Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs (2016)

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80 4.1 Introduction An important theme that emerged from this research, and one that is not surprising, is that no single governance model has proven to be particularly effective for advancing passenger rail. However, the following models have proven successful in addressing one or more of the elements of an effective passenger rail program as represented in the conceptual framework: • Coordinated state efforts • Coalition/partnership • Single state agency contracting with or on behalf of other states • Public-private partnership • Multi-state commission • Multi-state special authority • Federal-state commission • Freight railroads Table 18 summarizes these models, which are described in more detail in this chapter. Table 18 provides a definition of each model and examples of where the model has been applied. In addition, the table notes the applicable phases of development for each model as the individual models might be appropriate for consideration in different phases. It should be noted that while this chapter presents each model as a stand-alone option, a multi- state passenger rail program is likely to employ a combination of these models depending on such factors as the phase of development and the legal authority of the state partners. A given corridor or project might progress through various governance models over its lifetime. In addi- tion, Amtrak provides passenger rail service on many multi-state routes across the country under individual contracts with states. Such service was originally provided pursuant to Section 403(b) of the RPSA and is now provided under Section 209 of the PRIIA. Examples include the Vermonter, which operates off the NEC to Connecticut, Massachusetts, and Vermont and the Carolinian, which operates off the NEC to Virginia and North Carolina. Under PRIIA, any losses associated with the operation of a train are paid by the states. However, in this example, the states are not acting together, but rather contracting individually with Amtrak. The research team’s analysis focuses on rail operations planned and/or implemented jointly by one or more states with an understanding that Amtrak is currently and will likely remain for some time the common denominator for the planning and operation of multi-state service in many corridors. 4.2 Coordinated State Efforts In this model, two or more states agree to coordinate passenger rail efforts within their respective states. This model emerged from the PNWRC and the SCHSRC case studies. It is most effective C H A P T E R 4 Decision-Making Models for Intercity Passenger Rail

Decision-Making Models for Intercity Passenger Rail 81 during the visioning and planning stages of project development. Often, one of the states is selected to lead grant applications or accepts other lead agency roles where necessary. 4.2.1 Mechanism for Implementation The coordination between state partners may occur without establishing any formal agreement or mechanism. In some instances, however, states may find it advantageous to utilize some form of a multi-state agreement. In the case of the PNWRC, for example, an MOU and, subsequently, a joint work plan was formed between the Washington State DOT and the Oregon DOT to provide a framework for how the agencies were to jointly manage intercity passenger rail service in the corridor with each responsible for the portion within their state boundaries. The MOU defined the parameters for establishing the work plan. The work plan defined the vision, goals, and objectives of the Cascades Rail Corridor and how the Oregon DOT and the Washington State DOT would work together, as well as milestones and an interim dispute-resolution procedure. Table 18. Recommended decision-making models for multi-state intercity passenger rail. Model Definition Phase of Development Examples Coordinated State Efforts Where two or more states agree to coordinate passenger rail efforts within their respective states. • Visioning • Planning • Pacific Northwest Rail Corridor • SCHSRC Coalition/ Partnership Where multi-state partners convene on a voluntary basis to carry out activities of common interest. May also be carried out in coordination with a non-profit corporation. • Visioning • Planning • Midwest High-Speed Rail Steering Group • I-95 Coalition • Coalition of Northeastern Governors • Midwest Regional Rail Initiative Steering Committee • Amtrak NEC Infrastructure Master Plan Working Group Single State Agency Contracting with or on Behalf of Other States Where an existing or newly created entity within a single state addresses multi-state interests, primarily through contractual arrangements with other states. • Design • Construction • Operations and Maintenance • Chicago-Detroit/Pontiac Corridor • NNEPRA • Operating agreements in the NEC Public-Private Partnership Where the government and the private sector enter into an arrangement that allows for greater private-sector participation in the delivery of transportation projects. • Design • Construction • Operations and Maintenance • All Aboard Florida • Texas Central Railway • Indianapolis-Chicago Hoosier State Service Multi-State Commission Where two or more states coordinate multi- state interests through a formal agreement that establishes a governing commission body. • Planning • Preliminary Design • SEHSR Project: VA-NC • Midwest Interstate Passenger Rail Commission Multi-State Special Authority Where an independent entity, often a distinct governmental body, delivers a limited number of public services within defined boundaries across state lines and can exercise a broad range of typical governmental powers. • Design • Construction • Operations and Maintenance • WMATA • Port Authority of New York and New Jersey Federal-State Commission Where a body of federal, state, and, sometimes, local leaders organize to address a critical need. • Planning • ARC • NEC Infrastructure Operations and Advisory Commission Freight Railroads Where freight railroads lead delivery of passenger rail services. • Design • Construction • Operations and Maintenance • No current examples

82 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs In the SCHSRC, Texas and Oklahoma established a legal agreement for conducting the ongoing TOPRS. The agreement designates Texas as the lead agency for the study and defines roles and responsibilities for both states, including Texas funding the cost of the study and Oklahoma providing in-kind services and data. For the PNWRC and the SCHSRC, relationships between the state DOTs already existed through the operation of current Amtrak service. The existence of these relationships made the initiation of efforts to improve passenger rail in these corridors simpler. Within the SCHSRC, several studies over the last 10 years have been conducted by both Texas and Oklahoma (as well as by the Kansas DOT and Missouri DOT). Texas and Oklahoma also both financially support the operation of Amtrak’s Heartland Flyer. These previous study efforts have made the adoption of the MOU for the TOPRS much simpler to develop and enact. The states of Washington and Oregon had already invested substantial money in infrastructure and equipment prior to their recent MOU and joint work plan. Further, the Washington State DOT and Oregon DOT have used development of their state rail plans to share knowledge and coordinate passenger and freight rail efforts in their states. Other states may want to follow this example. 4.2.2 Powers and Responsibilities State partners operate within the authority granted by their respective states, and no new powers are explicitly granted under this model. The range of responsibilities is quite varied and flexible, and the model is most appropriate for application during the visioning and planning phases of project development. It can be used as an early catalyst for moving toward seamless and connected service within a single, multi-state corridor. 4.2.3 Governance Structure This model does not require creation of a formal governance structure. However, oversight is usually provided by senior leadership from the respective state entities with lead roles in the project. In the SCHSRC, the agreement identifies Texas as having responsibility for oversight of the project with monthly updates and comment opportunities provided to Oklahoma. 4.2.4 Advantages • This model can easily build upon existing efforts within states without requiring special actions to begin coordination. • It does not require new legislation. • Coordinated state efforts can work well for advocacy and knowledge sharing. 4.2.5 Disadvantages • This model can make it difficult to ensure that state efforts proceed according to the same timeline. • The model is generally limited to planning and policy issues. • The model depends on continued commitment to the service by the states. • Coordinated state efforts may not be as helpful in gaining commitments and engagement from state and federal decision-makers as other models with binding agreements in place. 4.3 Coalition/Partnership This model provides a forum for multi-state partners to convene on a voluntary basis to carry out activities of common interest. The work of the coalition/partnership may also be carried out in coordination with a non-profit corporation that is often tax-exempt and eligible to

Decision-Making Models for Intercity Passenger Rail 83 receive government funds and private contributions. Examples of this model, found in the NEC and Midwest case studies, were the I-95 Coalition, CONEG, the Amtrak Northeast Corridor Infrastructure Master Plan Working Group, the Midwest High-Speed Rail Steering Group, and the MWRRI Steering Committee. The coalition/partnership model differs in that coordinated multi-state action can be accomplished with agreements or other means of establishing lines of communication and authority for specific tasks. The coalition model assumes that the partners collaborate on a shared goal, but does not assume any formal relationship. 4.3.1 Mechanism of Implementation A coalition can be established without any formal agreement or mechanism, but, in limited instances, may use a multi-state agreement. The Midwest High-Speed Rail Steering Group estab- lished an MOU to define each state’s role in and responsibility for the implementation of high-speed and passenger rail services. The MOU demonstrated gubernatorial support for implementation of the passenger rail vision and committed the state partners to coordinating projects for a federal funding application. 4.3.2 Powers and Responsibilities As the coalition/partnership may not create a formal entity, it generally does not have any powers. The responsibilities of a coalition/partnership generally encompass convening appropriate stakeholders to outline a vision, goals, and objectives and, potentially, oversee funded studies and research. The entity may be convened for a common purpose as was the case for the MWRRI Steering Committee. The MWRRI Steering Committee, which included key staff from each state agency engaged in the study and Amtrak, was responsible for directing early feasibility studies and leading planning coordination. The members of the coalition/partnership may agree to pool resources to support studies and other activities. A coalition/partnership may also establish or closely coordinate with an existing non-profit entity that is organized as a distinct corporation, often with tax-exempt status and eligibility to directly receive certain government grants and tax-deductible contributions from the private sector. CONEG, for example, conducts program activities through the CONEG Policy Research Center, Inc., a non-profit organization that functions as the staffing arm for CONEG. It should be noted that CONEG also has other programs in addition to transportation, which have helped to keep the institution going over time. 4.3.3 Governance Structure Decision-making for the coalition/partnership is based on a consensus of member agency representatives. Leadership may be selected on a rotating basis. As this model is recommended for visioning and early planning activities, it is recommended that the governance structure be kept relatively informal. The I-95 Coalition and CONEG provide examples of more formal structures for governance that should be considered if the scope of the organization includes expanding beyond visioning and early planning. 4.3.4 Advantages • This model can work well for advocacy, knowledge sharing, and development of an overall vision with stakeholder buy-in. • It is relatively easy to start, which means the coalition/partnership model might be a catalyst for a model with broader functions.

84 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs • A coalition/partnership model is highly flexible, making it easy to engage a large and diverse range of stakeholders, including local entities that may not otherwise be represented in decision- making bodies. 4.3.5 Disadvantages • The coalition/partnership model is generally limited to planning and policy issues for which consensus can be reached. • The model has no mechanism for settling disagreements or negotiating serious funding issues. • If a coalition/partnership is created without formal agreement, there is less accountability and potentially less effectiveness due to lack of participation by some parties. • This model does not include power to ensure that plans or policies are enacted and depends on continued commitment to the service by the states. • The effectiveness of this model may be limited by a lack of a long-term funding, even in the limited sphere of policy and planning. • This model may not be as helpful as models with binding agreements in place in gaining commitments and engagement from state and federal decision-makers. 4.4 Single State Agency Contracting with or on Behalf of Other States This governance model features an existing or newly created entity within a single state that addresses multi-state interests, primarily through contractual arrangements with other states. This model is recommended for application during implementation of passenger rail efforts, including design, construction, and operations and maintenance phases. Examples of this model are found in the Chicago-Detroit/Pontiac Corridor and NNEPRA case studies, and various operating agreements in the NEC. In practice, the state that hosts the lead agency generally is the state that stands to benefit most from implementation of the project. 4.4.1 Mechanism of Implementation This model may not require a direct formal agreement between state partners, but may include cooperative or operating agreements between the lead single state agency and such entities as host railroads, FRA, and Amtrak. For example, NNEPRA, located in the State of Maine, manages Amtrak’s Downeaster service between Boston, Massachusetts, and Brunswick, Maine, via New Hampshire. NNEPRA does not have any formal agreements in place with Massachusetts or New Hampshire, but has a series of cooperative agreements with Amtrak and the owners of the railroad right-of-way, which in most cases are Class I railroads, for the service. However, depending on the nature and complexity of the activities to be undertaken, an agreement among the states may be needed and is recommended. Operating agreements in place throughout the NEC outline roles and responsibilities and address such areas as risk, liability, and cost and revenue sharing for intercity services. As an example, the commuter rail operating agreement between Metro-North Railroad and Connecticut covers service and operation, main- tenance, allocation and payment of operating deficits, classification and acquisition of capital assets, allocation and payment of capital costs, service finances and the budget process, asset ownership and management, labor, productivity reviews, arbitration, claims, duration of the agreement, and other miscellaneous terms and conditions. In the case of NNEPRA’s operations, it should be noted that aside from ticket revenues, Maine is the only state that provides funding to support the development and operation of the

Decision-Making Models for Intercity Passenger Rail 85 passenger rail service. To date, there has not been a prescribed need for an operations agreement among the state partners. However, NNEPRA and MBTA are currently developing an agreement for the MBTA Track Improvement Program, which entails capital improvements to track within Massachusetts. The MBTA provided the 20 percent local match for the FRA grant that will fund the project. The match was to be provided in the form of sections of track within the project area that have previously been constructed by MBTA’s contractor. NNEPRA is the federal grantee and is serving as the primary administrator/manager for the project and will manage the construction of the remaining track improvements. The agreement will ensure that MBTA constructs the project as specified in the FRA grant. 4.4.2 Powers and Responsibilities Powers can vary depending on the type of entity established (i.e., authority, agency, or cor- poration) and the degree to which the managing agency and the other states can enter into contracts among themselves and with third parties. 4.4.3 Governance Structure Like powers, governance structure can vary depending on the type of entity established. Ultimate accountability rests with the single state agency, but oversight and safety responsibilities, in some cases, may extend to partner states. Formal oversight of NNEPRA, for example, is provided by the State of Maine’s Legislative Council and Maine Commissioner of Transportation. 4.4.4 Advantages • As demonstrated by the case studies, this model works particularly well for implementation of a pre-established vision in the design, construction, and operations phases of development. • This model provides a clear accountability structure. • In some cases, the model can work within existing legal frameworks. • The use of a single state agency minimizes contracting and overhead expenses. • A separate agency with a focused responsibility can act more nimbly and be more responsive to the needs of the business side of the operation. • This model might be especially beneficial in cases where there is one state that has a greater interest than the others. 4.4.5 Disadvantages • This model is not appropriate for visioning or planning because it can be difficult to foster a collective vision or overarching planning for a multi-state regional network within its context. • The model is contract specific, and agreements depend upon periodic renegotiation of the contract. • The complexity of the model is substantially increased when more than two states are involved. • Continued effectiveness of the model is dependent on continued good relationships among states. • State legislation and/or policy can change in one state that has responsibility for contracting, which could affect the actual model. • This model requires that a state be able to spend money and/or use state assets in another state. • The institutional allegiance of the arrangement will be to the state that is establishing the entity. • This model is likely to have more limited risk allocation. • It can be difficult to identify a lead state when it is not clear which state stands to benefit more than the others.

86 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs 4.5 Public-Private Partnership FHWA’s Office of Innovative Program Delivery defines public-private partnerships as “contractual agreements formed between a public agency and a private sector entity that allow for greater private-sector participation in the delivery and financing of transportation projects” (https://www.fhwa.dot.gov/ipd/p3/defined, accessed February 23, 2015). Under this model, a private entity can develop infrastructure and/or operate services on a for-profit, limited-liability basis in agreement with a public entity. The nature of the agreements can take various forms, including but not limited to a public-private partnership that includes the building of new infrastructure and operation of service under a single umbrella and one that allows for private operations on state-sponsored infrastructure. The private entity may be an existing company or a newly formed corporation managed by a consortium that includes for-profit investors. The private entity may be a recipient of a franchise or concession from a government to allow it to operate under certain constraints. Such models have been used successfully around the world for all types of infrastructure projects. This model was not reviewed as part of the case studies, but did emerge as a recommended alternative to for-profit corporations. Efforts such as XpressWest demonstrate the value of for-profit corporations, but the limited success of the effort may indicate need for more of a partnership with public-sector entities rather than sole leadership by private entities. While the following are single state models, ongoing projects such as the California High-Speed Rail Project that will connect Los Angeles and San Francisco, the All Aboard Florida project connecting Miami and Orlando, and the Texas Central Railway between Dallas and Houston demonstrate a growing shift toward the use of public-private partnerships in passenger rail. Public-private partnerships are generally recommended for project implementation (design, construction, and operations and maintenance). 4.5.1 Mechanism for Implementation PRIIA implemented a number of provisions that provide federal authorization for, and perhaps ultimately encourage incorporation of, public-private partnerships for passenger rail. Important sections included Section 217, which allows state partners on state-supported routes to engage alternate providers, and Section 301, which authorizes competitive federal grants to assist in “financing the capital costs of facilities, infrastructure, and equipment necessary to provide or improve intercity passenger rail transportation” (PRIIA § 301[a], 49 U.S.C. § 24402[a][1]). These public-private partnerships have seen limited application in U.S. intercity passenger rail projects to date. Notably, the State of Indiana wanted to enter into a public-private partnership agreement for the existing, Amtrak state-supported, Indianapolis-Chicago Hoosier State service. The Indiana DOT’s intent was to find a contractor that “could overcome constant delays, run trains at more convenient times, provide amenities such as Wi-Fi, attract more riders and operate the train more cost effectively than Amtrak” (Vizza, 2014). Indiana selected Corridor Capitol as the vendor for the Indianapolis-Chicago Hoosier State service in June 2014, but contract negotiations subsequently fell apart amidst coordination issues between Corridor Capital and Amtrak as well as mounting uncertainty that Corridor Capital would be able to mobilize services by the agreed upon start date of February 1, 2015. The Indiana DOT worked with Amtrak to continue service to April 2015. The Washington State DOT and Oregon DOT have also collaborated on a Request for Information from passenger service vendors to explore additional cost and service efficiency improvements to the Cascades Intercity Passenger Rail Service. Section 502 of PRIIA established a public-private partnership opportunity for high-speed rail development. In December 2008, FRA solicited proposals to finance, design, construct, operate,

Decision-Making Models for Intercity Passenger Rail 87 and maintain a high-speed intercity passenger rail system within one of 11 specified corridors. FRA deemed 8 of the 100 expressions of interest substantive and credible. The momentum for this effort was lost, however, when the February 2009 ARRA (Public Law 111-5) was passed and included $8 billion for high-speed and intercity passenger rail programs, with no requirements for private-sector participation or non-federal matching funds. Participating states must also have enabling public-private partnership legislation in place. At the time of this writing, FHWA’s Office of Innovative Program Delivery reported that 33 states and the District of Columbia had such legislation (http://www.fhwa.dot.gov/ipd/p3/state_legislation/, accessed February 23, 2015). 4.5.2 Powers and Responsibilities Public-private partnerships are distinguished from traditional government contracting in that the private sector is more integrated into project development and implementation. Further, this model is distinguished from full privatization as follows: • Risk, sometimes including financial risk, is allocated between the private- and public-sector entities. • At its core, the model is a partnership between the two parties. • There is usually no irrevocable transfer of assets. • Policy, service levels, and rates are set by the public sector as opposed to the public-sector role being limited to regulatory authority. • Mechanisms are put in place to ensure that service decisions are shared by the public and private entities. • The powers, responsibilities, and risks shared by the government and private-sector entity can vary. 4.5.3 Governance Structure The public-private partnership governance structure is often defined by the agreement or contract signed by the concessionaire and the public agency. This agreement spells out funding responsibilities and financial requirements. In addition, the agreement identifies the performance and service requirements that must be met by the concessionaire, such as level of service, vehicle condition, and other services provided to the customer. Depending on the number of years granted to the concessionaire, the agreement will also define intermediate steps that must be taken to make sure that assets retain a state of good repair. The turn back requirements for the asset at the end of the concession are also stipulated. This form of governance is a much more robust structure than that found in other models. 4.5.4 Advantages • In public-private partnerships, financial incentives are available for action and cost-effective investment decisions. • In some cases, public-private partnerships can facilitate design, construction, and operations of a corridor. • Public-private partnerships can help finance the delivery of projects or services through various debt and equity mechanisms. • Sharing risks between government and private entities can—if done correctly—make it more palatable for both entities to “take the leap” in building a project with great benefits for society. • This model may provide advantages in terms of speed, quality, or cost.

88 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs • This model permits flexible implementation structures. • This model can convert upfront public-sector capital investment into a stream of payments over the project life. 4.5.5 Disadvantages • In public-private partnerships it can be difficult to foster a collective vision or overarching planning for a multi-state regional network. • This model can be very autonomous; public agencies generally are needed to lead efforts and promote public goals when a subsidy is required. • Dividing the ownership or operations of multiple lines within a network among different firms has the potential to impose new challenges in ensuring that the system works as a cohesive whole. • Public-private partnerships can be difficult to establish within existing legal constraints. • Competition can lead to fragmentation of services and elimination of network efficiencies and economies of scale, which increase costs (Amtrak, March 11, 2011). • This model can also trigger safety, maintenance, and customer service issues that may take time to resolve and increase public-sector cost (Amtrak, March 11, 2011). • Because this model is market driven, it could be weak in poor markets unless subsidized. • Amtrak’s financial advantages, in terms of its ability to accept liability for accidents occurring in passenger rail service within statutory limits as well as its statutory right of access over freight rail lines, may be difficult for other operators to overcome. It will be particularly challenging to implement the public-private partnership model in corridors where Amtrak does not currently operate. 4.6 Multi-State Commission Under a multi-state commission, two or more states coordinate the interests of multiple states through a formal agreement that establishes a governing commission body. The case studies that illustrate this model are the SEHSR project (Virginia to North Carolina) and the Midwest Interstate Passenger Rail Commission. This model is generally most appropriate for planning and, potentially, early design activities. 4.6.1 Mechanism for Implementation While multi-state commissions do not include a direct role for the federal government, they will likely require some form of federal legislation. In both case studies where this model was applied, an interstate compact was established, which requires approval through federal legislation. Virginia and North Carolina enacted legislation establishing the Virginia-North Carolina Interstate High-Speed Rail Compact in order to oversee implementation of the SEHSR Corridor within their borders. The MIPRC was enacted to promote both current improvements and long-range plans for intercity passenger rail service in the Midwest, coordinate interaction among Midwest- ern state officials and between the public and private sector at all levels (federal, state, and local), and support current state efforts being conducted through state DOTs. Each of these compacts created a multi-state commission that would carry out stated provisions. 4.6.2 Powers and Responsibilities A multi-state commission can have a range of powers and responsibilities as defined in the enabling legislation.

Decision-Making Models for Intercity Passenger Rail 89 4.6.3 Governance Structure The governing body is the commission, which has representation from the state partners. The commission may be supported by a small staff that can be funded by one or more of the states participating in the partnership. Each state may have oversight authority for the funds allocated to the commission, as is the case with the MIPRC. 4.6.4 Advantages • A multi-state commission can be an effective model for multi-state planning and development of an overarching vision. • This model provides the capability to address challenging policy issues such as cost sharing. • This model will be viewed as having some standing as a federally created institution. • This model requires enactment of legislation in each state legislature, which helps to promote broad support for the effort across the state. 4.6.5 Disadvantages • Some federal intervention is likely to be required to establish a multi-state commission; although depending on agreement type, it can be potentially less challenging than interstate compacts. • A multi-state commission often takes time to establish, especially if congressional approval is necessary. • Depending on the commission membership, there is the potential for members to focus on their jurisdiction’s needs and desires rather than a broader vision. 4.7 Multi-State Special Authority A multi-state special authority is an independent entity, often a distinct governmental body, which delivers a limited number of public services within defined boundaries across state lines and can exercise a broad range of typical governmental powers. A multi-state special authority is distinct from a single state agency contracting with, or on behalf of other states, in that the multi-state special authority is expressly established as a partnership between two states that provides services across state lines. An example of a special authority from the case studies is WMATA. Other examples include the Louisville and Southern Indiana Bridges Authority (and Bi-State Management Team), the Port Authority of New York and New Jersey, the Transbay Joint Powers Authority, and the California High-Speed Rail Authority. This model is most appropriate for project implementation (construction and operations and maintenance). 4.7.1 Mechanism of Implementation Establishing a multi-state special authority generally will require an interstate compact that involves identical legislation in each participating state as well as approval through federal legislation. 4.7.2 Powers and Responsibilities A multi-state special authority follows limits set in the interstate compact and, potentially, corresponding state legislation. Generally, multi-state special authorities have the ability to raise

90 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs and collect revenues in order to conduct the mission for which they have been tasked. Some can also exercise specified fiscal powers, such as issuance of bonds, imposition of special taxes, levying benefit assessments, and charging service fees such as fares and tolls. WMATA, for example, has been responsible from its creation for the planning, construction, and operation of rail and bus transit services in the WMATA Transit Zone. WMATA also has the ability to raise relatively consistent streams of revenue along with their authorization to borrow and issue bonds to aid in financing long-term capital projects, for example. 4.7.3 Governance Structure Special authorities are often governed by a board of directors appointed by or consisting of elected officials. 4.7.4 Advantages • The purpose of a multi-state special authority is clearly defined in whatever form is used to establish the entity. • A multi-state special authority is functionally capable of planning as well as delivering trans- portation projects and services. • In some cases, a multi-state special authority can work more flexibly than an entity that must function under the constraints of each state’s respective legal framework. • The nature of a multi-state special authority makes it more attractive to investors that issue debt; therefore, special financing devices are more available to this model. Establishment as a special authority is seen as more of an assurance that the entity will endure over time. No one wants to lend money to a coalition. • Special authorities have generally proven effective in planning and delivery of transportation services across state lines and in the planning and design of high-speed rail within one state (California High-Speed Rail Authority). 4.7.5 Disadvantages • Multi-state special authorities are often difficult to implement as they generally require an interstate compact. • It can be challenging to expand the functions of the authority or amend compacts. • The difficulty in amending or refining compacts is due to the requisite action by the federal government, agreed to by the Congress and the President. 4.8 Federal-State Commission A federal-state commission is a body of federal and state (and sometimes local) leaders organized to address a critical need, which often includes the distribution of federal funds among multiple states or coordination of multi-state investments. Examples from the case studies include the ARC and the NEC Commission. This model is most effective for project planning and, potentially, early design activities. 4.8.1 Mechanism for Implementation Federal-state commissions are generally authorized through federal legislation that can take various forms. Examples include the ARDA, which authorized the ARC, and PRIIA, which authorized the NEC Commission.

Decision-Making Models for Intercity Passenger Rail 91 4.8.2 Powers and Responsibilities A federal-state commission can have a multitude of powers and responsibilities. It can often be empowered to issue funds in the form of grants to participating states. The ARC is a regional economic development agency whose primary purpose is to provide a collaborative forum in which federal, state, and local government entities could work together to address the problems affecting the primarily rural areas linked by the Appalachian Mountains. The largest ARC program is the planning and construction of the ADHS, a network of highways and access roads to generate economic development in previously isolated areas of Appalachia and to supplement the Interstate system. The ADHS functions like the Interstate highway system in that each state has designated miles within a corridor and the FHWA provides federal oversight during and after implementation. ARC provides funding for construction of the unbuilt ADHS segments only and apportions funding to each state based on each state’s share of the remaining cost to complete the ADHS network. The NEC Commission is tasked with facilitating cooperation and planning among NEC stakeholders for intercity, passenger, and freight rail. The NEC Commission has extensive responsibilities involving setting corridor-wide policy goals and making recommendations that encompass passenger rail mobility, intermodal connections to highways and airports, energy consumption, air quality improvements, and local and regional economic development of the entire Northeast region. The NEC Commission is required to create a statement of goals con- cerning the future of NEC rail infrastructure and operations; develop recommendations for short-term and long-term capital investment needs for the NEC; and develop and implement a standardized formula for determining and allocating costs across states. Actions of the NEC Commission are not binding on its members, although the NEC Commission has the authority to take members before the STB for resolution of disputes. 4.8.3 Governance Structure A federal-state commission is a governing body comprised of both federal and state represen- tation with oversight typically provided by Congress. The commission is typically supported by a small staff to carry out daily activities. ARC, for example, is composed of governors from each of the 13 states within the Appalachian region (Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, West Virginia, and Virginia), a federal co-chair who is appointed by the President and confirmed by the Senate, and a states’ co-chair who is appointed by a majority vote of the governors. There are only two votes in play—the federal co-chair has one, and the 13 governors share the other, which is cast by the states’ co-chair. Thus, for all resolutions except for project approval, considered by the ARC Board, the federal government representative and the majority of the governors must approve. The NEC Commission has 18 voting members. Each of the eight states along the NEC main line (Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, and Maryland) as well as the District of Columbia has one voting member appointed by its governor (this member is typically drawn from the state DOT). In addition, there are five voting members representing the U.S. DOT and four voting members representing Amtrak. Four freight railroads, states connecting to the NEC, and commuter rail operators who are not directly represented by a Commission member also sit on the NEC Commission as non- voting members. The Chairman of the NEC Commission is elected by the members. Certain actions of the NEC Commission require a majority vote, with formal recommendations to Congress requiring a two-thirds majority. Of note, the states that participate in the NEC Commission represent 50 percent of its membership, and a unanimous vote from the states

92 Developing Multi-State Institutions to Implement Intercity Passenger Rail Programs along with one member from Amtrak or the U.S. DOT could result in an affirmative action of the NEC Commission. 4.8.4 Advantages • A federal-state commission can be effective for multi-state planning and development of an overarching vision. • This model is capable of addressing challenging policy issues such as cost sharing. • This model engages federal government with states/regions and can be a strong candidate for attracting federal funds. • This model provides a platform for discussion and consensus among regional stakeholders. 4.8.5 Disadvantages • A federal-state commission can be viewed as a model that limits state power, although potentially less so than a federally chartered corporation or federal project office. • This model must be established by federal legislation, although this is potentially less challenging than establishing interstate compacts. • This model has a traditional funding structure that relies on annual federal appropriations. 4.9 Freight Railroads Under this model, freight railroads lead planning, design, construction, and operations and maintenance of an intercity passenger rail line. Passenger and freight services were owned and operated by single entities until changes in federal laws in the 1970s and 1980s ultimately moved passenger operations under the newly established Amtrak. PRIIA reestablishes the freight railroads’ authority to operate passenger rail service and sets the stage for this new model to be considered. This model might be most effective in the project implementation phases, although freight railroads might be considered partners in the planning stages as well. The degree to which freight railroads assume full control, in which case service is privatized, versus partnering with a govern- ment entity, as under the P3 model, should also be considered in applying this model. 4.9.1 Mechanism for Implementation Two sections of PRIIA provide the foundation for freight railroads to be a model for deliv- ering intercity passenger rail services across state lines. As noted in Section 4.5 of this report, Section 217 of PRIIA authorized states to select “an entity other than Amtrak to provide services required for the operation of an intercity passenger train route” (PRIIA § 217, 49 U.S.C. § 24702). Section 214 directed FRA to establish an Alternate Passenger Rail Service Pilot Program, under which “a rail carrier or rail carriers that own infrastructure over which Amtrak operates a[n] [intercity] passenger rail service route” may “petition the Administration to be considered as a passenger rail service provider over that route in lieu of Amtrak” and secure the ability to utilize Amtrak equipment and other assets (PRIIA § 214[a], 49 U.S.C. § 24711[a][1]). The pilot program was to be limited to two routes with contract durations of no more than 5 years. Only rail carriers that own the infrastructure over which Amtrak operates (freight rail- roads and some states) were to be eligible to petition FRA to be considered a passenger rail service provider in lieu of Amtrak. FRA’s final rule went into effect on February 13, 2012, and to date no proposals have been received.

Decision-Making Models for Intercity Passenger Rail 93 4.9.2 Powers and Responsibilities The powers and responsibilities of freight railroads can be broad and depend largely on the nature of the freight railroads involvement in the passenger rail service. Full privatization of a corridor results in the most power and responsibility, although these will be tempered through regulatory oversight and the desire or need for passengers to connect to other rail systems and/ or share stations and facilities with other railroads or Amtrak. 4.9.3 Governance Structure Freight railroads are generally managed as for-profit corporations. In this model, there would need to be some degree of public oversight, particularly through regulations. 4.9.4 Advantages • Most existing railroad corridors are owned by freight railroads. • With full control of all operations and proper incentives, freight railroads could manage sharing of railroad corridors by freight and passenger traffic. • This model provides a financial incentive for action and cost-effective investment decisions. • This model eliminates some of the conflicts between passenger and freight operations operating on the same tracks, potentially enhancing on-time performance and reliability. 4.9.5 Disadvantages • There is no recent successful precedent of a freight railroad planning and/or delivering passenger rail service. The last railroad to operate passenger service was Southern Railway, which retained operation of the Crescent, which operates between New York, New York, and New Orleans, Louisiana, until 1978, when it was finally folded into the Amtrak system. • Profitability from intercity passenger rail has proven to be a challenge. • There is a concern that sharing would not operate to the benefit of passenger services. • The financial risk associated with operating passenger rail service may prohibit freight railroads from participating, particularly given that the operating subsidy required by PRIIA Section 214 is not funded by Congress (Transportation Trades Department, AFL-CIO, November 7, 2011). • Increased liability to freight carriers. • There is a need to recognize the fundamental difference in engineering and design issues that distinguish freight rail design and the design parameters for passenger rail (especially for high-speed rail). • It can be difficult for this model to lead development of a multi-state regional vision. • This model can be very autonomous. • There is a potential lack of connectivity with existing Amtrak operations, including ticketing and marketing. 4.10 Conclusion It is important to note that federal action could really make multi-state cooperation more effective. This is particularly true for more active public-private partnerships and for global agreements to affect liability issues that impair non-Amtrak operators. The above discussion did not identify federal legislation or regulations that could have a beneficial effect on any of the models, but it is likely that as institutional models for intercity passenger rail provision continue to evolve, federal legislation and regulations will have either a beneficial or detrimental effect.