Texas Central Project May Be Dead

After promising that their Dallas-Houston high-speed rail project would be built solely with private funds, Texas Central backers are sending out feelers about getting a federal guaranteed loan to build it. A letter from the company chairman to Texas state senator Robert Nichols says the project “hit a snag” due to the coronavirus, but “monies we hope to receive from President Trump’s infrastructure stimulus” could make it “construction ready this year.”

The fact that President Trump doesn’t have any infrastructure stimulus money is just a minor detail. Company officials cited possible loans through the Railroad Rehabilitation & Improvement Financing (RRIF) or the Transportation Infrastructure Finance and Innovation Act (TIFIA) programs. However, neither of these loan programs are large enough for the kind of project contemplated by Texas Central.

Texas Central was originally supposed to cost $10 billion. Then it was going to cost $20 billion. But the letter to Nichols now admits that the project may cost $30 billion.

RRIF and TIFIA loans are typically for hundreds of millions of dollars, with the largest being under $2.5 billion. That’s barely a down-payment on a $20-billion to $30-billion project. The recipients of RRIF and TIFIA loans have been established agencies or companies with proven sources of revenue, not a speculative venture with no history of revenue.

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Texas Central received $300 million in loans from some Japanese banks and spent most of that on planning and lobbying to be given the power of eminent domain so it could buy its preferred right-of-way. It now appears that the deeds for the land it has acquired have been signed over to the “Japan Texas High Speed Railway Caymen LP,” which was created by the Japan Bank for International Cooperation, as collateral for the $300 million loan. One sign that it is running out of funds is that Texas Central has laid off 28 employees in its Texas offices.

Texas Central claims that its ridership projections show that it will carry 6 million riders a year. To repay $30 billion in loans, each of those riders would have to pay $255 a ticket on top of whatever it costs to operate the trains. Since, as I’ve previously noted, Texas Central would be competing against three different airlines that, before the pandemic, were offering 35 to 45 flights a day at one-way fares starting around $100, it doesn’t seems likely that people will pay around $300 to ride a high-speed train that is slower than flying.

Texas Central backers may blame its failure on the pandemic, but the truth is that it was never viable in the first place. As two members of the Texas House wrote, “This project, which has never been financially sound, has become financially impossible.”