Fiscal prudence or petty politics?

March 2011 » Departments » COMMENT
Bob Drake

In mid-February, Florida Governor Rick Scott became the third state leader to reject federal funding for design and construction of a high-speed rail line — following governors in Ohio and Wisconsin — and the fourth governor to put the brakes on a major transportation infrastructure project within the last six months. In October 2010, New Jersey Governor Chris Christie stopped work on the Access to the Region’s Core (ARC) rail tunnel beneath the Hudson River between New Jersey and New York City, citing a lack of state funds and potential cost overruns.

In the latest attempt to stop a high-speed rail project, Scott wrote in a letter to U.S. Department of Transportation (DOT) Secretary Ray LaHood, “Given that actual ridership will not be known until well after the capital investment is made, the potential for significant capital and operating cost overruns, and the nominal difference in travel times between the cities, it is likely that even with financial guarantees from a private-sector builder/operator, moving forward with such a project would likely lead to a financial obligation by the state of Florida in the future.”

In response to Scott’s action, Thomas Hart, vice president of government affairs and general counsel for the U.S. High Speed Rail Association (USHSR), said: “The high-speed rail project in Florida has already received 90 percent of the funds necessary to complete the segment from Tampa to Orlando and the remaining 10 percent could have been funded by private investment. ... Governor Scott’s decision must be carefully evaluated and all options must be pursued to fulfill the will of the voters in Florida who have repeatedly expressed strong interest in bringing high-speed rail and enhanced commuter rail to the state.”

At press time, a bipartisan group of Florida legislators had rebuked the governor’s decision and were negotiating directly with the DOT to resume the project and restore federal funding.

At least two aspects of the Florida case are troubling. First is the unilateral action of an individual state leader deciding the fate of a large, potentially impactful infrastructure project, apparently in opposition to state legislators and voters. Presumably, Scott relied on advisors — financial and political — to reach his decision, but to what degree is Scott’s decision influenced by the current political wind stirred up by the other recent gubernatorial decisions and weakly justified by conjecture about future ridership (even though gas prices continue climbing above $3 per gallon) and cost overruns?

Andy Kunz, USHSR president and CEO, said in a press release: “Governor Scott’s actions were premature. He made his decision without the benefit of the ridership study he commissioned, which was soon to be released. The RFQ submissions were never issued which would have given the bidding teams the opportunity to cover all operations and maintenance costs. He also failed to provide the private sector with the opportunity to cover any construction funding gaps.”

The second troubling aspect of the Florida case is the presumption that the project will incur large cost overruns. Given collaborative project delivery methods that have proven successful in other large projects and growing private-sector interest in public infrastructure investment — as exemplified by ongoing highway projects in Florida — it is unfortunate that Scott made little or no effort to resolve his concerns with the engineering and construction industry before pronouncing judgment. One must question whether fiscal prudence or petty politics played a more prominent role in this decision.

Bob Drake,
bdrake@zweigwhite.com


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