Despite Funding Fights, High-Speed Rail Progresses in 3 States

The Trump administration is pulling some federal funding from California. But that project and others like it are quickly moving forward.
by | May 14, 2019 AT 4:00 AM
Florida's Brightline, which is being renamed Virgin Trains USA, began transporting passengers last year. (AP/Wilfredo Lee)

Last Updated May 17, 2019 at 11:43 a.m. ET

 

A new era of passenger rail in the United States may finally be on the way, according to high-speed rail advocates. Despite the Trump administration's recent move to yank federal funding from California’s long-troubled high-speed rail venture, that project and others like it are quickly moving from drawing-board concepts to physical reality.

By the end of this year, the country may have as many as three new passenger railroad systems under construction, each promising fast service between cities in just a few years. The projects in California, Florida and Texas differ quite a bit from one another in size, scope and funding sources. But each one of those projects seems to be moving forward despite significant obstacles, something many rail proponents see as as a promising sign.

“This seems to be the convergence of a lot of things, all bubbling up at the same time,” says Andy Kunz, the CEO of the U.S. High Speed Rail Association.

People are increasingly worried about the effect driving carbon dioxide-emitting cars has on climate change, while road congestion seems to have “reached epic levels,” he says. Meanwhile, private investors see the potential of making money from passenger rail service between city pairs that are too far away to drive between, but too close to fly between.

Rick Harnish, the executive director of the Midwest High Speed Rail Association, says the progress on the new rail projects stands in sharp contrast to the slow processes used by Amtrak and individual states in improving rail service.

“The states have always looked at very small steps. They’ll add one train and see how it does, and then add another and see how it does,” he says. “The problem is that there’s a tipping point, because the train has to be frequent enough that you can ride it. You’ve got to be able to take the capital costs [for new construction and trains] and spread them out over a larger number of trains. That has been the biggest error, particularly in the Midwest, is these tiny little steps.”

In Florida, where the newly christened Virgin Trains have been running between Miami and West Palm Beach for a year, the private owners were able to prove their concept with frequent service on a short route, Harnish notes.

“The strategy is incredibly different. Frankly, it’s hard to imagine a state taking that type of leap of faith. And that’s the problem,” he says. “It’s difficult to imagine, but that’s what has to happen.”

Of course, there’s no bigger leap of faith with new rail service than the state-led project in California, which eventually promises to connect Los Angeles and San Francisco with trains traveling at more than 200 mph. Gov. Gavin Newsom, shortly after he was inaugurated this year, tried to tamp down expectations about the project even as the state continues to build it. Many observers interpreted his remarks as cancelling the project altogether, and soon President Trump was demanding that California return the federal stimulus money it has used to help build the new line.

In mid-May, the Federal Railroad Administration (FRA) yanked $929 million of federal grants for the project, a move that California is expected to challenge in court. The agency said California had “failed to make reasonable progress” on the project. “Additionally, California has abandoned its original vision of a high-speed passenger rail service connecting San Francisco and Los Angeles, which was essential to its applications for FRA grant funding,” the FRA said.

It warned that it may try to recover $2.5 billion of federal funds that California already spent on the project, too.

Newsom promised to fight the FRA decision, even though it was, at least in part, based on comments he made.

“The Trump administration's action is illegal and a direct assault on California, our green infrastructure and the thousands of Central Valley workers who are building this project,” he said in a statement.

Indeed, the California project has not been cancelled, and it's expected to move forward even while the fight continues over the FRA money.

“Some have suggested the state should walk away from the more than a decade of collaboration and progress that Republican and Democratic administrations and a generation of legislative leaders have made to bring the project this far,” the California High-Speed Rail Authority wrote in a report issued last week, before the FRA action. “Such a path would leave California, having spent $5 billion, with nothing but lawsuits, job losses and billions of IOUs with nothing to show for our debts.”

“Given those two options, the path forward is clear,” the authority added. “The California High-Speed Rail Authority will continue its efforts toward getting a working section completed in a responsible and transparent way.”

If the FRA action survives legal challenges, the $929 million it withholds from California would still be dedicated to high-speed rail projects, though, explains Jeff Davis, the editor of Eno Transportation Weekly.

“The real question is, if FRA puts out that $929 million [again], which states, localities and railroads would apply, knowing that the money might be tied up in court for a while?” he wrote.

The Florida and Texas projects so far have eschewed direct public funding, but there are other potential candidates, including Midwestern states like Illinois and Michigan that have improved existing track, or Washington state, which is exploring high-speed rail service between Portland, Ore., and Vancouver, British Columbia.

The California controversy shows that, even though it, Florida and Texas projects all share the goal of connecting big cities with fast passenger rail service, the projects in those three states are traveling down very separate tracks.

Here’s a look at where each stands.

 

Virgin Trains (formerly known as Brightline) in Florida

Richard Branson, of Virgin Group, third from right, posed with officials last month at the newly rechristened Virgin MiamiCentral train station. (AP/Lynne Sladky)

 

Train speeds: up to 125 mph

Initial cities connected: Miami, Fort Lauderdale, West Palm Beach (currently in operation)

Future service planned: Orlando. The company is also exploring connections to Tampa, Cape Canaveral, Treasure Coast (Fort Pierce or Stuart), Port of Miami and an Orlando-area theme park (such as Walt Disney World or Universal Studios). The company also owns rights for a corridor between Las Vegas and Southern California.   

Cost: At least $3.1 billion for the Miami-to-Orlando segment.

Funding source: Private. The company says it already has spent $2 billion in upgrades on its own. It also sold $1.75 billion in (publicly subsidized) private-activity bonds in April to build the West Palm Beach-to-Orlando segment and to refinance $600 bonds it sold earlier for the Miami-to-West Palm Beach segment.

Date of first expected service: Southern Florida operations began in 2018. Service to Orlando is scheduled to start in 2022.

Recent developments:

Virgin Trains is already up and running in South Florida, and it recently took a big step forward toward offering long-promised service to Orlando. In April, the company sold $1.75 billion in private activity bonds to 66 different investors, which a spokesman says is the largest sale of unrated municipal bonds in history.

The sale is significant, because it will allow Virgin Trains to transform its business from what is essentially now a commuter rail service in one metro region to intercity passenger rail between Florida’s two biggest tourist destinations. The company had struggled to sell bonds previously. In 2015, it tried four times to finance a similar deal, but with no success.

Now, though, investors and the general public can experience the service with hourly runs between Miami and West Palm Beach. The trains offer amenities like comfortable seating, free wi-fi and level boarding, while stations in the heart of three city downtowns have attracted retail outlets and offer easy connections to job centers.

Ben Porritt, senior vice president for corporate affairs for Virgin Trains, says the company has met its ridership goals since its Miami station opened a year ago. The Florida railroad carried more passengers in its first year than Amtrak’s Acela service in the Northeast corridor did in its first year, he says. The new service is not yet profitable, but, Porritt says, “we continue to demonstrate a steady increase in ridership, as projected.”

The current service uses a coastal line that dates back to the original development of Florida’s Atlantic coast, but to get to Orlando, the railroad will have to upgrade tracks and crossings north to the Space Coast, and then add tracks in a highway median to get west to Orlando.

With the money from the bond sale in hand, Porritt says the company will begin full-scale construction on its Orlando leg by the end of the month.

Unlike other planned intercity rail projects, Virgin Trains will not travel much faster than 125 mph -- far short of the 200 mph speeds that experts usually consider to be true “high-speed rail.”

The last few months have seen many other significant developments with the company, including:

  • The company that runs the trains, which used to be Brightline, got a new name in April: Virgin Trains USA. The switch comes after Richard Branson’s Virgin Group bought a small share of the private company, in exchange for the rebranding and marketing efforts. Virgin Group offers airline service to Florida and plans to start offering cruises, too. (Virgin also offers rail service in the U.K.) The Florida trains will continue to operate separately from Virgin Group, and the company is still owned by Fortress Asset Management.
  • The company explored, but ultimately pulled back from, going public earlier this year. Company officials originally hoped to sell shares at the beginning of the year, but the stock market declined at the end of 2018, and the federal government partially shut down for a month around the same time. The company decided to focus on getting finances from private investors, instead.
  • Virgin Trains is negotiating with the state of Florida for right-of-way in an interstate to extend its service from Orlando, in the middle of the state, to Tampa on the Gulf Coast.
  • The company acquired the rights to the long-stalled high-speed rail corridor between Las Vegas and the Los Angeles region from XPressWest in March. Getting those rights gives Virgin Trains a headstart in getting regulatory approval for the route along Interstate 15. The company expects to start building that line in 2020. The goal would be to get passengers to travel the 185-mile corridor in an hour and a half.
 

California High-Speed Rail

The first leg of California's long-troubled high-speed rail network is expected to begin service in 2028. (Rendering: California High Speed Rail Authority)

 

Train speeds: Up to 220 mph

Initial cities connected: Merced to Bakersfield, through Stockton

Future service planned: San Francisco, San Jose, Los Angeles, Sacramento, San Diego

Cost: The Merced-to-Bakersfield segment is currently estimated to cost $20.4 billion. The ultimate goal of connecting San Francisco to Los Angeles would cost at least $77 billion.

Funding source: All public so far. Funds include $10 billion from state bonds, $3.5 billion from federal sources, and ongoing funding from proceeds of California’s cap-and-trade system for carbon dioxide pollution (totaling $2.6 billion as of February 2019). Additional funding may be required to finish the first segment.

Date of first expected service: 2028

Recent developments:

The funding fight with the Federal Railroad Administration looms large over California's ambitious project, but the project was already in flux before the Trump administration announced it would withhold the $929 million in federal grants.

Developing a statewide high-speed rail network in California was a major priority for former Gov. Jerry Brown. But Newsom, who took office in January, seemed to throw cold water on the plan when he told lawmakers in February, “Let’s be real. The current project, as planned, would cost too much and, respectfully, take too long.”

Many observers quickly concluded that the new governor was trying to cancel the high-speed rail project, the country’s largest infrastructure project, altogether. That's what prompted Trump to first threaten to cut off federal funding for the project and demand a refund of federal money that had already been “wasted” on the effort. For several months after Trump tweeted about the project, the U.S. Department of Transportation has stopped communicating with California’s high-speed rail agency, the Los Angeles Times recently reported.

But state officials insist that Newsom never tried to cancel the project, only to refocus it. Prior to Newsom’s speech, the state focused its efforts on providing “Valley to Valley” service between the agricultural Central Valley and San Jose in the Silicon Valley. Now, it is focusing on providing service in the Central Valley first. (The Obama administration’s stimulus package all but forced California to start building in the Central Valley, because it required recipients to spend their stimulus money quickly.)

When completed, the initial line will start in Bakersfield (with a population of 380,000 people, about the same size as Tampa or Cleveland) in the south. It will connect to Fresno (with a population of 527,000, bigger than Kansas City, Atlanta or Miami) and end in Madera (population 66,000).

“This early-service option provides more and faster passenger service in the Valley, while increasing ridership and the system’s farebox recovery,” says Micah Flores, a spokesman for the high-speed rail agency. Initially, the state would lease its assets and trains to another operator to provide the new Central Valley service.

Meanwhile, regional rail agencies are working on increasing service to Madera from cities including San Jose, Stockton and Sacramento. In the south, the high-speed rail commission wants to start offering bus connections to other rail lines in the northern suburbs of Los Angeles, rather than downtown.

“The 171-mile trip from Merced to Bakersfield currently takes 2.5 hours by car and more than 3 hours by existing passenger rail. Implementation of high-speed intercity rail service could cut that travel time in half,” the agency said in last week’s update. “The faster travel times and the improved connectivity that high-speed rail will bring to the Central Valley has the potential to fundamentally transform the regional economy.”

 

Texas Central

In Japan, shinkansen bullet trains crisscross the country. A private company wants to run the same trains in Texas, connecting Dallas to Houston. (Shutterstock)

 

Train speeds: 186 mph (although they could later run at 205 mph)

Initial cities connected: Dallas, Houston, Brazos Valley

Future service planned: None announced

Cost: At least $15 billion

Funding source: Companies tied to the Japanese government and unnamed investors

Date of first expected service: 2024

Recent developments:

Texas Central, a private company, wants to introduce Japanese-style high-speed rail service between Dallas and Houston, but whether it will be able to do so may ultimately depend on whether it can use the power of eminent domain to clear a path for its bullet trains.

The company says it could start on construction as early as this year, after it gets the necessary environmental approvals from the Federal Railroad Administration. (The FRA, however, now says that it anticipates that the reviews will be completed by early 2020.)

A trial judge’s ruling earlier this year cast doubt on those projections, when she ruled that Texas Central is not a “railroad company” under Texas law and, therefore, cannot use eminent domain to purchase or even survey land needed for the project.

At the same time, Texas Central has tried to fend off a dozen bills in the state capitol trying to rein in the project in various ways. So far, most of those efforts have faltered, but the Texas legislature doesn’t adjourn for another two weeks.

Opponents are worried that Texas Central could use the power of eminent domain – which can restrict property owners’ ability to use that land, even before it’s condemned – without any public oversight or even a determination that the project is in the public interest.

“If the state of Texas decides this is a priority project – which by the way, it has not – there would be a process that would go through,” says Kyle Workman, the president and chairman of Texans Against High Speed Rail. It would have to be reviewed by the state transportation department, be put on the state rail plan and ultimately be reviewed by state lawmakers, he says. That’s on top of federal and local oversight.

But Texans don’t want to have that debate, because they’re not interested in the project, Workman adds.

Texas Central says it does meet the definition of a railroad company under Texas law, pointing to a decision in another county several years ago. The fact that the Federal Railroad Administration has worked with the company to review its plans also shows it is a bona fide railroad, it argues.

Still, the Texas company has tried win support locally by trying to distinguish itself from California’s troubled system.

“Texas is not California, which is why this project is taking a fundamentally different approach,” it says on its website. “The Texas approach is a private, investor-owned project, letting the discipline of the free market drive decision making. The private approach to financing this project changes everything.”

“This is the first project where commercial success is at the heart of the project focusing on ridership and the customer experience – a direct contrast to California’s politically driven, publicly-funded model,” it added.

But Workman doesn’t believe it. He believes Texas Central’s goal is to build the system, start running it and then transfer ownership to the government.

“High-speed rail worldwide is subsidized, and everybody knows that,” he says. “These guys claim that they figured out the magic formula, the first of its kind ever in the world, in an area where population density is extremely low and car ownership is extremely high, basically 180 degrees out of phase to where any of the high speed rail project he high speed rail in the world is actually successful.”

 

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