WASHINGTON — Executives of two rail organizations that rely on municipal bonds to finance some projects told international advisory firm KPMG that getting stakeholders and policymakers to buy into and embrace a cultural shift will be key to successfully financing large fast-rail networks.
In a report, “High Speed: The View from the North East and South West,” released this week by KPMG, Amtrak and California High Speed Rail Authority executives, who were not identified, spoke candidly about the future of financing high-speed rail.
When pressed about what the appetite is for high-speed rail in a country that has been far behind many other developed nations in embracing that mode of transit, both admitted to difficulties in selling the idea to potential investors.
“Most mass transit systems in existence today are generally highly subsidized, but this is not the case with high-speed rail in various parts of the world,” a CHSRA official said. “It’s really a very attractive investment opportunity and economically viable, at least from an operations perspective. That’s been very hard for Americans to understand.”
“Absolutely,” an Amtrak official added. “I think the hard part is not only painting that picture, but then connecting actions to it — taking that broad idea and turning it into investment.”
The federal government was eager to invest in high-speed rail in the early days of the Obama administration, granting $8 billion for development in California, Florida and the Midwest.
But after Florida Gov. Rick Scott refused to accept $2.4 billion earmarked for his state, and the California project — with a business plan that features $2.7 billion of tax-exempt bonds — experienced widely fluctuating cost estimates, Republicans in Congress have been eager to put on the breaks.
During the February deliberation of legislation sponsored by House Transportation Committee chairman John Mica, R-Fla., to reauthorize federal surface transportation spending, Rep. Jeff Denham, R-Calif., successfully attached an amendment that would block federal funds from the California project. That could still be an issue during the current House-Senate conference committee working on a final transportation bill.
Last month, House Oversight Committee chairman Darrell Issa, R-Calif., announced a probe into the CHSRA because of those varying estimates as well as allegations of possible conflicts of interest on the authority’s board of directors.
U.S. Transportation Secretary Ray LaHood has said he envisions high-speed rail will be delivered by public-private partnerships, something Amtrak and the CHSRA said could come to pass after a change in American attitudes. The report notes that some European projects have found success with P3s, such as rail stations in France and Spain delivered in tandem with private investors.
“Certainly there will need to be a cultural shift, but that is already underway,” the Amtrak official told KPMG.
“The U.S. tends to make shorter-term project decisions,” the CHSRA official said, “whereas high-speed rail spans many political election cycles.”