A Private Railroad Is Born

WSJ

By Holman Jenkins

Once in our presence the legendary agribusinessman and fixer Dwayne Andreas, who knew something about Washington boondoggles, sputtered in response to some inanity out of the capital, “It’s like we’re an idiot country.”

His phrase comes to mind today with every twist and wriggle out of California bureaucrats trying to keep that state’s federally backed high-speed rail project alive. In the latest go-round, a judge has blocked the initial San Francisco-to-Los Angeles leg on the reasonable grounds that the $68 billion to complete the project is nowhere to be found.

California’s project is one of several lingering on drawing boards since being promoted by President Obama’s first-term stimulus bacchanal. To call these projects “high-speed rail” is to stretch a concept. They involve dollops of federal money dangled in return for states agreeing to talk about high-speed rail, draw up plans for high-speed rail, conduct studies of high-speed rail, pour concrete and move earth around in ways vaguely suggestive of high-speed rail at some point in the future.

One obvious risk of playing this game too long is that some poor state’s taxpayers might end up with a white-elephant rail system that will require operating subsidies till the end of time. Florida was one of several states that waved off the initial dollop for exactly this reason, for what most knew was a nonsensical Tampa-Orlando bullet train. Thereupon something interesting happened: Private investors stepped up with a rail vision of their own, aimed at making money rather than spending it.

Their brainchild, All Aboard Florida (the train will get a new name this year), is not designed to push political buttons. It won’t go to Tampa. It will zip past several aggrieved towns on Florida’s Treasure Coast without stopping.

Nor will the train qualify as “high speed,” except on a stretch where it will hit 125 miles an hour. Instead of running on a dedicated line, the new service will mostly share existing track with slower freight trains operated by its sister company, the Florida East Coast Railway.

But the sponsoring companies, all owned by the private-equity outfit Fortress Investment Group, FIG -0.55% appear to have done their sums. By minimizing stops, the line will be competitive with road and air in connecting the beaches, casinos and resorts of Miami and Fort Lauderdale with the big airport and theme-park destination of Orlando. Capturing a small percentage of the 50 million people who travel between these fleshpots, especially European visitors accustomed to intercity rail at home, would let the train cover its costs and then some.

But Fortress has a bigger fish in the pan. Its local operation, Florida East Coast Industries, is a lineal progeny of Henry Flagler, the 1890s entrepreneur who created modern Florida when he built a rail line to support his resort developments. Flagler’s heirs are adopting the same model. A Grand Central-like complex will rise on the site of Miami’s old train station. A similar but smaller edifice is planned for Fort Lauderdale.

The project is a vivid illustration of the factors that have to fall in place to make passenger rail viable nowadays. If the Florida venture succeeds, it would be the only intercity rail service anywhere in the world not dependent on government operating subsidies. It would be the first privately run intercity service in America since the birth of Amtrak in 1971.

Because time is money, the train is expected to roll by late 2015, compared with effectively never for state-sponsored high-speed projects like California’s where politicians are more concerned with inputs (federal funds) rather than outputs (an actual train). “We just ask that government get out of the way,” the project’s vice president for corporate development cheerfully told a Florida Senate hearing a few weeks ago.

America is an idiot country in an idiot world. Many of America’s high-speed rail projects are openly or quietly supported by Japanese lobbyists, hoping for export markets. Japan, with its stagnant economy, shrinking population and monumental public debt, is spending $100 billion to build its own second Tokyo-to-Osaka bullet train. This time, instead of following the coast, the new track will travel through the mountains, needing tunnels for 60% of its distance.

When the project is finally finished in 2045, Japan’s population is expected to have shrunk by nearly 20%. Many wonder who is supposed to ride the super-expensive new train, let alone pay for it.

We live in strange times. Circumstances have conspired to invite pols everywhere to spend money as if bills never come due—and to feel righteous about it. High-speed rail, for some, has become a religious sacrament. For others the appeal is less mystical. How much easier it is, after all, to borrow and squander untold billions on a bullet train than to enact immigration and labor policies that might actually save the Japanese economy. How much more pleasant for politicians in Washington and Sacramento to fret about high-speed rail than to pursue the pension, education and tax reforms the country actually needs.