United States General Accounting Office

GAO Report to the Chairman, Committee on

the Budget, House of Representatives

January 1999 SURFACE

INFRASTRUCTURE

High-Speed Rail

Projects in the United

States

GAO/RCED-99-44

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-280830 

January 14, 1999

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

Dear Mr. Chairman:

High-speed rail systems that travel 90 miles per hour or more are a

common mode of ground transportation throughout Europe and Japan.

The systems in operation have proven to be a relatively safe and effective

means of transportation. Most systems receive some operating or capital

subsidies from their governments. While high-speed rail is not in

widespread use in the United States, these systems may be an effective

alternative in corridors where travel is increasing and it is difficult to

expand highway and airport capacity. However, high-speed rail systems

are costly, and thus ridership levels may not be high enough in the United

States for systems to cover their costs.

Concerned about the role that federal financial assistance might play in

developing such systems, you asked us to review the status of high-speed

rail development in the United States. In particular, you asked us to focus

on 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. Sponsors for the project, known as the Florida

Overland Express (FOX) project, will request significant federal capital

assistance in the near future. This report provides information on (1) the

estimated cost, financing, ridership, and schedule for the FOX rail project;

(2) 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 (3) the status of other planned high-speed rail

corridors in the United States. To respond to these objectives, we

reviewed cost, finance, ridership, and schedule documents on the FOX

project; interviewed federal officials on the new infrastructure financing

program; and interviewed state officials responsible for 11 other potential

high-speed rail corridors in the United States.

Results in Brief Because the Florida project is in the early phases of development, it faces

uncertainties. 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. First, the project’s current estimated

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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. Second, 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. Third, the ridership forecast

for the project relies on optimistic assumptions and could be overstated by

30 percent or more. Adjusting the forecast to reflect more conservative

assumptions would reduce expected future system revenues and increase

risks to the project’s financial viability. Finally, 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. For

example, the sponsors assume they can complete a very complex

environmental review in 2.6 years—a process that we have reported takes

on average over 5 years to complete.

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. The Department anticipates issuing regulations

and guidance for this program in April 1999 and has not yet funded any

projects under the program. The program was created to help large

infrastructure projects—those costing at least $100 million or 50 percent

of a state’s federal-aid highway apportionment for the preceding fiscal

year—access capital by providing credit assistance through secured loans,

lines of credit, or loan guarantees. Recipients of the program’s funds must

repay the assistance, in whole or in part, from a dedicated revenue stream

such as tolls. 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. 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. 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. 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.

At least 11 other corridors in the United States are in various stages of

developing high-speed rail projects. Unlike the Florida project, most of the

other corridors have not determined their funding sources. Most of the

corridors are in the early stages of project planning, but officials in

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Amtrak’s Northeast corridor—between Washington, D.C., and

Boston—have been upgrading their system for several years, and officials

in the Pacific Northwest corridor—between Vancouver, British Columbia,

and Eugene, Oregon—have bought high-speed trains and plan to upgrade

their track. Ten of the 11 corridors have proposed upgrading track, signal

systems, and train equipment on existing rail rights-of-way, thereby

obtaining incremental increases in train speeds. These 10 projects have

preliminary cost estimates ranging from $315 million to $4 billion. In

contrast, officials in the California corridor have proposed a new

dedicated rail line employing either very-high-speed or magnetic levitation

technology. California’s preliminary proposal could cost as much as

$29 billion.

Background High-speed ground transportation, which includes rail or magnetic

levitation (maglev) systems capable of speeds of 90 miles per hour (mph)

or more, could be developed in a number of ways. System developers can

(1) make incremental improvements to existing tracks, signaling systems,

and grade crossings and purchase modern trains that could permit speeds

between 90 and 150 mph on existing rights-of-way; (2) build completely

new rail infrastructures to support very-high-speed operations of 200 mph

or more; or (3) build maglev systems that could permit speeds around 300

mph. Typically, the cost to implement these options grows as the

sophistication of the technology and speed increase.

Since 1975, most federal funding for high-speed rail development in the

United States has been focused on making infrastructure improvements to

Amtrak’s Northeast corridor. However, high-speed rail corridors across

the United States may have access to federal funds through the

High-Speed Rail program, the Magnetic Levitation Transportation

Technology Deployment program, the Railroad Rehabilitation and

Improvement Financing program, and the finance provisions under the

Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA)

program. The TIFIA program is designed to help large infrastructure

projects—those costing at least $100 million or 50 percent of a state’s

federal-aid highway apportionment for the preceding fiscal year—access

capital by using federal funds to leverage substantial private investment.1

TIFIA authorizes the Secretary of Transportation to make secured loans,

loan guarantees, and lines of credit available to eligible projects that will

repay the assistance, in whole or in part, from dedicated revenue streams,

1

The act establishes a lower threshold—$30 million—for projects that principally involve the

installation of intelligent transportation systems—computer and telecommunications technologies

designed to enhance the safety and efficiency of surface transportation.

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B-280830 

such as tolls or passenger fares. TIFIA requires the Secretary of

Transportation to establish criteria for selecting projects and includes

general selection criteria such as whether a project is creditworthy and

nationally or regionally significant and whether the use of federal funds

would expedite implementing the project.

The three credit instruments under TIFIA—secured loans, loan guarantees,

and lines of credit—can be used to fund up to one-third of the costs of a

project. A secured loan would typically provide the project’s sponsors with

an infusion of capital needed to help pay for construction costs. The loan

would have to be payable, in whole or in part, from some form of

dedicated revenue and would typically be subordinate to other project

debt. In general, TIFIA loans are contingent on the receipt of an

investment-grade rating for a project’s senior debt.2

 This measure helps

ensure that the project is creditworthy. The second type of instrument,

loan guarantees, involves a pledge by the Secretary to pay all or part of the

principal of and interest on a loan or other debt obligation of the project. A

loan guarantee would help a project obtain capital by providing added

security to the debt. Finally, a line of credit is an agreement made by the

Secretary to provide a project with a secured loan, if needed, during a

project’s initial 10-year operating period.

One project that plans to use very-high-speed French train a grande vitesse

(TGV) technology and obtain TIFIA funding is FOX.

3

 The FOX system would

link Miami, Orlando, and Tampa, cover 320 miles, and have seven stops

along the route. Proponents of the system believe high-speed rail is needed

to alleviate the future highway and airport congestion that will be caused

by the anticipated growth in Florida’s population and tourism. Trains

could reach speeds of up to 200 mph, and the system would have no

ground-level pedestrian or vehicle crossings. To help design, construct,

and operate the system, the Florida Department of Transportation (FDOT)

entered into a system franchise agreement in 1996 with the FOX

consortium. The FOX members include Fluor Daniel, a U.S.-based

engineering and construction firm; Alstom, the manufacturer of French

TGV trains; and Bombardier, a manufacturer of rail passenger cars. The

franchise agreement between FDOT and FOX (collectively referred to as the

project’s sponsors) calls for a public-private partnership to plan, design,

build, operate, and finance the system.

2

Under TIFIA, the Secretary may provide limited funding before a project receives an investment-grade

rating for its senior debt obligations.

3

The TGV is an electric train operating in France. In commercial service, it runs at a maximum speed of

186 mph.

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The FOX Project Faces

Several Challenges

The FOX project is in the early phases of development and faces several

uncertainties regarding its cost, financing, ridership, and schedule. The

project’s sponsors are developing the detailed information needed to

assess whether the high-speed rail project is viable. It will be at least 2

more years before sufficient information is available to comprehensively

assess the project.

Preliminary Cost Estimates

Range From $6 Billion to

$8 Billion

FOX’s engineer responsible for developing the cost estimate stated that the

capital cost to construct the project may range from $6 billion to $8 billion

(in 1997 dollars). This range reflects up to 54 potential route options for

the new track under study in the environmental review process. Both FDOT

and FOX officials stated that the estimates are preliminary because they are

based on only a 5-percent level of design. These officials noted that by the

end of 2000, the project will be at a 35-percent level of design, and

therefore the cost estimate available at that time will be more precise.

The project’s sponsors were unable to provide us with a detailed line-item

breakout of the project’s high and low cost estimates, nor were they able

to provide detailed documentation explaining the $2 billion difference

between the estimates. However, according to FOX’s engineer, the

$2 billion range reflects whether track for the various alignments must be

elevated to cross roads and rivers and the degree to which the alignments

can use existing rights-of-way. In general, the $8 billion estimate assumes

an alignment from Miami to Orlando that traverses urban areas on the east

coast, using a significant amount of elevated track to avoid over 100 grade

crossings and cross several rivers. In contrast, the $6 billion estimate

assumes a more westerly alignment that requires less elevated track and

uses more state-owned rights-of-way along interstate highway corridors.

To develop more precise estimates over the next 2 years, FOX engineers

will take field measurements to either validate or adjust the earlier

conceptual estimates, according to FOX’s engineer. Engineers will perform

such tasks as taking instrument surveys to get actual measurements of

potential alignments, calculate the alignments’ grades and curvatures,

determine soil conditions, and determine the exact nature of any bridge

clearance problems. When completed by the end of 2000, this detailed

engineering work will provide FOX with a 35-percent level of design—a

level that will give FOX sufficient information to agree with FDOT on a

fixed-price construction contract for building the system.

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To help ensure the accuracy of the FOX estimates, FDOT officials have hired

an independent engineering consultant to review the estimates. The initial

review is focusing on the methods that FOX used to develop the current

cost estimates. The review will report on whether FOX used

industry-accepted estimation techniques and whether the estimates cover

all capital cost components. It will also include spot audits of FOX’s

estimates for quantities and unit prices. FDOT officials said that they would

continue to use independent engineering reviews throughout the cost

estimation process.

The Project’s Financing Is

Incomplete

In developing their finance plan, the project’s sponsors have assumed that

the FOX system will cost $6.3 billion (in 1997 dollars) to build. The project’s

sponsors are seeking federal, state, and private funds to finance these

capital costs. As of December 1998, they had secured only $436 million in

financing and faced significant challenges in securing the remaining funds

needed to build the project.

As figure 1 shows, the project’s sponsors expect to use state infrastructure

bonds and system infrastructure bonds—bonds backed by the state and

future system revenues, respectively—and a $2 billion federal loan to pay

for about 81 percent of the project’s financing needs. State cash

contributions prior to issuing the bonds, contributions from the FOX

consortium, private debt financing for the train equipment, and other

income sources make up the rest of the project’s financing.

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Figure 1: Sources of Funds for the

FOX Project

23% • State infrastructure bonds ($2.146

billion)

36% • System infrastructure bonds

($3.346 billion)

22%•

Federal loan ($2.0 billion)

•

3%

State-contributed equity ($256

million)

•

4%

FOX consortium-contributed equity

($349 million)

•

6%

Train equipment financing ($569

million)

•

6%

Interest earnings and balances

($588 million)

Source: GAO’s presentation of data from FDOT.

The project’s sponsors would rely on four sources of debt financing to

raise most of the needed funding. One source of debt financing would be

state infrastructure bonds. These bonds would be tax-exempt and backed

by a dedicated state committment of $70 million per year for 40 years,

adjusted for inflation at 4 percent per year, beginning in 2001. The

project’s sponsors anticipate that the bonds will have a 30- to 35-year

maturity, with an interest rate of 6.67 percent. A second source of debt

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financing would be system infrastructure bonds. These bonds would be

tax-exempt and secured by a senior lien on net system revenues. A senior

lien means that bondholders would have the first claim on available

revenues after the payment of annual operating costs, principal, and

interest payments on train equipment debt and a portion of FOX’s return on

equity.4

 The project’s sponsors anticipate that the bonds will have a 30- to

35-year maturity, with an interest rate of 6.67 percent. A third source of

debt financing would be private-sector financing for most of the train

equipment. Sponsors are considering using either a lease or private bonds.

The train equipment would secure the debt, and repayment of the debt

would have the first claim on system revenues available after the project

pays its annual operating costs. Finally, the fourth source of debt financing

would be a $2 billion federal loan secured by a junior lien on the net

system revenues. A junior lien means that the federal government would

have the last claim on revenues and would be repaid after the project pays

the annual operating costs, train equipment debt service, a portion of FOX’s

return on equity, and system infrastructure bondholders.5

The remaining funds will come from equity contributions made by the

state and FOX, project balances, and interest earned on those balances.

State equity consists of state contributions made before the state

infrastructure bonds are issued. The FOX equity contributions include

$58 million to pay for project development and $291 million to pay for

some of the trains. The project’s funding balances and interest earnings

amount to $588 million.

In total, the sponsors must secure nearly $9.3 billion to finance the $6.3

billion in initial capital costs. According to the project’s sponsors, the

financing needs exceed the estimated capital costs by about $3 billion

because the project must account for inflation, pay interest on state and

system infrastructure bonds during the construction period, establish

reserve funds required by bondholders, and cover the costs of issuing the

bonds. As of December 1998, the project’s sponsors had secured

commitments for about $436 million—$349 million from the FOX

consortium and about $87 million from the state of Florida. Over the next

2 years, the project’s sponsors will have to secure the remaining

funding—about $8.8 billion. Should the cost estimates increase as the

sponsors complete more detailed engineering, FDOT’s financial manager for

4

A November 1996 agreement between FDOT and FOX stipulates that FOX receive, on average, a

proposed 15-percent yearly after-tax return on its $349 million equity investment. The agreement also

provides that a partial return on equity of $28.5 million each year be paid to FOX before the project

makes any payments to system infrastructure bondholders.

5

Under TIFIA, a secured federal loan would not be subordinate to claims from other project

obligations in the event of bankruptcy.

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B-280830 

the project stated that the sponsors would likely issue more bonds or

work with bond issuers to lower reserve funding requirements.

The Project Must Meet

Several Financing

Challenges

The project’s sponsors face several challenges in obtaining the nearly $8.8

billion in estimated additional funding needed for the project. The major

challenges include issuing two sets of bonds on favorable terms and

obtaining the federal loan. To issue about $5.4 billion in state and system

infrastructure bonds, sponsors must convince the bond market that the

project will have sufficient state and operating revenues to repay the

bonds. To do this, sponsors must demonstrate that the state legislature

will support a $70 million yearly funding commitment for 40 years and that

the ridership estimates and revenue projections are valid. To obtain the

$2 billion federal loan, the sponsors must also show that the project meets

the criteria for assistance under TIFIA and deserves funding.

Challenges in Issuing State and

System Infrastructure Bonds

The project’s sponsors must convince the bond market that the state and

system infrastructure bonds are a good investment. Potential investors will

be more likely to buy the bonds if the bonds provide competitive returns

on investment and if the project has a reliable source of revenue to pay

back the principal and interest. According to FDOT officials, the state will

provide $70 million each year for the next 40 years to secure the

$2.1 billion in state infrastructure bonds. In addition, future operating

revenues will secure the $3.3 billion in system infrastructure bonds.

FDOT’s lead attorney for the project stated that in early 2000, FDOT will seek

the state legislature’s commitment to provide the $70 million in annual

funding. The state’s commitment is uncertain, however, because several

members of the legislature have raised concerns about the project and the

state’s new governor has indicated skepticism about the project. In

addition, should the legislature approve the 40-year funding commitment,

FDOT must still obtain an annual appropriation. FDOT’s lead attorney for the

project stated that the legislature has appropriated funds for other

transportation projects that were previously authorized and that he viewed

the risk of not obtaining the appropriation as minimal.

In contrast to the state infrastructure bonds, the system infrastructure

bonds will not be backed by a known amount of revenue. Instead, these

bonds will be backed by operating revenues, which can fluctuate each

year depending on the success of the system. On the basis of a 1998 FOX

ridership study, the project’s sponsors forecast that system revenues will

be sufficient to repay the principal and interest on $3.3 billion in system

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B-280830 

infrastructure bonds. The sponsors are confident that bond-rating agencies

will accept the revenue estimates and are planning to provide them with

the cost, ridership, and revenue information needed to assess the bonds’

creditworthiness and to thereafter issue a bond rating. FDOT’s financial

manager for the project does not anticipate issuing state or system

infrastructure bonds until cost estimates are more precise and the amount

of bonds needed is better known. The current plan is for the project’s

sponsors to receive a preliminary opinion from rating agencies in 1999 and

obtain a final rating and issue the bonds in 2001.

Our discussions with officials from three bond-rating agencies—Moody’s

Investors Service, Standard and Poor’s, and Fitch IBCA—revealed that

these agencies have little detailed information about the FOX project. Of

the three, Fitch’s officials had the most knowledge of the project. Fitch

officials told us that, in general, bond-rating agencies have little or no

experience reviewing high-speed rail projects, but when asked to rate the

project’s proposed bonds, they will focus on the reliability of the ridership

estimates and other important factors in assessing the project’s revenue

projections. On the basis of preliminary observations, one Fitch official

stated that some of the assumptions used in the ridership study were

optimistic and that the overall ridership estimate could be high. However,

Fitch officials said it was too early to make any definitive statement about

potential bond ratings for the project.

In addition to the ridership estimates, another factor that may affect the

rating for the system infrastructure bonds is the order in which the project

will pay its obligations. According to the November 1996 agreement

between FOX and FDOT, the project must first cover its operating costs,

principal and interest payments for the debt-financed train equipment and

pay the FOX consortium a partial return on its investment before it pays

back system infrastructure bond investors. This agreement subordinates

the system infrastructure bondholders’ claims on revenues and thereby

makes the bonds less secure. FDOT’s financial manager for the project

stated that this agreement may make the system infrastructure bonds

riskier to potential investors and therefore more difficult to sell. Our

discussions with Fitch officials also revealed that potential bondholders

would consider the structure of the FDOT and FOX agreement as something

that adds risks to the bonds.

Challenges in Obtaining a

Federal Loan

The project’s sponsors intend to seek a $2 billion federal loan from the

U.S. Department of Transportation under the new TIFIA program. The

sponsors cited language in the Transportation Equity Act for the 21st

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B-280830 

Century (TEA-21) conference report as evidence of federal support for the

project. The conference report noted the national significance of the FOX

project and suggested that the Department favorably review the project’s

request for TIFIA funds as long as it meets the program’s criteria. The

project’s sponsors intend to apply for a TIFIA loan as soon as the

Department begins soliciting project applications. The sponsors anticipate

a favorable preliminary decision by the Department by fall 1999. However,

unanswered questions regarding the TIFIA program, the bond market’s

views of the project, and the impact of a single $2 billion loan on the TIFIA

program could have an impact on the timing and outcome of the

Department’s funding decisions.

As of January 1999, the Department was developing regulations to

implement the TIFIA program, including the criteria it will use to select

projects. The regulations and selection criteria will affect the FOX project.

For example, during a September 1998 outreach session on the TIFIA

program, an official from the Department said that TIFIA funds may not be

forthcoming for projects that have not completed the environmental

review process. If this criterion is part of the Department’s TIFIA

regulations, the FOX project would be unable to receive a commitment for

TIFIA capital assistance until it completes its environmental review,

projected for the end of 2000. In addition, TIFIA requires that a project’s

sponsors provide a preliminary rating letter from at least one bond-rating

agency indicating that the project’s senior obligations have the potential to

achieve an investment-grade rating. An investment-grade rating indicates a

relatively low probability of default. Until the project develops firmer cost

and financing estimates for bond-rating agencies to review, a preliminary

rating for the FOX project may not be forthcoming. Furthermore, TIFIA

requires that, when selecting projects, the Department consider the

amount it must obligate to fund the credit assistance. As discussed later in

this report, providing the FOX project with the full $2 billion loan would

require the Department to obligate a significant amount of the program’s

available funding and would limit the funds that the Department has

available to fund other projects through TIFIA.

Lower Ridership May

Affect the Project’s

Financing

The FOX project’s sponsors forecast that the system will carry 8.26 million

passengers in 2010. From our analyses of the ridership study data, an

independent review of the ridership forecast, and other data we found that

the ridership forecast for the project may be overstated by 30 percent or

more because it relies on optimistic assumptions. Using more conservative

assumptions could reduce the ridership forecast to 5.59 million passengers

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or fewer in 2010. Because lower ridership would reduce the amount of fare

revenues that the system is expected to generate, revising the forecast

could affect the debt rating needed to obtain private capital and the

federal loan.

Project’s Sponsors Forecast

8.26 Million Passengers in 2010

Official forecasts prepared for the proposed FOX system have estimated

that the project’s ridership could range from 8.01 million to 8.50 million; a

consensus average is 8.26 million passengers in 2010.6

 Table 1 shows the

estimated number of annual FOX high-speed rail riders in 2010, categorized

by the sources of the riders.

Table 1: Annual Ridership Forecasts

for the FOX Project, 2010 Consensus average Sources of

FOX

passengers

KPMG Peat

Marwick’s

estimate

SYSTRA’s

estimate Number Percentage

Diverted from

automobiles 4,509,000 3,996,000 4,253,000 52

Transfer through

code-share

agreement with

airlinesa 1,476,000 1,477,000 1,477,000 18

Induced 865,000 1,787,000 1,326,000 16

Diverted from

intrastate flights 1,158,000 1,244,000 1,201,000 15

Total annual

riders 8,008,000 8,504,000 8,256,000

Note: Totals may not be precise because of rounding.

aA code share, or code sharing, is an agreement between passenger carriers whereby one

carrier (in this case, the airline) purchases seats on selected routes on another carrier (FOX, in

this case) and markets these FOX seats as it would market an airline flight. Under such an

agreement, the airline ticket would cover air transportation, a seat on FOX, and necessary

baggage handling.

Source: GAO’s presentation of data from FOX, KPMG Peat Marwick, and SYSTRA.

As table 1 shows, the project’s sponsors expect that over 50 percent of the

high-speed rail riders will be people who would otherwise use automobiles

to travel along the Tampa-Orlando-Miami corridor. The next largest source

of riders is from the air transfer market, that is, those travelers who fly for

one portion of their trip, but through a code-share agreement between FOX

6

The project’s sponsors hired two firms to produce independent ridership forecasts for the project.

These firms were KPMG Peat Marwick and SYSTRA, a French transportation consulting firm. Both of

these companies have extensive experience in producing high-speed rail ridership forecasts. Each firm

produced a forecast; officials then averaged the two estimates to arrive at an official agreed-upon

ridership forecast.

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and an airline, are expected to transfer to or from FOX to reach their

destination. The project’s sponsors also forecast that the new high-speed

rail service will induce 1.3 million new trips in the corridor that otherwise

would not have been taken if high-speed rail were not available. The

remaining 1.2 million riders would be diverted from the local air

market—those air trips that have their origins and destinations within the

high-speed rail corridor.

Alternative Assumptions Could

Produce a Significantly Lower

Ridership Forecast

Experts in travel demand forecasting acknowledge that forecasting

ridership for high-speed rail is difficult and that the results depend upon

future assumptions that may or may not become reality. The ridership

forecast is extremely important because it provides the basis for

determining the expected revenues of a system and whether a system can

be financially viable. On the basis of our review of an independent report

on the ridership forecasts, actual average airfare data from the

Department, the Federal Railroad Administration’s (FRA) estimates of

induced travel—new travel made solely because a transportation system

exists—and our interviews of airline industry officials, we concluded that

the FOX ridership forecast is too high because some of the assumptions

used to prepare the ridership studies were optimistic. Using alternative

scenarios based on less optimistic assumptions could produce a ridership

estimate of 5.59 million or lower in 2010. Table 2 summarizes the results of

our analysis of how less optimistic assumptions about the air transfer

market, lower airfares, and induced or new travel could reduce total

ridership estimates for the FOX system.

Table 2: Effect of Less Optimistic

Assumptions on Ridership Thousands of passengers in 2010

Calculation of less

optimistic forecast

Reduction from

KPMG Peat

Marwick’s

Forecast

Reduction from

SYSTRA’s

forecast

Average

reduction from

forecasts

Original KPMG Peat

Marwick and SYSTRA

forecasts 8,008 8,504 8,256

Assume no transfers

through airline agreements –1,476 –1,477 –1,477

Assume lower airfares –60 –761 –410

Assume lower rate of

induced travel –298 –1,263 –781

Revised forecast 6,174 5,003 5,589

Note: Totals may not be precise because of rounding.

Source: GAO’s analysis, based on data from FOX, KPMG Peat Marwick, SYSTRA, and the

Department.

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First, the ridership forecasts for the FOX project assume that nearly

1.5 million passengers will be supplied to the FOX system by airlines

operating in Florida markets. The assumption is that some airlines with

hubs in Miami and Orlando will establish code-share agreements with FOX,

thereby transferring short-haul intrastate air passengers to FOX so the

airlines can maximize revenues on long-haul flights. For example, the

ridership forecasts assume that through a code-share agreement,

passengers flying to Miami or Orlando could transfer to the FOX system to

reach another Florida destination in the high-speed rail corridor. An

independent review of the ridership forecasts completed by Wilbur Smith

Associates found that this assumption was unverified, and questioned the

entire forecast of passengers transferring through airline agreements.7

 In

addition, officials from American Airlines, Delta Airlines, the Air Transport

Association, and the Miami International Airport told us that airlines

would not be interested in establishing a code-share agreement with a

competitor such as high-speed rail. Accordingly, they contended that the

forecast for passenger transfers through code-share agreements was

unsupported. Without passengers from the air connect market, the FOX

ridership forecast is reduced by about 1.47 million passengers. (See table

2.)

Second, the FOX ridership forecasts assume that some air passengers will

choose FOX instead of air travel in local air markets. To divert these

passengers, FOX’s fares must be comparable with airfares. However,

average 1997 airfares actually charged were generally lower than the fares

assumed by the FOX ridership forecasts.8

 This assumption could lead to an

overestimate of the number of travelers who would use FOX instead of

flying. The actual airfares charged by airlines in 1997 were, in some cases,

21 percent less than the airfares assumed in the ridership forecasts. For

example, in the Fort Lauderdale-to-Orlando market, the ridership forecasts

assumed an average one-way airfare of between $62 and $66, while the

actual average airfare according to the Department’s data, was $52. In

addition, FOX’s forecast assumed that airfares would remain constant in

real terms from 1997 through 2010. However, officials from one major

airline stated that they would likely reduce fares in response to the

introduction of high-speed rail service. Furthermore, the Department has

found that over the past few years, established airlines have responded to

7

Wilbur Smith Associates is a transportation consulting firm that has conducted numerous high-speed

rail forecasts both in the United States and abroad. Wilbur Smith Associates was hired by the Florida

Transportation Commission, an organization that oversees FDOT, to review the ridership forecasts.

Wilbur Smith Associates issued its report in August 1998.

8

The ridership forecasts used 1997 airfare data to help make the 2010 ridership estimate.

Page 14 GAO/RCED-99-44 High-Speed Rail Projects in the United States
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the entry of a new competitor by selling large numbers of seats at low

fares.

In preparing their ridership estimates, both KPMG Peat Marwick and

SYSTRA developed alternative scenarios that were based on lower

airfares. KPMG Peat Marwick found that a 20-percent decrease in assumed

airfares would reduce total high-speed rail ridership by 60,000 passengers,

while SYSTRA found a 20-percent reduction in airfares would lead to

761,000 fewer high-speed rail passengers. We used these numbers to

reflect the effect of more conservative assumptions on ridership. (See

table 2.)

Third, the forecasts of passengers using the FOX system because of induced

or new demand may also be optimistic. KPMG Peat Marwick’s and

SYSTRA’s estimates for induced demand represent 11 and 21 percent of

total forecast ridership on the FOX system, respectively. The consensus

estimate—an average of the two forecasts—projects that 16 percent of the

total riders will be induced travelers. However, Wilbur Smith Associates

expressed concern about the amount of induced travel that the FOX system

will actually produce. In addition, a 1997 FRA report noted that estimates of

new demand are controversial because little historical information exists;

defining and quantifying such demand is methodologically difficult.9

 The

FRA study assumed that the new or induced demand generated by

high-speed rail service would equal 10 percent of the traffic diverted from

local air and automobile travel. Using FRA’s assumption for induced traffic,

KPMG Peat Marwick’s estimate would be reduced by 298,000 passengers,

while SYSTRA’s estimate would be reduced by 1.26 million passengers.

(See table 2.)

Finally, the consensus ridership forecast also predicts that over 4.2 million

passengers—52 percent of the total FOX ridership—will use the FOX system

instead of automobiles. In its independent review report, Wilbur Smith

Associates stated that the ability of a new high-speed rail system to cause

travelers to choose it rather than to travel by automobile has not yet been

proven in the United States. The report stated that while the level of

diversion forecast by FOX could occur, lesser rates of diversion from

private automobiles are also possible, which would result in lower

ridership. Although we did not attempt to quantify the impact of a more

conservative assumption regarding diversion from automobiles on the

overall ridership forecast, reductions in this rate of diversion could reduce

9

High Speed Ground Transportation for America, U.S. Department of Transportation, Federal Railroad

Administration (Sept. 1997).

Page 15 GAO/RCED-99-44 High-Speed Rail Projects in the United States
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ridership below the 5.59-million-passenger forecast resulting from the

analyses shown in table 2.

The Uncertainty in Ridership

Estimates Increases Risks to

the Project’s Financial Viability

Lower ridership would reduce the fare revenues the FOX system generates.

Lower fare revenues, in turn, would affect the project’s ability to repay its

infrastructure bonds and the federal loan. On the basis of their current

ridership estimate of 8.26 million passengers in 2010, the project’s

sponsors predict that fare revenues will be sufficient to pay all operating

costs and to repay bondholders and the federal government. However, if a

lower ridership estimate, such as 5.59 million, is used, it is not clear

whether the project can meet all of its obligations, given the lower fare

revenues that would result. On the basis of the 8.26-million-passenger

estimate, sponsors anticipate that revenues will be 1.5 times the principal

and interest requirements for the system infrastructure bonds and 1.3 to

1.4 times the principal and interest requirements for the federal loan.

The FOX project’s sponsors are in the process of analyzing financial

scenarios and preparing updated cash flow statements. If the updated cash

flow statements indicate that debt service payments are potentially in

jeopardy, the bond-rating agencies have indicated that they will be less

inclined to provide the project’s senior debt obligations with the

investment-grade debt rating that is necessary for participation in the TIFIA

program. In addition, a lower rating for project debt would increase future

interest costs for the project.

The Project’s Schedule Is

Ambitious

The FOX project is currently in the preliminary engineering stage of

development; therefore, many tasks must be completed before

construction can begin in 2001. Staying on schedule will require

completing an extensive environmental review process,10 securing needed

financing, passing several pieces of state legislation, and finalizing federal

high-speed rail safety standards in a timely manner. The project’s sponsors

do not have direct control over these matters, and staying on schedule will

be challenging.

An August 1996 agreement between FDOT and the FOX consortium sets out

three phases for developing the FOX system prior to construction—the

preliminary phase, the certification phase, and the final design phase.11

10We use the phrase “environmental review process” to collectively refer to review processes required

by the National Environmental Policy Act and the Clean Water Act (concerning wetlands permits).

11During the certification phase, the project’s sponsors must ensure that the project completes various

requirements, including federal, state, and local environmental requirements.

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The preliminary phase runs through January 31, 1999. During this phase,

the project’s sponsors will refine the project’s concept, identify proposed

alignments, refine capital cost estimates, and develop finance plans. Prior

to January 31, 1999, FDOT and FOX must jointly assess the prospects for

successful system development and decide whether they should continue

the project and enter the certification phase. If they decide to terminate

the project, a November 1996 agreement requires FDOT to reimburse FOX

for eligible costs incurred through the preliminary phase, or about

$5.59 million. If the sponsors choose to proceed beyond the preliminary

phase and complete remaining tasks on schedule, construction could

begin in 2001. According to the current schedule, the construction of the

Miami-to-Orlando segment would take about 4 years, and revenue

operations on that segment would begin in 2005. Revenue operations on

the Orlando-to-Tampa segment would begin in 2006.

The project’s sponsors face many challenges in keeping the project on

schedule. The environmental review could pose a significant challenge to

the FOX project’s schedule. According to the Federal Highway

Administration’s (FHWA) Florida Assistant Division Administrator, whose

office has overall responsibility for this federal environmental review

process, the environmental impact statement for this project will be

among the largest in scope and the most complex the office has

undertaken. The 320-mile FOX system could have an impact on wetlands,

encroach on the habitats of threatened and endangered species, cause

noise pollution, and adversely affect the region’s water quality. The

project’s sponsors must study these and other impacts and, where

necessary, develop plans to mitigate them. For example, if the project has

a significant impact on wetlands, the project’s sponsors will have to create

new or improve existing wetlands. Depending on the proposed alignment,

preliminary estimates by FOX show that mitigation plans may be needed for

over 700 acres of wetlands affected by the project’s construction.

Construction cannot proceed until sponsors obtain a wetlands permit from

the U.S. Army Corps of Engineers. To resolve these issues, FDOT must

coordinate efforts among at least 15 state and federal agencies. Both FHWA

and FDOT officials stated that the project is on schedule, and they are

confident that they will complete the entire environmental review process

in 2.6 years—by January 2001. Our previous work has found that the

average time for completing complex FHWA-led environmental reviews for

projects affecting wetlands was over 5 years.12

12Highway Planning: Agencies Are Attempting to Expedite Environmental Reviews, but Barriers

Remain (GAO/RCED-94-211, Aug. 2, 1994). In the report, the length of the environmental review

process was measured from the date that FHWA issued a notice of intent to prepare an environmental

impact statement until the Corps of Engineers issued a wetlands permit.

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The availability of TIFIA funding could also affect the FOX project’s

schedule. FDOT officials have stated that they cannot build the project, as

currently proposed, without the federal loan. The project’s sponsors plan

to obtain a preliminary TIFIA funding decision in the fall of 1999—about 2

years prior to construction. However, as of January 1999, the Department

had not issued the regulations for implementing the TIFIA program.

According to a Department official, TIFIA’s regulations could preclude the

Department from making construction funding commitments to projects

that have not completed the environmental review process. If the FOX

project cannot secure a TIFIA funding commitment until its environmental

review is completed, the project’s ability to secure bond financing could

also be delayed. These financing delays could delay the construction

schedule.

The project’s sponsors must also secure the state legislature’s timely

approval of several pieces of legislation needed to begin construction.

FDOT expects to introduce the legislation in spring 2000, when it will also

request that the legislature approve the $70 million per year, 40-year

funding commitment for the project. If approved, the proposed legislation

would provide FOX with an exclusive right to develop high-speed rail in

Florida, limit the project sponsors’ liability in the event of an accident, and

streamline and clarify the project certification process. FDOT expects the

legislation to pass easily. However, should the legislation encounter

difficulties or be held up by opponents to the project, the project could be

delayed.

Finally, FOX officials stated that a delay in the issuance of new federal

high-speed rail safety standards could affect the project’s schedule. In

February 1997, FOX petitioned FRA to develop a rule establishing safety

standards for the FOX system. The project’s sponsors requested the rule

because FRA’s safety regulations did not address a system with trains

traveling at speeds of up to 200 mph. In December 1997, FRA issued a

proposed rule containing a draft of the new safety standards for the FOX

system. Having received public comments, FRA is now drafting the final

rule. FRA officials stated that they are strongly committed to completing

the final rule for the FOX system in a timely manner. However, they also

stated that they have a large workload of other pressing safety issues to

address, including some required by the Congress, and therefore have no

timetable for issuing the final rule. Since the final rule may affect the

design and cost of the trains, track, and other infrastructure, the project’s

sponsors believe they need a final rule before they can arrange financing

for the project. FRA officials disagree and believe the proposed rule serves

Page 18 GAO/RCED-99-44 High-Speed Rail Projects in the United States
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as an excellent basis for financing the project because it addresses key

elements of FOX’s petition.

Funding FOX Would

Constrain the

Department’s New

Financing Program

Enacted in June 1998, the Transportation Infrastructure Finance and

Innovation Act established a new transportation infrastructure financing

program. The program is designed to help large infrastructure projects

access capital by providing federal credit assistance. The FOX project’s

sponsors intend to seek a $2 billion loan through the program to help

finance their high-speed rail project. The result of providing the full

$2 billion to the FOX project may be that the Department dedicates over

one-half of the funds available for subsidy costs under TIFIA to one project,

thereby constraining the program’s ability to fund other projects.

The Department Is

Developing Regulations for

the TIFIA Program

The Department has created a multiagency Credit Program Steering

Committee and Working Group to coordinate and monitor all policy

decisions and implementation actions associated with the Department’s

credit programs, including TIFIA. The Steering Committee and Working

Group are composed of representatives from the Department’s Office of

Budget and Programs, Office of Intermodalism, FHWA, FRA, Federal Transit

Administration, as well as other departmental agencies and offices. As of

January 1999, the Department and the Office of Management and Budget

(OMB) were reviewing a draft notice of proposed rulemaking (NPRM) for

TIFIA. The current timetable calls for the NPRM to be published in

January 1999. After receiving public comments and making necessary

revisions, the Department plans to submit final regulations to OMB for

review and clearance by April 1999. Both the final regulations and general

policy guidelines should be published in April 1999. Once the regulations

and guidelines are issued, the Department will begin accepting

applications for TIFIA funds.

Before the Department can issue the regulations, an FHWA official stated

that the Department must address a number of issues that will influence

the program’s structure. First, the Department must develop a clear and

objective process, including criteria for selecting projects. Second, the

Department must determine whether it should establish one deadline for

applications or allow multiple deadlines since some projects may not be

ready to apply at a particular time. Third, the Department must develop a

methodology for comparing the relative merits of different types of

projects (e.g., highway, rail, and port projects, e.g.). Fourth, the

Department must determine whether a project should be at a certain stage

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of development before it is eligible for assistance under TIFIA. For example,

an FHWA official said that the Department might require that a project

complete the environmental review process before the Department can

provide a commitment for TIFIA construction funding. Fifth, the

Department must decide what level of input from financial markets is

necessary for the Department to determine whether a project is

creditworthy and at what point in the process financial markets should

become involved. Furthermore, the Department must determine how long

it will take to review applications.

OMB is working with the Department to complete the TIFIA regulations. OMB

officials told us that TIFIA funding decisions should be based on fair,

objective, and transparent analyses. To ensure that this goal is met, they

stressed that the process would benefit from having detailed information

on all projects applying for TIFIA funds, such as a completed environmental

impact statement, a cost estimate based on detailed engineering plans, and

a finance plan with well defined and secured nonfederal funding

commitments. The officials said that having this type of detailed

information will enhance the Department’s ability to make sound

decisions on the financial viability of projects applying for TIFIA funds.

In addition to working with OMB, the Department is holding outreach

sessions with stakeholders such as bond market rating agencies and state

highway agencies to help develop the regulations. An FHWA official stated

that a number of issues remain undecided, including what appropriate

criteria the Department should use to make decisions; what level of

information is needed to assess projects; and whether the Department can

make funding commitments prior to and contingent on the resolution of

certain events, such as completing an environmental review. He stated that

the Department’s legal counsel needed to address many of these issues,

and no decisions had been made.

The Department Must

Determine the Risk Level

of Credit for Projects

Funded Through TIFIA

Under the Federal Credit Reform Act of 1990, the Department has to

obligate funds to cover the cost of the credit provided through TIFIA. The

amount obligated, which is known as a subsidy amount, covers the

expected long-term cost of the credit in case of default. The Department,

in consultation with OMB and the applicable rating agency, will calculate

the subsidy amount associated with the assistance to be provided for each

project. The subsidy amount is based on the risk level of the credit—the

more risky the credit, the greater the potential long-term cost and the

greater the subsidy amount. TIFIA, as amended by the TEA-21 Restoration

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Act, provides $530 million over fiscal years 1999 through 2003 to cover the

cost of up to $10.6 billion in credit. The annual amounts provided and the

credit limits are shown in table 3.

Table 3: Authorized TIFIA Funding,

Fiscal Years 1999 Through 2003 Dollars in millions

Fiscal year

Funding level

(available to

cover subsidy

cost)

Maximum credit

level

Subsidy cost as a

percentage of

credit

1999 $80 $1,600 5

2000 90 1,800 5

2001 110 2,200 5

2002 120 2,400 5

2003 130 2,600 5

Total $530 $10,600 5

Source: GAO’s presentation of TEA-21’s data.

As table 3 shows, the yearly authorized funding levels are equal to 5

percent of the annual maximum credit limit. Therefore, in order for the

Department to issue the maximum amount of credit—$10.6 billion—the

average subsidy amount must be 5 percent. However, if the Department

and OMB determine that credit for a particular project is more risky than

this assumed average, they will require a greater risk subsidy percentage

for the project. This means that to still provide the maximum amount of

credit, the Department would have to fund other, less risky projects that

require lower risk subsidies. Ultimately, whether the Department will be

able to provide the full $10.6 billion in credit will depend on the risk level

of the projects it chooses to fund.

The FOX Project Could

Require Over Half of

TIFIA’s Funds

The FOX project’s sponsors intend to seek a $2 billion loan through the TIFIA

program. In connection with this loan, the Department, in consultation

with OMB and the applicable rating agency, will have to prepare a risk

analysis of the project and determine the subsidy amount associated with

the loan. While it is too early to tell exactly what the subsidy amount will

be, the subsidy amount for a $2 billion loan could require a significant

amount of TIFIA’s total authorized funding. Table 4 shows a range of

potential subsidy levels for a $2 billion loan.

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Table 4: Range of Potential Subsidy

Amounts Dollars in millions

Loan amount

Subsidy

percentage Subsidy amount

Percentage of

TIFIA’s 5-year

funding

$2,000 5.00 $100 19

2,000 10.00 200 38

2,000 14.75 295 56

2,000 20.00 400 75

2,000 26.50 530 100

Source: GAO’s analysis.

As table 4 shows, the FOX project could require a substantial portion of

TIFIA’s total 5-year funding. In comparison, on the Alameda Corridor

project, the Department and OMB determined that a subsidy amount of

$59 million would cover the long-term cost of a $400 million federal

loan—a risk subsidy of about 14.75 percent.13 If it uses the same subsidy

rate for the FOX project, the Department would have to obligate

$295 million to support the $2 billion loan, which would be 56 percent of

TIFIA’s $530 million in total authorized funds. Bond market and OMB

officials we contacted stated that in their opinion, a loan to the FOX project

appears to be more risky than the loan to the Alameda Corridor and that

the subsidy rate for FOX could be higher. They regarded the FOX project’s

risk as higher because it will depend on unproven high-speed rail

passenger revenues to secure the federal loan, while the Alameda Corridor

project used cargo revenues from one of the nation’s largest established

port complexes. With a higher subsidy rate, the Department would have to

obligate more than $295 million.

The Department has not developed a list of projects that may apply for

TIFIA funding. However, in 1997, FHWA identified 31 projects nationwide,

including FOX, that could be candidates for federal credit assistance. These

projects include bridge, highway, and other types of projects, as well as

high-speed rail. Our review of the report indicates that these projects’

estimated capital costs range from $100 million to over $16 billion and that

10 of the projects are estimated to cost $1 billion or more. (App. I contains

a list of these projects and their estimated costs.) It is uncertain whether

these projects will request TIFIA assistance or how much they might

13The Alameda Corridor project is designed to improve the movement of freight between the ports of

Los Angeles and Long Beach and railroad switchyards near downtown Los Angeles. As security for the

$400 million federal loan, the project pledged revenues from cargo activities at the ports. The

Department considers the Alameda funding agreement a model for the TIFIA program.

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request. Given the large costs and scope of some of these projects, any one

of several could require most of TIFIA’s authorized funds if it applied for a

large secured loan. However, limited TIFIA funds would be available for

these projects if the Department decides to provide FOX with a $2 billion

loan.

Most Corridors Will

Use the Incremental

Approach to

High-Speed Rail

In addition to the FOX project, we have identified 11 corridors in the United

States that are either planning or implementing forms of high-speed rail

(see table 5).14 Most of the corridors are in the early stages of project

planning, but officials in Amtrak’s Northeast corridor—between

Washington, D.C., and Boston—have been upgrading Amtrak’s system for

several years, and officials in the Pacific Northwest corridor, between

Vancouver, British Columbia, and Eugene, Oregon, have bought

high-speed rail trains and secured funding to upgrade its track. Appendix

II shows the locations of these corridors. Ten of the corridors will use an

incremental approach to high-speed rail, which provides gradual speed

increases by making incremental improvements to existing rail

infrastructure or equipment. In contrast, the California corridor is

considering the development of a new high-speed rail system that may use

technologies similar to those of FOX or even more advanced technology

capable of reaching speeds up to 310 mph. The preliminary cost estimates

of these systems range from $315 million to $29 billion. Like FOX, most of

these corridors are developing their finance plans. Unlike FOX, however,

most of the corridors have not determined their funding sources. Two

corridors have expressed interest in applying to the TIFIA program for

funding, but none besides FOX have approached the Department about

doing so. Some corridors are beyond the preliminary stages and have

already begun to implement aspects of high-speed rail.

The 10 corridors that are concentrating on the incremental approach will

upgrade current rail lines to accommodate higher-speed passenger rail

traffic, as shown in table 5. Under this approach, the projects’ sponsors

would improve track, signals, and safety systems along existing rail lines.

Improving track often involves modernizing switches, replacing wooden

ties with concrete ties, and creating additional track capacity. More

sophisticated signal and collision avoidance systems are also needed to

handle the higher train speeds and the higher traffic density that

accompanies high-speed rail.

14A 12th corridor, the Texas Triangle, also considered building a new high-speed rail system using

French TGV technology but discontinued its efforts in 1994 because of a lack of funding. Currently, the

corridor has no firm high-speed rail plans.

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Table 5: Scope, Approach, and Costs

for 11 High-Speed Rail Corridors Dollars in millions

Corridor Scope Approach Estimated cost

California Sacramento/San

Francisco to San

Diego (676 miles)

Considering new

high-speed rail

(220 mph) or

maglev (310 mph) $21,000-$29,000

Chicago-St. Louis Chicago, Ill., to St.

Louis, Mo. (282

miles)

Incremental (110

mph) 350

Chicago-Detroit Chicago, Ill., to

Detroit, Mich. (279

miles)

Incremental (110

mph) 800

Chicago-Milwaukee Chicago, Ill., to

Milwaukee, Wis.

(85 miles)

Incremental (110

mph) 471

Wisconsin-IllinoisMinnesotaChicago, Ill., to

Minneapolis, Minn.

(418 miles)

Incremental

(speed unknown) To be determined

Empire (N.Y.) Buffalo to Albany

to New York City

(431 miles)

Incremental (125

mph) 315

Pacific Northwest Vancouver, B.C.,

to Eugene, Oreg.

(466 miles)

Incremental (125

mph) 1,865

Southeast Washington, D.C.,

to Charlotte, N.C.

(390 miles)

Incremental (110

mph) To be determined

Keystone (Pa.) Philadelphia to

Harrisburg (104

miles)

Incremental (110

mph) To be determined

Northeast corridor Washington, D.C.,

to Boston, Mass.

(457 miles)

Incremental (150

mph) 4,000

Gulf Coast Houston, Tex., to

Birmingham, Ala.

(719 miles)

Incremental

(speed unknown) To be determined

The lengths of the corridors currently considering high-speed rail range

from 85 miles on the Chicago-to-Milwaukee corridor to 719 miles on the

Gulf Coast corridor. Costs range from $315 million on the Empire corridor

in New York to between $21 billion and $29 billion on the California

corridor. Some corridors, such as the Wisconsin-Illinois-Minnesota and

Gulf Coast corridors, are still in the process of developing feasibility

studies for their proposed high-speed rail lines. As of December 1998,

other corridors were implementing some high-speed rail improvements.

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For example, the Empire corridor was running trains at speeds

approaching 110 mph. Also, the Pacific Northwest corridor had purchased

two high-speed rail trains that will operate initially at about 79 mph but

can operate at higher speeds (125 mph) once the corridor is prepared for

high-speed traffic. Appendixes III through XIV provide status reports on

the 11 corridors with active high-speed rail plans and on the Texas

Triangle corridor, where high-speed rail is not now under active

consideration.

Conclusions With TIFIA funds soon to be available to support large transportation

projects nationwide, proposed high-speed rail systems and other types of

transportation projects in the United States will have an important source

of federal financing to further their development. The Florida Overland

Express (FOX) project’s sponsors will ask the Department of

Transportation to provide the project with a $2 billion loan in the near

future. As a result of making this loan, the Department could provide at

least one-half of the funding available for subsidy costs under TIFIA to this

one project. However, the project’s sponsors are at least 2 years from

developing the information needed to determine whether the project is

economically viable. Currently, there is great uncertainty about whether

(1) the project can be built for the $6.3 billion that the project’s most

recent finance plan assumes; (2) the project’s sponsors can secure the

needed funds to complete the project’s financing; (3) the estimated

ridership levels are accurate and, thus, whether the project will be able to

generate sufficient revenues to repay the bonds and federal loan; and

(4) the sponsors can complete the complex environmental review and

mitigation process in time for construction to begin by 2001.

Similar to the FOX project, other large transportation projects applying for

TIFIA funding will face challenges in developing accurate capital cost

estimates, securing financing for those costs, generating sufficient

revenues needed to repay project debt, and minimizing impacts on the

environment. Some of these projects also have the potential to require

most of TIFIA’s funds, which would constrain the TIFIA funding available to

other projects. Therefore, the Department must make informed decisions

on each project’s technical merits and must obtain and evaluate detailed

information on the projects’ costs, financing plans, revenue projections,

and environmental impacts. As of January 1999, the Department was still

developing regulations for the TIFIA program; therefore, the extent to

which the Department will require this type of information is unclear.

Without this important information, the Department cannot ensure that

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TIFIA funds are targeted to financially viable transportation infrastructure

projects.

Recommendations In implementing the Transportation Infrastructure Finance and Innovation

Act program, we recommend that the Secretary of Transportation direct

appropriate Department officials to evaluate the economic feasibility of

projects applying for the program’s funds. Before providing a substantial

amount of federal dollars to projects, such as the Florida Overland

Express project, the Secretary 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. The

Department’s regulations or general policy guidelines on the program

should indicate that the Department will conduct this evaluation. The

Secretary should also ensure that the environmental review process has

been completed before it makes substantial Transportation Infrastructure

Finance and Innovation Act program funding commitments.

Agency Comments

and Our Evaluation

We provided the Department, OMB, and FDOT with a draft of this report for

review and comment. We also discussed the report with officials from the

Department and FDOT—including the Associate Administrator for Railroad

Development, FRA; the Director of Financial Management and Budgeting,

FHWA; and the Manager, High-Speed Rail program, FDOT—to discuss their

comments on the report. Overall, the Department’s officials generally

agreed with the report’s findings and conclusions, while officials from

Florida stated that the report was thorough. Officials from the Department

and FDOT had specific comments on the report’s (1) analyses of the FOX

project’s ridership forecast, (2) recommendations, (3) discussion of the

impacts of a loan to the FOX project through the Transportation

Infrastructure Finance and Innovation Act program, and (4) discussion of

the time frames for completing the FOX project’s environmental review.

With regard to our analysis of the FOX project’s ridership forecast, FRA

officials stated that we should adopt a less pessimistic stance on certain

aspects of the project’s ridership forecast. Specifically, the FRA officials

stated that it was too early to expect the airlines to enter into code-sharing

agreements with the FOX system; therefore, our ridership analysis should

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not entirely dismiss the forecast number of passengers that these

agreements could generate. The FDOT officials also affirmed their forecast’s

assumption that airlines will establish code-sharing agreements with FOX

and therefore transfer a substantial number of air passengers to the FOX

rail system. As a result, they stated that our ridership analysis should

include these passengers.

The FDOT officials also disagreed with our assertion that the airfares used

in their ridership forecast overstated the cost of air travel within Florida.

They noted that their forecast accurately reflected the fares paid by

passengers and cited first quarter 1998 airfare statistics that airlines

reported to the Department as evidence. Accordingly, they contend that

we should not reduce our ridership estimate on the basis of the

assumption of lower airfares.

The FDOT officials further stated that our estimate of new, or induced,

ridership was too low. They stated that their estimate was based on the

state’s intercity travel surveys, surveys that they contend are more precise

than FRA’s estimates used in our report.

As a final point on ridership, FRA officials stated that our report implied

that FOX’s fares must always be lower than the airlines’ fares in order to

remain competitive. The officials stated that this assumption was too

simplistic because FOX’s ridership would not solely be based on ticket

prices. They noted that the FOX system could also attract passengers

because it will have a higher quality of service and shorter trip times. The

FRA officials further questioned whether the airlines could maintain low

airfares over the long term and thereby remain competitive with FOX.

In responding to these comments on ridership, we recognize that making

estimates of how many people will use a high-speed rail system, where

none previously existed, is more an art than a science. The assumptions

used can significantly affect the forecast level of ridership. We have

developed a ridership forecast that is based on alternative scenarios that

use less optimistic—but still quite plausible— assumptions. Our first

alternative scenario evaluates whether the airlines, in a highly competitive

Florida air market, would willingly give up their passengers to a new

competitor—FOX. We acknowledge that FOX and some airlines might

establish code-sharing agreements in the future and that FOX officials have

cited positive statements made to them by at least one major airline to this

effect. However, FOX officials could not provide us with any

documentation showing that such agreements were likely. In addition, our

Page 27 GAO/RCED-99-44 High-Speed Rail Projects in the United States
B-280830 

discussions with two major airlines, the Air Transport Association, and the

Miami airport found little, if any, airline interest in establishing

code-sharing agreements with FOX. Wilbur Smith Associates also

questioned the viability of these potential agreements. On the basis of this

evidence, we made no changes to our ridership analysis with regard to the

possibility of ridership resulting from code-share agreements.

Our second alternative scenario evaluates whether the FOX ridership

forecast assumed airfares consistent with what the major airlines reported

to the Department. Using data from the first quarter of 1998, the FDOT

officials stated that Florida airfares are comparable to proposed FOX fares,

thus potentially enhancing FOX’s competitive position with the airlines.

This contrasts with our use of 1997 average reported airfares that are, in

some cases, 21 percent lower than the ones FOX used in its ridership

forecast. We used the average airfares for all of 1997 in reviewing the FOX

forecast because (1) it is the same year as that for other data used

throughout the FOX forecast and (2) a yearly average provides a more

constant picture of the air market than a single quarter. Accordingly, we

made no changes to our ridership analysis with regard to the level of

airfares.

Our third alternative scenario assessed the project’s assumptions

regarding induced demand. The FDOT officials’ suggestion that we use their

assumption regarding induced demand rather than FRA’s assumption

highlights the uncertainty in making estimates of induced demand.

Forecasting induced ridership is a subject of great uncertainty and

controversy, since induced demand attempts to predict how many people

will use a system simply because it provides a new service. The FDOT

officials said that their assumption was more accurate than FRA’s.

However, FRA has reported that because of the uncertainty in forecasting

induced demand, high-speed rail proponents should use caution when

preparing such estimates. We agree and therefore have not revised our

analysis to reflect the higher FOX assumption.

In addition, the FRA officials presented no evidence to support their

assertion that the airlines may not be able to sustain lower airfares over

the long term in competition with FOX. The experience of Southwest

Airlines supports just the opposite conclusion. Southwest Airlines has

established significant market shares in new markets while charging low

fares and has sustained these markets in the long term. Nonetheless, we

agree with the FRA officials’ comment that FOX could have a competitive

advantage over the airlines because it may provide better service and

Page 28 GAO/RCED-99-44 High-Speed Rail Projects in the United States
B-280830 

faster trip times in some markets. Since the FOX forecast already assumed

this service differential in its ridership assumptions and we did not

question them, no change to our ridership analysis is needed.

Regarding our recommendations, officials from the Department stated

they did not plan to independently verify information on the costs,

financing, revenue estimates, and environmental impacts of projects

applying for TIFIA program funds. They said that the Department would

rely on the financial markets in the private sector to analyze these factors

rather than on the Department to conduct its own independent analysis.

They also stated that since the Department is responsible for completing

the environmental review process, it did not need to independently

validate the results of environmental reviews.

In regard to these comments, we agree that the Department cannot

independently evaluate its own environmental document. As a result, we

have changed our recommendation to reflect the importance of having the

environmental review process completed before the Department provides

substantial TIFIA funds to a project. However, we disagree with the

assertion that the financial markets’ assessment of a project’s costs,

financing, and revenue estimates will provide the independent evaluation

that we call for in our recommendation. The financial markets’ input,

generally in the form of a bond rating, is important information that the

Department can use to supplement its equally important engineering,

financial, and transportation planning expertise. However, the Department

must produce an independent assessment of the merits of projects seeking

TIFIA funds. This is particularly important because the Department has the

expertise to compare, for example, a highway project to a rail or transit

project that might apply for TIFIA funds. As of January 1999, the

Department had not yet determined which of its agencies will have the

lead responsibility for performing such evaluations. Therefore, our

recommendation is targeted to the Secretary of Transportation, who can

ensure that the Department uses its analytical expertise as a basis for

awarding federal funds.

Regarding a potential federal loan to the FOX project, the FDOT officials

disagreed with our assertion that by funding the FOX project, the TIFIA

program would use over half of its available funding. The officials stated

that the subsidy rate that the Department used for the Alameda Corridor

project—a freight rail improvement project in Southern California—was

conservative and we should not use it to estimate the subsidy cost of a

federal loan to the FOX project. The FDOT officials believe that the subsidy

Page 29 GAO/RCED-99-44 High-Speed Rail Projects in the United States
B-280830 

rates for TIFIA-funded projects would be less than 10 percent rather than

the 14.7 percent used for the Alameda Corridor.

The FDOT officials’ questioning our use of the subsidy level for the Alameda

Corridor project’s loan as a model for TIFIA-funded projects is not based on

evidence from OMB or the bond rating agencies we contacted. These

groups will play critical roles in determining FOX’s loan subsidy amount.

OMB officials believe that the 14.7-percent subsidy cost for the Alameda

Corridor was accurate. In addition, both OMB and bond-rating agency

officials we contacted stated that a federal loan to FOX is riskier than the

loan to the Alameda Corridor because the loan repayment is premised on

unproven revenues from future ridership. In contrast, the loan repayment

for the Alameda Corridor comes from proven cargo revenues from one of

the nation’s largest ports.

In terms of the environmental review process, officials from both FHWA and

Florida expressed confidence that the project will complete the

environmental review process on schedule. The Florida officials stated

that our skepticism of their projected date for completing the

environmental review process is unwarranted. Because they have worked

early and closely with environmental review agencies to identify impacts,

they expect to meet their timetable for completing the environmental

review.

We have added language in the report to reflect the agencies’ confidence

in meeting their schedule. However, to accomplish this over the next 2

years, the project’s sponsors must assess the 320-mile-long project’s

impact on wetlands (over 700 acres), endangered and threatened species,

and water quality; seek and incorporate public comments; develop

mitigation plans acceptable to at least 15 state and federal agencies; and

obtain wetlands permits from the Army Corps of Engineers. An FHWA

official characterized the environmental review for the FOX project as one

of the largest and most complex ever undertaken by the office. The

complexity and amount of work remaining to be done continue to suggest

that it might take longer than planned to complete the required

environmental reviews.

Finally, officials from FRA, FHWA, the Department’s Office of the Secretary,

OMB, and the Florida High-Speed Rail program offered additional technical

comments that we incorporated throughout the report, where appropriate.

Page 30 GAO/RCED-99-44 High-Speed Rail Projects in the United States
B-280830 

Scope and

Methodology

To identify the status of the FOX project’s costs, financing, ridership

estimates, and schedule, we reviewed project documents, including the

engineering cost report, the finance agreement, the ridership studies, and

project status reports. To learn more about the status of the project, we

also interviewed officials from FDOT’s High-Speed Rail Office and the FOX

consortium. To identify challenges facing the project, we reviewed

independent analyses of the project and contacted numerous officials with

knowledge of the project. For example, to identify issues surrounding the

ridership forecast and the potential for the airlines to agree to transfer

passengers to the FOX project, we reviewed Wilbur Smith Associates’

independent review of the ridership forecast and interviewed officials

from the U.S. airline industry, including officials from the Miami and

Orlando airports, several U.S. airlines serving Florida, and the Air

Transport Association. In addition, to identify issues surrounding the

finance plan and the environmental mitigation for the project, we

contacted bond-rating agencies and state and federal environmental

review agencies.

To obtain information about the TIFIA program, we reviewed the act as

established in the Transportation Equity Act for the 21st Century, and as

amended by the TEA-21 Restoration Act. To learn more about the goals

and objectives of the program, we discussed the program with FHWA’s

credit program manager, attended a TIFIA outreach session in New York

City in September 1998, and reviewed FHWA documentation regarding the

TIFIA program. We also contacted OMB and bond-rating agency officials to

obtain their views on the potential risks to the federal government of

providing a $2 billion loan to the FOX project.

To obtain information on the current status of other high-speed rail

corridors, we reviewed information published by FRA and the High-Speed

Ground Transportation Association. To obtain further information on the

specifics of other high-speed rail projects, we contacted officials in states

responsible for planning and developing the projects and reviewed the

status reports they provided.

We performed our work from July 1998 through January 1999 in

accordance with generally accepted government auditing standards.

We will send copies of this report to cognizant congressional committees;

the Secretary of Transportation; the Administrator, FHWA; the

Administrator, FRA; the Director, OMB; the state of Florida’s Governor and

Page 31 GAO/RCED-99-44 High-Speed Rail Projects in the United States
B-280830 

Secretary of Transportation; and other interested parties. We will make

copies available to others upon request. Please call me at (202) 512-2834 if

you or your staff have any questions. Major contributors to this report are

listed in appendix XV.

Sincerely yours,

Phyllis F. Scheinberg

Associate Director,

 Transportation Issues

Page 32 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Page 33 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Contents

Letter 1

Appendix I 

Candidates for

Federal Credit

Assistance

38

Appendix II 

High-Speed Rail

Corridors in the

United States

40

Appendix III 

California Intercity

High-Speed Rail

Corridor

41

Appendix IV 

Chicago-St. Louis

High-Speed Rail

Corridor

42

Appendix V 

Chicago-Detroit

High-Speed Rail

Corridor

43

Appendix VI 

Chicago-Milwaukee

High-Speed Rail

Corridor

44

Page 34 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Contents

Appendix VII 

Wisconsin-IllinoisMinnesota High-Speed

Rail Corridor

45

Appendix VIII 

Empire High-Speed

Rail Corridor

46

Appendix IX 

Pacific Northwest

High-Speed Rail

Corridor

47

Appendix X 

Southeast High-Speed

Rail Corridor

48

Appendix XI 

Keystone High-Speed

Rail Corridor

49

Appendix XII 

Texas Triangle

High-Speed Rail

Corridor

50

Appendix XIII 

Northeast High-Speed

Rail Corridor

51

Page 35 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Contents

Appendix XIV 

Gulf Coast

High-Speed Rail

Corridor

52

Appendix XV 

Major Contributors to

This Report

53

Tables Table 1: Annual Ridership Forecasts for the FOX Project, 2010 12

Table 2: Effect of Less Optimistic Assumptions on Ridership 13

Table 3: Authorized TIFIA Funding, Fiscal Years 1999 Through

2003

21

Table 4: Range of Potential Subsidy Amounts 22

Table 5: Scope, Approach, and Costs for 11 High-Speed Rail

Corridors

24

Table I.1: Projects That FHWA Identified as Candidates for

Federal Credit Assistance

38

Figure Figure 1: Sources of Funds for the FOX Project 7

Abbreviations

DOT Department of Transportation

FDOT Florida Department of Transportation

FOX Florida Overland Express

FHWA Federal Highway Administration

FRA Federal Railroad Administration

NPRM notice of proposed rulemaking

OMB Office of Management and Budget

TGV train a grande vitesse

TIFIA Transportation Infrastructure Finance and Innovation Act of

1998

Page 36 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Page 37 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix I 

Candidates for Federal Credit Assistance

In November 1997, the Federal Highway Administration (FHWA) issued a

draft report entitled Federal Credit for Surface Transportation: Exploring

Concepts and Issues. In that report, FHWA identified 30 projects besides the

Florida Overland Express that could be candidates for federal credit

assistance. The projects are listed in table I.1.

Table I.1: Projects That FHWA

Identified as Candidates for Federal

Credit Assistance

Dollars in millions

Project Location Estimated cost

Dalton Highway Alaska $165

Hoover Bridge Arizona-Nevada $120

South Mountain Toll Road Phoenix, Arizona $380

Shreveport-to-Kansas City

High-Priority Corridor

Arkansas, Louisiana,

Missouri $2,380

California High-Speed Rail Los Angeles, Calif. to San

Francisco, Calif. $16,800

Foothill-South Transportation

Corridor

Orange County, Calif.

$1,500

Port of Oakland Intermodal

Terminal

Oakland, Calif.

$750

SR 125 Toll Road San Diego, Calif. $400

E-470 Public Highway Phase

IV

Denver, Colo.

$230

Quinnipiac River Bridge New Haven, Conn. $375

Miami Intermodal Center Miami, Fla. $1,700

Atlanta Multi-Modal

Passenger Terminal

Atlanta, Ga.

$183

High-Priority Corridor 18 (I-69

Extension)

Indiana, Kentucky,

Tennessee, Mississippi,

Arkansas, Louisiana, and

Texas $7,250

Louisville Bridges Louisville, Ky $507

I-75 at Ambassador Bridge Detroit, Mich. $107

US 82 Mississippi River

Bridge

Greenville, Miss.

$166

Meadowlands Rail Transfer

Station

East Rutherford, N.J.

$374

Farley/Penn Station Project New York, N.Y. $315

Midtown-Kennedy Airport

Rail Link

New York, N.Y.

$800

Maumee River Crossing Toledo, Ohio $220

South-North Light Rail Transit

Project

Portland, Oregon

$1,300

(continued)

Page 38 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix I 

Candidates for Federal Credit Assistance

Dollars in millions

Project Location Estimated cost

Freight Rail

Improvement/Access Road

Project

Rhode Island

$247

Grace Bridge Project Charleston, S.C. $400

Camino Columbia Toll Road Laredo, Texas $100

ITS Deployment: Weber,

Davis, Salt Lake, Summit,

and Utah Counties

Utah

$220

I-15 Reconstruction Salt Lake City, Utah $1,600

Hampton Roads

Bridge-Tunnel

Virginia

$2,000

Woodrow Wilson Bridge Virginia-Maryland $1,750

North Duwamish Intermodal

Facility

Seattle, Wash.

$1,000

Tacoma Narrows Bridge Seattle-Tacoma, Wash. $800

Page 39 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix II 

High-Speed Rail Corridors in the United

States

Northeast

Corridor

Southeast

Corridor

Florida

Corridor

Gulf

Coast

Corridor

Texas

Triangle

California

Corridor

Pacific

Northwest

Corridor

Empire

Corridor

Chicago -

St. Louis

Corridor

Chicago -

Minneapolis

Corridor

Vancouver

Eugene

Dallas

Houston Tampa

Miami

San Antonio

Detroit

Buffalo

Milwaukee

Washington, D.C.

New York

Albany

Charlotte

Chicago - Detroit 

Corridor

New Orleans Orlando

Birmingham

St. Louis

San Diego

San Francisco

Sacramento

Boston

Chicago

Seattle

Minneapolis

Page 40 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix III 

California Intercity High-Speed Rail

Corridor

Background The California Intercity High-Speed Rail Commission was created in 1993

to study the feasibility of implementing a high-speed ground transportation

system in California. In 1996, the Commission issued its study, which

found that high-speed rail offered California an environmentally and

physically feasible alternative to highway and air transportation for

accommodating future growth in intercity travel. The report also found

that revenues from the high-speed rail system would be able to cover its

operating costs but not all construction costs. The report concluded that

construction of the system would rely on substantial public investments.

In 1996, the state legislature created the High-Speed Rail Authority, which

now is responsible for implementing the system.

Proposed Technology A new high-speed rail or magnetic levitation (maglev) system.

Project’s Goals/Scope To build a high-speed ground transportation system to link northern and

southern California. The proposed system covers 676 miles and would link

Sacramento, the San Francisco Bay Area, the Central Valley, Los Angeles,

and San Diego. The project’s sponsors are considering using either a new

high-speed rail system with speeds reaching up to 220 mph or a maglev

system with speeds up to 310 mph. A new high-speed rail system could

carry up to 19.8 million passengers per year in 2015, while a maglev system

could carry 26.4 million passengers.

Cost Estimates The current cost estimates range from $21 billion for the new high-speed

rail system to $29 billion for a maglev system.

Status The Commission is continuing to study the feasibility of the system and is

trying to secure financing. The current schedule calls for a statewide vote

on the proposal by 2000.

Page 41 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix IV 

Chicago-St. Louis High-Speed Rail Corridor

Background Under the Intermodal Surface Transportation Efficiency Act of 1991

(ISTEA), the Secretary designated the Chicago-to-St. Louis corridor as a

high-speed rail corridor. In May 1994, the State of Illinois published a

feasibility study on the financial potential of implementing high-speed

passenger rail service in the corridor. The study found that revenues from

projected ridership would cover all the operating and maintenance costs

and a portion of the capital improvement costs for the project. The state

hopes to cover the remainder of the capital costs with federal or state

government assistance.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail system connecting Chicago and St. Louis. The

proposed system covers 282 miles and would also link Springfield, Illinois

and Bloomington-Normal, Illinois to Chicago and St. Louis. The Illinois

Department of Transportation (IDOT) plans to improve grade crossings

across the state, rebuild track in the East St. Louis area, and develop a new

signal system on an existing rail line between Chicago and St. Louis.

Currently, trains in the corridor travel at a top speed of 79 mph, with the

proposed improvements increasing speed up to 110 mph.

Cost Estimate IDOT estimates the cost of the project to be $350 million.

Status IDOT is currently working on a draft environmental impact statement for

the corridor and developing a grade crossing arrestor net that will block

the road when trains approach to prevent train-vehicle collisions. Also,

IDOT is working with the Association of American Railroads and the

Federal Railroad Administration to develop a train control system that will

increase safety along the line by overriding certain engineer actions. For

example, the control system would automatically stop a train if the

engineer runs a red signal or exceeds the speed limit. Once these tasks are

complete, IDOT will seek a private sector partner for the project. IDOT

hopes high-speed service could begin in 2003.

Page 42 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix V 

Chicago-Detroit High-Speed Rail Corridor

Background Since 1981, the State of Michigan has been exploring high-speed rail

technology. Under ISTEA, the Secretary designated the Chicago-to-Detroit

corridor as a high-speed rail corridor. The State of Michigan has developed

a plan of incremental improvements for the corridor.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail system connecting Chicago and Detroit. The

system would run approximately 279 miles and also link Ann Arbor,

Michigan and Kalamazoo, Michigan with Chicago and Detroit. The

Michigan Department of Transportation (MDOT) and Amtrak plan to

rebuild stations and improve signals on an existing rail line between

Chicago and Detroit to accommodate trains traveling at speeds up to 110

mph. Trains would also need to be refurbished. MDOT estimates that if the

line is fully upgraded, 3.5 million passengers will ride the corridor’s trains

annually by 2010.

Cost Estimate MDOT estimates the cost for the improvements to be $800 million.

Status MDOT and Amtrak are working on an automatic control system that

would help avoid collisions by using a computer to alert train engineers to

hazards out of their line of sight. It has also closed a number of grade

crossings and is constructing new stations and renovating existing

stations. MDOT and Amtrak plan on beginning high-speed service along a

portion of the corridor sometime in 1999 and along the full corridor by

2006.

Page 43 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix VI 

Chicago-Milwaukee High-Speed Rail

Corridor

Background The states of Illinois and Wisconsin completed a feasibility study for the

Chicago-to-Milwaukee high-speed rail corridor in 1994. The study

identified the existing Amtrak route between Chicago and Milwaukee as

the preferred route for high-speed service. The study also concluded that

operating revenues from a system with trains operating at 110 mph or 125

mph would cover operating costs and some capital costs. The study also

mapped out a comprehensive plan to allow the right-of-way to be shared

by high-speed rail, Amtrak, freight lines, and Metra, a Chicago area

commuter rail service.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail system between Chicago and Milwaukee. The

system would run approximately 85 miles, most likely along an existing

Amtrak route. The Wisconsin Department of Transportation (WisDOT)

plans to improve track and stations along an existing rail line between

Chicago and Milwaukee to accommodate trains traveling up to 110 mph.

Cost Estimates WisDOT’s cost estimate for the project is $471 million.

Status WisDOT is currently working with a nine-state coalition to determine

funding sources for high-speed rail. WisDOT has no construction planned

at this time and has not set a date for the start of revenue service, although

it hopes to have some high-speed service running by 2006.

Page 44 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix VII 

Wisconsin-Illinois-Minnesota High-Speed

Rail Corridor

Background In 1991, the Minnesota Department of Transportation (MN/DOT), along

with the Illinois and Wisconsin transportation departments, completed a

feasibility study for a Chicago-Milwaukee-Twin Cities high-speed rail

system. The study looked at the engineering, environmental, financial, and

economic impacts of a high-speed rail system and concluded that such a

system might be economically viable. The Minnesota legislature provided

$500,000 for a more detailed feasibility study that is in progress. The

second study will deal with the engineering and environmental issues

associated with a high-speed rail system, while also determining ridership

and revenue projections, as well as other issues.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail system between Chicago and Minneapolis-St.

Paul. The system would run approximately 418 miles and link Chicago and

Minneapolis with Milwaukee and perhaps Madison, Wisconsin and

Wisconsin Dells. The project’s sponsors plan on incrementally improving

an existing rail line between the two end points to accommodate

high-speed trains. The exact speed of trains and form of improvements

along the corridor are still to be determined.

Cost Estimate The project’s sponsors have not released any cost estimates at this time.

Status The second, more detailed feasibility study is under way and should be

completed in early 1999. Future actions are uncertain and depend on

MN/DOT identifying sources of funding.

Page 45 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix VIII 

Empire High-Speed Rail Corridor

Background The Transportation Equity Act for the 21st Century (TEA-21) designated

the Empire corridor as a federally recognized high-speed rail corridor. On

September 29, 1998, the state of New York and Amtrak announced a plan

to split $185 million in rail line improvements to the Empire corridor.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To increase the maximum speed on portions of the existing high-speed rail

line between New York City and Buffalo to 125 mph. The line would link

Rochester, Syracuse, and Albany with New York City and Buffalo. The

project’s sponsors plan to embark on a capital investment plan to improve

the condition and technology of the existing rail service between these

cities. Currently, the trains’ top speed is 110 mph, although only a portion

of the corridor is capable of handling trains at that speed. The line will be

approximately 431 miles long. The New York Department of

Transportation (NYDOT) estimates that once the corridor is finished,

annual ridership will be approximately 3 million.

Cost Estimate The funding for the current round of improvements is set at $185 million.

Future planned improvements would bring the total cost of upgrading the

corridor to $315 million.

Status Amtrak and NYDOT have acquired funding and will soon begin work on

adding a second track for a portion of the corridor, improving curves so

trains can negotiate them at faster speeds, and upgrading seven trains to

travel at speeds of up to 125 mph. The work should be completed by 2004.

Page 46 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix IX 

Pacific Northwest High-Speed Rail Corridor

Background In 1993, the states of Washington and Oregon began funding additional

train service along Amtrak’s Pacific Northwest line. Since then, ridership

on the line has nearly doubled. The Washington State Department of

Transportation (WSDOT) leased two Talgo trains for the line. Talgo trains

are made in Spain, have tilt technology that allows them to travel around

curves faster than a conventional train, and have a top speed of 125 mph.

However, in the Pacific Northwest corridor they are limited to 79 mph

because of track conditions. WSDOT and Amtrak have purchased three

new Talgo trains to replace the leased ones.

Proposed Technology Incremental improvements.

Project Goals/Scope To create a high-speed rail corridor between Vancouver, British Columbia,

and Eugene, Oregon. The line would run approximately 466 miles and link

Portland and Seattle with Vancouver and Eugene. The project’s sponsors

plan to install a new signal and monitoring system using global positioning

satellites, renovate stations and improve grade crossings along the current

rail line between these cities. Also, new sidings and track will be added in

some places to add capacity to the line, which will serve freight,

commuter, and high-speed trains.

Cost Estimate WSDOT estimates the total cost for bringing 125 mph service to the

corridor at $1.865 billion.

Status The State of Washington and Amtrak have purchased three Talgo trains

capable of traveling 125 mph. These trains were scheduled for service on

the existing Amtrak line in late 1998. The new trains will reduce the travel

times along the route because of their speed around curves. Also, WSDOT

and the Oregon Department of Transportation are currently preparing an

environmental impact statement and a 20-year investment plan for the

corridor. The project’s sponsors have not announced any schedule for the

start of high-speed rail service.

Page 47 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix X 

Southeast High-Speed Rail Corridor

Background Under ISTEA, the Secretary designated the Washington-to-Charlotte

corridor as a high-speed rail corridor. The states of North Carolina and

Virginia are working together to develop the corridor. The Virginia

Department of Rail and Public Transportation (VDRPT) and the North

Carolina Department of Transportation have done a preliminary

engineering study. Currently, the project’s sponsors are performing an

environmental impact study of the corridor.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail line between Washington, D.C., and Charlotte,

North Carolina. The line would run approximately 390 miles and link

Richmond, Virginia; Raleigh, North Carolina; and Greensboro, North

Carolina; with Washington, D.C. and Charlotte, North Carolina. The

project’s sponsors plan to straighten curves, add track, and improve

signals along an existing right-of-way between the end points, and

eventually run rail service at speeds up to 110 mph.

Cost Estimate No cost estimates have been released for the corridor. However, VDRPT

has estimated the cost of adding another track on the corridor at

$350 million.

Status The State of Virginia has approved a six-stage high-speed rail plan for the

Washington-to-Richmond corridor. The plan allocates funding to

straighten curves, improve signals, and eliminate speed restrictions along

this corridor. This work should be completed in 2002 and allow the

maximum train speed in the corridor to rise to 90 mph. Future

improvements on the corridor have not yet been determined. The project’s

sponsors are negotiating with CSX Transportation Corporation to

purchase some rights-of-way. The project’s sponsors have not set a

starting date for 110 mph service.

Page 48 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix XI 

Keystone High-Speed Rail Corridor

Background In 1995, Amtrak sought help from the Pennsylvania Department of

Transportation (PennDOT) to save the deteriorating rights-of-way between

Philadelphia and Harrisburg. PennDOT began giving Amtrak $2.6 million

per year to help operate service along the corridor. TEA-21 designated this

corridor as a high-speed rail corridor. The corridor is already electrified,

although few electric trains now serve the corridor. A few sections of

track along the corridor are capable of handling 90 mph service.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail line between Harrisburg and Philadelphia. The

line would run 104 miles. PennDOT hopes to improve track, overhead

wiring, and stations along existing, electrified rights-of-way to reduce

travel times between Harrisburg and Philadelphia.

Cost Estimates The project’s sponsors have not released any cost estimates for the

project.

Status FRA, PennDOT, and Amtrak are working on identifying the corridor’s

investment needs. PennDOT is negotiating the purchase of trains capable

of traveling 110 mph. PennDOT has not set a starting date for high-speed

rail service.

Page 49 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix XII 

Texas Triangle High-Speed Rail Corridor

Background In 1989, the Texas state legislature created the Texas High-Speed Rail

Authority to award a franchise to build a high-speed rail system in Texas.

The Texas TGV Corporation eventually won this franchise but could not

arrange financing for the project. In early 1994, the Authority determined

that Texas TGV had not fulfilled the terms of the franchise agreement and

terminated the franchise.

Proposed Technology Texas TGV was planning on building a new high-speed rail system using

French train a grande vitesse (TGV) technology.

Project’s Goals/Scope The franchise intended to link Dallas, Houston, and San Antonio, a

distance of 436 miles.

Cost Estimate The final cost estimate for the project was $4 billion.

Status Plans for a new high-speed rail system are dormant. As of December 1998,

the Texas Department of Transportation was in discussions with private

investors and a major railroad about taking an incremental improvement

approach to high-speed rail in Texas, but the proposal remains in the

planning stage.

Page 50 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix XIII 

Northeast High-Speed Rail Corridor

Background With the introduction of the Metroliner in 1969, the Northeast corridor

between Washington, D.C., and Boston became the first high-speed rail

corridor in the United States. In fiscal year 1997, the Northeast corridor

carried over 9 million of Amtrak’s passengers, making it the most highly

utilized Amtrak route. In 1990, the Congress directed Amtrak to upgrade

service on the corridor.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To improve the existing high-speed rail line between Washington, D.C.,

and Boston by electrifying the corridor north of New Haven, Connecticut,

installing continuous welded rail and concrete ties, rebuilding bridges, and

making numerous other improvements. The line is 457 miles long and links

Washington and Boston with New York, Baltimore, Philadelphia, and New

Haven. High-speed trains will operate at up to 150 mph.

Cost Estimate The total cost for the improvement project will be approximately

$4 billion.

Status Work is under way to mitigate environmental impacts, straighten curves to

allow higher speeds, install concrete ties for a smoother ride, and improve

the existing signal system. This work is to be completed by 2001.

Electrification of the section of track between New Haven and Boston will

be completed by 1999. Amtrak is buying 20 new electric trains capable of

traveling 150 mph. New trains are set to begin service in fall 1999, with

higher speed operation beginning sometime in 2000.

Page 51 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix XIV 

Gulf Coast High-Speed Rail Corridor

Background Under TEA-21, the Secretary designated the Houston-to-Birmingham

corridor as a high-speed rail corridor. The states of Mississippi, Alabama

and Louisiana are working together to obtain funding for the Gulf Coast

corridor.

Proposed Technology Incremental improvements.

Project’s Goals/Scope To create a high-speed rail system linking Houston, New Orleans, and

Birmingham. The line would be approximately 719 miles. No further plans

have been created.

Cost Estimate The project’s sponsors have not released any cost estimates.

Status A ridership and feasibility study is under way.

Page 52 GAO/RCED-99-44 High-Speed Rail Projects in the United States
Appendix XV 

Major Contributors to This Report

Joseph Christoff

Helen DeSaulniers

Lewison Lem

David Lichtenfeld

Ray Sendejas

(348118) Page 53 GAO/RCED-99-44 High-Speed Rail Projects in the United States
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