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High-speed rail plan risks taxpayer dollars for little to no benefit

JLF report from national expert urges N.C. leaders to return federal grant

Contact: Joseph Coletti
919-828-3876
jcoletti@johnlocke.org

April 27, 2011

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Click here to view and here to listen to Joseph Coletti discussing this Policy Report.

RALEIGH -- A high-speed rail proposal for North Carolina would create "substantial" risks for taxpayers, while doing little to nothing to reduce traffic, help the environment, cut energy use, or create jobs. A new John Locke Foundation Policy Report cites these reasons and others while urging state leaders to walk away from high-speed rail.

"North Carolina should return the federal high-speed rail grant funding, withdraw its pending application, and seek no more funding for passenger rail," said report author Wendell Cox, international public policy consultant for his firm Demographia.

"The N.C. Department of Transportation trumpets the supposed benefits of high-speed rail for this state, but this new analysis from a recognized expert in the fields of urban growth and transit policy shoots each of DOT's arguments down," said Joseph Coletti, JLF Director of Health and Fiscal Policy Studies. "After reading this report, there should be no question that high-speed rail makes no sense for North Carolina taxpayers."

Cox's report arrives as North Carolina legislators consider whether to accept $461 million in federal stimulus funding for high-speed rail. Federal grants awarded to the state to date total $545 million, while N.C. DOT has applied for another $620 million, according to the report.

Far from being "free" money from Washington, strings attached to the grants would require subsidies from North Carolina taxpayers. If construction costs and ridership figures miss projections, those subsidies would be even higher than expected.

"In the worst case, these figures could imply a longer-term annual operating subsidy obligation for the state of up to $30 million, or even higher," Cox said. "This could lead to a 20-year obligation of $250 million to $600 million or more to subsidize the trains. The subsidy may not be financially sustainable."

North Carolina also would be required to complete construction and continue operations for two new Charlotte-to-Raleigh Piedmont trains for 20 years. "Any additional costs that occur, whether in capital costs or higher operating subsidies, must be paid by the state," Cox said. "If the state were to not complete railroad improvements because of rising costs, it would be necessary to refund all or part of any federal funding that had been spent."

Taking on this risky obligation makes little sense as both the state and nation face "serious financial difficulty," Cox said. "Specifically, there is an objection to spending on a lower priority, such as high-speed rail, while higher-priority expenditures are threatened with reduction."

Similar concerns already have led governors in Wisconsin, Ohio, and Florida to refuse high-speed rail funding, while the Missouri legislature dropped high-speed rail from its budget.

For all of the costs, Cox identifies little to no benefit for North Carolina.

Supporters have touted a 12- to 13-minute reduction in train travel time from Raleigh to Charlotte. They have ignored a projection that the last new train would deliver on-time performance only 80 percent of the time, Cox said. That information changes the equation. "The average train travel time between Raleigh and Charlotte would be approximately 3:18, which would reduce the average speed -- terminal to terminal -- to 53 miles per hour."

New trains would have minimal impact on highway traffic volume, Cox added. "The reduction in traffic along the Interstate 85 and I-40 corridor between Charlotte and Raleigh would be under 0.5 percent for the two new round-trip trains, removing one out of every 200 cars," he said. "This reduction would not be perceivable to drivers."

Cox also rebuts arguments about environmental benefits. "The additional passenger trains would, in the longer run, emit more greenhouse gases than the automobiles removed from freeways and would increase fossil-fuel consumption."

An intercity bus system would reduce greenhouse gas emissions and energy consumption 50 percent to 75 percent relative to new passenger trains, Cox said.

The impact on jobs is negligible as well, according to the report. "The projected employment impact of expanding passenger train service excludes any analysis of the displacement of private-sector jobs that would take place as a result of the project," he said. "Government reports have shown the employment impacts of similar infrastructure spending to be minimal."

There is a potential for a negative economic impact, as high-speed passenger rail service changes operations for the state-owned North Carolina Railroad, Cox reports. Norfolk Southern Railroad operates freight trains over the route now. "In the longer run, additional passenger train service could diminish NCRR's value and earnings, principally because high-speed passenger trains and freight trains have materially different operating characteristics."

Each of these facts points to the same conclusion, Coletti said. "High-speed rail won't help with road congestion, won't help the environment, and won't boost the net number of jobs in the state," he said. "High-speed rail will put taxpayers on the hook for new obligations at a time when the state can't afford them. It's time to drop any and all government plans for high-speed rail."

Wendell Cox's Policy Report, "Should NCDOT Add More Piedmont Trains?", is available at the JLF Web site. For more information, please contact Joseph Coletti at (919) 828-3876 or jcoletti@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.

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