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. A secured loan would typically provide the project’s sponsors with an infusion of capital needed to help pay for construction costs. The FOX system would link Miami, Orlando, and Tampa, cover 320 miles, and have seven stops along the route. 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. It will be at least 2 more years before sufficient information is available to comprehensively assess the project. 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 or fewer in 2010. 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 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. TIFIA, as amended by the TEA-21 Restoration Act, provides $530 million over fiscal years 1999 through 2003 to cover the cost of up to $10.6 billion in credit. The preliminary cost estimates of these systems range from $315 million to $29 billion. Unlike FOX, however, most of the corridors have not determined their funding sources. 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. 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. 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. 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. Cost Estimates

The current cost estimates range from $21 billion for the new high-speed rail system to $29 billion for a maglev system. The project’s sponsors have not announced any schedule for the start of high-speed rail service. Status

Plans for a new high-speed rail system are dormant. Status

A ridership and feasibility study is under way.
Why GAO Did This Study

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

What GAO Found

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