Private value capture-funded rail still has detractors

The implementation of transit value capture faces many obstacles. Some of them are unrelated to value capture. Let me illustrate this point:

Even when a private rail company proposes to fund a new transportation option with value capture and bonds repaid by fare revenue, there will be detractors who say the public shouldn't "support" the investment. In this case, the private company is All Aboard Florida, the project is an inter-city high-speed rail investment (not exactly urban transit, I know), and the detractors are... well, many.

The folks at CityLab put together a piece that describes the pushback. There are plenty of reasons for various interests groups to oppose a major high-speed rail project (noise, a decline in airline traffic, etc.). It turns out that you can also oppose a privately planned project because it might fail financially (just as a new restaurant or grocery store might fail). However, in the case of a major infrastructure project, people want to weigh in on the private investment.

I can see a few legitimate reasons for concern about what could happen if the project suffers financially: permanent scars in the landscape without the offsetting benefit of service, safety lapses of a technologically advanced service due to underfunded maintenance, etc..

I can also see how the public might have standing in this private investment decision and others like it: a rail project may use eminent domain powers granted to it by the public, it may lease publicly owned property to provide its service, etc..

However, I am not swayed by the argument that the potential financial failure of this private enterprise will inevitably lead to a government bailout of the service to keep it running. While it is certainly a possibility, the public will have its chance to weigh in on whether or not a failing All Aboard Florida service is propped up. For now, the government of Florida has clearly stated that they are not backstopping the company.

All Aboard Florida's high-speed rail project is not a government initiated effort being implemented by a government-contracted private entity (a PPP). The public pursuit of high-speed rail died when Governor Scott shot it down. This is a private company swooping in to implement an infrastructure project that has a chance of succeeding as a private enterprise. (There is some irony relevant to the political philosophy that government should be run more like a business.)

I think it is more appropriate to think of All Aboard Florida's proposal as something akin to a private internet competitor to the cable internet provider your town already has. If you will, please follow me...

Would you want to use a private internet service if the monthly cost were cheaper and 100 times faster than your present service? Sure. Would you put up with the company stringing wires in your town? Maybe. Would you be concerned that the wires might still be there even if the private company failed and walked away? Maybe if the wires were particularly ugly, but they're not overly obtrusive since other wires were already there. Would you be worried that the government would step in to bail out the private company if their business model failed? Probably not. You've already got an internet connection, right?

Allow me to introduce you to Google Fiber. Google produces a superior product to Xfinity and others and many people are begging them to come to their town. Google Fiber and All Aboard Florida are not dissimilar (in this analogy, the Xfinitys of the world are airlines and other existing transportation options that will have to compete with the new private service). Yet, the response to the two private service offerings couldn't be more distinct.

Why fight high-speed rail on the grounds that it could become government subsidized but invite Google Fiber to town? As I see it, All Aboard Florida is proposing an enormous piece of infrastructure of the kind that U.S. citizens commonly associate with public goods. On the other hand, Google Fiber installs infrastructure commonly associated with government regulated private enterprises. Therefore, based on their distinct framing of the two services, people can't help but weigh in on All Aboard Florida as if it were a major public investment. 

So, back to the value capture lesson (this is a long-winded way of making this point!). I have written extensively about the political palatability of various value capture mechanisms. Yes, that's an uphill battle on its own. Yet, it's not just value capture that makes it difficult to implement. The reality is that the very things that value capture might fund (transit, roads, and other things that contribute to land values) are often controversial public investments. Even when value capture is proposed in a very politically palatable form, it can get caught in the crossfire.

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