High Speed Passenger Rail
Effectively Using Recovery Act Funds for High Speed Rail Projects Gao ID: GAO-09-786T June 23, 2009This testimony discusses the implementation of high speed intercity passenger rail projects in the American Recovery and Reinvestment Act of 2009 (the Recovery Act). The $8 billion provided by the Recovery Act for high speed and other intercity passenger rail projects has focused more attention on and generated a great deal of anticipation about the possibility of developing high speed rail systems in the United States. These projects are seen by some as serving an important transportation role, by moving people quickly and safely, reducing highway and airport congestion, and being environmentally friendly. This testimony focuses on (1) the factors identified that affect the economic viability of high speed rail projects and (2) how the Federal Railroad Administration's (FRA) recent strategic plan incorporates those factors.
While the potential benefits of high speed 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. Determining which, if any, high speed rail projects may eventually be economically viable will rest on factors such as ridership potential, costs, and public benefits. FRA largely agrees with our March report. FRA's strategic plan for high speed rail outlines, in very general terms, how the federal government may invest the $8 billion in Recovery Act funds for high speed rail development. However, this plan does not establish clear goals for the federal government in high speed rail--other than establishing a "longer term goal of developing a national high speed intercity passenger rail network of corridors"--and does not define a clear federal role for involvement in high speed rail projects other than providing Recovery Act funds. As such, in our view, it is more a vision than a strategic plan. As part of a discussion to prepare for this hearing, FRA told us that it sees its strategic plan as a first step and that it intends to seek structured input from stakeholders and the public to help develop strategies to implement its vision.
GAO-09-786T, High Speed Passenger Rail: Effectively Using Recovery Act Funds for High Speed Rail Projects
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Testimony:
Before the Subcommittee on Surface Transportation and Merchant Marine
Infrastructure, Safety, and Security, Committee on Commerce, Science
and Transportation, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:30 p.m. EDT:
Tuesday, June 23, 2009:
High Speed Passenger Rail:
Effectively Using Recovery Act Funds for High Speed Rail Projects:
Statement of Susan A. Fleming, Director: Physical Infrastructure Issues:
GAO-09-786T:
[End of section]
Mr. Chairman, Ranking Member Thune, and Members of the Subcommittee:
I am pleased to be here today to discuss the implementation of high
speed intercity passenger rail projects in the American Recovery and
Reinvestment Act of 2009 (the Recovery Act). The $8 billion provided by
the Recovery Act for high speed and other intercity passenger rail
projects has focused more attention on and generated a great deal of
anticipation about the possibility of developing high speed rail
systems in the United States. These projects are seen by some as
serving an important transportation role, by moving people quickly and
safely, reducing highway and airport congestion, and being
environmentally friendly. My statement today focuses on (1) the factors
that we have identified that affect the economic viability of high
speed rail projects and (2) how the Federal Railroad Administration's
(FRA) recent strategic plan incorporates those factors.[Footnote 1] My
testimony is based on our recent report on high speed rail, our review
of FRA's strategic plan, and discussions with FRA and selected
transportation experts.[Footnote 2]
In summary, we found that while the potential benefits of high speed
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. Determining which, if any, high speed rail projects may
eventually be economically viable will rest on factors such as
ridership potential, costs, and public benefits. FRA largely agrees
with our March report. FRA's strategic plan for high speed rail
outlines, in very general terms, how the federal government may invest
the $8 billion in Recovery Act funds for high speed rail development.
However, this plan does not establish clear goals for the federal
government in high speed rail--other than establishing a "longer term
goal of developing a national high speed intercity passenger rail
network of corridors"--and does not define a clear federal role for
involvement in high speed rail projects other than providing Recovery
Act funds. As such, in our view, it is more a vision than a strategic
plan. As part of a discussion to prepare for this hearing, FRA told us
that it sees its strategic plan as a first step and that it intends to
seek structured input from stakeholders and the public to help develop
strategies to implement its vision.
Factors That Affect the Economic Viability of High Speed Rail Projects:
The factors affecting the economic viability of high speed rail
projects include the level of expected ridership, costs, and public
benefits (i.e., the benefits to non-riders and the nation as a whole
from such things as reduced congestion), 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 there is congestion on existing transportation modes (such as
highways or airports). Characteristics of the proposed service are also
a key consideration because high speed rail is more likely to attract
riders where it compares favorably to travel alternatives in terms of
trip times, frequency of service, reliability, and safety. 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.
Once projects are deemed economically viable, project sponsors face the
challenging tasks of securing the significant up-front investment for
construction costs and of sustaining public and political support and
stakeholder consensus. We found that in other countries (France, Japan,
and Spain) with high speed intercity passenger rail systems, the
central government generally funded the majority of the up-front costs
of high speed rail lines.[Footnote 3] 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 amount, however,
represents only a small fraction of the estimated costs for starting or
enhancing service on the 11 federally authorized high speed rail
corridors. For example, the San Francisco-Los Angeles portion of the
California high speed rail corridor alone, which already has about $9
billion in state bonding authority, is estimated to cost about $33
billion dollars.[Footnote 4] Furthermore, federal funds for high speed
rail in the past (as with the Recovery Act) 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, as they compete for funding with other national priorities
such as health care, national defense, and support for ailing
industries. In addition, the challenge of sustaining public-sector
support and stakeholder consensus is compounded by long project lead
times, the diverse interests of numerous stakeholders, and the absence
of an established institutional framework for coordination and decision
making.
FRA's Strategic Plan Is a First Step:
FRA's strategic plan attempts to address the absence of an
institutional framework for investments in high speed intercity
passenger rail service. In our recent report and in 2005,[Footnote 5]
we discussed the need for:
1. Clear federal objectives and clear roles for all stakeholders
(federal, regional, state, and local governments and freight, commuter,
and passenger railroads).
2. Clear identification of outcomes expected.
3. Ensuring the reliability of ridership and other forecasts to
determine the viability of high speed rail projects.
4. Including high speed rail with 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 financing transportation improvements that will lead to the
greatest improvements in mobility.
FRA's plan, which the Recovery Act required the FRA to issue 60 days
after the act was signed, outlines in very general terms how the FRA
will allocate the Recovery Act high speed rail funds. It does not
define goals for investing in high speed rail, how these investments
will achieve them, how the federal government will determine which
corridors it could invest in, or how high speed rail investments could
be evaluated against possible alternative modes in those corridors. In
our opinion--and as FRA recognizes--this strategic plan is a first step
in planning federal involvement. FRA has emphasized that its approach
is to involve the ultimate "owners" of high speed rail--the states and
communities in which they will reside--to help flesh out the approach
to developing high-speed rail that are under its control. FRA officials
also told us that it plans to spend Recovery Act funds in ways that
show success to help keep long-term political support for these
projects at the local level.
Overall, FRA generally agrees with the issues that we raised in our
March report, with the report's recommendations, and with the
observations that we are making today. Last week, FRA took its next
step by issuing interim guidance for applying for Recovery Act funds.
[Footnote 6] The guidance lays out the evaluation criteria for grant
funding, the weights to be applied to the criteria, and the selection
criteria.
In conclusion, the infusion of up to $8 billion in Recovery Act funds
is only a first step in developing potentially viable high speed
passenger rail projects. The host of seemingly intractable issues that
have hampered development of these projects remain as challenges, and
these issues will need to be resolved to effectively spend Recovery Act
funds. Surmounting these challenges will require federal, state, and
other stakeholder leadership to champion the development of
economically viable high speed corridors and the political will to
carry them out. It will also require clear, specific policies and
delineations of expected outcomes, and objective, realistic analysis of
ridership, costs, and other factors to determine the viability of
projects and their transportation impact.
Mr. Chairman, this concludes my prepared remarks. I would be pleased to
answer any questions you or other Members of the Subcommittee may have.
Please contact Susan Fleming at (202) 512-2834 or Flemings@gao.gov
about this statement. Contact points for our Offices of Congressional
Relations and Public Relations can be found on the last page of this
statement. Greg Hanna and James Ratzenberger made key contributions to
this statement.
[End of section]
Footnotes:
[1] By economically viable, we mean that a project's total social
benefits offset or justify the project's total social costs.
[2] See GAO, High Speed Passenger Rail: Future Development Will Depend
on Addressing Financial and Other Challenges and Establishing a Clear
Federal Role, GAO-09-317 (Washington D.C.: Mar. 19, 2009); and Federal
Railroad Administration, Vision for High-Speed Rail in America
(Washington D.C.: April 2009). We conducted this performance audit from
May 2009 to June 2009 in accordance with generally accepted government
auditing standards. These standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
[3] GAO-09-317.
[4] The corridor would extend from Sacramento and San Francisco through
Los Angeles to San Diego.
[5] GAO-09-317 and GAO, 21st Century Challenges: Reexamining the Base
of the Federal Government, GAO-05-325SP (Washington D.C.: February
2005).
[6] A link to the guidance can be found in 74 Fed. Reg. 28770 (2009).
[End of section]
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