Texas High Speed Rail: On the Right Track?

The Central Japan Railway (Note 1), which operates one of only two high-speed rail segments (Tokyo Station to Osaka Station) in the world that has been fully profitable (including the cost of building), proposes to build a line from Dallas to Houston, with top speeds of 205 miles per hour. This is slightly faster than the fastest speeds now operated. This line is radically different from others proposed around the nation and most that have been proposed around the world. The promoters intend to build and operate the route from commercial revenues.

There is the understandable concern that eventually, the promoters will approach the state or the federal government for support. Not so, say Texas Central High Speed Railway officials. According to President Robert Eckels, not only is there no plan for subsidies, but "investors would likely walk away from a project that couldn’t stand on its own." He also told the Texas Tribune “If we start taking the federal money, it takes twice as long, costs twice as much,” Eckels said. “My guess is we’d end up pulling the plug on it.”

Eckels is a former Harris County Judge (Houston), a position the equivalent of a county commission or county board of supervisors chair in other parts of the nation. Eckels developed a reputation for fiscal responsibility during his tenure at the county courthouse.

The Texas project is in considerable contrast the California High Speed Rail project, which if built, is likely to require a 100 percent capital subsidy and perhaps subsidies for operations. It is also different from the Tampa to Orlando high speed rail project, which would have required a 100 percent capital subsidy and was cancelled by Florida Governor Rick Scott. The Texas project can also be contrasted with the Vegas to Victorville, California XpressWest high speed rail line that would require at least a $5.5 billion federal loan and a subsidized interest rate. Our recent Reason Foundation report predicted that XpressWest would not be able to repay its federal loan from commercial revenues and could impose a loss on federal taxpayers of up to 10 times the Solyndra loan guarantee loss (see The Washington Post, "Solyndra Scandal Timeline").

From the horrific record of private investment in startup high speed rail lines and the huge losses that have been typical, I am certainly skeptical. The Taiwan high speed rail private investors have lost two-thirds of their capital investment and debts are guaranteed by the government. The Channel Tunnel rail line to St. Pancras station has been bailed out by British taxpayers. However, if any company can make money at high speed rail in the United States, it would be the Central Japan Railway.

So far the Texas Central High Speed Railway seems to be doing it right. Like the other intercity modes, the airlines system and the intercity highway system (Note 2), this project would be paid for by people who use it.

Without government subsidies or loans, the Texas Central High Speed Railway will certainly have an incentive to get the sums right. If they are not, it sounds like the plug will be pulled. If they are, high speed rail could be on the right track in the United States for the first time. More power to them.

——

Note 1: Central Japan Railway, and other companies purchased the assets of the Japanese National Railway in the late 1980s. The nationalized railway had run up a debt of nearly $300 billion, which was eventually transferred to taxpayers.

Note 2: There is a small subsidy to the airline system from the Federal Aviation Administration. Intercity highways have been financed by users until contributions from the federal general fund in recent years. However these contributions have been far less than diversions over the past 30 years from highway user fees, principally to mass transit a major transfer of highway trust fund interest to the general fund and now ongoing interest transfers.

Photograph: Central Japan Railway corporate headquarters at Nagoya Station (by author)

Comments

44 responses to “Texas High Speed Rail: On the Right Track?”

  1. Alki444 Avatar
    Alki444

    In what alternative universe are inter city modes paid entirely by the users? I see you posted two notes to cover yourself but unfortunately, they don’t do the job. The interstate system was built entirely by the gov’t. Anyone who buys gas whether they use the system or not helps pay for it. Most airline terminals also are built by the feds. Only in the largest cities do the airlines throw in some money.

    If you mean taxes paid by users help to defray the cost of building and maintaining highway and airline inter city travel. No worries. We can do the same with hi speed rail.

    1. Wendell Cox Avatar
      Wendell Cox

      Thank you for your comment.

      The government of the city of Los also supplies electricity to the homes and businesses in the city. It does so with user fees — payments made for the service. The same is true with respect to interstate highways, virtually all paid for with either user fees or tolls, and with airports, including the terminals you mention.

      The highway and airport user fee systems may not be as efficient as the city of Los Angeles Department of Water and Power (DWP) — that is, there is not a one-to-one relationship between the specific road use of any one user and extent of their user fee payment, which is a reason there is support for road pricing among economists.

      But it is just a matter of bundling. It’s like the parking lot at a suburban shopping center. It is paid for by the revenues from customers of the shopping center. Yet, the payment is not related to the extent of use. The few who walk do not use the parking lot, but pay anyway, because the cost of the parking lot is imbedded in the product prices. Those who secure their bicycles on the shopping center property use less physical space than those who use trucks or recreational vehicles. People park for varying amounts of time that may have little or no relationship to how much they buy. In the case of the shopping center, customers pay for their products, which includes the cost of the parking lot, whether or not they use it. In the case of people who drive on intercity highways, customers pay for their use and that use includes the interstates and much of the roadway in the state highway systems.

      But, the bottom line is that only customers pay for the suburban shopping center parking lot and only customers pay for the interstate highways and the airline (subject to the caveats in the article). The issue is one of cost allocation and prices — how shall the costs of the parking lot and the interstate highway system be allocated between customers of the shopping center or the intercity highway system; only they pay.

      I advocated using rail ticket taxes to finance intercity rail while serving on the Amtrak Reform Council (1999 to 2002). This aviation like financing mechanism would fit well, except that there is insufficient customer demand to at the fare plus ticket tax prices that would be required to pay for the capital and operations.

      There is no need to subsidize intercity passenger transport, as the experience with highways and aviation demonstrates.

      Best regards,
      Wendell Cox

  2. Erik Bruvold Avatar
    Erik Bruvold

    Now I am not going to argue TOO much about the skepticism about HRS but please note that the subsidies to the airline industry are NOT little. The most notable is that the FAA is able to significantly restrict land use and property rights to preserve their airspace AND to reduce land use intensity in the immediate areas around airports. They do so without compensating land owners. If I was a transportation historian I also would be interested in seeing the title records of most/all of the major commercial airports in US Metros – as well as a true accounting for the ground side infrastructure they require.

    HSR can be rightly criticized on a number of fronts. But too often these analysis underestimate the subsidies going to other forms of transportaion.

    1. hoahong Avatar
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      Now I am not going to argue TOO much about the skepticism about HRS but please note that the subsidies to the airline industry are NOT mua bao cao sulittle. The most notable is that the FAA is able to significantly restrict land use and property rights to preserve their airspace AND to reduce land use intensity in the immediate areas around airports.sextoys cho nữ They do so without compensating land owners. If I was a transportation historian I also would be interested in seeing the title records of most/all of the major commercial airports in US Metros – as well as a true accounting for the ground side infrastructure they require.bao cao su

      HSR can be rightly criticized on a number of fronts. But too often these analysis underestimate the subsidies going to other forms of transportaion.

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