High Speed Passenger Rail
Developing Viable High Speed Rail Projects under the Recovery Act and Beyond Gao ID: GAO-10-162T October 14, 2009This testimony discusses funding for high speed and other intercity passenger rail projects under the American Recovery and Reinvestment Act of 2009 (the Recovery Act). The $8 billion that the Recovery Act provided for these projects has attracted great attention from states and others who look to develop or improve intercity passenger rail service across the country. Proponents see these projects as serving an important transportation role, by moving people quickly and safely, reducing highway and airport congestion, and being environmentally friendly. While we have found that the potential benefits of high speed and intercity passenger rail projects are many, these projects--both here and abroad--are costly, take years to develop and build, and require substantial up-front public investment as well as potentially long-term operating subsidies. This testimony focuses on (1) some principles that could guide the effective use of these Recovery Act funds, (2) some challenges that states face in establishing high speed and other intercity passenger rail service, and (3) the nature of our ongoing work on Recovery Act high speed rail projects. This testimony is based on our recent report and testimony on high speed rail and our ongoing work.
As policymakers decide how to allocate current Recovery Act funds and any possible future federal investments in high speed and other intercity passenger rail projects, several principles could guide the effective use of those funds. In our recent report and in 2005, we concluded that there is a need to (1) clearly establish federal objectives and clear roles for all stakeholders (federal, regional, state, and local governments and freight, commuter, and passenger railroads); (2) clearly identify expected outcomes; (3) base decisions on reliable ridership and other forecasts to determine the viability of high speed rail projects; and (4) include high speed rail in a reexamination of other federal surface transportation programs to clarify federal goals and roles, link funding to needs and performance, and reduce modal stovepipes that hinder the financing of transportation improvements with the greatest potential for improving mobility. Once FRA chooses projects for funding, project sponsors face several challenges. These include securing the significant up-front investment for construction costs; sustaining public, political, and financial support; and resolving outstanding liability issues. To further help Congress understand how Recovery Act funds for high speed and intercity passenger rail service can be used effectively, we are addressing the following three questions: (1) How have states that have recently initiated intercity passenger rail service overcome the challenges to establishing service? (2) How can the rail industry accommodate the increased investment in intercity passenger rail? (3) How FRA is positioning itself to implement and oversee current and any future federal investments in intercity passenger rail? The infusion of up to $8 billion in Recovery Act funds is only a first step in developing potentially viable high speed or other intercity passenger rail projects. The principles we have identified can be applied to promote the effective investment of Recovery Act and any future federal funds for these projects. Surmounting these challenges will require federal, state, and other stakeholder leadership to champion, and commitment to carry out, the development of any new or improved intercity passenger rail service. It will also require (1) clear, specific policies and delineations of expected outcomes and (2) objective, realistic analyses of ridership, costs, and other factors to determine the viability of projects and to maximize their transportation impact and other public benefits.
GAO-10-162T, High Speed Passenger Rail: Developing Viable High Speed Rail Projects under the Recovery Act and Beyond
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Testimony:
Before the Subcommittee on Railroads, Pipelines, and Hazardous
Materials, Committee on Transportation and Infrastructure, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:00 p.m. EDT:
Wednesday, October 14, 2009:
High Speed Passenger Rail:
Developing Viable High Speed Rail Projects under the Recovery Act and
Beyond:
Statement of Susan A. Fleming, Director:
Physical Infrastructure Issues:
GAO-10-162T:
[End of section]
Madam Chairwoman, Ranking Member Shuster, and Members of the
Subcommittee:
I am pleased to be here today to discuss funding for high speed and
other intercity passenger rail projects under the American Recovery and
Reinvestment Act of 2009 (the Recovery Act). The $8 billion that the
Recovery Act provided for these projects has attracted great attention
from states and others who look to develop or improve intercity
passenger rail service across the country. Proponents see these
projects as serving an important transportation role, by moving people
quickly and safely, reducing highway and airport congestion, and being
environmentally friendly. While we have found that the potential
benefits of high speed and intercity passenger rail projects are many,
these projects--both here and abroad--are costly, take years to develop
and build, and require substantial up-front public investment as well
as potentially long-term operating subsidies.[Footnote 1] My statement
today focuses on (1) some principles that could guide the effective use
of these Recovery Act funds, (2) some challenges that states face in
establishing high speed and other intercity passenger rail service, and
(3) the nature of our ongoing work on Recovery Act high speed rail
projects. My testimony is based on our recent report and testimony on
high speed rail and our ongoing work.[Footnote 2]
Summary:
Several principles could guide the effective use of the Recovery Act
funds and any future federal investments in high speed and other
intercity passenger rail. These principles include establishing clear
federal objectives and stakeholder roles, clearly identifying expected
outcomes, basing decisions on reliable ridership and other forecasts,
and reexamining how intercity passenger rail service fits in with other
federal surface transportation programs. In addition, determining
which, if any, high speed rail projects may eventually be economically
viable will depend on an accurate determination of such factors as
ridership potential, costs, and public benefits. These projects also
face many challenges, such as securing the significant up-front
investment for construction costs; sustaining public, political, and
financial support; and resolving outstanding liability issues. Our
ongoing work in this area will focus on determining how states that
have recently initiated passenger rail service have met these
challenges, how the rail industry can accommodate this increased
investment, and how the Federal Railroad Administration (FRA) is
planning to oversee the use of Recovery Act funds for intercity
passenger rail service.
Principles for the Effective Use of Recovery Act Funds for Intercity
Passenger Rail Service:
As policymakers decide how to allocate current Recovery Act funds and
any possible future federal investments in high speed and other
intercity passenger rail projects, several principles could guide the
effective use of those funds. In our recent report and in 2005,
[Footnote 3] we concluded that there is a need to:
1. clearly establish federal objectives and clear roles for all
stakeholders (federal, regional, state, and local governments and
freight, commuter, and passenger railroads);
2. clearly identify expected outcomes;
3. base decisions on reliable ridership and other forecasts to
determine the viability of high speed rail projects; and:
4. include high speed rail in a reexamination of other federal surface
transportation programs to clarify federal goals and roles, link
funding to needs and performance, and reduce modal stovepipes that
hinder the financing of transportation improvements with the greatest
potential for improving mobility.
While each of these principles is important, the third principle will
soon come into play as FRA decides which projects will receive initial
Recovery Act funding. FRA has received applications totaling $57
billion for its $8 billion in available Recovery Act funds. The factors
affecting the economic viability of high speed rail projects--meaning
whether total social benefits offset or justify total social costs--
include the level of expected ridership, costs, and public benefits
(i.e., the benefits to nonriders and the nation as a whole from such
things as reduced congestion and pollution), which depend on a
project's corridor and service characteristics. High speed rail is more
likely to attract riders in densely and highly populated corridors,
especially where existing transportation facilities, such as highways
or airports, are congested. Characteristics of the proposed service are
also a key consideration because high speed rail is more likely to
attract riders where it compares favorably with travel alternatives in
terms of trip times, frequency of service, reliability, safety, and
price. Costs largely hinge on the availability of rail right-of-way and
a corridor's terrain. To stay within financial or other constraints,
project sponsors typically make trade-offs between cost and service
characteristics. We are pleased to note that FRA's notice of funding
availability for high speed and other intercity rail projects generally
asks applicants to address these factors.
Challenges Facing High Speed and Other Intercity Passenger Rail
Projects:
Once FRA chooses projects for funding, project sponsors face several
challenges. These include securing the significant up-front investment
for construction costs; sustaining public, political, and financial
support; and resolving outstanding liability issues. We found that in
other countries with high speed intercity passenger rail systems
(France, Japan, and Spain), the central government generally funded the
majority of the up-front costs of high speed rail lines.[Footnote 4]
The $8 billion in Recovery Act funds for high speed rail (and other
intercity passenger rail) lines represents a significant increase in
federal funds available to develop new or enhanced intercity passenger
rail service. This $8 billion, however, represents only a small
fraction of the estimated costs for starting or enhancing service on
the nation's 11 federally authorized high speed rail corridors. For
example, a portion of one such corridor, from San Francisco to Los
Angeles, which already has about $9 billion in state bonding authority,
is estimated to cost about $33 billion.[Footnote 5]
Federal funds for high speed rail in the past (like Recovery Act funds)
have been derived from general revenues, not trust funds or other
dedicated funding sources. This makes ongoing capital support for high
speed rail projects challenging, because such projects compete for
funding with other national priorities, such as health care, national
defense, and support for ailing industries. States face similar
challenges as they develop these systems over a decade or more, and as
they look to provide operating support for the rail lines. The
potential problem could be compounded when service extends across state
boundaries and each state must provide operating support. Finally,
several state and industry stakeholders have told us that outstanding
questions about liability coverage for passenger rail providers
operating on freight railroads' tracks is a major barrier to entry for
service providers and for host railroads.[Footnote 6]
GAO's Ongoing Recovery Act Work on Intercity Passenger Rail Projects:
To further help Congress understand how Recovery Act funds for high
speed and intercity passenger rail service can be used effectively, we
are addressing the following three questions:
1. How have states that have recently initiated intercity passenger
rail service overcome the challenges to establishing service?
2. How can the rail industry accommodate the increased investment in
intercity passenger rail?
3. How FRA is positioning itself to implement and oversee current and
any future federal investments in intercity passenger rail?
To carry out this work, we have identified states that have initiated
new intercity passenger rail service and states that have expanded
existing service since 1995, including "higher-speed" rail service.
Intercity passenger rail service in those states has a mix of
characteristics, including infrastructure and equipment ownership,
capital investment levels, levels of state involvement, and multistate
operating agreements. We are also meeting with FRA, freight railroads,
Amtrak, possible domestic and foreign operators of intercity passenger
rail service, passenger rail equipment manufacturers, and other
possible rail industry stakeholders. We are in the beginning stages of
our work and plan to report on these issues early next spring. We would
be pleased to discuss our work with you as we progress.
In conclusion, the infusion of up to $8 billion in Recovery Act funds
is only a first step in developing potentially viable high speed or
other intercity passenger rail projects. The principles we have
identified can be applied to promote the effective investment of
Recovery Act and any future federal funds for these projects.
Surmounting these challenges will require federal, state, and other
stakeholder leadership to champion, and commitment to carry out, the
development of any new or improved intercity passenger rail service. It
will also require (1) clear, specific policies and delineations of
expected outcomes and (2) objective, realistic analyses of ridership,
costs, and other factors to determine the viability of projects and to
maximize their transportation impact and other public benefits.
Madam Chairwoman, this concludes my prepared remarks. I would be
pleased to answer any questions that you or other members of the
subcommittee may have at this time.
GAO Contact and Staff Acknowledgments:
For additional information about this testimony, please contact Susan
Fleming at (202) 512-2834 or flemings@gao.gov. Contact points for our
Offices of Congressional Relations and Public Relations can be found on
the last page of this statement. Heather Chartier, Greg Hanna, James
Ratzenberger, and Caitlin Tobin made key contributions to this
statement.
[End of section]
Footnotes:
[1] GAO, High Speed Passenger Rail: Future Development Will Depend on
Addressing Financial and Other Challenges and Establishing a Clear
Federal Role, [hyperlink, http://www.gao.gov/products/GAO-09-317]
(Washington, D.C.: Mar. 19, 2009).
[2] [hyperlink, http://www.gao.gov/products/GAO-09-317] and GAO, High
Speed Passenger Rail: Effectively Using Recovery Act Funds for High
Speed Rail Projects, [hyperlink,
http://www.gao.gov/products/GAO-09-786T] (Washington, D.C.: June 23,
2009). We conducted our work for these products in accordance with
generally accepted government auditing standards.
[3] [hyperlink, http://www.gao.gov/products/GAO-09-317] and GAO, 21st
Century Challenges: Reexamining the Base of the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO-05-325SP] (Washington,
D.C.: February 2005).
[4] [hyperlink, http://www.gao.gov/products/GAO-09-317].
[5] The corridor would extend from Sacramento and San Francisco through
Los Angeles to San Diego.
[6] Some freight railroads are concerned that an accident involving a
passenger train on their tracks could involve potentially substantial
liability claims, even if the freight railroad was not at fault. We
reported that such liability is capped at $200 million per accident or
incident for passenger claims; however, this cap has not been tested in
court. See GAO, Commuter Rail: Many Factors Influence Liability and
Indemnity Provisions, and Options Exist to Facilitate Negotiations,
[hyperlink, http://www.gao.gov/products/GAO-09-282] (Washington, D.C.:
Feb. 24, 2009); and Commuter Rail: Information and Guidance Could Help
Facilitate Commuter and Freight Rail Access Negotiations, [hyperlink,
http://www.gao.gov/products/GAO-04-240] (Washington, D.C.: Jan. 9,
2004).
[End of section]
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