Skip to content
Link copied to clipboard

Cost the highest hurdle for high-speed rail in U.S.

As the United States takes its first tentative steps toward high-speed rail travel, the initial hurdle is the biggest: money.

President Obama and Vice President Biden in Tampa, Fla., where Obama in January announced $8 billion in high-speed rail funds. (CHRIS O'MEARA / Associated Press)
President Obama and Vice President Biden in Tampa, Fla., where Obama in January announced $8 billion in high-speed rail funds. (CHRIS O'MEARA / Associated Press)Read more

Fast Track: Is America ready for high-speed rail?

Second of four parts.  

As the United States takes its first tentative steps toward high-speed rail travel, the initial hurdle is the biggest: money.

In the past, the nation's enthusiasm for fast trains has always evaporated when sticker shock set in. Political support has been inconsistent and ephemeral, leaving previous efforts to die amid debates over ridership, land acquisition, and cost - especially cost.

This time, politicians and railroaders believe the momentum is greater than ever to actually build and operate high-speed lines in the United States.

They compare planned U.S. rail projects to the transformational development of the interstate highway system more than 50 years ago, and they cite polls that show Americans more receptive to paying for the economic and environmental benefits that fast trains can bring.

The success or failure of the first line in the United States may decide the fate of U.S. high-speed rail. An expensive bust could kill plans elsewhere, while a technical and financial success could create demand for more, as it did in Europe.

"We have to show the traveling public that this is real, and let them experience it," said Joseph C. Szabo, administrator of the Federal Railroad Administration, who will issue a new national rail plan next month. "The doubters won't be convinced until they can touch it, see it, ride it." President Obama has made high-speed rail a priority of his administration. To tout its benefits, he and Vice President Biden went to Tampa, Fla., where the first U.S. high-speed tracks may be laid.

"We want to start looking deep into the 21st century, and we want to say to ourselves, there is no reason why other countries can build high-speed rail lines and we can't," Obama said to loud applause on the day after his State of the Union address. "And that's what's about to happen right here in Tampa - we are going to start building a new high-speed rail line - building for the future, putting people to work."

Obama cited construction jobs. Manufacturing jobs. Cleaner air. Less gridlock. Reduced dependence on foreign oil. And no herding in airport security lines, with all its attendant little indignities: "I mean, those [trains] are fast, they are smooth. And you don't have to take off your shoes."

He brought with him the promise of $1.25 billion to help build a $3.2 billion, 84-mile Tampa-to-Orlando high-speed line that could be the nation's first.

He also announced $6.75 billion more for 29 other rail projects in 30 states. The plans ranged from true high-speed rail corridors, as in Florida and California, to less ambitious efforts to upgrade existing Amtrak service, as in Pennsylvania and the Midwest.

For the first time, U.S. high-speed rail was getting the one thing it had always lacked: cash.

Andy Kunz, president of the U.S. High Speed Rail Association, says his lobbying has gotten easier as public support has grown and other forms of transportation have become less attractive.

"Airlines are such a nightmare now, and highways are so congested," Kunz said. "High-speed rail is actually an easy sell, especially for anyone who has been to Europe or Japan."

"It all comes down to how much money we throw at it," he said.

U.S. Rep. John Mica of Florida, the ranking Republican on the House Transportation Committee, noted that some European lines cost from $25 billion to $40 billion to build.

"That's not out of line with what we're talking about here," Mica said. "We'll never get these projects done at a better cost than now."

Art Guzzetti, the vice president of policy for the American Public Transportation Association, said public support - and public money - would be crucial for high-speed rail.

"We're not going to get these built without public involvement, and we should not expect it to be otherwise," said Guzzetti.

"The whole country needs to feel engaged in this. We need to connect high-speed rail to other issues that are overarching, such as energy, environment, mobility, and jobs."

Robert Yaro, an urban planning professor at the University of Pennsylvania and president of the Regional Plan Association, a New York-area research group, said high-speed rail was the only reasonable response to the nation's congested highways and skyways.

"The only other answer is to build more lanes on I-95, and I don't think that's going to happen, do you? Or we could build lots of new runways at O'Hare and Newark and JFK. I don't think that's going to happen. . . . We're out of airspace."

Yaro said the hundreds of billions required "is the kind of money that other countries are spending. This is what the rest of the world is doing. . . . This is what we have to do."

In just four U.S. cities, high-speed rail development could create 150,000 jobs and $19 billion in new business in the next 25 years, according to a report for the U.S. Conference of Mayors issued in June.

The report looked at Orlando, Los Angeles, Chicago, and Albany, N.Y., and concluded: "Results particularly point to an increased economic payback when intercity travel time is under three hours."

Frank Nero, president of the Beacon Council, a business group pushing for high-speed rail in Florida, said: "Most of our people haven't tried it, so they don't know if they will like it.

"People here have the view that trains are a romantic, old form of transportation. They don't view it as a modern, futuristic way of transportation.

"We need to make the case that it's not just a great way to go on vacation, but that it will sustain our economy."

The federal government, since 1991, has designated 10 corridors for high-speed rail development, including the Philadelphia-Harrisburg-Pittsburgh "Keystone Corridor." Those 10 corridors don't include the most heavily traveled one, the Northeast Corridor between Washington and Boston.

With the exception of Florida and California, the corridor plans call for incremental steps to speed up existing service, rather than installing true high-speed service with trains traveling at more than 155 m.p.h.

Such incremental "higher-speed" development is much cheaper, allowing passenger trains to share tracks with freight and commuter trains.

But it does not allow for the full advantages European or Japanese-style high-speed rail offers, such as dramatic travel-time savings that can make trains competitive with airplanes on trips of up to 600 miles.

Eventually, "higher-speed" U.S. corridors could be upgraded to true high-speed service, with separate tracks and state-of-the-art signal systems.

Experience in Europe and Asia shows that, with enough passengers, high-speed rail lines can be operated profitably. But the lines generally require taxpayer funds to build.

So, the old questions remain: How much will the lines cost, and where will the money come from?

"These are expensive ventures," said Jack Short, secretary-general of the International Transport Forum, a transportation think tank in Paris. "The $8 billion won't go far, will it?"

The average cost of construction for a high-speed line in Europe is $24 million to $60 million per mile, according to the International Union of Railways.

Spain is devoting $150 billion over 10 years for its burgeoning high-speed rail network, about 1 percent of its gross domestic product. China spent $88 billion in the last year alone.

"These are big, expensive projects that take years to complete," said Petra Todorovich, director of America 2050, an urban-planning organization in New York City. "They're not for the impatient."

She said "$10 billion a year would be a good start, but it's not enough."

She estimated the cost of a U.S. high-speed network at $500 billion to $1 trillion over the next 40 years.

Eric Peterson, president of the American High Speed Rail Alliance, estimated the cost at perhaps $1 trillion in current dollars.

The $8 billion committed by the Obama administration is "pretty laughable," U.S. Rep. Peter DeFazio (D., Ore.), a member of the House Transportation and Infrastructure Committee, told a recent meeting of the Coalition for America's Gateways and Trade Corridors, a trade group that advocates for more federal spending on freight infrastructure. "China will spend that much in eight weeks," added his colleague Rep. Earl Blumenauer (D., Ore.).

China, planning to spend $100 billion a year on high-speed rail, touts its ability to take advantage of previous development by the Europeans and Japanese.

"It's an advantage of the latecomer. We are late, but we achieve big," Chen Juemin, director-general of China's Ministry of Railways' international cooperation department, told the official newspaper Renmin Ribao last month.

A recent report by Boston-based Economic Development Research Group researchers estimated the number of jobs rail spending would create: 24,000 construction and manufacturing jobs per $1 billion in capital investment, and 41,000 operation and maintenance jobs per $1 billion in operating investment.

Most of the construction money for high-speed rail is likely to be a federal responsibility, with states and regions on the hook for perhaps 20 percent of the costs.

Once the lines are built, private or public entities could operate the trains, with taxpayer subsidies if fares and other revenues fail to cover the costs.

Opponents of high-speed rail argue the cost is too high, especially when the nation struggles to recover from a recession. Some contend it is unfair to ask taxpayers who will never use the service to help pay for it; others argue that unending subsidies will be required to operate the service.

Louisiana Gov. Bobby Jindal refused in September to pursue $300 million in federal funds for a high-speed rail project between New Orleans and Baton Rouge because state taxpayers could be responsible for annual operating and maintenance costs.

In California, Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, decried that state's planned $45 billion high-speed rail line as "just an extravagance that very few people are likely to use. . . . We are hearing extravagant promises, but this is just going to run us deeper into debt."

Others object to proposed rail routes since they involve the seizure of private or public land for construction.

Airlines in the United States, aware of the impact of high-speed rail on air travel in Europe as well as America's historic reluctance to develop high-speed rail, have been cautious in their response.

"I don't know what the airline industry will look like when high-speed rail is built. We haven't taken a position other than to point out that the transportation-funding priority should be on the modernization of our air-traffic-control system," said David A. Castelveter, spokesman for the Air Transport Association of America. "If there's a way to do both on parallel tracks, so be it."

A recent analysis by the U.S. Government Accountability Office concluded that building high-speed rail service in this country "is a difficult, multiyear effort" that hinges on financing that goes "far beyond the funds provided by the Recovery Act in a time of continuing federal and state deficits."

The GAO also noted that states would have to cooperate with one another and with freight railroads, and that the Federal Railroad Administration would have to "transform itself from essentially a rail-safety organization to one that can make multibillion-dollar investment choices" while still taking care of its original responsibilities.

In Washington, 106 members of the House in April asked Obama to support spending $50 billion over the next six years on high-speed rail. The lawmakers asked the president to help develop a dedicated source of revenue so funding would not depend on annual budget negotiations.

The administration and Congress are looking to make dedicated funding of high-speed rail part of the next federal transportation reauthorization bill, which is expected to be put together in the next year.

Among the possible ways to pay for high-speed rail:

Gas taxes. The federal gas tax has been 18.4 cents per gallon since 1993. It pays for building and maintaining the nation's interstate highways. States also levy gas taxes. The taxes could be increased and tied to inflation, based on the argument that motorists would benefit from reduced traffic congestion.

Highway tolls. Most highway tolls are levied by states. New tolls could be added, or existing tolls increased.

Sales taxes. Many states and local governments have used sales taxes to pay for transportation projects that are seen as benefiting local residents.

Regional payroll taxes. A tax could be placed on businesses in regions served by high-speed rail, similar to the current tax levied on payrolls by New York's Mass Transportation Authority.

Rail-passenger surcharges. A charge could be added to the cost of every rail ticket. Since most rail passengers are now in the Northeast, they would bear the heaviest burden of such a tax.

Freight fees. A charge could be levied on trucking and railroad shipments or containers, with the argument that shippers benefit from reduced highway or rail congestion.

Driver-related fees. States could levy higher driver's license fees, registration fees, auto-rental fees, or other motorist-related charges.

Private financing can be part of the picture, if investors are convinced they will get a return on the money they put into building or operating high-speed rail systems.

To attract that private investment, high-speed rail in the United States would have to offer investors something it never has in the past: stability.

Previous U.S. flops in Florida and Texas have demonstrated the risks of putting money into fast-train projects without assurances of long-term support.

"This country and the idea of high-speed rail is competing against a lot of investment opportunities around the world," said George Bilicic, vice chairman of investment banking and global head of power, energy, and infrastructure for the Lazard investment bank. "You have to have stability of revenue."

Government can provide that stability by assuring that projects move forward and attract the necessary ridership, Bilicic said at a recent high-speed rail forum in Florida.

"The government has to decide what social good is being served," he said.

Revenue will come from fares, and fares will come from passengers, so accurate forecasts of ridership are crucial to financial success.

If ridership is underestimated, there won't be enough trains to handle the passengers, potential revenue will be lost, and would-be riders will be disaffected. If ridership is overestimated, too many expensive trains will be purchased and crews hired, and millions of dollars will be wasted.

"With a new line, within three months you know if it is a success - you know if the traffic is there or not," said Michel Leboeuf, one of the creators of the TGV high-speed trains in France. "If you can react within the first three months, it's very important. We saw that on our earlier lines."

Leboeuf, who is now director of SNCF Voyages, overseeing long-distance passenger projects in France and abroad, said it is crucial to be able to alter fares quickly to react to airline competition or to unexpected changes in ridership: "The first year is very important."


Foreign accent for U.S. rail projects.