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Florida Gov. Scott Rejects Federal Funding for Flawed Orlando to Tampa High-Speed Rail Plan

Robert Poole
February 16, 2011, 4:59pm

Florida Gov. Rick Scott has pulled the plug on the 84-mile Tampa to Orlando high-speed rail project, rejecting $2.4 billion in federal funding for what has been touted as a $2.7 billion project. But according to a Reason Foundation study released in January (on which Scott relied), there was a high risk that the actual cost could have been as much as twice that amount—with the difference having to come from Florida taxpayers. In addition, since the official ridership projections were straight out of fantasyland, there was a high likelihood of the state being stuck providing operating subsidies, as in most of the existing high-speed rail projects overseas. Yet if the state accepted the $2.4 billion from the federal government and built the line, it would be stuck operating it—or else required to give back the $2.4 billion in, by then, sunk costs. So Scott made a responsible decision to protect Florida’s taxpayers, consistent with his campaign rhetoric and his other actions since taking over in January.

The Tampa Tribune's Ted Jacovics reports:

Gov. Rick Scott's decision to turn down nearly $2.4 billion in federal money for a high-speed rail project that would link Tampa and Orlando has been met with criticism from members of both parties.

Scott this morning justified his decision saying "the truth is that this project would be far too costly to taxpayers, and I believe the risk far outweighs the benefits.''

U.S. Transportation Secretary Ray LaHood said in a statement that Florida's money will go to other states "that are enthusiastic to receive Florida's funding."

Scott did not wait for Florida's Department of Transportation study on expected ridership and revenues.

Instead, he said he made his decision on three points: The price to build the project could cost Florida taxpayers up to $3 billion; ridership and revenue projections could be overly optimistic and if the federal government decides to shut down the project, the state would have to return the money.

Those claims came from a January report from the Reason Foundation, a Libertarian think tank.

"President Obama's high-speed rail program is not the answer to Florida's economic recovery," Scott said.

"Rather than investing in a high-risk rail project, we should be focusing on improving our ports, rail and highway infrastructure to be in a position to attract the increased shipping that will result when the Panama Canal is expanded when the free trade agreements with Colombia and Panama are ratified and with the expansion of the economies of central and south America,'' Scott said.

The Orlando Sentinel's Aaron Deslatte and Dan Tracy add:

Scott's decision likely means those dollars will be rerouted to California and other states investing in a high-speed rail network that Obama has likened to the national highway system. Washington state, in fact, sent out a press release asking for the money.

Scott had previously said he didn't want the state spending any money on the rail line, which required $280 million in matching funds. But backers of the project have said that the consortiums of companies set to bid on the line had indicated a willingness to put up their own money in return for a contract.

News of Scott's decision quickly rippled through Washington and Tallahassee, where lawmakers had approved the project during a special session in late 2009. Some lawmakers grumbled that Scott couldn't unilaterally overturn their decision.

Critics are bad-mouthing Scott’s decision, arguing that the least he could have done was wait to see if any of the private-sector firms wanting to make proposals would have guaranteed to absorb any and all cost overruns and to sign a long-term agreement guaranteeing no operating subsidies. That has to be a pipedream.

On cost overruns, the state capital has been overrun with high-speed rail lobbyists the last few months, and I’m sure the Governor’s office and the Florida Department of Transportation have a pretty good idea, by now, how much (and how little) actual risk the private sector would be willing to take on.

And no matter what an overly-optimistic company might agree to, if its special-purpose entity for Florida high-speed rail got in seriously over its head and walked away from the project after spending, say $3 billion (including the feds’ $2.4 billion), what options would the state then have? With no way of repaying the feds’ money—now turned into concrete and steel—it would have no choice but to spend state tax money finishing the project and then subsidizing its operations.

And on operating subsidies, the much larger California high-speed rail project has been testing that premise for the past two years. The ballot measure the voters approved in November 2008 to authorize $9 billion in general-obligation bonds for that project spelled out in black and white that voter approval was conditional on there being zero operating subsidies. But the private firms interested in building and operating the high-speed rail project are telling the California High-Speed Rail Authority that they cannot get financing unless the state provides them with “revenue guarantees.” And what, precisely, is that? If the traffic and revenue on the rail line are below the forecasts on which the financing was based, the state would agree to make up the difference. In other words, operating subsidies. If the private sector required that protection in order to fund the California project, whose ridership potential is far higher than that in Florida, there is no way they would go unprotected in Florida.

So Gov. Rick Scott was on firm ground in judging that the risks to Florida taxpayers were simply too great if this project went forward. He made the right decision. 


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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