High-Speed Rail: Public, Private or Both?

Assessing the Prospects, Promise and Pitfalls of Public-Private Partnerships

High-speed rail public-private partnerships and efforts toward rail privatization abroad have a mixed track record. This report reviews a number of international cases of better and worse cases of contracting in Europe and Asia.

Report

Private sector companies are likely to play a major role in the construction of high-speed rail lines in the United States. Public-private partnerships – or “PPPs” – have come to play an important role in the construction of high-speed rail lines around the world.

The experience with high-speed rail PPPs, 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. America must learn from these experiences and pursue PPPs only in keeping with key principles designed to protect the public interest.

All high-speed rail public-private partnerships require substantial public investment. In fact, no modern high-speed rail line has ever been built with only private capital. In several recent and current European high-speed rail PPPs, the public sector has been responsible for more than half the capital cost of the high-speed rail line.

Public-private rail partnerships have the potential to tap 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, including:

  • Higher costs for capital, as well as costs related to the profits paid to private shareholders.
  • Heightened risk for the public once a project has begun, due to the ability of private-sector actors to hold projects hostage and demand increased subsidies or other concessions from government.
  • The costs of hiring and retaining the lawyers, financial experts and engineers needed to protect the public interest in the negotiation of PPP agreements and to enforce those agreements over time.
  • Loss of control over the operation of the high-speed rail line, which can result in important transportation assets being operated primarily to boost private profit rather than best advance public needs.
  • Delays in the early stages of a project, as government and private partners engage in the difficult and complex task of negotiating PPP agreements.

High-speed rail PPPs and efforts toward rail privatization abroad have a mixed track record. The report reviews a number of international cases of better and worse cases of contracting in Europe and Asia.