Texas Looks to State for High-Speed Rail Funding

Multibillion-dollar project could fail if financing falls through

AFTER seeing Congress pull the plug on the Superconducting Super Collider, Texas could soon lose another multibillion-dollar project: a proposed 200-mile-an-hour railroad. Only this time, the decision rests with Texans themselves.

Three years ago, Texas awarded a franchise for a high-speed rail system connecting the Houston-Dallas-San Antonio triangle. The franchisee, now called Texas TGV Corporation, promised that the private sector would pay all the costs. But in December, Texas TGV executives announced that they would not be able to meet a year-end deadline to raise $170 million. ``We've more or less told [state regulators] there needs to be a restructuring, a relooking at how this project ought to be done,'' says David Rece, president of Texas TGV in San Antonio. ``We're waiting for them to evaluate what their next step is.''

Marc Burns, executive director of the Texas High Speed Rail Authority, says attorneys are determining the authority's options. The 11-member board is expected to meet late next month to decide what to do.

At stake is a $6 billion rail system - $8 billion if the cost of financing is counted. Backers say it is an essential component of the intermodal transporation network that will be needed by 2015, when three times as many people as today will be traveling within the three-city triangle. High-speed rail also has potential environmental advantages, requiring less land than a highway and powered by electricity.

The Intermodal Surface Transportation Efficency Act of 1991 set aside money for high-speed rail corridors. Many have been designated: Boston-Washington, New York-Albany-Buffalo, Washington-Richmond-Charlotte, and Miami-Orlando-Tampa on the East Coast; Detroit-Chicago-St. Louis and Milwaukee-Chicago-St. Louis in the Midwest, and San Diego-Los Angeles-Oakland and Portland-Seattle-Vancouver on the West Coast.

``When you lay those black marks out on the map, you see the beginnings of a national intercity high-speed rail system,'' says Gil Carmichael, who was federal railroad commissioner under President Bush. ``And the Texas piece is the premier part of the whole thing.''

Mr. Carmichael is now a vice president of Morrison Knudsen Corporation, the Idaho-based construction giant and Texas TGV's largest shareholder. Morrison Knudsen had intended to underwrite the $170 million financing that Texas TGV set out to raise in United States and European financial markets. When it changed its mind, the financing collapsed. ``We would have exposed our shareholders to the full potential of having to shut that thing down,'' Carmichael says. Adds Mr. Rece: ``This is a very big risk at this stage.''

That is one reason why Texas, which is asking the federal government to repay millions of dollars it spent on the supercollider, chose not to invest scarce state tax revenues in high-speed rail. ``Our transportation and environmental needs have already collided,'' Burns says. ``At the same time, while our schools and health care and prisons are so plainly inadequate, it's pretty hard to get people to focus on something that might not be palpable today.''

Although Carmichael says Texas TGV has ``a lot more information'' than it did three years ago, and now it knows public participation is essential, company executives were saying as much two years ago. In a prospectus it published last year, Texas TGV for the first time stated that 25 percent of the $8 billion would come from public funds.

Rece suggests using some of the $1 billion a year that Texas receives in federal highway funds. But Tom Griebel, assistant executive director of the Texas Department of Transportation, says federal regulations preclude that. Besides, the federal money only covers 60 percent of needed highway projects. As for the rest, ``we're not doing them,'' Mr. Griebel says.

Texas cities could pay for one-half of the $2 billion of public funds needed by building their intermodal terminals, just as they pay for airports, Carmichael says. He says he would also like the state to buy the right of way and lease it to Texas TGV, using federal matching dollars. But Texas cannot qualify for federal funds until it agrees to invest state money. That would require an act of the Texas Legislature, which is not scheduled to meet until 1995.

``I've got an $8 billion project that includes a factory to manufacture and assemble the train sets, and I need 25 percent participation,'' Carmichael says. ``If [my state] had this opportunity, my governor would call a special session tomorrow morning.''

In fact, Texas TGV, which has already spent $40 million on the project, has made such a request of Gov. Ann Richards, Carmichael says. But ``it's been caught in the political crossfire. [Southwest Airlines chairman and vehement rail opponent] Herb Kelleher is a major force in Texas,'' he says.

``Texas needs to say, `We want to work with you and help put this together.' Right now, Texas is not saying that,'' Carmichael says.