Purchasing Public Benefits Through Public-Private Partnerships

On everything from bumper stickers to t-shirts, Texans often proudly boast that, “Everything is bigger in Texas.” Unfortunately, this claim also frequently applies to highway congestion. In 2012, a company called Texas Central Partners LLC (TCP) formed with the goal of privately financing and constructing an approximately 240-mile high-speed rail line between Houston and Dallas. TCP’s plan calls for trains to reach speeds in excess of 200 miles per hour. This would result in a run time of roughly 90 minutes, providing a potentially attractive alternative to both highway and air travel.

The scale of the proposed high-speed line along with the location of terminal stations will affect regional travel and economic development patterns in Houston and Dallas for decades to come. Importantly, TCP must construct and operate a rail line that generates enough revenue to repay its debt obligations and provide a return to equity investors. This means that TCP must carefully design the line and terminal station locations to maximize ridership without incurring excessive cost. However, TCP’s need to control costs may result in terminal station locations that are suboptimal from a broader public policy perspective. This raises an interesting question: Should the public sector invest in an otherwise privately financed facility to purchase better station locations that support more compact and sustainable land use—something that would not make financial sense for TCP?

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center for american progress houston texas p3