Texas High Speed Rail Faces a New Threat: Semantics

For rail fans who cling to the dream that the United States will someday boast the high-speed rail systems that much of the rest of the world enjoys, the plan to bring bullet trains to Texas has been something of a ray of hope. Texas Central Railway, the private company helming the effort to connect Dallas and Houston in a zippy 90 minutes via Japanese shinkansen technology, says it will be ready to break ground as soon it receives its safety and environmental permits, which could be as soon as late 2019. The company now has more than $450 million of backing, and its scheme is largely proceeding without the kind of political drama and cost overruns that have consumed California’s L.A.-to-S.F. undertaking.

But Texas Central does have a few legal and procedural disputes to clear up first. Currently, some of the opposition to the project focuses on an oddly existential question: whether the company is a railroad at all. “Simply self-declaring that you are a railroad does not make it so,” Kyle Workman, the president of the opposition group Texans Against High-Speed Rail, told the Houston Chronicle in February.

The terminology is important for reasons beyond its own sake. Being a railroad or not determines whether Texas Central is entitled to use eminent domain as it surveys and acquires property. State law allows railroads and certain other private companies to use eminent domain to seize land for projects in the public interest. But in February, in response to a lawsuit by a landowning couple in rural Leon County, a district court ruled that Texas Central did not have that right. The firm is “not a railroad or interurban electric company,” the judge stated, because it hasn’t laid track or run a train yet.

Texas Central contends that it is indeed a railroad, and points to an earlier court decision from Harris County where a judge said so. The company says it would prefer to acquire privately held land through amicably struck commercial sales, and has already secured more than 30 percent of the land in its preferred right-of-way. But in the all-but inevitable event that it can’t seal 100 percent of those deals, it plans to keep fighting the Leon County case in court to secure those eminent domain rights, Holley Reed, the managing director of external affairs at Texas Central, told CityLab.

“We feel that we’ll win this on appeal,” Reed said. “We feel that Texas law is very clear, that the intention of the language is that [railroad] is mean in the current and future tense.”

That didn’t stop opponents from declaring victory, though. “This project cannot be finished without eminent domain and the project is completely off track,” Blake Beckham, the lawyer representing the plaintiffs and the TAHSR group, stated at the time.

And there may be still more hoops to jump if some legislators get their way. Earlier this month, Texas Senator Brian Birdwell added language to the state’s proposed 2020 budget that would curtail Texas Central’s ability to communicate with state government officials as it proceeds. The provision would bar the Texas Department of Transportation from making expenditures to help the company use public rights-of-way for construction until a higher court issues a final ruling about the project’s eminent domain authority. Already, the state is prohibited by law from funding the project. Birdwell’s budget rider would further limit even DOT staff time and resources spent in coordination with the rail company.

It is one of just many bills filed in this year’s legislative session, mostly by rural Republican lawmakers, aimed at dragging down or outright terminating the high-speed rail project by creating additional regulatory requirements. Texas Central has dodged other such attempts in the past, but this year, there are more than ever, according to Workman. As the Texas Tribune reported this week, an entire congressional subcommittee has been appointed to referee the battle over the multibillion-dollar proposal.

What motivates combatants? A few factors seem likely, including a Texas-tight attachment to property rights (some 95 percent of land is privately held), and fear that the privately funded project could run aground and force state taxpayers to save it. It’s also hard to ignore the possible influence of bias against passenger rail promulgated by various right-leaning think tanks and other conservative critics. Texas bullet train detractors frequently point to California’s high-speed rail project as a ghoulish postcard from the future: With costs mounting on that project upwards of $77 billion, Governor Gavin Newsom announced earlier this year that the state would roll back the project’s ambitions and focus primarily on the leg that runs through the rural Central Valley. Texas conservatives have referred to that project as a boondoggle and a sign of things to come for the Dallas-to-Houston venture.

“This project has many issues, and one could easily see the potential outcome that could befall Texas by looking at the catastrophic failure occurring in the California high-speed rail project,” Senator Birdwell said in a statement in early April when he announced his budget provision, which “seeks to solely protect state resources.”

But the Texas Central project differs from California’s high-speed rail in many ways. Chiefly, it is an investor-backed undertaking, not a publicly subsidized project. Texas Central has said that it plans to spend more than $15 billion to build and run its planned 240-mile route from Houston to Dallas, in partnership with Central Japan Railway, which will help implement the shinkansen technology. Construction won’t begin until funding in full has been raised among investors, the firm promises (one bill moving through the Texas legislature would codify that promise in law). Citigroup and Mitsubishi are advising its intricate financing structure, and Renfe, the Spanish rail operator, has signed on to run the trains. Texas Central company might apply for federal loans, but the project won’t be funded by state or federal grants.

“In Texas, it would be completely unpalatable to think about that level of public funding,” said Kyle Shelton, the director of strategic partnerships at Rice University's Kinder Institute for Urban Research. “The rhetoric around this has always been: ‘This is going to succeed, but if it doesn’t, we are not going to ask for public funding.’ That’s part of the commitment, and it fits into the Texas mold.”

Still, opponents argue that the project is destined to fail without public subsidy, since that is how most rail lines funded around the world, at any speed. Workman, the president of Texans Against High-Speed Rail, said that he believes that “government bail-outs” will be required if Texas Central goes bust, which is inevitable in his mind. “We’re under no illusion that those people have figured out the first fully funded, self-sustaining high-speed rail over its entire existence in the world,” he said. “The possibility of that is so minute and slim that it’s just not reasonable.”

Project leaders insist that under no circumstance would Texas Central seek a taxpayer bail-out. If the train doesn’t generate the necessary revenue, investors would shoulder the loss and the company would go bankrupt. But that’s not what they expect, obviously. Texas Central projects 6 million annual riders by 2029, and more than 13 million by 2050. Reed explained that Houston and Dallas were selected from a list of 90 city pairs because they have the best potential for a profitable service in the U.S.: thousands of daily trips made by car and airplane, fast-growing populations and economies in both metro areas, and opportunities for prime real estate development around the stations on either end. The route itself is 240 miles of plain and prairie—an engineering breeze compared to California’s varied topography. “The tunneling costs are higher in California than our estimates for the entire project,” said Reed. “The cost side of this equation marry up to commercial success.”

As for the dispute over Texas Central’s status as a railroad, many sources pointed to electrical utilities, pipelines, and telecom companies as precedents for its claim on eminent domain authority. “There is a provision in the law for private companies that are doing things for the public good,” said Peter LeCody, the president of Texas Rail Advocates. “But some state reps seem to feel that, ‘Everyone is encroaching on my land, and we are going to fight back because we don’t want anything to get built.’"

It’s hard to dispute that the project is indeed risky in some basic respects, though. The United States has never seen a privately operated high-speed rail line; Florida’s partially opened, investor-backed Brightline project in Florida—now dubbed Virgin Trains USA—is the closest example, but it has the major advantage of using an existing right-of-way and is still a ways from judgment. And it’s true that few rail lines around the world operate successfully on ticket sales alone. (Even Japan’s rail systems, which are unusually profitable, make a big chunk of proceeds from shrewd station planning and advertising.) In the U.S., the best-performing passenger train routes link the densely packed cities of the Northeast Corridor, which have extensive public transit networks. Neither Houston or Dallas particularly qualify on that front. “This is Texas. People have pickup trucks and want to drive cars,” Workman said. “This is the recipe for the worst, most colossal failure financially.”

Yet Texas Central’s reliance on private investment, rather than government bonds or sales tax dollars, should mean that project leaders are scrutinizing ridership projections under the very brightest light, Michael Bennon, the managing director of Stanford University’s Global Projects Center, pointed out in the Texas Tribune in 2017. “It’s their money that’s going to be on the line,” he said. And the caliber of the parties assembled to manage, finance, and operate the project, said LeCody, should be a testament to its good prospects as a financial undertaking.

Despite headwinds in the statehouse and local courts, proponents of the project say they’re still confident. “A very professional organization wants to build true high-speed for first time, at no cost to the public and we ought to give them a chance,” LeCody said. “If anyone could do it, Texans can.”

And if they can’t? Well, Texas Central’s opponents can say that it was never a railroad in the first place.