Texas High Speed Rail: On the Right Track?

The Central Japan Railway (Note 1), which operates one of only two high-speed rail segments (Tokyo Station to Osaka Station) in the world that has been fully profitable (including the cost of building), proposes to build a line from Dallas to Houston, with top speeds of 205 miles per hour. This is slightly faster than the fastest speeds now operated. This line is radically different from others proposed around the nation and most that have been proposed around the world. The promoters intend to build and operate the route from commercial revenues.

There is the understandable concern that eventually, the promoters will approach the state or the federal government for support. Not so, say Texas Central High Speed Railway officials. According to President Robert Eckels, not only is there no plan for subsidies, but "investors would likely walk away from a project that couldn’t stand on its own." He also told the Texas Tribune “If we start taking the federal money, it takes twice as long, costs twice as much,” Eckels said. “My guess is we’d end up pulling the plug on it.”

Eckels is a former Harris County Judge (Houston), a position the equivalent of a county commission or county board of supervisors chair in other parts of the nation. Eckels developed a reputation for fiscal responsibility during his tenure at the county courthouse.

The Texas project is in considerable contrast the California High Speed Rail project, which if built, is likely to require a 100 percent capital subsidy and perhaps subsidies for operations. It is also different from the Tampa to Orlando high speed rail project, which would have required a 100 percent capital subsidy and was cancelled by Florida Governor Rick Scott. The Texas project can also be contrasted with the Vegas to Victorville, California XpressWest high speed rail line that would require at least a $5.5 billion federal loan and a subsidized interest rate. Our recent Reason Foundation report predicted that XpressWest would not be able to repay its federal loan from commercial revenues and could impose a loss on federal taxpayers of up to 10 times the Solyndra loan guarantee loss (see The Washington Post, "Solyndra Scandal Timeline").

From the horrific record of private investment in startup high speed rail lines and the huge losses that have been typical, I am certainly skeptical. The Taiwan high speed rail private investors have lost two-thirds of their capital investment and debts are guaranteed by the government. The Channel Tunnel rail line to St. Pancras station has been bailed out by British taxpayers. However, if any company can make money at high speed rail in the United States, it would be the Central Japan Railway.

So far the Texas Central High Speed Railway seems to be doing it right. Like the other intercity modes, the airlines system and the intercity highway system (Note 2), this project would be paid for by people who use it.

Without government subsidies or loans, the Texas Central High Speed Railway will certainly have an incentive to get the sums right. If they are not, it sounds like the plug will be pulled. If they are, high speed rail could be on the right track in the United States for the first time. More power to them.


Note 1: Central Japan Railway, and other companies purchased the assets of the Japanese National Railway in the late 1980s. The nationalized railway had run up a debt of nearly $300 billion, which was eventually transferred to taxpayers.

Note 2: There is a small subsidy to the airline system from the Federal Aviation Administration. Intercity highways have been financed by users until contributions from the federal general fund in recent years. However these contributions have been far less than diversions over the past 30 years from highway user fees, principally to mass transit a major transfer of highway trust fund interest to the general fund and now ongoing interest transfers.

Photograph: Central Japan Railway corporate headquarters at Nagoya Station (by author)