Texas High-Speed Rail Still Not Viable

A few weeks ago, the Antiplanner reviewed the proposed Texas Central high-speed rail line between Dallas and Houston and concluded it was not viable. Last week, the Reason Foundation released a much-more detailed review that reaches the same conclusion.

Reason’s report notes that Texas Central officials claim they won’t need any subsidies, but still plan to ask the federal government for government-guaranteed low-interest loans. While Reason joins with the Antiplanner in supporting private rail projects, the desire for government-backed loans, says Reason, makes it “critical to assess the viability of this project.”

Reason’s assessment concludes that Texas Central officials have overestimated ridership and underestimated costs. As a result, ticket revenues are likely to fall almost $100 million per year short of operations & maintenance costs. Of course, that means there would be nothing left over to repay the government-guaranteed loans, so lenders would be out about $18 billion. That’s based on a construction cost of at least $20 million per mile based on the fact that the only high-speed rail lines that have been built for less had cheap or free right of way. Since the line in Texas would go over mostly private land, the right of way isn’t likely to be cheap.

As it happens, the Antiplanner’s post was republished by the Houston Chronicle. In response, a member of Texas Central’s board of directors, Drayton McLane, wrote a fawning review of the project that the Chronicle also published.

McLane looks forward to the day when Dallas residents will be able to take a high-speed train to a Super Bowl the next time it happens to be in Houston. Never mind that the stadium is at least eight miles from where the train station is likely to be located. Never mind that one train full of people would only fill about one-tenth of one percent of the stadium, so it would take five hours to fill just 10 percent of the seats. Never mind that the last time they tried to use trains to get people to a super bowl, it was a disaster. Like so many rail advocates, McLane sees the train as something that would be convenient for him, so everyone else should take the company’s claims at face value.

Texas Central is backed by JR Central, one of the seven major railroads in Japan that came out of the 1987 breakup of the Japanese National Railways (JNR). That breakup took place because JNR had accumulated $350 billion in debts from trying to build high-speed rail throughout Japan. One of those lines built in 1964 was profitable, but most of the rest lost a lot of money.

The one profitable line connected three very densely populated urban areas housing about 30 million people in a country that, at the time, relied on rail for more than 70 percent of passenger travel. Thus, it succeeded by attracting people from low-speed trains onto high-speed trains. While that first high-speed rail line made money, it put the low-speed trains into the red, and construction of additional high-speed lines put both high- and low-speed lines in the red.

Dallas-Houston does not resemble 1964 Japan in any way. The two urban areas together have about 11 million people, a lot by American standards but not much compared with Tokyo-Osaka. Dallas & Houston densities are so low that far more people will be within easy reach of commercial airports than train stations. And right now the number of people taking low-speed trains between Dallas and Houston is precisely zero, so there is no pent-up market of train riders wanting faster trains.

JR Central is backing this project because it is eager to sell Japanese rail technology to the United States. But to sell it, it has to find a buyer. I doubt that anyone in Texas is interested putting up $18 billion towards this project, and taxpayers shouldn’t be expected to do so.

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10 thoughts on “Texas High-Speed Rail Still Not Viable

  1. Sandy Teal

    I have not lived in Texas, but have driven across it several times. I can’t imagine that Texas would be a place for high speed rail, not practically, culturally, or economically.

    And I am not knocking Texas culture — they clearly have evolved into the later 20th century invention of the automobile and big trucks and are not stuck in the 19th century rail frame of mind of NYC and the NE corridor.

  2. Jardinero1

    I appreciate the Antiplanner’s well reasoned arguments against taxpayer financed public transit boondoggles. I cannot understand his concern for a privately financed, as yet unbuilt rail line. Who cares if it works? It’s not our money getting squandered if it fails. This is Texas and you can be sure that not one Texan’s tax dollar will be spent trying to bail them out. Are there any other private business ventures that the Antiplanner would like to criticize.

  3. JOHN1000

    “It’s not our money getting squandered if it fails.” We wish that were true.

    “Government guaranteed loans” mean that when the loans aren’t paid back, “our money” will be used to pay off the banks. And based on the figures we have seen, the biggest guaranty you can get about this project is that the government guaranteed loans will be paid for by the taxpayers.

  4. Jardinero1

    @John1000 That is a critique of government guaranteed loans, not this particular venture. Thus far, this venture has been financed by equity investors. Government guaranteed loans are bandied about, by opponents, as a bogeyman but the final financing arrangement has yet to be determined.

  5. JOHN1000

    “Texas Central officials claim they won’t need any subsidies, but still plan to ask the federal government for government-guaranteed low-interest loans”

    I am not creating a bogeyman. They say they want the government guaranteed loans – not me or the Antiplanner.

    If they do it all with private funds, without government subsidies or guarantees (which are basically the same thing) I sincerely hope they succeed. Their success would encourage more private investment and, hopefully, discourage more government control.

  6. Jardinero1

    It is obvious that I like this project.

    They state they are looking at all forms of financing including RRIF and TIFIA programs. They have settled on nothing at this point. http://www.texascentral.com/rumors-vs-reality/project-financing/

    My broader point is that opposition to this project mostly hinges on the prospective use of RRIF and TIFIA. If that is your beef with this project; then your beef is actually not with the project but with RRIF and TIFIA financing. That is what you should be complaining about. Alternately, If you think that TIFIA is fair to use for your favorite “private sector” project, then it is probably fair enough for this one as well

    Most of the other critiques don’t stand to reason. The comparison to the non-profitability of state owned railways is irrelevant. State owned railways are unprofitable because there is zero incentive to turn a profit. Without a profit motive, there will be no profits. Incentives matter. Bus systems, railways and even subways were once all profitable private sector endeavors before the state assumed control and eliminated the profit motive.

    Any reader who claims knowledge of ridership or other factors, much less that they know what makes for a profitable railway line is, at best, disingenuous. Sorry, you really don’t know what you say you know about Dallas to Houston ridership or anything else. I don’t claim any special information in that arena either. Though I have reported, in two prior comments on this blog, what I heard straight from the mouth of a member of TCR management whom I spoke with once.

  7. Henry Porter

    “Any reader who claims knowledge of ridership or other factors, much less that they know what makes for a profitable railway line is, at best, disingenuous.”

    All I need to know about what makes this particular line profitable I can deduce from the fact that the proponents need a taxpayer backed loan in the first place. If the project had any reasonable chance of turning a profit, there would be private financiers stepping up to do so and there would be no need to be begging for government to take the risk. But they are. Therefore, it can be assumed, there is no money to be made. So say the experts who live to make money.

    I agree with John1000. I wish success to anyone who would be willing to risk his or her own treasure on Texas high-speed rail. But let’s admit it–the supporters of Texas high-speed rail are not risking their own money. They’re risking taxpayer money. The handwriting is on the wall.

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