During his presidential campaign, President-elect Joe Biden talked about a “rail revolution” that would include large increases in Amtrak funding and potentially coast-to-coast high-speed rail (HSR) service. If the US Senate remains in Republican hands after January’s elections in Georgia, there may be resistance to the fiscal and budgetary impacts of major increases in federal funding of passenger rail.
But beyond the federal spending aspects is the question of how much value would be produced by such funding. Consequently, this report offers a detailed review of the most recent attempt to boost passenger rail by funding high-speed rail projects and improving service in Amtrak corridors.
In 2009, the Obama administration proposed, and Congress enacted, legislation that authorized the High-Speed Intercity Passenger Rail (HSIPR) program. The program offered grants to four states to develop and implement new HSR corridors, but only one (California) was accepted. It also offered many grants to improve the performance of individual Amtrak corridors.
This report draws on many sources to assess the results of the seven projects that accounted for 98 percent of the HSIPR program. The results suggest caution in attempting a similar program during the new administration.
- California High-Speed Rail: HSIPR funding of $3.9 billion for the 520-mile planned Phase 1 from San Francisco to Los Angeles. This project included the 119-mile initial construction segment (ICS) in the Central Valley and the high-speed rail infrastructure component of the new Transbay Transit Center. High-speed rail service would cover the entire Phase 1 route (from Los Angeles to San Francisco) by 2020. Since the grant awards, both Phase 1 and the ICS have doubled in cost and decreased in scale, with portions now expected to operate in “blended” service with commuter trains. Service operation dates have been delayed by at least seven years on the ICS and at least 13 years for Phase 1. Cost projections for Phase 2 have not been updated. The overall federal commitment equaled nearly one half of the $8.1 billion spent on HSIPR corridor grants nationally. The Federal Railroad Administration (FRA) is seeking to reclaim some grant funding from this project.
- Northeast Corridor: HSIPR funding of $0.75 billion for two major projects to improve operations in New Jersey and through the city of New York. The New Jersey project will allow the operation of Acela trains at 160 miles per hour over a 23-mile segment. Slated for completion by 2017, the New Jersey project has been delayed to 2020. The New York City project, an Amtrak bypass through a busy rail junction seeking to reduce travel delay, is to be completed by 2022.
- Seattle-Portland Corridor: HSIPR funding of $0.75 billion for upgrading infrastructure. This project aimed to reduce travel time by 10 minutes on this trip that took between 3:20 and 3:30, and to add two daily round trips. The infrastructure was completed and the two new trains were scheduled to begin operating on December 17, 2017. Tragically, a fatal derailment approximately 50 miles into the first trip of a new Seattle-to-Portland train halted the service expansion. The National Transportation Safety Board (NTSB) cited positive train control, which was not operational, as one factor that might have prevented the accident. Restoration of additional service is pending the NTSB report.
- Chicago-St. Louis Corridor: HSIPR funding of $1.34 billion. This project upgrades infrastructure with new locomotives and passenger cars to reduce travel time by 45 minutes on a five-hour and 20-minute trip (5:20) to a five-hour and 40-minute (5:40) trip. No additional service was to be added. Incomplete critical safety improvements (positive train control) have precluded achieving travel time reductions. While the new locomotives are in operation, the original manufacturing contract for the new passenger cars has been canceled due to testing safety failures.
- Chicago-Detroit Corridor: HSIPR funding of $0.6 billion for upgrading infrastructure. This project aims to reduce travel time by 30 minutes on this trip that took between 5:05 and 5:35 without adding additional service. With a top operating speed of 110 mph, this project has substantially achieved its intended travel time improvement. As with the Chicago-St. Louis Corridor, new locomotives are in operation, but the new passenger cars have not been delivered due to testing safety failures that led to the cancellation of the original manufacturing contract.
- Charlotte-Raleigh Corridor: HSIPR funding of $0.52 billion. This project aimed to improve safety (largely by upgrading infrastructure that eliminated grade crossings) and to add two daily round trips. The infrastructure improvements were completed on schedule and one additional train is in operation, with a second train scheduled for 2019, though a start date has not occurred in 2020.
- Chicago-Iowa City Corridor: HSIPR funding of $0.23 billion. This project sought to upgrade infrastructure to re-establish service, which would operate at a maximum speed of 79 mph. After the grant award, Illinois and Iowa suspended the corridor improvements citing cost escalation and operating subsidies problems. Illinois recently announced that it would begin work, though Iowa continues to suspend its portion of the project.
From the perspective of value for taxpayers’ money, this report finds inconsistencies between project objectives and the assumptions on which public policies have been adopted.
For example, none of the five major conventional corridor HSIPR projects had a significant share of rail travel in their respective corridors. As a result, none of the projects would materially reduce the market shares of the dominant modes in their respective corridors, even if all project objectives were met.
Another concern for taxpayers is cost overruns, which are endemic in high-speed rail projects. Around the world, publicly funded high-speed rail systems have incurred large cost overruns relative to forecasts at the time of project approval, as documented in comprehensive research by European academics. Specifically, the California high-speed rail project and Great Britain’s HS2 project have incurred some of the most egregious cost overruns, a decade or more before there could be any prospect of complete service operation. This unfortunate experience seems likely to continue until there is effective and successful reform of high-speed rail planning and management approaches.
Even after construction is complete, financing operations have proved challenging. The international experience strongly suggests that the U.S. has little potential for financially successful high-speed rail projects. Out of the many high-speed rail lines that have been developed in the world, only three have covered their capital and operating costs from commercial sources, especially passenger fares. Each of these corridors had substantial pre-existing rail ridership, which is an advantage shared only by the Northeast Corridor in the United States.
High-speed rail is especially expensive in the United States compared to other nations. This makes the probability of financial success even more remote. Additionally, the United States has little potential for airline passengers and auto drivers to shift travel to high-speed rail in numbers that would transform travel markets.
With these challenges in mind, developing public policy that efficiently serves the taxpayers requires that decisions are made based on the best possible information. The data and analysis available at the time of project authorization should provide a reliable basis for informed decision making. This has not been the case in passenger rail, as substantial post-authorization cost escalation has been typical.
It is unfortunate enough when cost escalation occurs on a critical megaproject—one that is an important part of the existing transportation system, without which a city may be severely affected. It is particularly unfortunate when the cost-escalation occurs in a non-critical project—those not required for the continued operation of the transportation system. These projects are additions to the existing system. Until megaproject planning and management functions sufficiently reliably, taxpayers would be better served by not developing megaprojects that are not critical, such as high-speed rail.
Some high-speed rail and other intercity rail niche markets could be commercially developed by the private sector and operated commercially (without subsidy). Such systems would have the advantage of switching unforeseen risk for cost overruns away from the taxpayers to private investors. Moreover, the private sector would likely choose projects with a high likelihood of financial sustainability over those without. But private businesses must also consider the relatively high cost of permitting and regulation involved in such projects.
This policy analysis concludes with the following recommendations:
- Given the tendency for gross underestimation of costs that has occurred among government-sponsored high-speed rail projects, taxpayers should not be “on the hook” for the success of a project. The federal government should not provide funding or loans for new high-speed rail projects.
- The federal government should support commercial passenger rail development with regulatory assistance in the form of simplified environmental reviews, expedited permitting, and expansion of tax-exempt private activity bonds, backed by revenues from the commercial company.