Florida governor Rick Scott has rejected federal funds for high-speed rail connecting Orlando and Tampa, a decision that could send up to $2.4 billion in stimulus money back to the federal government. In a statement, Scott says that the red ink in President Obama’s budget – and the higher taxes the White House is proposing – would hurt the business environment in Florida. The decision came after Scott’s administration conducted a feasibility study to determine whether such a rail would be cost effective and whether Florida taxpayers would have to contribute any additional tax dollars to operate the rail.
During his gubernatorial campaign against Democrat Alex Sink, Scott had expressed skepticism about the project and said he would not raise taxes on Floridians to pay for it.
“Every project we do, we have to get return for taxpayers. So, the way I look at it, on the high-speed rail, if the federal government is going to fund all of it, and there's no – there's nothing the state – going to cost the state any money, let's look at it,” he said at a CNN debate one week before the election.
An independent study conducted for the Reason Foundation by Wendell Cox found that Florida taxpayers would almost certainly be on the hook for some additional funding for the project – potentially a lot of money. Bob Poole, a transportation expert with the Reason Foundation, served as a campaign adviser to Scott. He told THE WEEKLY STANDARD that funding shortfalls were almost inevitable. "Historically, 90 percent of high-speed rail projects have had cost overruns."
Scott becomes the third Republican governor to turn down federal money for rail projects, following Wisconsin governor Scott Walker and Ohio governor John Kasich, who rejected a combined $1.2 billion after the November elections. Walker sought to repurpose some of the rejected money – $800 million – for Wisconsin’s more pressing infrastructure needs or to use it to reduce the deficit. Kasich urged the Obama administration to use all of Ohio’s money to reduce the deficit. But Secretary of Transportation Ray LaHood dismissed those suggestions and sent the Wisconsin/Ohio money to rail projects in other states. In an ironic twist, Florida received a large chunk of that money – an additional $342 million – for its rail projects. That money was assigned to Florida one day after incoming chairman of the House Transportation Committee, John Mica of Florida, met with LaHood, his former Republican colleague. Transportation officials said that the money was given to Florida using the same formula that determined the initial distribution of federal funds. But a Politico story about the timing of the award – as part of an Obama administration “charm offensive” with influential Capitol Hill Republicans – raised concerns among some deficit hawks that Mica had undercut the Republican governors who had rejected the federal money.
In early December, Mica had told the Jacksonville Business Journal that Florida should not accept any additional federal money. “I agree with [Governor] Scott in that it can't all just be paid through government money. We have committed $2 billion and the total cost is $2.6 billion. I want to see the private sector build, operate and help finance this, and I don't think we need to put more public money into it. If that doesn’t work, we need to scale it down.”
Less than two weeks later he met with LaHood and Florida was awarded the additional money. Last month, as President Obama was walking through the House of Representatives following his State of the Union address, Mica could be heard urging Obama to "put the rest into the plan for the high speed." A spokesman for Mica told THE WEEKLY STANDARD that his boss meant high-speed rail generally, not in Florida. Mica has supported high-speed rail in the northeast corridor.
In a statement announcing his decision, Scott listed three specific reasons for rejected the money.
o First – capital cost overruns from the project could put Florida taxpayers on the hook for an additional $3 billion.
o Second – ridership and revenue projections are historically overly-optimistic and would likely result in ongoing subsidies that state taxpayers would have to incur. (from $300 million – $575 million over 10 years) – Note: The state subsidizes Tri-Rail $34.6 million a year while passenger revenues covers only $10.4 million of the $64 million annual operating budget.
o Finally – if the project becomes too costly for taxpayers and is shut down, the state would have to return the $2.4 billion in federal funds to D.C.
The truth is that this project would be far too costly to taxpayers and I believe the risk far outweighs the benefits.
The Obama administration’s new budget proposes an additional $53 billion for high-speed rail, one of the administration’s keys to “winning the future.” In his State of the Union, Obama pledged to make high-speed rail available to 80 percent of Americans in the next 25 years. Some experts are skeptical that this goal is achievable at all. "You're talking there about a trillion dollars," says the Reason Foundation's Poole. "There's no conceivable funding source for a system of that scale."
The history of cost overruns and funding shortfalls was a major factor in Scott's decision.
“Let us never forget, whether it is Washington or Tallahassee, government has no resources of its own. Government can only give to us what it has previously taken from us.”
UPDATE: Transportation secretary Ray LaHood just released the following statement in response to Governor Scott's decision to reject federal funds for high-speed rail:
“We are extremely disappointed by Governor Rick Scott’s decision to walk away from the job creating and economic development benefits of high speed rail in Florida. We worked with the governor to make sure we eliminated all financial risk for the state, instead requiring private businesses competing for the project to assume cost overruns and operating expenses. It is projects like these that will help America out-build our global competitors and lay the foundation needed to win the future. This project could have supported thousands of good-paying jobs for Floridians and helped grow Florida businesses, all while alleviating congestion on Florida’s highways. Nevertheless, there is overwhelming demand for high speed rail in other states that are enthusiastic to receive Florida’s funding and the economic benefits it can deliver, such as manufacturing and construction jobs, as well as private development along its corridors.”