Recent years have seen an increasing demand for passenger rail service in the United States; however, no stable source of funding exists for developing or expanding passenger or freight rail. Passenger rail does not have a sufficient source of revenue for either capital development or operations and maintenance and, therefore, generally depends on various levels of public investment. In contrast, freight rail, primarily developed in the private sector, has access to traditional financing and revenue streams from its operation. Freight rail is primarily a self-sustaining, for-profit private enterprise that generates its own revenue; yet there are potential public benefits to maintaining or enhancing freight rail services that might benefit from public investment. Public benefits can accrue, for example, when passenger rail systems operate on freight rail right-of-way or visa-versa. Under those conditions, there is public benefit to ensure and enhance continued and efficient goods movement from a freight rail perspective and comparable efficient movement of people from a passenger rail perspective. Improvements that enhance shared corridor operations benefit both passenger and freight rail and the economies dependent on those services. The net result is that increasing demand for rail services perceived to be in the public interest requires alternative financing strategies to generate additional revenues that neither the private nor public sectors can generate acting alone. Research is needed to identify and examine existing and alternative approaches for financing and generating revenue for investment in rail projects. Rail in this context includes those modes regulated by the U.S. DOT Federal Railroad Administration: commuter, high-speed, intercity passenger, and freight. There is a need to collect and review information about and analyze the effectiveness of current national and international methods for financing passenger and freight rail. Building on this review, additional research is necessary to analyze alternative financing methods that have been used in other transportation modes or other industries. The purpose of this review is not to re-invent financing and revenue-generating methods that are already widely applied but, rather, to identify and formulate new and innovative financing mechanisms.

The objective of this research was to identify alternative methods for financing passenger and freight rail project development, including capital investment, operations, and maintenance. The research

In the context of this research project, passenger rail included high speed, intercity, and commuter rail. This research is intended to be of interest to public and private entities that have responsibility for planning, developing, maintaining, and operating passenger and freight rail systems throughout the United States. The findings of this research provide best practices and lessons learned, alternatives, and strategies to develop and execute alternative financing to maintain and enhance future investment in passenger and freight rail systems.  Passenger and freight rail systems differ in terms of alternative financial requirements, and the research addressed these differences. Freight systems, as private entities, generally are built on a business model that functions through a revenue stream supporting services provided. Differences exist among the various classes of freight rail, including Class I, 2, and 3, and these differences with respect to financing requirements were addressed as a function of the services they provide. Public-private partnerships and other financing options may be appropriate where there is a public interest, such as projects of regional or national significance, or in the context of shared corridors.

STATUS: The final report has been published as NCRRP Report 1: Alternative Funding and Financing Mechanisms for Passenger and Freight Rail Projects