There already are additional fees on the tickets for 9/11 fund, facility charges, TSA funds and other taxes. The airline industry, through a steady stream of mergers and acquisitions over the past several years, has become much more concentrated, is experiencing much less resistance to fare increases especially for higher fuel prices, as many travelers will attest.
Additionally, airlines are now bringing in billions of extra dollars in additional revenue for items passengers used to get for free. These “extras” include checked baggage fees, food on plane, ticket change fees, seat fees, etc. It is unlikely that the HSPT user fee will have a major impact on airline revenues, especially since airlines get a major benefit from NextGen.
Another issue that will need to be worked is the acceptance by affected parties of the benefit of P3s. Some unions, frankly, do not trust them. Railroad unions, especially, are concerned that long-term benefits on labor security may be jeopardized. Construction unions are concerned that P3s will adversely impact their ability to negotiate project labor agreements (PLA), which tie all labor costs on a construction project to the union scale.
Developers have a different set of concerns. Although popular in Europe and Asia, many American developers are not particularly comfortable building on land that they do not own. This will be a different model for American developers, and may necessitate longer lease terms to mitigate risk, but as long as the financials work, it should not be an insurmountable problem.
Rail advocates and the public are concerned about the diversion of public assets to private corporations. There is great resistance to seeing Amtrak privatized, which could potentially lead to the discontinuance of its heavily subsidized long-distance, overnight routes.
Also, many in the public are leery of political leaders to selling valuable state assets to a private company, especially if the proceeds from the sale are not used in the long-term public interest. This proposal is careful to note that the state assets are not sold; they are leased. More importantly, at the end of the lease term, the private party must return the leased asset to the state in as good a condition or better than it received it for existing assets or in full operational conditions for newly developed assets.
But perhaps the thorniest issue relates to capturing value from existing property assets near new HSR train stations. General rule of thumb is that the land within a quarter mile of a train station is very attractive from a development standpoint. Some planners would go so far as a half-mile away. In some areas, this will not be a problem as the prime locations are in need of redevelopment, and the land can be acquired relatively easily and inexpensively by Eminent Domain.
This would obviously not be the case with stations like Penn/Moynihan Station in New York City and Union Stations in Washington, D.C. and Chicago, Ill. It may now be necessary to enter the world of Business Improvement Districts (BID) and Tax Incremental Financing (TIF) rather than seizing properties by Eminent Domain. The risk is that BID or TIF revenue alone may not be enough to make the financials work. There may need to be legislation that would treat the private buildings near HSR stations as property tax-free entities, like hospitals or universities, with the developer receiving the property tax income and making Payments in Lieu of Taxes (PILOT) to the city to compensate the local government for city services. Depending on the situation, a portion of the rent or lease payments may also need to be allocated to the HSR builder.
Why so much revenue back to the builder/developer? As indicated earlier, the best and cleanest way would be for the government to acquire all the land around the stations and lease it to the developer. This is necessary because, while HSR will cover its operating expenses, it cannot recover its capital expenses quickly enough to build out the entire rail network in a timely manner.
It requires the additional financial kicker it will get from TOD revenues. These revenues will be needed to construct the thousands of miles of HSR lines, build the commercial and retail spaces around the stations, pay back the original $100 billion bond offering that was used to prime the pump, upgrade and modernize the existing HrSR speed rail lines, and continue to innovate on the HSR lines.