Face the stats: Texas high-speed rail destined for failure

You’ve probably heard about the Dallas to Houston high-speed “bullet train” proposal, but you may not have heard many of the details beyond the claim that it can make the trip in less than 90 minutes and will be privately financed and won’t cost taxpayers a dime.

The reality isn’t so clear-cut, and taxpayers should be watching their wallets.

A few other questions will help us answer that. What is the proposal and who is behind it? How will the project be funded? What is the track record of high-speed rail (HSR)? How does Texas high speed rail compare to the successes and the failures? What would make HSR a success in Texas? Most importantly, what happens if it fails?

The proposal is a high-speed passenger rail line from Dallas to Houston that can reach speeds of up to 210 mph, with travel time between the two metros of less than 90 minutes. The company behind this proposal is called Texas Central Partners (www.TexasCentral.com), a Texas-based private company. Texas Central promises that the estimated $15 billion cost of construction is backed by private investors, not public funds.

CEO Tim Keith has said repeatedly that Texas Central “does not need, does not want and will not ask for government grants for construction or public money to subsidize operations.” However, according to the Texas Central website, “As for federal loans, the project will explore all forms of capital available to private companies to finance debt for the project, including federal loan programs like RRIF and TIFIA.” These loans are either direct government loans or private loans with a government guarantee. In either case, if the project fails, the taxpayers are left on the hook for the unpaid balance and accrued interest.

Unfortunately, there is no detailed business plan publicly available from Texas Central. Without a plan or financial estimates, it is unclear if this high-speed train will earn enough from operations to payback the substantial taxpayer backed debt.  The amount of revenue will depend on a sizable number of commuters switching from air or car to high-speed rail. Previous studies have shown that the odds of enough people changing their transportation habits to make such a rail line profitable are low. The Texas Department of Transportation analysis projects round trip ticket prices of $216 compared to Hobby-Love Field round trip prices of $177, based on figures from Texas Central, which is not at all encouraging.

Turning to the track record, there are only two HSR lines that have operated at a profit according to a 2013 Reason Foundation study (among others): the Tokaido Shinkansen from Tokyo to Osaka and the LGV Sud-Est from Paris to Lyons. Without digging too deep into financial details, it’s worth nothing that the train station at the Paris end of the LGV Sud-Est line handles over 90 million passengers per year and there are five other train stations in Paris.

What about the less successful record? The study cited above looked at HSR lines in 25 countries, found two profitable lines and one running at breakeven. The other cases, including other lines in Japan and France, operated at a loss, subsidized by taxpayers. The key difference is the capital cost – construction, land acquisition, design, etc. The capital cost is $2.6 million per mile for Shinkansen and $3.3 million per mile for LGV Sud-Est. Costs of other lines have run as high as $163 million per mile. The Taiwan High Speed Rail, a privately funded, government backed project, narrowly averted bankruptcy in 2015 with substantial government concessions.[i] The Taiwan line, like the proposed Texas project, uses the Japanese Shinkansen technology. It had ridership of more than 47 million passengers per year but had a capital cost of approximately $39 million per mile for its two track, 214 mile system.

In the United States, the major project was the now defunct California High Speed Rail. Proposed to connect the 19 million people in the Los Angeles area with the 7 million in the San Francisco Bay area, and 6 of the 10 largest cities in the state, California’s new Governor Gavin Newsome said it would “cost too much and take too long.” The costs are so high, that California will return $3 billion to the federal government rather than complete the project, according to the San Francisco Chronicle. For the first 119-mile section, the initial budget was $6 billion or just over $50 million per mile. Cost overruns pushed that to $89 million per mile before the project was abandoned.  

So, how does Texas Central compare? Financially, the profitable lines average capital cost per mile was less than $3.5 million compared to a projected $62.5 million per mile for Texas Central. The other half of the success equation is ridership. The Tokyo-Osaka line carries 159 million passengers a year, the Paris-Lyon line carries as many as 30 million passengers a year, and Taiwan High Speed Rail served over 47 million passengers annually at the time of its financial crisis. Texas Central forecasts 5 million riders by 2026 and 10 million by 2050.

  Capital cost/ track mile Passengers/ year Success or failure
Tokyo Bullet Train $2.6 million 159 million Success
Paris-Lyons $3.3 million 20-30 million Success
Taiwan High Speed Rail $39 million 47 million (2015) 60 million (2018) Government bailout 2015
California High Speed Rail (under construction) $89 million 33.5 million+ Under construction
Texas Central (projected) $62.5 million 5 million ???

[ii]

For HSR to be a success in Texas, it must have passengers. Texas Central think they can be successful with 5 to 10 million annual passengers, a much lower number than other successful high-speed rail lines. But even getting to the 5 million level may be a problem. The projected ticket prices, based on TXDOT and Texas Central statements, are higher than air travel and much higher than car travel. Texans love the freedom of automobiles and aren’t likely to give that up for a 70-minute time savings at three to four times the cost.

Another concern is the seizure of private property by eminent domain to provide the route for the rail. A Leon County district court judge has blocked the company from using eminent domain, for now, as reported by the Houston Chronicle on February 11th. This ruling alleviates some concerns provided higher courts and the Texas legislature let the ruling stand. That is a an utterly heroic assumption given that the company has already announced its appeal.

If HSR comes to the United States and to Texas, we should all want it to be successful, even more so if tax dollars are at stake. Based on Texas Central’s own statements, at the very least federal taxpayer dollars will be at risk. There is no detailed business plan, so the best taxpayers can do is compare this project to the failures and successes. Unfortunately, the plan is on the high end of capital costs per track mile and on the low end of passengers, the two most important predictors of success in HSR. The estimated time saved compared to air or auto is negligible, is less flexible than auto travel, and comes at a higher price than either. Worse, with the conflicting statements from Texas Central on public funding, we don’t know how many dollars may come from my wallet, your wallet, and other Texas taxpayers. Take all of this into consideration, and ask yourself: Is this project worth a potential $15 billion or more in bailouts from your pocket… your children’s pockets… or even your grandchildren’s pockets? If not, then the state of Texas needs to keep our tax dollars miles away from this project.

Originally published February 13, 2019 in the Houston Chronicle.


[i] https://www.reuters.com/article/taiwan-rail-loan-idUSL5N10G2JZ20150805

[ii] Texas Central projections are from the Texas Central website. Taiwan High Speed Rail figures from Taiwan High Speed Rail. California High Speed Rail figures from the California High Speed Rail Authority. Other figures from 2013 High-Speed Rail in Europe and Asia: Lessons for the United States, Baruch Feigenbaum, Reason Foundation.

https://www.thsrc.com.tw/index_en.html
http://www.hsr.ca.gov/docs/about/ridership/ridership_revenue_source_doc5.pdf
https://reason.org/wp-content/uploads/files/high_speed_rail_lessons.pdf