“Paint is Cheaper Than Rails”: Why Congress Should Abolish New Starts

COST Commentary: The title of this posting if the title of a ‘Policy Analysis Paper’ written by Randal O’Toole, senior fellow with the Cato Institute. The paper’s opening sections of executive summary and introduction are below followed by the last section, Can New Starts Be Fixed?</ The full paper can be found at the Cato site referenced at the end of this commentary.

O’Toole’s paper is primarily directed to the U.S. Governments role in encouraging wasteful spending of local government taxpayer dollars on ineffective rail transit by partial funding of rail systems through the “New Starts” program. The paper ends with his recommendations for “fixing” New Starts. (See last section below)

In developing his major recommendations regarding the New Starts program, O’Toole effectively addresses all major aspects of rail transit, including: Mobility, Congestion, Environmental Benefits, Cost-Effectiveness, Operating Efficiencies and Economic Development. In each case, he convincingly develops factual based analyses which strongly contradict the often expressed justifications and perspectives of those supporting rail transit.

The full paper can be accessed by clicking here: Paint is Cheaper Than Rails

Cato Institute, Policy Analysis No. 727

‘Paint Is Cheaper Than Rails’: Why Congress Should Abolish New Starts

By Randal O’Toole, June 19, 2013

Executive Summary

The New Starts program has proven a failure and gives transit agencies incentives to build overly costly systems. Congress created the program in 1991, directing the Federal Transit Administration to ensure each grant be “justified based on a comprehensive review of its mobility improvements, environmental benefits, cost effectiveness, and operating efficiencies.” In 2012, Congress added “congestion relief” and “economic development effects” to this list, but dropped “operating efficiencies.” By any of these criteria, the program should be abolished. Here’s why:

• Many New Starts projects reduce transit mobility because transit agencies sacrifice bus service to low-income neighborhoods, where such mobility is needed, in order to deliver rail transit to middle-income neighborhoods, where such mobility is merely an amenity.

• Planning documents for many New Starts projects predict that they will increase congestion by taking up more roadway space, disrupting traffic signal coordination, or increasing queues at park-and-ride stations.

• Planning documents often admit new rail lines will use more energy and generate more air pollution than the cars they take off the road. Other plans do not account for increasing automobile energy efficiencies or the effects of congestion on energy consumption and air pollution.

• The Bush administration attempted to use the cost-effectiveness requirement to place an upper limit on project costs, but the transit lobby has persuaded the Obama administration and Congress to effectively eliminate this criterion altogether.

• Numerous projects are far from operationally efficient because they increase operating costs without improving transit service. The transit lobby persuaded Congress to drop this criterion in 2012.

• Claims that rail transit promotes economic development are contradicted by the FTA’s own research.

Urban transit funds should come from local, not federal, taxpayers. Until Congress is ready to stop funding transit, it should abolish New Starts and distribute all transit funds using formulas, the way most funds for highways and buses are distributed today. This would reduce, if not eliminate, incentives for transit agencies to build high-cost systems when low-cost systems would work just as well.


In a 2010 speech, Federal Transit Admin- istration (FTA) Administrator Peter Rogoff chastised transit agencies for promoting construction of so many new rail lines. On one hand, Rogoff pointed out, agencies were unable to maintain the rail lines they already had: the FTA had recently estimated that rail transit systems suffered from close to a $60 billion maintenance backlog and that the backlog was growing because of inadequate spending on maintenance. “If you can’t afford to operate the system you have,” Rogoff asked agencies who were applying for federal grants to build new rail lines, “why does it make sense for us to partner in your expansion?”(1)

On the other hand, Rogoff noted that, in many cases, buses work as well as trains at a far lower cost. “Paint is cheap, rail systems are extremely expensive,” he said. In response to those who claim that rail cars attracted more riders than buses, Rogoff pointed out, “you can entice even diehard rail riders onto a bus, if you call it a ‘special’ bus and just paint it a different color than the rest of the fleet.”
Despite this, Rogoff worried, too many cities were planning “shiny new rails” without being “mindful of the [maintenance] costs they are teeing up for future generations.” While buses don’t work in every situation, he argued, bus rapid transit “is a fine fit for a lot more communities than are seriously considering it.”

What Rogoff failed to acknowledge was that the emphasis on expensive rail systems in so many cities is almost entirely due to the incentives that his own agency gives, with the complicity of Congress, to transit agencies. The FTA awards large grants to transit agencies that emphasize the most costly forms of transit and offers only tiny grants to those agencies that emphasize the most efficient forms of transit. It has built this incentive system around a program Congress created in 1991 called New Starts, which provides matching funds for new transit infrastructure such as rail lines and exclusive bus lanes.

This paper will show that New Starts has effectively given transit agencies incentives to select the costliest, rather than the most cost-effective, alternative to any transit problem. This usually means building new rail transit lines, but can also mean building exclusive bus lanes for bus rapid transit.
The Body of the paper can be accessed by clicking here: Paint is Cheaper Than Rails

Can New Starts Be Fixed?

Some people might review the data and case studies presented in this paper and conclude that New Starts could work if only Congress established firm cost-effectiveness and other requirements; the FTA strictly enforced those requirements; and transit agencies did not cook the books in order to avoid meeting those requirements. But the real lesson should be that the incentives to get federal dollars are greater than any bu- reaucratic safeguards or the implicit obliga tion for public officials to guard the public purse.

Technologically, the notion of dedicating expensive fixed guideways to small numbers of transit riders is moving in the wrong direction. The fastest-growing segment of the transportation industry is intercity bus, which is growing rapidly by shedding infrastructure such as stations and baggage handling facilities and relying instead on shared infrastructure. (67) This, of course, was the trend in most of the transit industry before Congress started giving incentives to transit agencies to build expensive rail systems. Rather than spending large amounts of money on high-cost systems, transit agen cies should experiment with shared taxis, van pooling, and similar low-cost systems.

In sum, New Starts should be abolished for four reasons.

1. It gives transit agencies incentives to choose high-cost transit systems when other systems are far more cost-effective.

2. Both the FTA and Congress have aided and abetted this waste, which suggests that it can’t be fixed by tinkering with the grant standards.

3. The transit agencies themselves proj- ect that those high-cost transit systems often increase congestion, energy consumption, and air pollution, and even when they don’t, there are other, more cost-effective ways of treating those problems.

4. The example of Las Vegas shows that low-cost transit systems can do far better at providing transit mobility at a far lower cost to taxpayers.

There is in fact little justification for fed- eral funding for urban transit at all. Short of abolishing transit subsidies entirely, Con- gress should end New Starts and distribute all federal transportation funds on a for- mula basis, the way funds are currently dis- tributed for highways and most bus transit. This will minimize the incentives to waste such funds

1. All Rogoff quotes are from Peter Rogoff, “Next Stop: A National Summit on the Future of Transit,” presentation at the Federal Reserve Bank of Boston, May 18, 2010, tinyurl.com/7v6e8aq.

67. Randal O’Toole, “Intercity Buses: The Forgotten Mode,” Cato Institute Policy Analysis no. 680, June 29, 2011, pp. 2–3.

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