Report: 21st Century Transportation

High-Speed Rail: Public, Private or Both?

Assessing the Prospects, Promise and Pitfalls of Public-Private Partnerships
Released by: Illinois PIRG Education Fund

Private sector companies are likely to play a major role in the construction of high-speed rail lines in the United States. Even as California nears construction of the nation’s first high-speed rail line, however, it remains unclear just how the private sector will participate in building out the nation’s high-speed rail network.

Public-private partnerships – or “PPPs” – have come to play an important role in the construction of high-speed rail lines around the world.  In a PPP, the public and private sectors are supposed to share the risks, responsibilities and rewards of infrastructure development.

The experience with high-speed rail PPPs around the world, however, has been mixed. While PPP arrangements have brought private capital and expertise to the task of building high-speed rail, PPPs have also resulted in cost overruns, government bailouts, and other serious problems for the public. More private capital has not necessarily meant better projects. Most of the “private” companies are more accurately publicly chartered corporations, not unlike Amtrak.

America must learn from these experiences and pursue PPPs only in situations in which they make sense – and do so in keeping with a series of key principles designed to protect the public interest.

The research makes clear that:

·         Public-private partnerships will likely be part of the development of high-speed rail in the United States.

·         All high-speed rail public-private partnerships require substantial public investment. Private financing should be thought of as a complement rather than a substitute for public commitments to fund high-speed rail.

·         Public-private rail partnerships have the potential to leverage private capital, expertise, technology and economies of scale, and can also help mitigate the risk of high-speed rail projects to taxpayers. However, PPPs also come with a number of risks and costs.

·         High-speed rail PPPs and efforts toward rail privatization abroad have a mixed track record.

·         Public officials should use a set of common-sense principles to evaluate public-private partnerships – and should refuse to pursue PPPs that do not serve the public interest. Ten such principles are outlined in the report.

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