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Bullet Train Developer Secures Up to $300 Million in Texas as Rival Takes Aim

Texas Central Secures Japanese Funding as French Rival Criticizes Project for Lack of Taxpayer Support
September 24, 2018
Texas Central Partners secured a loan of as much as $300 million for a project that would bring high-speed public transit to Texas. Image Credit: Texas Central Partners

A modern-day tale of railroad tycoons, and the potential for related real estate speculation, is playing out deep in the heart of Texas as firms backed by billions of dollars vie to bring high-speed public transit to the nation's second-largest state.

Texas Central Partners, a private enterprise trying to build the first bullet train line in the United States, from Dallas to Houston, secured a loan of as much as $300 million from Japan Overseas Infrastructure Investment Corp. for Transport & Urban Development and the Japan Bank for International Cooperation, both institutions backed by the Japanese government.

Texas Central will need much more than a $300 million loan to complete its project. The total cost of construction, plus the acquisition of a train, would be roughly $16 billion, according to the firm’s own estimates. At stake is the ability to move commuters and other job-related travelers between cities at a rapid pace, increasing the potential for added real estate values in areas serviced by any high-speed rail. It has not yet been determined where tracks would be laid, which only increases interest in real estate circles about any potential land purchases.

The move drew sharp criticism from SNCF America, the Maryland-based arm of the French national railway company, which has its own plans for the Lone Star State.

The "project is right for Japanese companies subsidized by Japanese taxpayers and wrong for Texas," said Scott Dunaway, spokesperson for SNCF America, in a statement. "Nowhere in the world have high-speed rail projects become reality without government participation."

Last spring, SNCF lobbied Texas state legislators to consider a plan that would bring "higher-speed" rail -- different than bullet train technology -- to the Interstate 35 corridor, the state's busiest, connecting Austin, Dallas and San Antonio with an offshoot from Temple to Houston passing through College Station. In total, SNCF wants to lay roughly 480 miles of mixed-use track, allowing passengers and freight to share the line at varying speeds.

"Two Japanese-government agencies are supporting an attempt to corner the market with technology that lacks interoperability and creates a monopoly on the future of Texas high-speed rail," Dunaway said.

Texas Central’s plan would use Japan’s Shinkansen dedicated rail technology to connect Houston and Dallas, with one stop in Grimes County, near Texas A&M University. The 240-mile proposed route resembles a shortcut that connects two ends of the curving Interstate 45, a train trip that would take passengers from Dallas to Houston in roughly 90 minutes including one stop, rather than roughly 5 hours by car. In Japan, Shinkansen trains reach speeds of 150 to 200 miles per hour.

In response to SNCF's comments, Texas Central officials said nothing is preventing SNCF from developing its own rail system in Texas.

"SNCF doesn't understand how free-market capitalism works in Texas because they are a government-owned monopoly in France," Texas Central said in a statement. "Its state-owned approach and overextended unprofitable network demands immediate restructuring. SNCF and its industrial partners don't want competition in the United States nor do they offer to invest in bringing high-speed service here."

In May, SNCF questioned the bullet-train proposal in response to the Federal Railroad Administration's draft environmental impact statement on the project. SNCF has not commenced work on its own environment impact study, which took Texas Central years to complete.

Texas Central has opened three offices in Texas, hiring more than 30 full-time employees. The company acquired a large portion of the land needed for the railway across eight Texas counties and released renderings for its proposed endpoints.

Rail companies aren't the only operations trying to tap into Texas’ wealth of super-commuters, regularly traveling between the state’s major metropolitan areas. The Texas Triangle, a super-region formed by Houston, Dallas-Fort Worth, San Antonio and Austin, was chosen as a finalist for Virgin Hyperloop One's global challenge to build to the first hyperloop network.

The proposed route would offer high-speed travel via electric propulsion through a low-pressure tube, connecting Dallas, Austin, San Antonio and Laredo. For the time being, Houston is being left out. Virgin Hyperloop One is working on the feasibility of building the line with government officials.

No operational grants or subsidies will be used for Texas Central's project, and construction would not start until funds are raised. The financing plan includes federal loan programs similar to those used by transit agencies. Those loans are specifically designed to promote private investment in U.S. infrastructure.

"At $45 million a mile, which private investor is going to be foolish enough to do this? If you have billions of dollars, chances are that you're not stupid," Alain Leray, SCNF's president and chief executive, told the Dallas Morning News. "A railroad is no different than a highway. Either the taxpayers pay or it doesn't happen."

Texas Central and SCNF could not be reached for additional comment.

Kyle Hagerty, Houston Reporter  CoStar Group   
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