Bloomberg News

Amtrak Relying on U.S. Funding to Attract Bullet-Train Investors

July 12, 2012

Amtrak, the U.S. long-distance passenger railroad, is turning its sights from private investors toward governments to fund the beginning of a $151 billion plan for bullet trains between Northeast cities by 2040.

The Washington-based, taxpayer-supported railroad will need “significant” government support to carry out its plan to boost train capacity and increase speeds to 220 miles (354 kilometers) per hour between Washington and Boston, Amtrak Chief Executive Officer Joseph Boardman said in an interview.

“We knew it was going to take a significant effort on the part of government at some level or all levels,” Boardman said yesterday. “We know for sure that needs to come sooner than a public-private partnership that’s often talked about.”

Amtrak is trying to upgrade its infrastructure, some a century old, on its busiest corridor and establish the first U.S. rail service to be considered “high-speed” by international standards.

House Transportation and Infrastructure Committee Chairman John Mica, of Florida, has been among Republicans critical of public funding for high-speed rail, saying investors and companies could develop it more quickly and for less money.

“The chairman believes the private sector could do these types of projects much more effectively than the federal government,” Justin Harclerode, a spokesman for Mica, said.

Amtrak last year invited proposals by investors and hired KPMG LLP to help develop a business and financial plan to identify funding sources.

Lowering Expectations

Tamping down expectations for private-sector funding is prudent at this point, said Mortimer Downey, a former U.S. deputy transportation secretary who’s now a senior adviser at Parsons Brinckerhoff Inc., an infrastructure consulting firm based in New York.

“You don’t put a $150 billion plan out there and expect instant funding,” he said in an interview. “There’s no free money. The private sector isn’t coming and giving you a grant. They are going to invest their dollars if they think there’s a return.”

A $151 billion plan Amtrak released July 9 merges two previous blueprints that proposed spending $118 billion over 25 years for a new high-speed corridor and $52 billion over 20 years to improve existing Northeast services, said Stephen Gardner, Amtrak vice president of Northeast Corridor infrastructure and investment development.

Money Maker

The corridor is the only place Amtrak, which loses more than $1 billion a year, gets enough revenue to cover its operating costs. Northeast ridership may grow to 43.5 million people annually with ticket revenue of $4.86 billion by 2040, Amtrak said in the July 9 plan. That would be roughly four times last year’s ridership of 10.9 million and about five times the ticket revenue of $983.5 million.

Amtrak’s fastest train, the Acela, takes six hours to travel between Washington and Boston. Slower regional trains that make more stops also operate on the route.

The other place in the U.S. where high-speed rail is proposed is California, where the Senate and Assembly last week approved spending $4.75 billion from bonds to begin constructing a $68 billion route to link San Francisco and Los Angeles. Those moves allowed the state to claim $3.3 billion in promised U.S. funds, out of $8 billion for high-speed rail from President Barack Obama’s 2009 economic stimulus package.

U.S. Transportation Secretary Ray LaHood traveled to Sacramento in May to nudge the California government along. The project would make California, the most indebted U.S. state, the only state working on a bullet train after Congress cut off 2012 funds for such projects.

California Rail

The first phase of the route will be a 130-mile stretch of rail down California’s Central Valley, not connecting with Los Angeles or San Francisco.

In 2008, 53 percent of California voters approved issuing bonds for the rail project.

LaHood, speaking to reporters from a high-speed rail conference in Philadelphia yesterday, called California’s move “historic” and praised public investment in a rail project.

“The political will lies in California,” he said. “We hope our friends in Congress will take their cues from what we’ve seen come from California.”

The U.S. Transportation Department will decide “soon” whether to help fund a privately owned high-speed rail project linking southern California tourists and gamblers with Las Vegas, LaHood said.

Developers of the 190-mile Xpress West, formerly known as DesertXpress, have asked the U.S. to provide loans to cover most of its estimated cost of as much as $6.5 billion. Investors in the project, which is backed by Senate Majority Leader Harry Reid, a Nevada Democrat, include Las Vegas casino developer Tony Marnell, a Reid contributor.

“We’re evaluating their proposal, and we’ll be making some judgments about that very soon,” LaHood said. “We have worked with them on what we believe the costs will be and how those costs will be borne and who will pay for them. We’re working our way through their proposal and evaluating that and will be making some announcements about that soon.”

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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