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Private Sector Participation Essential to Northeast Corridor High-Speed Rail

December 13, 2012

Washington, DC – A Transportation and Infrastructure Committee hearing today on the status and future of high-speed passenger rail in the nation’s congested Northeast Corridor (NEC) focused on the indispensible role private sector participation must play in the effort.

Today’s hearing, led by Full Committee Chairman John L. Mica (R-FL), follows a series of Committee meetings – including the panel’s first hearing of the 112th Congress on January 27, 2011 – focused on improving the quality and cost-effectiveness of intercity passenger rail in the United States, including the NEC.

“I began my Chairmanship this Congress with a hearing in Grand Central Station on the need for private sector involvement in developing Northeast Corridor high-speed rail, and with today’s final scheduled Full Committee hearing of the Congress, we’ll examine the issue again nearly two years later,” Mica said. “While I have been a vocal critic of Amtrak, I am also a strong proponent of high-speed rail, passenger rail and transit. But we have to ensure that any rail development or project makes sense, in places where there is the greatest need and at the lowest possible cost to the taxpayers.

“High-speed rail in the NEC makes sense if done properly,” Mica continued. “It has the high population density and sophisticated transportation connections necessary, the New York-New Jersey airspace is responsible for about 70 percent of chronically delayed flights, and Amtrak and the American people already own the near entirety of this 437-mile stretch of real estate.

“Unfortunately, NEC high-speed rail development has had a problematic history and it has been a squandered asset for too long,” Mica said. “In fact, Committee Republicans highlighted the underutilization of the NEC in their ‘Sitting On Our Assets’ report in October 2010. Amtrak’s acquisition and use of the Acela has been plagued with problems, and while true high-speed rail averages a minimum of 110 miles per hour, Acela averages only 83 miles per hour between D.C. and New York and only 72 miles per hour between New York and Boston.

“There has been some recent progress,” Mica added. “The NEC was finally designated a high-speed corridor, an environmental review is underway, and the NEC Advisory Commission is moving forward in its planning. However, Amtrak’s $151 billion, 30-year plan is simply too much money and too long, and we must bring in the private sector if NEC high-speed rail is going to become a reality.”

Witnesses at today’s hearing included Amtrak President and CEO Joseph Boardman, Federal Railroad Administration Deputy Administrator Karen J. Hedlund, Morgan Stanley Managing Director Perry Offutt, American Enterprise Institute Adjunct Scholar Dr. Richard Geddes, Brotherhood of Locomotive Engineers and Trainmen Vice President John Tolman, and New York State Department of Transportation Commissioner Joan McDonald, who also chairs the Northeast Corridor Infrastructure and Operations Advisory Commission. Congresswoman Carolyn Maloney of New York also testified at the hearing, concurring that NEC high-speed rail could be achieved at a much lower cost and in a much shorter timeframe than is currently planned by Amtrak.

There was strong support among the panelists for significant private sector involvement in future plans for NEC high-speed rail development, echoing Department of Transportation Secretary Ray LaHood’s comments before the Committee last week, when he stated in reference to the California high-speed rail project, “We know that this project cannot or will not be built with total federal dollars. We don’t have enough money here to do that. We need private investment.”

“We are studying the prospects for private financing and innovative partnerships with the private sector,” said Boardman. “With possible operating profits over a billion dollars annually and ridership well into 40 million riders a year upon full build-out, Amtrak expects that private capital funding, probably in the form of a public-private partnership, could play a significant role in this project.”

Offut discussed some of the clear benefits to the taxpayers of involving the private sector in developing high-speed rail or other projects: “The private sector can often build a project more quickly and at a lower cost; drive efficiencies over time by introducing technology solutions; and develop incremental revenue sources by delivering additional services.”

Geddes detailed potential avenues for private sector participation, including public-private partnerships (PPPs), in the NEC: “There are many ways in which private participation through PPPs can improve social welfare by playing a greater role on the NEC. Private participation can enhance social welfare by creating new types of service, by improving the quality of existence, and by lowering the cost of providing a given service…. Private investors can be called upon to make substantial, sunk investments in transportation infrastructure, such as in tracks, yards, right-of-way, signaling, etc. on which they require assurances of a rate of return over time. After investing, private partners can also maintain and operate the infrastructure and rolling stock.” Geddes also said that “private partners contribute by bringing capital, focused incentives, and expertise to the management of existing transportation assets.”

McDonald outlined the progress of the Northeast Corridor Infrastructure and Operations Advisory Commission, which was established by the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) to create and implement a long-term, regional investment strategy for the NEC; advance near-term improvements; and coordinate regional planning: “As required by statute, later next year we will also publish an economic development study on the impacts of Northeast Corridor rail service on the region to help inform our short and long term recommendations and investment strategies…. The Commission will also examine investment strategies to fund long-term NEC improvements. Our goal is that through the Commission’s work and our close partnership with NEC FUTURE, we will be able to unify our members and other key stakeholders behind a long-term plan and investment strategy for the corridor.”

More information from today’s hearing, including witness testimony, video, and additional background information, can be found here.

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