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The analysis is in: the Tampa-to-Orlando high-speed rail (HSR) project that was shot down by Florida Governor Rick Scott would have been profitable for the state.

The analysis, conducted by the Florida Department of Transportation and sent to the Federal Railroad Administration this past November, found that losing the $2 billion the U.S. government was offering “Pink Slip Rick”will cost the state for decades to come:

The heart of the report is an analysis by two consulting firms of projected ridership, costs and the resulting surplus – or loss. If the project to link Tampa and Orlando would have gone forward, the research would have been used in determining an investment grade for bond sales.

According to data from both consulting firms hired by the state, the project, which would have given Florida the nation’s first high-speed rail line, would have been a fiscally sound decision.

The firm of Steer, Davis, Gleave projected Tampa-Orlando ridership of 2.5 million and a $9.1 million deficit in 2016, the first year of operation. By 2026, though, the high-speed rail would be carrying nearly 5 million passengers a year and generate an annual surplus of $31.1 million, according to the firm.

The projection by Wilbur Smith Associates was even rosier. The firm estimated 3.6 million riders in 2016, producing a $17.6 million operating surplus. By 2026, Florida’s high-speed rail would carry more than 5 million riders and produce a $44.8 million surplus, according to its analysis.

The state used the information from the two consultants to come up with a midrange estimate: 3 million passengers and $4.3 million surplus in the first year, and a ridership of nearly 5 million and an annual surplus of $38 million by 2026.

Did you hear that, California?

Projects like these eventually pay for themselves. Florida’s HSR in particular, with two phases (Tampa-to-Orlando and, later, Orlando-to-Miami), would have boosted the state’s already profitable tourism industry. The second phase was not included in the study’s findings, but was referenced in the report:

“Ridership and revenue for the (proposed second phase) Orlando-Miami corridor would be expected to be substantially higher and produce large operating surpluses,” the state report said.
Governor Scott, in true Tea Party fashion, refuses to admit his mistake and stands by his decision despite facts flying at him like winged monkeys in The Wizard of Oz:
A Scott spokesman last week said the governor stands by his decision to turn down the federal offer to pay $2.4 billion of the projects estimated $2.65 billion cost. The governor’s office has said Scott was “verbally briefed” on highlights of the study before it was completed.

“The governor thoroughly explored all of the issues surrounding High-Speed Rail, especially ways to lessen the financial risk to Florida, but he ultimately reached the same conclusion that California is now reaching – that the concept just isn’t going to be able to pay for itself,” Scott’s communication director Brian Burgess said in an email.

When making his decision a year ago, Scott relied heavily on a January 2011 Reason Foundation policy brief, whose project director Robert Poole Jr. served on Scott’s gubernatorial transition team.

Using comparisons with overseas high-speed rail projects and one envisioned for California, the report by the libertarian group said it was likely the project would cost significantly more to build than estimated and that the state could be on the hook for significant operating subsidies for years.

Who knows which “overseas” HSR projects the Governor’s office compared themselves to. Spain’s HSR, for one, has been a huge success. In a tourist driven economy, high-speed trains between your three major cities should be a no-brainer. But, not when your Governor strives for historically low approval ratings and is the man who defends Bain Capital with a famous Holocaust quote:
“I’ve got a quote in my office,” he said before paraphrasing Martin Neimöller’s famous statement criticizing the complacency of some during the Nazi-era. “First they came for the Jews, and I wasn’t a Jew so I didn’t say anything…”
Bad news Floridians: your Governor is not Jewish. Wait…WHAT!? Oh, I get it. I think he means there’s $31 million at the bottom of the Biscayne Bay.
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Comment Preferences

  •  If HSR pays for itself, why is it so hard to get (3+ / 0-)

    state employee pension funds, private pension funds etc., union pension funds, and other large investors to invest in such projects?

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Wed Feb 08, 2012 at 10:52:41 AM PST

    •  Who worth their salt invests in infrastructure? (4+ / 0-)
      Recommended by:
      bear83, David54, Curt Matlock, EricS

      The pension funds etc. have the option of investing in Apple. Why would they make a $2.6 billion investment that returns only $31 million a year?

      The state, on the other hand, needs to provide the infrastructure. A $2.6 billion investment in transportation that returns $31 million a year beats the socks off of any other kind of infrastructure spending that you can imagine between Orlando and Tampa. When any infrastructure is built, even if there are fares and tolls levied those revenues don't fully cover the economic benefit. It's like education. Would you eliminate public education because it doesn't make a profit? I didn't think so. Would you eliminate highway spending because highways cost an arm and a leg to build and your other arm and leg to maintain? I didn't think so. Passenger rail's role on busy routes is as a far cheaper alternative to highway and airport expansion and repair.

      •  What this boils down to is that America has not (4+ / 0-)

        yet wrapped it's head around the fact that there will come a time when we can't cruise down our (newly created) freeways in our new '56 Buick Roadmaster or our '67 Dodge Charger that gets 10 miles to the gallon at $0.26/gal.
        Or the modern equivalent thereof.
        If we do not accept the inevitability of change and get on with preparing the infrastructure out in advance of our path we're going to be like the runaway train that comes to the end of the track . Change will happen abruptly and it's not going to be pleasant.
        It's not just HSR, it's everything.

      •  Funds invest in diversified portfolios (0+ / 0-)

        So they are highly limited in how much Apple they can buy.

        Investing in infrastructure is actually common around the world, but such investments must offer completive returns for their level of risk.

        So in essence you said that you don't think HSR in Florida does not have strong enough economics that it can produce a competitive rate of return.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Wed Feb 08, 2012 at 12:42:05 PM PST

        [ Parent ]

        •  Plenty of other stocks better than 1.2% per year (1+ / 0-)
          Recommended by:
          EricS

          Utilties. Retailers. Electronics. You name it. A 1.2 percent per year return on investment puts even the most cost-effective infrastructure at the bottom of the pack for financial returns.

          The point is that 1.2 percent per year made is a heck of a lot better than 1.2 percent per year lost, which is what extra highway lanes would be, even before you count the environmental degradation and the loss in property values from blight.

    •  Do pension funds invest in highways, (1+ / 0-)
      Recommended by:
      bear83

      bridges, or other transportation infrastructure? It is the job of government to provide infrastructure. And why does rail have to be held to higher standard than other infrastructure projects? We have been brainwashed to believe that we can apply one standard to roads and another to rail. I wonder if that will change when gasoline reaches $10 a gallon?

      "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

      by gulfgal98 on Wed Feb 08, 2012 at 11:44:38 AM PST

      [ Parent ]

      •  A very large portion of the Municipal Bond market (0+ / 0-)

        is revenue bonds.

        Most all of revenue bonds are investments in infrastructure ranging from highways, mass transit, government owned utilities, etc. These bonds are private investments in public infrastructure.

        Typically in these bonds, the only source of payment to investors come from the revenues of the project.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Wed Feb 08, 2012 at 12:52:17 PM PST

        [ Parent ]

        •  I am very much aware of this (0+ / 0-)

          however, the bonds are rated based upon the issuer's capacity, not upon what they are being used for. For example, the way I uderstand it, institutions (including pension funds) buy bonds issued by municipality A because that municipality has a high and secure rating. They could care less is Municipality A is using the monies from those bonds to build an airport or a sewer plant or whatever.

          Feel free to correct me if your understanding is different.

          "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

          by gulfgal98 on Wed Feb 08, 2012 at 01:05:02 PM PST

          [ Parent ]

          •  What you described were general obligation (0+ / 0-)

            bonds.

            Revenue bonds are generally solely depending upon the revenue of the project for payment of principle and interest. The project's economics are fundamental to the value and quality of the bond.

            If an airport were built and there was little revenue, the bond holders take the loss not the city that sponsored the airport.

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Wed Feb 08, 2012 at 02:01:57 PM PST

            [ Parent ]

    •  Examples, please? (2+ / 0-)
      Recommended by:
      gulfgal98, EricS

      Do you know of any real world examples where pension funds have offered to invest in HSR projects but have been turned away?

      In France, the HSR lines owned by the national passenger rail company have been spinning off cash from operations since the first line opened.

      About five years ago, the French plan was to use the on-going operating profits to undertake construction of one new HSR line each year. No investments from pension funds would be needed.

      After the "worldwide financial crisis" hit, that is, when the bubble burst, the stimulus plan of the French Conservative (Sarkozy) government was to accelerate construction of additional HSR lines, and several are underway now.

      Meanwhile, all the completed HSR lines in France do operate at a profit.

      In Florida, the bidders for the right to build and operate the HSR line were prepared to cover any operating losses as part of their bids. (They did not expect any losses, so that made it easy.) The corrupt Repub Governor stopped the process before any formal bids could be made.

      •  I know that in California's HSR has been trying (0+ / 0-)

        to get private investors - but none are coming forward.

        Comment said:

        Do you know of any real world examples where pension funds have offered to invest in HSR projects but have been turned away?
        The way these large financings are done is that the people responsible for the project go to potential investors to raise money, not the way you describe.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Wed Feb 08, 2012 at 12:47:45 PM PST

        [ Parent ]

        •  Let Boehner and Cantor control the investment? (0+ / 0-)

          The private investment was always planned as the last piece to fall into place: the $10 bond issue, many billions in federal aid, perhaps some state and local aid for stations or jointly used tracks, and finally investment by the consortium building the route, the equipment suppliers, and possibly others. The state bond is the seed money to provide matching funds for the larger federal grants; then private groups will top off the investment.

          But the Repubs in the House are trying to prevent any more federal grants to construct CAHSR. If they succeed, we will never reach the point where private investors would make bids.

          For a pension fund to invest at this point would make the investment subject to the whims of John Boehner and Eric Cantor and crew. Obviously, any fund manager who did such a thing would be violating the fiduciary duty to protect the funds of the pensioners.

          Down the line, when most of the route is under construction or, like the Central Valley segment, actually operating, then you can expect to see the train builders and other private investors get in on the deal.

      •  You are correct (1+ / 0-)
        Recommended by:
        Woody
        In Florida, the bidders for the right to build and operate the HSR line were prepared to cover any operating losses as part of their bids. (They did not expect any losses, so that made it easy.) The corrupt Repub Governor stopped the process before any formal bids could be made.

        "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

        by gulfgal98 on Wed Feb 08, 2012 at 01:07:21 PM PST

        [ Parent ]

  •  Nice going there, Mongo. (2+ / 0-)
    Recommended by:
    Woody, bear83

    But long-term thinking doesn't figure into this jerk's plan to steal a quick buck. Tallahassee has its own legal slush fund now. R-thieves just vote themselves whatever they want, namely, $$$$$$$$$$. Frikkin sewer.

    #OWS #Occupy: Exposing US police brutality to the entire world.

    by OleHippieChick on Wed Feb 08, 2012 at 10:53:42 AM PST

    •  Please, not Tallahassee..... (1+ / 0-)
      Recommended by:
      OleHippieChick

      My city (Tallahassee) is blue. The problem is with those Rethug carpetbaggers who descend upon our fair city every year during the legislature.

      "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

      by gulfgal98 on Wed Feb 08, 2012 at 11:30:21 AM PST

      [ Parent ]

      •  Ugh, sorry to generalize. (1+ / 0-)
        Recommended by:
        gulfgal98

        I mean specifically the thieving denizens of FL's State Capitol.

        I'm glad T'hassee is Blue!! I did not realize that.

        #OWS #Occupy: Exposing US police brutality to the entire world.

        by OleHippieChick on Wed Feb 08, 2012 at 12:25:44 PM PST

        [ Parent ]

        •  No problem (1+ / 0-)
          Recommended by:
          OleHippieChick

          The City of Tallahassee has been cooperating with the local Occupy Movement and has given permission for the camp to be located upon a city owned parcel in the downtown. I am very proud of Tallahassee.

          "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

          by gulfgal98 on Wed Feb 08, 2012 at 01:11:57 PM PST

          [ Parent ]

          •  I am impressed. (1+ / 0-)
            Recommended by:
            gulfgal98

            Our county commish voted to not allow gatherings over a certain number and/or permitting is now needed, etc. etc. People e-mailed and demo'd to no avail. Then again, our county commissars aren't the brightest in the political barrel.

            #OWS #Occupy: Exposing US police brutality to the entire world.

            by OleHippieChick on Wed Feb 08, 2012 at 01:21:37 PM PST

            [ Parent ]

            •  Thus far, (1+ / 0-)
              Recommended by:
              OleHippieChick

              all is good. The mayor has backed this from the beginning and Occupy Tallahassee has worked very hard on maintaining the site in excellent condition and keeping the relationship cordial. They are also emphasizing community outreach. Monday night I attended a presentation at Occupy Tallahassee on Transition Towns which is an exciting and positive concept for addressing peak oil. Occupy Tallahassee is relatively small, but is working on monitoring state legislation and working on local solutions to the challenges that face us.

              "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

              by gulfgal98 on Wed Feb 08, 2012 at 01:33:17 PM PST

              [ Parent ]

  •  Not so fast. (1+ / 0-)
    Recommended by:
    erush1345

    Just how objective are these two consulting firms that project such a rosy financial future for this railroad project? Who are their paymasters? How much faith can you put in financial projections that are decades off in the future?

    All to often when money interests come through the door, objectivity goes out the window.

    •  The state hired the firms (4+ / 0-)
      Recommended by:
      gulfgal98, bear83, sebastianguy99, Woody

      According to the Tampa Tribune they were hired by the state.

      "According to data from both consulting firms hired by the state, the project, which would have given Florida the nation's first high-speed rail line, would have been a fiscally sound decision."

    •  Much as I love the concept of HSR... (1+ / 0-)
      Recommended by:
      erush1345

      I gotta say that even the best of consulting firms is blowing smoke when they are tasked with trying to predict what is going to happen over a decade into the future in even broad dollar specifics.

      There are SO many variables that cannot be answered that far away. The costs of petroleum energy, the growth of renewables, the population makeup of Florida then, the effects of climate change on Florida and its economy (will steadily rising temperatures make it less attractive.)

      Think about it. Here we are heading into 2012. It has been 12 years since:

      The crash of Alaska Flight 261 off LA

      The death of Charles Schulz

      The opening of San Francisco's new ballpark.

      The federal seizure and return to Cuba of Elian Gonzalez

      Israeli withdrawal from Lebanon after 22 years of occupation

      Vicente Fox is elected President of Mexico.

      The 27th Olympics in Sydney

      The resignation of Slobodan Milosevic in Yugoslavia.

      The attack on the USS Cole by suicide bombers

      The Supreme Court declared Dubya President

      Long time ago right? Well -- take that same time period and project it into the future, add two more years to it, and tell me with a straight face what the fiscal performance will be of a proposed multi-billion dollar project that is little more than a concept today.

      Sorry......I'm not buying it.

      Free markets would be a great idea, if markets were actually free.

      by dweb8231 on Wed Feb 08, 2012 at 11:25:15 AM PST

      [ Parent ]

      •  Consulting firms that project a losing operation (0+ / 0-)

        don't get hired by the next jurisdiction.

        •  This project was guaranteed (1+ / 0-)
          Recommended by:
          Woody

          not to cost the state any further funds because a private consortium was willing back it if the governor would have accepted the federal funds.

          As per Woody's comment:

          In Florida, the bidders for the right to build and operate the HSR line were prepared to cover any operating losses as part of their bids. (They did not expect any losses, so that made it easy.) The corrupt Repub Governor stopped the process before any formal bids could be made
          If need be, I will try to locate the citation for this since it has come up several times in this diary.

          "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

          by gulfgal98 on Wed Feb 08, 2012 at 01:18:10 PM PST

          [ Parent ]

          •  Link (2+ / 0-)
            Recommended by:
            Woody, EricS

            "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

            by gulfgal98 on Wed Feb 08, 2012 at 01:25:51 PM PST

            [ Parent ]

          •  True, but that's not relevant to the consultants' (0+ / 0-)

            report which was the topic of the diary.

            •  Putting money where ... (2+ / 0-)
              Recommended by:
              EricS, gulfgal98

              The bidders were putting their money where the consultants' mouths were. That is the relevance.

              Some say, "No consultants can predict 12 or 14 years ahead with any confidence." Others say, "Why are no pension funds investing in HSR?"

              The consortium bidders (which included foreign equipment manufacturers whose stockholders surely include pension funds) were willing to back their prediction with their own shareholders' money, willing to cover any loss if they could collect the profit. So both the consultants and the bidders were predicting the same outcome: a profitable route.

  •  What's the NPV on that? (2+ / 0-)
    Recommended by:
    erush1345, nextstep

    Finally turning a profit in 2026 sounds like it'd be uneconomic once NPV was applied.

    We're talking about something with significant upfront capital investment, here, and what's more, floating bonds to pay for it.

  •  What many non-Floridians may not understand (3+ / 0-)
    Recommended by:
    bear83, EricS, wayoutinthestix

    was that this link probably would have been supported heavily by tourist traffic between Tampa, Orlando, with Disney in between. That was the beauty of this high speed rail segment. It had winner written all over it and it was predicted to create between 22K and 28K jobs. Florida has one of the highest rates of unemployment in the nation.

    It was approved by the previous Republican legislature and the previous Republican governor. It had bipartisan support in Florida. Even when Rick Scott said he was turning down federal funds, there was a consortium of private interests which tried to keep the project alive by guaranteeing that there would be no further costs to the state if Rick Scott would accept the federal funds. Rick Scott turned this down for political reasons only.

    "Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help facilitate and structure the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction.”-Justice Stevens

    by gulfgal98 on Wed Feb 08, 2012 at 11:40:26 AM PST

  •  Maroons. (1+ / 0-)
    Recommended by:
    bear83
  •  Just goes to show... (0+ / 0-)

    ... Rick Scott cut off Florida's HSR funding to "stand up" to the "uppity" President...

    So, Mr. Governor, now try to explain why Florida will be losing out on the transportation benefits and financial gain because you didn't like the duly elected President of the United States...

    Scott=Idiot

    For a better America, vote the GOP out of office whenever and wherever possible and as soon (and as often) as possible!

    by dagnome on Wed Feb 08, 2012 at 05:36:33 PM PST

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