Skip to comments.A Railroader’s Plan for Amtrak (Mine: Privatization with a difference)
Posted on 08/16/2002 6:18:19 PM PDT by CedarDave
A railroaders plan for Amtrak
Susquehannas Walter Rich thinks Class 1s should get back in the passenger business but not in the traditional way
by Bill Stephens
| Walter Rich the man who transformed sleepy short line New York, Susquehanna & Western into a key transcontinental link for double-stack traffic has crafted what seems to be a sensible plan for saving Amtrak.
At first blush, the plan seems to be a non-starter. Thats because Rich envisions having the Class 1 freight railroads resume operating passenger trains for the first time since they fled the money-losing passenger business three decades ago.
Class 1s have scoffed at recent suggestions they pick up passenger operations again. Thats true, notes Rich. But thats because theyre looking at the traditional model.
The twist in Richs plan and really what sets it apart is that the freight railroads would form a joint company to operate a national passenger network.
The company, modeled after Trailer Train, would receive incentives that would make the Class 1s want to participate.
Tax credits would replace subsidies and appropriations
The two major incentives, Rich says, would be federal tax credits to offset losses associated with passenger trains, and provisions insulating freight railroads from liability involving passenger train accidents.
You have a body of people out there, the leaders of the Class 1 railroads, that know how to run railroads the finest railroads in the world, Rich says. Theres no reason they couldnt do the same thing for passenger trains, he reasons.
In this, Richs plan echoes United Transportation Union President Byron A. Boyd Jr.s call for a summit of rail industry leaders to solve the passenger rail problem. Rich credits Boyd with getting him thinking about how Class 1s could be a part of a solution to Amtraks woes.
Figuring out how to pay for it was Richs contribution.
These guys are in business to make money, Rich says of Class 1 leaders. At the end of the day, they want to make money for their stockholders. Obviously, if you put together an incentive, theyd be happy to do it.
Rich notes that Trailer Train has proven to be successful. Its a great model of how railroads can get together to run something and run it well, he says.
Add to that model the incentive of federal tax credits which would fully compensate railroads for passenger train losses and you have a formula that could prove attractive to Class 1s, says Rich, who heads the Cooperstown, N.Y.-based Delaware-Otsego Corp.
Freight railroads have been quick to point out that Amtrak doesnt pay its way for the use of their tracks. The Association of American Railroads claims that the freight railroads subsidize passenger service because they can charge Amtrak only incremental track use costs, not the full costs, which include capital improvements and the full market value of a slot on the main line.
Rich says the tax incentives could be structured to account for the full operating and capital costs of providing passenger service. That, in itself, would be an incentive, he says.
Clearly, providing a quality passenger service isnt going to make money, Rich says. After 9/11, theres demand for it.
What railroads would need to fill the demand, he says, is a guarantee that theyd get paid for providing passenger service. The system cant rely on annual appropriations from Congress, he says. Just look at how Amtrak has fared under that system, simply lurching from crisis to crisis.
By using tax credits, the passenger railroad operating company would be reimbursed automatically, and then the freight railroads would be reimbursed based on their level of passenger train operations.
The tax credit idea, Rich says, also would help remedy some of the harm done to railroads by federal subsidies of highway and aviation systems.
The cost: about the same as now
Housing a national passenger train system under the private umbrella of the railroads has other advantages, Rich points out.
Amtrak is a political creature. It depends on Congress for appropriations, its board is dominated by political appointees and its route structure is dictated, to a certain extent, by political considerations. This is not a recipe for good railroading.
Rich envisions a board of directors that includes the CEOs of the participating railroads, plus a federal transportation official. It would be run by railroaders, with political input but not political decisions, says Rich, who notes that hes a fan of how new Amtrak President David Gunn is sorting out the railroads organizational flaws.
Another advantage, from the railroads perspective, would be the removal of the privatization schemes floated by the Bush administration and Amtrak Reform Council. Those plans call for private companies to bid on Amtrak routes.
The Class 1s dont like this because they dont want to have to deal with several operating companies, or have to grant them access to their tracks. The AAR noted that it was deeply concerned thats PR-speak for hopping mad about the proposal to franchise Amtraks operating authority.
By operating passenger trains themselves, the Class 1s would avoid this problem, Rich notes. Plus, theyd eliminate the perceived threat of competition posed by Amtrak Mail and Express.
How much would it cost Uncle Sam, in terms of lost tax revenue, to support the private passenger company? About the same as it costs now to run the railroad, or about $1 billion annually, Rich estimates.
The costs would be higher because railroads would be fully reimbursed. But the Class 1s would likely do a better job of running the passenger company, and would make it more efficient, which would save money. So at the end of the day, youre probably back to a billion or so that Amtrak needs to run, Rich says.
The Amtrak map would be the starting point for the new Class 1-owned company, Rich says, although it might get nibbled around the edges.
Rich says the plan wouldnt address things such as ownership of the Northeast Corridor.
You have to be careful not to get hung up in the details, or youll never get anyplace, he says.
Rich, who has discussed his plan privately with a handful of railroad officials, as well as the UTUs Boyd, says it has been well-received. People are intrigued with it, he says. I havent had anyone say it was stupid.
When Boyd called for a passenger rail summit last year, Union Pacific, Burlington Northern Santa Fe, CSX, and the Federal Railroad Administration all expressed support for the concept. Only Norfolk Southern had no response.
Canadian National Chief Operating Officer E. Hunter Harrison has said that his railway would be interested in operating passenger trains provided it made business sense. Its uncertain whether other Class 1 railroads feel the same way.
One things for sure, though: Railroads can get together to respond to the privatization issue themselves, or stand idly by with the potential for unknown private operators to gain access to their tracks.
Richs plan appears to be a practical alternative the railroads could live with as long as they can overcome three decades worth of operating department resistance to running passenger trains.
Each Friday, TRAINS news wire editor Bill Stephens takes an in-depth look at todays railroad industry.
The common misconception, which you have apparently bought, is that rail doesn't get federal subsidies but air and highways do. Bull $hit. Air and highways are funded, almost exclusively, by "user fees", gasoline taxes and "airport" taxes. Rail, in the form of Amtrak gets more direct subsidy from the federal government when you consider the only basis that makes sense - passenger miles.
Airlines, after 9/11 got $5 billion plus loan guarantees of another $10 billion - a total of $15 billion. I've seen data that showed that if airlines got the same subsidy as Amtrak, they would have gotten $45 billion, not $15.
Amtrak's problem is the same problem that major airlines have - like US Airways, United, etc.. That proplem is unions and featherbedding. Why are airlines like Southwest and JetBlue making money? No union.
Unions have destroyed every industry that we once had in this country - steel, textiles, railroads, airlines, you name it. And now they infest the government and you can see what they're doing to that.
Ha! After the merger of two western railroads, boxcars were missing for weeks.
There's a reason this country has become so dependant on trucking and it's not because we have the best run railroads!
Talk of railroads "paying their own way" is specious; no mode of public-accommodation transport pays its own way. Just this week, for example, American Airlines and United both announced big staff/service cuts, and USAir went belly up -- and this AFTER a zillion-dollar donation from Uncle Sam to cover losses resulting from 911. The truth is that air and road transportation could not exist if they had to operate by "paying its own way"; if the taxpayers didn't cover the costs of airport construction and maintenance, air traffic control, and navaids, (not to mention the military R&D that developed the basic technology of large aircraft) there would be no commercial air travel in the United States. As for buses and trucks, forget it; the largesse of Dwight Eisenhower and his enormous coast-to-coast road network make their operations possible. In both cases, the transportation infrastructure is built and maintained at taxpayer expense.
By contrast, the railroads build and maintain their own infrastructure, and turn a handsome profit as well.
The federal government has no more business running a railroad than they do operating a trucking company. What they do have the responsibility for is providing the basic infrastructure for a modern national rail system. Uncle Sam should get out of the railroad business and go back to what he does best: helping the private railroads do their own business.
My question is: why don't we have a system likr that here?
I visit Europe regularly (and plan on buying a second home there in the near future). One reason I plan on retiring there is the ease and comfort of travel via their highly developed integrated rail system. Using the ordinary express trains, for example, it becomes possible to live up to 100 miles away from one's place of business in Paris and still have commute times comparable to those found in US cities. For example, I could live in country comfort in the Ile-de-France and easily commute into Paris by RER and Metro -- REGIONAL transit systems. (By using bullet trains such as the EuroStar or TGV, one can live even farther out; London is three hours from Gare du Nord by EuroStar. One could live in Paris, telecommute to the London office on Mondays, Wednedsays and Fridays, and commute in to London for face time on Tuesdays and Thursdays.)
There is no more civilized or comfortable way to travel than by rail. While I'd never advocate the death of the private autombile, I find that commuting by rail is in many ways superior to driving in to work. The trick is to make us cost-conscious American people see how much of the costs of operating an automobile are hidden costs -- and thus pointing out the intrinsic economy of rail transportation.
Providentially, a cadre of innovative and proactive accountants have just now become available, from the energy services industry.
Another advantage they have is a much smaller "footprint" that a national rail system, for example, in France, has to "cover" compared to the continental United States.
I haven't heard of any schemes to "create" a Unified European Rail Company (Heaven forbid!). If such a beast came into being then it would start having the same problems as Amtrak -- namely, the sheer enormous area Amtrak has to cover.
When I was in Stuttgart, we had a vendor of some new software, headquarted near Paris. Every month or so, their chief technical guy would come over and we would discuss improvements and bug fixes with him. (Fortunately, most of the discussions were in English!)
This guy would get on the InterCity Express outside of Paris in the evening, work on the train, get some sleep, and get to our Stuttgart-area offices late the next morning.
If'n'when I get back there, I intend to do some significant intercity travel by rail (my previous times were all by air and by car).
There seem to be some significant differences in the historical development of passenger rail travel on each side of the Pond. You could catalog the cultural and political differences and perhaps get an idea of the reason for them. Geography would also play a part.
Anyone have an essay on this handy? I don't have time just now to write one (that would make any real contribution <)B^).
Probably the major reason is track mileage. That's where capital and maintenance costs really add up. The distances in Europe are short hauls compared to what railroads have to cover in the U.S. . . . typically 200-400 km. Here, we're talking thousands of miles of track - even Boston to NYC is about 450 miles of track, and NYC to DC is about the same, IIRC. And that's the NE corridor, which is easy money revenue for passenger service, compared to the long hauls in the rest of the country.
I used to work for a major U.S. RR, and the main line of one of its competitors runs two blocks from our house. I chat with the maintenance crew chiefs while I'm walking the dog, for old times' sake. Just the maintenance on the grade crossing around the corner is staggering. They just regraded, reballasted, poured a new base, and replaced all the ties 40 feet on either side three weeks ago. The signals are tested twice a week with a two man crew. Multiply that by all the gated crossings between Atlanta and Chattanooga . . . on the entire system . . . on the other dozen or so major systems in the U.S. . . . and you're talking about REAL money. (The Paris Brussels high speed line has NO grade crossings at all.)
Another thing that occurs to me is that almost all the downtown rail terminals have been wrecked out, and there's no place for new ones because the sites have been built over. Atlanta's Union Station is long gone, wrecked out, the only bit left is a piece of sculpture that they stuck on the wall in the subway station . . . the only surviving station is Brookwood, a little siding well north of downtown, they have to back the two passenger trains a day in from the main line. Richmond's old main passenger station is a museum, if you take Amtrak to Richmond you wind up at a little suburban siding station WAY out of town. And so it goes.
Atlanta parking is not too bad if you know where to look. I do not use the bus lines or the subway because they don't go where I need to go. I would have to walk for blocks or use three transfers. Neither is acceptable, especially if your job (like mine) requires you to carry "stuff" around with you like (paper) files or a laptop.
Absolutely, totally, dead wrong.
The "user fees" you refer to only fund 42% of highway maintenance and construction costs. The other 58% comes from the "general fund", i.e. income taxes and other taxes.
This is true both at the federal and state levels. Only the percentages differ.
Your statement above is one of the most pernicious and dangerous myths of the transportation game. It prevents people from addressing the real facts of the matter.