Financing

The American High Speed Rail Alliance supports ensuring sustainable funding sources adequate to build and operate a high speed and regional passenger rail network in the United States, including, but not limited to, a combination of federal, state and local funding, public/private partnerships, government-backed bonds, tax credits, tax incentives, and private sector investments. 

The American High Speed Rail Alliance advocates for robust federal investment in building a high speed rail network in the United States.  The Alliance defines high speed rail consistently with federal statute and the Federal Railroad Administration’s strategic plan for high speed rail.

• Support $50 Billion for High Speed Rail in SAFETEA-LU Re-Authorization
• Modify Existing Funding and Financing Programs to Ensure High Speed Rail Eligibility
• Support Enactment of Freight Rail Investment Tax Credits That Benefit HSR
• Advocate for $4 Billion Annual Appropriation for High Speed Rail>

The American High Speed Rail Alliance advocates for House Transportation & Infrastructure Committee Chairman Jim Oberstar’s proposal to authorize $50 billion for high speed rail in his draft bill, the Surface Transportation Authorization Act (STAA). 

The STAA legislation will re-authorize federal surface transportation programs.  Structurally, surface transportation legislation normally consists of multiple separate legislative titles which can be viewed as the principal programs and their funding mechanism: highways, highway safety, transit, motor carrier safety, research, planning, hazardous materials transportation, rail and finance.

The Alliance will advocate for Chairman Oberstar’s proposal to authorize $50 billion over six years to further develop the 13 established high speed rail corridors linking major metropolitan regions in the United States.  Along with Chairman Oberstar, the Alliance supports this funding coming from outside the current gas tax revenues collected by the Highway Trust Fund.  The Alliance also supports authorizing the U.S. Department of Transportation (USDOT), acting in part through a proposed National Infrastructure Bank, to provide grants, loans, loan guarantees, lines of credit, private-activity bonds, tax-credit bonds and other funding and financing tools to allow investment in the design, planning and construction of these high speed rail corridors.

In addition to advocating that the $50 billion authorization for high speed rail be enacted into law, the Alliance will also work with Congress to ensure that the program is fully funded each year during the appropriations process. Furthermore, the Alliance will work to develop a dedicated funding source for HSR to allow effective long-term planning and develop a predictable and sustainable market for HSR services.

Modify Programs to Ensure High Speed Rail Eligibility

The American High Speed Rail Alliance supports ensuring eligibility for high speed rail projects in the various financing programs offered by the USDOT.

Rail Line Relocation.  The Rail Line Relocation program, authorized at $350 million annually through fiscal year 2009, provides financial assistance to States (or political subdivision of a State) for local rail line relocation and improvement projects for the purpose of mitigating the adverse effects of rail traffic on safety, motor vehicle traffic flow, community quality of life and economic development. In addition, the capital grants program for Class II and Class III railroads, authorized at $50 million annually, provides financing for rehabilitating, preserving or improving railroad track (including roadbed, bridges, and related track structures) used primarily for freight transportation.

• Chairman Oberstar’s STAA proposal extends eligibility to government sponsored authorities and corporations (such as Joint Powers Boards). The Alliance supports Rail Line Relocation program eligibility to be extended to high speed rail projects as defined by federal statute (49 USC 26106(b)(4).

Railroad Rehabilitation and Improvement Financing (RRIF) Loans.  The RRIF program, authorized to provide up $35 billion in federal loans, allows freight and passenger railroads and rail shippers to receive 35 year loans at federal interest rates.  The RRIF program does not require an applicant for a direct loan or loan guarantee to provide collateral and does not require that an applicant seek financial assistance from another source before applying for a RRIF loan.  Under the RRIF program, USDOT may defer payments on a loan for up to six years and there is no limit on the amount that can be used for one direct loan or loan guarantee. 

• Chairman Oberstar’s STAA proposal allows federal appropriations to support reduction of the interest paid on direct loans provided to State and local governments, interstate compacts, government sponsored authorities for the purpose of installing Positive Train Control(PTC).
  The Alliance supports this provision be extended to high speed rail projects as defined by federal statute and the Federal Railroad Administration.

• Chairman Oberstar’s STAA proposal allows recipients of direct loans and loan guarantees to pay the credit risk premium over the life of the loan and allows recipients of direct loans and loan guarantees to provide private insurance, including bond insurance, in lieu of credit risk premiums. The Alliance supports this provision.

• The Alliance also supports language to make this program more favorable to HSR projects through modifications of loan terms, such as interest rate and deferral periods.

Build America Bonds. The Build America Bonds program is a financing tool created by the American Recovery and Reinvestment Act to allow state and local governments to obtain funding at lower borrowing costs, for new capital projects such as development of transportation infrastructure, construction of schools and hospitals, and water and sewer upgrades.  Build America Bonds, which are taxable bonds, are designed to appeal to a broader set of investors than traditional tax-exempt bonds. Under the Build America Bonds program, the Treasury Department makes a direct payment to the state or local governmental issuer in an amount equal to 35 percent of the interest payment on the Build America Bonds.  Potential new investors include pension funds that typically do not hold tax exempt bonds and foreign investors.  These investors have been important additions to the market for municipal debt.

• The Build America Bonds program has been extended in legislation. The Alliance seeks eligibility and improved terms for HSR projects in legislation extending the program.

•  The Obama Administration's FY 2011 budget proposes to make Build America Bonds permanent with a 28 percent subsidy rate.  The budget also proposes expanding the eligible uses of Build America Bonds to cover a wider range of municipal borrowing, including original financings for public capital projects, current re-fundings for public capital projects, short-term working capital, and nonprofit 501(c)(3) organization financings. The Alliance seeks to make the program permanent as long as there is eligibility and improved terms for HSR projects.

Support Enactment of Freight Rail Tax Credits

Recognizing the important public interest served by private freight railroads, Congress has enacted tax credits to incentivize short line freight railroad infrastructure investment, and is also considering similar legislation that would establish a new credit for Class 1 railroads and shippers.  Unlike trucks, barges and airlines, U.S. freight railroads operate almost exclusively over infrastructure that they build, maintain and pay for themselves.  Public benefits from freight rail expansion are similar to passenger rail, such as:

• Fuel efficiency: Railroads move a ton of freight an average of 457 miles per gallon fuel.
• Greenhouse gas emissions:  Every ton-mile of freight that moves by rail instead of trucks reduces greenhouse gas emissions by 75% or more
• Highway congestion: A typical train takes the freight of 280 trucks off roads

The Alliance will advance freight and passenger railroad partnerships, recognizing the challenge in developing the “infrastructure that permits emerging high speed rail and freight rail to not only co-exist but to find the synergy to keep both world class, ” as articulated by FRA Administrator Joe Szabo. 

Specifically, the Alliance will lend its support to freight rail tax credit legislation, provided that the tax credit may be used to incentivize freight railroads to invest in capacity which can be shared by high speed passenger trains.

Advocate for $4 Billion Annual Appropriation for High Speed Rail

Interest in high speed rail in the U.S. dates back to the 1960s, but recent steps leading up to, including, and beyond the remarkable $8 billion provided by the American Recovery & Reinvestment Act has reenergized enthusiasm for high speed rail in the country.

In October 2008, Congress passed the Passenger Rail Investment and Improvement Act (PRIIA) of 2008 (Division B of P.L. 110-432). Among other things, this act created a new high speed rail development grant program and authorized a total of $1.5 billion over FY2009-FY2013 for this program. The act also authorized additional funding for Amtrak to address some of the backlog of maintenance needed to bring the Northeast Corridor up to a state of good repair. And the act included a provision directing the USDOT to seek private companies to build and operate one or more high speed lines.  PRIIA authorized the following investments in high speed rail:

• Intercity Passenger Rail Service Corridor Capital Assistance Program (PRIIA §301 or 49 USC §24402)
• $1.9 billion authorized over FY2009-FY2013.

• High Speed Rail Corridor Development Program (PRIIA §501 or 49 USC §26106)
• $1.5 billion authorized over FY2009-FY2013.

• Congestion Grant Program (to alleviate congestion on passenger rail corridors) (PRIIA §302 or 49 USC §24105)
• $325 million authorized over FY2010-FY2013.

In February 2009, Congress passed the American Recovery and Reinvestment Act (P.L. 111-5), in which $8 billion was provided specifically for intercity passenger rail projects, including high
speed rail projects.

In March 2009, the Administration announced that it would ask Congress to appropriate $1 billion annually for high speed rail projects.  The U.S. House of Representatives passed its fiscal year 2010 spending bill with $4 billion included for high speed rail; the Senate version included $1.2 billion.  In the end, the House and Senate agreed to $2.5 billion for high speed rail, and Congress included this amount in the FY2010 transportation appropriations bill which was signed by President Obama in December 2009.

The Alliance will advocate for annual appropriation funding for high speed of $4 billion per year, consistent with the intent of the U.S. House of Representatives in FY2010. The Alliance believes this level of aggressive investment will be crucial to maintaining the existing momentum for the development of high speed rail in America.