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Suggested Citation:"Chapter 1 - Introduction." National Academies of Sciences, Engineering, and Medicine. 2015. Alternative Funding and Financing Mechanisms for Passenger and Freight Rail Projects. Washington, DC: The National Academies Press. doi: 10.17226/22149.
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Page 10
Page 11
Suggested Citation:"Chapter 1 - Introduction." National Academies of Sciences, Engineering, and Medicine. 2015. Alternative Funding and Financing Mechanisms for Passenger and Freight Rail Projects. Washington, DC: The National Academies Press. doi: 10.17226/22149.
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Page 11

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10 Introduction 1.1 Background Most public surface transportation infrastructure and services in the United States do not, on their own, generate sufficient revenue to cover their full costs and are dependent on public funding contributions. A recent report noted that the combined contribution of the federal gov- ernment, states, and localities to the country’s highways and transit systems was on the order of $207 billion per year.5 Similarly, most public rail projects and services, including intercity passenger rail, commuter rail, and corridor improvement projects, also require public funding contributions to be financially viable. Both passenger and freight rail projects and services require significant capital investment as well as ongoing funding for operations and maintenance. Yet, there are significant differences in how passenger and freight rail projects and services are funded and financed. Generally, most freight rail services in the United States generate sufficient operating revenues to cover their capi- tal, operating, and maintenance costs and they are operated as profitable private businesses. U.S. passenger rail projects and services, on the other hand, do not generate sufficient operating revenues to cover their operating and maintenance costs, let alone capital costs. This is also true for some short-line freight railroad projects and services and most shared passenger-freight rail corridor or corridor improvement projects. From a financial standpoint, these projects and services have a “funding gap” and require other sources of funding to be viable. Nevertheless, many of these projects can generate important, non-market public benefits, such as improved mobility and access, regional economic develop- ment, reduced congestion and wear and tear on roads, and reduced environmental emissions. Although such public benefits can create a strong rationale for the projects in question, they do not on their own generate funding sources to pay for these projects. The question then is: how to pay for these projects? The research addresses this question by providing a consolidated set of alternative funding and financing mechanisms that could be used to help pay for passenger and freight rail projects that have a funding gap. This research project also presents specific strategies, approaches, and considerations for funding and financing rail projects in the United States. C H A P T E R 1 5 The PEW Charitable Trusts, Intergovernmental Challenges in Surface Transportation Funding, September 2014.

Introduction 11 1.2 Project Overview 1.2.1 Objectives The objective of this research was to identify alternative revenue generation (funding) and financing methods for realizing passenger and freight rail capital investment, operations, and maintenance. The research project ultimately sought to provide a resource to help policymakers, planners, and others identify ways to fund and finance rail projects that otherwise could not be realized. 1.2.2 Scope The scope of this research project was broad and covered funding and financing needs and mechanisms relating to capital, operations, and maintenance of • Freight rail projects and services (in particular short lines and regional railroads); • Passenger rail projects and services (particularly intercity passenger rail and including high- speed rail and commuter rail); and • Shared corridor and corridor improvement projects (covering both shared passenger and freight corridors along with freight corridor improvement projects). Urban metro and light rail projects and services were not included in the scope of this research project, although some of the identified funding and financing mechanisms identified might be relevant to these rail sub-sectors. 1.2.3 Structure This research project was undertaken in four steps as outlined in Figure 1-1. This Guidebook is the product of the final step and reflects the research undertaken in previous steps. 1.3 Purpose of This Guidebook This Guidebook provides approaches and mechanisms to help fund and finance rail projects and services that have a funding gap. It is not intended to prescribe or recommend specific funding or financing tools, nor are all the funding and financing mechanisms in this Guidebook appropriate for every project. Rather this Guidebook is intended as a resource for policymakers, planners, and other stakeholders in identifying and considering potential funding and financing models for use in realizing specific projects. Project Incepon Step 1: Global Scan & Assessment of Established Financing & Revenue Models Step 2: Idenficaon of Development of Alternave Financing & Revenue Mechanisms Step 3: Financing / Revenue Mechanism Feasibility and Implementaon Strategies Step 4: Reporng and Communicaon of Research Findings Figure 1-1. Project steps.

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TRB’s National Cooperative Rail Research Program (NCRRP) Report 1: Alternative Funding and Financing Mechanisms for Passenger and Freight Rail Projects identifies alternative funding and financing tools that can be used to realize passenger and freight rail project development, including capital investments, operations, and maintenance. The report summary is available online.

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