10 Steps to Improve Discretionary Grant Programs

Recent years have seen a strong shift in emphasis toward a more performance-based federal transportation policy in Washington. Performance-based competitive grant programs can be an important component of this shift. A few federal discretionary grant programs, such as TIGER Grants and Transit New Starts, already award transportation funding on a competitive basis. Under these programs the U.S. Department of Transportation selects projects for funding based on criteria and analysis. Congress has reduced funding available for such programs, however, preferring to distribute funds via formula. For investments such as freight, which tend to be capital-intensive and location-specific, formula funding does not work as well, nor does it encourage competition among the best ideas and projects for federal dollars. We need better and more sustainable discretionary grant programs in order to fund innovative transportation investments across modes.

In April, the Eno Center for Transportation released a paper that discusses the TIGER program. Based on work by Eno’s Thomas J. O’Bryant and 2012 Summer Fellow Amy Cavaretta, the paper gives recommendations for future federal discretionary grant programs. The following are 10 suggestions for Congress and the Obama administration to improve existing and future competitive discretionary grant programs so they are sizeable, sustainable and effective.

Include an Active Role for Congress

To promote political support and accountability, future discretionary grant programs should be structured to include a greater measure of cooperation between the DOT and Congress on project evaluation and selection. When Congress relinquished the TIGER program’s grant-making control entirely to the DOT, it made the program more of a potential target for criticism within its own membership. A better strategy is for the DOT to evaluate projects and make funding recommendations, and then have Congress confirm these recommendations as done in the Transit New Starts program. This structure would help bring a substantial level of technical analysis to congressional decision-making. Because this interaction maintains congressional involvement throughout the project selection process, it’s likely the only way a sizeable discretionary grant program can be sustained in the long run.

Ensure Transparency and Accountability

To promote decision-making based on true merit in achieving program goals, Congress will need to be specific in authorizing legislation about how much information the DOT must disclose about its decision-making process. At first, such disclosure requirements will result in increased scrutiny, but over time greater transparency will help produce a program that is widely viewed as fair and accountable. No agency can get the process right the first time, which is why transparency and public debate is necessary. An iterative learning process over time is more likely to result in a discretionary grant program that targets resources effectively. Congress also can help this process by being as specific as possible about the key criteria to be included in the project evaluation and grant selection process.

Create a Dedicated Office to Handle Multimodal Discretionary Grant Programs at the DOT

If and when Congress makes funding available, the DOT should consider creating an office or branch that includes staff with the skills to administer, evaluate and select projects for multimodal discretionary programs. This office could draw on expertise from the modal administrations and would be better prepared to handle the challenges multimodal programs pose. Relying on the Office of the Transportation Secretary to make technical decisions, as done in TIGER, creates a political perception problem that is likely to exacerbate congressional sensitivities.

More Explicitly Communicate the Financial Leveraging Intentions and Capability of Programs

One of the primary goals of discretionary programs is to leverage federal transportation funds in ways that would maximize overall transportation investment, but sometimes programs can allow for the federal share of project funding to cover as much as 100 percent of project costs. Although leveraging typically occurs even when the maximum federal funding share is high, it could be much greater if a program is structured appropriately. To promote leveraging and greater cost sharing, future discretionary grant programs should clearly state goals and requirements for leveraging and co-investment, not only in authorizing legislation but also throughout the process of program creation, oversight and decision-making. Most TIGER grants covered less than 50 percent of project costs even with funding permitted for up to 100 percent, so it’s likely a more explicit emphasis on cost sharing could bring even more state, local and private funding to the table.

Clarify the Costs of Including Set-Asides or Minimum Allocations

Discretionary programs often include several set-asides and minimum allocations seen as necessary to win political support from members of Congress. These kinds of provisions impose real costs by giving the implementing agency less flexibility to select the most effective projects informed by cost-benefit analysis. Legislative provisions that constrain program outcomes in terms of geographic distribution, rural set-asides or state funding limits also should require the implementing agency to clarify how these provisions affect project selection. Although there may be a political need for such provisions, greater transparency about the tradeoffs inherent in them could help highlight their costs and deter policymakers from abusing them. 

Target Discretionary Programs Toward Specific, Mode-Neutral, National Goals

Transit New Starts provides grants to transit agencies that want to build fixed guideway transit lines. Although this often accomplishes the goal of providing improved transit options to U.S. cities, it’s not useful to cities that can’t or don’t want to invest in this specific form of infrastructure. TIGER, however, allows any potential surface transportation project in the country to apply, leaving the DOT to evaluate a major seaport freight project alongside a bike path expansion. It’s difficult to justify the point of considering these dramatically different projects under the same program. By contrast, the Urban Partnership Agreements under former Transportation Secretary Mary Peters were focused on a mode-neutral goal — reducing urban congestion — and provided multimodal funding to implement that goal. Future reforms could include multiple discretionary programs dedicated to mode-neutral goals such as freight movement, urban accessibility or safety.

Allow for Broad Applicant Eligibility

Applicants for federal transportation grants are usually limited to state transportation departments or transit agencies. TIGER was one of the first programs to expand the pool of eligible grantees to include municipalities, port authorities, metropolitan planning organizations and other public and quasi-public agencies. This allowed for more innovation, provided an avenue for funding potential projects that previously had no means of gaining federal support and broadened the constituency of program supporters. As long as a prospective grantee has the authority to manage a transportation investment, it makes sense to allow them to put forth their best projects. Future programs also could consider expanding beyond public-sector applicants.

Ensure That Rigorous Economic Analysis Is Part of the Selection Process

Economic analyses, such as the cost-benefit analysis used in TIGER, can be a valuable component of the decision-making process to determine whether a project is worth the investment. This type of analysis, however, is underutilized across the country. While many transportation experts and researchers have recommended that cost-benefit analysis be included in federal, state and local decision-making, inexperience in conducting these analyses has made adding this element into discretionary programs a challenge for the DOT as well as for prospective grantees. Requiring the use of economic analyses as part of the selection process can help improve the practice over time for federal and local departments. Furthermore the use of economic analysis in federal programs doesn’t just benefit federal dollars; prospective grantees often find benefits for their own future decision-making whether they secure a federal grant or not.

Emphasize Long-Term Economic Benefits

TIGER included a selection component that gave priority to projects that could create jobs and short-term economic activity. Although this may have been an important part of its origins in the recovery act, it doesn’t have much merit in a more permanent discretionary grant program. The real value in transportation investment comes from the long-term accessibility, time savings and safety improvements. Allowing for prospective projects to apply for competitive grants on a rolling basis might help larger, more impactful projects succeed in securing funding based on their longer-term economic benefits. 

Expand the Use of Discretionary Grant Programs in the Next Surface Transportation Reauthorization

A recent report by the Bipartisan Policy Center titled “Performance Driven: A New Vision for U.S. Transportation Policy”suggested that Congress allocate 25 percent of all federal transportation funding to competitive grant programs for nationally important infrastructure improvements. Congress passed the most recent surface transportation reauthorization bill, Moving Ahead for Progress in the 21st Century or MAP-21, in 2012 and included only 8 percent discretionary funding. This bill expires in September 2014 and Congress should begin working now to increase the amount of competitive discretionary grants at the federal level. If Congress can increase discretionary funding in an effective manner, the U.S. transportation program can be better at investing in transportation that is targeted to specific, performance-based goals.

Joshua Schank is president and CEO and Paul Lewis is a policy analyst at the Eno Center for Transportation, a Washington-based nonprofit, operating foundation that seeks continuous improvement in transportation and its public and private leadership. Contact them at jschank@enotrans.org and plewis@enotrans.org

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