High-Speed Rail for the Northeast Corridor: Fantasy or Realizable?

If there is any corridor in the United States that has the high population density, major cities with concentrated downtowns and extensive transit service, and congested air and highway routes, it’s the 453-mile corridor from Boston to New York to Washington.
(Publisher’s Note: high speed rail has its advocates here in Virginia.  The federal money for such a program has been turned down by our Governor, but the advocates will continue to search for ways to find the funding necessary to get such a system started in the Old Dominion. The following article by a nationally recognized transportation expert advocates for high speed rail – but from Washington DC to Boston and not further south.)

In a recent interview with The Hill, Rep. John Mica (R, FL), chairman of the House Transportation and Infrastructure Committee, lambasted the Administration and Amtrak for sending the federal high-speed rail program off in the wrong direction. “So many people in the Northeast corridor are wondering what in heaven’s name is the Administration thinking giving away limited money on marginal projects,” he said. “Congress and the Administration threw huge amounts of money in the name of high-speed rail for snail-speed service.” He told The Hill that the Administration should have focused its HSR efforts on the Northeast Corridor, instead.

And indeed, that is what I have been telling reporters who ask me that question. If there is any corridor in the United States that has the high population density, major cities with concentrated downtowns and extensive transit service, and congested air and highway routes, it’s the 453-mile corridor from Boston to New York to Washington. The current Amtrak Acela takes 2 ¾ hours between DC and New York, for an average speed of 81.5 mph. Amtrak’s current master plan calls for investing $5 billion replacing obsolete tunnels and bridges so as to cut that time to 2 ¼ hours (average speed of just under 100 mph). These relatively slow speeds are due in part to the non-high-speed infrastructure (curve radii, especially) but also due to political mandates like stopping at Wilmington, DE (pop. 73,000, including Joe Biden).

Last fall, Amtrak announced a visionary plan to provide true HSR in the Northeast Corridor. That would involve essentially all-new right of way, to permit high-speed curves of three-mile radius (compared with existing ones as sharp as a half-mile) and long straight sections to permit steady acceleration to 200 mph. Its plan would include Super Express service making stops only in Philadelphia and New York in between Boston and Washington. The estimated price tag (in 2010 dollars) is $117 billion and the estimated completion date is 2040. So the question before the house is: Would putting $117 billion of general taxpayers money into this project be a good investment?

Amtrak estimates that the improvements in place by 2030 would attract an additional 3.7 million passengers a year by that year, increasing to 10.3 million new riders by 2040 when the system is finished. And it claims that 2040 revenues would exceed 2040 costs (including a $349 million line item for “annual capital renewal costs”) by $928 million (that number is the source for the widely reported “$900 million annual profit” figure). Even assuming all of Amtrak’s assumptions are correct (i.e., no cost over-runs, on-time completion, getting that many new riders, etc.), that alleged profit is highly misleading. First, that number ignores three decades of likely operating losses during the construction period, with that $928 million/year figure applying only from 2040 onward. Second, and far more important, Amtrak includes no financing costs for this $117 billion project, implying that it will not repay even one dollar of that amount to the Treasury. It’s all a sunk cost.

A former infrastructure analyst from the previous Administration shared with me his own assessment of Amtrak’s plan. “Fully amortizing the construction cost (over 30 years at an interest rate of 4.5%–roughly the rate on Treasury debt) adds an additional $7.2 billion in annual costs. The HSR-NEC is therefore designed with a built-in loss of $6.25 billion per year.” Using Amtrak’s 2040 estimate of 17.7 million passengers a year at an average fare of $143 per trip, he calculates that “Each of these trips would have a built-in subsidy of $353 per passenger,” based on including the debt service cost in the calculation. He also did a sensitivity analysis showing that if annual operating & maintenance costs are just five percent higher than Amtrak’s estimate, the $928 million operating profit becomes an operating loss of $757 million/year. In a more-extreme stress test, a combination of 20 percent higher costs, 20 percent lower revenue, and including the debt service cost yields a built-in loss of $14 billion per year.

So if there is to be some form of HSR in the Northeast Corridor, there will have to be a Plan B. In that regard, I was intrigued by an op-ed in the Wall Street Journal (March 16th) by Ed Rendell and Peter Peyser, “A Northeast Corridor Bullet Train.” They propose divesting the NEC from Amtrak and turning it over to a public-private partnership owned 51 percent by the nine states plus DC served by the NEC and 49 percent by a private consortium. The existing NEC is such a black hole, in their view, that the federal government should pay the new entity, over five years, to take it off the government’s hands. The amount of that payment would be a key factor in deciding the winning private-sector consortium—whichever qualified team required the smallest federal payment. The public-sector partners would have to work out with the consortium how much the former would put into the venture, based on the consortium’s business plan.

The op-ed includes what appear to me to be two contradictory points: that speeds would be upgraded to “200 mph or faster” and that “the dedicated right of way [is] already assembled.” But you can’t safely run 200 mph trains on half-mile curve radii, as far as I know, so perhaps they mean only 200 mph on long, straight segments, which is still better than Acela can do on such segments between New York and Boston. They also stress the potential of the consortium to “take full advantage of the real-estate development opportunities presented by property now owned by Amtrak” in the corridor.

Chairman Mica has long called for private-sector investment to rebuild the NEC and offer something like real high-speed rail there. And since Amtrak’s $117 billion plan will go nowhere in our current era (for the next several decades, at least) of fiscal stress, I’m all in favor of exploring ideas like that put forward by Rendell and Peyser. Perhaps a truly commercial approach can think far enough outside the box to be worth pursuing.