1997 Apr⁠i⁠l – Backgrounder #21 – Evalua⁠t⁠⁠i⁠on of ⁠t⁠he FDOT-FOX M⁠i⁠am⁠i⁠-Orlando-Tampa H⁠i⁠gh-Speed Ra⁠i⁠l Proposal

By: The James Madison Institute / 1997

Executive Summary

A high-speed rail line has been proposed for the 322-mile corridor from Miami through Orlando to Tampa with trains operating up to 200 miles per hour. The Florida Department of Transportation (FDOT) and the developer, Florida Overland Express (FOX), believe that the line would attract significant numbers of travelers from automobiles and airplanes. As a result, FDOT and FOX forecast that highway traffic congestion (gridlock) and air traffic congestion (winglock) would be alleviated, reducing requirements for highway and airport expansion. They also predict that various other environmental, traffic safety, and economic benefits would ultimately be enjoyed by the state because of this project.

The FOX line would require nearly $3.5 billion in subsidies. The state of Florida would provide $3 billion in subsidies, the federal government $300 million, Orlando International Airport $100, million and Miami International Airport $50 million. FOX would provide $350 million in equity, construct the line, build the trains, and operate the system for 40 years. Infrastructure debt of $6.5 billion would be incurred.

The proposed high-speed rail system is likely to be a financial disaster for Florida. This analysis, based upon FDOT, FOX, and generally available planning and market data, finds that high-speed rail is exceedingly unlikely to live up to the claims of its promoters. High-speed rail is likely to cost much more, carry fewer passengers, and expose the state to greater financial risk than is presently anticipated.

High-speed rail operates in Japan and Europe along highly populated corridors where the lines are fed by well used city transit systems. Those lines are an integral part of comprehensive intercity rail systems that provide frequent service in both Japan and Europe. High-speed rail fares are competitive with or below the cost of competing modes of transport (autos and airlines). Nonetheless, rail market shares are declining and impending airline deregulation is likely to significantly challenge high-speed rail in both Japan and Europe.

The market for high-speed rail is more challenging in the United States. Lower population densities, less used transit systems, and the absence of frequent connecting intercity rail service are significant disadvantages for high-speed rail in this country. Near high-speed rail service (125 miles per hour) operates in the New York-to-Washington corridor, but no genuinely high-speed rail systems operate. Two recent national studies–one by the United States Department of Transportation Federal Railway Administration and another by the National Research Council–have concluded that high-speed rail is not commercially viable in the United States.

The forecasts of officials planning large infrastructure projects have tended to underestimate costs and overestimate usage: Denver’s International Airport experienced cost escalation of 300 percent, and the English Channel Tunnel cost 140 percent more than expected. Boston’s Central Artery/Tunnel has doubled in cost. All three projects experienced opening delays of at least one year. Usage forecasts have also been inaccurate. Florida project forecasts have also been inaccurate both in costs and usage. Examples include Miami’s Metrorail and Metromover, Tri-Rail, and Jacksonville’s Sky Express people mover line. Even Florida’s Turnpike authorities significantly overprojected demand for its newest roads, despite decades of experience.

The Florida market is comparatively unfavorable to high-speed rail. The Miami-Orlando-Tampa corridor has much less population and lower population densities than high-speed rail corridors in Japan, Europe and New York-Washington. There is no frequent connecting intercity rail service and transit services are poorly patronized.

The FOX high-speed rail line would have no advantage over airlines. FOX fares are projected at 30 percent or more below air fares. However, in recent months the South Florida-Tampa and South Florida-Orlando air markets have been entered by discount air carriers, and average air fares have dropped significantly–the average airfare is now 15 percent below FOX’s anticipated average rail fare. In the Miami-to-Orlando market, rail travel times will be similar to that of the airlines, while rail will face a one hour disadvantage in the Miami-to-Tampa market. Further, the airlines are likely to become more competitive in future years.

The FOX high-speed rail line would be far more costly than autos. FOX fares are projected at 33 to 250 percent above the full cost of business automobile travel. FOX fares would be from two to 20 times the cost of a personal auto trip.

The FOX high-speed rail line would be slower than autos for some trips and faster for others. FOX travel times would be one hour and 30 minutes faster than autos, door to door between South Florida and Tampa or Orlando. However, high-speed rail would be slower than autos between Orlando and Tampa. This represents a major problem because FOX projects one-third of its ridership would be attracted from autos in the Orlando-to-Tampa corridor–a distance far too short to provide a competitive advantage to high-speed rail.

This study projects that ridership under favorable circumstances would be 55 percent below FOX estimates, as the ridership projections are extremely optimistic. Both FDOT and FOX state that high-speed rail will capture more than 65 percent of the airline market. This would be a formidable task even if rail fares were well below air fares, but air fares are already lower than projected high-speed rail fares. The predicted diversion from autos is very high in light of the auto’s travel time advantages in short markets and its overall cost advantages. The lower population densities, lack of connecting rail service, and low levels of transit usage would also impair high-speed rail patronage.

The FDOT and FOX high-speed rail cost projections are highly optimistic. The projected operating and capital costs are lower than industry estimates, and the forecasts do not include a contingency fund to accommodate the significant cost escalation characteristic of projects of this size.

High-speed rail is likely to cost Florida much more than projected. In the best case, this report estimates that the state of Florida would be required to increase its subsidy from $3 billion to $14 billion, and in the worst case to nearly $39 billion. It is unlikely that commercial revenues will be sufficient to pay debt service by the fourth year (out of 40 years). The financial projections are so fragile that small operating and capital cost overruns could force a default on debt in less than 10 years even if FOX generated its projected fares and commercial revenues (which this report considers well beyond realistic).

The state of Florida would assume virtually all of the risk. Because the state would be required to guarantee project completion and operation, its obligation would be open-ended (up to $39 billion). FOX’s risk would be limited to $350 million.

High-speed rail would not materially improve the environment, air traffic congestion, or highway traffic congestion despite the claims of promoters.

The impact upon the environment would be negligible or even negative.

Because high-speed rail would reduce automobile traffic by a negligible amount, increased highway investment would produce greater improvements in traffic safety.

The problem of air traffic congestion–winglock–has been exaggerated. All airports in the Miami-Orlando-Tampa corridor are expanding or intend to expand to accommodate rising demand. Even if the unrealistic FOX projected diversion from the airline market share were to occur, it would still only reduce airline operations by 2 percent. FOX would not reduce the demand for airport expansion, which is more cost effective than building high-speed rail.

The problem of highway traffic congestion–gridlock–is more difficult. But FOX would remove so few automobiles from highways that traffic congestion would essentially remain unchanged. Diversion from automobiles would average 1/30th of the traffic in a single traffic lane. Thus, FOX would not reduce the demand for highway expansion, which is more cost effective than building high-speed rail.

FDOT has adopted a policy of preference toward high-speed rail which could actually injure Florida’s economy. The state bias would result in greater highway congestion and impede Florida products in reaching their markets. Also, the likely high-speed rail cost escalation would require funding sacrifices in other public services, or tax increases, which reduce economic growth and job creation.

High-speed rail planning is based upon assumptions, not analysis. FDOT and FOX claim that high-speed rail would produce transportation, environmental, and economic benefits for Florida. They are proceeding with high-speed rail on the assumption that high-speed rail’s theoretical benefits would be achieved, without a critical examination of the likely actual benefits.

This analysis concludes that even if FDOT-FOX ridership projections were achieved, high-speed rail would have at best negligible impact on either transportation or the environment, because so few people would be diverted from autos or airlines. More importantly the FDOT and FOX projections are extremely optimistic–thus not even the negligible results are probable. Consistent with existing large infrastructure projects:

ridership is likely to be far lower than projected,

fares and commercial revenues are likely to be far lower,

operating costs are likely to be higher than projected, and

capital costs are likely to be higher than planned.

In sum, the proposed Florida Overland Express high-speed rail system would provide only negligible benefits, but its cost to Florida would be enormous.