Conditions and Performance Report

Conditions and Performance Report
Chapter 8—Comparison of Spending and Investment Requirements

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Introduction

Summary

Highway and Bridge Spending Versus Investment Requirements

Transit Capital Spending Versus Investment Requirements

Investment Requirements Versus Projected 1998-2003 Spending

As is the case with highway funding, TEA-21 substantially increases the authorized funding levels for Federal Transit Administration programs relative to the past levels of Federal assistance. It is there-fore useful to compare the projected transit capital funding levels over the period of the TEA-21 authorization, 1998-2003, to the investment requirements estimated by TERM.

Exhibit 8-11 shows projected transit capital funding levels for 1998-2003 (see sidebar for an explanation of how these levels were computed). Transit capital spending is expected to grow well in excess of the rate of inflation throughout the period, with an especially large increase in the 1999 fiscal year. The expected inflation rates are projections of the Consumer Price Index used in the Federal budgeting process.

Exhibit 8-11. Projected Transit Capital Expenditures 1998-2003, All Levels of Government

Exhibit 8-12 compares projected cumulative average annual funding levels for 1998-2003 to the average annual investment requirements for both the Maintain Conditions and Performance and Improve Conditions and Performance scenarios. The considerable bump in projected capital expenditures has a corresponding effect in lowering the investment gap. By 2003, transit capital spending is projected to reach $10.8 billion in constant 1997 dollars, matching the average annual investment required to maintain conditions and performance. However, over the full six-year period 1998-2003, projected average annual capital expenditures would rise only to $9.5 billion from $7.6 billion in 1997. Average annual spending would need to increase an additional 12.9 percent to reach the level of the average annual investment requirements under the maintain scenario. Six-year spending would need to increase 68.3 percent above projected levels to reach the level of the improve scenario.

Exhibit 8-12. Projected Capital Expenditures Versus Investment Requirements, 1998-2003


Q How were the projected transit capital expenditures for the period 1998-2003 calculated?
A TEA-21 includes guaranteed funding level caps for all Federal Transit Administration programs. Three of these programs, the Section 5308 Clean Fuels Formula Grant Program, the Section 5309 Capital program and the Section 5310 Formula Program (Elderly and Individuals With Disabilities) are exclusively for capital needs (see 49 U.S.C. 5308, 5309, 5310). Two others, the Section 5307 Urbanized Area and 5311 Nonurbanized Area Formula Programs, are used for both capital and operating expenses (see 49 U.S.C. 5307, 5311). To estimate Federal capital funding for each year, the guaranteed funding levels for Sections 5308, 5309, and 5310 funding were added to the capital share of the guaranteed funding levels for Sections 5307 and 5311. These shares were based on the capital shares of the 1998 obligations made for these two programs. This method provides a reasonable upper bound on what Federal capital expenditures are expected under TEA-21. Unlike FHWA, FTA has no model for forecasting State and local transit capital expenditures. In 1997, the Federal share of capital spending was 54 percent (Exhibit 6-24), which represented an increase from recent years, when the share was slightly below one-half. While it is possible that State and local governments may decrease their matching of Federal capital funds as those funds increase substantially, there is no way to clearly predict how much "crowding out" of State and local funds there will be. Therefore, it was assumed that State and local governments would match the increased Federal funding levels at a 1:1 ratio, approximating recent experience. These calculations yielded the projected amounts shown in Exhibits 8-11 and 8-12.

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