Transit-Oriented Development: DOT Should Better Document Its Rationale for Financing Decisions and Evaluate Its Pilot Program
Fast Facts
Transit agencies and local governments have encouraged the development of mixed-use residential and commercial neighborhoods near bus or rail services to increase ridership and revenues. Local stakeholders and developers plan and build these "transit-oriented developments." In recent years, Congress and the U.S. Department of Transportation have tried to support such projects by making federal financing available.
However, no such project has received federal financing. We found DOT deemed 6 of 7 reviewed projects as ineligible and didn't clearly document its rationale for 5 of them. Our recommendations address these issues and more.
A transit-oriented development in Washington, D.C.
Highlights
What GAO Found
Transit agencies and local governments have looked to increase transit ridership and revenues by encouraging growth along transit corridors with transit-oriented development. Such projects generally comprise mixed-use residential and commercial real estate near transit. In 2015, the Fixing America's Surface Transportation Act expanded eligibility under two federal financing programs administered by the Department of Transportation's (DOT) Build America Bureau (Bureau) to transit-oriented development projects. While the Bureau has provided information on these programs to many potential project sponsors, it has not approved financing for any transit-oriented development projects since 2016 or clearly documented all project eligibility decisions. Specifically, the Bureau received 29 inquiries from project sponsors—mostly joint ventures by developers and local agencies—about financing such projects. All but seven inquiries were in early stages of development and not ready for the Bureau to assess their eligibility for financial assistance. Of the seven more developed projects, the Bureau determined that six were ineligible for financing and that one project is preliminarily eligible. However, we found the Bureau did not clearly document its rationale for five of the six declared ineligible, in part because it did not follow its procedures for conducting these reviews and implemented new procedures without documenting the changes. Without a clearly documented rationale for eligibility decisions and procedures for making decisions, sponsors lack reasonable assurance that the Bureau is reviewing projects consistently.
Transit-Oriented Development Project Inquiries to the Build America Bureau since 2016
The Federal Transit Administration (FTA) awards grants through a pilot program to help transit agencies and communities plan for transit-oriented development. While FTA has invested almost $80 million through this pilot program since FTA made its first awards in 2015, it has not documented a plan to evaluate the pilot or identify lessons learned in line with leading practices. Without such an evaluation, FTA will not be able to understand whether the pilot program is fulfilling its goals to help communities develop strategies to facilitate transit-oriented development. Further, FTA will lack information to inform congressional decisions about the pilot program's future.
Why GAO Did This Study
U.S. transit agencies face fiscal challenges and rely heavily on local, state, and federal funding to operate rail and bus systems. Transit-oriented development projects could help transit agencies increase ridership and revenues, and Congress has sought ways to support these projects. A 2012 statute established a pilot program for FTA to provide grants to communities to plan for transit-oriented development, and a 2015 statute expanded eligibility under the Transportation Infrastructure Finance and Innovation Act program and the Railroad Rehabilitation Improvement and Financing program to include transit-oriented development projects.
GAO was asked to review DOT's transit-oriented development efforts. This report, among other things, examines: (1) the status of the Bureau's reviews of transit-oriented development projects since 2016 and the extent to which it documented decisions, and (2) how FTA has evaluated the pilot program for transit-oriented development planning. GAO reviewed Bureau documents, surveyed applicants for the Bureau's financing, and interviewed transit agencies in the pilot program selected by ridership, location, and other factors.
Recommendations
GAO is recommending: (1) that the Bureau document its rationale for decisions and follow its procedures in reviewing transit-oriented development projects, and (2) that FTA develop a plan to evaluate its pilot program. DOT concurred with the recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Transportation | The Executive Director of the Build America Bureau should ensure that the Bureau documents and follows its procedures for making decisions in its reviews of potential transit-oriented development projects for the TIFIA and RRIF programs. Such procedures should require the Bureau to document a clear rationale to explain why a project meets or does not meet eligibility requirements. (Recommendation 1) | Transit agencies and local governments have looked to increase transit ridership and revenues by encouraging growth along transit corridors with transit-oriented development. In 2015, the Fixing America's Surface Transportation Act (FAST Act) expanded eligibility under two federal financing programs administered by the Department of Transportation's (DOT) Build America Bureau (Bureau) to include transit-oriented development projects. Those programs are the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and the Railroad Rehabilitation Improvement and Financing (RRIF) program. In 2021, GAO reported that while the Bureau has provided information on these programs... to many potential project sponsors, it had not made any TIFIA or RRIF loans for transit-oriented development projects since the FAST Act had expanded its financing eligibilities for such projects. GAO also reported that the Bureau had not clearly documented all project eligibility decisions, in part because it did not follow its procedures for conducting these reviews and implemented new procedures without documenting the changes. The FAST Act outlines specific responsibilities for the Bureau on administering the TIFIA and RRIF programs including establishing procedures for analyzing and evaluating applications for these programs, as well as documenting major decisions in the application evaluation process through a decision memorandum or mechanism that provides a clear rationale for such decisions. According to Bureau officials, their evaluation procedures had evolved since its review process was established and the Bureau had not prepared any written requirements to record the rationale for its eligibility decisions by updating its review process or other documentation. GAO found that, without specific information from the Bureau on how its decisions are made, and a clearly documented rationale from the Bureau explaining why a project meets or does not meet eligibility requirements, project sponsors seeking financial assistance lack the information necessary to develop transit-oriented development project proposals that address RRIF and TIFIA eligibility requirements. In addition, without written procedures for making decisions, project sponsors lack reasonable assurance that the Bureau is conducting its reviews in a consistent manner. Therefore, GAO recommended that the Bureau document and follow its procedures for making decisions in its reviews of potential transit-oriented development projects for the TIFIA and RRIF programs. Such procedures should require the Bureau to document a clear rationale to explain why a project meets or does not meet eligibility requirements. In 2024, GAO confirmed that the Bureau had developed, implemented, and applied a new standard operating procedure to document its eligibility decisions for transit-oriented development projects. Specifically, Bureau's procedures identify the specific steps for the Bureau to follow in making a preliminary eligibility analysis of a transit-oriented development project, including coordinating with subject matter experts within DOT and drafting a preliminary eligibility determination letter that includes an analysis of borrower and project eligibility. Bureau officials stated they have applied this new procedure to 7 transit-oriented development projects. GAO reviewed the documentation for 3 of these transit-oriented development projects and found that DOT had followed its procedures and provided a clear rationale for its eligibility determinations. As a result of these efforts, the Bureau has established procedures for making and clearly documenting eligibility decisions for TIFIA and RRIF loans for transit-oriented development projects. These actions should provide project sponsors with enhanced assurance that the Bureau is using a consistent process to make important financing eligibility decisions for projects.
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| Federal Transit Administration | The FTA Administrator should develop a plan to evaluate the implementation and performance of the pilot program for transit-oriented development planning that includes: (1) measurable program objectives, (2) a methodology to collect and analyze information to assess whether the program is meeting those objectives, (3) criteria to inform future program decisions, and (4) a means to gather feedback from grantees. (Recommendation 2) | Transit agencies and local governments have looked to increase transit ridership and revenues by encouraging growth along transit corridors with transit-oriented development projects. A 2012 statute established a pilot program for FTA to provide grants to communities to plan for transit-oriented development. In 2021, GAO reported that while FTA has invested almost $80 million through this pilot program since FTA made its first awards in 2015, it has not documented a plan to evaluate the pilot or identify lessons learned in line with leading practices. Specifically, GAO previously reported that a well-designed pilot program can help ensure agency assessments produce information needed to...
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