US intercity passenger rail investment has lagged other industrialized countries for decades. To improve the situation, parts of the USD 1trn Infrastructure Investment and Jobs Act (IIJA) provide approximately USD 66bn in new spending for passenger and freight rail programs over the next five years (FY22-FY26).
The US intercity passenger rail system is operated mostly by Amtrak. The Congress passed legislation in 1970 (Rail Passenger Service Act) establishing the National Railroad Passenger Corporation—doing business as Amtrak—to take over the intercity passenger rail service that had been operated by private railroads. While the law requires railroads provide preference to passenger rail, freight trains are cited by Amtrak as the leading cause for their delays.
Funding provided by IIJA would represent the largest investment in passenger rail since Amtrak’s formation. The IIJA also includes language expanding Amtrak’s mission to meet intercity passenger rail needs across the country.
Beyond Amtrak, the most controversial aspect of the passenger and freight rail provisions in IIJA is regarding the new Strengthening Mobility and Revolutionizing Transportation (SMART) grant program. The SMART program would allocate USD 500bn towards providing municipalities with grants to test surveillance technologies that could improve transportation efficiency and safety such as remote biometric systems, sensors and drones. Privacy experts are concerned that without safeguards, government surveillance could become excessive.
The table below lays out the key passenger and freight rail programs being funded by the IIJA.
Amtrak’s vision over the next 15 years could have significant benefits for municipalities and by extension the tax-exempt bond market. The existing Brightline Florida and planned Brightline California projects represent opportunities to leverage funding from various competitive grant programs. Additionally, according to Rice University’s Kinder Institute for Urban Research, Sun Belt cities are poised for explosive growth that could benefit from intercity passenger rail.
There are a few significant challenges to intercity passenger rail expansion: 1) Funding for the substantial construction and ongoing operation expenses; 2) Still unproven that there is a large unrealized demand for this type of travel; and 3) Even if sufficient funding is available, railroad access remains a difficult negotiating point with private rail companies.
Federal highway and public transportation programs are funded through multi-year surface transportation authorization acts. The last five-year surface transportation program authorized was the Fixing America’s Surface Transportation (FAST) Act from FY16 through FY20. A one-year extension of the FAST Act was enacted for FY21 (ended 30 September 2021). The next five-year authorization—the Surface Transportation Reauthorization Act of 2021—has only been temporarily funded through 31 October. Negotiations are still ongoing, which required another temporary extension through 3 December.
On 10 August, the US Senate passed on a bipartisan basis the USD 1trn IIJA, also referred to as H.R. 3684. The IIJA focuses on “hard infrastructure.” The IIJA will not get a vote in the House of Representatives until the fate of the USD 3.5trn “soft infrastructure” legislation proposed by congressional Democrats is resolved.
On 28 October, President Joe Biden announced an agreement for USD 1.75trn on the soft infrastructure legislation. As these negotiations continue, Debtwire Municipals, through our Bill in Brief series, will write periodic summaries on elements of the IIJA that directly affect state and local governments.
by Paul Greaves