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US bullet train proposals shun public funds, favor private cash

[TOKYO] It took years of lawsuits and political battles for California to finally break ground last year on the nation's first bullet train, which aims to connect San Francisco to Los Angeles by 2029.

High-speed rail advocates had hoped the line, supported by more than US$13 billion in state and federal money, would inspire similar government-financed projects. Instead, its many delays have left rail groups wary of accepting public funds for projects they are proposing in three other states.

Companies in Texas, Minnesota and Nevada all plan to tap private cash from investors globally, with help from foreign train makers and governments eager to export train technology. The projects would rely on partnerships with Japanese or Chinese firms that face saturated train markets at home. "The United States is the Holy Grail of deployment for Japan, China, France, Germany and Spain," said Tim Keith, Texas Central CEO.

California's example shows that taking taxpayer money opens the door to political and legal challenges that can drag out planning, bidding and approvals for years, private rail advocates said. Companies now see a quicker - even cheaper - path by largely avoiding such headaches. "All the rules relating to public engagement start the day you take public funding," said Wendy Meadley, chief strategy officer for North American High Speed Rail Group's project in Minnesota. With private financing, she said, opponents "can't make thousands of public records requests and run the project over." The company said last year it would seek money from Chinese investors. Now, it said it is considering two foreign partners for the US$4.2 billion project, which seeks to connect the twin cities of Minneapolis and St. Paul to the internationally renowned Mayo Clinic in Rochester, Minnesota, by 2022.

Texas Central is paying for engineering studies with US$75 million from Texas investors, US$40 million from a state-backed Japanese development fund and about US$130 million in design work from two firms. The Dallas-to-Houston rail line is projected to cost US$12 billion and be completed by 2021.

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In Nevada, privately financed XpressWest plans to link Las Vegas to Southern California. Started by Las Vegas developer Marnell Companies, the company formed a joint venture last fall with a consortium of Chinese firms, infusing US$100 million into the project expected to break ground as soon as this year.

Some experts remain skeptical that bullet trains can work without government money to finance initial legs of construction.

Rail lines are generally profitable once in operation, said Jim Steer, director of UK-based high-speed rail research organization Greengauge 21. But operating profits are unlikely to be enough to repay massive construction costs. "No private party is actually going to stump up the kind of money needed to create these things," said Steer.

Supporters of the new rail lines said investors can expect solid returns based on ticket sales and profits from high-end real estate developments near stations.

Current economic trends also make private financing for infrastructure projects easier to secure. Interest rates at historic lows have created global demand for stable, long-term investments, igniting interest in infrastructure projects from banks and major investors, such as pension funds.

The number of institutional investors in infrastructure, such as roads, airports and rail, more than doubled since 2011, according to Preqin, an alternative investments research firm. "There's a lot of money swimming around the world that doesn't know where to go," said Dr. Alexander Metcalf, president of TEMS, Inc., a transportation consulting firm. "We've seen huge increases in institutional money that is willing to go into transportation." Longstanding US skepticism of expensive train projects does not necessarily extend to foreign investors, Ms Meadley said. "People outside of this country believe this will happen more than Americans believe this will happen," she said.


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