NCPA - National Center for Policy Analysis

High Speed Rail Subsidies in Iowa

June 14, 2011

The state of Iowa is being asked to provide funds to match federal funding for a so-called "high speed rail" line from Chicago to Iowa City.  The new rail line would simply duplicate service that is already available -- luxury intercity bus service is provided between Iowa City and Chicago twice daily.  Perhaps most surprisingly, the luxury buses make the trip faster than the so-called high speed rail line, at 3:50 hours.  The trains would take more than an hour longer (5 hours), says Wendell Cox, principal of the Wendell Cox Consultancy and an adjunct fellow at the National Center for Policy Analysis.

  • The state would be required to provide $20 million in subsidies to buy trains and then more to operate the trains, making up the substantial difference between costs and passenger fares.
  • This is despite a fare much higher than the bus fare, likely to be at least $50 (based upon current fares for similar distances).
  • By contrast, the luxury bus service charges a fare of $18 and does not require a taxpayer subsidy.

In the long run, this could cost the state hundreds of millions, if not billions, of dollars.  Already, a similar line from St. Louis to Chicago has escalated in cost nearly 10 times, after adjustment for inflation, from under $400 million to $4 billion.

Unplanned cost overruns are the rule, rather than the exception in rail projects.  European researchers Bent Flyvbjerg, Nils Bruzelius and Werner Rottengather and others have shown that new rail projects routinely cost more than planned.

  • Flyvbjerg et al., found that the average rail project cost 45 percent more than projected and that 80 percent cost overruns were not unusual.
  • Cost overruns were found to occur in 9 of 10 projects.
  • Further, they found that ridership and passenger fares also often fell short of projections, increasing the need for operating subsidies.

Source: Wendell Cox, "High Speed Rail Subsidies in Iowa: Nothing for Something," New Geography, June 9, 2011.

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