T4America Blog

Cities eager to receive transit dollars from USDOT are receiving letters instead

Instead of approving projects and providing the money cities have applied for, USDOT is “allowing” cities to move ahead with construction on transit capital projects and incur costs that might one day be reimbursed by USDOT.

A few weeks ago, Streetsblog LA reported that Metro in Los Angeles had received a letter from USDOT that allows them to proceed with construction on their Purple Line subway westward toward the beach. (Bold type ours):

At this morning’s Metro Construction Committee, CEO Phil Washington announced that Metro had received a federal letter of no prejudice (LONP) for construction to proceed on the third phase of the Westside Purple Line. Washington aptly described this as a “big deal,” as this was the first major transit project that this administration has approved to proceed to the federal New Starts engineering phase. The federal letter of no prejudice covers an initial $491 million, nearly all for tunnel construction. The LONP guarantees that the feds will reimburse the local expenditures under a forthcoming full-funding grant agreement (FFGA).

Guarantees? Not quite. Los Angeles is right to treat this as a positive development, but these types of letters do not guarantee any federal money for transit projects.

Here’s what Obama’s USDOT said about these types of letters in a batch of policy guidance from early 2017, just before the transition:

Pre-award authority is not a legal or implied commitment that the subject project will be approved for FTA assistance or that FTA will obligate Federal funds. Furthermore, it is not a legal or implied commitment that all items undertaken by the applicant will be eligible for inclusion in the project. …Federal funding…is not implied or guaranteed by an [Letter of No Prejudice.] (pp 20, 22.)

By starting construction on this project without the full guarantee of funding, LA Metro is taking a risk, but they are still making a pretty rational decision. Just like the other cities with transit projects in the pipeline, Los Angeles is fully expecting that USDOT will do their job as required by law—something they’ve always done—and approve projects in a timely matter in order to obligate the $2.3 billion Congress provided in 2017 and 2018.

LA has a project with expiring construction bids due to USDOT’s delays up to this point, is on a tight timeline to have service running in time for the 2028 Olympics, and has already raised billions in local funds to pay their share.

Under previous administrations, whenever a city received one of these letters, their project was typically approved. So why should anyone be skeptical when this USDOT provides these letters? Here are two reasons:

• This particular administration at USDOT has no established track record of advancing multi-year transit projects. If they were sending out these letters at the same time as they were routinely signing other grant agreements and obligating dollars to other multi-year transit projects, there would certainly be a level of trust established, as has been the case with previous administrations.
• This administration has gone on the record multiple times asking Congress to provide them with zero dollars for multi-year transit projects that don’t yet have signed funding agreements — projects just like those in Los Angeles and Minneapolis, a region that is also awaiting final approval.

Cities are only in this difficult position because USDOT has failed to advance transit projects through the process in a clear, transparent, and timely manner.

While USDOT will hopefully approve LA’s project and award them funding, possibly before the end of this year, what about the other cities who are a little further behind in the process?

On the one hand, you can get a letter from USDOT that says you’re free to proceed and spend your own dollars on a big-ticket transit project, and that they won’t “prejudice” the eventual review of your application with the fact that you started building a project that wasn’t yet fully approved.

On the other hand, this administration at FTA and USDOT has twice asked Congress to eliminate all transit capital dollars, save for the money they’re already on the hook to provide for the projects that have pre-existing funding agreements.

Los Angeles is in a position where they can spend their own money to get started, counting on USDOT to (eventually) follow the law and award the money Congress appropriated. But other smaller cities or cities with more tenuous local funding might not be able to spend millions with the non-binding promise that they’ll eventually be reimbursed.

USDOT is creating an unnecessarily risky situation for cities. If you are one of the cities that’s ready or nearly ready but awaiting funding from USDOT, why trust a non-binding letter from an administration that’s already asked Congress to appropriate zero dollars for your project in the budget?

We’re eager to give credit to FTA when it’s due and they get these projects moving, but that time hasn’t yet arrived.