High-Speed Rail Can Cover Its Operating Costs
While paying for its hefty infrastructure costs may be ambitious, many high-speed rail systems cover their operating costs and even turn a small operating profit.
Just three weeks after Florida Gov. Rick Scott made a point of thumbing his nose at $2.4 billion in Washington subsidies for a short high-speed rail line, saying it would be a money hole, his own state’s Department of Transportation released a study claiming quite the opposite.
The Florida DOT had commissioned an independent study on ridership and profitability for the proposed high-speed link between Orlando and Tampa. The research groups, Wilbur Smith Associates and Steer Davies Gleave, projected healthy ridership for the train and a $10.2 million operating surplus for 2015, the line’s first operating year.
The study flew in the face of conventional wisdom about high-speed rail, which is that it’s a nice idea but prone to expensive boondoggles. According to this conventional wisdom only the main Shinkansen line in Japan (Tokyo-Osaka) and the main TGV line in France (Paris-Lyon) — of all high-speed lines everywhere in the world — have turned a profit.
So how could a little train in Florida be so immediately and lavishly profitable?
The truth is that plenty of high-speed lines turn a profit in the sense of earning more every year than their annual operating costs. Their operational profits make them the flashy flagship attractions on trundling, heavily-subsidized, workhorse national railroads.
It’s true across Europe, from Spain to Russia. High-speed lines are something like the best-sellers at a publishing house, popular marquee products that can bring income to fund other parts of a costly operation. The rule even goes for Acela, Amtrak’s (outdated and slow) high-speed project in the Northeast Corridor. “Of all the Amtrak services, Acela alone operates at a substantial surplus year after year,” write the quantitative analysts at Fulcrum Inquiry. “… The experience in other countries is the same. High speed rail subsidizes slower intercity lines.”
What no high-speed railroad can do in its first year is earn back its entire capital costs, i.e., the full price of building the line in the first place. The trunk lines of the Shinkansen and TGV have earned back their original investment costs simply because they’re the oldest high-speed lines on the planet.
This is what people mean, or should mean, when they say talk about the outrageous expense of high-speed rail. It’s certainly what Iñaki Barrón de Angoiti, director of high-speed rail at the International Union of Railways in Paris, means in a much-quoted line from The New York Times. “High-speed rail is good for society and it’s good for the environment, but it’s not a profitable business,” he said, and the Times added: “He reckons that only two routes in the world — between Tokyo and Osaka, and between Paris and Lyon, France — have broken even.”
Also on Miller-McCune.com, how the idea of high speed rail died in Texas while thriving in Spain during the 1980s.
No one denies that high-speed lines need huge commitments by a government and by taxpayers. But that’s not the same as saying they’re unprofitable. The truth is that a high-speed train, done right, can earn enough to pay its own annual finance costs, the interest on debt incurred to pay for them. After many successful years, a well-placed line can even recoup the government’s investment. Eisenhower’s highways earned back their federal investment only because of a national fuel tax, which is still collected.
The Orlando-to-Tampa line might in fact be too short to earn back its entire investment; but it would probably end business flights between the two cities. Could the savings in fossil fuel be worth the tax commitment? Over time, probably so. But most enemies of high-speed rail aren’t thinking that far ahead. Fast new trains are still big-government projects, which to some people — at least in some cases — still means “un-American.”