Talking Transportation: The For-Profit Railroad

Talking Transportation: The For-Profit
Railroad

That’s a suggestion I often receive from commuters hoping that railroads that treat riders like customers instead of cattle are incentivized to offer better service.  Sounds good in theory but, as the finance bros ask, “Does it pencil?”

Well, you don’t have to look further than Florida for some answers . . . and they are not encouraging.

Brightline is the privately funded and operated passenger rail line in Florida launched in 2018 with this promise: shiny, clean new cars, fancy stations with amenities, and on-board food service. Trains are comfortable with two-by-two seating and free Wi-fi.  They even offered a free first-mile/last-mile solution promising free rides to and from nearby stations.

Riders were gobsmacked. Initial service was between Miami and West Palm Beach, recently expanding to Orlando and with dreams of eventually pushing further west to Tampa.

Ridership by 2025 was projected to be 6.6 million annually.  In fact, it wasn’t even half that amount.  That year they lost $127 million, not counting an additional $114 million in interest payments on construction loans.

The railroad is also tied to over 180 deaths… most of them pedestrians and cyclists at grade crossings, of which there are 156 between Miami and West Palm Beach.  Brightline’s trains hurtle along at 80 mph (eat your hearts out, Connecticut rail users!), leaving no margin of error for impatient people at crossing gates who think they can just zip around the barriers.

On-time performance is about 94%.  And fares are reasonable. Miami to West Palm is about $30 one way for the 66-mile trip.  Compare that to Metro-North’s 72-mile run from New Haven to Grand Central, which costs about $23.50.  Both railroads offer peak and off-peak fares and commutation discounts.  But Brightline has something Metro-North doesn’t:  Premium (First) Class seats.

Even with 23 times the ridership as compared to Brightline, Metro-North still requires an annual subsidy of over one billion dollars, 26% paid by CDOT.   As a private railroad, Brightline (which is owned by freight carrier Florida East Coast Railway) has no subsidy, just a lot of debt.

While the farebox revenue is much lower than expectations (and doesn’t cover operating costs), Brightline is still trying to pay off its huge construction costs. This is what threatens its survival, not a lack of good train service.

Brightline borrowed $5.5 billion to prove what Wall Street never wants to admit: you can’t run trains like a retail franchise. Twenty-year bonds at five percent interest? That math worked fine until it didn’t.  Now the vultures are circling with fears of a Chapter 11 filing in early 2027. 

If that happens, the trains will probably keep running but fares may go up and dreams of westward expansion to Tampa could evaporate.  Some pieces of real estate may get liquidated and Brightline’s creditors will take control.

To be honest, comparing Brightline to Metro-North isn’t fair: a brand-new railroad constructed at huge costs versus an existing rail line operating far more trains with a much larger ridership.

And the lesson in all of this for publicly-funded passenger railroads like those in Connecticut?  Be thankful for what we’ve got: a multi-billion-dollar, century-old railroad on valuable real estate with a captive ridership that’s able, if not thrilled, to pay ever-rising fares.

About the Author: Jim Cameron is the founder of the Commuter Action Group and advocates for Connecticut rail riders. His column is published by several publications in the state.