The Twisted Tale of Talgo
Settlement forces state to pay more for trains it didn’t get, leaving it with slower Amtrak trains.
The story of Talgo, the Spanish manufacturer of trains, and its dispute with Republican leaders, just keeps getting worse for taxpayers.
Last week we learned that state officials have agreed to pay $9.7 million more to the Talgo company to settle a suit by the company over two state-of-the- art train sets that state officials agreed to buy before later canceling the deal. This settlement of a nearly three-year-old lawsuit would bring the total costs to the state for the rejected trains to about $50 million, reporter Jason Stein wrote in a story for the Milwaukee Journal Sentinel, and “reflects the depth of the political disagreement” between Democratic Gov. Jim Doyle and his successor, Republican Gov. Scott Walker.
In reality, the cost to taxpayers is considerably higher, and the suit was caused not by a disagreement between Walker and Doyle, but between Walker and Republican legislative leaders. Yes, Walker famously rejected the high speed, Milwaukee-to-Madison-to-Twin Cities rail project that would have used Talgo trains. But Walker made it clear as soon as he was elected that he supported the use of the newer Talgo trains for the Milwaukee-to-Chicago Hiawatha line, which still used the old-fashioned Amtrak trains.
As Walker noted in a Milwaukee Journal Sentinel story in March 2011, he had always supported improvements to improve and speed up the Hiawatha line, even as he opposed the high speed rail line through Madison. “This is not inconsistent with the position I took in the past,” he said.
As Nora Friend, Talgo’s vice-president for public affairs, told me in May 2012, the company was disappointed with the cancellation of the Madison project, but still intended to retain its Milwaukee manufacturing base, because Walker had made it clear he would honor the state contract for the Hiawatha line from Chicago to Milwaukee. “Gov Walker called us,” Friend recalls. “He said I am a supporter of the Hiawatha Project. I have no issue with it.”
But Republican legislators, over the objections of the Walker administration, decided to reject the Talgo trains. As the suit by Talgo noted, the Walker administration and GOP lawmakers waited more than a year to go back on the state’s order with Talgo for the Milwaukee-Chicago train sets, as the company continued to spend money for the contracted work.
GOP legislators claimed the decision would save money for the state and cited a Legislative Fiscal Bureau study. But the report was based on assumptions GOP lawmakers asked the bureau to use and did not take account of savings on fuel for the lighter Talgo cars, which the company says would save some $300,000 a year. Nor did it take account of potential revenue increases from switching to the state-of-the-art Talgo cars, which attracted a 40 percent increase in ridership in Washington State in the first year there. Nor did it factor in the $11 million spent on the project by Milwaukee, nor the possibility that Illinois might chip in some subsidy for the Talgo trains (that state now pays 25 percent of the cost of the Hiawatha line).
Republican Assembly Speaker Robin Vos told Stein that at the time the legislature killed the deal for Talgo’s Milwaukee-to-Chicago train cars, he believed the state had protections against legal action by the company. But no such legal opinion was cited at the time, and as Stein reports, then-state Rep. Jon Richards (D-Milwaukee), an attorney and budget committee member, had warned that the Joint Finance action was inviting a lawsuit for breach of contract and was “completely foolhardy and irresponsible.”
Vos told Stein the legal settlement with Talgo is “is just another reminder of the dark days of Jim Doyle.”
Those “dark days” secured $810 million in federal funding that would not only have paid for construction of the high-speed rail line from Milwaukee to Madison, but would have paid for the maintenance base to keep up the Talgo trains for both the Hiawatha line to Chicago and the extension through Madison. All told the federal grant would have paid for $99 million in costs to upgrade the current Hiawatha line.
To help attract Talgo’s plant to Milwaukee, the city spent nearly $11 million and state invested another $3.5 million to upgrade an 82-acre site, paying for new tracks and pavement and retrofitting and making additions to the old AO Smith warehouse Talgo used before abandoning it. The state also issued bonds for the rail improvements which have presumably been cancelled, but I’ve yet to see any cost figure for this.
Meanwhile, the state has paid about $40 million for the Talgo trains it will never get to use and has now agreed to pay the company an additional $9.7 million in damages. The state could be reimbursed the $9.7 million, if Talgo is able to sell the train cars for at least $29.1 million.
Walker said he rejected the high speed rail project because he objected to the estimated $30 million in operating costs the state would face for the train’s first 20 years. In fact, as experts noted at the time, the majority of those costs were likely to get picked up the federal government, given past practices. But even if the total cost was $30 million for Wisconsin, the total costs to taxpayers for the Talgo debacle are now up to at least $65 million, with nothing to show for it and more costs to come when the Amtrak trains need replacement. Those dark days of Doyle’s transit policies are looking pretty sunny right now.
Talgo Trainsets Leaving Town in 2014
More about the History of Talgo in Milwaukee
- Eyes on Milwaukee: New Locomotives for Amtrak - Jeramey Jannene - Sep 1st, 2017
- The Return of Talgo - Graham Kilmer - Jul 17th, 2017
- Plenty of Horne: Welcome Back, Talgo USA! - Michael Horne - Nov 25th, 2016
- Eyes on Milwaukee: Talgo Coming Back to Milwaukee - Jeramey Jannene - Sep 26th, 2016
- Op-Ed: Walker’s High Speed Folly - Spencer Black - May 26th, 2016
- Murphy’s Law: The Twisted Tale of Talgo - Bruce Murphy - Aug 25th, 2015
- The Last Train from Talgo - Bruce Murphy - May 29th, 2014
- Back in the News: Michigan May Get Talgo Trains - Bruce Murphy - Apr 14th, 2014
- Plenty of Horne: State Delays on Talgo Claim - Michael Horne - Dec 12th, 2013
- Back in the News: Talgo Files Claim Against State - Bruce Murphy - Nov 8th, 2013
- Murphy’s Law: Did the State Screw Talgo? - Bruce Murphy - May 31st, 2012
- Eyes on Milwaukee: Tour the Talgo Trains You Might Never Ride - Jeramey Jannene - May 17th, 2012
- The train is gone, why does Talgo have to go with it? - Patti Wenzel - Dec 13th, 2010
- Talgo Location Choice a No-Brainer – Milwaukee - Jeramey Jannene - Jul 30th, 2009