Sunday, March 11, 2012

What to anticipate with the GAO report from Washington on California's HSR project

My colleague William Grindley, whose papers on the financial debacle of HSR in California have been accessible through this blog in the past, (and can be found by scrolling down this blog site), recently sent me two papers from the General Accounting Office (GAO) in Washington.

As you know, the GAO is currently underway with an audit of the California HSR project.  In the past, 2009 and 2010, the GAO published several papers related to inter-city rail in the US, with particular attention to High-Speed Rail.

The point of presenting this material at this time is to create an appropriate level of expectations for the new report.  The GAO has not been shy about raising many of the problems and challenges with HSR in the US.  I don't expect them to hold back their judgements when they complete their anticipated analysis of the California project either. 

Based on these documents, I would expect the GAO report to be neither a CHSRA white-wash or a total demolition-job.  They will doubtless raise critical issues and vexing problems.  However, we should not expect either a vindication of the rail authority's project nor a complete condemnation.

Here is a salient passage from the Jun 2010 paper, entitled:  

HIGH SPEED RAIL: Learning From Service Start-ups, Prospects for Increased Industry Investment, and Federal Oversight Plans

Concluding Observations

The federal government has embarked on a new role in transportation by designating an unprecedented amount of federal funds for high speed passenger rail. Federal, state, and local officials have welcomed the investment and have cited the possible public benefits of passenger rail service for the nation, regions, states, and communities.

However, this new opportunity will come with many years of planning, testing, and construction, and brings new concerns. While the rail industry and some states are ready to take advantage of this opportunity, the federal government and many states do not have any experience in contracting for intercity passenger rail service. States that have established intercity passenger rail service have taken years to build public support, secure funding, obtain equipment, and manage their services. 

More passenger rail service, especially services at higher and high speeds, will require new safety rules, constant public capital investment and operating subsidies, and balance with freight rail service and the rest of the national transportation system—and currently only some of these elements are in place.

While the recent federal funds may serve as a catalyst for many projects and have generated high public expectations, the planning necessary to meet the many concerns outlined above has not yet occurred. In particular, some states do not have a state rail plan that identifies the states’ strategies, priorities, and possible public benefits of public investment in rail transportation. While it is understandable that Congress exempted projects funded by the Recovery Act from this requirement to stimulate the economy, it remains nonetheless important to know how states plan to use federal funds for passenger rail projects over the long term. 

PRIIA established that states should plan how they use federal passenger rail funds and we believe this kind of planning can provide the basis for sound investment of federal funds. Additionally, on a national level, FRA’s definition of federal role, goals, and objectives, in conjunction with a robust grant oversight program, are critical to making sound federal investments. These elements will become even more important as more federal funds are appropriated and distributed and as states and the federal government gain experience in investing and managing intercity passenger rail service. We are not recommending that FRA include these elements in its next version of its National Rail Plan at this time, as the agency appears to be on a path to doing so. We will continue to monitor FRA’s efforts in this regard.

What GAO Found: 

State successes to initiate or improve intercity passenger rail 
services in the recent past (the last 15 years), hinged largely on 
their abilities to build public and political support, secure funding, 
obtain equipment, and manage their services. Public and political 
support and funding provided a foundation for these services. States 
acquired equipment by using collaborative and cost-saving approaches.

Further, states managed their rail services by building consensus with
stakeholders, borrowing expertise, and developing state capacity. All 
of these activities will be important for states that seek to initiate 
or improve services in the future, including developing conventional 
passenger rail (operating at speeds up to 79 miles per hour), higher 
speed passenger rail (operating at speeds up to 150 miles per hour), 
and even high speed rail services (operating at speeds of 150 miles 
per hour or more). 

Rail industry stakeholders are optimistic that they can meet increased 
public investment in intercity passenger rail; however, they are 
looking for (1) federal leadership in setting safety standards for 
high speed rail and in promoting interstate cooperation for service 
across state lines, among other things, and (2) stable funding to 
create a structure for developing a passenger rail marketplace. 

Additionally, stakeholders said that a stable federal funding stream 
would encourage firms to enter and invest in the intercity passenger 
rail marketplace. However, even with strong federal leadership and 
funding it could take several years to provide the necessary 
infrastructure, such as for building new passenger rail cars, 
potentially making it difficult to spend some Recovery Act high speed 
rail funds by 2017, as required by law. 

As a result of Recovery Act funding and the Passenger Rail Investment 
and Improvement Act of 2008, FRA has had to develop a rail program and 
an oversight approach. Among other things, FRA had to quickly draft a 
preliminary national rail plan and a high speed rail strategic vision, 
as well as develop a program to distribute Recovery Act funds. As a 
result, FRA officials stated that they concentrated their efforts on 
meeting these requirements and they are currently designing their 
oversight program. FRA is in its early stages of setting up agreements 
with its state grantees and hiring both FRA and contractor personnel 
to oversee how the federal funds are used. FRA is planning to release 
another version of its national rail plan in September 2010 which it 
expects to discuss issues such as the roles of federal, state, and 
local governments in rail transportation and public and private 
funding sources. 

The strategic vision did not define the goals, stakeholder roles, 
or objectives for federal involvement in high speed 
intercity passenger rail and the preliminary national rail plan did 
not have any recommendations for future action. While states will be 
the recipients of Recovery Act funds, many states do not have state 
rail plans that would establish strategies and priorities, capital 
investments, and public benefits of rail investments in the state. To 
try to stimulate the economy quickly, Congress exempted projects 
funded by the Recovery Act and recent appropriations from being in 
state rail plans. 


A year earlier, in March, 2009, the GAO had published another paper: HIGH SPEED PASSENGER RAIL: Future Development Will Depend on Addressing Financial and Other Challenges and Establishing a Clear Federal Role  By logging on to this site, you can also download the entire report.

Here's a good summary/highlights:

This testimony discusses the potential viability of high speed rail in the United States. Federal and other decision makers have had a renewed interest in how high speed rail might fit into the national transportation system and address increasing mobility constraints on highways and at airports due to congestion. 

This testimony is based on our report issued March 19, 2009, entitled High Speed Passenger Rail: Future Development Will Depend on Addressing Financial and Other Challenges and Establishing a Clear Federal Role. 

In preparing the report, we reviewed federal legislation; interviewed federal, state, local, and private sector officials, as well as U.S. project sponsors; and reviewed high speed rail development in France, Japan, and Spain. More detailed information on our scope and methodology appears in the March 19, 2009, report. 

We conducted our work in accordance with generally accepted government auditing standards. This statement focuses on (1) the factors affecting the economic viability of high speed rail projects, including difficulties in determining the economic viability of proposed projects; (2) the challenges in developing and financing high speed rail systems; and (3) the federal role in the potential development of U.S. high speed rail systems.

In summary, high speed rail does not offer a quick or simple solution to relieving congestion on our nation's highways and airways. High speed rail projects are costly, risky, take years to develop and build, and require substantial up-front public investment as well as potentially long-term operating subsidies. 

Yet the potential benefits of high speed rail--both to riders and nonriders--are many. Whether any of the nearly 50 current domestic high speed rail proposals (or any future domestic high speed rail proposal), may eventually be built will hinge on addressing the funding, public support, and other challenges facing these projects. 

Determining which, if any, proposed high speed rail projects should be built will require decision makers to be better able to determine a project's economic viability--meaning whether total social benefits offset or justify total social costs.

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