Via Ezra Klein, it seems that yesterday Ray LaHood announced an important change to how the government will evaluate proposals for federal financial support for “New Starts” mass transit proposals. Unfortunately, the MSM’s coverage of this isn’t incredibly clear. Thankfully, we have Elana Schor for that:
The first move: LaHood’s DOT will rescind a 2005 rule that elevated “cost-effectiveness” above all other criteria used to determine whether a local transit project can receive federal funds. Cost remains a factor in the “New Starts” process, but is no longer given more weight than factors such as congestion relief. [...]
The second of the Obama administration’s moves: Environmental and economic benefits will become official factors in evaluating “New Starts” proposals. This change requires a rulemaking by the Federal Transit Administration (FTA), which typically includes a period of public comment, so will not take effect immediately.
It’s worth being clear on what this does and doesn’t mean. Some of the coverage I’ve seen seems to imply that this means we’ll see more mass transit projects. It probably doesn’t actually mean that since as Steven Lee Davis points out the rule change doesn’t actually increase the quantity of money available:
Of course, the one problem that this will not fix is the very high demand for a limited supply of New Starts funding. Even under the old narrow rules for winning approval, only a small percentage of the many applicants were receiving limited funding, and even then, the federal government was only matching about half of local funds, compared with at least 80 percent for road projects.
That’s not a criticism of the new rule, this simply isn’t the appropriate vehicle to make more funding available. We should, however, make more funding available.
What this does do is make the program evaluation process more technically sound. Doing a cost-benefit analysis for different proposals that only considers the direct financial costs is just a mistake. When evaluating a transportation proposal you have to consider the environmental and traffic congestion externalities, as well as the possible broader economic and community benefits. The practical impact of this ought to be, by my guess, fewer “park and ride” type projects, and more projects designed to facilitate transit-oriented development. It could also result in more densely packed station construction so as to serve more people, albeit slowing down suburban commutes somewhat.
Aren’t you glad you have a know-nothing logician on hand to break this down?
Further clarification. The point isn’t that cost is irrelevant. The point is that if Project A will move 10,000 people and costs $1,000 and Project B will move 9,500 people and costs $1,000 but also has substantial environmental or economic or congestion benefits, you can give the money to Project B instead. Right now the sole consideration is the price-per-person, in the future that will be one consideration out of several, which is how it should be.