As a transit option, a Texas bullet train would be a major breakthrough. As an economic development project, it would be off the charts.
That's because taxpayers don’t have to cough up anything to make it happen. That’s almost unheard of — not only for giant investments but even for small ones.
A high-speed rail system between Dallas and Houston would cost an estimated $12 billion, and the economic impact would be widespread and lasting. Yet the developers, Texas Central Partners, are not seeking government grants, tax abatements or other incentives.
They like to say they’re taking a market-based approach to high-speed rail.
They’ll be raising money from private investors and betting that its approach will be faster and more efficient. And those pesky cost overruns that overwhelm so many transit projects? Their problem, not ours.
Too many public-private partnerships have big public risks. And taxpayer incentives are doled out so often they’ve almost become corporate entitlements.
This month, Neiman Marcus requested over $1 million in state tax rebates for investing $5 million to update some local facilities. It’s not making any new hires.
In contrast, Texas Central expects to create an average of 10,000 jobs during the four-year construction period of the rail line. It will maintain over 750 permanent jobs after opening.
The company will pay property taxes on the completed corridor and rolling stock, and sales taxes on tickets. By 2040, the high-speed rail system is projected to contribute over $3 billion in tax revenue to the state, schools, cities, counties and transit systems.
That’s a huge upside before factoring in the impact from adding giant rail stations in Dallas and Houston. The stations are expected to attract blocks of private development and rival the impact of the rail line itself, according to a 2015 study commissioned by Texas Central.
“This is like a giant gift from heaven, and Texas needs to welcome these people,” said Andy Kunz, CEO of the U.S. High Speed Rail Association. “They could’ve gone to California or Florida or Vegas. Or they could be asking for tax breaks and everything else.”
Instead of getting the red carpet, Texas Central is facing strong opposition from rural landowners and legislators, and top politicos are not quieting the dissent. Rural residents worry that the train will disrupt their way of life and not bring many economic benefits.
Last week, lawmakers in Austin filed over 20 bills aimed at derailing or delaying the project. The most threatening would prevent bullet train operators from using eminent domain. Without that tool, Texas Central probably couldn't assemble the land needed for the 240-mile line.
Lawmakers criticized the project for having foreign partners and physically dividing the state. Texas Central is teaming with Central Japan Railway, which developed the technology for the Japanese Shinkansen bullet train. It’s also likely to pursue financing from the Japanese Bank for International Cooperation, a national development bank.
The Japanese are eager to export bullet-train technology, and many countries are exploring high-speed rail systems. The Dallas-to-Houston route is an ideal demonstrator project.
It’s long enough to entice Texas drivers and short enough to compete with airlines for business travelers. The metro areas on both ends are among the largest and fastest-growing in the country, and the Texas terrain is well-suited to a line.
Texas stands to benefit in many ways. A stronger connection between Dallas and Houston would deepen economic ties and boost the state. The train would relieve traffic by attracting a projected 5 million riders a year by 2026. And Texas’ reputation would get a boost from having the first bullet train operating in North America.
“This is groundbreaking and Texas is in the vanguard,” said Texas Rep. Jason Villalba, R-Dallas. “This is something we’ve got to support, even in the rural counties. ”
The property taxes from high-speed rail would be a continuing revenue stream, and that would help rural areas along the route. It’s worth noting that other big projects often find ways to slip that tax burden, in part because Texas has such a high tax rate.
Professional sports stadiums are usually owned by local cities and leased to the team, so there’s no property taxes due. When that approach won’t work, governments often use abatements and tax rebate programs.
Toyota, which is building a major campus in Plano, will pay just half of its usual property tax for its first two decades there.
That’s in addition to the $40 million cash award that Toyota is slated to get from the state’s Texas Enterprise Fund. Plano also is throwing in $6.75 million in grants.
Toyota will add more direct jobs than the bullet train while Texas Central will spend more to build its system. But Texas doesn’t have to choose between Toyota or the bullet train, because it could have both — and without putting a hit on taxpayers.
So why not give the company enough rope to succeed?