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 High-speed rail advocates had hoped the line, supported by more than
$13 billion in state and federal money, would inspire similar
government-financed projects. Instead, its many delays have left
rail groups wary of accepting public funds for projects they are
proposing in three other states.
Companies in Texas, Minnesota and Nevada all plan to tap private
cash from investors globally, with help from foreign train makers
and governments eager to export train technology. The projects would
rely on partnerships with Japanese or Chinese firms that face
saturated train markets at home.
“The United States is the Holy Grail of deployment for Japan, China,
France, Germany and Spain,” said Tim Keith, Texas Central CEO.
California's example shows that taking taxpayer money opens the door
to political and legal challenges that can drag out planning,
bidding and approvals for years, private rail advocates said.
Companies now see a quicker - even cheaper - path by largely
avoiding such headaches.
“All the rules relating to public engagement start the day you take
public funding,” said Wendy Meadley, chief strategy officer for
North American High Speed Rail Group’s project in Minnesota. With
private financing, she said, opponents "can’t make thousands of
public records requests and run the project over.”
The company said last year it would seek money from Chinese
investors. Now, it said it is considering two foreign partners for
the $4.2 billion project, which seeks to connect the twin cities of
Minneapolis and St. Paul to the internationally renowned Mayo Clinic
in Rochester, Minnesota, by 2022.
Texas Central is paying for engineering studies with $75 million
from Texas investors, $40 million from a state-backed Japanese
development fund and about $130 million in design work from two
firms. The Dallas-to-Houston rail line is projected to cost $12
billion and be completed by 2021.
In Nevada, privately financed XpressWest plans to link Las Vegas to
Southern California. Started by Las Vegas developer Marnell
Companies, the company formed a joint venture last fall with a
consortium of Chinese firms, infusing $100 million into the project
expected to break ground as soon as this year.
XpressWest officials declined to comment.
GOVERNMENT JUMPSTART
Some experts remain skeptical that bullet trains can work without
government money to finance initial legs of construction.
Rail lines are generally profitable once in operation, said Jim
Steer, director of UK-based high-speed rail research organization
Greengauge 21. But operating profits are unlikely to be enough to
repay massive construction costs.
“No private party is actually going to stump up the kind of money
needed to create these things,” said Steer.
Supporters of the new rail lines said investors can expect solid
returns based on ticket sales and profits from high-end real estate
developments near stations.
Current economic trends also make private financing for
infrastructure projects easier to secure. Interest rates at historic
lows have created global demand for stable, long-term investments,
igniting interest in infrastructure projects from banks and major
investors, such as pension funds.
The number of institutional investors in infrastructure, such as
roads, airports and rail, more than doubled since 2011, according to
Preqin, an alternative investments research firm.
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“There’s a lot of money swimming around the world that doesn’t know
where to go,” said Dr. Alexander Metcalf, president of TEMS, Inc., a
transportation consulting firm. “We’ve seen huge increases in
institutional money that is willing to go into transportation.”
Longstanding U.S. skepticism of expensive train projects does not
necessarily extend to foreign investors, Meadley said.
“People outside of this country believe this will happen more than
Americans believe this will happen,” she said.
POLITICAL PERILS
The U.S. is decades behind Europe and Asia in building fast trains.
In the early 1990s, French and German companies made plays to
construct a high-speed network across Texas. But the project relied
in part on taxpayer money, and the proposal collapsed when local
political support waned.
Texas train officials now see private financing as the faster,
cheaper - and only - avenue. If their project relied on public
subsidies, “we’d end up pulling the plug,” said Robert Eckels, a
director at Texas Central.
Project officials say they have avoided U.S. federal funding in part
because it includes a requirement that American workers manufacture
the trains - even though no such U.S. factory currently exists.
Since 2009, the government has spent $10 billion to improve
passenger rail service in the U.S. California was the only recipient
constructing a high-speed rail line, and the money will only go so
far. The state will likely need private money to finance much of the
project's estimated $64 million cost.
State rail officials overseeing the California project, considered
the most ambitious planned in the U.S. and the farthest along, say
there’s growing interest from foreign governments and international
firms to finance the second leg to Los Angeles.
In February, the state announced the opening of the train’s first
leg, a 250-mile line from the rural Central Valley to Silicon
Valley, would be pushed back by three years to 2025.
The progress has been measured in decades rather than years.
California Governor Jerry Brown first signed legislation to study
high-speed rail during a previous tenure in office - in 1982.
“Everything big runs into opposition,” Brown said at the rail line's
groundbreaking in January 2015.
(Additional reporting by Brenda Goh in Shanghai and Tim Kelly in
Tokyo; Editing by Brian Thevenot)
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