Sunday, February 21st, 2010

Eye on the TIGER

* Winners and Losers – No Political Bias in Awards – Donor States Lose Again *
* Congress won’t outsource earmarking to Sec. LaHood *

Last week the US DOT unveiled the recipients of its TIGER grant program. This was a pool of $1.5 billion in stimulus funds directly awarded by the federal government to innovative projects of any type based on merit.

Looking at the project list, it looks like the DOT did an absolutely first rate job of picking winners. The projects I know personally such as CREATE, the Indianapolis Cultural Trail, and the Madison-Milton Bridge replacement are all critically needed and these awards have me excited.

The grants were heavily weighted to rail and transit projects, with highways getting a comparatively small piece of the pie in comparison to how federal transportation funds are typically allocated. And therein lies the problem as far as future programs of this nature go.

You can’t compare apples and oranges. Trying to compare projects in radically different modes such that you can select winners based on “merit” is inherently difficult. The only real way to do it is based on benefit/cost, NPV, ROI, or some other financial metric. But the DOT is explicitly moving away from these traditional measures, as evidenced by the recent decision to eliminate a financial hurdle rate for new start transit projects.

So how then do you decide? One of the evaluation criteria was “enhancing community livability”. But I’m not aware of any objective way to measure that.

Ultimately, the projects had to be chosen using the professional judgment of the team doing the evaluation. It should be no surprise that the list reflects the political priority the Obama administration has put on rail and other matters. If you leave the decision process up to the executive branch, what else can you expect? That’s why America elected President Obama in the first place.

In effect, the TIGER grant program outsourced earmarking of $1.5 billion dollars for specific projects to the executive branch. While I’d argue that Sec. LaHood did a far better job at this than Congress ever has, I can’t imagine that the legislative branch is going to be willing to give up that prerogative again the future. Even this only happened in the harried environment around the passage of the stimulus. Indeed, I already read that there is skepticism about future TIGER grant like programs in Congress. Also, because of the heavy focus on rail and such over highways, Congress is likely to view this as yet another alternative transportation program.

I hope I’m wrong because I like a lot of the results and the generally high quality of projects. But I’m not holding my breath for another round. I’d expect DOT discretionary decision making to retreat to those areas within modes where it has been traditional.

With that, let’s have some fun looking at the projects.

Winners and Losers

Most discussion to date about winners and losers has been based on the total dollar value of the projects awarded. While that’s one way to look at it, our states are radically different in size. I prefer a per capita metric as the best way to look at it. For example, New York City received $83 million for Moynihan Station, one of the largest grants. But New York state is big, and actually received less per capita than the national average.

Based on per capita awards, here are the top twenty winners:

Of course, plenty of states lost too. In particularly, eight states received no money. These were Connecticut, Delaware, Florida, Georgia, Nebraska, New Hampshire, North Dakota, and Utah.

Of course, this is only one way to slice it. Some states might prefer taking a per square mile view, for example.

A full list of states and their awards is below.

The Red and the Blue

Over the last year I’ve read various vague allegations by Republicans about stimulus funds going to pro-President Obama areas or car dealers who donated to Republicans being disproportionately targeted for closure during the GM and Chrysler bankruptcy and other such things. Since hard data was readily available on the TIGER grants, I decided to look at the percentage of grants that went to red states and blue states from the last presidential election.

The TIGER grants were almost perfectly balanced between red state and blue. In fact, red states actually received a slightly higher percentage of the grants. Red states received $5.16 per capita and blue states $4.75 per capita. That’s probably about as close to 50/50 as you can get with this sort of program. Notable red states like Texas ($1.74) were below average, but so were New York ($4.25), California ($3.52), and Connecticut ($0). The administration appears to have been scrupulously fair here.

Urban vs. Rural

I recently wrote about the persistent anti-urban bias in transportation spending. State governments routinely spend disproportionate amounts of transportation funds on rural projects to the detriment of cities.

The TIGER grants showed the almost opposite allocation. Only 16% of funds went to rural areas, while 84% went to metropolitan areas. The Brookings Institution tracks the largest 100 metro areas in the country through their Metropolitan Policy Program and they found a similar result. They found that 70% of TIGER grants went to the top 100 metro areas compared to only 59% of stimulus funds through other programs, which were largely allocated by states. The ability to allocate funds to critical transportation projects in urban areas, often ones of national importance, aligned with return on investment, population, economic activity, and other metrics is a win for the TIGER. It shows perhaps that if more project funding decisions are made at the federal level, we might see the shift we need.

I further classified the TIGER projects as to urban (those within a core city of a metro area), suburban (those located anywhere else inside a metro area), and rural (all other projects).

This is even better news for urban advocates. Over half the money went to core cities.

Donor State Blues

One of the hot topics in federal transportation planning circles is the percentage of federal gas tax revenues that are collected in a state vs. the money sent back in the form of transportation grants. A majority of the states adding up to almost 80% of the population get back less than they contribute, making them so-called “donor” states. Obviously that doesn’t sit well with them. If you look at some of the states that get more than their tax contributions back, some of them are geographically large states with low populations like Montana that intuitively make sense. But there’s a significant pocket of states in the northeast like New York and Pennsylvania that also get more back than they put in (in transportation funding specifically, that is).

Since TIGER grants were awarded on a discretionary basis based on merit, not funding formulas, in theory it should not have followed the traditional donor/donee state allocation – but it did. The pattern of donor and donee states held up in the TIGER awards. States that were donor states in the regular funding formula received $4.60 per capita, while donee states received $5.87 – a 28% edge. If you take the national average as 100%, donor states received on average 94% of that, which is only two percentage points higher than the 92% minimum guarantee under traditional funding formulas.

A La Mode

The DOT had a big focus on multi-modalism in the TIGER program, which makes sorting the dollars by mode difficult. Some folks like Reconnecting America simply classified some spending as “multi-modal”.

I decided to take a cut at assigning each project to what appeared to be its principal mode. This, and the assignment to urban/suburban/rural areas, involved a lot of judgment since the project list I had didn’t give sufficient information to authoritatively sort it. Full data is at the bottom so you can critique or adjust as you desire.

As you can see, transit and rail got more than their usual share, while roads got less.

I am actually somewhat troubled by the freight rail grants. Most of these are going to projects on privately owned railroads. While some projects like short line improvements in West Virginia might deserve some subsidy, other spending is going to the core infrastructure of major Class I railroads. CREATE is one example. Grade separating a UP/BNSF line coming out of the ports in the LA area is another.

These projects do have big benefits to the US economy. But they also have enormous benefits to the rail carriers. These are some of the most critical piece of infrastructure in their systems. Why would these profitable companies not pay to improve them themselves? I believe we have sent a terrible message to these companies that if they simply refuse to fix major freight bottlenecks, eventually the government will pick up the tab for them. We’re creating an incentive for bad behavior.

BNSF is being bought by Warren Buffett’s company. Why should American taxpayers be subsidizing Warren Buffett? Especially when there is so much bona fide public infrastructure needing investment in America, I don’t think these are the kind of grants we should be making going forward. After programs like CREATE wind down, we should draw a clear line under this.

Data and Analysis

A full list of TIGER projects with all of my codings and analysis is available for download in Open Office format or Microsoft Excel format. This should enable you to change my codings if you desire to create your own slices. What’s more, it should be straightforward to extend this to any number of additional coding types, so should make a useful tool for further analysis. It’s certainly possible I made errors, so please mail any corrections to arenn@urbanophile.com.

Other Coverage

The TIGER program received quite a bit of media coverage. Here are what some other folks had to say:

TIGER’s Tale and Lessons for Stimulus Spending (TNR/Brookings)
TIGER Grants: Which States Were the Big Winners? (Infrastructurist)
Rail and Transit Benefit, Highways Lose Out in TIGER Grant Distribution (Transport Politic)
Who Lost Out in the Bid for a Piece of TIGER Stimulus? (Streetsblog)
Rounding Up More TIGER Coverage (Streetsblog)

9 Comments
Topics: Transportation

9 Responses to “Eye on the TIGER”

  1. david vartanoff says:

    about grants to the Class one freight RRs. What the Feds neglected was to add language mandating Amtrak access to the routes benefiting as a condition. Note that in a recent case, Union Pacific refused the money rather than accede to state of California passenger access conditions. In upstate NY CSX refused to let the Feds/ATK/NYS restore a second main line needed to telieve a choke point for ATK/NYS funded trains because CSX wanted a sweetheart tax deal. These RRs need to be more cooperative. (written as a tiny shareholder in several)

  2. Wad says:

    Some alternate ways of funding to explore are an infrastructure bank or opt-out-and-audit.

    Congress will not much like either choice, as it leaves legislators out of the loop from influencing the process. (Like it or hate it, that is the raison d’etre for legislators.)

    An infrastructure bank could take many forms, and policymakers are trying to develop a U.S. format.

    The second format, opt-out-and-audit, would be for a local or state agency to enter into a compact with the federal government to agree to spend the same or greater amount of money on a public good without having to pass the money through federally.

    The compact is a contract, so one condition would be for the agent to not only meet the terms of the deal but also to document and audit the findings.

    Theoretically, let’s say Indianapolis receives $100 million from the federal government for funding capital and operations of IndyGo.

    Local and state leaders approach your senators and representatives to work out an agreement that IndyGo would forgo federal funding if the money that would go to the feds stays within Indiana and is levied within the state.

    It’s not a tax increase or decrease. The money is revenue-neutral. Indiana agrees to fund IndyGo for the equivalent amount it gets from the federal government, and will produce documentation to show the funds are being spent in the right place.

    But then what would be gained? Well, locally, the money can be spent more flexibly. The cost of vehicles would come down, as buses and train cars would not have to be purchased and run by FTA life-cycle standards. Also, less of the money is lost through bureaucratic overhead and can be spent directly on services.

  3. Alon Levy says:

    The standard answer to your question about freight rail is, it’s no different from how Interstate investment subsidizes trucks.

    But in reality, US freight rail is about as independent as the defense industry. Nominally it’s private, and the profits go to shareholders, but there’s a huge body of industry-specific regulations, special laws such as the rule forbidding states from using eminent domain on railroad property, and a history of collusion with government. Conversely, the local governments view the railroads as a source of windfall revenue, much like federal land or military pork.

  4. BeyondDC says:

    It is NOT NOT NOT true that DOT “eliminated a financial hurdle rate for new start transit projects”. This is what actually happened:

    1. Congress enacted legislation adopting a scoring system for justification of New Starts applications. The scoring system was broken down like so:
    20% economic development
    20% mobility improvements
    10% environmental benefits
    10% operating efficiencies
    20% time savings cost effectiveness
    20% land use benefits

    2. Ignoring the adopted law, the Bush administration issued an order that all ratings be ignored except time savings cost effectiveness. In effect, changing the above list to:
    0% economic development
    0% mobility improvements
    0% environmental benefits
    0% operating efficiencies
    100% time savings cost effectiveness
    0% land use benefits
    This was at best legally questionable, but no one challenged it.

    3. The Obama administration reversed the Bush order and reverted to the original law, where time savings cost effectiveness is 20% of the foruma.

    So it important to note two key facts:

    A) The “cost effectiveness” guideline was NEVER a valid measurement of cost effectiveness. The ONLY benefit it measures is travel time savings.

    B) It has NOT been eliminated, but merely adjusted to be 1/5 the formula.

    You don’t have to take my word for this. HERE is an FTA briefing on the subject.

  5. I read that document. It doesn’t appear I got it wrong. If you reduce the cost effectiveness components to 20% from 100%, then you are moving away from financial criteria. Also, if you move from requiring a “medium” for cost effectiveness to requiring only a “medium” overall score, you are eliminating a financial hurdle rate. Given the comparatively low percentage of the overall score that cost-effectiveness comprises, it isn’t hard to imaging that projects with very poor cost effectiveness could nevertheless achieve a medium overall score.

    Whether this change is good or bad is a separate matter, but that doesn’t change what actually happened.

  6. Alon Levy says:

    Time saving is just one component of cost effectiveness. Environmental benefits, operating efficiencies, and mobility improvements are just as objective as financial criteria. It’s land use and economic development that are fuzzier, though even they could in principle be made more objective.

  7. Jennifer says:

    I’m happy for the projects that got the grant money, and I’m happy with the general trends shown by the grant awards. I just wish St. Louis had gotten some of the cash, because we put in some pretty interesting and different projects, and there will be no local funds for these kinds of things for a while, I think, until some examples can get off the ground funded by federal dollars.

    For instance, there was very little support for light rail in St. Louis when the first light rail alignment opened; it was built on the cheap, through donated rail ROW and 75% on the federal dime. But now that it’s here, people love it, use it, and want more of it all over the region. I think TODs and bus & pedestrian improvements would get the same reception, but only after people have a chance to see it in action. This is, after all, the Show-Me State.

  8. Alex B. says:

    Aaron, your exact language references the recent change to “eliminate a financial hurdle rate.” De-emphasis is not elimination.

    The other factor, of course, is that the FTA’s cost-effectiveness index was a poor measure to begin with – it had an unnecessarily broad definition of costs and didn’t allow for local governments to pay for add-ons on their own dime, and it had an even worse definition of ‘effectiveness,’ as BeyondDC notes above.

    Quantitative metrics are great, but we run into massive problems when we do not recognize the limits of those measurements and adjust the weight accordingly.

  9. the urban politician says:

    Thanks for all of the info and tables, Aaron.

    I for one agree with you that, unfortunately, these TIGER grants are a mere blip in the radar and that, in the future, we will probably be returning to the ‘business as usual’ kind of spending that prefers highways over rail, and rural over urban areas.

    Regarding your concerns about freight rail, I also agree, but it extends beyond rail. Not only is government picking up the tab to improve privately-owned freight rail infrastructure, it has already been doing so with the nation’s air traffic infrastructure. For example, American and United Airlines are in a dispute with the city of Chicago over who will pay for certain aspects of OHare’s future expansion, and more than likely the brunt of the cost will continue to fall on the city taxpayer, despite the fact that these two airlines will benefit most from the expansion.

    All that said, the only way I can justify spending taxpayer money to improve privately owned freight railroads is through the side benefit of improving taxpayer-run passenger rail. I can’t speak to the project in the Southeast, but when completed, CREATE is supposed to significantly reduce delays on both Amtrak and Metra.

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