Friday, January 05, 2024

Texas high-speed rail update

Happy new year everyone! This week we have another excellent analytical guest post from Oscar Slotboom, author of Houston Freeways (reposted from HAIF here). TL;DR: if it was marginal with 2% interest rates before pandemic inflation, it is now *way* underwater economically at current construction costs and interest rates!


On November 17, Texas Central provided the H-GAC TPC a status update about the high-speed rail project between Houston and Dallas. There was no "new" news, but a few tidbits of interest.

* The official status (previously known) is that Texas Central is cooperating with Amtrak "seeking opportunities to advance planning and analysis work associated with the proposed Dallas-Houston 205 mph high-speed rail project to further determine its viability." Texas Central and Amtrak are "evaluating partnerships to further study and potentially advance the project". Transit industry veteran Andy Byford recently joined Amtrak to coordinate high-speed rail initiatives for Amtrak.

* The Texas Central representative mentioned the previously disclosed estimated cost of $30 billion. A TPC member mentioned $40 billion.

* The Texas Central representative says there are 16 million trips per year between Houston and Dallas. (43,800 per day)

* Texas Central has 6 employees and a new CEO Michael Bowie

* There was discussion of who actually owns Texas Central now. The Texas Central representative was vague, but said that FTI consulting group now owns it. According to the FTI website, they seem to do anything and everything, and are not focused on infrastructure.

* There was discussion of the 2019 H-GAC MOU (memorandum or understanding) between H-GAC and Texas Central. The MOU mentions no public funding, and a TPC member mentioned it is obsolete and needs to be reviewed.

* There was discussion about the Environmental Impact Statement, and if it conforms to new flood standards in the Houston area.

* The Texas Central representative said that Amtrak will complete its "due diligence" in about 6 months, and we can expect some more information in that time frame.

In Dallas-Fort Worth, NCTCOG is continuing with its study of the section between Dallas and Fort Worth, and a newsletter was just released.

My observations

* The $30 billion cost number is more than two years old. Highway construction costs are up 56% in the last two years. I think 40+ billion is probably more realistic. In my opinion, an updated cost estimate should be Amtrak's top priority. If they don't get a new cost estimate, then they won't have any credibility because they can't do any analysis without the cost number.

* The entire project was contingent on a very low interest rate. With 30-year treasury bonds at 4.6%, it seems to me that project bonds would need to be at least 7% to get investors. If the project is $40 billion, that's $2.8 billion in interest per year.

* When Texas Central started, the cost was estimated at $12 billion and interest rates were very low. Now it is probably 40+ billion and interest rates are very high. It seems to me that the only conclusion Amtrak's "due diligence" can reach is that this project can only be done with government funding.

* Interstate 45 near Centerville has a traffic count of 39,000 to 41,000 per day. So the Texas Central number of 43,000 per day is realistic. The question is, what percent of those trips could become train trips?

* Just for illustration, let's say 50% of the trips switch to rail. (Of course it will be much less than 50%, but this is an illustrative calculation). $2,800 million in interest divided by 8 million = $350 interest cost for every boarding! Obviously this cannot be a private project at $40 billion construction expense and 7% interest. There would need to be some kind of government-supplied below-market interest rate. Even at 2% interest, the interest cost per boarding is still $100 for the hypothetical 50% traffic capture.

* Andy Byford at Amtrak really has only 2 choices for true high-speed rail in the U.S.: California and Texas. (It will be impossible to build a new high-speed right-of-way in the Northeast corridor.)

* The financial status of the federal government is shockingly bad. There's no recession or emergency or military conflict, but the budget deficit was $1.7 trillion in the recent fiscal year, which is 6.3% of GDP. Interest cost was $659 billion. At some point (probably sooner rather than later), the federal government will need to drastically curtail free money giveaways and wasteful spending.



At 6:32 PM, January 05, 2024, Anonymous Anonymous said...

Maybe the feds can borrow the $ needed, though? The USA only owes $34 trillion (not including what's been promised to continue with the federal Ponzi schemes such as Social Security & Medicare / Medicaid): How's that for a business plan? (For secession, that is: ).

At 2:40 PM, January 06, 2024, Blogger TheCastle said...

"High speed" passenger rail became obsolete globally in 1958 with the invention of the airplane. A better use of taxpayer money would be to eliminate TSA (saves a ton of money), optimize airports so passengers can move through them as quickly as possible. I think 10 minutes from car to gate should be a reasonable goal.

Then raise the speed limits on the interstates to a reasonable speed, to eat away at high speed rail on the low end.

I've ridden high speed rail in France, Germany and Japan. Its a mostly pleasent experence so long as the trains aren't over booked and the bathrooms aren't broken. But even in the holy land of high speed, there aren't actually that many lines. I only road 1 line in Germany that stayed above 100mph.....

The future of ground transportation is speed, I don't see how high speed rail replaces cars for fastest door to door time or air planes. Instead we should be focusing on making these better.

At 2:43 PM, January 06, 2024, Blogger TheCastle said...

I meant in 1958 with the inception of JET passenger travel

At 3:13 PM, January 06, 2024, Blogger Tory Gattis said...

Absolutely agree. HSR is considered a "middle range" technology, but cars are getting faster and more autonomous, and they'll never compete with planes over longer distances. The sweet spot is so narrow as to make the economics impossible.

At 9:01 PM, January 08, 2024, Blogger George Rogers said...

HSR became obsolete in 1959 with the introduction of Sud Aviation Caravelle. The other jets of that period made no sense at the distances of rail travel.


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