The private-sector Brightline passenger rail service connecting Miami and Orlando appears to be struggling.
Railways, say anti-car puritans, are part of the solution to America’s supposed transportation horrors. Collectivist bliss on the tracks is the way to go, efficient, planet-saving and (whispers) a gift to organized labor. Driving where and when you want is so retrograde. People will leap at the chance of hopping on a train. Fixed destination. Fixed timetable (theoretically). None of that pesky choice!
The Brightline train running from Miami to Orlando, lauded as an alternative vision for the future of American rail travel, is making some investors anxious.
The concerns have amped up since Bloomberg reported earlier this month that Brightline was going to delay an interest payment on $1.2 billion of bonds it issued through the municipal-bond market, one of several different types of debt issued by various arms of the company.
Brightline’s ridership and revenue have lagged projections, creating a growing number of financial hurdles for the Fortress Investment Group-backed project and defying the enthusiasm about the train shared by Ron DeSantis and Joe Biden.
Ridership has lagged projections?
Yes. So far it looks as if ridership will miss expectations by about a half, and revenues by more.
The good news is that Brightline is a private-sector project, the first in the U.S. for a century, viewed as an alternative to the approach adopted by Amtrak and whatever it is that they are building or not building in California. That ought to mean that the company can deal with its difficulties (if they can be dealt with) in a speedier, more efficient way.
If the worse comes to the worst, the rails will still be there, and new owners might be able to fare better with them. Go back to the development of railways in the 19th century, and this was a not unfamiliar pattern. Some ideas don’t work. Some ideas need more than one attempt to be made to work. The essence of free-market development is trial and error. Thus electric cars led the way at the beginning of the 20th century, and did well, until they were overtaken by the internal combustion engine, which did better. Lesson learned (for a while).
At least no public money was involved in funding Brightline:
The underperformance led S&P Global Ratings and Fitch Ratings to downgrade some of the tax-exempt municipal bonds associated with the project into junk territory earlier this year, while the corporate debt was cut deeper into junk.
Oh.
When then-Brightline executive Mike Reinenger appeared before Congress in 2017, he told lawmakers the private train company would not be using any taxpayer dollars. “It’s completely an investment of private capital,” he said.
Today, seven years after the rail company opened for business, nearly a half-billion taxpayer dollars have been allocated to projects related to Brightline trains, a joint investigation by the Miami Herald and WLRN News has found.
Oh.
It may be that Brightline will be rescued by Florida’s population growth. If so, fine, especially if it can be shown to have attracted people to the area it serves.
Or it may be that Floridians will be “encouraged” to use it in the same way say that Congestion Tax advocates in New York have “encouraged” those driving into or within parts of New York City to take public transport, although I doubt that Governor Ron DeSantis would go down that route.
Bloomberg:
Any attempt to raise new debt in the corporate junk-bond market would likely be very expensive, according to some of the people. That’s because the existing notes yield more than 24%, according to Trace pricing data.
There’s a message there.
And there are others. Let’s throw in some of the words that climatists and “new” urbanists (to the extent there’s a difference) like to use about cars: Some people, particularly in a small number of large cities, are “addicted” to trains or are “dependent” upon them (I’d be stuck without the subway myself), but most Americans prefer to drive.