Florida East Coast Industries Announces Ambitious Plan For Private Passenger Rail Service

 
on March 29 2012 12:33 PM

Private companies used to dominate American railroading, but the industry faced rough times as the twentieth century wore on. Private freight rail was eventually revived around 1980 through a series of deregulatory measures, but passenger service hasn't been profitable in half a century. Amtrak and a bevy of commuter railroads picked up some of the slack, but with mounting pressure from Republicans to staunch deep losses, U.S. passenger rail is in dire straits.

Proposed
Proposed routes, courtesy of allaboardflorida.com

But that narrative might be changing, as Florida East Coast Industries, affiliate of the storied Florida East Coast Railway, announced plans for All Aboard Florida last Thursday. The private, intercity service would initially connect passengers in Miami, Ft. Lauderdale, West Palm Beach, and Orlando, with possible future extensions further west to Tampa, and north to Jacksonville. With a substantial right-of-way and a well-run freight railroad that could be adapted to passenger service more easily than most, the major question that remains is that of funding.

The announcement at first sounded almost fanciful – public transit authorities are hemorrhaging cash, and passenger rail in the U.S. has so far mostly avoided the liberalization that has occurred in Europe and East Asia. But the Florida East Coast is no stranger to the industry: From Henry Flagler's first investments in South Florida in the late 19th century to the violent strikes of the 1960s, the FEC has been at the forefront of Florida railroading for over a century.

The hiring of Eugene Skoropowski lends the enterprise further credibility. A respected transit veteran who's worked in both the private and public sectors, he recently led Amtrak California's Capitol Corridor service to record ridership, reliability, and efficiency. Skoropowski will presumably lead the project as senior vice president for passenger service development, a position created for him by Florida East Coast Industries earlier this month.

Of the 240 miles of track needed to bring Florida East Coast trains from Miami to Orlando, the company's main line already covers the 200 miles along state's eastern coast, from Miami to the Space Coast city of Cocoa. Florida East Coast will need to acquire land and build tracks along the last 40 miles to Orlando, with All Aboard Florida spokeswoman Christine Barney saying on Monday, We expect that it'll be land that's already in public use. Some have speculated that the company could build new tracks in the median of the Bee Line Expressway.

No matter how the Florida East Coast gets passengers to Orlando, freight would surely follow. CSX currently has a monopoly on freight rail in Central Florida, but the FEC is no doubt eager to gain a foothold in Florida's third-largest metropolitan area. The railroad has made significant investments in South Florida ports in anticipation of the latest Panama canal expansion, which would be made more valuable by a higher capacity double-tracked main line and direct access to Orlando and Tampa.

Florida East Coast Industries emphasizes that the passenger service will be owned, operated, and maintained privately with no risk to Florida taxpayers, perhaps seeking to distance itself from Florida's recently-canceled public high speed rail proposal. The project was championed by the Obama administration and had already won federal funding, but Florida's newly-elected Republican Governor Rick Scott axed the line after saying he was afraid that state taxpayers would be liable for operating costs.

The project's backers are less specific about construction costs. Barney said that the vast majority of the costs, which the company estimates at $1 billion, will be covered privately, but left open the possibility that the company could seek subsidies or financing for construction.

Randal O'Toole, a senior fellow at the Cato Institute, speculated that the company might look for a loan from the federal government, emulating the strategy of DesertXpress, a privately held company whose $4.9 billion federal loan application decision is due by mid-year. The firm, which envisions building high-speed rail from Las Vegas to Victorville, Calif., has sought a loan from the Federal Railroad Administration's Railroad Rehabilitation & Improvement Program, which finances public passenger proposals along with projects by non-Class I freight carriers. (The FEC was the smallest Class I railroad until 1992, when a change in the upper bound for annual revenue changed it to a Class II.)

The Florida East Coast is a much smaller railroad than the well-known Class I carriers like CSX and BNSF, but it has a number of attributes that make it uniquely suited for passenger rail. The railway hauls a large amount of time-sensitive multimodal freight – that is, goods that are transferred to and from trucks and ships – which is operated more like passenger service than the slower bulk freight that dominates the interior of the country.

As a result, the Florida East Coast has some of the most sophisticated signaling of any freight railroad in the United States, allowing cargo to travel at up to 60 miles per hour. Most of the track is currently rated for passenger speeds of up to 80 miles per hour, but further upgrades will be needed to bring the line up to the 110 miles per hour maximum speed touted in All Aboard Florida's press release.

The railroad also has a history of tough labor relations, which may presage conflict again as the company seeks to profit where labor-heavy American public passenger railroads have not. Beginning in 1963, the railroad was the scene of one of the longest and most violent strikes in modern history, dragging on for more than a decade. Management sought to do away with seniority restrictions and what it considered to be wasteful featherbedding, or make-work rules, and strikers responded to the FEC's use of scab labor by bombing and shooting at freight trains. The FEC eventually prevailed, and the labor savings kept it in business and gave it the ability to invest the capital needed to bring it to up its current prime state.

The days of dynamiting and derailments are behind the Florida East Coast, but some in organized labor have reservations about FEC's plans. Frank Wilner, national spokesman for the United Transportation Union, which represents many FEC workers, warned that the new operation may be contracted out, and the private contractor may attempt to use non-union labor. Because the Florida East Coast operates only within the state, Wilner said, it could try to avoid participating in a number of federal railroad worker programs, including the Railroad Retirement Board, the Railway Labor Act, and Federal Employers Liability Act.

He did, however, emphasize the distance between labor relations today and relations in the days of Ed Ball, who owned the company during the strikes. No one can really draw any similarities between what happened in the 1960s and what's happening today, Wilner said. Ownership is different, all of the players are different, and the UTU and all the other unions have a very cordial relationship with the FEC.

A
A postcard from the '40s or '50s, showing a Florida East Coast passenger train

The announcement of passenger service on the Florida East Coast will also affect existing public transportation throughout Florida. South Florida commuter railroad Tri-Rail has considered shifting its trains from its current line, which the Florida Department of Transportation bought from CSX in 1989, to the the parallel FEC main line, which runs through more densely populated coastal areas. Amtrak has also been eyeing the FEC main line for intercity service all the way up the coast from Miami to Jacksonville, and late last week settled liability issues related to the planned service, though funding does not appear to be forthcoming.

Christine Barney said that the Amtrak and FEC plans, which would run the same route, are not exclusive, and that the company would not see any problem with the line's capacity, but that at this time our project is not involved in any way.

Steven Abrams, a Palm Beach County Commissioner and vice-chair of Tri-Rail's governing board, called the proposal complementary to our commuter service and said he wished FEC well, pointing out that All Aboard Florida would be a regional service, while Tri-Rail serves a commuter market. Abrams said that he was notified of the plan before the announcement by an executive at the Florida East Coast, but that they were not working in coordination on the new passenger service.

Fellow board member Bruno Barreiro, a Miami-Dade County Commissioner, expressed similar hopes. I personally believe in some areas, especially going downtown, [the FEC] should have elevated rail, he added in a phone interview on Friday. When you have 250 street crossings [in the tri-county area] and you're putting through a substantial amount of trains, it starts to have a huge impact on the roads.

In a transit feasibility study done in 2006 on the southernmost 100 miles of FEC's track, researchers counted an average of two and a half at-grade crossings per mile, with one segment in West Palm Beach having ten crossings in under a mile. Beyond impacts on traffic, grade crossings annoy local residents, who have to endure Federal Railroad Administration-mandated horn blowing at each intersection.

And of the real estate around the railroad that could benefit from passenger service, only one such parcel remains in the hands of FEC shareholders. The property portfolio of the modern-day Flagler Development Company, named after the Florida East Coast founder who turned down the opportunity to name the city of Miami after himself, is concentrated instead in outlying commercial and industrial areas. (Flagler Development was spun off of from the railroad as a real estate investment trust by Fortress Investment Group soon after it purchased the railroad and its land in 2007.)

The only piece of real estate that could benefit from passenger service is a 9-acre strip of land in Miami's fast-growing historic downtown, which has 2,500,000 square feet of entitled development rights – about the same size as the new 1 World Trade Center in lower Manhattan.

Florida East Coast Industries' passenger proposal is still in its infancy, and much remains to be done before the first passenger tickets are taken. Many of the details are a bit ambitious – from the 2014 opening date, to the $1 billion price tag, to the about three hour Miami-Orlando travel time – and it remains to be seen if the company can come up with financing. But if any freight railroad in the United States can bring profits to passenger rail, it's hard to think of a better candidate than the Florida East Coast.

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