by Wendell Cox
Project Director: Robert W. Poole, Jr.
Governor Rick Scott is evaluating whether to proceed with construction of the proposed Tampa to Orlando high-speed rail project. The potential cost to Florida taxpayers is a principal factor in this evaluation. Capital cost escalation, revenue shortfalls and higher than projected operating costs are common in high-speed rail projects. Governor Scott Walker of Wisconsin and Governor-elect John Kasich of Ohio have cancelled projects funded by the Obama administration’s high-speed rail program and foregone the federal funding because of cost concerns such as these.
Construction cost escalation recently led New Jersey Governor Chris Christie to cancel a federally funded tunnel to avoid up to $4 billion in projected cost overruns that would have been the responsibility of the state’s taxpayers.1 Perhaps the ultimate example of an over-budget megaproject is the Boston “Central Artery” (“Big Dig”) highway project, which exceeded projected costs by $16 billion, including interest.2 While there was considerable federal funding in the project as originally planned, much of the cost overrun became the responsibility of Massachusetts taxpayers.
Florida taxpayers face two potentially significant financial risks from the project:
1. Capital Cost Escalation: If construction cost projections prove overly optimistic, costs could increase substantially from the current estimates. The state of Florida would be responsible for virtually all of any such increase. This report estimates that the cost to Florida taxpayers could be $3 billion more than currently projected.
2. Operating Subsidy Liability: If ridership and revenue projections prove overly optimistic, it could become necessary for the state to provide an annual operating subsidy for the service. A state operating subsidy could also be necessitated by operating costs that are greater than projected. This risk could easily run into the hundreds of millions of dollars per year.
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