FRA Offers National Plan With Alternative Financing

The Federal Railroad Administration last week released an early draft of a national rail plan that includes alternative-financing strategies that could involve bonds.

The preliminary national rail plan praised the Kansas City Flyover and the Alameda Corridor as successful public-private partnerships. The FRA pointed out that the corridor was paid for in part by user-fee backed government financing. Currently, such public rail infrastructure projects are eligible for private-activity bond financing.

The long-range plan that the administration is developing for high-speed rail “will consider methods of identifying ... projects of national significance and propose financing mechanisms,” the draft plan said. “In addition, the plan will evaluate alternative strategies for financing freight and passenger rail needs.”

The plan did not detail which alternatives would be considered, but the National Surface Transportation Infrastructure Financing Commission earlier this year recommended that Congress consider authorizing tax-credit bonds to pay for rail projects.

An earlier report by the National Surface Transportation Policy and Revenue Study Commission said options should include a tweaked private-activity bond program that would remove the requirements for other federal funding and for the Federal Highway Administration to be the lead agency on the projects. Instead of providing a new revenue source, the program changes would be stimulative — increasing the issuance of PABs to finance rail projects, the commission said.

The FRA was required to develop the rail plan by the Passenger Rail Investment and Improvement Act that was enacted one year ago, preceding the $8 billion high-speed rail funding provided by this year’s American Recovery and Reinvestment Act. The PRII act is among the legislation that Congress approved in the past year to give the FRA more responsibility over funding of rail transportation. The act also directs it to help states develop their own rail plans in accordance with the federal plan.

Currently, there are two types of rail systems: privately owned and operated freight rail, and publicly subsidized passenger rail such as Amtrak.

“Most passenger service, however, occurs on rail infrastructure that is owned and operated by freight railroads; only a small amount of rail infrastructure is owned by passenger carriers,” the FRA’s report said. More than 20 commuter rail systems funded by all levels of government serve 25 major metropolitan areas, according to the report.

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Transportation industry Washington
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