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The Need for High-Speed Rail Full-Funding Grant Agreements

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.

13 Comments | Leave a Reply »
  • jim

    The process laid out in the hsipr interim guidance actually does meet these requirements.

    Section 2.5.2: for approved programs, FRA will sign a letter of intent and reserve the funds in the LOI out of the $8B. The LOI establishes milestones. If those milestones are missed, then FRA can pull the funds not yet obligated and make them available for other grantees. If the milestons are met, then FRA obligates the funds necessary to reach the next milestone.

    Section 3.4: grantees have to commit to funding any cost overruns and future cash needs resulting from operating the service that the capital grant funded.

    This is a bit more flexible than the FTA’s process since the milestones are negotiable. 2.5.2 does say that if your program is approved you immediately get funding to get you through NEPA. Construction funds, though, won’t be forthcoming until the NEPA milestones are met.

    From the grantees’ point of view, this mechanism gives them confidence that they will get the money that FRA has promised them, as long as they hit their milestones. From FRA’s point of view, this prevents them being caught in a money pit.

  • jim

    By the way, section 3.4 probably prevents Florida from getting HSR money until they get the referendum result fixed.

  • Jim –
    Thanks for your point. The Letter of Intent (LOI), however, does not provide the backbone for structuring a grant for an entire corridor such as CAHSR — it allows for projects to move forward through engineering and into the first elements of construction. Another agreement will be required for funding the entire corridor; as section 2.5.2 says:

    “Funding for FD (final design)/construction would be awarded through a grant or cooperative agreement as milestones are reached. Even after funds are converted from LOI into a cooperative/grant agreement (i.e. obligated), grantees will be required to obtain FRA approval prior to commencement of construction activities. This process will be included in the grant agreement.”

    As far as I can tell, then, the FRA has yet to establish the framework for distributing corridor-level grants (which will be concluded in a post-LOI situation), and that’s what this post was intended to address.

    Section 3.4 doesn’t require states to pay for overruns, but rather says that they must “demonstrate the ability to” do so. This is an important, but quiet, detail.

  • glenn

    Prop1A was amended before the election so as to limit any state money to no more than 50% per any section of the CAHSR network and will only be released when a match has been secured. Nothing will be built unless we get this dedicated funding system as noted above..I sure hope its worked out in the next year as CAHSR plans on major construction in 2012.

  • jim

    Yonah,

    I misread you, sorry.

    But: “The Letter of Intent (LOI), however, does not provide the backbone for structuring a grant for an entire corridor such as CAHSR.” There are no other corridors like CAHSR. The other corridors are mostly multi-State and are being tackled piecemeal: SEHSR is first working on Washington-Charlotte and Washington-Hampton Roads, Georgia did a feasibility study of Charlotte-Atlanta, I think there was a pre-application from someone to study Atlanta-New Orleans, no-one appears to be even thinking about Raleigh-Columbia-Savannah; MWHSR is incrementally upgrading the existing network, they have a priority list, as they get money they work down it; in the North-West, Washington and Oregon are concentrating on Portland-Seattle, Oregon has begun to think about Eugene-Portland, Washington has started talking to BC about Seattle-Vancouver. And so on. California is the only corridor where there’s a full corridor-wide plan with a massive budget.

    So right now FRA has a system which (they think) works for everyone but California. And California’s budget is much larger than any money they can see coming down the pike (unless Oberstar’s reauthorization comes through, and even then California would need about 70% of Oberstar’s proposed HSR funding). It’s hard to see FRA making that large a commitment to a single State.

    If we get more big budget corridor proposals (reading the UK HS2 proposal, I was consumed with envy and would really like to see an Atlanta-New York 220mph new mainline track proposed along the same lines) and a larger HSR budget to handle them, then, yes, full-funding grant agreements would be appropriate.

    At this point, we don’t know how the LOI process will work though; let’s see how the track 2 awards play out.

  • New York-Atlanta is difficult – for a start, it’s 1,500 km, compared with 650 for London-Glasgow. It also suffers from lack of good ROW: the existing rail lines are all curvy, and unlike in the Northeast, there’s no way of straightening them without either massive eminent domain or sticking to I-95 and missing all the downtown areas.

  • orulz

    Reg. the NY-ATL corridor.

    South of Richmond, there actually are plans and/or studies of what would have to be done to make for a substantially straighter, faster corridor. Not sure whether VA has studied any realignments north of Richmond, but between Richmond and Raleigh, the SEHSR already plans on straightening the deactivated S-line. The sharpest curves on the line supposedly would allow 110mph with conventional equipment, which would be like 150mph with lighter weight European style tilting trains.

    Between Raleigh and Charlotte, the state of NC’s rail plan calls for upgrading the existing NCRR to 90 or maybe 110mph and eliminating most/all grade crossings. Hardly high speed. But the long term (2050) plan includes a 150+mph shortcut between Raleigh and Charlotte, going through entirely rural areas by straightening the Aberdeen, Carolina & Western route.

    For Charlotte to Atlanta, this report gives a fairly brief overview of what would be required for 200mph service. Mostly, the plan would stick to I-85 except for Spartanburg-Greenville and Gainesville-Atlanta.

  • jim

    I threw in Atlanta-New York as an example of the sort of big budget true HSR program that FRA wouldn’t get to consider because there’s no mechanism for such a proposal to get made. But since it’s been denigrated, let me defend it :).

    The motivation is actually the report that oruiz cited. It says that true high speed rail Macon-Atlanta-Greenville-Charlotte is possible and not appallingly expensive (about $3.5B), but ridership won’t cover operating costs, ever. When SEHSR was considering the Washington-Charlotte segment, NCDOT said it was better to go for 110mph rather than 220mph because “you get 90% of the benefit for 25% of the cost.” I’m not sure that 6 hours Charlotte to Washington is 90% of the benefit of 3 hours Charlotte to Washington, but I am sure that he was right about 25% of the cost. If one is to justify true HSR in the Southeast, it has to be in a larger context than these individually planned segments. Just as the UK found in the HS2 business case that what couldn’t be justified London-Birmingham-Manchester could be justified in the context of London-Edinburgh, it seems to me that Atlanta-New York is an appropriate context for the SE. It’s maximal: a non-stop express Atlanta to New York would take about four hours; there’s little to be gained by extending service south of Atlanta; any train from the south will stop in NYC and since there seems to be a mandatory dwell of 15 min in NYP, there’s not much penalty to making people transfer there. And while I don’t know that anyone’s done actual modeling, there’s likely to be real opportunity to capture air travel between the southern part of the BosWash conurbation and the heart of the southeastern conurbation that Richard Florida has named Char-lanta.

    “Massive eminent domain.” Why not? It’s what we do for highways today. No-one says anything. Railroads require much narrower RoW than highways and in the centers of cites, one can manageably bore tunnels.

    “Missing all the downtown areas.” There’s nothing wrong with having the high speed mainline bypass some cities and running spurs into those cities from the mainline. It’s the strategy the French used. It’s the strategy proposed for the UK HS2. It’s easier, faster and cheaper to build one access line (and bore one tunnel) trains run both in and out of a city on than build a line to go in (with its tunnel through the center) and another to come out (with its tunnel, too). I’d certainly rather do that than be confined to 110mph on legacy tracks.

  • First, the 110 mph speed limit for existing ROW assumes tilting trains. Even tilting trains can’t run at 150 mph unless the curve radius is at least 1.8 km, whereas the existing S line is full of curves with radius in the hundreds of meters.

    Second, the study’s numbers are really weird. On the one hand, it assumes construction costs of $7 million/mile even for true HSR, which is one third of how much HSR costs in France for tunnel-free alignments. On the other, it assumes an annual ridership of 2 million by 2040, barely higher than for 90 mph; is there any rail corridor anywhere in the world where HSR got barely higher ridership than the low-speed line it replaced? The modeling gets it wrong because it seems to be restricted to American lines, none of which is true HSR.

    Third, missing the downtown areas, French-style, depresses ridership, and reduces capacity – again, compare the performance of the LGV Sud-Est with this of the Tokaido Shinkansen. Running spurs is even worse – it actually increases construction costs by increasing the total track length to be constructed; the Italian TAV network, which runs a siding or spur to each city it serves, is by far the most expensive. And with sidings, you can at least run local trains; with spurs, you can’t, reducing frequency and increasing the amount of equipment necessary.

    Fourth, at-grade HSR construction costs about $22 million per mile; tunneling costs $400 million. There’s no reason, ever, to tunnel, unless you’re trying to cross a wide river or a mountain or the alternative is to level entire blocks. Bridgeport, you can tunnel under with benefits exceeding costs. Greenville, you can’t – that’s one place where it can be useful to avoid downtown and build a Shin-Greenville station on I-85 (not that I-85 is straight enough for HSR, but it’s closer than the existing line).

  • jim

    Spurs vs. tunnels:

    Consider Washington DC. Two choices. (1) Run HSR through Washington, (2) Bypass Washington and run a spur in to Union Station from the north. (1) requires a new tunnel south from Union Station and bypassing the existing 25mph viaduct leading to the Long Bridge. Cost: $2B (at least). (2) doesn’t.

    Consider Baltimore. Two choices. (1) Run HSR through Baltimore, (2) Bypass Baltimore and run a spur in to Penn Station from the north. (1) requires a new tunnel to the south of Penn Station (BP Tunnel won’t hack it) and probably a new tunnel north of Penn Station, since an HSR line carrying all East Coast traffic won’t be able to share the existing tunnels. Cost: $3B. (2) on the other hand will definitely be able to avoid building a new tunnel south of the station and since HSR will only be sending Baltimore bound trains through the northern tunnels, there’s a good chance they can be shared.

    $5B will fund an awful lot of bypass track.

    There’s other cities where this sort of calculation works. Richmond, for example. Not a tunnel, in this case, but a new bridge over the James in the center of Richmond would be expensive. Crossing the James further upstream and running a spur in to Main St. Station from the north is going to be cheaper.

    Short spurs need not even be built to 220mph HSR standards. They can be legacy track, upgraded to 90mph standards and electrified. Come into Baltimore’s Penn Station from the north through the existing tunnels, you’ll be running on legacy track.

    That’s not to say one should bypass every city. I’d want to see HSR run through Philadelphia’s 30th St. Station, for example. But bypasses and spurs are part of the vocabulary and should be used where appropriate.

  • No, option (2) is more expensive, because it requires more new track. Washington and Baltimore both have tunnels leading to them on both sides, on existing track. Only Baltimore has a real access bottleneck that can’t be fixed on existing ROW, and only on the west; to the east there’s no problem with either capacity or track conditions. A study performed by the FRA shows that the cheapest way of upgrading the track involves a new tunnel from Baltimore Penn Station to the west, built to higher standards, at a projected cost of $500 million. Bypass options were rejected for cost reasons: one option involved new tunneling near downtown, another involved underwater tunneling, and the third involved circling north of downtown in hilly terrain. As for Washington, it’s the second busiest Amtrak station – bypassing it would destroy ridership.

    Only in a few areas are bypasses justifiable for express trains – for example, Wilmington, where a bypass track is straighter and thus allows higher speeds than running trains nonstop through the station; the existing station configuration still allows running trains from New York to Washington, obviously. In Philadelphia, too, Keystone trains need to reverse direction, and the PRR’s express New York-Chicago trains skipped 30th Street Station and stopped at North Philadelphia instead; future HSR trains could do the same.

    Mostly, the best way of running trains in the US is to have one trunk line, with minor stations having two nonstop tracks in the middle. For major cities, it’s perfectly okay to run trains on upgraded legacy tracks near the station. This is what’s proposed in California: upgraded track in the LA Basin and the Bay Area, new track in between, downtown station stops. This is also what’s being done in the NEC – the main improvements there are for raising speeds between stations, not at stations.

  • I think the cost differential between a Urban 125mph through section on a 220mph Express HSR corridor and a “spur and bypass” with a bypass Express HSR route for no stopping trains and an urban through route for stopping trains may be being understated.

    For one very important point, when you actually do the cost/benefit analysis, the least cost through spur will often not be the highest net benefit spur. That is, indeed, why the very least cost spur, going in and out on the same line, is not often the best net benefit, because it necessarily imposes additional travel time on the services running through the city, which costs ridership on all origin/destination pairs running through the city.

    And for another, the 125mph through urban corridor is not restricted to Express HSR services – it is infrastructure that can be used by a wide range of rail services.

  • The issue is places where the urban line has a top speed nowhere near 125 mph. The Baltimore and Potomac tunnel has a top speed of 30 mph; there’s a reason it’s one of the few parts of the NEC that the government is trying to upgrade. The other station approaches on the NEC are fine; the problems on that line are the catenary south of New York and the curves in Connecticut, not the station approaches.

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