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91 7.1 Case Study Approach To illustrate how alternative financing and revenue mechanisms could be used in practice, the research team assessed the potential application of these alternative mechanisms on five case studies for U.S. rail projects in planning or early development stages, and all with a fund- ing gap.70 ⢠California High-Speed Rail (High-Speed Rail) ⢠Amtrak Virginia (I-81/US-29 Corridor) (Intercity Passenger Rail) ⢠Virginia Rail Express (Commuter Service) ⢠Chicago CREATE (Shared Corridor) ⢠New Orleans Rail Gateway (Shared Corridor) This chapter summarizes the key lessons from these case studies. Full case studies are provided in Appendix E. C H A P T E R 7 Case Studies: Potential Application of Alternative Funding and Financing Mechanisms Case Study Method For each project, the research team researched publicly available information from online sources and industry publications. The researchers then identified, at a preliminary level, where potential gaps for funding exist along with potential solutions. The research team then reached out to stakeholders involved in each project (e.g., project sponsor, key government departments, and prospective funding partners) to get additional information on the project. For each project reviewed the research team sought to answer the following questions, using a case study format: ⢠Project Overview: What is the background/history of the project and the rationale for investment? What information is known about traffic/ridership levels? 70 The research teamâs approach in selecting projects was to first ensure inclusion of at least one project per rail sector (i.e., com- muter, regular intercity, HSR intercity, and freight/shared corridor). Thereafter, the research team sought projects that have a funding gap. The extent of public information available was also a determining factor in project selection.
92 Alternative Funding and Financing Mechanisms for Passenger and Freight Rail Projects 7.2 Lessons on Application of Alternative Financing and Revenue Mechanisms The five case studies provide examples of very different projects but many of the lessons on applying alternative financing and revenue mechanisms are similar: ⢠If a project has a funding gap after seeking all other available sources of revenue, public funding will be needed if the project is to be feasible. ⢠Private financing is not a solution to a funding gap. It is not possible when there is insufficient funding. ⢠Public revenue (funding) mechanisms can raise significantly more money to pay for rail projects than revenue mechanisms relating to the rail project or rail assets and services themselvesâbut there are more barriers (often political) to obtaining such funding. ⢠In most cases, it will be necessary to draw on multiple sources of funding, many of which are underutilized or not utilized at all. ⢠The types of projects differ. For commuter rail, public funding through local specific taxation has the highest potential for funding because it is most likely to attract local political support. For more expensive passenger rail projects like high-speed rail, local specific funding has more limited application because it is difficult to âring-fenceâ a project and raise revenue from those who gain from the project (other than the passengers themselves). Such projects must have broader political support for general tax funding. For passenger projects, general taxation offers the greatest funding potential. The Virginia case study demonstrates the importance of the political will of the state to fund and develop the skills to initiate projects and to obtain federal funding. There are also transport and other differences among jurisdictions. Virginia is close to Wash- ington, D.C., with significant congestion. In Chicago, rail is important and visible. In Louisiana, there is little rail passenger use. In California, there is only moderate use of rail by passengers. Significant differences in the ability of the states to increase taxes or increase state debt are partly political and partly arise from different perceptions of appropriate uses for public funds. ⢠Funding Requirements: How large is the project? How are costs broken down (insofar as known)? What other factors will influence cost? ⢠Anticipated/Suggested Funding/Financing Model: What is the anticipated approach to funding/financing the project (e.g., public, private, PPP)? Who is lined up to provide funding? Is there a funding gap? ⢠Potential for Alternative Funding and Financing Mechanisms: Which of the alternative funding and financing mechanisms identified in NCRRP Project 07-01 would be suitable for use in the project? What are some of the opportunities and barriers to using the models?
