BRADENTON, Fla. — Florida Gov. Rick Scott Wednesday rejected $2.4 billion in federal funding toward the state’s $2.6 billion high-speed rail project from Orlando to Tampa before reviewing the most recent ridership and revenue study.
More than $26 million in federal funds have already been spent on the rail project, which had been seen as the most shovel-ready rail project in the country.
The Florida Department of Transportation had been planning to use a public-private partnership to build, operate, and finance the first segment. That contract was expected to offer the winning consortium a right-of-first refusal to develop the second route from Orlando to Miami, which was viewed as the most profitable.
An updated ridership and revenue study for the Tampa to Orlando leg was due out later this month, which would have revealed the financial risk in the project.
Scott, a Republican, said ridership and revenue projections are “historically overly optimistic and would likely result in ongoing subsidies that state taxpayers would have to incur.” He cited the state’s $34.6 million annual subsidy of the Tri-Rail system between Palm Beach County and Miami, which receives $10.4 million in passenger revenues. That system was constructed largely with federal funds.
Other concerns cited by Scott were about capital cost overruns he estimated at $3 billion and the fact that the state would have to return $2.4 billion if the system shut down.
“I believe the risk far outweighs the benefits,” Scott said. “Rather than investing in a high-risk rail project, we should be focusing on improving our ports, rail, and highway infrastructure to be in a position to attract the increased shipping that will result when the Panama Canal is expanded.”
The decision to shut down the state’s largest public works project, which stood to bring the state thousands of jobs at a time when the jobless rate is 12%, drew criticism from veteran GOP lawmakers in the state and in Washington as well as industry supporters of fast rail.
“This is a huge setback for the state of Florida, our transportation, economic development, and important tourism industry,” said John Mica, R-Fla., chairman of the House Transportation Committee. “I have urged the governor to reconsider going forward and allow the private sector to assume the risk and any future costs for the project.”
“With the federal government assuming 90% of the cost of the project, I am disappointed the private sector will not have an opportunity to even offer innovative proposals to help finance the balance of the costs and to construct and operate this system,” he said.
With state and local government budgets strained to assist with the funding of massive projects like high-speed rail, developing them with P3s may be difficult, said Richard Norment, spokesman for the National Council for Public-Private Partnerships.
“In the state’s the fiscal constraint is an enormous challenge and in partnerships you have a blend of federal, state, and local funds,” Norment said. “There is a long-term concern if there will be the revenue stream to make these self-sustaining enterprises.”
Norment said other P3 sectors are doing well, such as water, wastewater, municipal building, and non-rail transportation projects that are more common and financially predictable.
Seven teams comprised of various companies had shown interest in Florida’s rail project and FDOT said in the past that its P3 concession would have required the private sector to assume ridership risk.
“Each of these teams had explicitly agreed to design, build, operate, and maintain Florida’s high-speed rail system for a firm, fixed price, with no cost overruns and no subsidies,” said state Sen. Paula Dockery, R-Lakeland, who had been an adviser to Scott on the issue.
“It was my hope and expectation that the governor would have allowed these teams to submit proposals before pulling the plug on this true public-private partnership that had little risk to the state and tremendous return to Floridians,” she said.
U.S. Transportation Secretary Ray LaHood said his agency worked with Scott “to make sure we eliminated all financial risk for the state, instead requiring private businesses competing for the project to assume cost overruns and operating expenses.”
“We are extremely disappointed by Gov. Rick Scott’s decision to walk away from the job creating and economic development benefits of high-speed rail in Florida,” he said. “Nevertheless, there is overwhelming demand for high-speed rail in other states that are enthusiastic to receive Florida’s funding.”
Ironically, Florida had received additional federal funding after governors in Wisconsin and Ohio turned back more than $1 billion for their high-speed rail programs.
“It is absolutely critical that we make smart investments with taxpayer dollars, whether state or federal, and I believe our state will be better served by spending these funds on projects that will benefit Florida and not turn into a spending boondoggle," Scott said.
U.S. High Speed Rail Association president Andy Kunz called Scott’s decision irresponsible because it was made without the benefit of the ridership study that will be completed soon, and without seeking qualifications from private-sector companies to determine their willingness to finance the project.
“No road project on earth generates cash back; everything in transportation is subsidized,” Kunz said, referring to Scott’s complaint that rail would require taxpayer support. “Roads require the biggest subsidy over any other transportation mode.”
Kunz said numerous organizations “are mobilizing to appeal” Scott’s decision and explore alternative ways to bring high-speed rail to Florida. He declined to comment further on those efforts.