New Report: High-Speed Rail: Public, Private or Both?

Transportation policy in America is at an inflection point. It is increasingly clear that the approach that has dominated since the 1950s – in which federal revenues are distributed to the states with very little accountability and allocated mostly toward highways – no longer serves the national interest. That approach is both financially unsustainable and out of step with the nation’s future transportation needs.

Moments like these are tailor made for innovation, both in  transportation technologies and in the ways in which  transportation infrastructure projects are carried out. Our newest report, High-Speed Rail: Public, Private or Both?, explores the relationship between the exciting technology of high-speed rail and a form of transportation financing – public-private partnerships, or PPPs – that is relatively new to the United States.

We have regularly made the case in recent years for the importance of high-speed rail to the nation’s transportation future. But it is unlikely that a vibrant high-speed rail system will be built in America without some form of private-sector involvement, particularly in these fiscally troubled times.

Nations around the world have faced the same challenges in building out their high-speed rail networks, and have often turned to various types of PPPs as a solution. In a PPP, the public and private sectors share the risks and rewards of a particular infrastructure project.

PPPs are often talked about as a panacea – a way to get more infrastructure for less public investment. Witness, for example, the recent House Transportation and Infrastructure Committee proposal to privatize Amtrak, which envisions that the private sector can build a true high-speed rail line in the Northeast in one-third the time and at a fraction of the cost proposed by the nation’s current passenger rail provider.

The reality, however, is quite different. PPPs overseas have experienced a host of problems, including several situations in which governments have been called upon to bail out or take over private sector-led high-speed rail projects. And in some cases, the benefits of private capital investment have come at a heavy potential cost in loss of public control over the operation of key infrastructure.

Ultimately, the experience abroad suggests that American policy-makers should enter into high-speed rail PPPs with great caution. Yes, the private sector can bring capital and expertise to high-speed rail projects. But every high-speed rail PPP in the world has required hefty public investment. There is no way that that investment will pay off in benefits for the public unless government is equipped and empowered to protect the public interest every step in the way.

Our new report suggests a series of principles that governments should use to evaluate potential high-speed rail PPPs. We hope that the report will start a useful dialog that transcends the ideological debate between advocates and opponents of privatization, and gives policy-makers the tools to make sure that any PPPs that are used in high-speed rail projects are adequately protective of the public interest.