Texas HSR Proposal Slammed as Costly Boondoggle

Register now

DALLAS -- The proposed privately financed high-speed rail line between Dallas and Houston would be an expensive boondoggle that could set back the development of bullet trains in the U.S. for decades if not forever, the libertarian-leaning Reason Foundation contended in a recent report.

The proposal by Texas Central Railway to privately finance the building and operation of a $12 billion, 240-mile HSR system has been cited as an example of the private investments in transportation projects promised in President Donald Trump's $1 trillion, 10-year infrastructure proposal.

However, the Reason Foundation report said Texas Central's ridership projections are too optimistic, the construction costs for the rail system and its stations are seriously underestimated, and the project would run a multi-million dollar operational deficit for many years.

"Dallas and Houston are poster children for big cities where high-speed rail has no chance of succeeding without public funding," the report said. "We are concerned that Texas Central's project will fail so spectacularly that privately financed U.S. high-speed rail lines may never be given a second chance."

Texas Central said the report offers no new original research and instead relied on outdated traffic numbers from a state analysis of transportation corridors.

 "The recently published Reason Foundation report is deeply flawed and rife with uninformed biases about how Texans travel," the company said. "We disagree with the paper's findings, its assumptions, and regret its inexplicable departure from the Reason Foundation's usual adherence to respectable, defensible academic standards."

A spokeswoman for the rail project sponsors defended the ridership projections and disputed the report's contention that the Dallas and Houston areas are well served by existing airports and highways.

 "Texans have told us they want a choice, a new choice, in how they travel in between these cities," said Holly Reed, Texas Central's managing director of external affairs.

Nearly 5 million passengers per year will use the bullet train by 2026, almost 25% of all trips between the two cities, Texas Central said, with market share hitting almost 30% with some 10 million rail journeys per year by 2030.

"Of the more than 12 million car trips taken between the northern and southern ends of the route in 2015, 93% of the trips would have been shorter by train," the company said.

Texas Central has said it does not need federal or state grants or subsidies to build and operate the rail line.

However, company officials said they would probably seek low-interest federal loans through the Transportation Infrastructure Financing and Innovation Act or the Federal Railroad Administration's Railroad Rehabilitation and Improvement Financing program. The sponsors may also seek an allocation of transportation-specific public activity bonds from the Transportation Department. The rail line will cost at least $16 billion to build rather than the project sponsor's estimate of $12 billion, said Baruch Feigenbaum, assistant director of transportation policy at the Los Angeles-based Reason Foundation.

Total project costs in the Reason Foundation report also include $8.8 billion of operational and maintenance costs over 40 years and $840 million to build stations in Dallas and Houston and a midway stop near the main campus of Texas A&M University.

Total costs of the project financed at 5% simple interest would total $27.5 billion over the next 40 years, with total revenues of only $6 billion over the period, Feigenbaum said.

The annual revenue gap of $537 million would put the rail line in a deep financial hole, he said.

"We do not believe that Texas Central can build the rail line without significant public subsidies," Feigenbaum said. "While Texas Central may not be intending to take any public funding, we believe that if construction starts, the project will inevitably have to be bailed out by the taxpayers of Texas."

For reprint and licensing requests for this article, click here.
Infrastructure Transportation industry Washington Texas
MORE FROM BOND BUYER