Experts Talk: Transit Capital Investment Grant Funding With Stephanie McVey

Experts Talk is an interview series with technical leaders from across our transportation program. 

How to Prepare and Successfully Compete for Major U.S. Transit Grants

The Federal Transit Administration’s Capital Investment Grants program allocates more than $4.5 billion a year to investments in heavy rail, commuter rail, light rail, streetcars and bus rapid transit. Competition is high to secure these discretionary funds, with more eligible projects than available funding. U.S. transit agencies interested in tapping this source of funds should begin with a thorough knowledge of the program, its requirements and what will be expected of them.

With more than 20 years of transit experience, Stephanie McVey is an expert at delivering successful projects with FTA funding. She most recently helped advance the first phase of Austin Transit Partnership’s Project Connect light rail program into Project Development and advanced to achieve a medium-high rating. Before joining HDR in 2009, Stephanie was a community planner with FTA’s Office of Planning Methods in Washington, D.C., where she evaluated Very Small, Small and New Starts projects. In this interview, she explains the Capital Investment Grants, or CIG, program, shares insights on what can help create successful applications, discusses the timeline of projects and describes the biggest hurdles for agencies pursuing these grants.

Transit Capital Investment Grant Funding

Q. What are the basics of this program and its components?

A. While the overall federal program is referred to as the Capital Investment Grant (CIG) program, there are three main project categories that comprise it:

• New Starts: Projects qualify if they are new fixed guideway rail or BRT systems, or an extension of a current system. These grants are for projects whose total cost exceeds $400 million or that are seeking New Starts funding of more than $150 million.
• Small Starts: A smaller version of New Starts, the same project types qualify, but the total project cost is less than $400 million, and total Small Starts funding sought is less than $150 million. In addition, corridor-based BRT systems that mostly emulate rail service delivery, those not using a separated right of way, are eligible for this category.
• Core Capacity: This category funds corridor-based investments in existing fixed guideway systems. To qualify, projects must be in a corridor that is at capacity or will be within the next 10 years. And the project itself must increase that capacity by at least 10%.

Q. How can agencies benefit from consulting CIG funding specialists?

A. While the statutory requirements of the program are spelled out in legislation, the program can and does change over time. Agencies that received a grant in the past may find that the process is markedly different than they remember. Experts in the process who work on grants across the nation are up to date on changes as well as nimble and flexible when it comes to new revisions.

In addition, those more familiar with the program understand its practical as well as statutory limits. For example, the federal statute states that FTA can pay up to 60% of the cost of a project seeking a New Starts or Core Capacity grant. But in practice in recent years, FTA grant awards have been closer to half of project cost, some less than 50%. Understanding norms such as these can help dramatically in planning and budgeting.

Since 2011, HDR has supported 40 CIG projects totalling more than $11.6 billion in federal funding — including 17 New Starts projects, 21 Small Starts projects and two Core Capacity projects. With fewer than 10 grants a year awarded and more than 2,000 transit systems in the U.S., experience and know-how on the CIG program can vary considerably among agencies. Staff turnover, the time interval since an agency’s last major project, staff experience and other factors can impact chances of receiving an award.

Agencies with limited knowledge about the CIG program can benefit from talking with counterparts at other agencies that have pursued grants. They can also benefit from seeking the assistance of consultants who’ve gone through the process with multiple agency clients and can give guidance and advice and help assemble the required FTA documentation.

Q. What is the FTA looking for in successful grant applications?

A. Many factors go into the FTA recommendation for any grant award, including the overall readiness of the project for capital funding, geographic balance of grant awards, the amount of committed funds available as local match and a project’s overall rating. Each project seeking funds must provide technical information that responds to six project justification criteria:

• Environmental benefits — dollar value of anticipated direct and indirect benefits to human health, safety, energy and the air quality environment
• Congestion relief — number of new weekday linked transit trips resulting from implementation of the project
• Land use — quantitative examination of existing corridor and station area development
• Economic development — qualitative examination of proposed project’s likelihood to induce additional, transit-supportive development based on existing local plans and policies
• Cost effectiveness — annualised capital cost plus operating and maintenance cost per trip on the project
• Mobility improvements — total number of linked trips using the project, with a weight of two assigned to passenger trips that would be made by transit dependent persons

The FTA also has a set of financial criteria that projects must meet, showing “evidence of stable and dependable financial sources.” Applicants must first explain how they're going to fund the delivery and construction of the project for which a grant is being sought. In most cases, the FTA also requires a 20-year financial plan that demonstrates how the transit agency will successfully operate and maintain the new project(s), as well as any base system that might already be in service. This is an area where HDR’s financial experts have excelled in helping our clients. We have helped agencies across the U.S. with their 20-year operating plans, working in close collaboration with their financial, operations and maintenance lead staff. 

Q. What parts of the grant application process tend to be most difficult or time-consuming for agencies?

A. Three major parts of the process stand out as the most challenging. First, agencies need to have their financial houses in order. That includes having commitments to pay for the new project and a plan that shows existing operations will not be negatively impacted. Most often, the local dollars are not provided solely by the transit agency, and typically, there are multiple non-federal funding partners that need to make hard financial commitments for their contribution share. Securing board or legislative action to solidify these funding commitments adds time and uncertainty to the process.

Second is the need to negotiate agreements — in some cases, fairly complicated ones — with third parties like utilities or the municipalities that the project will pass through. Some projects I've worked on have required agreements with Class I freight railroads that a project will cross over or under or parallel. Patience and fortitude are often required to negotiate agreements with all of these entities so the project can move forward and is ready for construction.

Lastly, the FTA requires an evaluation of not only the financial health of project sponsors, but the breadth and experience of their management with large capital projects. The FTA wants to confirm the project sponsor has the capacity and the capability to take on this new project. This can be challenging for agencies who may be adding a new mode of transit to their service offerings that requires different technical skills to construct, operate and maintain.  Do they have a sufficient number of staff to ultimately manage the construction? Once constructed, do they have adequate in-house or contract staff to operate and maintain the project? This is often an area where agencies rely on consultants to deliver their projects, particularly for program and/or construction management of a project.

Q. Early preparation can make a big difference in applications. What does that preparation look like?

A. Before presenting a request to the FTA to enter the CIG pipeline, a project sponsor should complete three steps to best position a project.

First, conduct early planning and engineering in the project corridor with robust community engagement. This requires 5-10% engineering to confirm the project is physically viable in the corridor and will generate the community benefits expected by the FTA justification criteria.

Second, the FTA wants some confidence that this project has the state and local support to succeed, and so they look to see if the state and local stakeholders are in alignment. Those stakeholders are not merely governmental agencies and regulators, but also community and business groups, major institutions (academia, health care, etc.) and directly affected third parties. General consensus should be achieved on the project parameters and plan. If the preferred plan prescribes an 8-mile system and 15 stations, there should not be a critical stakeholder saying, “Well, that’s OK, but the only plan we’ll support is 10 miles and 17 stations.”

Soon after a project is approved to enter the Project Development phase, the FTA expects the lead agency will request the metropolitan planning organisation to formally adopt the locally preferred alternative into their long-range transportation plan. It can take some time to make sure that all of the stakeholders have the same vision and are in agreement as to what this project ultimately is going to look like.  This phase also requires the environmental review be conducted in concert with FTA to identify impacts and develop mitigation actions where necessary.

Third, it is always beneficial to present the project scope and justification to FTA regional and headquarters staff early in the process. This important communication step will clarify the project definition and the resulting benefits that the FTA will expect to review as the project moves along.

Even after a project is initially approved to enter the CIG pipeline, it might need to be presented to new leaders to re-secure its base of support. These are complex, multi-year projects and in some cases, the officials who championed the project initially retire or don’t get re-elected or re-appointed. This can create a need to re-anchor and re-educate some of the stakeholders as a project advances through the phases of the CIG program.

Q. Is there a cycle by which grants are awarded? What schedule should agencies expect? What about timing beyond the initial FTA approval?

A. Traditionally, yes, there is an annual cycle. However, the FTA will accept applications for these CIG projects at any time. The FTA has historically set its own rhythm for these projects because they're driven by the development of each annual federal budget. That budget typically comes out in the first half of February, except for years in which a new administration is transitioning.

Backing up from that budget, the FTA typically asks for all of the data such as project rating, project justification and project financials at the end of the previous August.  From that submittal, they go through their internal review, conduct their analysis and rate the projects in the FTA Annual CIG Report. The CIG Report is one of many detailed agency reports that are ultimately incorporated into the president's budget request for the following federal fiscal year.

On a wider scale, project backers can expect a long road. Each project has its own characteristics and opportunities, but grant seekers can almost universally expect to be working on these for many years. Generally speaking, once approved to enter project development, under current law, that's a two-year commitment. Next is the engineering phase, which typically takes two to three more years. With HDR’s experience with the CIG program, we know what FTA expects and can minimise the duration of grant readiness prior to the CIG grant.

Then, once an agency has completed project development and engineering, it then secures the grants to build the project. Depending on the scope of the project, this construction usually takes another three, four or more years.

So, from the start of the FTA saying, “Yes, this project has merit and yes, we will partner with you to bring it through to implementation,” it can be upward of seven or eight years to ribbon cutting.

Q. How can agencies position their projects to remain competitive as the CIG program and federal priorities continue to evolve?  

A. A heightened level of uncertainty around future program authorisation and how federal funding may be administered can affect funding reliability, project timelines, risk allocation and administrative requirements. Projects grounded in realistic assumptions and able to adapt are better positioned to move forward.  

Agencies should build flexibility into their projects early, as evaluation criteria and delivery expectations can shift. Maintaining strong communication with FTA staff can help agencies understand those shifts and strengthen their project narrative.  

It is also critical to demonstrate financial resilience, including the ability to manage delays, changes in funding flow and increased compliance requirements. As projects advance, agencies should expect to revisit and refine elements while maintaining a clear, consistent vision.

A. I find it gratifying to support agencies at the beginning of their CIG journey, particularly those who may be new to the process or are returning after a number of years away. As we discussed above, positioning a project to enter the CIG pipeline and to advance a project through the evaluation and readiness process requires education and the development of a strategic vision across all departments of an agency. I enjoy working with project sponsors to develop that in-depth understanding of the process and then developing a competitive strategy so that their project best aligns with the current evaluation framework.

Q. What advice do you have for someone just starting out in transit?

A. Be clear about what drives you and you will find a home in transit. I came to transit with a background in mathematical modelling, aviation maintenance and operations and demographics — seemingly unrelated paths — but a strong desire to make my community better. The diversity of my previous experience has given me a broad perspective that has benefited my work on every project I have been a part of. As cliché as it sounds, staying curious and being open to new experiences has provided the most interesting and expansive opportunities in my career.

I will also add that getting into transit in the current environment may seem like a greater challenge, but one that is perhaps a challenge of a generation. To understand the changing legal landscape and to support our clients in understanding and leveraging it to advance their transit program is a gift that will benefit generations to come.   

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