Financing high speed rail in the United States and France: The evolution of public-private partnerships

a r t i c l e i n f o Using cross-national comparative analysis, this paper discusses the reasons why France has succeeded in partially privatizing its most recently constructed high speed line, while the U.S. has not reached this stage. The authors argue that France, with an interventionist government, diverged from the U.S. during the Great Depression by nationalizing its private railways and regulating competition with highway-based transport, thereby establishing favorable conditions for the future development of high speed trains. The U.S., because of its strong free market orientation, delayed nationalization until 1971, by which time passenger railways were severely weakened, so the U.S. lagged far behind France. After accruing a large public debt on its high speed rail program in the 1980s and 1990s, the French government recently took steps to privatize construction and operations on its Tours–Bordeaux line. Similarly, in the U.S., the State of California is trying to attract private participation on its planned high speed line between San Francisco and Los Angeles. Based on French high speed rail history, this paper argues that, to succeed, California must commit both a high level of public borrowing as well as public guarantees on private borrowing. Public credit is the sine qua non of financing high speed trains. On October 1, 1964, the world's first dedicated high speed passenger train service, called the Shinkansen, began operating between Tokyo and Kyoto. The line immediately attracted a large ridership and, by the end of its third year of operations, was earning net profits over and above both its operating costs and the debt incurred for infrastructure construction and purchase of rolling stock (Gourvish, 2009: 9). This was a highly significant achievement since, starting in the 1920s, most privately operated intercity passenger rail services had become unprofitable due to competition from highway-based transportation, causing governments throughout the world, including Japan's, to nationalize passenger services. High speed rail created the possibility that these services could return to profitability, become a significant part of the national transportation systems, and perhaps even attract the private sector to return once again to operating passenger trains. The commonly accepted definition of " very high speed " trains are those that run at average speeds greater than 150 miles per hour and operate on dedicated, grade separated track. In more than four decades after Japan achieved high speed commercial operations, public railway companies have developed high …