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Legal Update

Award of $8 Billion in Federal Funds for High Speed Rail Creates Significant Opportunities for Private Investment

1 February 2010
Mayer Brown Legal Update

President Obama has announced awards totaling $8 billion from the American Recovery and Reinvestment Act for high speed inter-city passenger rail projects. The money will go to 13 rail corridors covering 31 states and the District of Columbia. Major awards include: $1.25 billion to develop a high speed rail corridor between Tampa and Orlando in Florida, with trains at speeds up to 168 miles per hour; $2.25 billion to connect Southern California to the San Francisco Bay area, with trains running up to 220 miles per hour; and $2.6 billion for projects in the Midwest Corridor, including $1.1 billion for service between Chicago and St. Louis. Smaller awards across the nation target improvements and extensions to existing inter-city lines, repair of tunnels and bridges for increased speeds on existing tracks and planning studies for future service.

While this investment in high speed rail is unprecedented, demand far exceeds available federal funds. The US Department of Transportation received requests totaling $55 billion. Additional funds for high speed rail projects may be made available from the $1.5 billion in discretionary stimulus funds yet to be announced by US DOT Secretary Ray LaHood. Also, Congress has approved an additional $2.5 billion for high speed rail projects that has not yet been awarded and a proposed version of the transportation reauthorization bill includes an additional $50 billion for high speed rail.

The awards provide only partial funding for most projects, creating significant opportunities for private investment in high-speed rail infrastructure in the United States. Private capital is likely to be required to bring many projects to fruition; private rail car manufacturers will be tapped to provide specialized equipment and private operators with expertise in high-speed rail from the United States and abroad may also play a role. 

Many states are already looking to public-private partnerships to supplement federal, state and local funding as well as management capacity for the development, financing and operation of such projects. For example, the Florida Department of Transportation expects to contract with the private sector for more than $1 billion for core systems, rolling stock and operation of the Tampa to Orlando corridor. In California, the total estimated cost for the new San Francisco to Los Angeles corridor exceeds $40 billion and the state expects to use a combination of bonds and public-private partnerships to fill this gap. In addition, the federal government has secured a commitment from more than 30 domestic and foreign manufacturers and suppliers to establish or expand operations in the United States if they are retained for high speed rail and intercity passenger rail projects.

For more information on this topic please contact David Narefsky at +1 312 701 7303.

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