An Economic Analysis of All Aboard Florida

Download: AAF-Friedman-Report_.pdf

All Aboard Florida (AAF) proposes building a 220-mile line connecting the Miami area with Orlando via long-distance train. This study analyzes the market for this mode of transportation, as compared with alternative travel options, to project fares and annual ridership. It then takes these projections to assess the overall economic feasibility of the project. Finally, the report studies the size and efficiency of the taxpayer subsidy for All Aboard Florida through the issuance of tax-exempt Private Activity Bonds. The primary conclusions of this report are as follows: 

All Aboard Florida will generate an average ticket price of $34 and attract between 1.5 and 2 million riders. 

Train fares are limited for business travelers by the relatively cheap airfare for the one-hour flight between Miami and Orlando, as well as the fact that – unlike other long-distance trains – All Aboard Florida will arrive at the Orlando airport rather than downtown, which is more advantageous to passengers. Fares for personal travelers will be limited by the relative ease of car travel. Train ridership will also be limited by high levels of urban sprawl and the lack of connecting public transit. 

All Aboard Florida will generate annual losses of more than $100 million and will be unable to service its large debt burden. 

Under optimistic projections, this report projects annual revenues of $95.8 million, operating costs of $81.5 million, and debt-service costs of $125 million, for annual losses of $110.7 million. AAF has no way to pay the resulting annual deficit, except perhaps by non-train-related business such as real estate profits. 

All Aboard Florida would have to charge $273 per train ticket one-way, even under unrealistically optimistic assumptions, in order to service its debt. 

The revenue required to service its debt is more than twice as large as actual projected revenues. The implied fare of $273 required to raise this revenue – even holding ridership constant – would be $145 more expensive than airfare on the Miami to Orlando route. But of course ridership would fall drastically at such high prices. 

All Aboard Florida will benefit from between $50 and $73 million of annual taxpayer subsidies. 

All Aboard Florida plans to issue $1.75 billion of Private Activity Bonds, which are tax-exempt bonds similar to municipal bonds. The foregone tax revenue is an inefficient taxpayer subsidy of $37-$60 million for a private enterprise. AAF will also benefit from another $13 million of annual subsidies from the State of Florida and local governments in the form of state-funded station in Orlando and safety upgrades and maintenance along the rail line.

Product Files (DOWNLOAD)
Report on the feasibility of the All Aboard Florida project

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