Advocates and federal agencies are searching for ways to pay for a rail revolution in the U.S. , even as high and higher speed rail projects are under stress in Florida and California.
"This is an asset class that is really worthy of long-term investment by the private sector," said Sia Kusha, group head, business development & partnering, for Plenary Americas.
"But we need to recognize that it is a public infrastructure, and a public infrastructure needs to be owned by the public sector, from the federal all the way down to the local government."
The comments came on Wednesday during a panel discussion at the High-Speed Rail Conference in Washington, D.C.
Developing a high-speed rail network in the U.S. remains stalled, with the publicly-funded California High Speed Rail project facing major political opposition and Brightline West, which would connect Los Angeles with Las Vegas, struggling to hammer down financing.
Brightline Florida, the country's only privately owned intercity express passenger line, which is technically not high speed, is facing a potential
The House Transportation and Infrastructure Committee remains in the throes of writing a surface transportation reauthorization bill that is expected to include a rail component while trying to beat a Sept. 30 deadline.
The U.S. Department of Transportation is touting the Transportation Infrastructure Finance and Innovation Act, and Railroad Rehabilitation and Improvement Financing loan programs as viable instruments for financing high speed rail while also nodding towards lifting the cap on private activity bonds.
"Everything I'm hearing suggests that on both sides of the aisle, there is agreement that private activity bonds are needed because they promote more private investment," said Morteza Farajian the executive director of the Build America Bureau.
"The fact that we ran out of private activity bonds two years before expiration of Infrastructure Investment and Jobs Act, that's not a negative thing, that's a positive thing. We brought in $30 billion of private investment much faster than what Congress intended us to do."
PABs were deployed in the Brightline Florida project and are being
While using P3's to fund new rail lines is coin of the realm in many countries, the U.S. is still learning the ropes.
"It's hard to underwrite these deals, at least the first few deals, because there are no benchmarks," said Farajian. There's no history. There's no track record that we can use. It kind of reminds me of the express lane market back in early 2000. Very similar challenge, similar situation, similar types of risks."
The private side of the equation balances the risk by taking the long view.
"Most of these contracts are long term," said Kusha. "In case of a high-speed rail 50 to 90 years is not unheard of. Anything less than 50 years is probably a bit short sighted."
While government supported rail programs remain dependent on the uncertainties of appropriations and politics, private firms bake in funding for future capital improvements.
"We develop a renewal program that's factored in over the life of a 30-year contract, so we have certainty," said Michael Mulhern, the chief operating officer for ACI, a transit operating company based in Boston.
"Instead of relying on a public agency to fund our capital needs subject to the discretional whims of the local legislature, we know we have a dedicated funding stream. That's a major advantage for P3 contracts that a traditional Operate and Maintenance contract does not provide you."
Roadblocks to establishing a domestic high speed rail network are myriad but one seems to loom larger than the rest.
"The biggest risks that we worry about is a political risk," said Kusha.
"It's the risk of the public sector owner changing course midstream. These are very long -term contracts. We commit equity, we go to the lending markets, either public or private, and we invest in these programs for the long term."
"Given the politics and the electoral cycles in this country, there's always that risk."
