PO LICY BRIEF
Photo: All Aboard Florida - designs by Rockwell Group
Why a HighSpeed Rail
Skeptic Likes All
Aboard Florida
It’s a Promising Niche Market,
and the Private Sector Will Bear the Risks
Robert W. Poole, Jr.
Director of Transportation, the Reason Foundation
Senior Fellow, The James Madison Institute
T
o many Americans who are both
life-long rail fans and technology
consumers, the idea of high-speed
rail (HSR) is incredibly attractive. But
for market-oriented proponents of
limited government, there is also a
natural opposition to projects that
require large-scale taxpayer subsidies
to even exist. Therefore, many have
strong objections to the struggling
California High-Speed Rail project
and were proud when Gov. Rick Scott
cited a critical Reason Foundation
report in cancelling the proposed
Tampa-Orlando HSR project in 2011.
Nevertheless, there exists a strong
market-based case for the privatesector Miami to Orlando project called
All Aboard Florida.
www.jamesmadison.org | 1
To begin with, why does high-speed rail (HSR)
“work” in Europe and Japan? Partly because those
governments are willing to spend billions of dollars in
taxpayers’ money to heavily subsidize the construction
costs, and hundreds of millions more to subsidize their
operations. Admittedly, HSR is a better fit for those
countries than it is in the U.S. because:
•
•
•
European and Japanese cities are closer together,
on average, than large U.S. cities;
Their cities also have dense urban transit
networks on which travelers can connect with
HSR; and,
Driving and flying are far more expensive in
Europe and Japan than they are here, so rail is
more competitive.
A Japanese Tokaido line train passes in front of Mt. Fuji.
In fact, every serious transportation researcher agrees
that only two HSR lines in the world may be covering
both their capital costs and their operating costs from
passenger fares: the original Tokaido line from Tokyo
to Osaka in Japan and the original TGV line in France
from Paris to Lyon. Every other HSR line has required
large taxpayer subsidies for construction. Most also
need operating subsidies to maintain fares low enough
that people will pay them. Experts also agree that HSR
is the best fit for routes of between 200 and 400 miles—
where the train is significantly faster than driving and
less hassle than flying.
For many years, market-oriented assessments of
grand federal government plans for HSR lines around
POLICY BRIEF
| All Aboard Florida
the country could be summed up as a solution looking
for a problem. It’s not as if there aren’t good alternatives
for most intercity travel. For family travel, driving puts
as many as half a dozen people in a single vehicle, rather
than paying for six train tickets and then renting a car at
the other end. Intercity bus is enjoying a rapid rebirth,
and handles twice the annual number of passengers as
Amtrak, while serving five times as many cities and
towns. Coach airfares are still historically inexpensive,
as they have been since the 1978 deregulation act that
led to the democratization of air travel.
The real question for HSR in the United States is
whether there are niche markets where a passenger
rail business can be self-supporting. The All Aboard
Florida (AAF) project proponents believe they
have found a market linking the cities of Miami and
Orlando (a distance of 235 miles), and another private
group called Texas Central Railway believes it has
found another market in a Houston to Dallas route
(a distance of 240 miles). The Texas project is still in
the design and permitting stage, while AAF is already
under construction. Both companies have maintained
from the outset that they do not need and will not seek
taxpayer subsidies—neither construction grants nor
operating subsidies.
Both companies are approaching their passenger
rail projects as business enterprises, not as politically
driven public works projects. In both cases that means
selecting the lowest-cost right of way. In Florida, that’s
the existing north-south line owned and operated by
parent company Florida East Coast Railway (plus 35
miles of east-west right of way alongside the Beachline
Expressway, which AAF will lease). In Texas, that
company has selected an electric utility corridor for
most of the route from Dallas, then entering Houston
alongside US 290.
A second difference between these projects and
government-sponsored HSR is selecting the metro
areas to be served. To deliver significant time savings,
these must be “express” services connecting regions
with large populations. The Texas route will have just
one intermediate stop between Dallas and Houston,
and the Florida route has just two (Ft. Lauderdale and
West Palm Beach). By contrast, the Tampa-Orlando
project would have had two intermediate stops in its
short 84-mile route. Additionally, the boondoggle
California HSR’s route zigzags from San Francisco to
Los Angeles so it can serve such politically required
stops as Bakersfield, Gilroy, Sylmar, and Visalia.
OPPONENTS’ CONCERNS
ARE REAL, BUT NOT DECISIVE
 Citizen groups and local governments in the Treasure
being in the “down” position for trains to cross over navigable
Coast region have filed suit and are spending local tax money
waterways.
trying to derail the All Aboard Florida project. They argue that
Local objections about longer delays at grade crossings
it will increase noise, interfere with boat traffic to and from the
are misleading, because the improvements AAF is making in
Intracoastal Waterway, and harm public safety by holding up
track and signaling will mean higher average speeds and less
police, paramedics, and fire trucks at grade crossings. They
gates-down time than today for a given train. Remember, the
also allege that the plan cannot possibly succeed without
AAF passenger trains will operate on the same tracks as FEC
taxpayer subsidy.
freight trains. According to the environmental report, the av-
These are genuine concerns, however upon further exam-
erage gates-down time for AAF’s short passenger trains will
ination, these concerns appear to be exaggerated and imbal-
be 1.7 minutes per hour. Even with the projected increase in
anced. First, there is no acknowledgement that the Florida
freight trains due to more containers being hauled from the
East Coast Railway was already present, with passenger as
ports in Miami and Fort Lauderdale, thanks to faster freight
well as freight trains running every day, long before any of the
train speeds the average gates-down time for freight trains
current residents lived there (or were even born). Railroads
will be 2.5 minutes per hour.
have every right to increase service on their rights of way—
that’s what successful railroads do.
Finally, after opponents raised serious concerns about AAF
having applied for a large loan from the Federal Railroad Ad-
The company is working with local governments to help
ministration’s RRIF loan program, the company switched from
them implement “quiet zones” through residential areas,
that approach to issuing tax-exempt private activity bonds.
where federal regulations allow them to not blow diesel horns
Congress authorized those bonds for privately financed in-
when approaching grade crossings that have been equipped
frastructure back in 2005, and the bonds have been used
with more elaborate crossing gates and signals. However,
for dozens of highway and transit projects, including several
under current law, those expenses are the responsibility of
here in Florida. Those bonds are secured by a dedicated rev-
state and local roadway providers, not railroads. AAF is also
enue stream from the project, and are not in any way backed
working on plans to reduce the duration of railroad bridges
by federal or state taxpayers.
Altogether, its $68 billion (before cost overruns) first
phase has nine intermediate stops. It’s hard to be “highspeed” with all of that stop-and-go.
Another major difference is the projected cost.
One of the reasons Florida’s Governor cancelled the
Tampa-Orlando project was its high budgeted cost
plus the very significant likelihood of cost overruns (a
Reason Foundation report cited a book-length study
from Oxford University Press finding that the average
cost overrun worldwide for passenger rail projects is
45 percent.) Even if that project had somehow been
built for the planned $2.7 billion, it would have cost
$32.1 million per mile. Compare that with All Aboard
Florida’s lean $10.6 million per mile. That lower cost is
due in part to the use of mostly (83 percent) existing
track and right of way.
Another key difference between AAF and most HSR
projects is its planned top speed. AAF is using passenger
rail equipment similar to Amtrak’s Acela, with a 125mph top speed. With just two brief intermediate
stops, it can take passengers from Miami to Orlando
in three hours—significantly faster than driving and
comparable with flying, once in-airport times are
included in trip times. AAF decided that this higherspeed (not HIGH speed) is sufficient to be competitive.
That nuance reduces capital and operating costs. Track
that can handle 200 mph (as on overseas HSR lines)
is significantly more costly. Additionally, much higher
air drag at 200 mph would mean significantly higher
energy costs.
www.jamesmadison.org | 3
Yet another difference in AAF’s
business plan is associated real
estate development. The company
is constructing major station
complexes in Miami, Ft. Lauderdale,
and West Palm Beach. The largest
of these, the $200 million station
in Miami, is part of a nine-acre,
multi-function
complex
on
company-owned land. This follows
the model pioneered by the Hong
Kong Mass Transit Railway (MTR)
Corporation, which is both a real
estate and rail transit enterprise.
Though developed as a government
corporation, it has been run as
The proposed route for Brightline
a business and makes an annual
Map: All Aboard Florida
profit. It had such an impressive
track record that it was partly privatized in 2000,
though the government still owns a majority stake. In
Orlando, AAF will not own its own multi-use station
complex; its northern terminus will be a new multimodal transportation center at Orlando International
Airport.
Pricing is another difference between AAF’s
commercial approach and government-run rail
businesses. The company will price its tickets similar
to airline tickets, with various price points depending
on type of trip, day of week, demand for seats, etc. For
2.5 to 3 hour trips, it can also offer an array of food and
beverage services as passenger amenities, which will
become additional revenue sources.
All of this is no guarantee that the venture will be
profitable (the same as with toll roads). This brings
us to the most significant point of difference between
The James Madison Institute
The Columns
100 North Duval Street
Tallahassee, FL 32301
850.386.3131
www.jamesmadison.org
HSR projects and AAF. Investors are the ones on the
hook for the success of the project – not the taxpayer.
If there are cost overruns on AAF’s project, they will be
borne by AAF and its investors.
The same applies to operating costs. By contrast,
any and all cost overruns on the Tampa-Orlando
project would have been borne by Florida taxpayers.
Given the global track record that nearly all passenger
rail systems—HSR or otherwise—require operating
subsidies, the odds were high that Tampa-Orlando (a
line far too short for HSR) would have needed them,
too. But if AAF has over-estimated ridership and
revenue, that once again is a problem for the company
and its investors, not taxpayers.
Because of the sensible business plan AAF has
adopted, this project has a much greater likelihood of
success than any other U.S. passenger rail project in
recent history. If the fares are competitive with flying,
it will no doubt be a popular mode of choice for many
travelers helping it to turn a profit quickly. All Aboard
Florida may in fact be a niche market where higherspeed rail can make business sense without taxpayer
support.
ABOUT THE AUTHOR
Robert Poole is the Director of Transportation for
the Reason Foundation, a Senior Fellow at The James
Madison Institute, and a member of The James Madison
Institute's Research Advisory Council. He received
two engineering degrees from MIT and has advised
the U.S. DOT, the Federal Highway Administration,
the Federal Transit Administration, and eight state
Departments of Transportation (including Florida
DOT). In 2010 he served on the transportation
transition team of Gov.-elect Rick Scott.
Stay Connected
 The James Madison Institute
 @JmsMadisonInst
 youtube.com/user/JamesMadisonInstitut
 flickr.com/photos/jmsmadisoninst
 pinterest.com/jmsmadisoninst