12.1 INTRODUCTION

Completed by the Federal Railroad Administration, the landmark study High Speed Ground Transportation for America looks at the SEHSR between Washington, DC and Charlotte, NC in conjunction with other potential high speed rail corridors to determine the benefits and costs of such travel. Congress commissioned the study to determine the "commercial feasibility" of high speed ground transportation in the U.S.

In the study the SEHSR was placed under "specialized analysis" because of its extraordinary positive impacts. Indeed, the study reports that the "average trip on the Southeast Corridor would be longer and generate more revenue than any other illustrative route" and would also "increase traffic levels on the Northeast Corridor itself." Because of its connection with the highly successful Northeast high speed rail corridor, the SEHSR would therefore improve the efficiency of passenger travel along the entire East Coast.

It should be noted that the FRA study was not completed in conjunction with the other studies of the SEHSR undertaken by the State of North Carolina. Because of the independent nature of this analysis, it has very different assumptions and methods for calculation of the corridor's commercial feasibility compared to those of the NCDOT. Moreover, NCDOT was not able to review or provide input to the FRA before the study's publication in 1997.

Due to the potentially high commercial success of the SEHSR, the FRA gave it "exceptional treatment" in its study. A summary of this analysis follows.

12.2 DEFINITION OF COMMERCIAL FEASIBILITY

From this study, the question of commercial feasibility meant "will the project pay for itself?" To answer this question, the FRA compared various high speed rail routes and technologies to determine the benefits to consumers (travelers) and to the public at-large.

12.2.1 TOTAL TRANSPORTATION BENEFITS

The HSGTA study identified the following as the total transportation benefits from implementation and operations of a high speed rail corridor.

• Benefits to HSR users. In economic theory, travelers will only pay for transportation whose worth to them is equal to or greater than the applicable fare. In other words, the full users. benefit is dependent on the number of persons who would be willing to pay a certain fare or higher fare. Therefore, the full user benefits are divided into two sub-categories.
1. Benefits for which users must pay, which is measured by the number of riders combined with total fare revenues, the product of which equals system revenues.
2. Users. consumer surplus, which represents the difference between the full value of HSR to passengers and the fares they would pay. A surplus arises because fare levels are set to maximize overall net revenues rather than to exact maximum payment from each traveler individually for the full worth of the transportation provided.¹⁵
• Benefits to the public at large. These benefits recognize the effects of diverting significant passenger volumes from existing modes to HSR, and consist of savings from alleviated congestion and reduced emissions.

12.2.2 TOTAL TRANSPORTATION COSTS

Total costs of a high speed rail corridor consist of the following.

• The initial investment in HSR infrastructure and vehicles;
• Operations and maintenance expenses; and
• Continuing investments necessary to assure capacity for future traffic growth.

These total costs then fall into two categories. The first category is the costs borne by users, which equals system revenues described above. The second is publicly-borne costs, which are total costs less system revenues. Obviously, the goal is to minimize the publicly-borne costs and maximize the costs borne by the users.

12.3 PARTNERSHIP POTENTIAL DEFINED

The study also assesses the various HSR corridors for its "partnership potential" -- their capacity to draw the private and public sectors together in project implementation. To exhibit partnership potential in this study, a corridor must satisfy at least the following two conditions (see figure 12-1). First, private enterprise must be able to run the corridor, once built and paid for, as a completely self-sustaining entity. Second, the total benefits of a HSR corridor must equal or exceed it total costs.

Figure 12-1: Definition of Partnership Potential

The study looked at eight different corridors, using a variety of technologies from 90 mph fossil fueled locomotives to magnetic levitation capable of speeds in excess of 250 mph.

12.4 FEDERAL ANALYSIS OF THE SEHSR

Due to the special nature of traffic on the SEHSR connecting with an existing high speed rail corridor (the Northeast Corridor, or NEC), the SEHSR received special analysis in the study. As stated in the report, "the [SEHSR] would increase the traffic levels on the Northeast Corridor itself, because through passengers from south of Washington...would need to use the Northeast Corridor to access major Northeast cities. In this manner, traffic densities on the Northeast Corridor would increase, thus creating synergistic ridership, revenue, expense, and income effects that might redound to a single high speed ground transportation operator's profitability."

The study's results for the SEHSR are listed in table 12-1.

12.5 STUDY RESULTS

BENEFITS
Benefits to HSR Users:
System revenues	$ 2,560
Users. consumer surplus	$ 2,550
Total benefits to HSR users	$ 5,110
Benefits to the Public at Large:
Airport congestion delay savings	$ 666
Highway delay savings	$ 721
Emissions savings	$ 22
Total benefits to the public at-large	$ 1,409
TOTAL BENEFITS FROM SEHSR	$ 6,519
COSTS
Initial investment	$ 1,047
Operations & maintenance expenses	$ 1,389
Continuing investments	$ 131
TOTAL COSTS OF SEHSR	$ 2,567
INCIDENCE OF TOTAL COSTS
Costs borne by users (equal to "system revenues" above)	$ 2,560
Publicly-borne costs (total costs less costs borne by users)	$ 7
Percent of total costs covered by revenues	99.73%
BENEFITS V. COSTS	$ 3,952
Benefits to HSR users less user-borne costs	$ 2,550
Benefits to public at large less publicly-borne costs	$ 1,402
Ratios of total benefits to total costs	2.54 to 1
Ratio of benefits to HSR users to costs borne by users	2.00 to 1
Ratio of benefits to the public to publicly-borne costs	201.29 to 1
Does this meet the threshold tests for "partnership potential?"	YES

Assumes year 2020 operations, 27 round trips daily between Charlotte and New York, with maximum speeds of 110 mph.

When measured with the assumptions from the FRA, the SEHSR will have benefits that far outweigh costs. The SEHSR's total benefits outweigh its total costs over 2.5 to 1. Moreover, since the study projects that the SEHSR will have nearly no publicly borne costs, the benefits to the public at large are enormous -- nearly 200 to 1, or 26 times higher than any other corridor in the study.

Figures 12-2 and 12-3 compare the SEHSR to the results gleaned from other selected corridors in the study. As seen in figure 12-2, the SEHSR is the only corridor in the study expected to cover over 90 percent of its costs with system revenues alone.¹⁶ Figure 12-3 shows that the SEHSR's ratio of total benefits to total costs is nearly two times higher than any of the corridors using more advanced technologies to achieve speeds greater than 150 mph. This shows that the SEHSR with its lower speeds will have a far greater positive impact to the nation than corridors that invest more public funds in infrastructure and technology to achieve higher speeds.

Figure 12-2: Percent of Total Costs Covered by Revenues, Proposed High Speed Corridors

Figure 12-3: Ratio of Total Benefits to Total Costs, SEHSR v. Other Corridors with Higher Speeds

It should be noted that the above figures are based upon FRA's assumptions and projections, which are more aggressive than other projections specifically developed for North Carolina's study of the SEHSR.

12.6 FINDINGS AND CONCLUSIONS

Based upon the assumptions in the report High Speed Ground Transportation for America, the Federal Railroad Administration has projected the following about the Southeast High Speed Rail corridor.

The benefits from the SEHSR will far outweigh costs. The SEHSR (using 110 mph technology) will create over $2.50 in benefits for every $1.00 spent to build and operate the corridor.

The SEHSR is the only corridor in the study projected to cover over 90 percent of its full costs with system revenues alone. With increased speed and frequencies, revenues from high speed trains between Charlotte and New York should pay for not only the operations but may cover much of the capital costs of new equipment, stations and track. Currently the Carolinian's annual revenues are 130 percent of its cost of operations along the same route as the SEHSR, suggesting that the SEHSR will cover at least its operating costs. North Carolina's own projections also predict that the SEHSR will turn an annual profit.¹⁷

Of all corridors in the study, the SEHSR has the highest ratio of total benefits to total costs. The SEHSR's total benefits to total costs ratio of 2.54 is the highest of any corridor in the study. Moreover, due to the high cost recovery in system revenues for the SEHSR, the ratio of public benefits to publicly-borne costs are over 200 to 1, or nearly 26 times higher than any other scenario modeled in the report.

Though having lower speeds, the SEHSR will have more benefits than corridors that invest more public funds to achieve high speeds. The SEHSR's benefit-cost ratio far exceeds those of corridors that would use high speed technologies such as new high speed rail or magnetic levitation. This demonstrates that from a cost-benefit analysis the best solutions for the SEHSR and elsewhere may be less expensive investments with lower overall speeds.

Although the FRA expressly withholds any recommendations on future action in their report, the State of North Carolina believes that the findings show that the SEHSR is the most significant future high speed rail corridor in the nation, given its higher benefit to cost ratio than any other potential corridor. Due to the inherit synergy between the SEHSR and the NEC, North Carolina proposes that the SEHSR be considered an extension of the NEC and receive national attention and funding on a similar scale for project implementation.