This article was written before the Grupo Mexico purchase was finalized, but published months after the deal was complete. However, there is a great deal of pertinent information about the structure of the train company so that the parent companies are protected, but taxpayers will be on the hook in the event of failure.
Few railroads have ever been truly “privately funded.” While many were constructed by private corporations, the construction was underwritten by governmental largesse via tax-exemptions, land grants, and the issuance of public bonds. As described by historian Richard White, the story of the railroads is the story
of how “public resources were turned into private capital.”23 The Brightline project, as a “privately-funded” project, is not inconsistent with this assessment.
At the beginning of this investigation, the authors sought
to understand how Brightline would be a profitable, privately-funded passenger rail service. What was discovered is a far more complicated reality, where the project’s direct benefits are, at best, uncertain, and where the application of creative financing arrangements allow FECI to shift the project’s costs and liabilities onto the public. The project’s structure as a series of limited liability corporations, backed by payment-in-kind bonds, insulates the project’s parent company from potential losses. Should Brightline fail, FECI can abandon rail service with little direct liability, while retaining ownership of the double-tracked corridor and the corresponding freight benefits.
Even under the most generous interpretation, the Brightline project provides FECI with a mechanism for doubling the system’s freight capacity while masking its environmental impacts from public review. For transportation professionals tasked with representing
the public interest, Brightline suggests that such “privately-funded” projects should be regarded with a healthy dose of skepticism
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