Enthusiasts See One Red Light for High-Speed Trains--Money

High-speed trains, long touted as a solution to some of America’s transportation problems, could become a reality in the next few years if a solution can be found for one problem--how to pay for these multibillion-dollar systems.

“The technology is essentially in place,” John H. Riley, federal railroad administrator, told the Fourth International Convention on High-Speed Rail here recently. “The issue now is financial.”

The Las Vegas setting was appropriate. The city is trying to promote a 230-mile $2.5-billion system that would connect the gambling mecca with Southern California, and it had eagerly wooed the gathering of super-speed train enthusiasts.

Through several days of meetings, panel discussions and speeches, liberally sprinkled with such arcane terms as “zonal controids,” “modal splits” and “cryostat outer vessel,” some general points could be discerned:

- The case for high-speed rail is more compelling than ever, as highways and air corridors become more crowded and the threat of another oil shortage looms.

- Most of the bugs have been worked out of high-speed rail technology, whether “steel wheel on steel rail,” like the French TGV ( tres grand vitesse or “very great speed”) that runs between Paris and Lyon at speeds of up to 170 m.p.h., or the newer magnetically levitated (“maglev”) trains that can achieve speeds of 250 m.p.h. or more.

- The most difficult problem will be to find the money for projects that will cost between $2 billion and $7 billion to build.

Super-speed trains (defined as those exceeding 125 m.p.h.) are faster, more comfortable, environmentally cleaner and less expensive to operate and to maintain than conventional trains or, in many cases, airplanes, conferees were told.

Riley said there is “growing public awareness” that existing transportation methods--automobiles, buses, planes and conventional trains--cannot handle the increasing travel demand and that “another system is needed.”

Several speakers noted that overcrowded air corridors are causing increased flight delays and a surge in mid-air collisions and “near-misses.”

Others said U.S. dependence on foreign oil, which led to the shortages and sharp price increases of the 1970s, could return.

Las Vegas Mayor Bill Briare, an ebullient, unabashed pitchman for high-speed rail, suggested that the recent Iraqi attack on the U.S. frigate Stark might not have happened “if the United States were not so dependent on foreign oil.”

Several speakers talked about the economic benefits of building a super-speed rail network across the country.

Briare estimated that $20 billion would be pumped into the national economy if five projects being actively discussed actually are built.

Despite these advantages, there were times during the meetings when the advocates of super-speed trains seemed to be working hard to convince themselves of the seriousness of their endeavors.

High-speed rail “is not a figment of our imagination,” Briare said at a press conference opening the convention.

“These aren’t fantasies, these are realities,” Rep. Richard A. Geist (R-Pa.), chairman of the High-Speed Rail Assn., said at another point.

History, that old friend of convention orators, was invoked repeatedly.

“This reminds me of the problems Queen Elizabeth (presumably he meant Queen Isabella of Spain) had when Christopher Columbus came to her and asked for money to sail around the world,” said Jack Libby, a Las Vegas builder and chairman of a citizens’ task force supporting the Las Vegas-Southern California line. “Her advisers said, ‘You want to do what? You’ll fall off the edge, you damn fool--we all know the world is flat.’

“We have the same problem with high-speed rail. We know it will pay off but the ‘doom and gloom’ people don’t want to believe it,” Libby said.

“Those who say it can’t be done will be left behind by the doers,” Briare intoned.

Of the projects under active consideration around the country, a 350-mile route connecting Miami, Orlando and Tampa, Fla., seems to have made the most progress.

The Florida High-Speed Rail Transportation Commission asked for bids last January and 13 companies or combinations of companies have showed an interest in building the line, expected to cost $3 billion to $5 billion, depending on the technology.

Charles Smith, executive director of the commission, said that the bidding deadline is March, 1988, that the franchise will be awarded early in 1991 and that it is hoped operations will begin in 1995.

Texas is considering a $1.7-billion corridor connecting Houston with the Dallas-Fort Worth area, said Robert Neely, executive director of the Texas Turnpike Authority. He estimated that it would create 40,000 to 50,000 construction jobs, produce at least $150 million in added sales tax revenue and possibly bring new high-technology industry to the financially pressed state.

Ohio plans to spend about $2 billion for a “steel-wheel” system connecting Cleveland, Columbus and Cincinnati, state Rep. Ross Boggs said at the conference.

Although planners once envisioned an $8-billion network of super-speed trains covering the state, Ohio voters rejected a 1% sales tax increase to finance it, and the scaled-down Cleveland-Columbus-Cincinnati plan was chosen instead.

Financing of this system was made easier when Ohio obtained an exemption to the section of the 1986 tax-reform act that precludes the use of tax-exempt industrial revenue bonds for such projects as super-speed trains.

Pennsylvania, like Florida, has established a High-Speed Rail Commission, which has been conducting feasibility studies for 3 1/2 years and expects to make final recommendations soon, Geist said.

2-State Commission

Geist said a route connecting Pittsburgh with Harrisburg, the state capital, could be built in five years for about $3 billion. Later, the line might be extended to Philadelphia, he said, raising the project’s cost to about $7 billion.

Legislation to create a California-Nevada commission to obtain right-of-way and to seek a builder for a 230-mile line between Las Vegas and Ontario is moving through the legislatures of both states.

A magnetically levitated system could be built for about $2.5 billion and “steel wheel” for about $500 million less, according to studies done for Las Vegas.

These proposals face problems, including the need to convince political leaders, potential investors and the general public that high-speed rail is technically feasible.

(The Las Vegas-Ontario project also faces strong political opposition in San Bernardino County and elsewhere in Southern California, primarily based on studies showing that Nevada would derive 80% of the long-term economic benefits).

Although super-speed trains have been operating profitably for several years in France and Japan, “this is still perceived as an exotic technology,” said Harriet Stanley, a New York investment banker who has been working on the Ohio project.

Steel-wheel technology, like the TGV or the Japanese bullet train, is easier for most people to understand than the newer magnetically levitated trains, which have no wheels and float at very high speeds a few inches above a magnetized guideway.

System’s advantages

Magnetic levitation has several advantages. The trains are faster and quieter than even the fastest steel-wheel systems. Maintenance costs are lower and the trains can climb steeper hills.

If the TGV technology were used on the Las Vegas-Southern California run, for example, two tunnels would be needed in the Cajon Pass area and the line would have to be routed around the steep Baker grade. A magnetically levitated train proposed by Transrapid International, a West German consortium, although it would be more expensive to build, would need no tunnels and could be routed directly over the Baker grade.

A serious disadvantage for magnetically levitated technology is that it can be seen only on test tracks--in West Germany, Japan and elsewhere. The technology is not in intercity use.

“There is no doubt in my mind that maglev is the long-haul mass transportation of the future,” said Robert Pattison, former president of the Long Island Railroad and a vice president of the engineering firm of Parsons Brinckerhoff, Quade & Douglas, “but right now, steel wheel is a proven method and maglev is not.”

The collapse in 1984 of the proposed bullet train between Los Angeles and San Diego--a project that one speaker said was launched with “a lot of hype and a lot of hope (but) not much financial backing”--is another obstacle for super-speed train enthusiasts.

Riley, the federal railroad administrator, urged planners to undertake “serious ridership studies” if they expect to find financial support for their projects.

‘Skeptical’ Wall Street

“Wall Street is skeptical of all ridership studies,” Riley said, and will only pay attention to those based on “conservative, not heroic, assumptions.”

Several experts, for example, privately questioned the rosy ridership estimates prepared for the Las Vegas-Ontario route by Barton-Aschman Associates.

In a study completed last June, Barton-Aschman, assuming a round-trip fare of $65, projected 4 million passenger trips in each direction by 1995 and more than 5 million by the year 2025. The study said the super-speed train would attract 42% of all travel in the Las Vegas-Los Angeles corridor by 1995, although Amtrak now carries less than 1% of the traffic between the two cities.

With the technology generally regarded as proven, the biggest hurdle remains one of finding the money to pay for these trains.

Operating costs are not expected to be a problem, although conventional rail service in this country requires substantial federal subsidies.

Robert E. Parsons, a former Federal Railroad Administration official who supervised the Las Vegas studies, said high-speed trains are more likely than conventional trains to make money because they carry large numbers of passengers with small crews and few stops.

Parsons said that the Paris-Lyon service “is making money and paying back its costs much faster than anticipated” and that Japanese bullet trains are profitable “on selected routes.”

Construction Costs

If operating costs are not a problem, however, the same cannot be said of the several billion dollars needed to build these systems.

The federal interstate highway system, begun in the 1950s, was largely financed through an increase in the federal gasoline tax, but no similar tax increase has been proposed to assist super-speed rail construction.

Nor are substantial federal subsidies expected, at least as long as the Reagan Administration, or an administration sharing its general economic philosophy, is in office.

Individual states may pay for feasibility studies or for high-speed rail commissions or authorities but are not likely to come up with the billions needed for construction.

Riley said the creation of “very large pools of private-venture capital” in recent years “make multibillion-dollar transportation projects,” built with private funds, “more feasible.”

Others at the conference expressed doubt that private investors would be patient enough to wait through several years of construction, plus the first few years of operation, to realize profits.

“It’s hard to sell equity partners on waiting several years to get a good return,” Harriet Stanley said. “They’re not likely to come in until the first system is operating and shows a good profit.”

Land Right Sales

Florida hopes to finance about 10% of construction costs by selling land rights, at the stations and along the route, to private developers.

Several states are seeking foreign capital. A group of South Koreans, said to have $6 billion to invest, was heavily courted at the conference.

Pennsylvania, Texas and the promoters of the Las Vegas-Southern California train hope to persuade the foreign equipment manufacturers--French or West German or Japanese--to invest in building the systems.

Their rationale is that the company or the country that provides the equipment for the first successful super-speed train in America will have the inside track on billions of dollars worth of orders around the world.

Foreign representatives are wary.

“I would not believe that a German vendor consortium would be able to finance such a venture,” Dr. Werner Menden, a West German official who attended the conference, said in an interview. “Perhaps as part of a group we could do it, but not alone.”

The most promising financial solution seems to lie in some kind of public-private cooperative venture--perhaps a combination of state-guaranteed bonds and private financing.

‘On the Hook’

The key question, Wall Street investment banker William James reminded the group, is, “Who’s going to be on the hook for the bonds?”

Almost as important, James added, is building political and popular support.

“Unless it can be sold to the people who are going to use it and pay for it, it’s not going anywhere,” James said.

High-speed rail is “the most powerful political idea (in the transportation field) to come along in my experience,” Geist said, “but we have a big sales job to do. . . . We must explain it in language that every Joe Lunch Bucket across the country can understand.”