vary significantly, based on the specific project 
and area. For example, according to the National Transit Database, 
operating costs per-vehicle revenue mile for heavy rail systems ranges 
from about $5 to about $15, whereas for light rail, these costs range 
from a little over $5 to over $20 in some locations.

Measuring and Forecasting Benefits and Costs Subject to Several 
Difficulties and Sources of Error: 

Experts we consulted and literature we reviewed cited several 
limitations in current practice, and some major sources of error in 
evaluating transportation projects that can lead to over or 
underestimation of a project's benefits and costs.[Footnote 32] The 
following sections discuss some of these limitations and sources of 
error.

Challenges in Predicting Changes in Travel Behavior and Land Use with 
Current Models and Data: 

One of the key challenges in measuring and forecasting benefits and 
costs is the inability to accurately predict changes in traveler 
behavior, land use, or the usage of nearby roadways or alternative 
travel options resulting from a highway or transit project using 
current travel models.[Footnote 33] For example, according to FHWA 
guidance, travel models do not generally anticipate the impact of a 
transportation improvement on travelers who change their time of travel 
or make entirely new trips in response to the relatively lower trip 
cost resulting from the improvements. Current transportation demand 
models are also unable to predict the effect of a transportation 
investment on land-use patterns and development, since these models 
take land-use forecasts as inputs into the model. Nonetheless, expected 
land use and development impacts are often the major drivers of 
transportation investment choices.[Footnote 34] In addition, the effect 
of a highway or transit investment on alternative roadways or on other 
modes is rarely taken into account and is difficult to forecast. In 
fact, according to the DOT Inspector General, transit's effect on 
alternative roadways is not reliably estimated by local travel 
models,[Footnote 35] although this effect can be a major source of 
benefits in some cases.[Footnote 36] These same models are also used in 
making highway investment decisions.

Compounding these shortcomings is the considerable variation in models 
used by local transportation planning agencies. The federal government 
gives local transportation planning agencies the flexibility to choose 
their own transportation models without being subject to minimum 
standards or guidelines. This flexibility reflected varying local 
conditions and expertise in applying these models. However, one expert 
pointed out that this strategy has had the unintended consequence of 
making local planning agencies very dependent on outside expertise 
because they usually contract with independent consultants who have 
their own software packages. This strategy also has produced 
significant variation in forecast quality and limited the ability to 
assess quality against the general state of practice.

Data quality is a pivotal concern to the challenges in modeling, as the 
available data provide critical input for travel models. For example, 
data about traffic flow throughout the day, rather than at a single 
time, are crucial to produce valid representations of travel needs and 
problems. However, reliable and complete data are not always available-
-which can result in forecasting errors. Collecting the data needed for 
modeling is growing more expensive and difficult. For instance, a home 
survey of travel habits, which identified basic transportation needs 
and travel patterns of a region and is the foundation of transportation 
modeling, is now beyond most local transportation agencies' annual 
budgets, according to experts. Moreover, obtaining data through 
telephone surveys is difficult and willingness to participate is 
declining.

Omitting Certain Benefits and Ignoring Impacts on Different Groups: 

Experts we consulted and literature we reviewed also indicated that 
benefit-cost analysis and economic impact analysis often do not include 
all potential benefits, some of which are very difficult to quantify. 
For example, according to one expert we consulted, transit projects are 
often put at a disadvantage in terms of estimating benefits and costs 
relative to highway projects because several types of benefits specific 
to transit are not typically evaluated and are difficult to quantify. A 
review of economic analyses conducted for over 30 transit projects 
found that these analyses routinely omitted benefits to noncar owners, 
often did not include environmental benefits, and often did not 
evaluate the economic development benefits related to the 
project.[Footnote 37] Experts we consulted also highlighted the 
importance of taking account of which groups benefit from a project and 
which bear the costs, although these distributional impacts are 
commonly ignored in evaluation of a project's benefits and costs. In 
theory, a benefit-cost analysis could take such considerations into 
account, but the outcome of a benefit-cost analysis is a net value, 
which under standard assumptions eliminates any distinction between 
groups who benefit and groups who do not.[Footnote 38]

Double Counting and Counting Costs as Benefits: 

Project appraisals often double count benefits and count certain 
project expenditures as benefits. As previously discussed, for the most 
part, indirect benefits are more correctly considered capitalization of 
direct user benefits or transfers of economic activity from one area to 
another.[Footnote 39] Therefore, estimating and adding such benefits to 
direct benefits would constitute double counting and lead to an 
overestimation of a project's benefits. Some evaluations of particular 
transportation projects also cite jobs created, or the economic 
activity resulting from the construction of the project, as benefits of 
the project. Experts we spoke with indicated that job creation from 
transportation spending would only be a true benefit if the person 
getting the job would otherwise be unemployed, and thus the reduction 
in unemployment benefits could be considered a benefit of the project. 
Nonetheless, local decision makers generally view such expenditures as 
producing benefits for their jurisdiction.[Footnote 40] In some 
evaluations decision makers also count the avoided cost of some other 
alternative project as a benefit of the project under consideration. 
For example, in some evaluations, decision makers have considered the 
foregone expense of improving the highway as a benefit of a transit 
project, or the foregone expense of adding general-purpose lanes as a 
benefit of adding high-occupancy vehicle lanes. Instead, those costs 
should be included in the benefit-cost analysis of the alternative and 
then compared with the benefits and costs of all other alternatives. In 
some appraisals, such cost savings have been the largest source of 
project benefits.[Footnote 41]

Not Discounting Future Benefits and Costs Properly: 

Another expert we interviewed stated that state departments of 
transportation often do not discount future benefits into present 
values. 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. Benefits and costs are worth 
more if they are experienced sooner because of the time value of money. 
Failure to discount future benefits or using an inappropriate discount 
rate can severely affect the results of a benefit-cost analysis. Not 
discounting at all will greatly overestimate a project's benefits. An 
unreasonably high discount rate will underestimate a project's 
benefits. OMB provides guidance on choosing appropriate discount rates 
for different types of investments.[Footnote 42]

Unreasonably Bad Conditions Expected Without the Project: 

Another source of error when calculating transportation projects' 
potential benefits and costs occurs because current travel demand 
models tend to predict unreasonably bad conditions in the absence of a 
proposed highway or transit investment.[Footnote 43] Travel 
forecasting, as previously discussed, does not contend well with land-
use changes or effects on nearby roads or other transportation 
alternatives that result from transportation improvements or growing 
congestion. Before conditions get as bad as they are forecasted, people 
make other changes, such as residence or employment changes to avoid 
the excessive travel costs. In one area we visited, local officials 
told us that the "do-nothing" scenario for a particular project 
evaluation predicted that travel delays would grow to almost 80 minutes 
for a typical commute after 20 years, and impacts on travel-time 
reductions were then calculated for the proposed investment. However, 
officials noted that traffic did not degrade as they had predicted in 
the years leading up to construction--with delays of 13 minutes by 
1999, although they had predicted delays of 40 minutes or more by that 
time. The officials noted that generally, commuters only stand for a 
certain amount of delay before they shift their own behavior to avoid 
the delay.

Lack of Comparison to Viable or Modal Alternatives: 

In addition, experts indicated that projects are often not compared to 
viable alternatives, or to projects in other modes, to enable adequate 
comparisons of investment alternatives. We found in our case studies of 
five New Starts projects and five highway projects that the transit 
projects we reviewed were compared with other transit modes, such as 
increased bus service, but not to new highway investment alternatives; 
and none of the highway projects we reviewed were compared with a 
transit alternative. However, in some cases, differently designed 
alternatives can prove to be a superior option. For example, one study 
of transportation decision making in Houston found that, if the bus 
alternatives to the preferred light rail system were designed to cost 
as much as the light rail option, the resulting bus system would carry 
more passengers and be more cost-effective than the rail option; 
however, local planners and decision makers did not consider such an 
alternative.[Footnote 44] Another recent evaluation compared a transit 
and a highway project with common economic yardsticks--such as a 
benefit-cost ratio and a rate of return--and found that under certain 
circumstances, transit can perform favorably compared with a highway 
alternative.[Footnote 45]

Analysis of Benefits and Costs Not Usually Systematic, and Results of 
Analysis Are Only One Factor Among Many Considered in Investment 
Decision Making: 

According to our survey results and case studies, although the costs 
and benefits of projects were almost always considered in some way, 
formal analyses such as benefit-cost analysis were not usually 
conducted when considering project alternatives, and they were 
completed less frequently for proposed highway projects than transit 
projects. Additionally, officials reported that the results of formal 
economic analyses were just one factor among many considered in project 
selection, and it was not necessarily the most important factor. Other 
important factors included qualitative assessments of the potential 
land use or economic development benefits of the project, public 
opinion and political support, and funding availability.

Costs and Benefits of Highway and Transit Investments Are Considered 
but Not Always Systematically: 

Most state DOT and transit agency officials that responded to our 
survey said that when alternatives are considered for a proposed 
project, they complete some analysis of either costs or benefits of the 
various alternatives, but they complete a formal benefit-cost analysis, 
economic impact analysis, or cost-effectiveness analysis less 
frequently (see fig. 1). These results indicate that many state and 
local transportation agencies are not consistently using formal 
economic analysis as part of their investment decision-making process 
to evaluate project alternatives. In addition, in the locations that we 
visited, we did not find any examples of completed benefit-cost 
analysis for the 10 projects that we examined.

Figure 1: Survey Responses of Frequency of Economic Analysis Completed 
for Proposed Project Alternatives by State DOTs and Transit Agencies: 

[See PDF for image] 

[End of figure] 

More Analysis Is Completed for Proposed Transit Projects: 

According to our survey results, when comparing alternatives for 
proposed projects, economic analyses were more likely to be conducted 
for transit projects than highway projects (see fig. 2). We saw a 
similar pattern in our case studies. For instance, a cost-effectiveness 
analysis was completed for all five transit projects that we examined 
in our case studies.[Footnote 46] We also found additional studies for 
the transit projects that included qualitative examination of such 
potential project impacts as regional economic development 
opportunities, distribution across social groups, increased transit 
reliability, and increased transit ridership. For the highway projects 
we studied, we found that project documents contained little, if any, 
economic analyses on the various alternatives. We did find that for 
some highway projects, safety and environmental impacts were 
quantified, but not put into dollar terms.

Figure 2: Survey Responses of Completed Economic Analyses When 
Evaluating Project Alternatives: 

[See PDF for image] 

[A] Economic analyses include cost-effectiveness, benefit-cost, or 
economic impact analysis.

[End of figure] 

Local and state officials noted that these economic analyses are done 
more often for transit projects because of the New Starts requirements. 
For example, FTA requires project sponsors to calculate a project's 
cost-effectiveness in order to be eligible to receive New Starts 
project funding--and the results of this analysis are used in FTA's 
evaluation of the project.[Footnote 47] In contrast, there are no 
similar federal requirements for economic analysis of highway projects 
because highway projects are funded under a formula program, and there 
is no federal analysis of project economic worthiness. In addition, 
because New Starts projects may require a higher local funding share 
compared with federally funded highway projects,[Footnote 48] officials 
suggested that more economic analysis is generally completed for 
transit projects, especially if a special taxing authority is required 
or the project becomes controversial and subject to public scrutiny.

Many Factors Are Considered in Selecting Transportation Projects: 

In our past work, we found that numerous factors shape transportation 
investment choices and that factors other than those considered in 
analyses of projects' benefits and costs can play a greater role in 
shaping investment choices.[Footnote 49] Some of the factors considered 
reflect local or regional priorities and needs; others are required to 
be considered in the decision-making process by federal legislation. 
For example, as a result of the National Environmental Policy Act 
(NEPA) of 1969, transportation officials must make project decisions 
that balance engineering and transportation demands with the 
consideration of social, economic, and environmental factors, such as 
air quality and impacts on communities. Some of these factors may not 
be easily considered in traditional benefit-cost analysis.[Footnote 50] 
Similarly, TEA-21 requires local, regional, and state transportation 
agencies to consider a range of factors in their planning, including 
environmental compliance, safety, land use, and public input.

Our case studies also demonstrated that officials often place value on 
a variety of indirect impacts that may be difficult to estimate and are 
often not quantified in project analyses. For example, we found that 
many of the projects we examined were expected to result in desirable 
changes in land use and economic development in the region, although 
these types of impacts were not quantified or systematically analyzed 
in the planning documents we reviewed for both highway and transit 
investments. For example, one proposal discussed the light rail transit 
project's potential for attracting new businesses and developers to the 
surrounding low-income community, but it did not present projections of 
the potential impact or estimates of the types of benefits these 
impacts might produce. Transportation officials indicated that these 
factors were just as important, if not more important than the results 
of their cost-effectiveness analysis in the decision to pursue the 
project.

Similarly, our survey of transit agencies and state DOTs also showed 
that the results of economic analysis of a project are not necessarily 
the most important factor considered in highway and transit investment 
decision making. For highways, political support and public opinion, 
the availability of state funds, and the availability of federal 
matching funds were ranked most often as important factors in highway 
project decision making within state DOTs (see fig. 3). Thirty-four 
state DOTs said that political support and public opinion are factors 
of great or very great importance in the decision to recommend a 
highway project, whereas only eight said that the ratio of benefits to 
costs was a factor of great or very great importance.[Footnote 51]

Figure 3: State DOTs' Survey Responses of Factors of Great or Very 
Great Importance in the Decision to Recommend a Highway Project: 

[See PDF for image] 

Note: Forty state DOTs responded to each survey question that asked 
about the relative importance of different factors. See appendix II for 
the survey instrument and complete results.

[End of figure] 

For transit, results from our survey showed that the factors ranked 
with "great or very great importance" most often included political 
support/public opinion, the availability of local funds, and the 
availability of federal matching funds. Specifically, of the 19 transit 
agencies that responded to these survey questions, 17 said that 
political support/public opinion and the availability of local funds 
were factors of great or very great importance in project decision 
making (see fig. 4).

Figure 4: Transit Agencies' Survey Responses of Factors of Great or 
Very Great Importance in the Decision to Recommend a Transit Project: 

[See PDF for image] 

Note: Twenty transit agencies responded to each survey question that 
asked about the relative importance of different factors, except for 
the question that asked about the relative importance of the 
availability of federal matching funds. Nineteen transit agencies 
responded to this question. See appendix II for the survey instrument 
and complete results.

[End of figure] 

Survey respondents also provided a number of examples of other factors 
that figure into the decision-making process. For example, one state 
DOT highway survey respondent mentioned that in the respondent's state, 
projects are often built as a basic public good, regardless of the 
relative benefits and costs. Another state DOT highway survey 
respondent said that the geographic distribution of funds plays a large 
role in determining the priority of highway projects. One transit 
agency survey respondent commented that comprehensive, long-range 
planning is a major component in evaluating and selecting projects, and 
the criteria are not solely based on economic factors; other typical 
considerations include population growth, land-use projections, 
environmental factors, and housing.

To further analyze the relationship between the results of economic 
analyses of transportation projects and decisions made in selecting the 
project, we conducted a regression analysis of the relationship between 
the results of benefit-cost analyses completed for state transportation 
projects in California and the subsequent decisions to program 
construction funds for projects in the Statewide Transportation 
Improvement Plan. The benefit-cost analyses used by California 
considered travel-time savings, vehicle operating cost reductions, and 
safety benefits. In our analysis, we found that projects with higher 
benefit-cost ratios had a higher probability of receiving funding for 
construction. However, the analysis explained little of the overall 
variation--for example, some projects with high benefit-cost ratios 
received funding while others with relatively lower ratios also 
received funding, indicating that other factors were likely considered 
in the decision.

Costs and Usage Outcomes of Highway and Transit Investments Are Often 
Different from Projected; and Other Expected Outcomes Are Not Usually 
Evaluated: 

Results from our literature review and case studies indicate that both 
completed highway and transit investments result in higher than 
expected costs and in usage that is different from what was projected. 
Transportation officials we interviewed generally contend that 
completed projects have achieved other outcomes that were projected to 
flow from the highway and transit investments, such as positive changes 
in land use and economic development. In most cases, however, these 
outcomes of highway and transit projects are not regularly quantified 
or evaluated after the projects are completed. Rather, transportation 
officials relied on limited and anecdotal evidence to support their 
statements about the impacts of the projects. Officials we met with 
cited several reasons that evaluations of completed projects are not 
regularly conducted, including lack of funding and technical 
challenges.

Highway and Transit Projects Are Subject to Inaccurate Forecasts of 
Costs and Usage: 

A number of studies have shown that both completed highway and transit 
investments often result in outcomes that are different from what was 
projected. The following examples highlight such problems for both 
highway and transit projects.

* A study of over 250 transportation projects in Europe, North America, 
and elsewhere found that costs for all projects were 28 percent higher 
than projected costs at the alternatives analysis stage, on average. 
Rail projects showed the highest cost escalation, averaging at least 
44.7 percent, while road projects averaged escalations of 20.4 
percent.[Footnote 52] This study further found that cost 
underestimation has not improved over time, indicating systematic 
downward bias on costs.

* Initial results from an ongoing study of New Starts projects by FTA 
show that nearly half of the 19 projects, for which ridership was 
reviewed, will achieve less than two-thirds of forecast ridership by 
the forecast year. In addition, costs escalated on 16 of the 21 
projects reviewed from the alternatives analysis stage, where decisions 
are made to go forward with a preferred alternative, to the completion 
of the project--with 4 of those projects experiencing increases of 
between 10 and 20 percent and 9 projects with increases over 20 
percent.[Footnote 53]

* In a 1997 report, we collected and analyzed data for 30 highway 
projects costing $100 million or more. We found that cost growth 
occurred on 23 of 30 projects when comparing actual costs to costs 
estimated at the alternatives analysis stage, with about half of the 
projects experiencing increases of more than 25 percent.[Footnote 54]

* A 1996 study that compared actual toll-road revenues to forecasted 
revenue streams, found that 10 out of the 14 projects studied fell 
short of projections by 20 to 75 percent, while a majority of the 
projects missed or are likely to miss revenue forecasts in the second 
year by 40 percent or more.[Footnote 55]

We found similar patterns for our case studies of 10 transit and 
highway projects in 5 metropolitan areas.[Footnote 56] Table 4 provides 
descriptions of the projects we reviewed in each metropolitan area.

Table 4: Description of Five Highway and Five Transit Projects Selected 
for Review: 

Location: Baltimore; 
Highway project: Construction of a new segment of road; 
Transit project: Extensions to existing light rail system.

Location: Dallas; 
Highway project: Widening a segment of an existing road; 
Transit project: Construction of an original segment of light rail 
system.

Location: Denver; 
Highway project: Widening and modifying a segment of an existing road; 
Transit project: Extension to existing light rail system.

Location: Miami; 
Highway project: Adding travel lanes and grade separation to a segment 
of road; 
Transit project: Extension to elevated people-mover system.

Location: San Jose; 
Highway project: Modifying major interchange; 
Transit project: Construction of an original segment of light rail 
system.

Source: GAO summary of project documents.

Note: According to FTA, the Miami People Mover is not typical of most 
New Starts projects. In particular, FTA officials noted that there are 
only three other people-mover projects in the United States.

[End of table]

In summary, we found the following: 

* Comprehensive data on the projected and actual costs and usage of all 
the highway projects we examined were not readily available. In 
particular, we were not able to obtain estimates of the projects' costs 
at a consistent point in the project development cycle (e.g., 
alternatives analysis). As a result, it is difficult to draw overall 
conclusions on how the projected costs compared with the actual costs 
for the five projects. However, the limited cost data we were able to 
obtain suggest that at least two of the five highway projects 
experienced cost escalation. In one case, the capital costs were 
originally budgeted in the state's capital funding program at 
approximately $62.7 million (in inflation-adjusted 1999 dollars); but 
the actual expenditures for the project, in 1999, approached about 
$94.4 million, 50 percent higher than the estimate. In another case, 
construction costs for the preferred alternative, at the alternatives 
analysis phase, were estimated at $16.6 million (in inflation-adjusted 
2001 dollars), while actual construction costs in 2001, according to 
officials, approached $25.4 million, a 53 percent increase. In 
addition, in at least two locations, traffic after the improvement was 
greater than had been expected after project completion, leading to 
less congestion relief than had been expected. FHWA is working to 
improve the cost estimates of federal-aid highway projects. For 
example, in June 2004, FHWA issued guidance for developing cost 
estimates, including steps for producing more realistic early 
estimates. FHWA also established help teams that travel to states that 
ask for assistance in developing better estimates.

* The five New Starts transit projects we reviewed had more extensive 
information on the projected costs of the projects and had estimates 
from several different points in the project development process. When 
comparing as-built costs to cost estimates at the alternatives analysis 
stage--where decisions are made on the preferred alternative but the 
project is likely not at final design--three out of five New Starts 
transit projects we reviewed had actual costs in excess of projected 
costs by more than 10 percent. When comparing costs from the Full-
Funding Grant Agreement stage--where the preferred alternative has been 
selected and the project is at its final design--only two projects had 
costs escalate, one by 6 percent and one by over 40 percent.[Footnote 
57] At the time ridership figures were reviewed, the forecast years--
that is, the years for which the ridership projections were made in the 
project's planning documents--for four of the five New Starts projects 
remained in the future; therefore, final conclusions about whether the 
projects exceeded or fell short of ridership projections are premature. 
Currently, only one of the projects achieved the ridership levels 
projected; however, four of these five projects have surpassed 50 
percent of the projected level of ridership for the forecast year. 
According to FTA, the agency has introduced a number of measures since 
these projects were planned and developed to improve ridership and cost 
estimates. For example, FTA is more rigorously examining ridership 
forecasts of projects, requiring before and after studies for all new 
projects, and conducting risk assessments of select projects to 
identify all significant risks related to the project's schedule and 
budget and to ensure that mitigation measures or contingencies are in 
place, among other things. In addition, FTA is currently examining the 
projected and actual ridership of New Starts projects that opened in 
the last 10 years to assess whether these projects achieved their 
estimated ridership levels and to improve the reliability of 
forecasting procedures. FTA also instituted a pilot program in 2003 to 
hold FTA senior executives accountable for project outcomes. 
Specifically, FTA's senior executive service team bonuses are tied, in 
part, to project cost control--that is, New Starts projects with full 
funding grant agreements must not exceed their current baseline cost 
estimate by more than 5 percent.[Footnote 58]

Transportation officials offered several reasons that the actual costs 
and levels of usage differ from those projected. For example, 
transportation officials from one metropolitan area we visited 
attributed lower than expected transit ridership to a severe economic 
downturn and slower than anticipated development around transit 
stations. The economic downturn also affected the highway project in 
this area, resulting in less traffic than expected. This had the effect 
of reducing congestion, although the transit project was credited with 
contributing to congestion reduction as well. In addition, inflation, 
changes in the project's scope, and changes in costs of building 
materials could also explain differences between the projected and 
actual costs of the project. For example, officials commented that 
estimated costs of a project always change as the project moves through 
the planning, design, and construction processes--becoming more 
accurate as more specifics about the project are known. When the cost 
of the project is initially estimated, sponsors do not know exactly how 
the scope/design of the project may change or what environmental 
problems may arise. However, by the time the New Starts project has 
reached the Full Funding Grant Agreement stage, or the highway project 
has had construction funds programmed, much more about these costs are 
known. Comparing costs from this stage to actual costs will reveal less 
variance than comparing costs with estimates from earlier stages in the 
process, such as the alternatives analysis stage. However, it is 
important to note that estimates from these earlier stages are 
generally used by project sponsors to select the preferred 
alternative.[Footnote 59]

Evaluations of Highway and Transit Projects Are Not Usually Conducted: 

Outcome evaluations of completed projects are not usually conducted to 
determine whether proposed outcomes were achieved. For most of the 
highway and transit projects we reviewed, several of the proposed 
outcomes were not defined in any measurable terms in the project 
planning documents we reviewed. Moreover, officials stated that many of 
the projected outcomes were not usually quantified, tracked, or 
evaluated after the projects were complete. Of the 10 projects we 
reviewed, 6 did not have any type of outcome evaluation completed. 
Before and after studies for four projects had been completed or were 
being conducted--three for transit projects, and one for a highway 
project. Although these studies provide a description of corridor 
conditions before and after the project, they do not compare or 
evaluate actual outcomes with projected goals. Results from our survey 
also indicate that outcomes are not typically evaluated, although 
evaluations for transit projects tend to be conducted more so than for 
highway projects. In particular, 16 of 43 state DOTs reported that they 
have analyzed completed highway projects to determine whether proposed 
outcomes were achieved, while 13 out of the 20 transit agencies 
reported that they have conducted such evaluations.

Although evaluations were not often conducted, officials we interviewed 
provided some limited evidence as to the outcomes resulting from the 
projects we reviewed. Table 5 shows the types of outcomes that project 
officials and planning documents cited for each project and the extent 
to which these outcomes were measured.[Footnote 60] As table 5 
indicates, the projects were often expected to result in indirect 
impacts that are difficult to forecast and measure, such as positive 
changes to land use, and economic development, among other things. 
According to project officials, these outcomes, while not forecasted in 
measurable terms, were important reasons that the projects were 
pursued.

Table 5: Summary of Key Projected and Observed Outcomes of Highway and 
Transit Projects: 

Project: Baltimore light rail extensions; 
Projected outcome: Expand ridership--average weekday boardings and 
alightings on the extensions were predicted to be about 11,800 by 2005; 
Measured outcomes: Boardings and alightings on the extensions in 2001 
were 8,272.

Project: Baltimore light rail extensions; 
Projected outcome: Attract growing reverse commuter population--two of 
the extensions combined were expected to carry over 4,000 reverse 
commuters; 
Measured outcomes: No measurement of reverse commuters.

Project: Baltimore light rail extensions; 
Projected outcome: Reduce travel-time--savings of 10 to 12 minutes for 
one extension were expected, and 11 to 24 minutes for another; 
Measured outcomes: No measurement of changes in travel times.

Project: Baltimore light rail extensions; 
Projected outcome: Support future development; 
Measured outcomes: No measurement of benefits of development, but local 
officials showed increases in employment and households around transit 
extensions.

Project: Baltimore highway addition; 
Projected outcome: Reduce congestion on nearby roads; 
Measured outcomes: Before and after study showed that congestion was 
reduced in some areas and traffic increased in others.

Project: Baltimore highway addition; 
Projected outcome: Attract new industry; 
Measured outcomes: No measurement of the extent to which new industry 
was attracted, but local officials showed increases in employment in 
the area.

Project: Baltimore highway addition; 
Projected outcome: Increase tax revenues from increased property values 
and additional employment; 
Measured outcomes: No measurement of increases in tax revenues, but 
officials provided data on increases in employment in the area.

Project: Baltimore highway addition; 
Projected outcome: Accommodate planned regional and local industrial 
and residential growth; 
Measured outcomes: Local officials showed that number of households 
grew around new highway.

Project: Dallas light rail segment; 
Projected outcome: Expand ridership--average weekday boardings on the 
segment were predicted to be 34,800 by 2005; 
Measured outcomes: 26,884 average weekday boardings in 2002.

Project: Dallas light rail segment; 
Projected outcome: Maximize transit potential in the city and improve 
overall transit travel; 
Measured outcomes: Before and after study for the entire system showed 
overall annual transit ridership increased by 7 percent and annual 
passenger miles of travel increased by 8 percent 2 years after opening.

Project: Dallas light rail segment; 
Projected outcome: Improve travel times from various points within the 
corridor to the central business district; 
Measured outcomes: Before and after study for the entire system showed 
that overall, the light rail offered better travel time, as compared 
with local bus routes, but limited bus express routes offered a better 
travel time.

Project: Dallas light rail segment; 
Projected outcome: Create land-use changes throughout the corridor; 
Measured outcomes: Before and after study for the entire system showed 
that mixed results have been observed throughout corridor, but areas in 
the southern sector of Dallas, where there are high levels of poverty 
and unemployment, have seen less development despite city incentives to 
develop the area.

Project: Dallas lane widening; 
Projected outcome: Improve existing and future congestion; 
Measured outcomes: Traffic counts are taken, but no measurement of 
changes in traffic levels and congestion, although officials noted 
fewer complaints of congestion.

Project: Dallas lane widening; 
Projected outcome: Enhance safety; 
Measured outcomes: No measurement of safety improvement.

Project: Denver light rail expansion; 
Projected outcome: Expand ridership--average weekday boardings on the 
expansion were predicted to be 22,000 by 2015; 
Measured outcomes: 19,083 average weekday boardings in 2002.

Project: Denver light rail expansion; 
Projected outcome: Relieve mounting congestion on alternative roadways 
with less traffic expected versus the no-build alternative; 
Measured outcomes: Before and after study showed that daily traffic on 
one road in the corridor declined between 2000 and 2001--a survey on 
the light rail line also indicated that 38 percent of the weekday 
riders were likely former drivers.

Project: Denver light rail expansion; 
Projected outcome: Contribute to the attainment of regional air 
quality objectives; 
Measured outcomes: No measurement of air quality impacts.

Project: Denver light rail expansion; 
Projected outcome: Influence land use and economic opportunity within 
the corridor; 
Measured outcomes: No measurement of benefits of land-use changes or 
development, but local officials cited changes to zoning and increases 
in development around stations.

Project: Denver light rail expansion; 
Projected outcome: By 2015, potential savings in bus operational costs; 
Measured outcomes: No measurement of changes in bus operating costs.

Project: Denver lane widening; 
Projected outcome: Reduce increasing congestion and improve level of 
service; 
Measured outcomes: No measurement of congestion reduction, but 
officials noted that improvements are self-evident.

Project: Denver lane widening; 
Projected outcome: Decrease the rate and number of accidents by 
eliminating signalized intersections and numerous turning movements; 
Measured outcomes: No measurement of accident reduction, although 
project did result in elimination of signalized intersections.

Project: Denver lane widening; 
Projected outcome: Business conditions may improve with improved 
accessibility; 
Measured outcomes: No measurement of changes in business conditions.

Project: Denver lane widening; 
Projected outcome: Regional emissions would be reduced; 
Measured outcomes: No measurement of changes in emissions.

Project: Miami Metromover extensions; 
Projected outcome: Expand ridership--average weekday boardings on the 
extensions were predicted to be 20,404 by 2000; 
Measured outcomes: 4,158 average weekday boardings in 2002.

Project: Miami Metromover extensions; 
Projected outcome: Promote land use and economic development; 
Measured outcomes: No measurement of benefits of land use changes or 
development, but officials noted some development occurring around 
stations.

Project: Miami Metromover extensions; 
Projected outcome: Minimize duplication of public transportation 
services; 
Measured outcomes: No measurement of benefits resulting from less 
duplication, but officials noted that bus service within downtown had 
been replaced by the Metromover.

Project: Miami highway expansion and interchange; 
Projected outcome: Improve overall levels of service, solve congestion 
at particular bottlenecks; 
Measured outcomes: Traffic counts were taken, but were not comparable 
with projections due to different data collection methods-- officials 
indicated that congestion has returned to levels similar to before the 
improvement was made because of greater than expected development in 
the area.

Project: Miami highway expansion and interchange; 
Projected outcome: Reduce accident rates; 
Measured outcomes: No measurement of accident reductions.

Project: Miami highway expansion and interchange; 
Projected outcome: Accommodate existing development and planned future 
development; 
Measured outcomes: No measurement of benefits of changes in 
development, but officials noted that development has increased at a 
greater rate than was expected.

Project: San Jose light rail extension; 
Projected outcome: Expand ridership--average weekday boardings on the 
extensions were predicted to be between 5,800 and 7,400 by 2005; 
Measured outcomes: 6,366 average weekday boardings in July 2000--
although ridership fell to 3,800 in July 2004.

Project: San Jose light rail extension; 
Projected outcome: Reduce congestion on area roadways; 
Measured outcomes: No measurement of congestion reduction, but a 2000 
survey of riders found that 46 percent of riders would drive if light 
rail were not available and 55 percent of riders were new to transit 
(in other words, riders were taken off the highway network, thereby 
lowering congestion levels).

Project: San Jose light rail extension; 
Projected outcome: Improve travel time; 
Measured outcomes: No measurement of changes in travel times, but 
officials noted that transit travel times are competitive with auto 
travel times.

Project: San Jose light rail extension; 
Projected outcome: Support the development plans of local cities, such 
as higher density development; 
Measured outcomes: No measurement of benefits of land use changes or 
development, but officials noted that many local businesses had 
located around transit stations, and one business had financed a 
station.

Project: San Jose interchange; 
Projected outcome: Improve congestion at interchange; 
Measured outcomes: Eastbound afternoon delay decreased from 13 minutes 
to 4 minutes, and westbound morning delay decreased from 6 to 3 
minutes.

Project: San Jose interchange; 
Projected outcome: Promote land use and economic development; 
Measured outcomes: No measurement of benefits of land-use changes or 
development, but officials noted that many local businesses had 
located in the area around the interchange. 

Source: GAO summary of information collected through case studies of 
each project.

[End of table]

For some outcomes, as table 5 indicates, transportation officials only 
had anecdotal or qualitative pieces of evidence about whether the 
projects achieved their proposed outcomes. For example, in one area, 
transportation officials cited personal experiences and public comments 
about reduced congestion on nearby roadways. In other areas, officials 
showed us developments that had been constructed around stations, or 
areas near the improvements where development was expected to occur as 
evidence of the projects' impacts.

Transportation Officials Cite Several Reasons for Not Conducting 
Outcome Evaluations: 

Transportation officials we spoke with offered several reasons why they 
do not typically conduct evaluations of the outcomes of highway and 
transit projects. In particular, transportation officials and experts 
agreed that there is little incentive to direct available funding 
toward doing outcome evaluations. Because state and local funding is 
limited and these studies can be costly and difficult, local officials 
indicated that studies of completed projects were not as high a 
priority as pursuing and conducting studies on future projects. Several 
transportation officials stated that once a project is completed, it is 
considered successful; and planners then turn their attention to other 
projects. Some officials also noted that these projects inherently 
improve safety, mobility, and economic development and that evaluation 
of these outcomes is not needed. Thus, project evaluations for 
completed projects do not fare well in competition for limited planning 
funds. The Senate-proposed bill (S. 1072) to reauthorize federal 
surface transportation programs, which was considered by the 108TH 
Congress in 2004, would increase funds available to support local 
transportation planning. The funds provided under such a provision 
could potentially be used to fund outcome evaluations.

Experts and transportation officials we spoke with also stated there 
were many technical challenges to designing and completing outcome 
evaluations. For example, experts stated that it is very difficult to 
determine the economic impacts that can be attributed to a 
transportation project, given the multitude of other factors that can 
influence development. According to experts and transportation 
officials, once transportation investments are completed, they become a 
part of an entire transportation system; and, therefore, the effects of 
the individual project become difficult to isolate, evaluate, and 
attribute to the individual project.

Finally, experts and transportation officials contend that a major 
disincentive to doing outcome evaluations is that the benefits of doing 
the analysis may be smaller than the potential risks. Transportation 
projects are concrete and cannot be easily redesigned or adjusted once 
completed, so some officials believe there is little incentive to find 
out that a project is not providing the intended benefits. Therefore, 
agencies tend to declare success once the project begins operating.

Options for Increasing Use of Information on Project Benefits and Costs 
to Better Inform Decisions and Instill Accountability: 

There are options for providing state, regional, and local decision 
makers with more and better analytic information for making investment 
choices. These options focus on improving the value of this information 
for decision makers to make more fully informed choices and in helping 
ensure that projects can be evaluated on the results they produce. At 
the federal level, these options could be implemented either through 
incentives or mandates. However, each of these implementation 
approaches has a degree of difficulty in such matters as the time 
required and the impacts on federal programs and resources. In 
addition, any attempts to increase the use of such information should 
be tempered with the knowledge that other factors, such as the 
structure of federal programs and the requirements of legislative 
earmarks, will affect the extent to which such information can be used. 
These other factors often have a strong effect on decisions about which 
projects are funded.

Options Exist to Improve Analytic Information and Its Use in 
Transportation Investments: 

The experts who served on our panel provided a variety of options for 
improving information available to decision makers and potentially 
giving such information a greater role in highway and transit 
investment decisions. The options are of three main types: (1) 
improving the quality of data and transportation modeling, (2) 
improving the quality and utility of benefit-cost analysis methods and 
tools, and (3) evaluating the results of completed transportation 
projects. These options focus on making the analytic information more 
useful and relevant to investment decisions, according to experts. 
Experts noted two important caveats in considering these options, 
however. First, no single analytic tool can answer all questions about 
the impacts of transportation investment choices. Second, even when 
benefit and cost information is available, it may play a relatively 
limited role in investment decisions. As a result, the best information 
and analysis may not result in the most beneficial highway and transit 
investments.

Improve the Quality of Data and Transportation Modeling: 

Local and state transportation agencies require valid, reliable data 
and transportation models in order to conduct analyses, including 
benefit-cost analysis. Yet, experts have expressed concerns about the 
quality of local data and transportation models and have proposed 
improvements in both areas.

Several options have been proposed to improve data and modeling 
quality. For example, TRB, with DOT sponsorship, is undertaking a study 
to gather information and prepare a synthesis of local planning 
agencies' current modeling state of practice so that this baseline can 
be used to identify data that these models require. In addition, an 
expert proposed adopting an approach used outside the transportation 
sector--that is, accept existing data but specify the degree of 
uncertainty associated with the data. This approach is based on the 
idea that consistent data and measures are more important than perfect 
data and measures.

To improve the accuracy of local travel models used to support New 
Starts projects, FTA introduced new reporting and analysis software--
"Summit"--in the fiscal year 2004 rating process. Summit is intended to 
produce a computation of user benefits from locally developed 
forecasts, as well as standardized analytical summaries of both the 
forecasts and user benefits. According to FTA, these reports and 
summaries have provided both FTA and transit agencies a means to (1) 
identify and diagnose travel forecasting problems related to 
assumptions regarding fare and service policies, regional 
transportation networks, land use, and economic conditions as well as 
(2) help ensure that the local forecast is utilizing comprehensive and 
up-to-date data on travel behavior and local transportation systems. As 
evidence of the impact of Summit, FTA officials noted that they 
required 22 of 29 projects rated in the fiscal years 2004 and 2005 
rating cycles to correct flaws in their underlying local forecasting 
models. Despite these improvements, however, forecasting of transit 
user benefits currently has a critical shortcoming. FTA has discovered 
that current models used to estimate future travel demand for New 
Starts are incapable of estimating reliable travel time savings as a 
result of a New Start project. According to DOT's Inspector General, 
this limitation is due to unreliable local data on highway speeds. FTA 
is studying ways to remedy this problem.

Improving the Quality and Utility of Benefit-Cost Analysis Methods and 
Tools: 

Experts said local, regional, and state transportation officials could 
have more reason to use benefit-cost analysis if it produced 
information more relevant to the investment choices that they face. In 
this regard, they cited various steps that could be taken to make 
benefit-cost analysis more accessible to these officials without making 
it more complex. Table 6 describes the improvements they identified.

Table 6: Experts' Suggestions for Improving the Quality and Utility of 
Economic Analysis: 

Improve land-use measures and incorporate more fully into analysis; The 
impacts of transportation investments on land use are an important 
factor in decision making. As a result, analyses that predict the 
impacts of transportation investments on land use, or the impact of 
changes in land use and employment on travel behavior and 
transportation choices, are critical to local transportation decision 
makers, according to experts and local officials we interviewed. 
Nevertheless, benefit-cost analysis and other types of economic 
analysis usually pay limited attention to land-use issues, according to 
experts. Moreover, land-use impacts--as well as other indirect 
benefits--are difficult to estimate, and the inclusion of such impacts 
must be done in a manner that captures the complexity of other factors 
that work in conjunction with access issues.[A] Noting that 
transportation planners generally find it difficult to adapt economic 
analysis to debates about population density and sprawl and lack 
economic analytic tools to forecast land-use impacts, experts described 
this as a situation that discredits economic analysis.

Consider distribution of projects in analysis; Distribution of 
transportation investments' benefits and costs is a critical, local 
concern that frequently is not considered adequately in economic 
analysis. Improving analytical tools and attention to how 
transportation benefits and costs are distributed across social and 
income groups and geographic areas could be important to local 
officials and the public, experts emphasized. At the same time, these 
issues often are treated as having secondary importance in economic 
analysis. By not fully addressing these issues, local transportation 
planning agencies can be open to charges--both from the public and 
judges in courts of law--of conducting a less than a comprehensive 
project assessment. One expert stated that these distributional issues 
are a key reason for conducting economic analysis--that is, the 
analysis can help referee situations where investments produce real 
differences in outcomes for various groups.

Improve understanding of travel patterns; Travel patterns are changing 
as the number of people using the transportation system increases and 
the demographics of the traveling public changes. The travel market is 
growing and diversifying and travelers' demands are changing. For 
example, experts point to significant differences between men's and 
women's travel patterns in use of different transport modes, and 
journey purpose and destinations, among other things. Understanding the 
implications of these passenger and freight travel patterns is 
important in meeting local, regional, and state needs, and supporting 
reasonable and accurate economic analysis, since travel demand models 
produce the information that is then used to estimate economic 
benefits.[B]; ; Transportation financing and service delivery also is 
changing--and some changes are generating the need for analytic tools 
to help predict travel patterns. For example, to the extent that more 
private firms build toll highways, their need for analyses to support 
required revenue bonds and insurance becomes greater. Highway expansion 
projects that are done with toll financing rather than highway trust 
funds will not advance without good models of travel patterns. This 
need for analysis to help predict how people will react to the project 
and respond to various prices is far more important, according to an 
expert.

Explore innovative approaches in using and communicating analysis; 
State, regional, and local officials who might be comparing a transit 
project with a highway widening project need information that is useful 
and better documented. Several paths could lead toward this result, 
according to one expert. Economic analysis could be reinvented to 
facilitate decision by discussion because it can be a powerful tool to 
discuss values--increasing jobs, reducing emissions, etc.--that are 
associated with certain investment choices. The use of risk assessment 
and probability analysis in conjunction with economic analysis could 
also be expanded. For example, weather forecasters talk about the 
probability of rain rather than suggesting that they can accurately 
predict what will happen. This approach could illustrate that projects 
with similar rates of return have very different risk profiles and 
different probabilities of failure.[C].

Source: GAO analysis of expert panel discussion.

[A] FTA's New Starts program requires project sponsors to assess the 
extent to which a New Starts project may affect land use.

[B] FTA requires that project sponsors describe the travel patterns of 
forecast project users as part of the submittal of information to 
support project ratings in the New Starts evaluation process.

[C] FTA currently requires risk analysis on the capital costs of all 
projects as a prerequisite for approving the project into final design 
in the New Starts program.

[End of table]

Evaluating the Outcomes of Completed Projects: 

A third set of options suggested by the experts dealt with conducting 
more analyses of completed projects. Information about the outcomes of 
completed highway and transit projects can be used not only to better 
determine what a particular project accomplished, but also to improve 
decisions on other projects. For example, a study of how federal 
agencies use outcome information indicates that this information can 
help decision makers maximize project effectiveness by identifying 
"best practices" and better allocate limited resources.[Footnote 61] 
However, as noted previously, the outcomes of completed projects are 
not typically evaluated. Experts noted that such studies are more 
regularly conducted in other sectors, such as health and education 
programs. Such evaluations provide an opportunity to increase 
accountability in the planning process by documenting and measuring the 
results of projects. Outcome evaluations also offer the opportunity for 
officials to learn from successes as well as the shortcomings of past 
projects.

FTA has recently adopted a requirement for project sponsors to complete 
before and after studies for New Starts projects.[Footnote 62] In 
particular, sponsors seeking federal funding for their New Starts 
project must submit to FTA a plan for the collection and analysis of 
information that addresses how the project's estimated costs, scope, 
ridership and operating plans prepared during planning and project 
development compared with what actually occurred. According to FTA 
officials, this requirement is intended to hold transit agencies 
accountable for results and identify lessons learned for future 
projects. The Senate-proposed bill to reauthorize federal surface 
transportation programs, which was considered by the 108TH Congress in 
2004, would codify this requirement.[Footnote 63] Neither the House nor 
Senate reauthorization bills that were considered in 2004, or FHWA 
regulations, would require similar studies for most highway projects, 
although the Senate bill provides for evaluating projects funded by the 
Congestion Mitigation and Air-Quality program.[Footnote 64]

Incentives or Mandates Could Be Used to Increase Use of Analytic 
Information: 

Incentives, mandates, or a combination of both, could be used to 
increase decision makers' use of analytic information and improve 
accountability for investment choices. Each strategy has factors that 
affect its feasibility--the difficulty of implementation, time 
required, and impacts on federal programs and resources. Each strategy 
also has its unique advantages and disadvantages, according to experts. 
Several experts also emphasized that the question of strategy is 
important because, although many ingredients for benefit-cost analysis 
already are in place as a result of local agencies' compliance with 
extensive environmental and clean air analytic requirements, they have 
not taken the extra step toward this analysis.

Incentives could be used to increase state, regional, and local 
agencies' utilization of analytical information and tools. For example, 
funding could support additional analysis; training for state, 
regional, and local agency personnel in using the analytical tools; and 
performance incentives. Using incentives would also be consistent with 
what one expert described as the appropriate federal role--supplying 
funds to improve data and modeling practices, providing guidance 
regarding best practices, and evaluating completed transportation 
projects. State, regional, and local transportation agencies also may 
view the use of incentives--as opposed to a new federal mandate--as 
giving them more flexibility to respond to their stakeholders' interest 
in how modal and distributional trade-offs are made. However, using 
incentives to increase the use of economic analytical tools, such as 
benefit-cost analysis, would be reasonably labor intensive for the 
respective federal agencies and require strong program management; 
clear strategies for setting goals and practices; and a workable method 
to ensure that state, regional, and local transportation agencies have 
good analytical tools, according to experts. FTA and FHWA are working 
to provide incentives that encourage greater use of analytical tools. 
For example, FTA and FHWA have collaborated to establish the 
Transportation Planning Capacity Building program, which provides 
training and technical assistance to state, regional, and local 
transportation officials on using analytical tools in the decision-
making process.

Federal mandates could also be used to increase state, regional, and 
local transportation agencies' use of analytical tools, such as 
benefit-cost analysis. However, in some cases, mandates would require 
legislative change. For example, benefit-cost analysis cannot currently 
be required as a condition of receiving highway funds because the 
federal government does not have exclusive approval power over the 
worthiness of these projects, and states maintain the sovereign rights 
to determine which projects shall be federally funded.[Footnote 65] In 
addition, it would also be necessary to change TEA-21's prohibition on 
placing dollar values on transit mobility improvements in order to 
require a benefit-cost analysis as part of the New Starts process.
[Footnote 66] As a strategy based on compliance with rules, mandates 
are comparatively simple to implement. However, detecting mistakes and 
enforcing mandates as well as creating mechanisms for sanctioning 
noncompliance would require considerable attention for effective 
oversight.

Factors that Work Against Greater Use of Analysis in Investment 
Decisions: 

As our survey responses showed, decisions about transportation 
investments are based on many things besides the results of economic 
analyses of a project's benefits and costs, such as the availability of 
funding or public perception about a project. Improving the quality of 
information about projects does not make these other matters disappear. 
Experts, other transportation researchers, and our past work have 
identified several overarching factors that can affect the extent to 
which additional analytical information may be used in making decisions 
about projects. Four such factors, each discussed below, would likely 
continue to affect the extent to which analytic information, even 
significantly improved, would be used as the dominant factor in making 
investment decisions.

* Structure and Funding of Federal Programs: According to several 
experts, the highly compartmentalized structure and funding of federal 
highway and transit programs work against an advantage of benefit-cost 
analysis--the ability to evaluate how well alternative investments meet 
transportation problems. Separations between federal programs and funds 
give state, regional, and local agencies little incentive to 
systematically compare the trade-offs between investing in different 
transportation alternatives to meet passenger and freight travel needs 
because funding can be tied to certain programs or types of projects, 
according to several experts.[Footnote 67] For example, only fixed 
guideway transit projects, such as rail projects, are currently 
eligible for New Starts funds.[Footnote 68] As a result, certain bus 
rapid transit projects, which have compared favorably with the per-
mile costs of light rail projects, are not eligible for New Starts 
funds.[Footnote 69] Both the Senate-and House-proposed bills (S. 1072 
and H.R. 3550) to reauthorize federal surface transportation programs, 
which were considered by the 108TH Congress in 2004, would allow 
certain nonfixed guideway transit projects (e.g., bus rapid transit 
operating in nonexclusive lanes) to be eligible for New Starts funding. 
The Transportation Research Board reported that most local agency 
staff continues to be in a single transportation sector "silo."
[Footnote 70]

Federal funding of highway and transit projects is also not linked to 
performance or the accomplishment of goals or outcomes. As a result, 
the federal government misses an opportunity to use financial 
incentives to improve performance and to hold agencies accountable for 
results. In a previous report, we identified possible options for how 
the federal highway program could be restructured to increase 
flexibility and accountability, including linking funding with 
performance and outcomes.[Footnote 71]

* Legislative earmarks: Legislative earmarks target transportation 
funds to specific local uses. As a result, these designated projects do 
not compete for funding against other alternatives, which removes the 
reason and incentive for transportation agencies to conduct benefit-
cost analyses.

* Multiple federal requirements: Federal legislation and regulations 
place many demands on state, regional, and local transportation 
agencies' analytic resources and--in some cases--give them compelling 
reasons to dedicate their analytic resources to areas other than 
benefit-cost analysis or to choose an alternative that is not the most 
cost beneficial. For example, one expert emphasized that local 
transportation agencies have especially strong incentives to focus 
their modeling and analytic resources on achieving air-quality goals, 
as mandated by federal statute. Demonstrating that these goals are met 
is a high priority because failing to do so creates the very tangible 
risk that transportation project funding could be blocked. In addition, 
TEA-21 requires local, regional, and state transportation agencies to 
consider a number of factors in their planning that are not easily 
quantified.[Footnote 72] As a result, these statutorily defined 
factors, which are considered in a more qualitative manner, can be more 
important than the results of a benefit-cost analysis in selecting a 
transportation project for funding.

* Expense of analysis: Experts told us that analysis can be quite 
expensive. For example, a formal benefit-cost analysis can typically 
cost over $100,000 for a multimodal urban corridor that is several 
miles long. The high cost of such analyses puts pressure on local 
agency budgets that are already stretched to meet other competing 
demands and poses a significant disincentive to using benefit-cost 
analysis or conducting outcome evaluation. As noted earlier, the Senate 
proposed bill (S. 1072) to reauthorize federal surface transportation 
programs that was considered by the 108TH Congress in 2004 would 
increase funds to support local transportation planning, and those 
additional funds could presumably be used to support economic analyses.

Concluding Observations: 

With growing concerns about the size of federal and state budget 
deficits, combined with the future mandatory commitments to Social 
Security and Medicare set to consume a greater share of the nation's 
resources, the prospects of future fiscal imbalances are a certainty. 
Given the current and long-term fiscal challenges, careful decisions 
need to be made to ensure that transportation investments 
systematically consider the benefits of each federal dollar invested.

Through federal regulations, laws, and guidance, a framework has been 
established for transportation planning that state, local, and other 
decision makers must follow to receive federal transportation dollars. 
Although the framework identifies factors for consideration during 
transportation investment decision making, it does not specify 
analytical tools to be applied for evaluating project merits--nor does 
it require that the most cost-beneficial project be chosen. 
Furthermore, many of the factors that are required to be considered are 
not easily incorporated in economic analysis, and methods for 
estimating dollar values associated with those factors may not be 
readily accepted. This results in some factors being considered more 
qualitatively and thus weighted differently than those factors that can 
be more easily incorporated in an economic analysis. Academic 
institutions, research organizations, and experts in the field continue 
to seek new methods and tools for estimating transportation project 
benefits and costs. Such advancements could help federal funding 
recipients improve their project analyses and thus improve the 
information available to decision makers, although these methods should 
be appropriately tested and vetted within the transportation community.

Throughout this report, we have acknowledged the very tangible 
difficulty of comprehensively and accurately estimating the benefits 
and costs of transportation projects, which, in part, leads to the 
relatively infrequent use of benefit-cost analysis in determining which 
projects to pursue. Further, we have recognized that transportation 
investment decision making does not occur in a vacuum. State, regional, 
and local officials consider a variety of factors in making 
transportation investment decisions, including the community's needs 
and priorities as well as federal requirements--and these factors can 
play a greater role in shaping investment choices than the analysis of 
a project's benefits and costs. In addition, overarching factors, such 
as the funding compartmentalization of federal transportation programs 
and legislative earmarks that target transportation funds to specific 
uses, inhibit more widespread use of benefit-cost analysis. 
Nevertheless, the increased use of systematic analytical tools such as 
benefit-cost analysis, and the continued improvement of such tools 
through dissemination of new methods and advancement of existing 
techniques, can provide important additional information that can be 
used to inform discussions about community needs and values, which 
could then lead to better-informed transportation investment decision 
making.

Agency Comments: 

We obtained comments from DOT, including FTA and FHWA. Overall, DOT 
said that the report presented a clear and useful assessment of the 
status of economic analysis in its application to evaluating 
transportation projects. While recognizing the utility of economic 
analysis for maximizing benefits associated with public investment in 
transportation capacity, DOT agreed with the limitations associated 
with the use of these techniques that we described in our report. DOT 
indicated that a combination of factors, including difficulties in 
measuring and forecasting benefits, along with local political, land 
use, and public support factors can limit the practical utility of 
formal economic analysis in making local transportation decisions. 
Nonetheless, at the federal level, representatives from FTA said that 
it had made significant strides incorporating state-of-the-art 
analytical tools into its New Starts Program. For example, as described 
in our report, FTA developed software capable of calculating 
transportation user benefits, based on locally originated data, and 
grantees are required to use it in making statutorily required New 
Starts submissions. Representatives from FTA also said that FTA is more 
rigorously reviewing ridership forecasts, requiring before and after 
studies for all new projects, and is conducting risk assessments to 
identify significant risks to project budgets and schedules, as 
described in our report. Finally, both FTA and FHWA offered a number of 
technical comments, which have been incorporated in this report, as 
appropriate.

We are sending copies of this report to the Secretary of 
Transportation, Administrators of the Federal Highway Administration 
and Federal Transit Administration, and interested congressional 
committees. We will also make copies available to others upon request. 
In addition, the report will be available at no charge on the GAO Web 
site at [Hyperlink, http://www.gao.gov].

If you have any questions about this report, please contact me at 
[Hyperlink, siggerudk@gao.gov], or (202) 512-2834. Key contributors to 
this report are listed in appendix VI.

Signed by: 

Katherine Siggerud: 
Director, Physical Infrastructure: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To identify the categories of benefits and costs that can be attributed 
to highway and transit investments and the challenges in measuring 
these benefits and costs as well as options to improve the information 
available to decision makers, 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 reviewed these studies, which 
were 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 also reviewed federal laws, regulations, and guidance on 
the transportation planning process in order to determine the extent to 
which considerations of project benefits and costs are required or 
encouraged. In addition, we interviewed federal transportation 
officials in the Department of Transportation's (DOT) Office of the 
Inspector General, Federal Highway Administration (FHWA), Federal 
Transit Administration (FTA) and the Volpe Transportation Center, as 
well as representatives from think tanks, consulting firms, academic 
institutions, and the Transportation Research Board's Transit 
Cooperative Research Program and National Cooperative Highway Research 
Program.

We also contracted with the National Academy of Sciences (NAS) to 
convene a balanced, diverse panel of experts to discuss the use of 
benefit-cost analysis in highway and transit project decision making 
and gather views about options to improve the information available to 
decision makers. The NAS Transportation Research Board (TRB) identified 
potential panelists who were knowledgeable about benefit-cost analysis, 
transportation policy and planning, highway and transit use, and 
transportation decision making. We worked closely with TRB to select 
panelists who could adequately respond to our general and specific 
questions about conceptualizing, measuring, improving, and using 
benefit and cost information in investment decisions (see app. III for 
more information about the panelists). In keeping with NAS policy, the 
panelists were invited to provide their individual views, and the panel 
was not designed to build consensus on any of the issues discussed. 
After the expert panel was conducted on June 28, 2004, in Washington, 
D.C., we used a content analysis to systematically analyze a transcript 
of the panel's discussion in order to identify each expert's views on 
key questions.

To determine how state, local, and regional decision makers consider 
the benefits and costs of new highway and transit investments and the 
extent to which select capacity-adding highway and transit investments 
met their projected outcomes, we conducted a survey and a series of 
case studies. Specifically, we conducted a self-administered e-mail 
survey of all state DOTs (excluding the District of Columbia and Puerto 
Rico) and the 30 largest transit agencies in the United States. We sent 
the survey to state DOT planning officials and transit agency general 
managers and asked them to coordinate responses with agency officials 
most knowledgeable about particular issues raised in the survey.

Although we did not independently verify the accuracy of the self-
reported information provided by these agencies, we took a series of 
steps, from survey design through data analysis and interpretation, to 
minimize potential errors and problems. To identify potential 
questions, we spoke with numerous transportation experts, agency 
officials, and officials at organizations relevant to transportation 
planning and decision making, including, the American Association of 
State Highway and Transportation Officials (AASHTO), the American 
Public Transportation Association, and the Association of Metropolitan 
Planning Organizations (AMPO). To verify the clarity, length of time of 
administration, and understandability of the questions, we pretested 
the questionnaire with 12 transit agencies, state DOTs, and 
metropolitan planning organizations (MPO). We also had the 
questionnaire reviewed by a survey expert and AMPO staff. In addition, 
we examined survey responses for missing data and irregularities. We 
analyzed the survey data by calculating descriptive statistics of state 
DOT and transit agency responses.[Footnote 73] A copy of the Survey of 
State Department's of Transportation and Transit Agencies--The Costs 
and Benefits of Transportation Projects can be found in appendix II.

We used AASHTO's standing committee on planning to identify state 
highway officials in each state. We also used the National Transit 
Database to identify the top 30 transit agencies nationwide as well as 
obtain contact information for the general managers of the agencies.
[Footnote 74] We also interviewed officials from several MPOs on the 
types of analysis they used in planning, but we did not include them in 
the survey population because MPO officials told us that state DOTs and 
transit agencies are typically project sponsors and are responsible for 
identifying and evaluating specific project alternatives. While MPOs 
are involved in the project planning process, we decided to limit our 
survey to those agencies that most likely had completed project 
specific analyses.

We conducted the survey from August through October 2004. We initially 
contacted state DOT and transit agency officials via telephone, and we 
then sent the survey via e-mail to each official. To maximize response 
rates, we sent periodic e-mail reminders with copies of the survey to 
nonrespondents in September 2004. Each of these messages contained 
instructions for completing the survey and contact information to 
submit questions. We extended the initial deadline from September 15, 
2004 to October 8, 2004, to allow additional agencies to submit 
completed questionnaires. Finally, we telephoned officials that had not 
yet responded between September 22, 2004, and September 28, 2004, to 
remind them to complete the questionnaire. Overall, 43 of the 50 state 
DOTs responded to our survey and 20 of the 28 transit agencies.

We supplemented our survey data with in-depth information from state 
and local transportation officials about 10 highway and transit 
projects in five major metropolitan areas: Baltimore, MD; Dallas, TX; 
Denver, CO; Miami, FL; and San Jose, CA. We chose these five 
metropolitan areas because they each had both a New Starts project and 
a capacity-adding highway project completed within the last 10 years 
and were identified by the Texas Transportation Institute as among the 
top 25 most congested areas in the United States. (Table 7 provides a 
description of each project.) In these locations, we interviewed 
officials from transit agencies, MPOs, and state DOTs in order to 
understand the type of analysis that was completed for the highway and 
transit projects, the factors that drove project decision making,
[Footnote 75] and the types of project outcomes that were achieved and 
tracked. We also analyzed available planning and project documents, 
such as Environmental Impact Statements and Project Study Reports. We 
also collected available cost and usage information from the planning 
and project documents or from project officials.

Table 7: Description of Five Highway and Five Transit Projects Selected 
for Review: 

Location: Baltimore; 
Highway project description: This project completed a 5-mile section of 
Maryland Route 100, located between U.S. Route 29 and Interstate Route 
95 in eastern Howard County Maryland. This project was opened to 
traffic in 1999; 
Transit project description: This project included three distinct 
extensions to the Baltimore Central Light Rail Line. The Hunt Valley 
extension was to be 4.6 miles with five stations, the Penn Station 
extension was to be 0.3 miles, and the BWI extension was to be 2.4 
miles with two stations. The extensions were opened to service in 
1997.

Location: Dallas; 
Highway project description: This project widened a 4-mile stretch of 
State Highway 66, between the cities of Rockwall and Rowlett, from two 
lanes to four lanes, and replaced an existing bridge with twin bridges. 
The project was completed in 2003; 
Transit project description: This project is a 9.6 mile segment of a 
20-mile light rail starter system. Traffic conditions within the South 
Oak Cliff Corridor were not severely congested, so this project was 
intended to provide dependable, fast, and convenient transit access to 
employment opportunities for residents. Initial revenue service began 
in June 1996. The final segment opened for service in May 1997.

Location: Denver; 
Highway project description: This project included widening Parker 
Road (State Highway 83) by one through lane in each direction, 
modifying the I-225 interchange ramps, completing a grade separation 
and access roads at Vaughn Way and a half-urban interchange at Hampden 
Avenue, eliminating three signalized intersections, and constructing a 
flyover ramp from northwest bound Parker Road to southwest bound I-225. 
The project was completed in 2001; 
Transit project description: This project was an 8.7 mile light rail 
line extending from I-25 and Broadway just south of downtown Denver to 
Mineral Avenue in Littleton, Co. The project is grade separated and
generally follows the South Santa Fe freight rail corridor. Revenue 
operation began in 2000.

Location: Miami; 
Highway project description: This project was one of several expansion 
projects planned for Biscayne Blvd., from downtown Miami to the Broward 
County line. It included adding travel lanes in both directions and a 
grade separation at the intersection of NE 203[RD] St. and Biscayne 
Blvd. This project was completed in 2001; 
Transit project description: This project was an extension to the 
existing Miami Metromover system--an elevated downtown people-mover 
system. It was designed to provide downtown distribution for the 
Metrorail system and for general circulation around downtown Miami. 
The extensions added 2.5 miles of additional guideway north and south 
of the initial 1.9-mile loop. The extensions began service in 1994.

Location: San Jose; 
Highway project description: This project consisted of modifications to 
the existing Route 237 and I-880 interchange, including providing a 
direct freeway-to-freeway connector between Route 237 and I-880, 
separating freeway traffic from eastbound and westbound local street 
traffic on Calaveras Blvd., providing for the expansion of I-880 to 
accommodate a 10-lane freeway, and converting the existing full 
cloverleaf interchange to a partial cloverleaf interchange. 
Construction of the interchange was completed in 2002; 
Transit project description: This project was the first 7.6 mile phase 
of a 12-mile light rail line running across the Tasman Corridor--a 
major travel corridor that covers the City of San Jose in the east and 
the City of Mountain View in the west in northern Santa Clara County. 
The Tasman West light rail line was constructed to connect to the 
existing Guadalupe light rail line for connections to downtown San 
Jose. Operations began in 1999. 

Source: GAO summary of project documents.

[End of table]

To examine the relationship between benefit-cost ratios computed for 
state transportation projects in California and the subsequent 
decisions to program construction funds for those projects in the 
Statewide Transportation Improvement Plan, we used a logit model. This 
model is one of the most commonly used statistical techniques for 
estimating problems involving outcome variables that take discrete 
values---in this case, the outcome variable is that the projects either 
received funding or they did not. The data for this analysis were 
provided to us by the California DOT. In the statistical analysis, we 
also included population density and total employment to both account 
for plausible effects from these demographic factors and to check for 
the sensitivity of the estimated relationship. These county-level 
demographic variables, obtained from Census Bureau's 2000 census, were 
matched to counties in which the projects were to be constructed.

Finally, to determine trends in public expenditure, capacity, and usage 
for highway and transit systems over a 20-year period (1982 to 2002), 
we analyzed information from FHWA's Highway Statistics, FTA's National 
Transit Database, and DOT's Conditions and Performance Report. We 
adjusted expenditures to 2002 dollars using the price index for state 
and local government gross fixed investment in highways and streets 
estimated by the Bureau of Economic Analysis (BEA) of the Department of 
Commerce. The adjusted expenditures using the BEA index will be 
slightly different from expenditures calculated by FHWA using its bid-
price index because BEA adjusts the FHWA bid-price index. We used BEA's 
index because it uses a 12-quarter phasing pattern that more 
consistently captures expenditure patterns for capital highway 
projects. To determine the reliability of the data, we (1) reviewed 
available documentation about these databases and the systems that 
produced them and (2) interviewed knowledgeable agency officials. We 
determined that the data were sufficiently reliable for the purposes of 
this report.

[End of section]

Appendix II: Survey Results: 

[See PDF for image] 

[End of figure] 

[End of section]

Appendix III: Panelists: 

The names and backgrounds of the panelists are as follows. Brian Taylor 
of the University of California, Los Angeles, served as moderator for 
the sessions.

* David J. Forkenbrock is Director of the Public Policy Center, 
Director of the Transportation Research Program, Professor in Urban and 
Regional Planning, and Professor in Civil and Environmental Engineering 
at the University of Iowa. His research and teaching interests include 
analytic methods in planning, and transportation policy and planning. 
From 1995 through 1998, Dr. Forkenbrock chaired a National Research 
Council-appointed committee to review the FHWA's Cost Allocation Study 
process. He is a member of the College of Fellows, American Institute 
of Certified Planners and a lifetime National Associate of the National 
Academies. He is chairman of the TRB Committee for Review of Travel 
Demand Modeling by the Metropolitan Washington Council of Governments 
and a member of the TRB Committee for the Study of the Long-Term 
Viability of Fuel Taxes for Transportation Finance. In 2004, he 
received the first ever TRB William S. Vickrey Award for Best Paper in 
Transportation Economics and Finance for his work on mileage-based road 
user charges. He received the Michael J. Brody Award for Excellence in 
Faculty Service to the University and the State, from the University of 
Iowa in 1996. He earned a Ph.D., from the University of Michigan; a 
Master of Urban Planning from Wayne State University; and a B.A., from 
the University of Minnesota.

* José A. Gómez-Ibáñez is Derek C. Bok Professor of Urban Planning and 
Public Policy at Harvard University's John F. Kennedy School of 
Government and Graduate School of Design. His research interests are 
primarily in the area of transportation policy and urban development 
and in privatization and regulation of infrastructure. He has served as 
a consultant for a variety of public agencies. His recent books include 
Regulating Infrastructure: Monopoly, Contracts, and Discretion; 
Regulation for Revenue: The Political Economy of Land Use Exactions 
(with Alan Altshuler); Going Private: The International Experience with 
Transport Privatization (with John R. Meyer); and Essays on Transport 
Policy and Economics (ed.).

* Ronald F. Kirby is Director of Transportation Planning for the 
Metropolitan Washington Area Council of Governments. He began his 
career in the United States as a Senior Research Associate with 
Planning Research Corporation. He joined the Urban Institute as a 
Senior Research Associate and became a Principal Research Associate and 
Director of Transportation Studies. He has served on several TRB 
committees and is currently a member of the TRB Executive Committee. He 
has a B.S. and a Ph.D., in applied mathematics, from the University of 
Adelaide, South Australia.

* David L. Lewis is President and CEO of HLB Decision Economics. His 
credits include a range of widely adopted applications in cost-benefit 
analysis, productivity measurement, risk analysis, and approaches to 
establishing public-private investment partnerships. He has authored 
three books, including Policy and Planning as Public Choice: Mass 
Transit in the United States (Ashgate Press), 1999. His past positions 
include Partner-in-Charge, Division of Economics and U.S. Operations, 
Hickling Corporation; Chief Economist, Office of the Auditor General of 
Canada; Executive Interchange Program and Principal Analyst, U.S. 
Congressional Budget Office, Congress of the United States; and Senior 
Economist and Director of the Office of Domestic Forecasting, 
Electricity Council. He has a Ph.D., and an M.S., in economics from the 
London School of Economics and a B.A., in economics from the University 
of Maryland.

* Michael D. Meyer is Professor of Civil and Environmental Engineering 
at the Georgia Institute of Technology. Prior to coming to Georgia Tech 
in 1988, he was the Director of the Bureau of Transportation Planning 
and Development at the Massachusetts Department of Public Works for 5 
years. Prior to his employment at the Massachusetts Department of 
Public Works, he was a professor in the civil engineering department of 
the Massachusetts Institute of Technology. His research interests 
include transportation planning and policy analysis, environmental 
impact assessment, analysis of transportation control measures, and 
intermodal and transit planning. He is a Professional Engineer in the 
State of Georgia, and a member of the American Society of Civil 
Engineers and the Institute of Transportation Engineers. He has chaired 
TRB's Task Force on Transportation Demand Management, the Public Policy 
Committee, the Committee on Education and Training, and the Statewide 
Multimodal Transportation Planning Committee. He is a former member of 
the National Research Council policy study Panel on Statistical 
Programs and Practices of the Bureau of Transportation Statistics. 
Currently, he is a member of TRB's Executive Committee and Standing 
Committee on Statewide Multimodal Transportation Planning.

* Donald Pickrell is DOT's Volpe Center's Chief Economist. Prior to 
joining DOT, he taught economics, transportation planning, and 
government regulation at Harvard University. While at the Volpe Center, 
he also was a lecturer in the Department of Civil Engineering at 
Massachusetts Institute of Technology. He has authored over 100 
published papers and research reports on various topics in 
transportation policy and planning, including transportation pricing, 
transit planning and finance, airline marketing and competition, travel 
demand forecasting, infrastructure investment and finance, and the 
relationships of travel behavior to land use, urban air quality, and 
potential climate change. He received his undergraduate degree in 
economics and mathematics from the University of California at San 
Diego, and Master's and Ph.D. degrees in urban planning from the 
University of California at Los Angeles.

* Kenneth A. Small is Professor of Economics at the University of 
California at Irvine, where he served 3 years as chair of the 
Department of Economics and 6 years as Associate Dean of Social 
Sciences. He previously taught at Princeton University and was a 
Research Associate at The Brookings Institution. He has written 
numerous books and articles on urban economics, transportation, public 
finance, and environmental economics. He serves on the editorial boards 
of several professional journals in the fields of urban and 
transportation studies and has served as coeditor or guest editor for 
four of those boards. In 1999, he received the Distinguished Member 
award of the Transport and Public Utilities Group of the American 
Economic Association. During 1999 to 2000, he held a Gilbert White 
Fellowship at Resources for the Future. He has served on two TRB policy 
study committees--the Committee for a Review of the Highway Cost 
Allocation Study and the Committee for a Study on Urban Transportation 
Congestion Pricing.

* Brian D. Taylor (Moderator) is Associate Professor of Urban Planning 
and Director of the Institute of Transportation Studies at University 
of California at Los Angeles as well as Vice-Chair of the Urban 
Planning Department. His research centers on transportation finance and 
travel demographics. He has examined the politics of transportation 
finance, including the influence of finance on the development of 
metropolitan freeway systems and the effect of public transit subsidy 
programs on system performance and social equity. His research on the 
demographics of travel behavior has emphasized access-deprived 
populations including women, racial-ethnic minorities, the disabled, 
and the poor. He also has explored relationships between transportation 
and urban form, with a focus on commuting and employment access for 
low-wage workers. Prior to coming to University of California at Los 
Angeles in 1994, he was Assistant Professor in the Department of City 
and Regional Planning at the University of North Carolina at Chapel 
Hill. Prior to that, he was a Transportation Analyst with the 
Metropolitan Transportation Commission in Oakland, California.

* Martin Wachs is Professor of Civil and Environmental Engineering and 
City and Regional Planning, and Director of the Institute of 
Transportation Studies at the University of California at Berkeley. He 
was formerly Professor of Urban Planning and Director of the Institute 
of Transportation Studies at the University of California at Los 
Angeles where he served three terms as Head of the Urban Planning 
Program. His research interests include methods for evaluating 
alternative transportation projects; relationships among land use, 
transportation, and air quality; and fare and subsidy policies in urban 
transportation. Most recently, he chaired the Transportation Research 
Board policy study Committee for the Study on Urban Transportation 
Congestion Pricing. He is the former Chairman of the TRB Executive 
Committee. He holds a Ph.D., in transportation planning from 
Northwestern University.

[End of section]

Appendix IV: Trends in Highway and Transit Expenditures, Usage, and 
Capacity: 

Public Expenditures: 

Expenditures by all levels of government for both highways and transit 
have grown substantially from fiscal year 1982 through 2002, at an 
average annual rate of about 3.4 percent for both highway and transit 
spending. Figures 5 and 6 show trends in federal, and state and local 
spending for highways and transit in inflation-adjusted 2002 dollars. 
In 2002, total highway expenditures reached almost $136 billion while 
over $26 billion was spent on transit, with the bulk of funding coming 
from state and local governments for both highways and transit systems. 
For highways, total federal expenditures have risen at a faster rate 
since the enactment of TEA-21 in 1998 than have state and local 
expenditures, with federal expenditures rising at about 8.4 percent per 
year, on average, from 1998 through 2002, and state and local 
expenditures rising at about 0.5 percent per year, on average, over the 
same period. For transit, the converse is true, as state and local 
expenditures have increased at a faster rate than federal spending 
since 1998, with state and local expenditures rising at an average 
annual rate of about 7.5 percent per year, as opposed to 5.8 percent 
per year for federal expenditures.[Footnote 76]

Figure 5: Total Public Spending on Highways, 1982-2002: 

[See PDF for image] 

Note: Amounts are presented in 2002 dollars.

[End of figure] 

Figure 6: Total Public Spending for Transit, 1982-2002: 

[See PDF for image] 

Note: Amounts are presented in 2002 dollars.

[End of figure] 

Investment in highway and transit capital, which represents investment 
in new capacity as well as rehabilitation of existing assets,[Footnote 
77] has also increased. Figure 7 shows trends in federal, and state and 
local capital spending from 1982 through 2002 in inflation-adjusted 
2002 dollars. The bulk of federal funding for highways goes toward 
capital outlays, with about 96 percent of all federal funding going to 
capital outlays in 2002, as compared with 36 percent of state and local 
funds. In addition, since the passage of TEA-21, federal capital 
spending has increased at a faster rate than state and local capital 
spending for highways. From 1998 through 2002, federal capital spending 
on highways increased an average of about 8.8 percent per year in 
inflation-adjusted dollars, while state and local capital spending 
decreased at about 0.8 percent per year, on average, in inflation-
adjusted dollars.[Footnote 78]

Figure 7: Public Highway Capital Expenditures, 1982-2002: 

[See PDF for image] 

Note: Amounts are presented in 2002 dollars.

[End of figure] 

Figure 8 shows trends in federal, and state and local capital spending 
for transit from 1995 through 2002 in inflation-adjusted 2002 
dollars.[Footnote 79] Data prior to 1995 are not reported because 
comparable data with those available in the National Transit Database 
are not available. In contrast to highway capital spending, since the 
passage of TEA-21, state and local capital spending has increased at a 
faster rate than federal capital spending for transit. From 1998 
through 2002, federal capital spending on transit increased an average 
of about 4.9 percent per year in inflation-adjusted dollars, while 
state and local capital spending increased almost 15 percent per year 
on average in inflation-adjusted dollars.

Figure 8: Public Transit Capital Expenditures, 1995-2002: 

[See PDF for image] 

Note: Amounts are presented in 2002 dollars.

[End of figure] 

According to DOT's 2002 Conditions and Performance report, capital 
investment by all levels of government remains well below DOT's 
estimate of the amount needed to maintain the condition of the highway 
and transit systems.[Footnote 80] As a result, according to DOT, the 
overall performance of the system declined, thus increasing the number 
of highway and transit investments needed to address existing 
performance problems. Figure 9 shows DOT's estimates of capital 
investment needed from all levels of government to maintain and to 
improve the highway and transit systems, compared with actual capital 
spending in 2002.

Figure 9: Cost to Maintain and Improve Highways and Transit, 2001-
2020A: 

[See PDF for image] 

Note: Amounts are presented in 2002 dollars.

[A] Investment requirements for highways and bridges are drawn from the 
Highway Economic Requirements System (HERS), which estimates highway 
preservation and highway and bridge capacity expansion investment. 
Transit investment requirements, except those for rural and special 
service transit, are estimated by the Transit Economic Requirements 
Model (TERM). All projections are based on 2000 data.

[End of figure] 

Usage of Public Highways and Transit: 

Travel on highways and transit has increased steadily from 1982 through 
2002. For highways, the level of usage has increased at an average 
annual rate of about 3 percent per year. By 2002, Americans traveled on 
highways more than 2.8 trillion vehicle miles annually. Figure 10 shows 
trends in usage of public highways from 1982 through 2002. Although 
most highway lane miles are rural, the majority of highway travel 
occurs in urban areas. For example, in 2002, 61 percent of highway 
travel occurred in urban areas. Passenger vehicles account for the bulk 
of vehicle miles traveled on public highways, although usage by trucks 
has increased more over the period. Highway usage by trucks increased 
by 92.5 percent, as opposed to 78.3 percent by passenger 
vehicles.[Footnote 81] Conversely, the level of usage of public 
highways by buses only increased 17.6 percent from 1982 through 2002.

Figure 10: Level of Usage of Public Highways by Mode, 1982-2002: 

[See PDF for image] 

[End of figure] 

The level of usage of public transit, measured in passenger miles 
traveled, has increased an average of 1.5 percent annually from 1982 
through 2002, although usage has increased more rapidly since passage 
of TEA-21.[Footnote 82] Figure 11 shows trends in rail and nonrail 
transit usage over this period. Since 1998, rail transit has seen an 
11.2 percent increase in usage,[Footnote 83] while nonrail forms of 
transit, including demand response, ferry-boat, jitney, motor bus, 
monorail, publico, trolley bus, and van pools, experienced a smaller 
increase, approximately 9.5 percent, over the same time period.
[Footnote 84] In 2002, passenger miles traveled on rail were 24.6 
billion and accounted for about 54 percent of total usage; however, 
according to the 2002 C&P report, rail accounts for only 5 percent of 
urban transit route miles.

Figure 11: Level of Usage of Public Transit, Rail/NonRail 1982-2002: 

[See PDF for image]

[End of figure]

Disaggregating rail usage by commuter rail, heavy rail, and light rail, 
shows that usage of heavy rail and commuter rail greatly exceeds that 
of light rail.[Footnote 85] Figure 12 shows trends in usage by rail 
mode from 1984 through 2001, the years for which the data are 
available. In 2001, light rail accounted for only 6 percent of the 
total passenger miles traveled on rail, whereas commuter rail and 
heavy rail were 38 percent and 56 percent, respectively, of the total 
passenger miles traveled on rail transit in 2001.

Figure 12: Level of Usage of Rail Transit, 1984-2001: 

[See PDF for image] 

[End of figure] 

Capacity of Highways and Transit: 

The capacity of the public highway system and the nation's transit 
system has increased at a slower rate than usage of these systems. For 
highways, total estimated lane miles have increased an average of 0.17 
percent annually from 1982 through 2002, compared with an annual 
increase of 3 percent for vehicle miles traveled.[Footnote 86] In 2002, 
there were approximately 8.3 million lane miles in the United States, 
with 76 percent of the total capacity existing in rural areas.
[Footnote 87]

From 1993 through 2002, years for which data are available, total 
transit system capacity increased 24 percent, while usage increased 27 
percent over the same period.[Footnote 88]The capacity of all rail 
modes increased 26 percent from 1993 through 2002, while nonrail mode 
capacity increased 22 percent. Light rail capacity experienced the 
greatest percentage change of the rail modes over the period, 
increasing 122 percent. Vanpools experienced the largest percentage 
change in nonrail capacity, 225 percent.

[End of section]

Appendix V: Information on Benefits Attributable to Highway and Transit 
Investments: 

Measuring benefits that can potentially result from highway and transit 
investments can be quite contentious and spur vigorous debates among 
experts in the field and in literature, although there tends to be more 
agreement about the nature of the direct user benefits associated with 
highway and transit investments, as opposed to the wider social 
benefits or the indirect benefits.

Direct and Social Benefits: 

Generally, the largest direct benefit from transportation investments, 
both highway and transit, is the reduction in travel time that results 
from the investment. When travel time is reduced, additional time 
becomes available to spend on some other activity and, therefore, 
people are willing to pay to reduce their travel time. The value of 
travel-time savings is an estimate of how much people would be willing 
to pay for reductions in travel time. There is a substantial body of 
literature consisting of both conceptual analyses of how best to 
estimate the value of travel-time savings and empirical analyses that 
estimate values in specific circumstances.[Footnote 89] Travel-time 
savings are often divided between work-time savings and nonwork-time 
savings. Work-time savings--for example, reductions in the time for a 
repairperson to get from one work site to another during the workday--
would allow someone to accomplish more in a day's work. Accordingly, 
the work travel time that someone saves is generally valued at that 
person's hourly wage rate because the wage rate represents the value to 
the employer of having an additional hour of that person's time 
available for work activities.

The values that travelers place on nonwork travel-time savings depend 
upon both the benefit that they would receive by spending additional 
time in some other way and the benefit they receive from reductions in 
individuals' perceived costs of travel. For example, it is generally 
accepted that reductions in time spent waiting for a bus to arrive are 
more highly valued than reductions in riding time because travelers 
dislike waiting more than riding and, therefore, would receive a 
greater benefit from waiting time reductions. As a result, the 
conceptual link between nonwork travel-time savings and the wage rates 
of the travelers is less direct. Different travelers along the same 
route with equal wage rates might value a given reduction in travel 
time differently, and any one traveler might value travel-time savings 
differently in different circumstances. In addition, a large change in 
travel time may be valued differently per minute than a relatively 
small change in travel time. Nonetheless, because some empirical 
studies have identified a relationship between willingness to pay for 
travel-time reductions and wage rates, DOT guidance for valuing 
benefits recommends estimating the value of travel-time savings for 
nonwork travel for both highways and transit as certain fractions of 
travelers' wage rates.[Footnote 90] For transit, the recommended value 
is different for different types of time savings, such as waiting, 
transfer, and in-vehicle time. It may be possible to obtain more 
accurate estimates of travel-time savings for a specific investment. 
This additional precision could be obtained by considering the degree 
to which the travelers who are affected by this investment are likely 
to have different values in this circumstance, as compared with 
previously estimated average values for all travel-time savings. 
However, obtaining this additional precision entails a cost, which 
would have to be considered in deciding whether to seek more precise 
estimates.

In addition to reductions in travel time for people, investment in 
transportation can reduce the time for freight products to move from 
one location to another, which is also a benefit from this investment. 
For highway investment, this effect is more direct; adding a new lane, 
for example, can increase the speed of highway travel, enabling trucks 
to reach their destinations more quickly. Although most freight 
typically does not travel by bus or subway, transit investment can 
indirectly allow freight to move more quickly to the extent that such 
investment removes cars from highways and allows trucks to travel at 
faster speeds.

Measurement and forecasting of travel-time impacts can be complicated 
by changes in demand resulting from shifts in travel behavior brought 
about by the highway or transit improvement. Reducing travel times 
leads to what has been referred to as triple convergence, where traffic 
on an improved road increases due to (1) travelers switching from less 
convenient alternative routes to the improved road (although travelers 
remaining on the alternative routes will benefit from reduced traffic), 
(2) travelers switching from less convenient times to the peak period, 
and (3) travelers switching from transit to driving because of the 
higher speeds and lower travel times.[Footnote 91] Estimates of this 
effect vary. One study showed that, over time, a 10 percent increase in 
road capacity led to a 9 percent increase in travel, while other 
research finds that these changes in demand may have a smaller 
effect.[Footnote 92] This change in demand does not mean travel-time 
benefits are not realized--only that forecasting future travel-time 
reductions should take account of increased traffic flows resulting 
from such shifts in demand, or else travel-time benefits are likely to 
be overestimated.

For transit investments, the impact of the investment on travel times 
for highway users can be complicated by what is known as travel-time 
convergence, whereby travel times on a roadway alternative to a transit 
line tend to converge to the transit travel time. The convergence of 
travel times occurs because some drivers are drawn off of the 
alternative roads to the transit line in search of lower door-to-door 
travel times. As these drivers leave the road, traffic conditions on 
the roadway improve, leading to some additional demand on the road and 
resulting in additional traffic. This process continues until door-to-
door travel times on the two modes converge. Several studies bear out 
the existence of this phenomenon in highly congested urban corridors 
and suggest that improving the transit travel time will lead to 
improvements in travel times on the alternative roadways.[Footnote 93]

Another user benefit from transportation investment in both highways 
and transit related to travel time, concerns reliability, which is 
generally defined to mean the variability in travel time. Empirical 
studies suggest that travelers often place a high value on increased 
certainty of arrival by a specific time, such that they would be 
willing to pay to reduce their travel time variability even if there 
was no change in mean travel time. Some investments might accomplish 
both and would be valued accordingly. For example, improving a 
bottleneck might not only reduce time on average, but it also might 
reduce variability by reducing the likelihood of an exceptionally long 
delay. One study estimates that the value of increased travel time 
reliability may be as large as the value of travel-time savings on a 
per minute basis.[Footnote 94] Not all projects that affect travel-time 
savings will affect reliability and vice versa.

In addition to benefits related to making travel times shorter and less 
variable, transportation investment can provide travelers other 
benefits, such as lower vehicle operating costs and safer and more 
comfortable travel. Lower vehicle costs can arise from highway 
investments that improve road quality, thereby reducing wear and tear 
on vehicles, and from investments that reduce congestion, which can 
reduce fuel consumption. Estimates exist in the literature of the 
extent to which highway investment reduces vehicle operating costs. 
Transit investment can also reduce vehicle operating costs to the 
extent that such investment reduces congestion by inducing some drivers 
to switch to transit. Improved safety has often been found to be a 
major benefit from transportation investment. Improving roadway designs 
generally contributes to fewer accidents, which implies fewer deaths 
and injuries and less property damage. As for the value of safety 
improvements, there is substantial literature--both conceptual and 
empirical--on how to value lives saved, often referred to as the value 
of a statistical life. Although different people might be willing to 
pay different amounts to reduce their likelihood of death, and the same 
person might be willing to pay different amounts in different 
circumstances, an average value based on various research studies is 
generally recommended.[Footnote 95] Improved comfort is another benefit 
from some forms of transportation investment. Transit investment that, 
for example, improves the comfort of a seat or increases the likelihood 
that a rider will get a seat, creates benefits for which some travelers 
would be willing to pay.

Transportation investment benefits also include benefits that accrue to 
the general public, not just to the travelers directly taking advantage 
of the investment. For example, transportation investment can lead to a 
reduction in environmental damage, which can be a benefit to an entire 
metropolitan area. Research has indicated that increased roadway 
congestion increases air pollution. Thus, investments that reduce 
congestion--including highway investments that directly speed up 
traffic and transit investments that indirectly speed up traffic by 
inducing people to switch from driving to using transit--can provide 
environmental benefits. However, to the extent that transportation 
investment induces additional travel by reducing expected travel time, 
the pollution resulting from these additional trips might offset the 
initial pollution-reducing effects of the investment. As another 
example, transportation investment that increases mobility for those 
who currently have limited access to the transportation network for 
access to jobs, schools, etc., might provide social benefits that go 
beyond the benefits to the users themselves. Such investment could 
include both additional transit service and highways that connect 
residents of lower income areas with job sites to which service and 
roads do not currently exist.

Another form of public benefit that may result from transportation 
investment, particularly for transit, is sometimes called option value: 
nontransit users, for example, might be willing to pay to provide 
transit service to retain the option to use it in the future. That is, 
for some people, having the option of transit service available in case 
circumstances--such as the weather or the price of gasoline--change 
could have some value, even if they do not currently plan to use it. 
The Transit Manual provides a methodology for estimating the value of 
this benefit.

Indirect Benefits: 

The direct user benefits of highway and transit improvements result in 
individuals, households, and firms acting to take advantage of those 
benefits. These actions can then lead to several types of indirect 
benefits, such as increased property values and new development, 
reduction in the costs associated with other public infrastructure 
(e.g., water, electricity, etc.) due to more compact development, 
reduction of production and logistics costs from improved freight 
efficiency, and overall increases in productivity and economic growth. 
As was discussed earlier in the report, these benefits largely 
represent capitalization of direct user benefits or transfers of 
economic activity from one area or group to another and, therefore, 
should not entirely be added to direct benefits.

As transportation costs fall and access is improved, incentives are 
created for households and firms to relocate to areas where housing and 
land is less expensive or more desirable. This can result in new 
development and increases in land values of the areas made more 
accessible, although improvements can also result in land values 
falling in other locations, due to changes in relative access, and 
negative impacts from noise and emissions that may result from the 
improvement. Most studies show a positive effect on land values from 
highway improvements, although the effects of improvements to highways, 
as opposed to new roads, are more localized and tend to be 
smaller.[Footnote 96] For transit, several studies have documented that 
increases in land values and higher-density development can occur 
around rail transit stations, although these impacts depend highly on 
local conditions, such as the condition of the local economy, and the 
extent to which complimentary land-use policies exist.[Footnote 97] 
Residents of areas where new transit lines are constructed, or where 
transit is improved may also value the type of urban development, i.e., 
high density or mixed use, which typically occurs around transit 
stations.[Footnote 98] However, increasing property values around 
transit stations can also displace low-income households, who may rely 
on transit.

Transportation investments can also have an impact on how land is used 
in an urban area. How such changes are valued can depend in large part 
on individual preferences for more or less compact and dense 
development. Highways are generally thought to encourage development on 
the outskirts of urban areas, although transit investments that provide 
access to those areas can also encourage such development. However, 
some research indicates that transit-served sites require less public 
capital than sites on the edges of urban areas.[Footnote 99] 
Nonetheless, while investments in transportation infrastructure have 
had major effects on development and land use in the past, research 
indicates that future effects are likely to be much weaker due to the 
already extensive amount of connectivity that exists and shifts in the 
nature of the U.S. economy from manufacturing to service orientation.
[Footnote 100]

Transportation investments can also reduce freight transportation costs 
and increase freight reliability, which allows firms not only to move 
to more desirable locations, but also to reorganize their warehousing 
and production processes to take advantage of those benefits. This 
reorganization can result in lower production and inventory costs for 
firms. Research on this relationship has estimated the benefits on a 
national level and found that, while the relationship is positive, the 
returns have been diminishing over time. While diminishing returns are 
to be expected as the highway and road network becomes more 
interconnected, the authors of one study also postulate that returns 
may also be diminishing because highways are inefficiently priced, and 
highway investment policies do not target the most efficient 
investments.[Footnote 101] While investment in highways has a more 
direct relationship to this benefit, transit investment can also result 
in such benefits to the extent that it improves conditions on nearby 
roadways.

Transportation improvements also lead to increased productivity and 
economic growth, through improving access to goods and services for 
businesses and individuals and increasing the geographic size of 
potential labor pools for employers and potential jobs for individuals. 
Recent research into the relationship between productivity, economic 
growth, and highway investment shows average annual returns on 
investment of 13.6 percent between 1990 and 2000, slightly greater than 
the return on private capital investment.[Footnote 102] However, this 
research also supports the notion that returns on highway investment 
have been declining over time. Transit can also lead to economic growth 
through encouraging the concentration of economic activity and the 
clustering of offices, shops, entertainment centers, and other land 
uses around transit stops, particularly rail transit stops. This 
concentration of activity leads to more efficient economic 
interactions, which results in higher productivity and can stimulate 
economic growth. One study has estimated that a 10 percent increase in 
transit presence would raise economic growth by about 0.2 
percent.[Footnote 103] Another study on the rate of return of several 
investments in new transit capacity suggests that these returns can be 
substantial, depending on the project, with projects ranging from 11.8 
percent returns to 92 percent returns.[Footnote 104]

[End of section]

Appendix VI: GAO Contacts and Acknowledgments: 

GAO Contacts: 

Katherine Siggerud (202) 512-2834: 
Nikki Clowers (202) 512-4010: 

Acknowledgments: 

In addition to those named above, Mark Braza, Jay Cherlow, Steve Cohen, 
Sharon Dyer, Sarah Eckenrod, Scott Farrow, Libby Halperin, Jessica 
Kaczmarek, Terence Lam, Heather MacLeod, Sara Ann Moessbauer, Stan 
Stenersen, Stacey Thompson, Andrew Von Ah, and Susan Zimmerman made key 
contributions to this report.


(542031): 

FOOTNOTES

[1] U.S. Department of Transportation, 2002 Status of the Nation's 
Highways, Bridges, and Transit: Conditions and Performance, Report to 
Congress (Washington, D.C.: 2002). Estimates are in 2000 dollars.

[2] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and 
Options for Future Program Design, GAO-04-802 (Washington, D.C.: Aug. 
31, 2004).

[3] H.R. 108-243.

[4] We surveyed state DOTs about capacity-adding highway projects and 
transit agencies about New Starts transit projects because these 
agencies are typically project sponsors and responsible for identifying 
and evaluating specific project alternatives.

[5] Specifically, we visited the Baltimore, Dallas, Miami, Denver, and 
San Jose metropolitan areas. All of these metropolitan areas are among 
the top 25 most congested areas, as measured by the Texas 
Transportation Institute. These projects should not be considered 
representative of all transportation projects but are rather 
illustrations of experiences with specific types of projects.

[6] See appendix I for a complete description of our scope and 
methodology, appendix II for our survey instrument and results, and 
appendix III for profiles of the panelists from our expert panel.

[7] Bent Flyvbjerg, Mette Skamris Holm, and Soren Buhl, 
"Underestimating Costs in Public Works Projects: Error or Lie?,"Journal 
of the American Planning Association, Vol. 68, No. 3 (2002).

[8] There are several types of rail transit, including commuter, heavy 
and light rail. The National Transit Database defines commuter rail as 
a transit mode that is an electric or diesel propelled railway for 
urban passenger train service consisting of local short-distance travel 
operating between a central city and adjacent suburbs. Heavy rail is 
defined as a transit mode that is an electric railway with the capacity 
for a heavy volume of traffic. It is characterized by high speed and 
rapid acceleration passenger rail cars operating singly or in multicar 
trains on fixed rails, separate rights-of-way (ROW) from which all 
other vehicular and foot traffic are excluded, sophisticated signaling, 
and high-platform loading. Light rail is defined as a transit mode that 
typically is an electric railway with a light volume traffic capacity, 
compared with heavy rail. It is characterized by passenger rail cars 
operating singly (or in short, usually two-car trains) on fixed rails 
in shared or exclusive ROW, low-or high-platform loading, and vehicle 
power drawn from an overhead electric line via a trolley or a 
pantograph.

[9] David Schrank and Tim Lomax, The 2004 Urban Mobility Report 
(College Station, TX: Texas Transportation Institute, September 2004). 

[10] U.S. Department of Transportation, Conditions and Performance 
Report.

[11] GAO, Surface and Maritime Transportation: Developing Strategies 
for Enhancing Mobility: A National Challenge, GAO-02-775 (Washington, 
D.C.: Aug. 30, 2002).

[12] P.L. 102-240 and P.L. 105-178, respectively. In 1983, the Highway 
Trust Fund was divided into two accounts: a Highway Account and a Mass 
Transit Account. The Highway Account mainly funds federal highway 
programs, and the Mass Transit Account funds federal transit programs.

[13] The remaining highway program funds were distributed through 
allocations to states with qualifying projects. For more information 
about the structure of the federal-aid highway grant program and 
formulas, see GAO-04-802.

[14] The phases of the New Starts process are preliminary engineering, 
final design, and full-funding grant agreement.

[15] For more information about FTA's New Starts program, see GAO, Mass 
Transit: FTA Needs to Better Define and Assess Impact of Certain 
Policies on New Starts Program, GAO-04-748 (Washington, D.C.: June 25, 
2004).

[16] Although the law requires that these factors be considered, 
failure to consider all of these factors in the long-range planning 
process is not reviewable in court. 

[17] Some federal regulations encourage states to conduct life-cycle 
cost analysis or benefit-cost analysis for highway projects, although 
TEA-21 prohibits the Secretary of Transportation from requiring a state 
to conduct a formal life-cycle cost analysis. See 23 C.F.R. 627, and 
section 5204(j)(1) of TEA-21. 

[18] Guidance for evaluating land-use effects can be found in FTA's 
Office of Planning "Guidelines and Standards for Assessing Transit-
Supportive Land Use" (May 2004). 

[19] Section 3010 of P.L. 105-178.

[20] This section is limited to a brief overview of the major 
categories of benefits and costs. Additional discussion of benefits can 
be found in appendix V.

[21] American Association of State Highway and Transportation 
Officials, User Benefit Analysis for Highways Manual (August 2003). 

[22] U.S. Department of Transportation, Federal Highway Administration, 
Office of Asset Management, Economic Analysis Primer (Washington, D.C.: 
August 2003). 

[23] As part of our review, we convened an expert panel in 
collaboration with the National Academy of Sciences. See appendix I for 
information about the design of the expert panel and appendix III for 
profiles of the panelists. We refer to the panelists as "experts" in 
this report.

[24] ECONorthwest and Parsons Brinckerhoff Quade & Douglas, Inc., 
Estimating the Benefits and Costs of Public Transit Projects: A 
Guidebook for Practitioners, TCRP Report 78 (Washington, D.C.: National 
Academy Press, 2002). TCRP is a cooperative effort of FTA; the National 
Academies, acting through the Transportation Research Board; and the 
Transit Development Corporation, a nonprofit, educational, and research 
organization established by the American Public Transportation 
Association. TCRP provides free research tools for the transportation 
industry and identifies real-life solutions to address the technical 
and operations challenges facing the industry's service providers, 
consultants, and suppliers.

[25] Cambridge Systematics, with Robert Cervero and David Aschauer, 
Economic Impact Analysis of Transit Investments: Guidebook for 
Practitioners, TCRP Report 35 (Washington, D.C.: National Academy 
Press, 1998). 

[26] For more discussion, see Kenneth A. Small, "Project Evaluation," 
In Essays in Transportation Economics and Policy--A Handbook in Honor 
of John R. Meyer, J. Gomez-Ibanez, W.B. Tye, and C. Winston, eds. 
(Washington, D.C.: Brookings Institution Press, 1999). 

[27] See David Lewis and Fred Laurence Williams, Policy and Planning as 
Public Choice: Mass Transit in the United States (Brookfield, VT: 
Ashgate, 1999). See also, Martin J.H. Mogridge, Travel in Towns: Jam 
Yesterday, Jam Today, and Jam Tomorrow? (London, England: The Macmillan 
Press, Ltd., 1990).

[28] See Kaveh V. Vessali, "Land Use Impacts of Rapid Transit: A Review 
of the Empirical Literature," Berkeley Planning Journal 11 (1996).

[29] Washington State DOT, "Highway Construction Cost Comparison 
Survey: Final Report," (April 2002). 

[30] For example, the 7.5 mile Central Artery/Tunnel project may cost 
as much as $14.6 billion, or over $90 million per lane mile, as of 
2002. See Alan Altshuler and David Luberoff, Mega-Projects: The 
Changing Politics of Urban Public Investment (Washington, D.C.: 
Brookings Institution Press, 2003). 

[31] GAO, Mass Transit: Bus Rapid Transit Offers Communities a Flexible 
Mass Transit Option, GAO-03-729T (Washington, D.C.: June 24, 2003). 

[32] For more discussion of these sources of error, see Peter Mackie 
and John Preston, "Twenty-One Sources of Error and Bias in Transport 
Project Appraisal," Transport Policy 5 (1998). 

[33] DOT has not issued standards on the development of forecasting 
models, which generate the data to calculate potential project 
benefits. Thus, localities generally have the latitude to develop their 
own traffic forecasting models, which may lead to varying quality of 
the estimates of future traffic demand. However, DOT officials noted 
that, while the state of modeling is inadequate, the agency does review 
models used to produce measures for the New Starts criteria to ensure 
that the model reflects good practice. 

[34] FTA's New Starts program requires project sponsors to evaluate the 
land-use impacts of their project. However, FTA guidelines suggest 
measurements of the extent of land use that is supportive of the 
transit project, such as new developments occurring near potential 
station locations, but do not suggest methods for valuing the benefits 
that arise from land-use changes. FTA is currently considering changes 
in the New Starts land-use criteria, although there is no time frame 
established for when new criteria may be developed.

[35] "The Rating and Evaluation of New Starts Transit Systems," 
Statement of the Honorable Kenneth M. Mead, Inspector General, U.S. 
Department of Transportation before the Committee on Appropriations, 
Subcommittee on Transportation, Treasury and Independent Agencies, U.S. 
House of Representatives, April 28, 2004. 

[36] One study, using recently developed modeling tools, showed that 
congestion-related benefits of building a light rail line in Cincinnati 
constituted 63 percent of the project's total projected benefits. For 
more detailed information see HLB Decision Economics, Inc., "Moving 
Forward: The Economic and Community Benefits and Investment Value of 
Transportation Options for Greater Cincinnati," prepared for the 
Metropolitan Mobility Alliance (April 2001).

[37] HLB Decision Economics, Inc., in association with ICF Consulting 
and PB Consult, "Economic Study to Establish a Cost-Benefit Framework 
for the Evaluation of Various Types of Transit Investments" (January 
2002). 

[38] For more information on the practical challenges of conducting 
benefit-cost analysis, see GAO, Surface Transportation: Many Factors 
Affect Investment Decisions, GAO-04-744 (Washington, D.C.: June 30, 
2004). 

[39] For a more detailed discussion of transfers and double counting, 
see Herbert Mohring, "Maximizing, Measuring, and Not Double Counting 
Transportation-Improvement Benefits: A Primer on Closed-and Open-
Economy Cost-Benefit Analysis," Transportation Research Part B: 
Methodological, Vol. 27 (1993). 

[40] Anthony Boardman, Aidan Vining, and W.G. Waters, II, "Costs and 
Benefits through Bureaucratic Lenses: Examples of a Highway Project," 
Journal of Policy Analysis and Management, Vol. 12, No. 3 (1993). 

[41] See Robert J. Harmon & Associates, Inc., Westside LRT MAX 
Extension: User Benefit-Cost Analysis (Portland, OR: 1988). See also, 
Russell H. Henk, Daniel E. Morris, and Dennis L. Christiansen, An 
Evaluation of High-Occupancy Vehicle Lanes in Texas, 1994, sponsored by 
the Texas Department of Transportation (College Station, TX: November 
1995). 

[42] OMB, Circular A-94 Guidelines and Discount Rates for Benefit-Cost 
Analysis of Federal Programs (Washington, D.C.: 2002). For a more 
detailed discussion of discount rates see Mark A. Moore, et al, "'Just 
Give Me a Number!' Practical Values for the Social Discount Rate," 
Journal of Policy Analysis and Management, Vol. 23, No. 4 (2004). 

[43] See Patrick DeCorla-Souza, Jerry Everett, Brian Gardner, and 
Michael Culp, "Total cost analysis: An alternative to benefit-cost 
analysis in evaluating transportation alternatives," Transportation 24 
(1997). 

[44] John F. Kain, "The Use of Straw Men in the Economic Evaluation of 
Rail Transport Projects," American Economic Review, Vol. 82, No. 2 (May 
1992). 

[45] HLB Decision Economics, Inc., "Moving Forward." 

[46] For each transit project, these analyses included a cost-
effectiveness ratio for at least one alternative, but the project 
sponsors were not required to choose an alternative based on the most 
favorable cost-effectiveness ratio. However, according to FTA, once 
selected as a locally preferred alternative, a New Starts project must 
go through a rigorous national competition before it is funded. 

[47] This requirement has changed over time. The current cost-
effectiveness measure used by FTA to evaluate candidate New Starts 
projects is defined as incremental cost divided by transportation 
system user benefits.

[48] In general, the federal share for most highway projects is 80 
percent. By statute, the federal share of a New Starts project cannot 
exceed 80 percent of the project's net cost; however, in fiscal year 
2004, FTA instituted a preference policy favoring projects that seek a 
federal New Starts share of no more than 60 percent of the total 
project cost in its recommendations for full-funding grant agreements. 
As a result, the nonfederal share of a New Starts project must be at 
least 40 percent of the total cost for the project to be competitive 
for New Starts funding. 

[49] GAO-04-744.

[50] The NEPA process is designed to ensure that possible adverse 
economic, social, and environmental effects related to any proposed 
project have been fully considered in developing such a project. To 
comply with NEPA, agencies are required to prepare an Environmental 
Impact Statement for large transportation projects, among other things. 
An EIS is a full disclosure document that details the process through 
which a transportation project was developed, includes consideration of 
a range of reasonable alternatives, analyzes the potential impacts 
resulting from the alternatives, and demonstrates compliance with other 
applicable environmental laws and executive orders. The Senate-proposed 
reauthorization bill that was considered by the 108th Congress in 2004 
would require that all project alternatives considered as part of the 
environmental review process meet the stated purpose and need of the 
investment--that is, the transportation objectives or other objectives 
intended to be achieved by the project--and that the alternatives be 
made available for public comment. See S. 1072, 108th Cong. Sec. 
1511(g) (2004).

[51] This relationship holds true, although to a lesser extent, when 
combining responses for the three types of economic analysis. Twenty-
two state departments of transportation ranked at least one of the 
three types of economic analysis as being of very great importance or 
great importance in the decision to recommend a project from among its 
various alternatives.

[52] Flyvbjerg, Holm, and Buhl, "Underestimating Costs in Public Works 
Projects."

[53] Other evaluations of New Starts projects show similar results, 
although the FTA study shows improvements have been made in projections 
of ridership. See Don Pickrell, "Urban Rail Transit Projects: Forecast 
Versus Actual Ridership and Costs," prepared for Office of Grants 
Management, Urban Mass Transportation Administration (October 1990); 
and Jonathan Richmond, "A Whole System Approach to Evaluating Urban 
Transit Investments," Transport Reviews, Vol. 21, No. 2 (2001).

[54] GAO, Transportation Infrastructure: Managing the Costs of Large-
Dollar Highway Projects, GAO/RCED-97-47 (Washington, D.C.: Feb. 27, 
1997). To calculate the cost growth for these 30 projects, we examined 
the initial cost estimates contained in the project's draft 
environmental impact statements.

[55] Robert H. Muller, "Examining Toll Road Feasibility Studies" PW 
Financing (1996).

[56] These projects should not be considered representative of all 
transportation projects but are rather illustrations of experiences 
with specific types of projects. In particular, FTA noted the people-
mover is a unique project; there are only three other people-mover 
projects in the United States. For more information about the projects, 
and the selection methodology we used for our case studies, see 
appendix I.

[57] According to FTA, the full-funding grant agreement is a fixed 
public record of the project sponsor's and FTA's specific objectives 
against which to measure project performance and outcomes.

[58] For more information about FTA's efforts to improve ridership and 
cost estimates, see FTA Administrator Jennifer L. Dorn's testimony 
statement before the U.S. House of Representatives, Committee on 
Appropriations, Subcommittee on Transportation and Treasury, and 
Independent Agencies, Hearing on the Rating and Evaluation of New Fixed 
Guideway Systems (Apr. 28, 2004).

[59] See Pickrell, xiiii; see also, Flyvbjerg, Holm, and Buhl, 279-291. 


[60] One official commented that it may be possible to measure several 
of the outcomes included in table 5 although it is not typically done 
for specific projects.

[61] Harry P. Hatry, Elaine Morley, Shelli B. Rossman, and Joseph S. 
Wholey, "The Managing for Results Series of the IBM Endowment for the 
Business of Government and National Academy of Public Administration," 
How Federal Programs Use Outcome Information: Opportunities for Federal 
Managers (Washington, D.C.: May 2003).

[62] 49 C.F.R., Part 611 (2003). 

[63] Section 3011(g) of the Safe, Accountable, Flexible, and Efficient 
Transportation Equity Act of 2004 (S. 1072), 108TH Congress.

[64] S. 1072 and the Transportation Equity Act: A Legacy for Users 
(H.R. 3550), 108TH Congress.

[65] 23 U.S.C. 145 (2003).

[66] FTA officials noted that this prohibition does not preclude local, 
regional, or state agencies from conducting benefit-cost analysis of 
their New Starts projects. However, FTA officials acknowledged that the 
New Starts evaluation criteria usually set the bar for the type and 
amount of analysis that is performed for New Starts projects. Rather 
than a benefit-cost analysis, the New Starts evaluation process 
requires a project's cost-effectiveness, as defined by FTA, to be 
measured. 

[67] See also, Jianling Li and Martin Wachs, "The Effects of Federal 
Transit Subsidy Policy on Investment Decisions: The Case of San 
Francisco's Geary Corridor," Transportation 31 (2004). 

[68] Fixed-guideway systems use and occupy a separate ROW for the 
exclusive use of public transportation services. They included fixed 
rail, exclusive lanes for buses and other high-occupancy vehicles, and 
other systems.

[69] Bus rapid transit projects are designed to provide major 
improvements in the speed, reliability, and quality of bus service 
through barrier-separated busways, high-occupancy vehicle lanes, or 
reserved lanes or other enhancements on arterial streets. For more 
information about the potential costs and benefits of bus rapid transit 
projects, see GAO-03-729T.

[70] Transportation Research Board, Transportation Agencies Meet Fiscal 
Challenges: The Transportation Research Board's 2003 Field Visit 
Program (Washington, D.C.: Feb. 2004).

[71] GAO-04-802.

[72] TEA-21 requires that metropolitan and state projects that are 
proposed for federal funding address seven criteria including economic 
vitality, safety, accessibility, environment, transportation system 
integration, efficiency, and system preservation.

[73] We also surveyed state DOTs about the analysis of benefits and 
costs of transit projects, and the importance of different factors in 
decision making, for capacity-adding transit projects in their states. 
However, based on the inconsistencies and irregularities of the survey 
responses, low response rate, and telephone conversations with survey 
respondents, we concluded that the information from this survey was not 
sufficiently reliable for our purposes. Therefore, we did not use the 
information from this survey in our analysis or include it in the 
report.

[74] The largest 30 transit agencies were identified based on total 
passenger miles traveled. We later eliminated 2 transit agencies from 
the study population because 1 reported that it was privately owned and 
operated, and the other received no federal funds, making the survey 
population 28 rather than 30 agencies.

[75] Several of the factors we identified during our in-depth 
interviews with state and local transportation officials, such as land-
use changes, were not specifically included in our survey. See appendix 
II for a copy of our survey instrument.

[76] Average annual increases since 1998 reported throughout this 
appendix were calculated using 1998 as a base year. Therefore, the 
figures represent an average of four annual increases. We report annual 
increases since 1998 to show recent trends under current law. We do not 
mean to imply that there is a direct causal link between the enactment 
of TEA-21 and the resulting trends, as many factors have affected the 
level of investment in both highways and transit. 

[77] Also included in highway capital expenditures are highway 
improvements, such as land acquisition and other right-of-way costs, 
and installation of traffic service facilities such as guardrails, 
fencing, signs and signals. 

[78] We previously reported that state and local capital outlays had 
decreased by 4 percent from 1998 to 2002 (see GAO-04-802). Since GAO-
04-802 was released, FHWA has provided us with adjusted data for 2002. 
In addition, the Bureau of Economic Analysis revised their price 
indexes on March 12, 2004, and August 5, 2004. Using the adjusted data, 
the overall percentage decrease in spending from 1998 to 2002 is 3.5 
percent. 

[79] Capital expenditures include funds for design and construction of 
New Starts projects, the modernization of fixed assets--including fixed 
guideway systems (e.g., rail tracks), terminals and stations, as well 
as maintenance and administrative facilities--and the acquisition, 
renovation and repair of rolling stock--which includes buses, rail, 
cars, locomotives, and service vehicles.

[80] U.S. Department of Transportation, 2002 Status of the Nation's 
Highways, Bridges, and Transit: Conditions and Performance, Report to 
Congress (Washington, D.C.: 2002). 

[81] Trucks include single unit 2-axle, 6-tire or more and combination 
trucks. Passenger vehicles include passenger cars and other 2-axle, 4-
tire vehicles. 

[82] Passenger miles traveled are the total number of miles traveled by 
passengers in transit vehicles.

[83] Rail includes automated guideway, Alaska rail, cable car, commuter 
rail, heavy rail, inclined plane, and light rail.

[84] According to the National Transit Database, a jitney is a transit 
mode comprised of passenger cars or vans operating on fixed routes 
(sometimes with minor deviations) as demand warrants without fixed 
schedules or fixed stops. A publico is a transit mode comprised of 
passenger vans or small buses operating with fixed routes but no fixed 
schedules.

[85] The National Transit Database defines commuter rail as a transit 
mode that is an electric or diesel propelled railway for urban 
passenger train service consisting of local short distance travel 
operating between a central city and adjacent suburbs. Heavy rail is 
defined as a transit mode that is an electric railway with the capacity 
for a heavy volume of traffic. It is characterized by high speed and 
rapid acceleration passenger rail cars operating singly or in multicar 
trains on fixed rails, separate rights-of-way (ROW) from which all 
other vehicular and foot traffic are excluded, sophisticated signaling, 
and high platform loading. Light rail is defined as a transit mode that 
typically is an electric railway with a light volume traffic capacity 
compared with heavy rail. It is characterized by passenger rail cars 
operating singly (or in short, usually two-car trains) on fixed rails 
in shared or exclusive ROW, low or high platform loading, and vehicle 
power drawn from an overhead electric line via a trolley or a 
pantograph. 

[86] Highway capacity can be measured by estimating the number of 
highway lane miles that exist across the functional classification 
system. The functional classification of roadways is determined 
according to their primary function: arterials, collectors, and local 
streets.

[87] Urban lane miles increased from 1982 through 2002, while rural 
lane miles decreased. However, a significant percentage of the increase 
in urban lane mileage is the result of functional reclassification. 
FHWA's functional classification system defines areas under 5,000 in 
population as rural; 5,000 to 49,999 in population as small urban; and 
50,000 and over in population as urban. Many previously rural 
communities have grown above 5,000 in population, and thus, their 
existing roads have been reclassified as small urban mileage. Likewise, 
as communities classified as small urban areas have grown above 50,000 
in population, their mileage has been reclassified as urban.

[88] Transit system capacity is measured in capacity-equivalent vehicle 
revenue miles, the distance traveled by a transit vehicle in passenger-
carrying revenue service, adjusted by the carrying capacity of the type 
of transit vehicle. The capacity of a motor bus is used to represent 
the baseline.

[89] For more detailed discussion of travel-time savings, see P.J. 
Mackie, S. Jara-Diaz, A.S. Fowkes, "The value of travel time savings in 
evaluation," Transportation Research Part E 37 (2001); and Jay R. 
Cherlow, "Measuring Values of Travel Time Savings," Journal of Consumer 
Research, Vol. 7 (March 1981).

[90] For monetizing travel time, DOT recommends that analysts use "50 
percent of the wage for all local personal travel regardless of the 
mode employed, 70 percent of the wage for all intercity personal 
travel, and 100 percent of the wage (plus fringe benefits) for all 
local and intercity business travel, including travel by truck drivers… 
In special cases where out-of-vehicle time (access, waiting, and 
transfer time) on transit trips is isolated as an object of analysis, 
the value of 100 percent of the wage is adopted." See "Valuation of 
Travel Time in Economic Analysis," Guidance of U.S. DOT, Office of the 
Secretary, April 9, 1997, and revised February 11, 2003.

[91] Anthony Downs, Stuck in Traffic - Coping with Peak-Hour Traffic 
Congestion (Washington, D.C.: The Brookings Institution, 1992). 

[92] Robert Cervero. "Road Expansion, Urban Growth, and Induced Travel: 
A Path Analysis," Journal of the American Planning Association, Vol. 
69, No. 2 (2003). 

[93] See Lewis and Williams, Policy and Planning as Public Choice and 
Mogridge, Travel in Towns. 

[94] David Brownstone and Kenneth A. Small, "Valuing Time and 
Reliability: Assessing the Evidence from Road Pricing Demonstrations," 
Working Paper (October 2003). 

[95] For benefits resulting from safety improvements, DOT recommends 
that analysts use a threshold value of $3 million per life saved to 
determine if a project is worthwhile. See "Treatment of Value of Life 
and Injuries in Preparing Economic Evaluations," Guidance of U.S. DOT, 
Office of the Secretary, January 8, 1993, and revised January 29, 2002. 


[96] Brian ten Siethoff and Kara M. Kockelman, "Property Values and 
Highway Expansions: An Investigation of Timing, Size, Location, and Use 
Effects," Recommended for Publication in the Transportation Research 
Record. 

[97] Vessali, "Land Use Impacts of Rapid Transit."

[98] See Lewis and Williams, Policy and Planning as Public Choice, for 
more discussion of transit's value to neighborhoods. 

[99] ECONorthwest and Parsons Brinckerhoff Quade & Douglas, Inc., 
Estimating the Benefits and Costs of Public Transit Projects.

[100] Don Pickrell, "Transportation and Land Use," in Essays in 
Transportation Economics and Policy--A Handbook in Honor of John R. 
Meyer, J. Gomez-Ibanez, W.B. Tye, and C. Winston, eds. (Washington, 
D.C.: The Brookings Institution Press, 1999). 

[101] See Chad Shirley and Clifford Winston, "Firm Inventory Behavior 
and the Returns from Highway Infrastructure Investments," Journal of 
Urban Economics 55 (2004). 

[102] Theofanis P. Mamuneas and M. Ishaq Nadiri, "Production, 
Consumption and the Rates of Return to Highway Infrastructure Capital," 
preliminary draft (September 2003). 

[103] Office of Policy Development, Federal Transit Administration, 
U.S. Department of Transportation, Transit Benefits 2000 Working 
Papers: A Public Choice Policy Analysis (Washington, D.C.: 2000). 

[104] U.S. Department of Transportation, Federal Transit 
Administration, Resource Allocation in Rail Transit: Evaluating the 
Balance Between New Capacity and Modernization Investments, final 
report, October 2004. 

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