Surface Infrastructure:

High-Speed Rail Projects in the United States

RCED-99-44: Published: Jan 14, 1999. Publicly Released: Jan 14, 1999.

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Pursuant to a congressional request, GAO reviewed the status of high-speed rail development in the United States, focusing on: (1) project plans for the Florida corridor for which detailed studies on building a new high-speed rail system between Miami, Orlando, and Tampa have begun; (2) the estimated cost, financing, ridership, and schedule for the Florida Overland Express (FOX) rail project; (3) the status of a new federal transportation infrastructure financing program and how federal funding decisions for the FOX project might affect the new program; and (4) the status of other planned high-speed rail corridors in the United States.

GAO noted that: (1) because the Florida project is in the early phases of development, it faces uncertainties; (2) overall, it will be at least 2 more years before sufficient information is available to comprehensively assess the project's cost, financing, ridership, and schedule; (3) the project's current estimated cost ranges from $6 billion to $8 billion, however, the accuracy of the estimate is uncertain because the project is only at a 5-percent level of engineering design; (4) the finance plan, which relies heavily on debt, is incomplete, and the project's sponsors have secured only 5 percent of the estimated needed funding for the project; (5) the ridership forecast for the project relies on optimistic assumptions and could be overstated by 30 percent or more; (6) adjusting the forecast to reflect more conservative assumptions would reduce expected future system revenues and increase risks to the project's financial viability; (7) the project's ambitious schedule calls for the train to begin operating over a 320-mile route in 2005, but several factors will make it difficult to meet this schedule; (8) to help pay for the Florida project's capital costs, the project's sponsors will seek a $2 billion federal loan under the Department of Transportation's new Transportation Infrastructure Finance and Innovation Act program; (9) the Department anticipates issuing regulations and guidance for this program in April 1999 and has not yet funded any projects under the program; (10) under the Federal Credit Reform Act of 1990, the Department must consider a project's risk of default and estimate the cost to the federal government of the credit provided for each project funded through the program; (11) the Transportation Infrastructure Finance and Innovation Act provided a total of $530 million for fiscal years 1999 through 2003 to cover the costs of providing all selected projects with credit; (12) in order to cover the cost associated with a $2-billion loan to the Florida project, the Department may need to obligate over one-half of the program's $530 million; (13) providing the Florida project with a $2-billion federal loan would constrain the Department's ability to fund other projects that are potential candidates for credit assistance; (14) at least 11 other corridors in the United States are in various stages of developing high-speed rail projects; (15) unlike the Florida project, most of the other corridors have not determined their funding sources; and (16) these 10 projects have preliminary cost estimates ranging from $315 million to $4 billion.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In its February 1999 reports to congressional committees and OMB, DOT concurred with GAO's recommendation. DOT stated that it would "carefully evaluate each TIFIA application including capital cost estimates based on detailed plans, financial plans outlining sources and uses of funds, and operating plans showing estimated revenues and other cash flows on an annual basis." In June 1999, DOT issued a final rule detailing the guidelines for the TIFIA program. The rule did not explicitly state that DOD would follow GAO's recommendation. However, in December 1999, a DOT official stated that DOT had evaluated the capital cost estimates, financial plans, and operating plans of each project applying for TIFIA funding, as called for in GAO's recommendation.

    Recommendation: In implementing the Transportation Infrastructure Finance and Innovation Act program, the Secretary of Transportation should direct appropriate Department officials to evaluate the economic feasibility of projects applying for the program's funds.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In its February 1999 reports to congressional committees and OMB, DOT concurred with GAO's recommendation. DOT stated it would "carefully evaluate each TIFIA application including capital cost estimates based on detailed plans, financial plans outlining sources and uses of funds, and operating plans showing estimated revenues and other cash flows on an annual basis." In June 1999, DOT issued a final rule detailing the guidelines for the TIFIA program. The rule did not explicitly state that DOT would follow GAO's recommendation. However, in December 1999, a DOT official stated that DOT had evaluated the capital cost estimates, financial plans, and operating plans of each project applying for TIFIA funding, as called for in GAO's recommendation.

    Recommendation: Before providing a substantial amount of federal dollars to projects, such as the FOX project, the Secretary of Transportation should obtain and independently evaluate information including: (1) a capital cost estimate based on detailed engineering plans; (2) a finance plan that is based on the detailed cost estimate and that specifies the source and security of all public and private-sector financial commitments; and (3) an operating plan that enumerates the project's future revenues and assesses the risks to the federal credit instrument should revenues be lower than projected.

    Agency Affected: Department of Transportation

  3. Status: Closed - Not Implemented

    Comments: In its February 1999 reports to congressional committees and OMB, DOT concurred with GAO's recommendation. According to the TIFIA Final Rule, issued in June 1999, the environmental review process must be completed before funds are obligated or distributed. However, the rule allows DOT to set funds aside for particular projects, and inform project managers that it has done so, with the provision that the projects must complete the environmental review before the funds are obligated. Because DOT will not obligate those funds to other eligible projects, the rule enables DOT to tie up limited TIFIA funds on projects that may need several years to complete their environmental reviews. In addition, making funding commitments prior to completing the environmental reviews could be seen as an endorsement of the construction project, and be viewed as pre-judging the environmental review process.

    Recommendation: The Secretary of Transportation should ensure that the environmental review process has been completed before it makes substantial Transportation Infrastructure Finance and Innovation Act program funding commitments.

    Agency Affected: Department of Transportation

 

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