Industry News

Can the US get the strategy right for high-speed rail?

President Joe Biden, often referred to as “Amtrak Joe” in infrastructure circles, sees his administration’s $1.2 trillion infrastructure framework as an opportunity to invigorate and connect rural communities through high-speed rail. According to a White House fact sheet released Thursday, rural communities acutely feel the effects of the United States lagging behind the rest of the world in terms of passenger rail reliability, speed and coverage. The framework includes $66 billion in passenger and freight rail, and the White House has vowed to ensure the plan delivers "world-class rail service to areas outside the northeast and mid-Atlantic."

But as California State Treasurer Fiona Ma has warned, the federal government has tried to jump-start the high-speed rail revolution before. If the Biden administration is going to achieve its vision for high-speed rail, it needs to be smart about the funding strategy. In a letter to Congress last month, her warning was clear. "Spreading funding thinly across dozens of states and congressional districts to secure votes is a recipe for incremental progress with no new operational trains on the horizon," she wrote. "Such was the case with the federal government’s last attempt to bolster HSR after allocating $10.5 billion in 2009-2010. The approximate ridership on new rail lines built with these funds? Zero."

Many in the public transit community agree. During a recent United for Infrastructure webinar, Paul Skoutelas, president and CEO of the American Public Transportation Association, said the country needs to make a multiyear commitment to passenger rail through a predictable and dedicated funding stream instead of providing a one-time funding injection like it did through the 2009 stimulus. Specifically, he reiterated APTA's call for a Passenger Rail Trust Fund supported through avenues other than revenue dedicated to the Highway Trust Fund.

That call was echoed by Husein Cumber, chief strategy officer at Florida East Coast Industries, the parent company of Brightline, the only privately owned and operated intercity passenger railroad in the US. Cumber said the coronavirus pandemic has shown how fixed revenue streams can put stress on local communities. He added that the US needs the right capital structure to get through construction and ridership ramp-up phases of high-speed rail projects. He noted Brightline's main financial differentiator from other rail builders is that it is building high-speed rail projects without "a single dollar of operating subsidies from the public sector." Brightline also builds within established corridors, and Cumber says that's critical to success.

"If we're going to build a national network of high-speed rail ... we need to look at these existing transportation corridors," Cumber said. "If you look at Florida, we leveraged the freight right of way that we owned. Then we also leveraged a state road right of way. In California and Nevada, we're leveraging the I-15 right of way. That allows us to be able to get these projects done very quickly." 

Brightline has gone through the Railroad Rehabilitation & Improvement Financing loan program a few times, but according to Cumber, RRIF is "not really set up for greenfield-type projects." Instead, Brightline has been bullish on high-speed rail private activity bonds, which he says lower debt and make private-sector risk more palatable. Cumber suggested making credit risk premiums eligible for discretionary grants could allow private companies to take on debt instead of relying on the government for equity. That strategy, he said, would "unleash a significant amount of capital sitting on the sidelines." 

For highway projects, there are multiple funding mechanisms in play, including toll roads, public-private partnerships and federally and state-partnered roads. Similarly, there shouldn't be one funding mechanism for rail, Cumber said. He noted three options, all of which should be in play: The Amtrak model, the state-sponsored model, as in California, and the private-sector-driven model. Cumber believes the future of these projects is pursuing opportunities for states and localities to shift risk without sacrificing profitability. 

"As policymakers sit around the table ... what I would emphasize is that you're allowing all three of these models to be successful," Cumber said. "It shouldn't be government choosing what model ends up winning." 

One of those key players, Amit Bose, deputy administrator of the Federal Railroad Administration, agrees. During the webinar, he asserted FRA's commitment to getting California's beleaguered high-speed rail project "back on track so the state knows it has a partner in the federal government." While he didn't suggest a passenger rail trust fund was immediately in the works, he did seem open to a dedicated funding stream supplementing the "foundation" set under the Biden administration's American Jobs Plan.