High-Speed Intercity Passenger Rail Grants: The Competition Begins

On June 17, the Federal Railroad Administration (FRA) released interim guidance that opens the competition for more than $8 billion in federal funding for high-speed and intercity passenger rail projects. The interim guidance implements the high speed rail strategic plan issued by President Obama in April. The guidance takes effect immediately and includes tight deadlines, which vary based on the four funding "tracks" established in the guidance.

This Update provides a brief summary of the application process as outlined in the interim guidance. We will soon be issuing a second Update, which will focus on the National Environmental Policy Act (NEPA) requirements for high-speed and intercity passenger rail projects.

Background

In the American Recovery and Reinvestment Act (ARRA), Congress appropriated $8 billion to fund high-speed and intercity passenger rail capital projects. All of this funding is to be distributed by the U.S. Department of Transportation through a competitive application process. The USDOT has broad discretion in deciding how to allocate these funds.

The funds appropriated in ARRA can be used to implement three distinct programs that were authorized under a previous law, the Passenger Rail Investment and Improvement Act of 2008 (PRIIA). These programs include:

• Section 501 of PRIIA. Section 501 authorizes funding for a "High-Speed Rail Corridor Development Program." Funds under this program can only be used to develop high-speed rail projects on one of the federally designated high-speed rail corridors.
• Section 301 of PRIIA. Section 301 authorizes funding for an "Intercity Passenger Rail Corridor Capital Assistance Program." Funds under this program can be used for intercity passenger rail projects, even if they are not located on designated high-speed rail corridors.
• Section 302 of PRIIA. Section 302 authorizes "Congestion Grants" for specific projects that reduce congestion on existing intercity passenger rail corridors.

In the interim guidance, the FRA has established a new High-Speed Intercity Passenger Rail Program (HSIPR) that consolidates all of these programs into a single application process. The funding provided in ARRA can be used to fund any of these programs. Thus, while there are three distinct programs, there are not three distinct 'pots' of funding. There is one large ($8 billion) pot, which the FRA can allocate at its discretion among these programs.

The interim guidance also implements two much smaller programs for which funds were authorized in the 2008 and 2009 USDOT appropriations acts.

The Four Tracks

The FRA has defined four distinct funding tracks. Applicants will be required to identify a proposed track or tracks. FRA will use the preapplication process (described further below) to help applicants determine the appropriate track or tracks.

Track 1 – "Projects." Track 1 focuses on individual projects that have independent utility and can be implemented quickly. ARRA funds (the $8 billion) can be used for projects on this track. There are two distinct sub-tracks within this track:

• Final Design / Construction Projects. Funding in this sub-track is provided for projects that have finished preliminary engineering and have a completed project-level NEPA document "at the time of application."1 An application "may be" considered in this category if "substantial progress" on the NEPA review has been made at the time of the application. If the NEPA review is not finished at the time of the application, it must be done by the time the grant is awarded. The bottom line is that this track can only be used for projects that have completed, or are very close to completing, the NEPA process.
• PE / NEPA Studies for Individual Projects. Funding in this sub-track is provided for individual projects that are not ready for final design and construction. For these projects, funds would be provided to complete preliminary engineering and/or NEPA review—and only for that work. Funds would not be provided for final design and construction. The applicant would need to compete for final design and construction funding in future solicitations (which will be held only if the FRA does not fully disburse the $8 billion in this round). If future solicitations are held, an applicant could compete for final design and construction funding if, at that time, the NEPA review for the project has been completed.

Track 2 – "Programs." Track 2 focuses on developing new or improved high-speed rail and intercity passenger rail corridors. ARRA funds (the $8 billion) can be used for projects on this track. This track differs from Track 1 in several ways:

• On Track 1, an applicant would seek funding for an individual project. On Track 2, an applicant would seek funding for a set of inter-related projects that collectively comprise a corridor or portion of a corridor.
• On Track 1, an applicant would seek funding for final design/construction or for preliminary engineering/NEPA—but could not seek funding for both at once. On Track 2, an applicant could seek funding for a series of activities that extend from preliminary engineering and NEPA through final design and construction. But there is still a NEPA requirement that must be met at the time of the application on Track 2: to be eligible, an applicant must have completed a "corridor-wide 'service' NEPA study, such as a programmatic or Tier 1 EIS."²
• On Track 1, the FRA would provide funding by entering into an agreement for an individual project. On Track 2, the FRA would issue a letter of intent (LOI) promising to fund a series of activities over a period of time. The LOI would need to include specific milestones (dates) for completing specific activities, including NEPA. If the milestones are not met, the funding reserved under the LOI would be "returned to the pool" of available funding and made available for other applicants.³ Thus, failing to meet the NEPA schedule could result in a major loss of funding.

Track 3 – "Planning." Track 3 provides funding for planning—that is, pre-NEPA studies that help to evaluate the feasibility and determine the overall vision for a rail corridor. These activities are not eligible for the ARRA funds. They are funded through annual USDOT appropriations. Currently, the FRA has only $9.5 million in total available for this track. Given the small amount of funding, we do not go into detail on this track.

Track 4 – "Projects" With 50% State Match. Track 4 provides funding for individual projects that meet the requirements for Track 1, but include at least 50% state funding. There are only $82.4 million available for this track. the FRA encourages states that can provide the 50% match to apply under this track as well as Track 1.

The Pre-Application Requirement

The FRA is requiring all prospective applicants to submit a pre-application, which must be filed by July 10, 2009—less than one month from now. Pre-applications must include three main components:

• Project description;
• Project development status, including status of NEPA reviews; and
• Applicant eligibility, including evidence of the applicant's legal, financial and technical capacity to carry out the project.⁴

Failure to submit a pre-application by July 10 will prevent an applicant from even being considered for funding in this solicitation. The applicant will still be able to compete for funds in future solicitations, if the FRA does not completely distribute the $8 billion in the current round. But the window of opportunity to compete in the current round will be closed for anyone who does not submit a pre-application by July 10.

Applicants that are not state DOTs—for example, special purpose high-speed rail authorities—are required to submit additional information as part of the preapplication to demonstrate their ability to carry out the project. This information may include laws, contractual agreements, financial statements and audit reports, as well as other reports demonstrating the applicant's technical capacity and experience.⁵

The FRA may contact applicants directly after receiving the pre-application to address any questions or concerns (e.g., regarding eligibility of the applicant) and to begin discussing the contents of the application.⁶

The Application Process

After an application is received, the FRA will follow a three-step process for reviewing the application and deciding whether to approve the project for funding.

Step 1: Determine Completeness and Eligibility. Before even reviewing the merits of the application, the FRA will review the application to assess completeness and eligibility. If the application is not complete or the eligibility requirements are not met, the application will be rejected – and the applicant will miss out entirely on this round of the competition for high-speed rail funds.

• Completeness review. The FRA will assign a team to review all applications for completeness. The guidance includes detailed requirements for applications. Some are technical: for example, an application without a DUNS number is incomplete. Others are more substantive: for example, an application must include not only engineering and environmental information, but also sufficient economic analysis to enable the FRA to assess the public return on investment.⁷ Applicants will need to thoroughly review the guidance to ensure that every required element is included and is easy to locate in the document.
• Eligibility review. There are two distinct aspects to eligibility: eligibility of the applicant and eligibility of the project. An applicant is considered eligible only if it has the legal, financial and technical capacity to carry out the project. The guidance lists in detail the issues that need to be addressed to show that the applicant is eligible^.8 Then, in addition, the application must show that the proposed project is eligible. Complex projects may include a range of infrastructure improvements—e.g., road improvements near rail crossings. It is important to demonstrate that the specific rail project or projects proposed for funding are in fact eligible for funding.

Step 2: Apply "Evaluation Criteria." After an application is deemed complete and both the applicant and the project are found to be eligible, the FRA turns to the merits of the application itself. At this stage, an "evaluation panel" reviews the remaining applications by applying seven "evaluation criteria" that are listed in the guidance^.9 The applications will be scored on each of the seven criteria, on a scale from 1 to 5. As part of this evaluation, the FRA will require a "rigorous analysis of benefits and costs of proposed projects."¹⁰

Step 3: Apply "Selection Criteria." After the evaluation criteria have been applied by the evaluation panel, the FRA will review "several cross-cutting comparative criteria" before ultimately selecting the projects to receive grants. These criteria include factors such as geographic diversity, technological innovation and use of partnerships (e.g., multistate agreements). These factors provide some flexibility for the FRA, at a policy level, to consider factors that are not reflected in the seven "evaluation criteria" in Step 2.

Applications must be filed through www.grantsolutions.gov. To file an application through that Web site, applicants must take the following steps:

• Register in Grant Solutions Grants Management System.
• Obtain a Data Universal Number System (DUNS) number.
• Register with the Central Contractor Registration (CCR) database.
• Download application forms from the Grant Solutions Web site.
• Download program-specific forms from the FRA's Web site for the HSIPR program.

It is important to begin these administrative tasks soon, especially for applications that are due in August. There is often a long lead time in obtaining a DUNS number and completing a CCR registration. Applicants should not leave these tasks to the last minute.

Counsel can provide assistance in preparing and filing applications for federal grants, loans and loan guarantees under several different programs, including:

• Evaluating funding opportunities to determine whether a client is eligible.
• Assessing the potential for additional NEPA studies to be required based on the passage of time, changes in the project or other factors.
• Developing an overall strategy for the application process, including NEPA strategy.
• Drafting portions of the application, such as eligibility analysis.
• Reviewing the application to ensure completeness, so that the application will not be rejected by Department of Energy on completeness grounds.

Counsel can also advise on NEPA reviews for large-scale infrastructure projects, including projects such as highways, pipelines, transmission lines and other linear facilities.

Conclusion

This Update provides an introduction to some of the important near-term issues that will need to be considered by states and others that intend to apply for high-speed rail grants. In subsequent Updates, we will address specific aspects of the application process in more detail, including NEPA requirements for high-speed and intercity passenger rail projects.

Footnotes

1 Federal Railroad Administration, "High-Speed Intercity Passenger Rail Program: Interim Guidance" (June 17, 2009) [hereinafter "Interim Guidance"], p. 18.
2 Interim Guidance, p. 10.
3 Interim Guidance, p. 18.
4 Interim Guidance, p. 30.
5 Interim Guidance, p. 30.
6 Interim Guidance, p. 30.
7 Interim Guidance, p. 40.
8 Interim Guidance, p. 49.
9 Interim Guidance, p. 6.
10 Interim Guidance, p. 6.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.