Analysis: Taxpayer cost for Walker’s breach of contract with trainmaker rises to $50M

Wisconsin taxpayers are on the hook for a modernizing rail transportation project Scott Walker nixed when he took office as governor, breaking a contract that ex-Gov. Jim Doyle’s administration entered into with the Spanish trainmaker Talgo. 

Under terms of a settlement made recently in a lawsuit that Talgo filed against the state, Wisconsin will pay $9.7 million to Talgo in addition to the $42 million it’s already paid the company. The total bill taxpayers must pay for trains the state never received or used is $50 million.

Talgo had originally sued the state for nearly $66 million.

Doyle and the state’s then-Democratic Legislature agreed in 2009 to purchase two new train sets from Talgo. They were to be used for Amtrak’s popular Hiawatha line between Milwaukee and Chicago, as well as for a high-speed rail project between Milwaukee and Madison.

In addition to agreeing to purchase the trains, the state had entered into a 20-year maintenance agreement to service the trains, a deal to provide a maintenance facility and an option to purchase two additional train sets.

The deal fell victim to politics, as the new governor sought to burnish his credentials as an “anti-big government” conservative. The rail project was tied to $810 million in federal stimulus money to help pay for it, but Walker rejected the federal funding, depicting it as part of a scheme to foster state dependency on Washington.

Still, Talgo continued building the train sets that the state had agreed to purchase. In January 2012, Talgo notified the state they were ready for delivery, but the Wisconsin Department of Transportation refused to accept them. In November 2012, Talgo canceled its purchase contract with the state.

According to the settlement, Talgo will try to sell the two train sets it built for Wisconsin to another buyer. If successful, the train manufacturer will give 30 percent of the sale price to Wisconsin. 

But Nora Friend, the company’s vice president of public affairs and business development, told Milwaukee Business Journal that it would be difficult to find a buyer. Part of the problem is that the trains were not built to meet federal specifications, because they were paid for by the state, according to MBJ.

“We are hopeful we will find a state that is actually open to doing business and actually honors their contracts,” Friend told the publication.

Politics over people

Walker’s critics say the rejection of federal money and the subsequent loss of jobs and high-speed rail was the first in a series of destructive economic decisions the governor made.

Walker’s public argument at the time was that the project would eventually cost the state millions in maintenance fees.

But advocates for the project claimed it was potentially a vital economic development engine that would create jobs and spur new business growth along the rail line, as it has in other regions that have modernized rail.

In light of the Talgo deal, critics charged Walker with hypocrisy when he sought to borrow more than $1.3 billion for new highway projects in the 2015–17 biennial budget. At the time, Walker argued that the road construction would help create jobs. That’s something Walker has said the government should not be in the business of doing.

Walker also has been criticized for saying yes to the considerable federal funds that the state receives for road construction while turning down funds for other forms of transportation. He enjoys major financial support from roadbuilders and donors whose wealth is tied to the fossil fuel industry, leading to accusations that his transportation decisions are being made on their behalf rather than that of the state’s residents. 

Some of the highway projects Walker supports were found to be unnecessary, according to an independent audit of traffic flow patterns commissioned by 1000 Friends of Wisconsin.

A court decision earlier this year denied federal funds for a project to widen Highway 23 due to faulty traffic-flow projections from WisDOT. In response, the Republican-led Legislature included an item in the budget requiring WisDOT to reevaluate and justify its methods of traffic projections.

Walker vetoed that item, which watchdog groups said could have saved Wisconsin taxpayers billions of dollars.