Increasing the cap on tax-exempt private activity bonds and reforming federal loan programs could encourage more private investment in high-speed rail projects, according to the CEO of Brightline—currently the only privately built and operated high-speed rail system in the U.S.
Considering the Biden administration’s support of rail, “I don’t think any group is more optimistic about the prospects for and benefits of high-speed rail as an important addition to transportation solutions in the U.S. than we at Brightline,” said Michael Reininger, addressing a group of journalists online on June 8. “It seems like this is the moment…there is a growing sense of momentum and recognition of the attributes and benefits this form of transportation can add into the equation.”
Available Allocation of PABs Depleted
Construction of the route between Miami and West Palm Beach was funded in part by a $1.5-billion private activity bond allocation in 2014. But currently, the available allocation of $15 billion for PABs, issued by or on behalf of a local or state government for the purpose of providing special financing benefits for qualified projects, is depleted, Reininger noted. “It needs to be expanded.” He said that he has testified to Congress that making private-sector entities in partnership with the public sector eligible for some federal grant programs would be helpful.
He also suggested that the federal Railroad Rehabilitation and Improvement Financing (RRIF) loan program could be reformed regarding long-term fixed rates. “In practice, application of credit risk premiums is very high and represents up-front large equity costs. Economic benefits of low-cost loans become much less attractive.” He noted that out of some $35 billion in available loans, only $6 billion has been utilized, and none are for high-speed rail projects.
Planned LA-to-Vegas Route
Reininger said that environmental documentation is nearing completion for the Brightline West, a planned route between Los Angeles and Las Vegas. “We are working to 'de-risk' the project in the eyes of the investment community,” he said. Construction on an extension of the Florida system to Orlando is currently underway.
Brightline West could tie into the planned San Francisco-Los Angeles high-speed rail system as a part of a future high-speed rail network, Reininger noted. “Our own model is premised on the idea of city pairs where it’s too short to fly, too long to drive,” as in 250 to 350 miles. “We foster a strong belief that the private sector for portions of the overall vision of a national network has an enormous amount to offer,” he said.