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High-Speed Rail: What's Good for Texas Is Good for California

It's becoming clear that Texas will beat California to having the first all high-speed train on the continent. Ethan Elkind suggests three ways that success for Texas Central's Dallas-to-Houston line will benefit the struggling California project.
September 12, 2016, 7am PDT | Irvin Dawid
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A conceptual rendering of a grade separation in Anaheim, California.

Texas Central, the high-speed rail line planned for the 240-mile corridor between Dallas and Houston, should break ground next year, "with service scheduled to begin within the next five years," according to Jeff Turrentine, columnist at Natural Resources Defense Council's onEarth.

Undoubtedly this will be good news for Lone Star State residents and guests traveling between the nation's ninth and fourth most populous cities, respectively, as they will be able to opt for a 90-minute train trip over a 4.5-hour road trip.

Moreover, it will be good news for the beleaguered 800-mile California high-speed rail project, writes Ethan Elkindwho directs the climate change and business program at the Center for Law, Energy and the Environment at the UC Berkeley School of Law.

California’s progress is much slower (to be completed sometime in the 2030s at best), while the funding picture grows ever murkier.  The financing has recently been undermined by poor cap-and-trade auction proceeds that Governor Brown is using to backstop the lack of available federal and private dollars.

Elkind suggest three ways that Texas Central's success could benefit California project: 

  • First, it could improve the funding and economics of California’s system.  A Texas system could encourage high speed rail manufacturing in the United States.  This local production would help California obtain domestically sourced (and possibly cheaper) parts and supplies, which would allow the state to comply more fully with federal funding requirements and therefore secure more such funding.
  • Texas’ success could also improve the politics for California.  Having high speed rail in red state Texas could change congressional attitudes and achieve more bipartisan support for high speed rail in general.  That dynamic could lead to more federal dollars for the system, which have been stalled since Republicans took over the House of Representatives.
  • Finally, Texas’ experience could potentially inspire some improvements to California’s system design.  Because California’s is primarily a government-funded system, the route has to satisfy various political constituencies.  But with a privately funded system, the Texas train is all about the economics, in terms of speed and service between the most populated areas.  

Elkind may be overly optimistic about the positive spillover effects of success by Texas Central. Here's a Sept. 8 progress report (paywall) on the Texas project from Greenwire reporter, Nathanial Gronewold:

Texas Central aims to finish a draft environmental impact statement by December. Construction could begin by late 2017 if its funding is realized. Alon Levy, author of the popular transit blog Pedestrian Observations, says the full project would be financed by a combination of debt, equity, government loans [e.g., private activity bonds] and possible low-interest lending support from the Japan Bank for International Cooperation. He likened it to financing structures used to build private toll freeways.

Indeed, a 'milestone' was reached with the first $75 million in private funding, according to a July 2015 post:

 The new CEO for the venture, Tim Keith, says "the rest will come through big private investment from private equity funds, large pension funds and large real estate and asset investors." That's Keith's specialty—his prior position was CEO of RREEF/Deutsche Bank Infrastructure Investments.

As Levy indicates, what makes the Texas Central project so attractive is that for the most part, it's entirely privately funded, in contrast to California's $64 billion and growing project that's reliant on federal and state funding, and has yet to attract any private investment.

A case could be made for just the opposite of what Elkind suggests—taxpayers and political leaders will insist that the private sector pay the full costs, much like with Brightline, the higher-speed train scheduled to begin service in mid-2017.

Foreign banks work with their country's high-speed train manufacturers and construction companies

Furthermore, to address Elkind's first point about domestic manufacturing of high-speed trains, foreign investment often comes from rail companies and banks associated with their country's high-speed rail manufacturing, like Japan's Central Japan Railway (or J.R. Central), the original investor per an August 2014 post.

Japan's Central Japan Railway (or J.R. Central), which operates several Shinkansen lines and is described by Wikipedia as "Japan's most profitable and highest throughput high-speed-rail operator," sees a huge opportunity for exporting its technology to America.

Keith had "mentioned the government-affiliated Japan Bank for International Cooperation as one of the potential lenders it seeks for the project," according to a Japan Times article last December. The bank was also behind a possible $5 billion investment for a proposed maglev train between Washington D.C. and Baltimore.

Elsewhere in North America

China Railway International (CRI) inability to use its own rail equipment for the Los Angeles-to-Las Vegas high-speed rail project known as XpressWest caused it to withdraw its proposed $100 million investment last June.

The 150-mph Acela (soon-to-be Avelia) high-speed train on Amtrak's Northeast Corridor "only reaches its maximum speed along short sections."

"The Mexican government postponed again, this time indefinitely, a controversial $3.7 billion dollar high-speed train project," reported Forbes' Mexico correspondent, Dolia Estevez on Feb. 10, 2015. The contract had been won by a "consortium led by China’s Railway Construction Corp (CRCC)."

Hat tip to Metro Transportation Headlines.

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Published on Thursday, September 8, 2016 in Ethan Elkind
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