High Speed Rail to Require Heavy Subsidies
"Commercial Feasibility" Terminology Could Mislead
A study by the Federal Railroad Administration (FRA) similarly found that commercial revenues would fall far short of costs in all studied corridors over the period from 2020 to 2040 (see Table 4).(1) The most favorable performance was projected in the Washington-New York-Boston corridor at 55.3 percent, which would require a public subsidy of 44.7 percent.
FRA found ridership would be even lower where discount airlines operated, noting that an
air fare reduction of 30 percent would reduce high-speed rail ridership by 30 percent.(33)
Despite these findings, the FRA report concludes that high speed rail would be commercially feasible in a number of the corridors above. This is accomplished by FRA's adoption of what could be chararcterized as a rather "loose" definition of "commercial feasilibity."
Section 1036 of the 1991 Intermodal Surface Transportation Act of 1991 required the U.S. Department of
Transportation to conduct a study on the commercial feasibility of high speed rail. The report appears to
have violated the Congressional mandate, by evaluating high speed rail on a non-commercial basis.
USDOT counted non-user benefits and consumer surplus as commercial revenues. Consumer surplus is
the difference between the price paid by a purchaser and the price that the purchaser would be willing to
pay for the good or service. No amount of rationalization can convert non-user benefits and consumer
surplus into commercial revenues -- they are simply not real money. If they were, the rates of non-user
benefit and consumer surplus used by USDOT could be used by Congress and the President to balance
the federal budget this year and forever, pay off the national debt in three years and cancel state and local
taxation in perpetuity.
1.. Overview Report: High Speed Ground Transportation for America (Washington, D.C.: Federal Railroad Administration, United States Department of Transportation, August 1996).