When the federal government decides which transit projects to fund, they use an arcane formula called the CEI, or Cost-Effectiveness Index. In theory, this tells which projects are the best and which aren’t, so that scarce transit funds (only 3% of federal transportation money goes to transit) can build the best projects.

In reality, though, the formula rewards the wrong things. As The Overhead Wire put it in comments on Mary Peters’ speech, “Why are we trying to solve for x (congestion) when we should be solving for y (livability). Reducing congestion does not equal livability.” The CEI rewards projects that move many people the farthest for the least money. And that’s the wrong goal.

For example, a short light rail line that goes to a sparsely populated warehouse district might be a great investment because of the potential to stimulate high-density development and enable many people to live close to work. But to the CEI, there are not very many people on the line and they wouldn’t go very far, denying federal funds for the project.

Minnesota Public Radio reports that Rep. James Oberstar, the Chair of the House Transportation Committee, has made some changes to the federal formula to consider other factors beyond the CEI, including “environmental benefits and the potential for economic development”. While the effect of this bill is not clear (the CEI isn’t going away), it’s good to hear that Oberstar understands and wants to fix the problems with our current system. Congress will be passing a new transportation bill in 2009, and this arcane formula will have a huge impact.

David Alpert is Founder and President of Greater Greater Washington and Executive Director of DC Sustainable Transportation (DCST). He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He lives with his wife and two children in Dupont Circle. Unless otherwise noted, opinions in his GGWash posts are his and not the official views of GGWash or DCST.