The Federal Railroad Administration should take a page from the FTA’s playbook in establishing payment regimes for new fast rail projects.
The submission of final applications for high-speed rail funding on Monday was an important step in the growth of the U.S. federal government’s involvement in rail investment; the FRA will begin distributing a portion of the $8 billion in reserved stimulus dollars to a number of these proposals in early October. Though these applications were mostly for small investments such as double-tracking existing lines or building new bridges, states will submit more detailed applications for entire corridors in early October, and the FRA will begin awarding funds for those projects later in the fall. That phase demands that Washington think more seriously about how it distributes cash for high-speed rail in the future. It must establish a formal, grant-based procedure by which states or authorities receive funds and rely on those financial commitments throughout the construction process.
The need for such a funding regime is clear in the case of California High-Speed Rail, which will build a 220 mph line between Los Angeles and San Francisco by 2020. The full system, including branches south to San Diego and north to Sacramento, will cost $45 billion to build. Currently, the state has around $9 billion in voter-approved bonds ready to go, but no commitment from the federal government or private sources, both from which the rail authority will require contributions. The expected appropriation from Washington alone will be in the range of $20 billion if the state’s legislators are able to make their case effectively.
Including the stimulus, and depending on the outcome of budget negotiations in the Senate, the federal government will pay out between $9 and $12 billion to high-speed rail projects nationwide in fiscal 2010. James Oberstar (D-MN), chair of the House Transportation and Infrastructure Committee, has indicated he’d like to pay out an average of around $10 billion a year over the next five years to such rail projects, though his transportation bill is stalled as a result of controversy over how to pay for it. Nonetheless, it now seems likely that the government will contribute at least $20 billion to high-speed rail over the next five years alone — meaning that California’s project, the most advanced in the nation, has a good chance of getting its needed share. That is, assuming that Democrats maintain their majorities in Congress.
The problem is that the FRA has no standardized system by which to hand out those funds; as of now, it looks like the Department of Transportation will simply distribute money every few months to the projects it deems most valuable. As a result, California could get a billion here for the Transbay Terminal or a billion there for a line between Bakersfield and Merced, but never receive a guarantee that the feds will fully fund their prescribed share of the entire corridor’s construction costs. This is a huge problem, because a public agency shouldn’t be expending massive amounts of money on sections of a train system it doesn’t know it can finish completely. The private partners California hopes to interest in its program will not be excited about helping out on a train line they aren’t sure will ever open.
This problem, however, has a solution, and the Federal Transit Administration has mastered it with the New Starts process. The FTA invites transit agencies to compete for grants that will go to major new capital projects, and then it selects what it considers the most “cost-effective” projects for funding (the federal proportion is not set project-to-project; this is a major problem). Typically, transit agencies divide their long-term plans into what they term “minimum operable segments” that must be finished for service to begin. The FTA and the proposing agency sign a Full-Funding Grant Agreement (FFGA) that bonds the federal government to paying out its share of costs during the construction period. For its part, the transit agency agrees to complete the project on-time and on-budget; any cost increases will be debited to the locality, not Washington.
Once its own high-speed rail fund is guaranteed through inclusion in the next transportation bill, the FRA should institute a similar system.
Small projects, such as double tracking existing lines or the reconstruction of a tunnel or bridge, would be treated under a separate authorization program. But states or authorities that are interested in building a brand new line (or substantial full-line upgrade of an existing corridor) would be invited to follow FRA’s own New Start program, which would accept applications for grants for minimum operable segments. Using a set of objective, standardized criteria, the FRA would choose to fund the most deserving projects at a certain share of overall costs and sign an FFGA with the relevant agency. The FRA’s overall funding limits would be defined by the Congress in the transportation bill. By this point, the state or authority will have pinpointed a source of funds covering the rest of the costs, such as California has already done.
By establishing this New Start system, states like California could move forward with their proposed systems with both speed and confidence. That’s what we’re going to need to implement a renewed rail network in the United States.