[Senate Hearing 108-994]
[From the U.S. Government Publishing Office]
S. Hrg. 108-994
S. 1501, THE PASSENGER RAIL
INVESTMENT REFORM ACT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
OCTOBER 2, 2003
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South
CONRAD BURNS, Montana Carolina, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas JOHN D. ROCKEFELLER IV, West
OLYMPIA J. SNOWE, Maine Virginia
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada RON WYDEN, Oregon
GEORGE ALLEN, Virginia BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
MARIA CANTWELL, Washington
FRANK R. LAUTENBERG, New Jersey
Jeanne Bumpus, Republican Staff Director and General Counsel
Robert W. Chamberlin, Republican Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
C O N T E N T S
----------
Page
Hearing held on October 2, 2003.................................. 1
Statement of Senator Burns....................................... 7
Prepared statement........................................... 8
Statement of Senator Dorgan...................................... 9
Statement of Senator Hollings.................................... 2
Statement of Senator Hutchison................................... 4
Statement of Senator Lautenberg.................................. 5
Letter, dated September 20, 1996 from George W. Bush,
Governor, State of Texas to Thomas M. Downs, Chairman,
President and Chief Executive Officer, National Railroad
Passenger Corporation...................................... 6
Statement of Senator McCain...................................... 1
Statement of Senator Smith....................................... 38
Prepared statement........................................... 39
Witnesses
Gunn, David L., President and Chief Executive Officer, Amtrak.... 43
Prepared statement........................................... 44
Howells, Claudia L., Administrator, Rail Division, Oregon
Department of Transportation................................... 46
Prepared statement........................................... 48
Mead, Hon. Kenneth M., Inspector General, U.S. Department of
Transportation................................................. 23
Prepared statement........................................... 26
Rutter, Hon. Allan,Administrator, Federal Railroad
Administration, U.S. Department of Transportation.............. 10
Prepared statement........................................... 11
Appendix
Busalacchi, Frank J., Secretary, Wisconsin Department of
Transportation, prepared statement............................. 56
Hungerbeeler, Henry Director, Missouri Department of
Transportation (MoDOT), prepared statement..................... 58
Kerry, Hon. John F., U.S. Senator from Massachusetts, prepared
statement...................................................... 55
Rockefeller IV, Hon. John D., U.S. Senator from West Virginia,
prepared statement............................................. 55
Response to written questions submitted by Hon. John McCain to:
David L. Gunn................................................ 59
Kenneth M. Mead.............................................. 65
Response to written questions submitted by Hon. John B. Breaux
to:
Kenneth M. Mead.............................................. 68
Written questions submitted to Hon. Allan Rutter by:
Hon. John B. Breaux.......................................... 70
Hon. Frank R. Lautenberg..................................... 70
S. 1501, THE PASSENGER RAIL
INVESTMENT REFORM ACT
----------
THURSDAY, OCTOBER 2, 2003
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m. in room
SR-253, Russell Senate Office Building, Hon. John McCain,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
The Chairman. Good afternoon. The Committee meets today to
hear testimony on the Administration's plan for restructuring
intercity passenger rail service in the United States. Key
elements of the plan were announced in June 2002 when Amtrak
was threatening its entire system unless Congress provided yet
another bailout. But it was only this past July that
legislation was sent to Capitol Hill. At the Administration's
request, I introduced the Passenger Rail Investment Reform Act,
S. 1501.
The Administration's plan embodies what I believe are the
concepts critical for reform, a network of trains that makes
economic sense, fair and open competition for Amtrak, and cost-
sharing with the States. Equally important, the proposal would
transform Federal support from sponsorship of an intercity
passenger company, that for all practical purposes is owned by
the Federal Government, to providing capital support for an
intercity rail program along the lines of the New Starts
transit program. Amtrak could become one of a number of
companies providing service under contract through a
competitive bidding process.
While my colleagues and I may not agree on exactly how
Amtrak and intercity passenger rail service should be
restructured, I think we all agree that what exists today is
far from ideal. Amtrak loses over $1 billion annually, yet
serves less than 1 percent of intercity travelers. It operates
routes that lose hundreds of dollars per passenger that would
not survive if service was based on market demand rather than
parochial political interests. For example, the Sunset Limited,
a train that operates through Arizona on its long odyssey from
Los Angeles to Orlando, loses over $400 per passenger and it
carries less than 300 passengers per day. At the same time,
four times as many people fly between Los Angeles and Tucson as
ride between all points served by the Sunset Limited.
While we continue to subsidize long-distance trains at
hundreds of dollars per passenger, there is no train service in
many short-distance corridors where rail might actually attract
enough customers to break even at least on operating costs.
Time and again, reports have shown that the future of intercity
service is in short-distance corridors that can compete with
other modes of transportation, and corridors are where states
are proposing to invest their own money.
The Administration's plan is far from perfect. There are
obvious omissions in it, notably how much restructuring will
cost. In some aspects the plan may not be entirely workable.
Nevertheless, the plan is commendable for addressing head-on
the difficult issues of restructuring, including the existing
Amtrak route network, access to the rights of way of the
freight railroads, and how new rail service could be developed.
I'm also encouraged by the recent announcement of the
Administration's intent to nominate Lou Thompson, the U.S.
expert on international rail reform, Bob Crandall, former CEO
of American Airlines, well known to the Senator from South
Dakota and to me, Floyd Hall, former CEO of K-Mart, to serve on
the Amtrak Board of Directors. We need a board that will
exercise its fiduciary responsibilities, initiate some real
change, and provide Congress some constructive legislative
recommendations. I'll certainly schedule a hearing on the
nominees as soon as possible once we receive their paperwork.
Last June, during the Committee's mark-up of our safety
title for the TEA-21 reauthorization, the Committee inserted a
placeholder for Amtrak of $2 billion for each of the next 6
years. The placeholder provision would authorize a level of
funding well above the average $1.6 billion in annual funding
requested by Amtrak in its latest 5-year plan and would require
no reform or restructuring. I think we can do better.
This Committee has an obligation to come to terms with
Amtrak's problems and why our passenger rail program is largely
a failure. Simply throwing billions more at Amtrak, whether
through appropriations, bonds, or some other scheme will not
solve the fundamental problems, and if we're serious that the
status quo is unacceptable, the longer we postpone making the
tough choices that need to be made, the harder it's going to be
and the more limited our options become.
I remain committed to reform. I hope the Administration's
plan can serve as a basis for developing a consensus proposal
on Amtrak. Unless we can make progress on legislation in a
bipartisan manner, I fear that Amtrak will remain the albatross
blocking the development of a program that actually helps meet
the needs of the traveling public. I know that the Senator from
South Carolina has had a long and deep involvement in the
Amtrak issue, as has our friend from New Jersey who arrives
here today. I thank them. Senator Hollings.
STATEMENT OF HON. ERNEST F. HOLLINGS,
U.S. SENATOR FROM SOUTH CAROLINA
Senator Hollings. Thank you very much, Mr. Chairman. Your
test, of course, of whether or not you have sufficient
passengers to warrant whether you're making sufficient money to
sustain, those are good business tests. But there are certain
entities in public domain that are exceptions from that test,
obviously defense, we don't look upon defense as a money-making
situation, it's a service necessary to a free government.
Similarly with Medicare, similarly with Social Security, and I
say similarly with respect to a national passenger rail
service.
I happen to have been the attorney for the local city
passenger bus service. We constantly looked for how in the
Lord's world to save money or to make it operate in the black.
It never did, that was 50 years ago. As of this minute it's
still not operating in the black, yet they're very capable
people operating it, the pay scale is appropriate, and all
these other things, the routes and so forth cut back and
everything else and it's still in trouble. And last week when I
met with the distinguished Administrator, David Gunn, and I
think the Government is lucky to have him, he just outlined an
emergency situation. He described the track. He brought a piece
of the track with him, and I hope he'll bring it today or
something of that kind because you see how the track is just
worn into half a track, I can tell you that now.
He says he's money in his own schedule to take that worn
track and have it replaced and that's what he's doing. He's not
risking safety at the minute, but he will not be able under the
present budget to continue doing the necessary repairs to that
track on the one hand. Otherwise, he had a piece of cable,
telling me that in 1935 going through the tunnel, Senator
Lautenberg, into New York, they put this cable, it was very
sophisticated cable, very expensive, and there was three cables
there to sustain the Amtrak operation. One of them is gone
completely, another one went out, and they've got it repaired.
From his particular experience up in Canada, these repairs
never last and that one cable that's still got it going, it
might meet the demands of the distinguished Senator from
Arizona. Once that goes, Amtrak closes down.
I think we are in a critical, critical situation, an
emergency situation. This committee ought to know it because
Mr. Gunn has proposed that, outlined exactly what he outlined
to me and to the Amtrak board, and as a result of having
outlined that, Senator from Texas, there has been no
appropriations sent up here to take care of the situation and
to really establish a passenger rail service.
Now we are establishing one. We're about to vote. In fact,
the final vote will be Tuesday, 2 weeks from now on a passenger
rail service for Iraq, but we don't have a proposal from the
Administration for a passenger rail service for the United
States of America. This Committee ought to come clean and ought
to vote close it down or close it up.
Of course, I favor a national system that's going to cost--
I think the concerns of our distinguished Chairman are very
well based in other words, there's no use to run a rail service
just to call it national to where it's not picking up any
passengers at all. There are going to have to be some cutbacks,
but then they're going to have to be, if you're going to
continue to go from north to south and east to west, they're
going to have to be some inordinate expenses there and they've
got to be taken care of.
So I appreciate the hearing but I don't think we can
continue with hearings or appointing new boards or whatever
else. We this year, before we adjourn, we ought to call a spade
a spade and either vote to have a passenger rail service
appropriating the money or say that we're not going to do it.
If there's some way to pose this particular amendment to bring
it to a head so we'll know where we're headed I would try to
propose it. We'll look at it and see. Thank you very much.
The Chairman. Thank you, sir. Senator Hutchison.
STATEMENT OF HON. KAY BAILEY HUTCHISON,
U.S. SENATOR FROM TEXAS
Senator Hutchison. Chairman McCain and I have battled over
Amtrak for years, but we agree on one thing: Amtrak is in bad
shape. We can choose to throw in the towel, we can dissolve
Amtrak, or we can work to make rail a viable transportation
option. I fear that the proposal before us today would be the
elimination of Amtrak. Why not cutoff funding for our highways
and our aviation system?
Rail opponents point to low Amtrak ridership numbers to
justify shutting it down, but as Mr. Gunn has learned from
actually going on the Sunset Limited, if you have bad service
you really can't test the ridership. If we are going to have a
reliable rail option, I think we are going to have to fund it
and we're going to have to support it and we're going to have
to treat it like the other modes of transportation in our
system.
The Texas Transportation Institute recently released its
2003 Urban Mobility Study, which surveys surface transportation
conditions across the Nation. The study depicts a bad situation
getting worse. In 2001, traffic congestion cost the Nation $69
billion, $4.5 billion more than in 2000. This figure includes
5.7 billions gallons of lost fuel and 3.5 billion hours of lost
productivity resulting from congestion.
The study also found that the extra time needed for rush
hour travel has tripled since 1982. This situation is one of
the greatest domestic transportation challenges facing America
today. We should strictly act to reauthorize TEA-21 with
adequate funding for Federal highway and mass transit programs.
We need to complete the conference on the overdue FAA
reauthorization bill and we need to make rail a viable
transportation alternative.
Senators Lott, Burns, Snowe, and myself have introduced
legislation that would create a true national passenger rail
system. Our bill, the American Rail Equity Act, AREA, would
create a national passenger rail office at the Department of
Transportation responsible for coordinating with states and the
railroads to ensure the national system makes improvements
necessary to efficiently operate an intercity passenger rail
system. It provides increased capital and operating funds so
routes on the national system can finally have a chance to
succeed. In return, Amtrak must operate on time or risk losing
its routes to private operators.
I suppose the bill before us is better than no bill at all,
but not by much. It provides no funding for operating intercity
passenger rail, insufficient funding levels for capital needs,
and it tasks the states to fund an engineer of the network.
Train tracks, like highways, do not stop at State borders. If
President Eisenhower had adopted this approach, we would not
have the interstate highway system.
Amtrak itself has much to answer for. I was extremely
disappointed in Amtrak's proposed $9.1 billion capital plan,
which allocates more than $8 billion to the Northeast corridor,
leaving crumbs for the national system. This inequity can not
continue. Area sponsors have adopted a motto, national or
nothing. The Administration bill, I'm afraid, is not much. If
we fail to enact real change in this reauthorization bill, I
think we're going to run out of opportunities to achieve
intermodal transportation systems. I will not support a
proposal that does not put the national system on a par with
the Northeast corridor. We face a new beginning or the
beginning of the end.
I hope that we can support a bill that will actually fund
Amtrak, will give us the capital needs to make it a good
system, and commit to it like we do highways and rail. Thank
you, Mr. Chairman.
The Chairman. Senator Lautenberg.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Thanks, Mr. Chairman. I'm going to
repeat something I heard just now. Senator McCain and I have
occasionally disagreed on this matters, so that's two against
one. We haven't done well so far, but thanks, Mr. Chairman, for
holding the hearing. It's the second time this year this
Committee has held a hearing on the topic of passenger rail
service, and here we are with another idea before us about what
to do with Amtrak, this one from the Bush Administration, and
frankly I think it's a non-starter.
In my previous stint in the Senate, I was the Chairman and
then Ranking Member of the Appropriations Subcommittee on
Transportation and I learned one thing: Transportation takes
money and anybody who tells you otherwise isn't being candid.
David Gunn was hired last year to stabilize Amtrak and he has
done, as Senator Hollings said, a very impressive job and my
hat's off to him. The job's gotten harder since he has had the
task. He has told us in forthright terms what resources he
needs to provide safe and efficient rail service to our
country. He's told us what we will get for the funding we
provide.
My read of the Administration's Amtrak proposal is that
it's long on ideology and short on practical solution. Let the
states pay for rail services is what the Bush Administration's
proposal is. It's just not realistic. The states are facing
their biggest budget crunches since the Great Depression, and
I'll take the liberty, Mr. Chairman, of reading something that
I'd like put in the record. It's a letter dated September 1996
and it says in one paragraph on the second page, ``First, many
of us believe that Amtrak finances and operations are a matter
for the Federal Government. The Federal Government created
Amtrak.'' It's signed by George W. Bush, then Governor of the
State of Texas. So I don't know what kind of a change in view.
The Chairman. That will be made part of the record without
objection.
[The information referred to follows:]
State of Texas--Office of the Governor
September 20, 1996
Thomas M. Downs,
Chairman, President and Chief Executive Officer,
National Railroad Passenger Corporation,
Washington, DC.
Dear Mr. Downs:
Since our conversation, it appears that there is a discussion in a
number of states about subsidizing Amtrak's operations. This letter is
a report on some of the sentiments of leaders in the State of Texas.
Before I talk about funding options, I do want to reiterate how
disappointed we are with the Texas Eagle decision. I am particularly
concerned about the inadequate notice given to communities along the
Eagle route. Amtrak has encouraged local officials to invest funds in
depot facilities and to help market rail services. As I am sure you can
understand, this abrupt decision created a lot of consternation and
worry among the impacted communities. Secondly, it is hard for us to
understand the Texas Eagle decision since few Amtrak routes were
eliminated, although many lines are losing money just like the Texas
Eagle.
Recently, congressional action allows Texas to spend our
Congestion, Mitigation and Air Quality (CMAQ) program funds as a short-
term subsidy for the Texas Eagle. After discussions locally elected
officials, it appears that the CMAQ option is not feasible. First, CMAQ
funds are generally limited to projects within our state's four air
quality non-attainment zones. Only one of these zones, Dallas/Fort
Worth, is served by the Texas Eagle. Secondly, the Dallas/Fort Worth
area Metropolitan Planning Organization has fully allocated all of its
expected CMAQ appropriations to specific projects for the next five
years. Finally, it is unlikely that the portion of the Texas Eagle
which operates in the Dallas/Fort Worth area will have any significant
impact on air quality in the region: a fact which would make a rail
subsidy a poor candidate for CMAQ funding. In short, many of the local
leaders are convinced that diverting CMAQ funds from ongoing air
quality projects would hurt efforts to meet air emissions reduction
goals.
I have discussed the idea of long-term state funding subsidies with
key members of the legislature. I am not optimistic about long-term
funding for several reasons.
First, many of us believe that Amtrak finances and operations are a
matter for the Federal Government. The Federal Government created
Amtrak. If your long-term plan is entice states to be Amtrak's main
funding source, as opposed to Washington, you should clearly state this
goal and debate it. We understand that there are efforts to dedicate
some of the ??? cents of the gas tax to meet Amtrak's capital need. If
this is the case, it seems wise to wait and see whether or not this
course of action is approved. It if is approved, the concept of state
subsidies should be moot.
Secondly, state leaders, including me, worry about subsidizing a
poorly run operation over which we will have no control. Germane
questions such as routes, frequency of traffic, capital improvements,
and marketing plans, concern us. With no control, it seems that any
state's subsidy would be like pouring money in a black hole.
Finally, Texas is being asked to subsidize interstate long-haul
services. This does not seem fair since other states' subsidies fund
intrastate and short-haul routes. In short, other states are buying
more frequency and more runs, not just paying for survival. Texas
leaders do not want to be treated differently.
I appreciate your attention to this matter, and I hope this update
helps in your future planning.
Sincerely,
George W. Bush,
Governor.
Senator Lautenberg. Thank you very much. The Bush
Administration officials argue that rail infrastructure
shouldn't be funded at the same Federal/State share as highways
and airports and the Government has no business providing
essential transportation services. Well, that's ideology
talking and ideology doesn't build or maintain our Nation's
transportation infrastructure. It takes concrete and steel and
human labor and engineering, yes, it takes money, Federal
money. It took Federal money not just gasoline taxes to build
the Dwight D. Eisenhower interstate highway system. It took
Federal money to build our national aviation system.
Yesterday we celebrated the 75th anniversary of Newark
Liberty International Airport, one of the most utilized
airports in our Nation's history. Ideology didn't build it,
money did. With regards to witnesses who are here today on
behalf of the Bush Administration, I have to ask them where
some of their ideas come from. It seems to me they're bankrupt
ideas to bankrupt a railroad. After 9/11 I thought it would be
quite evident, self-evident, how important Amtrak is as part of
our national intermodal transportation system, but I guess it
didn't.
According to the Texas Transportation Institute at Texas
A&M University, the average rush-hour driver wasted 26 hours
stuck in traffic in 2001, and that's nearly a 20 percent
increase in just 5 years. People in Los Angeles spent 90 hours
a year stuck in traffic. In Phoenix, in the Chairman's home
State, commuters spent 61 hours on average stuck in traffic
each year. The annual cost of all of this is estimated to be
$70 billion, according to the Institute. Instead of solutions
to these problems we get an ideology.
So if I sound angry, I am, that the Bush Administration
wants to abdicate its responsibility with regard to passenger
rail in this country. And I remind everybody that on 9/11, that
fateful day when America's vulnerability was evidenced, the
only thing that moved in the busiest region of our country was
Amtrak. Aviation stopped dead, 5,000 airplanes directed to land
because we were afraid that their being in the sky was a danger
to the passengers. The country needs Amtrak and Amtrak needs
Federal assistance. It's that simple and I thank you, Mr.
Chairman.
The Chairman. Senator Burns.
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Thank you, Mr. Chairman, and thank you for
this hearing. I will offer my statement for the record and I'll
just paraphrase. I want to hear from the testimony today.
We took a look at the recommendation or the idea that
states should participate more financially in the support of
Amtrak in the local states, and I just want to pass this along
to you. In Montana, we requested a report, analysis of the
economic benefits of Amtrak's Empire Builder into Montana. I'm
not going to go through all the findings but we found out some
very interesting things. The Empire Builder is an essential
transportation service, which is by and large, in most
communities served, the communities had had no alternative
means of transportation.
Direct spending by Amtrak using non-resident travelers in
Montana by Amtrak is estimated between $5.3 and $5.7 million
annually. Now that might not be a hill of beans to some States,
but it is to my State of Montana up on the High Line. And it
plays a very important part to the everyday lives of Montanans
who live in isolated areas and that is the High Line of my
State.
I concur with the ranking member of this committee that if
we want a national railroad system it should be a national
system. We can't draw it back into areas where the so-called
heavily traveled or demand for commuter routes, because we know
one thing: Highway 395 North at 6 in the morning until 9 is the
world's largest parking lot and it's getting worse. And for us
to be discriminated against because we're in rural areas and
have no public transportation, our relief is just as great. So
a national system in the bill that was identified by my friend
from Texas, and I'm a co-sponsor on that bill, we think is the
right approach.
And so we've got to wrestle with this and I think the
Committee is going to have to take on the responsibility of
coming down on one side or the other. So Mr. Chairman, thank
you for the hearing and I'll submit my full statement.
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
Thank you Mr. Chairman for calling this important hearing. As you
know, myself and several others on this Committee have an ongoing
interest in the future of Amtrak. Together with Senators Hutchison,
Lott and Snowe, who all sit on this Committee, we introduced S. 1505,
the American Rail Equity Act of 2003, in response to the bill we are
reviewing today. I applaud the Administration and you Mr. Chairman for
your work in this area, but I do not agree with you on this issue.
Our bill, in summary, reauthorizes Amtrak for six years to coincide
with TEA-21 reauthorization. It establishes a National Passenger Rail
System that consists of Amtrak's current routes. Additionally, S. 1505
authorizes approximately $60 billion over that six year authorization
period, with $12 billion for operating costs and $48 billion in bonding
authority.
Now is not the time to pull the plug on a national passenger rail
system. Our authorization alternative gives Amtrak the funds to prove
itself over a six-year term and doesn't shift the burden to states whom
without our assistance could not afford to maintain service. If changes
need to be made at the end of that time period then we should deal with
them. Amtrak should be given a decent shot and not provided another
year of ``just enough.''
In this Committee and in Congress as a whole, we sometimes forget
the true positives Amtrak provides to many rural areas of the Nation. I
want to take a moment and discuss the results of a report prepared in
July of this year that addresses Amtrak's importance and footprint in
my state.
In July an outside company provided a requested report for the
Montana's Departments of Transportation, Commerce and Agriculture
labeled ``Analysis of the Economic Benefits of The Amtrak Empire
Builder to Montana.'' While I don't intend to go through all the
findings, there are some important excerpts I believe should be
considered by the Committee.
The Empire Builder is an essential transportation service
for which there is, by and large in most communities served, no
reasonable alternative.
Direct spending by Amtrak-using nonresident travelers in
Montana and by Amtrak is estimated to be between $5.3 and $5.7
million annually. This may not amount to a hill of beans in
some states but $$5-6 million along the hi-line of Montana
makes a dent in the lives of those who live there.
The Empire Builder as an institution is no small part of
everyday life to many Montanans who live in rural isolation
along the hi-line and who depend upon it to get to medical
services, send children to college, and for travel out of the
state.
Retention of long-distance trains and specifically the Empire
Builder is essential to my state. Without it, there would be relatively
no transportation alternative when looking at the rural and isolated
character of Montana and adjoining states.
This Congress needs to remember there is a lot of land and a lot of
people who need transportation alternatives who reside between the east
and west coast of this country. Until we address the reoccurring
problems with Amtrak and make a good faith long-term effort to
establish a national passenger rail system this issue will dog us for
years to come.
I look forward to hearing from the witnesses on this matter and I
look forward to hearing from the panel on their thoughts for the future
of Amtrak.
Thank you, Mr. Chairman.
The Chairman. Thank you very much. Our first panel is the
Honorable Alan Rutter, who is the Administrator of the Federal
Railroad Administration. Pardon me? But first we'll hear from
Senator Dorgan.
[Laughter.]
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much. I feel
like a consolation prize.
The Chairman. He usually blends into the woodwork.
Senator Dorgan. That's true. Let me just say that I
appreciate Mr. Rutter and Mr. Mead being here. Mr. Mead, you've
been very helpful to our Committee on a good many issues, and
to Mr. Gunn, thank you for assuming this obligation that you've
undertaken.
The Amtrak rail passenger issue is a serious issue, and
regrettably, I don't think the administration's Passenger Rail
Investment Reform Act is a serious proposal. It's a serious
proposal if you just decide you want the message to be shut
down the rail service on the long-haul routes and continue the
rail service on the Eastern Corridor. That would probably be
self-sufficient, raise revenues so that you can have rail
passenger service on the East Corridor from Boston to Florida.
The Administration is not quite saying it that way, but it
would probably more appropriate for them to just say, look, we
don't believe in long-haul routes. We think the Empire Builder
ought to shut down and we'll just continue an Eastern Corridor
piece of rail passenger service. They don't do quite that, they
concoct a mechanism by which they say the states should create
compacts and do various things.
Transportation, I think, is critical to this country's
economy. Whether it's on wheels or on rails or on water or in
the air, this economy moves forward with transportation and the
transportation for people and freight makes this economy run. I
happen to think, as Senator Burns has indicated, that rail
passenger service is something very important to this country,
and not just the service on the East Coast. Roughly 70- to
80,000 North Dakotans use Amtrak service in a year. Montanans
use it. It's a significant adjunct to our transportation needs
and it's just very important that we continue it. The Empire
Builder has been a great part of our transportation network and
we want to continue it.
So the question is today how do we seriously address this.
We will, I think, dismiss quickly the Administration's
proposals because I don't view them as serious. Then the
question is, how do those of us from both political parties
serving in Congress construct something that is serious, that
recognizes we want to continue rail passenger service in this
country's future. We can do this and we should do it, but we
ought not delay much longer, because we delay, it seems to me,
at the risk of having this service shut down and that's the
last thing I want to have happen.
Finally, Mr. Chairman, one statement. Will this require
some subsidy? Sure. Frankly, we subsidize every form of
transportation in this country. We always have and I don't
think we ought to shy away from providing a reasonable subsidy
to create a rail passenger system that works, one that is
national in scope, and one that I think strengthens this
country's economy.
The Chairman. Mr. Rutter, Mr. Mead, welcome.
STATEMENT OF HON. ALLAN RUTTER, ADMINISTRATOR,
FEDERAL RAILROAD ADMINISTRATION, U.S. DEPARTMENT OF
TRANSPORTATION
Mr. Rutter. Thank you, Chairman McCain, Members of the
Committee. Thanks for the opportunity to discuss the
administration's proposal for intercity passenger rail reform,
the Passenger Rail Investment Reform Act, which Senator McCain
has so graciously introduced at Secretary Mineta's request.
In my 2 years in office I've often come to this Committee
to talk about passenger rail and have been chastised, rightly
so, for not having more to say. Today I'm proud to describe and
defend a comprehensive proposal to reform the manner in which
passenger rail services are provided to our citizens. I've been
reading capsule descriptions of our proposal in the press,
often included in recent stories about the perpetual battle on
Amtrak appropriations.
Our proposal has been described in general terms as this:
The Bush Administration seeks to dismantle Amtrak, dumping
passenger rail service on the states and privatizing the
remaining routes. I'd have to identify with newspaper readers,
who upon reading that assertion would react with incredulity.
Not only does that not sound like a great plan, it doesn't
sound like our plan at all, its intent, or its likely effects.
I hope my testimony has clarified some of the features of
our legislation, but let me now respond to the three ways in
which that caricature fails to describe our bill. First, I
don't think the word dismantle should be used to describe our
proposal to alter the organizational structure of the current
passenger rail provider. Dismantle is a verb with intent. It
describes a process or stripping down and does not always imply
reassembly. We have no such malice here. Rather, we are merely
proposing a different institutional arrangement for passenger
rail service in hopes of providing an increase in the quality
and quantity of such services. We can disagree about the
effects or the pace of that restructuring, but no one should
impugn our motives.
Second, I'll object to the word ``dumping''. After Isabel
blew through our region recently, I frequently joined my fellow
Prince William County residents at our county landfill to
dispose of the remains of our uprooted trees. When you go to a
dump, you drive up, drop off your refuse, and drive away. To
apply that analogy to passenger rail, we would have to be
proposing to leave states wholly responsible for all passenger
rail provision and propose that the Federal Government refuse
to have anything to do about it ever again, and that is not
what we are proposing.
When I was in Buffalo a few weeks ago to discuss our
proposal with AASHTO's standing committee on rail
transportation, I heard from State officials who disagree with
our proposals for long-distance train operating support or
capital matching percentages. However, most of them appreciated
that we are proposing a long-term partnership where the Federal
Government would share capital funding and service design
responsibility with States.
Finally, I want to make sure we distinguish between the
board's privatization and competition. I call your attention to
my discussion of this point in our testimony so I won't repeat
it verbatim here. If states are already providing operating
subsidies for intrastate passenger rail service, we agree with
many of them that there should be a careful, routine process
for allowing them to choose an operator who will provide the
best value proposition for their citizens. We do so consistent
with a core tenet of governmental procurement policy that
taxpayers receive more value when service providers compete
against each other. We deliberately chose this path, not that
of the British experience or that recommended by the Amtrak
Reform Council.
That's my opening statement, Mr. Chairman. This is a
complicated issue and ours is a complicated proposal, and I
look forward to discussing it with your Committee. This hearing
is another step that we trust will lead to fundamental,
sustainable, long-term reform in intercity passenger rail
policy. Thanks.
[The prepared statement of Mr. Rutter follows:]
Prepared Statement of Hon. Allan Rutter, Administrator, Federal
Railroad Administration, U.S. Department of Transportation
Chairman McCain, Senator Hollings and members of the Committee, I
am honored to appear on behalf of Secretary of Transportation Norman Y.
Mineta and the Bush Administration to discuss our legislative proposal,
the Passenger Rail Investment Reform Act (the PRIRA), and the future of
intercity passenger rail service.
This year marked the first time in the last several years that
there was no summer Amtrak crisis. There was no impending financial
meltdown that required the Congress and/or the Administration to bail
Amtrak out yet again.
That was not a happy accident. Much of the credit goes to Congress:
in the Department of Transportation's FY 2003 Appropriation Act, you
imposed on Amtrak the discipline and oversight of the formal Federal
grant process. This is a process that is common throughout the
Department's other programs but which had not applied to Amtrak for
decades. FRA used the grant process effectively to hold Amtrak
accountable. Much credit also goes to David Gunn and his senior
management team who have embraced the need to change the way things
have been done at Amtrak. They have recognized the need for accurate
and reliable financial reporting, and improved fiscal controls. They
have also recognized their accountability for the sound and effective
expenditure of the public's funds. These are essential values for any
organization that depends upon the public's investment and trust.
The lack of a crisis this year does not mean that the Congress and
the Administration can put intercity passenger rail service policy on
the back burner. We must confront the reality, as the Department's
witnesses have stated in our past testimony before this Committee on
April 29 and June 5 of 2003 and during the previous year that this
Nation's present business model for intercity passenger rail service
cannot be sustained indefinitely. It will take more than authorizing
mountains of cash to address the need for improved intercity passenger
rail service in this country, particularly since we know that such
mountains will look more like molehills in the final versions of the
appropriations acts. The Department believes significant structural
reform is required. Only forceful action will permit this form of
transportation to be anything more than an afterthought in
transportation plans of our citizens.
Any objective analysis of intercity passenger rail today leads to
the conclusion that this form of transportation is slowly withering
away under the current system. After $25 billion of Federal subsidies
and countless Congressional hearings, studies, and new business
initiatives by Amtrak, intercity rail passenger traffic volumes have
remained essentially constant over the past 25 years, while airline
enplanements have increased to 250 percent of their mid-70s levels, and
traffic volumes for both commuter rail and intercity automobile travel
have more than doubled.
But the picture is not bleak across the board, not by any means.
When the Administration undertook an effort to reform the way we make
passenger rail investments, we looked at where passenger rail is
working and growing. Those places have a few things in common: broad
public support for passenger rail and support from local communities
and states, often in the forms of capital investment and operating
assistance.
We have strived to build a system based on those descriptors of
success, rather than on the cobbled-together remnants of the failed
passenger rail operations of freight railroads. We need a passenger
rail system that is dynamic, one whose services and route structure can
adapt to changing consumer needs, one coordinated with the rest of our
intermodal transportation system.
In every other mode of transportation, we get that flexibility and
that degree of planning and investment through a state-federal
partnership. The Federal Government cannot do good highway investment
without partnering with states on where those highways should go. We
cannot do good work on maintaining and growing our maritime or aviation
infrastructure without state and local partners making some key
decisions. Thus, our proposal's foundation is built on a strong, stable
federal-state relationship.
Before I talk about the specifics of the Administration's
legislative proposal to accomplish this reform, I wish to reiterate the
consistent message of the Department before this Committee and before
other forums for the last two years. This Administration believes that
there is a vital role for intercity passenger rail service as part of
this Nation's system of passenger transportation. That is the reason
Secretary Mineta reluctantly approved Amtrak's proposed mortgaging of
its rights to use Penn Station in 2001, and why the Department expended
substantial effort to provide Amtrak a loan under the Railroad
Rehabilitation and Improvement Financing Program in 2002. Without
either of those actions, Amtrak would today be in the hands of the
Bankruptcy Court. The Administration's commitment to successful reform
of intercity passenger rail can also be seen in the President seeking
out truly gifted citizens such as David Laney, Robert Crandall, Floyd
Hall, and Lou Thompson to serve on Amtrak's Board of Directors.
It is the Administration's belief in intercity passenger rail
transportation that also led to the first serious review of intercity
passenger rail service in a generation and the first new Administration
proposal for how that service should be provided in three decades. In
the Administration's reform bill, we have addressed how to best
structure the decision-making and public financial assistance this form
of transportation requires, taking into account the changes that have
taken place in this country's transportation needs and patterns over
the last three decades and the changes yet to come. And, quite frankly,
we have also tried to recognize the realities and limits of the Federal
treasury.
The Fundamental Issues of Intercity Passenger Rail Reform
The Administration's legislative proposal for the Passenger Rail
Investment Reform Act contains a very detailed sectional analysis that
describes not just the specifics of each section but how they work
together. Rather than use this testimony as an opportunity to say the
same thing a different way, I will append that analysis to this
testimony. Instead, I will focus this testimony on the issues that are
addressed by the reform bill and must be addressed by any other serious
effort to provide for viable intercity passenger rail service over the
long-term. After almost two years of internal Administration analysis,
review of options and debate, I am convinced that the Administration
and Congress must resolve these eleven fundamental issues, loosely
grouped in three broad categories. These categories are:
Governmental Roles and Relationships
Constituency Issues
Money
Governmental Roles and Relationships
Defining the future Federal/State and local roles in the
provision of intercity passenger rail service: The Federal
Government and 12 State Governments have taken on essential
roles in the provision of intercity passenger rail service
either for that service in general, or for specific routes and
services. It is difficult to imagine the absence of a public
sector role in this form of transportation, particularly over
the upcoming five or six years covered by the next
authorization legislation. But are the current relationships in
the public sector the optimum or most desirable? In the
proposed reform bill, the Administration says they are not. The
dominant decision-making and funding role of the Federal
Government in this form of transportation is inconsistent with
Federal involvement with other forms of transportation. This
over-reliance on Federal initiative may be a contributing
factor to intercity passenger rail's inability to effectively
address the changing transportation demands of this country.
The Administration's legislative proposal looks to the
successful highway and transit programs as models for intercity
passenger rail. The bill would establish a strong Federal/State
partnership much like those that exist for highways and transit
where the Federal Government is responsible for safety, is a
partner in capital investment, and establishes certain minimum
standards that services must meet to receive this funding. The
States, however, will be the initiator and implementer of
actions.
And states are already taking that initiative. More than $136
million in passenger rail investments were made by the states
in FY03. Not coincidentally, those investments are being made
in places where demand for passenger rail is high, where state
and local commitments are strongest, and where the service has
the greatest chance for success. Right now, states are making
those investments largely unsupported by the Federal
Government. The Administration's proposal considers that kind
of state supported investment as the most important sign for
where Federal investment should be directed.
Planning and Decision-making: Currently, intercity passenger
rail planning is primarily the responsibility of Amtrak.
Amtrak's exercise of that duty is marked more by a defense of
the route system it inherited in 1971 rather than initiative to
address changing demographics and travel patterns. While the
reluctance to change before 1997 might be attributable, in
part, to the statutory restrictions on the route system,
neither highways nor transit nor aviation are subject to
centralized planning of this sort. These are the forms of
transportation that have seen explosive growth while Amtrak
ridership has stagnated. The Department does not believe this
is some sort of unrelated coincidence.
Highway and transit programs require comprehensive statewide
and metropolitan area planning performed by the State
departments of transportation and metropolitan planning
organizations. These are the organizations most in tune with
changing regional and local mobility needs. The Administration
believes they must play a primary role in passenger rail
planning, deciding when, where, how, how much and who provides
intercity passenger rail service as part of a coordinated,
comprehensive and multi-modal transportation system.
Addressing Commuter Service Concerns: The intertwining of
Amtrak and commuter rail operations has resulted in the latter
being periodically held hostage over issues relating to the
financial condition of Amtrak but otherwise unrelated to
commuter service. In recent years we have even witnessed a
commuter agency that prepaid for its Amtrak services having
been threatened by an Amtrak shutdown because Amtrak had
commingled the commuter agency's funds with other funds in
Amtrak's accounts. The Administration strongly believes that,
while intercity and commuter rail service are complementary in
many ways, commuters should not go through the periodic stress
and uncertainty brought on by Amtrak's regular flirtation with
financial catastrophe.
Under the Administration's legislative proposal, infrastructure
currently owned by Amtrak but on which commuters depend will be
transferred to public bodies. These new owners can structure
contracts for the operation and maintenance of these facilities
that are independent of the financial condition of the
intercity rail service provider. Equally important, the States
will be given the opportunity to select the operators of the
intercity rail service important to them. In making such
selections, the States can balance the risks versus the
advantages offered by different operators. Indeed, some States
might decide that the best approach may be to have one entity
provide both commuter and intercity passenger service. But
these will be local decisions based upon local issues, not ones
that result in threatened national shutdowns of commuter
service because of the failure of a single national intercity
passenger rail carrier.
Addressing Intercity versus High-Speed Passenger Rail Concerns:
Some believe that high-speed passenger rail requires a Federal
policy completely distinct from other forms of intercity
passenger rail. We don't see it that way. The Administration
sees intercity passenger rail as one form of transportation
that encompasses a wide range of speeds that reflect the
mobility needs of the transportation market being served. We
should view high-speed rail, not as a distinct and separate
goal, but as a possible end state of current investment in
passenger rail.
The Administration's legislative proposal is consistent with
this perspective. Section 7101 of the proposed Safe,
Accountable, Flexible and Efficient Transportation Equity Act
of 2003 (SAFETEA), would transform the existing program of
``high-speed'' corridor planning into a program that supports
State planning for conventional as well as high-speed rail
service. This planning program would help States make informed
decisions on the where, what and how intercity passenger rail
service can play an appropriate role in enhancing passenger
mobility. PRIRA would create a Federal/State capital investment
partnership modeled after that now used for the transit new
starts program. This program would provide capital grants,
including full funding grant agreements, to implement State-
based intercity passenger rail initiatives that are the product
of sound State planning. The scope of the planning and capital
improvements that can be undertaken under these programs allows
the States more flexibility to choose whether to support or
expand services currently provided by Amtrak, or to develop new
or improved (including high-speed) intercity passenger rail
service on new or existing rail rights-of-way.
Constituency-Issues
The Role of Competition: One of the greatest challenges facing
intercity passenger rail is how to assure that the service
provides the best value in terms of cost and quality to the
passenger and the public, both of whom must foot the bill. This
has always been an issue where States have provided financial
support for specific trains. To them, Amtrak has looked like
the monopoly utility, dictating prices and conditions of
service with little or no apparent connection to the actual
costs of that service. Missouri knows what Amtrak charges to
provide the State-supported Mules and Ann Rutledge, but how
does the State determine whether that is the best possible
price? Is Amtrak's menu of service options all that can be done
or are there service innovations that warrant consideration?
How can the State motivate Amtrak to reduce its enormous
overhead burden, which is currently about $400 million
annually?
In aviation, in trucking, indeed in most commercial enterprises
in this country, the best possible price is determined by
competition. Competition also is the incubator of innovation.
As Amtrak has stagnated for three decades, lower cost
commercial aviation and intermodal package delivery have seen
creative and successful new companies grow and flourish. The
Administration proposes to phase in the ability of States to
use competition to select the operators of services they deem
important enough to justify State financial support. If the
reconfigured Amtrak operations group, which the
Administration's bill calls the Passenger Rail Service
Provider, is indeed meeting the State's needs by offering the
best possible price and the highest quality service, then it
will keep the business. If it is not, competition will force it
to improve. The riding public and the State and Federal
taxpayers will be the beneficiaries.
In discussions on the Administration's bill, I have been struck
by how some people confuse the concepts of competition and
privatization. They argue that because few if any passenger
rail systems are profitable, our proposal, which they
mistakenly assume transfers the responsibility for intercity
passenger rail service solely to the private sector, is not
workable. In fact, under our proposal, the responsibility for
intercity passenger rail rests with the States and Federal
Government, just as it does for the National Highway System.
States do not build these highways. They competitively select
design teams and contractors to fabricate the bridges and pour
the pavement. The States pay these contractors for their
services. However, through competitive selection, the States
assure themselves they are getting a quality product and a fair
price. But this role for competitively selected contractors
doesn't make I-95 or any other highway private.
Passenger Rail Access to the Freight Railroad System: A
corollary to the issue of competition is how to provide access
to the freight railroad system by service providers other than
the current Amtrak operating entity. The Administration
recognizes the reluctance of many of the freight railroads to
host any passenger rail service of any kind, but their
preference is that Amtrak should provide passenger service, if
it has to be provided. The freight railroad system is too
important to this Nation's economy to create uncertainty that
could adversely affect freight service. At the same time,
intercity passenger rail cannot survive without access to the
freight railroads. The Administration's proposal attempts to
reconcile these two positions.
First, the Administration's bill provides a workable and
legally sustainable way to provide access to freight railroad
lines for non-Amtrak providers of intercity passenger rail
service.
Then the Administration's bill addresses concerns expressed by
some freight railroads that they would have to deal with
multiple new, small passenger operators. The Federal Railroad
Administration will review and approve the qualifications of
any operator the States might propose. Such a review would go
to all significant issues needed to assure that the carrier can
meet its obligations to operate over the specific freight
railroad in a safe and reliable manner. No more than one
service provider will operate over any route thus eliminating
the possibility of having multiple intercity passenger
operations on one line except in limited areas around
terminals. Going beyond this, the Administration's bill limits
the current access to the freight rail system at incremental
cost to those routes and service frequencies currently operated
by Amtrak. This amounts to less than 15 percent of the freight
rail system currently operated by the Class 1 railroads. An
``arm's length'' agreement between the State and freight
railroad would be required to establish service over a new
route or expand service on an existing route.
Addressing the Concerns of Liability: One of the recurring
issues related to intercity passenger rail service revolves
around issues of liability and insurance. The Administration
believes that the Amtrak Reform and Accountability Act
adequately addressed this issue by setting liability limits.
The issue then becomes the ability of States or their
designated operators to obtain insurance up to those liability
limits. Experience with Amtrak has shown that insurance is
generally available for the higher levels of liability--in the
$10 million to $200 million range. It is the first dollar of
coverage that is more difficult to obtain because of the
greater likelihood of successful claims in amounts less than
$10 million. The Administration's bill addresses this issue by
making first dollar of insurance coverage an eligible cost
under the proposed capital program.
What Happens to Amtrak's Employees: It is natural that Amtrak's
employees are very concerned about the future of intercity
passenger rail service. The short-term prospects for Amtrak's
financial condition should raise greater questions for them
than the long-term effects of the potential introduction of
competitive selection of operators and of maintainers of the
Northeast Corridor. Over the long run, the reforms of intercity
passenger rail service will result in stable if not growing
employment in this industry, much as has occurred in the
commuter rail industry. But that prospect provides little
solace for someone facing this transition. The Administration's
bill seeks to address these concerns in a number of ways. It
provides a relatively long transition in areas that affect
employment; requires that current collectively-bargained
agreements transfer to Amtrak's successor corporations;
provides current employees with priority consideration for
employment with new operators; requires that new operators be
subject to the Railway Labor Act, railroad retirement and other
railroad laws in the same way as Amtrak; and, provides an
employee transition program modeled after the program that
helped ease the impact on employees of the changes that made
Conrail financially viable.
Money
Operating Assistance: One of the lessons learned from the
Amtrak Reform and Accountability Act of 1997 is that Amtrak
requires operating subsidies. While many of the other reforms
the Administration proposes will help reduce the size of the
subsidy requirements for specific routes and services, some
amount of operating assistance will be required for almost all
of these routes and services for the foreseeable future. Such
subsidies should be the responsibility of the State or States
that believe these services are important enough to warrant
their support. The Administration really sees no difference
between commuter and intercity passenger rail in this regard.
Having said that, the Administration is cognizant of the
challenges many States will face in first determining whether a
particular train or service warrants financial support, then
identifying the sources of that financial support. For those
reasons, our legislative proposal would not seek the State
operating assistance requirement for corridor trains until two
years after enactment and phase in this assistance for long
distance trains over five years.
The extended phase-in period is also intended to provide
opportunities and incentives to improve the financial
performance of these trains. Moreover, the gradual reduction in
financial support on an even-handed basis across the system
will necessitate addressing first the trains that perform the
worst. That should yield important improvements in financial
performance each year.
By the end of the period covered by this authorization bill,
the proposed reforms would also provide financial equity among
the States supporting intercity passenger rail. The States that
choose to pay for more service would receive more service. No
State would get for free that for which another State must pay.
Design of the Capital Assistance Program: One of the Federal
Government's continuing responsibilities for intercity
passenger rail will be as a capital investment partner of the
States. Intercity passenger advocates aspire for a capital
program that is like those for other modes of transportation,
and our legislative proposal contains such a program. The
proposed structure of the capital program in the
Administration's proposal is closely modeled after the Federal
Transit Administration's Transit New Starts program. It will
have the same sort of eligibility criteria. It will require the
same rigorous planning and analysis by applicants, including
the development of project management plans with regular
updates. Finally, it will include the same safety, procurement,
management and financial compliance reviews and audits as the
Department undertakes with recipients of FTA funding.
Amounts and Sources of Capital Funding: The Administration has
consistently said that it is willing to invest in a reformed
system of intercity passenger rail service. The
Administration's willingness to support funding for intercity
passenger rail recedes the less the system is reformed and the
more it resembles the flawed business model we currently use.
The Administration also believes that this funding should be
upfront and honest and thus come from the General Fund of the
Treasury. The Administration cannot support the use of the
Highway Trust Fund nor can we support back door approaches to
financing from the Federal treasury such as those using tax
credit bonds.
A National System
One other issue that should be addressed as part of intercity
passenger rail policy is the meaning of a ``national system''. Must
such a system involve a single carrier national in scope? The
Administration does not believe so. Indeed, before the creation of
Amtrak, there was no national carrier of rail passengers. Our Nation's
system of intercity passenger rail service was really composed of
regional services provided by multiple carriers that came together in
precursors of what we today call intermodal terminals but back then
were frequently called ``union stations.'' The Administration's
proposal envisions a modern view of a national system that has
attributes of the past. This would be a coordinated system of passenger
transportation that takes advantage of the strengths of all forms of
passenger transportation; a system where connections to rail, air,
highway and personal transportation come together in intermodal
terminals. This is the promise of the Statewide and metropolitan area
planning that are part of the surface transportation program. The
Administration's intercity passenger rail legislative proposal would
provide additional encouragement to the States to consider the merits
of all forms of passenger transportation in their planning and to
prioritize their investments based upon how the different forms of
transportation can work together to provide for effective passenger
mobility throughout this country.
The Passenger Rail Investment Reform Act is a serious effort to
address a serious problem, the declining state of intercity passenger
rail transportation in this country. For the first time in 30 years, an
Administration has made a proposal that actually has a chance of
providing long-term stability for this form of transportation. It
deserves thoughtful consideration by this Congress. Secretary Mineta
and I look forward to working with this Committee and Congress to craft
a meaningful authorization of intercity passenger rail service that
looks beyond the failures of the past to the needs and opportunities of
the future.
______
Sectional Analysis
Summary: The purpose of the bill is to undertake a restructuring of
intercity passenger rail transportation in the United States that will
increase management accountability and encourage response to market
forces. The assumption adopted in 1970, at the time Amtrak was
established, that a single for-profit private entity could succeed in
planning and providing nation-wide passenger rail service has long
since been shown to be unworkable. The losses of several predecessor
railroads on passenger service foreshadowed this outcome and, in any
case, the Federal Government has provided $26.6 billion in subsidies to
Amtrak over its 32-year existence.
Notwithstanding Congress' enactment in 1997 of a strong reform
mandate, Amtrak has demonstrated since that date that, in its current
form, it is either unwilling or incapable of rationalizing its
operations. Five principles for change are:
Create a system driven by sound economics.
Require that Amtrak transition to a pure operating company.
Introduce carefully managed competition to provide higher
quality rail services at reasonable prices.
Establish a long-term partnership between the states and the
Federal Government to support intercity passenger rail service.
Create an effective public partnership, after a reasonable
transition, to manage the capital assets of the Northeast
Corridor.
This bill proposes a different course for Amtrak, one that has been
shown to be viable and beneficial in earlier examples of legislative
restructuring in the transportation area. One instructive example is
the transfer of the Alaska Railroad, a federally owned and operated
railroad, to the State of Alaska in 1985. More recently, in 1987, the
Federal Government entered into a long-term lease of the two federally
owned airports in the metropolitan Washington region (Reagan National
and Dulles International) to an airport authority created by the
Commonwealth of Virginia and the District of Columbia. In both cases,
governmental entities with a direct stake in the service accepted
planning and management responsibility for these facilities, with
subsequent major improvements. A third example, very close to the
Amtrak situation, was the Northeast Rail Service Act of 1981, which
provided for transfer of Conrail commuter operations in the Northeast
Corridor to the states or localities involved, or to an alternative
Amtrak operating subsidiary that was not considered a serious
competitor at the time. This shift in responsibility also succeeded.
The model for the restructuring proposed in the bill is the
Federal-State-local partnership found in the public transit mode. Under
this model, the regional, state, or local entity (``public entity'')
makes the fundamental decisions about what service is justified,
undertakes the planning that fits this service into overall passenger
transportation patterns in the area, and manages the enterprise to best
advantage. The Federal role is to participate in making capital
investments that support high-quality, integrated services in an area,
but not to subsidize service that the local entity itself would not
subsidize.
Throughout the bill and this analysis, the time-frame for actions
is expressed in relation to the date of enactment and the subsequent
Fiscal Year (that is, the first Fiscal Year after enactment is defined
to be ``Year One,'' with subsequent years identified in the same
manner. If the legislation is enacted sooner than 61 days after a
Fiscal Year begins, that Fiscal Year is defined to be ``Year One.''
The bill consists of three Titles. Title I provides the foundation
for Amtrak's future--the basic realignment of Amtrak management and
services that would permit a public entity to inherit and enhance
existing routes through decisions that it has the ability to develop
and implement itself. Specifically, (1) the Board of Directors would be
directed to restructure Amtrak to prepare for the transfer of decisions
about what service to provide and how to pay for it to public entities;
(2) all but a few residual but important legal rights and duties would
be shifted into two separate, free-standing corporations (along with
associated personnel and assets) that would undertake arms-length
contracting with public entities for services starting not later than
the second year after enactment; (3) a North East Corridor Compact
Commission would be created to formulate an interstate compact among
the eight states comprising the Northeast Corridor and the District of
Columbia to, under a 99-year lease from the United States, manage all
rail operations in the Corridor; (4) an employee severance payment
modeled on that provided to Conrail employees in the Northeast Rail
Service Act of 1981 would be offered to current Amtrak employees; and
(5) a schedule for phased reduction of operating subsidies to Amtrak's
17 long-distance routes would be put in place over the second through
sixth years after enactment, to enable states or groups of states to
determine whether and how to continue these operations in whole or
part.
Title II addresses the many financial matters Amtrak must deal with
to ready itself for transfer of services and equipment and other assets
to successor organizations. Specifically, (1) the Fiscal Year 2003
limits on grants to Amtrak to ensure more accountability would be made
permanent for the transition period of continued operations by Amtrak;
(2) Amtrak would prepare the necessary financial and engineering plans
to address the backlog of capital projects in the Northeast Corridor
and elsewhere; (3) Amtrak's common stock would be redeemed or acquired
by eminent domain at book value to simplify the corporate structure in
advance of transfers; (4) an exchange of assets held by Amtrak and debt
held by the United States would occur to place the fee simple title to
the Northeast Corridor and other assets in the United States for
subsequent lease or transfer to other government entities; (5) unneeded
real estate and other facilities would be liquidated over the 2004-2006
timeframe; (6) the outstanding debt secured by real estate and rolling
stock would be readied for transfer to the entities that accept this
property, with a process for possibly refinancing the debt at more
favorable rates; and (7) necessary operating and other assistance to
effectuate transfer would be authorized.
Title III establishes the permanent Federal program of grant
assistance for capital projects to be provided to the public entities
that succeed to Amtrak nation-wide, including the Northeast Corridor.
This title is intentionally structured to parallel the existing capital
assistance program for public transit (49 U.S.C. 5309). It is quite
likely that existing transit properties will accept management
responsibility for existing Amtrak services in some metropolitan
locales and would benefit from adoption of a familiar, time-proven,
grant program mechanism.
Short Title and Purposes: The Act would be named the ``Passenger
Rail Investment Reform Act.'' This signifies that the bill is designed
to maintain and enhance rail passenger service nation-wide, not to
undermine it.
The purposes of the bill emphasize the need to restructure
passenger rail service in the United States to adapt to competition
from other modes by establishing a long-term partnership among the
states and the Federal Government to support intercity passenger rail
service through mutual commitment.
Title I--National Passenger Rail Service Restructuring
Transition Board of Directors: Section 101 would expand the current
7-member, reform Board of Directors to 11 members, to equip the Board
with enough depth and expertise, such as corporate financial management
and accounting experience, to undertake the many transition duties set
forth in the bill. Current members would continue to serve for their
established terms, the Department of Transportation (DOT) Secretary
would remain as an ex officio voting member, and the Amtrak President
would remain as an ex officio non-voting member. In anticipation of the
decreased membership due to the expiration of terms prior to enactment
of the bill, a quorum of members for conducting business is defined as
a ``majority of the Board members who have been lawfully appointed.''
This will allow decisions to be reached and implemented while
additional Presidential appointees are considered by the United States
Senate.
To ensure that the valuable rail assets currently held by Amtrak
are used to best advantage and in the public interest, the Board of
Directors would be directed to form an Asset Transition Committee
comprised of the DOT Secretary and two other Board members (or one
other member if two other members are not lawfully appointed). The
Asset Transition Committee would ensure that the public interest is
served in Board decisions and Amtrak management actions that change the
use of or status of (1) the Amtrak's contractual right of access to
rail lines of other railroads; (2) Amtrak secured debt; (3) Northeast
Corridor real property and assets; and (4) rolling stock. This
committee would approve any Amtrak management actions that would affect
the four subject areas.
Elsewhere in the bill, Amtrak is directed to transfer most of its
personnel, assets, and duties to two successor corporations. In
recognition of the public nature of the remaining duties following
these transfers, the Transition Board of Directors would then be
reduced to three ex officio officials of the Department of
Transportation: the Secretary of Transportation and possibly the
Federal Railroad Administrator and Federal Transit Administrator. The
residual duties are set forth below. The other members of the
Transition Board of Directors would thereafter no longer serve as
appointees of the President to the Amtrak Board of Directors, but could
instead become members of the Board of Directors of the successor
corporations.
Passenger Rail Service Restructuring: Section 102 sets forth
requirements for the fundamental restructuring of Amtrak to prepare for
the transfer of its duties, personnel, and assets to successor
entities. Within 6 months of the beginning of Year One, the Board of
Directors is required to prepare a plan to restructure Amtrak
management, personnel, assets, operations, and other activities and
relationships into three entities: (1) a ``holding company'' staff to
oversee and manage Amtrak's contracts with host railroads, including
the ``right of access'' to rail lines of other rail carriers, and
contracts with operators of passenger trains chosen by states or
interstate compacts (including the rail passenger service provider
discussed next); (2) a nationwide rail passenger service operator, to
continue rail services and to include the Reservations Center and
rolling stock ownership and maintenance; and (3) a rail infrastructure
manager. This would involve the assignment of all Amtrak personnel by
name to one of the entities and the division of accounting, finance,
budget, and assets to provide for the operation and funding of each
entity independently. Amtrak would operate under this division of
responsibility as of the first day of Year Two.
An initial step in the restructuring would be the requirement that
Amtrak file appropriate Articles of Incorporation under state law for
two business corporations that are entirely independent of Amtrak,
referred to in the legislation as the ``Passenger Rail Service
Provider'' and the ``Passenger Rail Infrastructure Manager'' or the
``successor corporations.'' No later than the first day of Year Two,
the two divisions of Amtrak that generally correspond to the
descriptions of the successor corporations would be transferred to
create the successor corporations. Employees of Amtrak on the date of
enactment would retain their pay and benefits, seniority, and other
collective bargaining rights for a minimum of four years from date of
transfer. The corporations would only undertake railroad activities on
a contractual basis with Amtrak or another entity.
The first successor corporation, the Passenger Rail Service
Provider, would enjoy the exclusive right, until the last day of Year
Three, to continue to provide the intercity passenger service that is
being provided by Amtrak on the date of enactment, and would provide
interline reservations services to any other provider of intercity
passenger rail services on the same basis and rates as services are
provided to the operational entities that provide service within Amtrak
on the date of enactment. This corporation would also take ownership of
Amtrak rolling stock and associated debt. The President of Amtrak on
the date of enactment of this section would be offered the position of
Chief Executive Officer of the Passenger Rail Service Provider. Prior
to the last day of Year Three, a competitive process would be required
to decide who would provide services after that date.
The second successor corporation, the Passenger Rail Infrastructure
Manager, would enjoy the exclusive right, until the last day of Year
Six, to continue to provide the dispatching, maintenance, and
infrastructure services that are being provided by Amtrak on the date
of enactment in the Northeast Corridor, and would begin to carry out
the capital backlog investment plan prepared by Amtrak, to the extent
funds are made available. Prior to the last day of Year Six, a
competitive process would be required to decide who would provide those
services after than date.
While the successor corporations and the ``holdover company''
entity have no common carrier obligations, they would continue to be
subject to laws and regulations governing railroad safety, employee
representation for collective bargaining purposes, the handling of
disputes between carriers and employees, employee retirement, annuity,
and unemployment systems, and other dealings with employees that apply
to a rail carrier providing transportation subject to subchapter I of
chapter 105 of title 49, U.S.C.. In addition, retirement, annuity, and
unemployment system rights would be maintained for employees in the
remaining Amtrak entity.
This section directly addresses the interests of commuter
authorities and freight railroads whose facilities and operations are
intertwined with Amtrak's. As a general matter, Amtrak is required to
ensure that the implementation of the restructuring gives due
consideration to the needs of freight and commuter rail operations
that, as of the effective date of the Act, operate in the Northeast
Corridor on Amtrak right of way. In addition, two restrictions are
placed on use of the ``right of access'' to freight lines as of the
date of enactment: (1) the terms and conditions for operation of an
intercity passenger rail route or frequency that is not in place on the
date of enactment of this section would be subject entirely to
negotiation and mutual agreement between the host railroad and Amtrak,
or any successor to Amtrak, and would not operate under the pre-
existing right of access; and (2) the right of access to any segment of
rail line of another rail carrier would not be available to more than
one intercity passenger rail operator, whether Amtrak or a successor to
Amtrak, during any period of rail passenger service over that line.
Other portions of the section address the terms that would apply
after ``exclusive rights'' for the successor corporations terminate if
a public entity chooses to replace the successor corporations. For
example, ``legacy equipment'' (rolling stock associated with a
particular route) would be made available on an equitable basis, and
passenger reservations services would be provided at reasonable cost.
North East Corridor Compact: Under section 103, Congress would
encourage creation of an interstate compact among the eight states that
comprise the Northeast Corridor, plus the District of Columbia, to
succeed to Amtrak as the provider of passenger rail services in the
Corridor. The United States would lease the Corridor and its facilities
to the NEC Compact for 99 years at no cost. The Compact would, in turn,
accept full responsibility for managing service at its expense, with
the exception of capital grant assistance. The Compact would be
established no later than the last day of Year Two, and operating no
later than the following June. The Compact would contract with the two
successor corporations at least until the end of the periods of
exclusive rights enjoyed by the corporations, and thereafter at the
option of the Compact if the contracts are competed.
The minimum responsibilities and authorities of the Compact
specified by section 103 are as follows: (1) full responsibility for 99
years to succeed to Amtrak as operator of the Northeast Corridor,
subject to the provisions of a lease from the Department of
Transportation; (2) execution of a lease of the Northeast Corridor from
the Department of Transportation for a period of99 years; (3)
responsibility for Corridor maintenance and improvement; (4) operation
of intercity passenger rail service; (5) arrangements for operation of
freight railroad operations and commuter operations; (6) assumption of
financial responsibility for Northeast Corridor functions; (7)
authority to make use of the Corridor for non-rail purposes; and (8)
provision for participation by the U.S. Department of Transportation as
the non-voting representative of the United States. Authority (7)
contemplates creative use of the Corridor right of way and easements to
help finance Corridor operations over the long term.
The section provides for a ``Compact Commission'' of five members
that must propose a Compact for adoption no later than the last day of
Year One. Two of the members are appointed by the DOT Secretary; two by
the governors of the Northeast Corridor states and the Mayor of the
District of Columbia; and a fifth member chosen mutually by the other
four members. Elsewhere, section 207(c) of the bill provides an
authorization of funding for the activities of the Commission. In
addition to the Compact responsibilities and authorities set forth
above, the Commission must create a Compact that addresses the basis
for Compact debt issuances; the assurance that the Federal Government
is ``held harmless'' as to lease of the Corridor; and guarantee of any
residual rights of organized employees who transfer to a replacement
organization from a successor corporation. The Commission would
terminate upon the completion of its work.
Three inducements to adoption of the Compact are provided by this
section or elsewhere in the bill. First, the ``backlog'' capital
funding authorized to bring the Corridor to a state of good repair
would not be released until the Compact is established and
operationally prepared to accept a grant. This best assures that this
large amount of capital investment will be made in ways that best serve
the passenger rail service the Compact decides to provide. Second,
commuter services headquartered in a state that does not join the
compact would pay fully allocated costs of commuter operations on the
Corridor after the last day of Year Two. Third, in the event the
Compact is not adopted, the legislative directs that the DOT Secretary
to make appropriate legislative recommendations to Congress that
address the monetary contributions by Northeast Corridor states and the
District of Columbia that would be necessary to provide continued
intercity passenger rail service to those states and the District.
Assistance to Address Capital Needs: Section 104 provides an
authorization for ``backlog'' capital assistance grants on a one-time
basis (spread over several years) to restore rail facilities and
equipment nation-wide, including bringing the Northeast Corridor back
to a state of good repair, consistent with capital spending plans
developed under section 202 of the bill. In the case of the Northeast
Corridor, the funding would only be released with the NEC Compact is
functional. Such sums as may be necessary are authorized to be
appropriated over the time-frame of Years Three through Six. The
Federal share of expenditures for capital improvements under this
section would be up to 100 percent but solely for the purpose of
funding deferred maintenance, safety and security projects.
Expenditures for capacity expansion are not authorized by this section.
Employee Transition Assistance: Section 105 provides an
authorization for voluntary buyouts for current Amtrak employees that
are modeled on, but (when adjusted for inflation) are more generous
than, those available to Conrail employees at the time Conrail was
readied for sale to the private sector. A maximum payment of $50,000
would be offered during Years One and Two to employees of Amtrak who
voluntarily terminate their employment with Amtrak and relinquish any
legal rights to receive termination-related payments under any
contractual agreement with Amtrak. Amtrak would be required to certify
that the financial assistance results in a net reduction in the total
number of employees of Amtrak equal to the number receiving financial
incentives; the financial assistance results in a net reduction in the
total employment expense of Amtrak equivalent to the total employment
expenses associated with the employees receiving financial incentives;
and Amtrak would not increase the total number of employees eligible
for termination-related payments without the express written consent of
the DOT Secretary.
Limit on Operating Assistance for Long-Distance Routes: Section 106
provides an authorization for a gradual reduction in and phase-out of
the Federal subsidies of Amtrak's 17 ``long-distance'' routes, over a
five-year period to permit adequate time for the adjustments in service
or provision of state-funded operating subsidies that would permit
continuation of service desired by affected states. States or
interstate compacts might be able to preserve some long distance routes
by making modest incremental improvements in their economic performance
each year. In other cases, states or interstate compacts might decide
that they want to preserve a portion of a long distance route that
performs well and stop or reconfigure other portions. Section 106 is
designed to facilitate such decisions by the states. The technique
proposed would effectively preserve the existing subsidy levels longest
for the most cost-efficient service, by capping the per-passenger mile
subsidy amount at $0.40 in the first year of restriction (Year Two) and
gradually reducing the cap to $0.10 in the last year of subsidy (Year
Five). This relatively long transition for long distance routes
compared to other routes is provided in recognition that it is more
difficult to form interstate compacts among large numbers of states and
the states involved with long distance routes may need more time to
work out what to do and implement it.
Title II--Financial Reforms
Limitations on Availability of Grants to Amtrak: Section 201 would
make permanent the Fiscal Year 2003 restrictions on grants to Amtrak
that bring more accountability to the use of those Federal funds.
Because two successor corporations will take over from Amtrak in Year
Two, a revised form of the restrictions would then be applicable to
them, as appropriate to their duties.
Spending Plans for Capital Backlog Reduction: Section 202 would
direct Amtrak to undertake the development of the backlog capital
investment plans for the Northeast Corridor and elsewhere in the
system. The plan would be required within 6 months of the beginning of
Year One, and this section would specify that Amtrak submit the capital
spending plan prepared under this section to the Secretary of
Transportation for review and approval The plan could be implemented
only after approval by the Secretary, and with any modifications
specified by the Secretary. When the NBC Compact becomes effective, it
would take over the plan for the Corridor. Authorizations for grants is
separately provided in section 104 of the bill.
Redemption of Common Stock: Section 203 provides for the redemption
of Amtrak common stock, to simplify the governance of the corporation
as it is restructured. Given Amtrak's current assets and liabilities,
it is anticipated that the common stock has little or no value. This
section would provide for mandatory redemption of the stock on the
basis of current book value, after an impartial valuation supervised by
the Secretary of the Treasury. In the event the shareholders do not
accept this outcome voluntarily, the section provides for use of
Amtrak's eminent domain authority to acquire the stock. Judicial review
of such an action would be limited to the question of just
compensation. The common stock would not be reissued, with the
exception of a token amount to the DOT Secretary in recognition of the
financial contributions of the United States to Amtrak over time.
To prepare for the stock redemption, the DOT Secretary would
arrange, at Amtrak's expense, for a valuation of all assets and
liabilities of Amtrak to be performed by the Secretary of the Treasury,
or by a contractor selected by the Secretary of the Treasury. The
valuation would be completed not later than 6 months after the
beginning of Year One.
Retirement of Amtrak Preferred Stock; Transfer of Assets: Section
204 provides that, subsequent to the redemption of common stock, Amtrak
would exchange its assets, including the Northeast Corridor, to the DOT
Secretary in return for extinguishing the mortgage held by the United
States on the Corridor and the cancellation of more than $10 billion in
accrued but unpaid dividends on preferred stock that Amtrak owes the
United States. The United States would also surrender its preferred
stock, in exchange for a nominal amount of common stock. Amtrak would
remain liable for debt secured by these assets that is not held by the
U.S., such as the mortgage on Pennsylvania Station in New York City.
These debts would ultimately be assumed by the successors to Amtrak. At
the time of transfer of assets to the United States, the DOT Secretary
would enter into an agreement with Amtrak under which Amtrak would
exercise on behalf of the Secretary care, custody and control of the
assets transferred.
An element of the valuation and exchange process under section 203
and 204 would be to accomplish a detailed specification of the assets,
personnel, and activities that support commuter authority operations in
the Northeast Corridor and elsewhere. This would permit the
uninterrupted continuation of commuter service in the event of other
service disruption in the Amtrak system.
It is contemplated that, outside the Northeast Corridor, the DOT
Secretary would consider the retransfer of certain real estate assets
to appropriate state authorities, including Chicago Union Station and
rail-related assets in the Chicago metropolitan area, and properties
owned by Amtrak between Boston, Massachusetts and Washington, District
of Columbia that constitute the route through Springfield,
Massachusetts and the routes to Harrisburg, Pennsylvania and Albany,
New York from the Northeast Corridor mainline.
Real Estate and Asset Sales: Section 205 mandates liquidation in
the Year One-Year Three time-frame of the many properties held by
Amtrak that are not integral to the provision of rail service and do
not convey to successor entities. Any proceeds from the liquidation of
assets under this section would be credited as an offsetting collection
to the account that finances grants for debt and interest payments
under section 206 of the bill to the Passenger Rail Service Provider.
Management and Transfer of Secured Debt: Section 206 sets forth a
number of criteria for the future handling of Amtrak debt. First,
except as approved by the DOT Secretary to refinance existing secured
debt, Amtrak would not be allowed to enter into any obligation secured
by assets of Amtrak after the date of enactment. Second, when the
Passenger Rail Service Provider successor corporation is in place and
it accepts the transfer of ownership of the existing rolling stock from
Amtrak, all debt secured by the rolling stock would be transferred to
and become a liability of the Passenger Rail Service Provider. An
equivalent transfer of debt obligations would be made to the North East
Corridor Compact.
This section would also authorize such sums as may be necessary to
the Secretary for grants to the Passenger Rail Service Provider and to
the North East Corridor Compact to pay principal and interest payments
on its secured debt for Years Two through Six.
Transition Operating Assistance: Section 207 sets forth the final
operating assistance that would be provided by the Federal Government
for intercity rail passenger service (other than the separate long-
distance subsidies described above). Specifically, the section provides
``such sums as may be necessary'' for grants to Amtrak for operating
expenses in Year One; grants to the Passenger Rail Service Provider for
operating expenses of all services except long-distance trains and
routes in Year Two; the administrative expenses of interstate compacts
in Years One through Three; and grants in Years Two through Six to
cover administrative expenses of the ``holding company'' Amtrak.
This section also provides that, after the last day of Year Two,
the Federal Government would only enter into a grant agreement with a
State, regional Compact, or other public entity.
Title III--Grants and Other Assistance for Intercity Passenger Rail
Service
Capital Assistance For Intercity Passenger Rail Service: Section
301 adds a chapter 244 to title 49, United States Code, to set forth a
permanent program for Federal grant assistance to rail passenger
operations for needed capital investments. The provisions of the
chapter are closely modeled on the existing Federal transit capital
assistance program (49 U.S.C. 5309). The new program is intended to
adopt the same stance as the current transit program, in leaving the
management and operations of transit systems to appropriate government
entities and restricting the Federal role to up to a 50 percent share
in the capital projects that qualify under planning and other criteria
for Federal assistance. As an interim measure, the Federal share could
be a higher percentage (up to 100 percent in the first year of the
program (Year Two)). Up to an additional 30 percent of project net
capital cost could be funded from amounts appropriated to or made
available to a department or agency of the Federal Government that are
eligible to be expended for transportation.
Grants could be used for acquiring, constructing, supervising or
inspecting equipment or a facility for use in intercity passenger rail
service, expenses incidental to the acquisition or construction
(including designing, engineering, location surveying, mapping,
environmental studies, and acquiring rights-of-way), payments for the
capital portions of rail trackage rights agreements, passenger rail-
related intelligent transportation systems, highway-rail grade crossing
improvements on routes used for intercity passenger rail service,
relocation assistance, acquiring replacement housing sites, acquiring,
constructing, relocating, and rehabilitating replacement housing, and
rehabilitating, remanufacturing or overhauling rail rolling stock and
facilities used primarily in intercity passenger rail service.
In addition to these purposes, the grant funding would be available
to fund self-insured retention of risk for the first tier of liability
insurance coverage for rail passenger service associated with the
capital assistance grant, but the coverage may not exceed $20 million
per occurrence or $20 million in aggregate per year. This option
addresses the difficulty that replacement operators for Amtrak may have
in obtaining ``first dollar'' liability insurance coverage.
Final Regulations on Applications by States for Corridor
Development Grants: Section 302 provides that the Federal Railroad
Administration must issue final implementing regulations for the new
capital assistance program not later than June 1, 2004, so that the
program can be available in Fiscal Year 2005.
Authority for Interstate Compacts for Corridor Development: Section
303 encourages the formation of interstate compacts (other than the NEC
Compact, addressed separately) that can succeed to Amtrak as a regional
operator of continued rail service. Formation of such entities, along
with states that take on Amtrak service, is a necessary step in the
restructuring process.
The Chairman. Thank you very much. Mr. Mead, welcome back
to the Committee.
Mr. Mead. Thank you, Mr. Chairman.
The Chairman. Next time you come tell me how many
appearances you've made before this Committee.
STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR GENERAL, U.S.
DEPARTMENT OF TRANSPORTATION
Mr. Mead. I'll have to add them up. I think working with
committees like this though is what makes being a civil servant
worthwhile.
The Chairman. Or makes you earn your pay.
Mr. Mead. Well, it is a hard way to earn a dollar, sir.
Reauthorization of the aviation, highway transit, and rail
programs all seem to involve difficult policy and funding
issues this year, more so it seems to me than in the past, but
Amtrak and passenger rail, in fact, may be the most difficult
of all of the reauthorizations that you face. Fiscal 2004
actually marks the second year that Amtrak's getting Federal
money without any authorizing legislation. I think
Congressional direction is needed to move the current system
beyond the unsatisfactory status quo.
I want to reiterate a point we made at the hearing this
past spring that the current model for designing, governing,
and funding the intercity passenger rail system in this country
is broken, that problems manifest by numerous indicators, most
notably the persistence of Amtrak's cash operating loss,
growing debt burden, and declining on-time performance. There
are charts in my testimony to that effect and I'm not going to
belabor it here.
Something that's not commonly understood is that for the
past 6 years those results, the declining performance, have
developed in an environment where Amtrak had access to external
funding of about $8.4 billion. That's an average annual amount
of $1.4 billion per year. Most people think they've been
getting $650, $670 million a year, which is their annual
appropriations, and they have gotten that, but you add to that
the money that came from the taxpayer relief fund and from
their borrowings, a couple billion dollars of borrowing and
going further into debt.
I don't want to paint this though as just a problem of
money. It goes well beyond that to the amount of services
provided, who controls the investment, who provides the
service, who selects the providers. And without a
reauthorization, the answers to those questions, you're likely
to see a continuation of the stalemate or current status quo.
I want to make a strong point of saying I think the
Department, the Amtrak board, and David Gunn, his management
team, all have done a good job over the last year of
controlling expenses, something we have not seen in the past.
Make no mistake about it, those efforts are not going to save
you from a limp-along, deteriorating Amtrak without either a
significant increase in funding for the current system or
fundamental changes to it. There is no way that Amtrak is going
to save its way through success. There is no way that pinching
pennies alone is going to make the current model we have work.
Some thoughts, Mr. Chairman, on the Administration's
proposal. In fact, I think the Administration's proposal
confronts several key issues in a straightforward and
comprehensive way while leaving others quite vague or
unanswered altogether. In particular, its provisions on
corridor development and governance, that is giving the states
greater control over passenger rail service and decisions in
their state. I think that has merit and deserves consideration.
But the proposal leaves open and unanswered what level of
Federal capital funding it's prepared to support. The bill
says, ``such sums as are necessary'' and that's it. Answers are
needed here because probably the biggest problem facing the
current system, in our view, is the condition of its
infrastructure, and that of course is going to be a show-
stopper to any corridor development.
This lack of clarity on the funding issue has also fostered
a conception that the burden of funding operating losses is
going to fall on the states in a relatively short period of
time with no compensating, sustained, Federal commitment to
significantly expanded Federal capital funding. Given the
current fiscal climate in the states as well as the Federal
Government, this funding uncertainty has got to be addressed as
a central part of any reauthorization measure.
I also want to point out that the Administration's proposal
calls for the separation of the Northeastern Corridor
infrastructure from the operations. In our view, keeping the
infrastructure, the tracks, the bridges, signaling, as well as
the operations of the trains as one integrated unit is likely
to introduce the least risk to the successful transfer of its
governance to the Northeastern states or to disruption of
operations. The concern here is that if you have two separate
units, a separate infrastructure group would have different
incentives and priorities than the operations group and that
could be pretty disruptive.
And as for the proposed phase-out of operating subsidies, 3
years may seem like a long time, but it's likely to prove
logistically and financially difficult for the states to deal
with in the timeframes contemplated, especially in the current
budget climate. I think that requiring a large increase at this
pace in State operating subsidies for their trains is more
likely to lead to their elimination and restructuring than
improvement.
I want to say a couple words about the Administration's
focus on short-distance corridors. These are corridors that are
500 miles or less. I think this is a central element of the
proposal. I think it deserves your consideration. That's
because these corridors are the ones that are most patronized
today. They're all over the country, there's not just a
Northeast Corridor, and they hold the greatest potential for
some growth.
I'll give you a frame of reference. Amtrak ridership in
2002 totaled about 23.4 million people. The short-distance
corridor trains carried 19.8 million, or 84 percent, of them.
Forty-seven percent were in the Northeast Corridor, 37 percent
outside. The remaining 16 percent of the passengers, or 3.5,
3.6 million, rode the 17 long-distance trains. Many of the
people that rode the long-distance trains are traveling only
between stations located on existing corridors that could be
served by improved service on the corridor trains, which are
the Amtrak trains, rather than riding on long-distance trains
that go well beyond the corridor and sometimes arrive very late
at night or in the early a.m.
A word on Amtrak's 2004 funding needs. I'm assuming no
reauthorization before enactment of the Fiscal Year 2004
appropriations. We think that Amtrak can get by and run the
current system with about $1.5 billion in 2004. How can that be
accomplished? It can be accomplished by limiting the capital
spending to the minimum needed to maintain reliability. Amtrak
ought to be able to cover the difference between the 1.5
billion and the Senate mark, which is around 1.35, because it's
going to have $200 million in carry-over funds from 2003. But I
don't want to leave with you the erroneous impression. You
shouldn't make any mistake about it, that level of funding is
merely going to postpone the day of reckoning. Amtrak can't
continue to operate the current system without eventually and
soon addressing the backlog investment needed to bring the
system to a state of good repair. The price tag on that is
about $6 billion.
I noted earlier that the Administration's bill provided no
guidance on funding levels and it merely authorizes such sums
as may be necessary. Well, I wanted to give the Committee an
illustration of how this bill might work, and so we assumed,
that is the Inspector General, this isn't the Administration,
that given the fiscally constrained budget environment, the
total annual funding would be about $1.5 billion. That's
illustrative only and it may sound conservative but it's more
than has ever been appropriated to Amtrak for intercity rail in
a single year and it's more than the Senate 2004 mark.
After allocating funds to cover the operating costs, we
allocated the remaining money between capital and debt, and we
were able with that level of funding to pay off about two-
thirds of Amtrak debt, while also providing an increase in
capital funding continuously over the period of
reauthorization. There's a chart in my testimony, and I don't
want to get into a lot of detail now, I'll answer questions in
the Q&A period, but I want you to keep in mind please that the
Administration bill provides that the Federal Government would
share in the capital investment. The states would be required
under the bill to pick up the full cost of subsidizing
operating losses on all the trains. That's going to be about
$600 million a year. Additionally, that proposal would
eventually require a 50 percent capital match, which would
total another $600 million per year.
I think the capital match requirements and the phase-in of
the operating subsidy, that the states should pick that up. I
think those could usefully be points in negotiation and
compromise. I think the states this is a mode of transportation
like highways and the others and I think they should pay their
fair share. It's a question about what their fair share is and
when the fiscal situation is such that they can responsibly
assume it. Thank you.
[The prepared statement of Mr. Mead follows:]
Prepared Statement of Hon. Kenneth M. Mead, Inspector General,
U.S. Department of Transportation
Mr. Chairman, Senator Hollings, and Members of the Committee:
We appreciate the opportunity to testify on the reauthorization of
intercity passenger rail service and Amtrak, and the Administration's
proposed reauthorization legislation. Fiscal year 2004 represents the
second year that Amtrak will have received Federal funding without new
authorizing legislation providing guidance on how that money should be
spent. In the interim, Congress has provided that direction in piece-
meal fashion in the appropriations process. At this crossroads for
passenger rail service, a comprehensive reauthorization that provides
new direction is needed to move the current system beyond the
unsatisfactory status quo.
Current Model Is Broken. We want to start today by reiterating a
point we made to this Committee last spring which is that the current,
overall approach to designing, governing, and funding the intercity
passenger rail system in this country is broken. As shown in the
following table, these problems are evident in the persistence of
Amtrak's cash operating loss, growing debt service burden, and
declining on-time performance.
------------------------------------------------------------------------
1999 2000 2001 2002 2003*
------------------------------------------------------------------------
Cash Operating Loss $579 $561 $770 $631 $671
------------------------------------------------------------------------
Debt Service (Principal & 139 131 145 233 247
Interest)
------------------------------------------------------------------------
On-Time Performance 79% 78% 75% 77% 74%
------------------------------------------------------------------------
* 2003 figures are forecast except for on-time performance which is for
the 11 months through August 2003. Cash operating loss and debt
service are in millions of dollars.
What is not commonly understood is that these results have
developed in an environment in which Amtrak has had access to external
funding of $8.4 billion over the last 6 years (1998-2003). This is an
average annual amount of $1.4 billion per year--more than twice the
average $670 million in appropriated funds during this period. These
funds consist of Federal funds of $6.2 billion split between $4 billion
of annual appropriations and a one-time infusion of $2.2 billion in
Taxpayer Relief Act funds. To supplement these Federal funds, Amtrak
tapped private financial markets to borrow an additional $2.2 billion
in this period. In spite of the resulting $1.4 billion per year in
funding, the accumulated backlog of capital investment has grown to at
least $6 billion.
Reauthorization Guidance Is Essential. The problems with our
current approach to intercity passenger rail service extend beyond
issues of funding to questions of who decides on the types and amounts
of services provided, who controls the investment in infrastructure and
operations, who provides service, and who selects the providers.
Without a reauthorization that answers these questions, we are likely
to see an unfortunate continuation of the status quo that provides too
little money to adequately fund the current system--a system that, as a
result, provides unsatisfactory service.
Although that sounds critical of current operations, on the
contrary, we think the Department, the Amtrak Board, and David Gunn and
his management team have all done a good job over the last year of
controlling expenses--an issue we have consistently cited in our annual
Assessment Reports as a key to improving Amtrak's financial
performance. Nevertheless, such efforts will not free us from a limp-
along Amtrak without either significant increases in funding for the
current system or fundamental changes to it. As we have noted before,
Amtrak can't save its way to financial success--pinching pennies alone
won't make this model work.
The Administration's bill confronts several key issues in a
straight-forward and comprehensive manner while leaving others less
clear or unanswered. In particular, its provisions on governance and
corridor development are well-developed. It leaves unanswered, however,
what level of Federal capital funding it supports. Also, we would
suggest a different approach to organizing the Northeast Corridor
(NEC)--separating operations and infrastructure may risk disruptions to
service--and the timing of the phase-out of Federal operating support
could prove problematic, especially in the current fiscal climate.
The elimination of all Federal operating support over a short
timeframe, in conjunction with stepped-up requirements for the states
to match Federal capital funds, would create significant financial
difficulties for states wishing to preserve long-distance train
service. Although we make clear in this testimony the trade-offs that
may need to be made between long-distance and short-distance service if
funding remains at recent levels, we recognize that resolving this is a
policy call for the Congress and the Administration.
Focus on Short-Distance Corridors. The Administration's bill
proposes to focus Federal capital funding on developing and investing
in short-distance corridors (routes with end-to-end distances of less
than 500 miles). This would target service improvements to the services
that are most patronized today and that hold the greatest potential for
passenger growth in the future. Specifically, Amtrak ridership in 2002
totaled about 23.4 million passengers, and short-distance corridor
trains carried 19.8 million (84 percent) of them--47 percent in the
Northeast Corridor and 37 percent on other corridor trains. The
remaining 16 percent of passengers (3.6 million) rode the 17 long-
distance trains. (Attachment 1 provides more details on ridership and
revenue by route for 2002.)
In addition, most long distance trains overlap at least one and
often two or more corridors. As a result, many of the passengers on
long-distance trains are traveling only between stations located on
existing corridors and could be served by improved service on corridor
trains rather than riding on long-distance trains that continue on
beyond the corridor. For example, on the Coast Starlight from Seattle
to Los Angeles, only 5 percent of passengers (about 27,000) in 2000
rode from one end of the route to the other. Over 50 percent of
passengers (277,000) boarded and alighted within one of the three
corridors on the route. In other words, if the Coast Starlight had not
run, 55 percent of the passengers it carried had alternative rail
service on either the Cascades, Capitols, or Pacific Surfliner
services. (Attachment 2 provides the ``end-to-end'' and ``corridor''
passengers for each of the 17 long-distance trains in 2000.)
Maintain Integrated NEC and Slow the Pace of Operating Subsidy
Phase-Outs. We would take a different tack than does the Administration
on certain issues, however, particularly on the separation of NEC
infrastructure from operations and the pace of the phase-out of
operating assistance. Maintaining the NEC as an integrated railroad is
likely to introduce the least risk to the successful transfer of its
governance to the northeastern states or of disruption to operations in
the period leading up to that transfer. The proposed phase-out of long-
distance subsidies is likely to prove logistically and financially
difficult for the states to deal with in the timeframes contemplated.
In today's state budget climate, requiring a large, rapid increase in
state operating subsidies for both long-and short-distance trains is
more likely to lead to their elimination than restructuring and
improvement.
Funding and Fiscal Capacity Are Open Questions. We note also that
the Administration's proposal leaves open the question of the level of
funding committed to short-distance corridor development and its
source. This lack of clarity has fostered the perception that the
burden of funding system operating losses would fall on the states with
no compensating Federal commitment to significantly expanded Federal
capital funding. Such a perception weakens support for the governance
reforms in the proposal, particularly given the current fiscal climate
in the states.
The basic equation confronting the Congress in reauthorizing
intercity passenger rail service is that, without a substantial
increase in funding, the entire current, interconnected system cannot
be adequately maintained while also investing in short-distance
corridor development. In fact, it will require an increase in
appropriated funds of nearly 50 percent compared to 2003 enacted levels
just to maintain the current system ($1.50 billion versus $1.05
billion). To significantly increase investment in the corridors, which
serve the majority of passengers, would require an additional increase
of a like amount. If such funding increases are not feasible, new
investments in corridors could only come from either cuts to long-
distance train services or, as reflected in the Administration's bill,
the transfer of the funding responsibility for their operating losses
to the states.
A number of reauthorization proposals have been made in addition to
the Administration's bill. Although each has its strengths, the
incremental improvements we discuss in this testimony could be lost if
this contention between funds for new investments or for long-distance
train subsidies results in a stalemate. Then we are likely to see a
continuation of the ugly status quo into the indefinite future.
Amtrak's 2004 Funding Needs. We think that Amtrak can maintain
reliability on its system and meet its other obligations if its 2004
appropriation were near to or matched the Senate figure of $1.346
billion. Although Amtrak has requested $1.8 billion, about $300 million
of this amount is for reducing the backlog of capital investments on
the system or for lower priority investments. Therefore, we estimate
that Amtrak can get by with about $1.5 billion in 2004 by limiting
capital spending to the minimum needed to maintain reliability. Amtrak
should be able to cover the difference between this amount and the
Senate mark from its carryover funds from 2003, which are about $200
million.
One should keep in mind, however, that the Senate level of funding
merely postpones the day of reckoning and that day is surely coming.
Amtrak cannot continue to operate the current system without eventually
and soon addressing the backlog of investment needed to bring that
system to a state-of-good-repair. Otherwise, unacceptable and
unpredictable equipment and infrastructure problems will surely begin a
downward spiral of diminished service levels and disappearing passenger
revenue.
Cost of the Administration's Bill. The Administration's bill
provides no guidance on funding levels, but merely authorizes ``such
sums as may be necessary.'' As a result, providing a projection of the
costs in the bill requires making assumptions about the annual spending
totals and the amount of funds to allocate among capital backlog
investment, corridor development, and debt amortization.
We have made the following assumptions to give the Committee an
illustration of how the bill might work. First, we have assumed that,
given the fiscally constrained Federal budget environment, total annual
funding would remain flat throughout the reauthorization period at
about $1.5 billion. This is the amount we have estimated Amtrak needs
in 2004 to maintain system reliability and have arbitrarily adopted
that as the 2005 baseline. We note this is more than Amtrak has ever
received in a single appropriation.
After allocating funds to cover projected operating requirements,
we have allocated the remaining funds in each year between capital and
debt based on the following approach: we have dedicated sufficient
funds to amortize about two-thirds of Amtrak's non-defeased equipment
debt while providing sufficient funds to increase capital funding
continuously over the period. The slow but steady growth in capital
funding should permit the parties to plan for and efficiently invest
the new capital funds. The reduction in debt would provide the needed
flexibility to either use Amtrak's legacy equipment or retire it
depending on each route's future operating requirements or alternative
equipment opportunities. Otherwise, this legacy expense will fall on
the states, saddling them with a burden they did not create, or new
service providers, reducing their inclination to compete to provide
existing services.
The detailed projection of the bill's cost based on these
assumptions is provided as Attachment 3 and the table below provides an
abbreviated version of that estimate.
----------------------------------------------------------------------------------------------------------------
OIG Estimate Of Administration's Bill
Amtrak OIG ------------------------------------------------------------------
Request Estimate Total 2005-
2004 2004 2005 2006 2007 2008 2009 2010 2010
----------------------------------------------------------------------------------------------------------------
Capital (except debt) $927 $600 $600 $650 $700 $800 $1,000 $1,200 $4,950
----------------------------------------------------------------------------------------------------------------
Debt Principal 117 117 113 88 177 138 126 120 762
----------------------------------------------------------------------------------------------------------------
Net Added Debt Service 0 0 0 4 37 272 276 83 672
----------------------------------------------------------------------------------------------------------------
Total Capital $1,044 $717 $713 $742 $914 $1,211 $1,402 $1,403 $6,384
----------------------------------------------------------------------------------------------------------------
Operating Loss $607 $607 $634 $664 $476 $189 $ 2 $ 2 $1,966
----------------------------------------------------------------------------------------------------------------
Interest Expense 163 163 153 118 111 104 98 92 676
----------------------------------------------------------------------------------------------------------------
Total Operating $771 $771 $787 $782 $587 $293 $100 $94 $2,642
----------------------------------------------------------------------------------------------------------------
Total Request $1,814 $1,487 $1,499 $1,524 $1,500 $1,503 $1,502 $1,497 $9,026
----------------------------------------------------------------------------------------------------------------
Keep in mind, however, that the Administration's bill and these
figures assume that the Federal Government would share in capital
investments, but the states will pick up the full cost of subsidizing
operating losses on both the long-distance and corridor trains. After
the 3-year phase-in period in the bill and absent any restructuring,
this would amount to $650 million per year. In addition, for the states
to fully tap the capital funding we have projected, the
Administration's proposal would require a 50 percent capital match at
full phase-in, totaling $600 million per year. Thus, the $1.5 billion
in Federal funding we have projected for 2010 would require a state
match of about $1.2 billion.
We note that the Administration's proposal has an increasing state
capital match requirement over the course of the reauthorization
period. Both highway and transit programs over their histories have had
changing state matching requirements, some as low as 5 or 10 percent,
that grew over time as the programs matured. Because of the tough
fiscal climate facing the states, setting the value of the state
matching percentages as well as the timing of the phase-out of
operating support will be points for negotiation and compromise in this
reauthorization.
In the remainder of our testimony, we would like to comment in more
detail on six reauthorization issues and how the Administration's bill
proposes to address them:
Targeting system development and capital investment to
short-distance corridors;
Implications for long-distance trains of refocusing
investment;
Maintaining the Northeast Corridor as an integrated railroad
and addressing its capital needs;
Improving the governance of intercity passenger rail service
by giving the states more control;
Funding the legacy expenses of the current system including
debt and excess retirement costs; and,
Providing reliable Federal funding for passenger rail
service.
The first two issues address the nature of intercity passenger rail
service, the second two focus on how to produce and govern that
service, and the last two address funding issues.
Targeting development and investment to short-distance corridors
The Administration's bill would target investments in intercity
passenger rail service to short-distance corridors with the goals of
increasing speeds, increasing frequency, and improving the quality of
the services offered. Short-distance corridors are those routes whose
endpoints are less than 500 miles apart. This distance lends itself to
services that can compete with the automobile for both leisure and
business travelers and with air service if the trip times are low
enough and frequencies of service are high enough.
Because constraints on Federal and state budgets are likely to
persist for many years, investments in these corridors by necessity
must be made on an incremental basis. Track capacity, train equipment,
and signaling and control improvements will have to be added as funding
permits and in phases that gradually increase speeds, decrease travel
time, and improve service quality. Realistic goals are to achieve
eventual top speeds of 110 miles per hour, end-to-end travel times of 3
to 4 hours, and 5 to 15 round trips per day in these corridors.
Section 301 of the Administrations' bill proposes a capital
investment program for these corridors that would match Federal capital
funds to those raised by the states. Successful development of the
corridors will require such a dedicated program with a separate funding
allocation. Success, however, requires more than a program, it will
hinge on identifying reliable levels of funding.
Corridor services currently exist in the Northeast, in the Pacific
Northwest on the Cascades route between Vancouver and Eugene, between
San Diego and Santa Barbara on the Pacific Surfliner service, and
between Chicago and Milwaukee on the Hiawathas. Examples of emerging
service corridors are Chicago-Detroit and Chicago-St. Louis in the
Midwest and Washington-Richmond and Richmond-Charlotte in the East.
Implications for long-distance routes of investment in short-distance
service
There is no magic answer to the fundamental dilemma of corridor
development versus long-distance service facing the Administration and
Congress. Without a significant boost in funding from some source,
whether Federal or not, investment in short-distance corridors is not
possible without reducing funding for long-distance service. However,
as we pointed out last spring, the long-distance trains have been the
political glue that has held the Amtrak system together for the last 30
years.
One option that might provide some fiscal relief is the
restructuring of some long-distance trains into corridor feeder
services. Much of the territory and stations covered by the 17 long-
distance trains are also covered by short-distance corridors and trains
today. In fact, on some long-distance trains, significantly fewer than
half of the passengers travel the entire route from endpoint to
endpoint. (See Attachment 2.) By redesigning train services that
operate in the gaps between corridors, but not overlapping them, feeder
services could continue to provide services to stations currently
served by the long-distance trains and do so on more convenient,
daytime schedules and likely on more frequent schedules. This
restructuring can be accomplished over a period of years that would
minimize transition costs and would allow for the growth of the
complementary short-distance corridor services.
Some long-distance trains are not well-suited for restructuring as
corridor feeder services, particularly the trains from Chicago to the
West Coast. To maintain services to the stations on these routes may
require the indefinite continuation of operating subsidies. Corridor
feeder services may require operating subsidies as well, but are likely
to be less expensive to operate and generate more revenue resulting in
lower losses and subsidy requirements.
Restructuring most long-distance trains into feeder services
mitigates the ``free rider'' problem in cost sharing with the states.
If one state in the middle of a route refuses to contribute to the
operating subsidy, bordering states may be required to bear an
increased burden to maintain the service. Because most of the feeder
routes would operate in only one state, funding responsibility and
operating control would reside with that state alone.
Maintain the Northeast Corridor as an integrated railroad
The Administration's bill proposes to divide activities on the
Northeast Corridor among two companies, separating train operations
from the maintenance and control of the infrastructure. Separating
operations from infrastructure increases the risk that conflicts will
arise between operations and investment because each company will be
responding to different incentives that may not be reconciled. The
result could be disruption to service and a decline in on-time
performance. Outside the Northeast Corridor, operations and
infrastructure are separated and system performance there is markedly
worse than on the NEC.
The fundamental goal of the Administration's proposed realignment
is to facilitate the eventual transfer of control of the NEC to the
northeast states. Maintaining the NEC as an integrated railroad,
however, can achieve this goal just as well while also providing
additional benefits. In particular, keeping operations and
infrastructure integrated offers advantages of simplicity, performance,
efficiency and risk.
Simplicity. Realigning the NEC as an integrated railroad would
merely involve reestablishing something similar to the old NEC
Strategic Business Unit (SBU). A combination of the old Intercity and
Amtrak West SBUs would constitute the nationwide passenger rail service
provider.
Performance. Consolidated control of infrastructure and operations
would produce substantially better on-time performance based on current
experience with on-and off-corridor results, (on-time performance in
the 90 percent range versus 70 percent and below for intercity
services).
Efficiency. An integrated NEC provider of track maintenance,
capital programs, operations, and dispatching is likely to be more
efficient and less costly than two providers, each having a monopoly
over a subset of these services.
Risk. A bifurcated approach would require a fully functional
oversight and control organization at the outset lodged in the NEC
Compact to coordinate between operations and infrastructure. If the NEC
Compact is delayed, there could be disruptions to smooth operation of
the corridor.
Improving system governance through greater state control
The Administration's bill proposes to vest primary control of
intercity passenger rail services in the states. It also proposes to
shift significant funding responsibilities to the states as well. We
support this refocusing of decision-making authority onto the state
level because a new relationship must be established among Amtrak, the
Federal Government, and the states if higher speed, higher frequency,
short-distance corridors are going to be successfully developed.
Many interested parties have raised concerns that multi-state
compacts will be needed for many of the routes currently operated and
that, depending on the number of states involved, they will either be
impossible to negotiate or unworkable in practice. This concern is
overstated. Most corridor and feeder services will be primarily in one
or two states. A few will extend to 3 states. Though not without
potential difficulties, negotiating these compacts should not present
an insurmountable obstacle to corridor development.
The most complicated compact will involve the NEC states (nine
states). Although the potential problems in developing a workable
governance, operating, and funding structure are perhaps great, the
potential benefits to the states are great as well from assuming
control of the NEC. There should be sufficient incentive to reach a
workable consensus on the NEC because the problems for these states for
their commuter operations as well as intercity services would be severe
without a rebuilt and efficiently functioning corridor.
The Administration proposal models a Federal passenger rail program
on the current transit program for New Starts. Under this approach,
states would: (1) decide on the corridor service attributes such as
speed, frequency, and quality, (2) choose who operates the service, and
(3) negotiate with freight railroads to operate and invest in the
services, and (4) apply for Federal capital grants for equipment and
track investment.
We have heard concerns about how complex and time-consuming the
application and other processes might be that are developed to
implement the program. One way of dealing with this issue is to tie the
level of Federal requirements and control to the Federal funding
requested for a project. As the Federal funding percentage exceeds
certain thresholds, then additional criteria and procedures would
apply, and where state and private funds exceed some percentage of a
project's total cost, maximum local flexibility and minimum filing
requirements would apply.
Funding the current system's legacy expenses, principally debt
Adopting a new approach to organizing, investing in, and operating
intercity passenger rail service as proposed by the Administration
raises the question of what to do about the legacy expenses of the
current system. Amtrak has long-term debt with amortization periods as
long as 25 years that must be financed. In addition, Amtrak pays excess
railroad retirement taxes (excess RRTA) because of the decline in
freight railroad employment over the last 30 years that is unrelated to
passenger railroad employment which has been essentially constant over
the same period. Direct and separate Federal funding of these legacy
expenses would facilitate the development and experimentation with
alternative operating models and route structures. Otherwise, these
legacy expenses, principally debt, will fall on new service providers
and the states, reducing their inclination to compete for existing
services and, in the case of Amtrak's debt load, saddle them with a
burden they did not create.
Long-term Debt. Because Amtrak requires Federal operating
and capital subsidies greater than its debt principal and
interest payments, these obligations are currently financed by
Federal funds. Just to service the current long-term debt and
capital lease obligations will require an average of $285
million per year through 2010. Because all current and future
Amtrak debt would likely be paid by the Federal Government,
Amtrak's ability to incur additional long-term debt should be
permanently frozen, except for refinancing opportunities that
lower interest expense and do not increase the outstanding
principal. Furthermore, because Amtrak borrows at higher
interest rates than the Federal Government, a one-time
appropriation that repays immediately any debt that can be
economically amortized would produce long-term Federal savings.
Excess RRTA. Future retirement tax payments for any
passenger rail providers that would qualify today as excess
Railroad Retirement Tax Act payments should be funded through a
direct appropriation to the Railroad Retirement Board. The
estimated annual cost to Amtrak for excess RRTA is about $160
million per year. Direct funding would establish and maintain a
level playing field for all competitors to provide intercity
passenger rail services.
Securing a Federal consensus for consistent funding
As we have noted before, the Federal quid pro quo to a stepped-up
state funding role in passenger rail services should be the provision
of some assurance to the states that past uncertainty concerning the
levels of Federal funding would not recur. Investments in corridor
development can proceed most efficiently where long-term decisions and
multi-year investments can be made without the threat of a disruption
in Federal funding.
This is, perhaps, one of the toughest nuts to crack considering the
tight fiscal constraints facing the Federal budget. Highway, transit,
and aviation trust fund revenue projections are down and, as a result,
those programs are likely to add new demands on the general fund over
the next few years. Alternate funding arrangements, such as tax credit
bonds, have not found favor. In spite of these difficulties, a reliable
Federal funding commitment will likely be needed to generate state
support for a new Federal-State financing partnership. A broad and
committed consensus needs to be reached so that achieving the
authorized funding levels and Federal capital funding commitments will
be much more tractable in future budgets.
Mr. Chairman, this concludes our statement. I would be pleased to
answer any questions.
Attachment 1
Amtrak 2002 Ridership Distribution
------------------------------------------------------------------------
Fiscal Year 2002
---------------------------------------------------
Riders Revenue
(000) % of Total (000) % of Total
------------------------------------------------------------------------
Long Distance Train
16--Silver Star 252 1.1% $25,088 1.9%
17--Three Rivers 127 0.5% 9,863 0.8%
18--Cardinal 74 0.3% 3,921 0.3%
19--Silver Meteor 248 1.1% 28,347 2.2%
26--Capitol Ltd. 146 0.6% 12,558 1.0%
45--Lake Shore Ltd. 288 1.2% 24,295 1.9%
48--Silver Palm 206 0.9% 18,262 1.4%
52--Crescent 246 1.0% 25,287 2.0%
57--Pennsylvanian 76 0.3% 2,855 0.2%
63--Auto Train 202 0.9% 50,742 3.9%
25--Empire Builder 368 1.6% 39,717 3.1%
27--California 327 1.4% 36,521 2.8%
Zephyr
28--Southwest Chief 256 1.1% 36,770 2.8%
30--City of New 159 0.7% 11,676 0.9%
Orleans
32--Texas Eagle 129 0.6% 14,349 1.1%
33--Sunset Ltd. 97 0.4% 13,794 1.1%
34--Coast Starlight 446 1.9% 33,272 2.6%
---------------------------------------------------
Total Long Distance 3,646 15.6% 387,315 30.0%
NEC
1--Acela Express/ 3,214 13.7% $ 364,150 28.2%
Met.
5--Regional 5,760 24.6% 298,788 23.1%
13--Clocker 1,979 8.5% 18,867 1.5%
---------------------------------------------------
Total NEC 10,953 46.8% $ 681,804 52.7%
Other Corridor
3--Ethan Allen 39 0.2% $ 1,726 0.1%
4Vermonter 67 0.3% 3,759 0.3%
6--Twilight 215 0.9% 13,291 1.0%
Shoreliner
7/15--Maple Leaf/ 1,241 5.3% 47,853 3.7%
Empire
9--Downeaster 245 1.0% 3,844 0.3%
14--Keystone 949 4.1% 21,969 1.7%
40--Adirondack 91 0.4% 4,116 0.3%
66--Carolinian 215 0.9% 11,328 0.9%
67--Piedmont 44 0.2% 596 0.0%
20--State House 226 1.0% 5,656 0.4%
21--Hiawatha 404 1.7% 6,689 0.5%
22--Wolverine 300 1.3% 9,695 0.8%
23--Illini 92 0.4% 2,886 0.2%
24--Illinois Zephyr 94 0.4% 2,339 0.2%
29--Heartland Flyer 53 0.2% 903 0.1%
35--Pacific 1,725 7.4% 28,357 2.2%
Surfliner
36--Cascades 580 2.5% 13,004 1.0%
37--Capitols 1,080 4.6% 11,014 0.9%
39--San Joaquins 734 3.1% 17,620 1.4%
41--International 92 0.4% 2,774 0.2%
54--Kentucky 21 0.1% 664 0.1%
Cardinal
56--Mules 144 0.6% 3,153 0.2%
65--Pere Marquette 60 0.3% 1,604 0.1%
XX--Special Trains & 98 0.4% 8,640 0.7%
Buses
---------------------------------------------------
Total Other Corridor 8,808 37.6% $223,480 17.3%
Grand Total 23,407 100.0% $1,292,600 100.0%
------------------------------------------------------------------------
Source: Amtrak's Fiscal Year 2002 Ridership and Revenue summary.
Attachment 2
End-to-End vs. Corridor Passengers
On Long Distance Trains
----------------------------------------------------------------------------------------------------------------
2000 Passengers
Train --------------------------------------- % End-to- %
End-to-End Corridor\1\ Total End Corridor\1\
----------------------------------------------------------------------------------------------------------------
1 Auto Train 233,900 233,900 233,900 100% 100%
2 California Zephyr 33,362 72,198 382,002 9% 19%
3 Capitol Limited 62,481 16,698 145,196 43% 12%
4 Cardinal 3,631 16,087 74,479 5% 22%
5 City of New Orleans 39,433 -- 200,682 20% 0%
6 Coast Starlight 26,174 277,299 505,098 5% 55%
7 Crescent 8,561 77,610 265,789 3% 29%
8 Empire Builder 40,307 155,159 433,404 9% 36%
9 Lake Shore Limited 67,264 99,326 300,989 22% 33%
10 Palmetto 28,148 70,524 217,865 13% 32%
11 Pennsylvanian -- 33,590 33,590 0% 100%
12 Silver Meteor 52,063 69,913 254,229 20% 28%
13 Silver Star 34,877 129,397 269,577 13% 48%
14 Southwest Chief 47,079 2,683 268,267 18% 1%
15 Sunset Limited 13,685 5,972 119,444 11% 5%
16 Texas Eagle 2,192 30,675 145,023 2% 21%
17 Three Rivers 20,599 55,947 133,206 15% 42%
----------------------------------------------------------------------------------------------------------------
Total Long Distance 713,756 1,346,978 3,982,740 18% 34%
----------------------------------------------------------------------------------------------------------------
1 Represents the number of passengers who get on and get off the train within the confines of a single corridor.
Corridors include stations on existing Amtrak corridors and those on planned high-speed rail corridor routes.
Source: OIGs analysis of Amtrak's 2000 Origin/Destination station pair data.
Attachment 3
----------------------------------------------------------------------------------------------------------------
Administration's Bill
Section Account Amtrak OIG --------------------------- 2008 2009 2010 6 Year
2004 2004 2005 2006 2007 Total
----------------------------------------------------------------------------------------------------------------
Capital
104 Capital Backlog 252 -- -- -- 350 400 500 600 1,850
[100% Federal;
Section 202
Plans]
207/301 Capital Grants 675 600 600 650 350 400 500 600 3,100
[100%--50%
Federal; Section
207 for 05/06]
--------------------------------------------------------------------------------
Total Capital 927 600 600 650 700 800 1,000 1,200 4,950
(except debt
principal)
[Section 301-- -- -- -- -- 88 267 500 600
States' Capital
Match]
[Section 301- 0% 0% 0% 0% 20% 40% 50% 50%
States'
Percentage
Match]
Operating
207/106 Long Distance 563 563 580 501 395 187 -- -- 1,662
Losses [Amtrak
2005; PRSP
thereafter]
207 Short-Distance 188 188 194 169 -- -- -- -- 362
Losses [Amtrak
2005; PRSP 2006]
207 Multi-State -- -- 4 5 4 -- -- -- 13
Administrative
Transition
207 Amtrak 2 2 2 2 2 10
Administrative
Expenses
103 NEC Compact -- -- 2 -- -- -- -- -- 2
Commission
105 Employee Buyouts -- -- -- 75 75 -- -- -- 150
[PRSP & PRIM]
--------------------------------------------------------------------------------
Total Operating 751 751 779 752 476 189 2 2 2,200
(except interest
expense)
NEC Operating (144) (144) (146) (88) -- -- -- -- (234)
Loss/(Profit)
Amtrak Legacy
Debt
207/206 Amtrak/PRSP 117 117 113 88 177 138 126 120 762
Principal
206(d) Additional -- -- -- 39 292 315 130 776
Principal
Paydown
207/206 Amtrak/PRSP 163 161 153 118 111 104 98 92 676
Interest
206(d) Interest Savings -- -- -- -- (2) (20) (39) (47) (108)
from Paydown
--------------------------------------------------------------------------------
Total Debt 280 278 266 206 325 515 500 295 2,107
Service
TOTAL 1,814 1,485 1,499 1,520 1,500 1,503 1,502 1,497 9,023
Amtrak Legacy 2004 2004 2005 2006 2007 2008 2009 2010 Total
Debt
Total Principal 117 117 113 118 207 168 156 150
Total Interest 163 163 153 148 139 130 122 114
NEC Compact
Operating Profit 144 144 146 148 150 152 155 157 908
Amtrak Legacy -- -- -- (30) (30) (30) (30) (30) (150)
Principal
Amtrak Legacy -- -- -- (30) (28) (26) (24 (22) (130)
Interest
Compact Net 144 144 146 88 92 96 101 105 628
Profit
----------------------------------------------------------------------------------------------------------------
The Chairman. Thank you, Mr. Mead, and the Senate mark is
1.35 and you say they've got 200 million rolled over from last
year. Is that correct?
Mr. Mead. Yes, sir.
The Chairman. But yet the Administration has only asked for
$900 million, Mr. Rutter. Where do you think that you and Mr.
Mead differ here on the estimates of what level of
appropriations are required?
Mr. Rutter. I think the main difference is that our
appropriation, or at least the President's budget for 2004,
talked about a $900 million number and that any amount over
that should be accompanied by concrete moves in the direction
of reform. Frankly, the 2003 appropriation, which came out
after the President's 2004 budget, contained many of those
steps, and we believe that there are additional steps that the
appropriators can take to move continuously toward this point
away from the status quo.
I would, however, note that that $900 million is 70 percent
more than the previous year's request and is much higher than
the last 3 to 4 years of the previous Administration's requests
for Amtrak appropriations.
The Chairman. Well, you have a point there. Mr. Mead, do
you still think that Amtrak needs to restructure its debt?
Mr. Mead. Oh yes.
The Chairman. How do you do that?
Mr. Mead. Well, I mean, it's a matter to some extent of a
personal philosophy, but I think if you're going into a
reauthorization period we're really going to try to make a
difference. My own view is that you ought to freeze the debt,
the Federal Government probably ought to pay it off, because
frankly we're paying off the debt anyway and we can borrow
money cheaper than Amtrak's interest rates. We could just pay
it off.
The Chairman. So we ought to just pay off their debt?
Mr. Mead. Yes, as part of the reauthorization. I certainly
wouldn't recommend you do it as part of the appropriations
process. I think it should be part of a larger package. And I
say that also because if we're going to be looking to the
change in governance and structural change in Amtrak, and look
to the states to take more responsibility and start governing,
the states aren't going to be interested in picking up anything
if you say, well, you're going to be saddled with debt to boot.
The Chairman. You've observed as I have over the years by
the way, I really regret that Yogi Berra ever made that comment
about deja vu all over again because we all get real tired of
hearing it, but over the years we've sort of had this same
debate, this same discussion, and you have noticed many of
their long-distance routes that have, as I mentioned in my
earlier opening statement, as much as $400 per passenger
subsidy. Is there any way that any of those long-distance
routes in your mind, from your experience, are ever going to
come close to any kind of reasonable cost per passenger?
Mr. Mead. Some of them won't, but I believe there is a
misconception about what a long-distance route actually is. If
you stop and look across the United States and take the East
Coast as point A and the West Coast as point Z, there are very
few people that are actually going to ride from point A to
point Z, but there are lots of people that will be going
between intermediate points across the United States, and it's
those intermediate points that hold a lot of promise that are
called corridors. And that is what I think is a very important
feature of the Administration's bill to invest in those,
regardless of the State. In many states, such as Texas, there
are corridors in Texas that could stand development.
The problem is that when you're just relying on long-
distance trains, the train that's one train going across and it
may show up at 3 a.m. in the morning. It's one train, it's
really not maximizing the growth potential, but there are some
in this country, Mr. Chairman, that the distances between one
corridor and another exceed 500 miles, maybe 1,000 miles.
Frankly, those people probably ought to consider getting on a
plane.
The Chairman. I think most of them . . .
Senator Burns. We've got airplanes that show up at 3 in the
morning. That doesn't solve any problems.
Mr. Rutter. Mr. Chairman, if I could add to that.
The Chairman. Please, Mr. Rutter.
Mr. Rutter. The other thing that treating all long-distance
trains equally is inaccurate because not all long-distance
trains have the same characteristics, either their on-time
performance or the kind of people who ride it. You have two
members of your committee here who represent states served by
the Empire Builder. The Empire Builder travels on BNSF freight
ride-away and BNSF operates that train at about 80 to 90
percent on time.
The other thing that characterizes that particular route is
that if you looked at between Minnesota and Chicago and North
Dakota and Washington, you've got different characteristics of
where people are traveling. People in North Dakota and Montana
are mostly going between those two states or to Washington.
Very few of those people go to Chicago. Similarly, Chicago to
Minnesota, Minneapolis, that's where most of that traffic
happens on that end. One of the things that could be possible
is to look at bifurcating long-distance trains into shorter
segments, serving those segments with coach service rather than
more expensive sleeper service and particularly the Empire
Builder is in a situation where it's the least avoidable costs
aren't nearly as high as some of the other Western routes. So
it's important to recognize that there are different
circumstances for each of these particular services.
The Chairman. Well, my time has expired but I'm afraid we
may be headed in the same direction we have, and that's we'll
give them enough money to limp along and the debt goes up and
the operating losses continue and that's very unfortunate
because at some point or another we're going to have to maybe
never, maybe we won't ever have to make a touch decision. We've
avoided those pretty well in some other areas. Senator
Lautenberg.
Senator Lautenberg. Thanks, Mr. Chairman. The thing that
struck me is that we talked about when we heard from Mr. Mead
about giving, limiting the funding to $1-1/2 billion above,
that's certainly above where we are now, but it goes with the
statement that says, minimize the capital to maintain
reliability. And one of the things that we've done here is
we've constantly minimized what it is that we put into the
road, and I think the chairman just said the same thing and I'm
inclined to agree with him. He didn't say quite what I'm going
to say, but we are talking about kind of fisher-cut bait here,
I mean, either we're going to put enough into the railroad at
one time or over a period of a few years to bring it up to the
kind of travel that people would like to see or just limp along
as we see and not really do much.
Chairman McCain and I a few years ago were in Brussels,
Belgium, at the same time, and I headed for Paris where my trip
was to continue and I got on a train and in an hour and 25
minutes we went 200 miles. I don't think you could get an
airplane there if you wanted to, and at what point does it take
us to in this country to say, hey listen, when you get those
distances that are 500 miles or less, there almost ought to be
no dispute. Certainly between here and New York City, if we
could get there in an hour and a half, an hour and 45 minutes,
one could speculate but make some pretty optimistic guesses
about how much rail service would be occupied, would be taken.
Even now you get a cloudy day out here, a rainy day, and I
usually use Acela if I can, it's crowded. People want to know
the reliability of rail service is there.
So I would ask if there shouldn't be a point, Mr. Rutter,
that we say, look, I read the statement that then-Governor Bush
about it being a Federal responsibility, Federal costs for
capital and operations, and I can ask you what changed in his
mind, I guess the job probably from being Governor out there
and knowing you can't afford to do much about this, but there
are those national causes. What should we do about you said
refinance the debt in some way, Mr. Mead. Well, that's a nice
idea but it's the how-to that's bothersome. If we're going to
restructure the debt we're going to have to put a lot more
money into it. So at what point do we face up to our
responsibility and say that we want to get it done? Is the
Administration allowing Amtrak to spend its funding to cure the
same safety defect as it criticized Amtrak for, funding
provided for Amtrak adequate to address all these safety
concerns, Mr. Rutter?
Mr. Rutter. Well, we're certainly one of the things I get
to do is represent the Secretary on Amtrak's board, we regulate
Amtrak from a safety perspective as well as advise the
Secretary and the Administration on passenger rail policy.
Getting back to I think part of your question on the amount of
money, it's also much a matter of what are you going to spend
that money on. When Mr. Mead talks about buying down debt,
dollars invested toward that have serious and significant
benefits in a present value situation now. If that has appeal
to spend money on, rather than spending money on the status quo
without any further change, I think the other thing that those
dollars going toward of a different kind of system would be
illustrated between the difference in what we were being asked
to do when that letter that you quoted from, when Tom Downs was
going to shut down the Eagle and said, we'd enjoy you picking
up the difference, and the current Governor, Governor Perry,
who's talking about resuscitating some plans for high-speed
passenger rail, not where the Eagle goes, but where the most
people in Texas are.
I think that's one of the distinctions that we'd like to
move toward in our proposal, which is to make investments in
services that have the most potential for serving people.
Senator Lautenberg. Well, I'd ask you this. I understand
that the Administration has recently released the names of
three people that it proposes to nominate to the Amtrak board.
One is a long-time advocate of railroad privatization, the
second is an experienced hand at working with companies headed
into bankruptcy, and the third has a reputation as an outspoken
business person, no experience whatsoever in the rail sector
and perhaps has some conflict of interest in modes of
transportation. So were these individuals selected by the
Administration for the purpose of administering a coup de grace
to the railroad once and for all?
Mr. Rutter. Absolutely not, sir. First, let me talk about
well, I'll get to the people we've named, then we'll talk about
killing Amtrak. The people that we've named, the three that you
mentioned, all have qualifications that speak to the kinds of
qualifications set out in the statute for Amtrak's board,
people who are familiar with business, with transportation
services, and all three of those folks are very qualified.
They're outspoken, they're going to speak their mind, but
they're very bright, and we believe they're the kind of people
that are going to help offer assistance to David and to the
rest of the board members as we try to make Amtrak better.
Finally, let me speak directly to the frequent not
necessarily here but frequent accusations that this
Administration is about killing Amtrak. If that were indeed our
interest, we would have done that last summer. Amtrak was in
dire straits, they were on the brink of bankruptcy. Instead of
having them go bankrupt, our Administration came in with a $100
million RIF loan and Congress came in with $200 million in
supplemental appropriation, and we've worked with David and the
Amtrak team to make sure that they're able to live within the
means that Congress provided for them.
It is not the Administration's proposal or its policy that
passenger rail service go away. We'd like to make it better and
the people that we will soon send paperwork up here for the
three additional board members we believe are capable, talented
people who are going to help make a positive difference in how
Amtrak meets that need.
Senator Lautenberg. And Mr. Rutter, we don't expect the
negative difference to be the target, but this isn't an IQ
test. I want to know whether these people have experience in
passenger rail service. I want to know whether their business
experience is appropriate for what is a quasi- government
corporation and the responsibility of providing service. You
look at what we spent for aviation and for highways and compare
that to the monies and funds that we put into rail service.
There is no comparison.
Mr. Rutter. One more response to that. It's certainly as
qualified or more qualified than some of the people that have
served on the board in the past 2 or 3 decades. You look at Mr.
Crandall, who knows about running a transportation business.
You look at Mr. Hall, whose entire life has been about customer
service, retail business, which frankly should be a concern of
Amtrak's about what its passengers need.
Senator Lautenberg. Well, we're not going to debate that
here, I assume, Mr. Chairman. Mr. Crandall, you know, very
capable guy. He opposed my stopping smoking in airplanes when
he was smoking five packs of butts a day.
The Chairman. Senator Smith.
STATEMENT OF HON. GORDON H. SMITH,
U.S. SENATOR FROM OREGON
Senator Smith. Thank you, Mr. Chairman. I'd like to put an
opening statement if I may.
The Chairman. Without objection.
Senator Smith. And I do want to note with appreciation
Claudia Howells from Oregon who's come to testify on the next
panel. I appreciate her coming here. Also, gentlemen, I'm quite
mindful as a former State legislator that every time an Oregon
State budget was made we had a big Amtrak issue and we would
put millions of dollars into it to keep it going to do our part
of it, and I know the State of Washington does the same. In
other words, the states value the service. I'm also mindful
that many states don't pay anything for it and I'm wondering if
there isn't something that can be fairly done to share the
burden. If it's a value, why don't they participate? And
resources are scarce, but if it means something, why does the
Federal Government pick up all for some and not all for others?
Mr. Mead. I think that point is well taken. I view
intercity passenger rail much like the highways, much like the
airports, that the states ought to have more to say about what
happens. I think one problem with this bill though is that it
comes before you with no money in it. And when you say, well,
such sums as are necessary, you say, well, what that may mean
to one person may mean something quite different to another.
And the other is that this whole problem with Amtrak actually
began, well, many years ago, but it started coming to a head 2
years ago and now the Federal budget situation is quite
different than it was a couple years ago. We have more Federal
obligations and the State fiscal crisis, as Senator Lautenberg
was saying, I don't know if it's the worst since the Great
Depression, but it's almost the worst fiscal situation facing
the states since the Great Depression.
And you have that, the confluence of the Federal situation
and Amtrak and it's hard to go to the states at that point and
say, well, we want some money, we want you to belly up and
contribute something too. But I do think they have to pay their
fair share, but we need to look very closely at this bill in
terms of the phase-in period and the size of the capital match.
On the capital match issue, sir, I'd point out that over the
years different transportation programs have had different
matching levels. This bill proposes 50 percent. The highway
program, when you were starting the interstate, I think it was
90 percent at that point. Now for most highway programs it's 80
percent. In transit I believe it's 50 or 60 percent. Airports
it's even different. So I think Congress has some flexibility
there on the exact match to require.
Senator Smith. But it's prospective, it's not a part of
this bill that states would have to contribute if they want to
continue?
Mr. Rutter. Well, no actually. Part of this bill is to do
two things that meet or at least respond to the situation that
Oregon, Washington and California have particularly seen. And
that is, one, that those states have made substantial
investments in increasing and improving passenger rail. It's
been responded to by lots of passengers, but they've done so
without a Federal partner, any Federal dollars. Our bill would
create a capital partnership where the Feds and the states
would be able to participate in that.
And the other point that you made is that there ought to be
some degree of equity among states for that operating subsidy.
No State should get for free what other states choose to pay
for.
Senator Smith. And do you find when the states are involved
like Oregon, California, Washington, that you have a better
system?
Mr. Rutter. I think that one of the things that informed
our bill was the success that's happened on the West Coast, and
it's happened not at high speeds of 110 or so, it's happened
with frequencies, it's happened with reliability, which
resulted from investments made in the freight infrastructure,
and it's happened with new and newer rolling stock, all of
which have meant that it's much more patronized, as Mr. Mead
has talked about, the number of Amtrak passengers who are on
shorter corridor distance.
Senator Smith. Thank you. That's a very helpful update.
Another update I would appreciate, Mr. Chairman, is on the
Pioneer Line that Amtrak used to run between Boise actually it
used to go from Chicago to Portland, Oregon but now from Boise
to Portland and my understanding of that was actually, well,
not a money maker, it was far better for Amtrak than many of
the lines that are still running. I wonder if you can give me
an update as to what the status is of that. Is there still a
consideration of a freight passenger rail component? Is there
anything happening on the Pioneer Line?
Mr. Rutter. Not that I'm aware of. One of the things that
would certainly be possible, and Ms. Howell's from Oregon,
would certainly be able to talk about, one, the difficulty that
they've just gone through keeping the service they have, and
that's they're contributing where maybe some other states
aren't. But to the extent that that lift for a Portland to
Boise service may not be huge, that's certainly something that
this bill would anticipate that those two states could make
that choice jointly together.
Senator Smith. Thanks, Mr. Chairman.
[The prepared statement of Senator Smith follows:]
Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
Thank you Chairman McCain. I appreciate you for holding this
hearing on a very important issue to my State of Oregon and our
country.
Oregon is fortunate to be served by two Class I freight railroads,
19 shortlines, and Amtrak. As this hearing considers the
Administration's legislative proposal for restructuring intercity
passenger rail service and Amtrak, one area of improvement I would like
to see is more equitable participation by all the states in supporting
Amtrak. In the Pacific Northwest, the states of Oregon and Washington
provided $16.5 million in operating support in 2002.
In addition, according to Amtrak, since 1992, Amtrak, the states of
Washington and Oregon, and their freight partners have committed more
than $600 million in track and signal upgrades, train equipment and
station improvements on the Pacific Northwest Rail Corridor. Many other
states with Amtrak service, however, contribute nothing. As we debate
the future of Amtrak, I hope we can devise a system whereby all states
make a fair contribution to supporting intercity passenger rail
service.
I would like to extend a special welcome to one of my constituents
who is testifying today--Ms. Claudia Howells from the Oregon Department
of Transportation's Rail Division. I look forward to hearing your views
regarding Oregon's partnership with Amtrak and how the rest of the
country can learn from Oregon's experience.
I would also be interested from all the witnesses on how we can
encourage more states to contribute financially to an intercity
passenger rail system that benefits the traveling public.
Thank you, Mr. Chairman.
The Chairman. Senator Dorgan.
Senator Dorgan. Mr. Chairman, thank you. Mr. Rutter, as I
understand the Rail Investment Reform Act, which the
Administration has proposed, the long-distance trains would
operate with 100 percent of the operating costs of those trains
being guaranteed by the states in which it operates?
Mr. Rutter. At the end of that authorization period. It
wouldn't start immediately.
Senator Dorgan. So 100 percent of the operating costs and
50 percent of the capital, correct?
Mr. Rutter. It would be 100 percent of that operating
subsidy. That's a pretty big difference, the difference between
revenues and expenses, which differs by route.
Senator Dorgan. But long-distance trains, by and large, are
not profitable, is that correct?
Mr. Rutter. That's true.
Senator Dorgan. And so----
Mr. Rutter. And nor do we pretend that they ever will be.
Senator Dorgan. I understand. And so the losses that exist
on the long-distance trains are not offset by, for example,
profits on a heavily populated Eastern Corridor, which is
circumstantial where you have a national system? Instead you
take pieces of this apart and separate them and you say there
shall be a Northeast Corridor and there shall then be long-
distances trains in states involved in paying the operating
losses of those trains and then states also paying 50 percent
of the capital costs, do I have that right?
Mr. Rutter. At the conclusion of that authorization cycle
that's how it would work.
Senator Dorgan. And tell me how long the phase-in, when is
that conclusion of that cycle?
Mr. Rutter. Our bill sets out a 6-year pace and certainly
as Mr. Mead has mentioned, there are those who would question
the speed with which that happens, and certainly that's a
conversation that we'd be happy to have with Members of this
Committee and the House, as long as we're moving toward away
from the status quo and toward a better future.
Senator Dorgan. But isn't this a philosophy that says,
look, to the extent that there are trains out there, the Empire
Builder being one, as part of our rail passenger service that
are losing money, the Federal Government's going to have
nothing to do with that, 50 percent of the capital costs, but
otherwise we're going to have nothing to do with that. If
somebody wants to run them, God bless them, we don't have any
interest in it. And the reason I ask that question is
philosophically I think it would have been much more up-front
if we just say, the Administration does not believe in
subsidizing long-distance trains. We believe that we ought to
have a Northeast Corridor, which likely would be self-
sustaining, I assume, and then the long-distance trains, we
don't want anything to do with them really, if somebody else
wants to cover the losses, let them do it, but our philosophy
is not to do that. Why would you just not say that because
that's what your bill is?
Mr. Rutter. Well, our bill is trying to put passenger rail
in the same position that we have for other surface
transportation programs, which is the Federal Government is a
capital partner and that operating and maintenance expenses are
primarily a responsibility of States. That's how we do
highways, that's how we do transit. There can be arguments
about the level of capital participation and there can be
probably some talk about how you transition from where we are
now to where that would be and how fast do you get there?
Mr. Mead. You know, very substantial parts of what people
think of as long-distance routes today, the Administration, if
I'm reading the bill correctly and I think I am, does see an
interest in and that's where they want to put up capital money,
and I think that's really important.
Senator Dorgan. Well describe that to me. Describe where
those routes would be.
Mr. Mead. Well, you could take a long-distance route, take
Chicago to Los Angeles.
The Chairman. Try Orlando to Los Angeles, that's my
favorite.
Mr. Mead. Orlando to Los Angeles, OK, we take Orlando to
Los Angeles.
Senator Dorgan. Well, don't take too much time, I only have
5 minutes.
Mr. Mead. I'll be real quick. There are few people that are
going to go from end to end, get on that train in Orlando and
ride it all the way to Los Angeles, but there are lots of
cities in between. In some instances, 400 or 500 miles separate
those two cities. Those two cities would be eligible for
funding as a capital grant to develop corridor service. Right
now, the service they get is that long-distance train coming
through going all the way across country and yet those two
communities could probably sustain or may very well be able to
sustain additional frequencies, and that's why the capital
program in the bill, I think, has some merit. But the
Administration would not be funding the whole route all the way
from Orlando to Las Vegas.
Senator Dorgan. I'm much more interested in the operating
costs and the operating subsidy in the bill. I've often asked
the question if we did not describe the interstate highway
system of a national system, who would have decided to invest
the money that was needed to be invested to build an interstate
highway from Fargo, North Dakota to Beech, North Dakota, which
travels through a substantial part of our State where there are
very few people living and yet we build an entire interstate
highway through North Dakota, through Montana. Why? Because we
are bridge states in which that piece of the interstate highway
is every bit as important as every other piece of that highway
in this country.
And the same is true, exactly the same thing is true, as
between Rugby, North Dakota, and Williston, North Dakota with
Amtrak. You simply can't stop Amtrak at Fargo, North Dakota and
decide to pick it up again in Helena, Montana, going to Seattle
unless you're going to airlift that locomotive and the cars. I
mean, it is implausible, you just can't do that. So my point is
that what you've described here is a system that I think says
we don't want to subsidize any long-distance trains and we know
from the start that long-distance trains require subsidy, we
know that. You're taking tons of metal across this country on a
track and we know it takes money, so we have decided as an
affirmative matter to subsidize that over the years.
I'm perfectly comfortable with that. I want it to be
effective and efficient but I'm perfectly comfortable because
we subsidize everything else in transportation. So let me just
ask this question. We know that you proposed this at a time
when State governments are financially flat on their back and
there isn't a ghost of a chance in my judgment for you to, just
as you could not have with George W. Bush back in 1996, you
won't now convince those Governors to spend money they don't
have to subsidize long-distance trains. And even more than
that, my understanding of the way this would work is you'd have
to have groups of States, all of which would agree to meet that
subsidy to get, and probably two of seven states would say no,
five say yes, and you don't have an opportunity then to run
that train and provide the operating loss or the subsidy for
the operating loss.
So, Mr. Chairman, I appreciate the support not the support,
I should say the testimony--of Mr. Rutter and Mr. Mead, but I
end this questioning exactly where I began with my statement.
This is a plan that says, let's abandon the Federal support for
long-distance trains. It is exactly moving in the wrong
direction, exactly in the wrong direction.
And, Mr. Mead, you might say in the long run, or Mr.
Rutter, you might say in the long run wouldn't it be nice to be
able to provide some State support? Sure, that would be nice in
the long run, but the fact is, this railroad, this Amtrak, will
either live or die in the short and intermediate run and the
fact is this proposal comes at a time when you don't have a
ghost of a chance of connecting the dots to keep long-distance
trains running with your plan. And there are a lot of folks in
this country that are going to be disadvantaged by this and I
think it takes an important part of our transportation system
and renders it inoperative at a time when we really need it.
The Chairman. Mr. Rutter and Mr. Mead, would you care to
respond?
Mr. Rutter. Well, first off, we do continue to plan for and
look at the Federal Government having a responsibility and an
ongoing partnership with states to provide dollars for capital
assistance. The other thing that I'd say is that we've done an
awful lot of outreach with a lot of States, State DOTs, the
Governors' offices, and they share your concerns about long-
distance trains. They've said that about 60 or 70 percent of
your bill, Mr. Rutter, is OK, but don't ask us to do that.
I would I mention that to show that we've actually talked
to folks and we've heard that same thing. The other part of
that though is that most of the states are also quick to note
that what our bill proposes at a 50 percent capital
participation rate is 50 percent more than they have now, which
is zero. We think that the Federal Government ought to be a
capital partner with states in making investments in places
that they choose.
The Chairman. Mr. Mead, do you want to respond?
Mr. Mead. I believe that the long-distance train issue, I
think, has been overblown a bit and it isn't my job to carry
the Administration's water anywhere and I wouldn't do that. But
I think it might be beneficial, just as we have with the
highway reauthorization, is to sit down and look at every, each
situation. For example, you're pointing to some specific
situations. I can't respond to those right now because I'm not
familiar with them all, but it does seem to me that the future
of intercity passenger rail is going to rise or fall on how
much people use passenger trains in this country and the
quality of the service and the on-time performance of it and
how well the capital infrastructure is, and if we don't pay
attention to that because we're focusing on the preservation
simply of long-distance trains, I think the future of passenger
rail is going to down the tubes and I'd hate to see that
happen.
The Chairman. Well, I thank you both and I appreciate you
coming here and testifying and we'll be seeing you again. Thank
you.
Our next panel is Mr. David Gunn, who is the President and
Chief Executive Officer of the National Railroad Passenger
Corporation, and Ms. Claudia Howells, the Rail Division
Administrator of the Oregon Department of Transportation. Mr.
Gunn, welcome back before the Committee.
Mr. Gunn. Thank you, sir.
The Chairman. Please proceed.
STATEMENT OF DAVID L. GUNN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMTRAK
Mr. Gunn. I haven't been here as many times as Mr. Mead but
I----
The Chairman. I hope you never have to.
Mr. Gunn. I don't think I'd want to. Mr. Chairman and
Ranking Member, Hollings, and distinguished Members of the
Committee, I want to thank you for the opportunity to testify
today on the hearing on the Administration's proposal for
Amtrak reauthorization. In the interest of time, I have
submitted written testimony.
The Chairman. Without objection, your full statement will
be part of the record. You, too, Ms. Howells.
Mr. Gunn. And I will just make a brief statement if that's
permissible. If you look at the Administration's proposal,
there are a number of things that I think are troublesome. The
idea of engaging in a debate about the future of Amtrak I think
is laudable, but this specific proposal, I think, has a number
of practical problems in it. It requires a series of very
complicated actions and the time lines provided in the proposed
legislation I think are very inadequate. For example, you would
expect the Amtrak management to create 3 Amtraks in 6 months
and I think that that is just administratively very, very
ambitious if not impossible.
The other problem that I have with the proposal is that
there is no mention or no specific funding provided for in this
bill, and I disagree with the philosophy personally on the
long-distance trains, but that set aside you have a proposal
that is very ambitious.
The Chairman. What is your philosophical difference on
long-distance trains?
Mr. Gunn. I think they are a national service, that they
should be provided to these communities. I have ridden most of
them. In fact, I'm going to be on the Empire Builder next week,
and I find that these trains in the rural areas actually are
used, the ridership is growing, and that they are an important
service to rural areas. But the proposal contained in the
Administration's legislation is just impractical, that's my
point, and it is impractical particularly when you look at the
condition that Amtrak is in.
I mean, we are struggling to regain fiscal discipline and
control, which I think we're doing. We have an enormous backlog
of deferred maintenance throughout the system, which we're
trying to overcome, and to try to run trains and engage in this
sort of reform, to have Amtrak management do both things I
think is very, very unwise. So with that I'll turn it over to
my compatriot here.
[The prepared statement of Mr. Gunn follows:]
Prepared Statement of David L. Gunn, President and Chief Executive
Officer, Amtrak
Mr. Chairman, Ranking Member Hollings, and distinguished members of
the Committee, thank you for the opportunity to testify at today's
hearing on the Administration's proposal for Amtrak reauthorization.
I have read the Administration's proposal. Let me give you my
general observations about their plan and approach. I want you to know
that the testimony I am presenting today reflects comments I shared
with the Board of Directors and employees shortly after the plan was
unveiled.
I realize that the Administration's proposal is one of several
bills and in many respects the reauthorization discussion is in its
early stages. While I have strong concerns about the Administration's
plan, I appreciate their intentions through their bill to play an
active role in the debate. As you know, Allan Rutter is not only the
Secretary's representative to the Board, but he also provides
regulatory oversight on a number of fronts as it relates to our
operations, not the least of which is the responsibility for managing
our Federal grant. He has been a good member of the Board and has been
fair to us in his other roles. Therefore, I wish I could offer more
positive views on the Administration's proposal.
In short, I believe that the timelines set are unrealistic and the
overall approach is unworkable. As you know, the timelines in the bill
start with passage of the legislation and extend for six years.
The Amtrak board is given six months to prepare a transfer plan. As
I understand it, this requires creating three independent companies:
Residual Amtrak
Passenger services operating company
Infrastructure company
At the end of the first year, the transition must be complete and
the companies incorporated, which would require articles of
incorporation, by-laws, changes in board structure, and additional
management changes.
Also at the end of the first year, you would have to have contracts
for service to have been negotiated between the entities. I believe
this would be a very complex, and needlessly distracting, undertaking.
Simultaneously, with the above mentioned activities, and by the end
of year one, a proposal for an interstate compact for service and
maintenance of the Northeast Corridor would have to be presented to the
eight Northeast states and the District of Columbia. This arrangement
would in essence be controlled by the Department of Transportation
through a new Northeast Corridor Compact Commission. My reading of the
proposal left me in some doubt as to what will occur if the Compact is
not formed. One could infer that absent the compact the Administration
would have to propose and submit to Congress new legislation to provide
for the continuation of NEC service--intercity, commuter, and freight.
What is clear is that at the beginning of year two, there would be
three aforementioned companies: Residual Amtrak; Passenger Services
Operating Company; and Infrastructure Company.
The legislation provides for the Federal Government to fund capital
grants to overcome deferred maintenance in years three to six, but only
if the Northeast Corridor Compact is formed.
It is not clear who would advocate for the ongoing funds necessary
to run service and the costs for the creation of these new entities. It
is also not clear how this funding would be obtained, but presumably it
would be through the appropriations process but without any specific
levels of funding authorization for appropriations. All of this occurs
with a $50,000 voluntary severance available to existing Amtrak
employees.
As I indicated to the Board in my summary of the bill, one can
appreciate the enormity of the task that would be at hand. The Amtrak
Board will be attempting to run a railroad, which is in serious
physical difficulty. There is apparently no attempt to address deferred
maintenance until year three. All the while, Amtrak will be losing
skilled hourly workers and a significant portion of management to the
severance arrangements or resignations. The Board will be responsible
for the operation, safety, and reliability of a company whose assets
are deteriorating and whose organization is in turmoil. Key existing
vacancies and newly created positions will have to be filled in the
surviving companies while the Board will have to continue to address
existing financial control issues by a finance department that could be
in chaos. Furthermore, every decision the Board makes would be subject
to approval by the new Asset Transition Committee of the Department of
Transportation to ``ensure'' that the pubic interest is being served.
There are many other provisions in the proposed legislation
concerning:
long distance routes; liquidating real estate; debt; exclusive
rights; common stock and preferred stock, etc. In particular, this bill
will radically alter the relationships between Amtrak and commuter
authorities who will have to pay substantially more for access to the
corridor. Additionally, it proposes stringent new financial standards
for long distance trains that will result in the extinction of all long
distance trains within three years of enactment if not sooner.
Eventually, any route that survived the test would go on the auction
block for privatization.
As I said, I realize that the reauthorization of Amtrak is no easy
task and there are many different ideas for reforming Amtrak. I also
know that none of this will happen overnight. So, I am proceeding to
carry out the capital and operating budgets, which were approved by the
Board. I recognize that large organizations tend to be resistant to
change. It is easy to be critical and sometimes it is human nature to
resist change. I am not being critical for the sake of being contrary.
But I do not believe that the Administration's plan is workable.
The closest parallel would be the privatization of British Rail,
which began in 1993, and the separation of their operations and
infrastructure maintenance. In that case, it took years to accomplish
and it consumed billions of dollars in government funding. For 25 years
the NEC states and Amtrak have worked to improve capacity, reliability
and utility for rail passengers. One of the key reasons for its success
is that Amtrak largely controls the infrastructure and operations on
the NEC.
I will say that I do agree with the Administration's proposal that
states ought to pay operating support for services that they request
and that there be Federal matching funds for states for capital
investments.
Before I conclude, I want to say a word or two on some of Fiscal
Year 2003's highlights and give you some preliminary year-end figures.
For the first time since 1995, we did not have to seek emergency
funding or borrow money to cover our costs and get through the year.
Despite the war, blackout, hurricane and weak economy, Amtrak finished
the year with an all-time high ridership record. We expect to record
nearly 24 million trips, breaking the record of 23.5 million in 2001.
Similar to the rest of the travel industry, our ticket revenues will
fall short of last year and budget. We expect that our revenues will be
about 6 percent below last year and 10 percent below plan. We have made
substantial progress overhauling damaged and wrecked cars returning 22
cars to service (when I came to Amtrak we had about 110 wrecked and
damaged cars, so we have chipped away about 20 percent of the total),
and we have successfully replaced 40 miles of wood ties with concrete
ties and replaced old rail with new rail where needed. We have undercut
an additional 22 miles of rail. We also have exited the express
business and eliminated two routes.
As we look ahead, what is clear to me is that the railroad is in
desperate need of investment for both plant and equipment. In the
absence of any reauthorization legislation, I am moving forward with a
capital plan and reforming Amtrak's internal structure. No matter what
happens, work on both fronts must occur. The work we have begun this
year is work that would have been done no matter which plan is adopted
and has set the foundation for Fiscal Year 2004, the first year of our
five-year capital plan that, with adequate funding, will bring the
railroad to a state-of-good-repair.
Again, thank you for the opportunity to testify and I look forward
to responding to your questions.
The Chairman. Welcome, Ms. Howells.
STATEMENT OF CLAUDIA L. HOWELLS, ADMINISTRATOR, RAIL DIVISION,
OREGON DEPARTMENT OF TRANSPORTATION
Ms. Howells. Thank you. For the record, my name is Claudia
Howells. I'm the Administrator of the Oregon Department of
Transportation, Rail Division, and I very much appreciate the
opportunity to be here today. It's very flattering that so much
is said about the Cascades service and indeed it has been very
successful.
To give you a little bit of an idea of where we've grown in
actually a very short time, in Oregon alone, and our service by
the way runs from Eugene, Oregon, to Vancouver, British
Columbia, in Oregon alone in 1993 with only the Coast Starlight
we handled 25,000 riders. This most recent year I'm sorry, 2002
we handled 120,000 riders. The entire corridor, including the
Coast Starlight, this year will handle very nearly 1 million
passengers in a part of the country that is not all that
heavily populated.
Our customer satisfaction is very high and we think that
there's really no magic in why that's true. We have frequent
train service, we'd like to have more frequent train service,
we have reliability, we have clean and modern train equipment.
Most of the time, if we get someone riding our trains they come
back again and again.
It has been a very difficult struggle though for our state.
As Senator Smith pointed out, every legislative session has
been a struggle to maintain our operating support and it's not
because Oregonians don't support rail, it's simply that we have
to compete with the most essential of State services. We have
received no capital funds for improvements in the corridor
since an initial infusion of Federal dollars in 1993.
I'm here to tell you today that without some level of
financial partnership with the Federal Government very, very
soon we will not be able to sustain service, which would be
very sad given the support that we have. We will certainly not
be able to grow service or even explore the notion of restoring
operations like the Pioneer, which I actually think could be
viable if we could actually get back there again.
There are some good things about S. 1501 and even about the
growing level of discussion about passenger rail. It's good
that intercity passenger rail is recognized as a transportation
mode and part of the national transportation system. We also
agree that there needs to be a State role in the development
and management of the passenger rail system. And finally, most
important to us, recognizes the need for State and Federal
partnership in funding capital investments in passenger rail
corridors.
We are concerned though about the notion that privatization
or competition or actually anything you want to call it is
something that we can actually work with, certainly given the
short time-frame within the bill, or that it actually deals
with some very sticky issues that we as partners with Amtrak
fully understand. We could not have begun the Cascades without
the legal and the institutional framework that Amtrak provides.
Transferring the responsibility of the states or coming up with
the notion of multi-State compacts sounds pretty good
theoretically, but it could present significant legal,
political, and financial challenges to States, particularly
when looking at regional multi-state, or in our case multi-
national, rail systems.
Compacts among multiple political entities will not be
easy. There are also the issues such as access to freight lines
and something that I really want to emphasize, the insurance of
insurance and liability as well as how you manage a system with
multiple political governing bodies. I have no doubt that
managing a cross-border system will require some form of
separate rail authority, which of course will be another level
of bureaucracy and will unlikely save money.
Some of you apparently have heard about our recent
experience with contracting for a limited passenger service as
part of our Lewis and Clark bicentennial events. We learned a
lot of things from that experience, even surprising us. One of
the things we actually learned was that we didn't save any
money. We had an excellent short-line operator. We had
wonderful ridership, in fact ended the season with 88 percent
capacity filling the seats. Our revenues were very strong and
we still ended up having to come up with privacy subsidy to
meet the operating deficit.
By the way, we contracted with Amtrak for the reservation
and ticketing system, which worked extremely well, and in fact
most of our passengers went through that system either on the
Website or through the call-in system, and I think if we would
not have had that we would have had a much more difficult time
in selling tickets.
We had some illusions about our ability to run systems on
our own. I don't think we do anymore. I think we thought we
could save money and what we've discovered is running a
railroad costs pretty much the same thing no matter who runs
it, whether it's privately owned or publicly owned. There are
just some things about running trains that are pretty much the
same no matter how you do it.
For us, whether it's a private entity or a public entity
there are some things we just simply have to have. We need
funding for rail infrastructure, we need funding for rail
equipment, and we need to recognize that the people who work on
board trains need to be fully qualified and well-skilled.
Railroading is still a very responsible and very dangerous
business.
We also support the continuation of the long-distance
trains and I think you've heard a number of reasons why. The
Coast Starlight within the corridor functions as part of the
schedule, but it also provides a needed link to many
communities in southern Oregon. The Empire Builder, oddly
enough and I thought the ridership numbers were interesting
from Portland, most of the travelers from Portland are actually
going to Chicago and not going to points in between. This was
actually also true on the Pioneer. Given our own experience, we
actually think long-distance trains could increase ridership,
decrease public subsidy, if in fact they could be run reliably
with modern equipment and in a fashion very much like they way
we run our Cascades Corridor.
Again, I thank you very much for the opportunity to be hear
today and I am of course available for questions.
Thank you.
[The prepared statement of Ms. Howells follows:]
Prepared Statement of Claudia L. Howells, Administrator, Rail Division,
Oregon Department of Transportation
My name is Claudia Howells, Administrator of the Oregon Department
of Transportation Rail Division. In that capacity, I am responsible for
the planning and development of Oregon's passenger and freight rail
initiatives, as well as for railroad, rail transit and crossing safety
oversight and regulation, in partnership with the Federal Railroad and
Federal Transit administrations.
I am here today to testify on the Passenger Rail Investment Reform
Act (S. 1501), and I very much appreciate being given this opportunity.
Background on Oregon's Passenger Rail Program
Oregon began state funded train service in 1994, as part of a
Pacific Northwest Corridor Initiative. In 2000, we added one state-
funded roundtrip train, bringing the total round trips between Eugene
and Portland to three round-trip trains, including Amtrak's Coast
Starlight. We also fund Amtrak Thruway Motor Coaches, providing
connections to the State of Washington's additional train frequencies.
In 2002, the state funded corridor trains and buses, exclusive of
Amtrak's long distance train, carried 120,000 passengers. The entire
Pacific Northwest Corridor, including the Cascades and the Coast
Starlight, carried nearly 1,000,000 people. For a system that has been
in existence for not quite ten years in a part of the country that is
generally viewed as being in love with automobiles, we believe this is
extraordinary.
Public support is solid. Nearly every major newspaper in Oregon,
even some survey communities outside the corridor, strongly support the
growth of passenger rail, the continuation of state funding, and the
continuation of Amtrak. They also stress the need for Federal support.
State funding for our program is very fragile. We managed, again,
to maintain barely adequate funding levels and secured a small amount
of funds for capital investment, but only because of extraordinary
support from our governor and key members of our legislative assembly.
The Passenger Rail Investment Act
The Passenger Rail Investment Act clearly recognizes successes like
the Cascades, as well as new service in other states. We are very
encouraged that the discussion about passenger rail is getting beyond
the discussion of what to do about Amtrak. S. 1501 establishes that
intercity passenger rail is an essential part of the Nation's
transportation system; that it should be treated like all of the other
transportation modes and that the states and the Federal Government are
legitimate partners in the management and development of passenger
rail. S.1501, as well as other proposals, suggest very real progress.
We are also flattered that the Pacific Northwest Corridor has been
touted as a model for passenger rail development. I need to tell you
though, that it has not been easy, and we are now at the point, despite
our success, that if we as a state have to continue to fully support
both capital and operating expense, Oregon will likely be the first
casualty.
Passenger Rail Funding
As S. 1501 recognizes, we need a stable, reliable Federal
contribution as exists with all other modes. There also needs to be
parity among the states. Oregon, like Washington, California and
Oklahoma, fully pays for our trains. Other states pay only part, or in
some cases, none of the operating costs. While we are very sensitive to
the need for an adequate transition period for those states that
currently benefit from full Federal funding, Oregon cannot continue to
fully fund the trains on our own in the interim.
More critical is capital investment. After a one time Federal
appropriation in 1991 of $20 million dollars, we have received no
Federal funds to improve the railroad infrastructure. As tenants on a
private railroad, we must be good partners able to make the
improvements necessary to allow critical freight traffic to move
efficiently. This is not a theoretical issue. In 2000, Union Pacific
Railroad permitted a second train without Oregon making the needed
capital improvements. The resulting train interference causes operating
problems for both the passenger and freight trains on a daily basis.
S. 1501 proposes a 50-50 match, equivalent to the match ratio now
required for projects funded through the FTA. We have serious concerns
about that proposal. States will always look to invest state dollars
where the Federal share is the greatest, particularly in hard economic
times. If rail projects are forced to compete with 80-20 or 90-10
federal-state match ratios, as is typical with highway projects, we
will have a difficult time competing when dollars are scarce.
Privatization of Amtrak
We strongly caution against a rush toward privatization. Oregon's
recent experience with contracting private passenger rail service as
part of the Lewis and Clark Bicentennial Commemoration events has shown
us there are risks in privatization. We were very lucky. We have a high
quality and cooperative short line operator, who operated the trains
very, very effectively. We contracted with a separate local food
vendor, who could not have done a better job. We had outstanding
ridership, ending the season with 88 percent of the seats for the
season sold. We did not save money. It is wishful thinking to suggest
that privatizing passenger rail service will cost less than Amtrak.
Competition could have benefits, but third party operators also
cause us concern. Yes, there are very good third party rail operators,
but those of us in the railroad business know many dreamers and
schemers who would likely bid on routes. Many states have legal
requirements to accept the lowest bid. In the railroad business this
could be disastrous. The Class I railroads' concerns about this issue
are legitimate. Railroading is not for amateurs.
Governance and Multi-state Compacts
The Pacific Northwest is touted because Oregon, Washington and
British Columbia appear to exist as an operating entity. In fact, there
is no formal compact. We exist only because Amtrak exists. Multi-state
compacts are very difficult to develop. Even simple reciprocity
agreements often take years, because, by law, these compacts must be
approved by legislative bodies. The drafters of the U.S. Constitution
understood full well that interstate commerce should not be left to the
states. Imagine, if you will, a similar requirement for the maintenance
and operation of the Interstate Highway System.
Is it possible? Perhaps, but it will take time and money to address
the myriad of legal issues that such compacts necessarily raise.
Furthermore, it would likely require a new bureaucracy, something like
a multi-state port authority, to actually operate, or contract for
operations of the trains.
Long Distance Trains
Two long distance routes, the Coast Starlight and the Empire
Builder, serve Oregon. For reasons that sometimes elude even me,
ridership continues to grow. It tells me that despite years of neglect
these trains still serve a purpose. It is easy to talk about how much
these trains lose, how much they are subsidized, but the reality is
that the long distance system over-all recovers nearly half of the
operating costs through passenger revenues. That is very good when
compared to most other forms of public transportation.
It is easy to target the long distance trains, but we fully agree
with Mr. Gunn. Eliminating the long distance trains will not solve the
``Amtrak problem,'' and may actually make it worse. Transferring the
responsibility to the states makes as much sense as transferring the
responsibility of the interstate highways to the states.
Having now had the experience of being involved with successful
passenger rail service, I believe that the long distance trains could
increase ridership and reduce the level of public subsidy, but it will
take some investment. The long distance train equipment needs to be
modernized. We need to make investments in the track system to improve
on-time performance and ride quality. We need to look at certain
corridors to increase frequencies, and in those cases look to the
states for partnership. As we have learned from the regional trains,
more frequencies mean more riders which over-all reduces the per
passenger level of public support. We need to invest in stations, not
only historical buildings but new stations, and in a way that will
generate economic development in those communities.
Rejuvenating the long distance train system provides a tremendous
opportunity to reinvest in rural America and sustain what in many
places is the only transportation link beyond roads.
Amtrak
As a state partner, I would be less than truthful if I said we and
Amtrak had a perfect relationship, but I can also tell you that without
Amtrak, the Cascades would never have happened. Amtrak has provided the
legal, operating and institutional framework that is necessary to run a
railroad. I have confidence that David Gunn has provided a new
direction that is refocusing the railroad in the direction it needs to
head.
There are issues with Amtrak as it exists today. The Amtrak Board
needs better geographic representation. Part of our success in the
Pacific Northwest has been our ability to put our stamp on the service
we pay for. We need to be able to select our own local food and
beverages, develop our own marketing strategy and determine our own
color schemes. While that may sound trivial, it is just the kind of
thing that sustains the local constituencies needed to support local
funding.
But for all of Amtrak's flaws, may I suggest that it would be far
easier to fix what is wrong with Amtrak than to start from scratch.
Why Intercity Passenger Rail?
Our ten years in developing passenger rail has made some things
very apparent.
There is the obvious. Passenger rail offers a transportation
alternative for those who cannot or choose not to drive or fly. The
real dividends go far beyond that.
Passenger rail, and railroading generally, provides solid
family wages jobs.
Rail infrastructure improvements are as valuable to the
economy as any other construction job. For every million spent,
19 family wage jobs are created.
Passenger rail capital investment will reduce the cost of
time delays for freight and reduce transportation costs for
American producers.
Station improvements, beyond construction jobs, generate
economic development and increase property values.
A commitment to passenger rail would likely encourage more
rail equipment companies to locate in the U.S. providing both
jobs and competition.
What States Need
States need:
Federal funding for capital investment consistent with
funding for other transportation projects.
Operating funding equity.
Control over capital projects.
Equity among rail passengers nationwide.
A stable, adequately funded rail service provider.
Conclusion
In closing, I want to emphasize that Oregon needs a Federal partner
now. Oregon is not alone. Many states began planning and development
when the High Speed Rail Act was passed as part of ISTEA. It has been a
promise not kept.
What are we talking about it terms of funding? In Oregon, we could
have a high quality passenger rail program, with five round trips a day
matching eight roundtrips in Washington for a total investment of $350
million dollars. $100 million for track improvements, $100 million for
train equipment, $100 million for highway-railroad grade crossing
improvements, and $50 million for building or restoring train stations.
These are investments with long term economic, environmental and social
benefits that will last along time.
Thank you for your consideration and the opportunity to testify
before you today.
The Chairman. Thank you very much, Ms. Howells, and thank
you for your perspective. It's very helpful to us as we
consider these challenges we face.
Mr. Gunn, everybody applauds, and I among them, your new
leadership and your new efforts and your renewed commitment to
being forthcoming and candid with the Members of Congress as
well as the riding public as the challenges that we face, and I
appreciate the job you're doing. But let me tell you why I
remain a little skeptical, not of you but of Amtrak. The
project for Acela was to be $1.6 billion, it's now $2.86
billion. I understand that on any given day there will be 20
trains in the fleet, any given day 7 of the trains are out of
commission. According to Amtrak, a few trains are always
undergoing maintenance, a few more need to be inspected, a few
more working fine and held in reserve in case one of the 13
trains running that day breaks down and needs a replacement.
Within the military, if only a little over 60 percent of
any piece of equipment was functioning on a daily basis we
would call it a national scandal. But here's kind of the
anecdote that interests me: Amtrak spokesman led a visitor on a
tour of Acela on a recent afternoon and he showed off a new
lavatory door on one train. The old ones did not close
properly. Some early customers of the premier service would
find themselves exposed in lavatories that they thought
incorrectly were locked. The situation inspired Amtrak's
president, David Gunn, to proclaim in exasperation last year to
the Washington Post, ``You'd think after 170 years of
railroading you could have a crapper door that works.''
You know, the interesting thing though is what follows, Mr.
Gunn. Bombardier has a sober response. If you're going to use
that, said some Bombardier spokesman, David Slack, know that
that design is not the original design Bombardier and Alstom
came up with, that was a design change that Amtrak requested.
So there's, you know, it's a pretty clever statement and it got
a lot of attention, a crapper door that works, which would then
lead one to believe that people had built the train, but yet we
also find out that maybe that change that caused the crapper
door not to work was a change that was requested by Amtrak
itself.
So we get into layers and layers here that make one at
least skeptical, if not cynical, about the future of Amtrak.
Acela time after time I mean, I don't need to tell you because
I'll be glad to show you the congressional record executives at
Amtrak sat there and looked me right in the eye and said, we
are on the glide path to economic self-sufficiency. And I said,
how could that possibly be? I guess we should have put them
under oath because then maybe there should be some perjury
charges brought, but everybody knew. It was a dirty little
secret. Everybody knew that Amtrak was not and will never be on
a glide path to economic self-sufficiency.
So if I don't take everything you say on its face value,
Mr. Gunn, I hope you can appreciate that. And I guess my first
question is, what is the future of Acela? Are you going to
continue to have 7 out of 20 trains stopped? Are you going to
continue to have, as Mr. Rob Simmons says, it's totally bogus,
it's not a high-speed train, says U.S. Rep Rob Simmons, who
sits on the House Transportation, because the trains run from
Washington to New York in about 2 hours and 15 minutes, about
15 minutes faster than the older, less expensive Metroliners?
What is our prospect on the Acela issue since that seems to
have been, in the view of some, the crown jewel of what Amtrak
was going to be all about?
Mr. Gunn. Well, first of all, let me just say that I think
that Amtrak, in terms of our ability to you're really talking
about our ability to manage the railroad I think this year
we've done fairly well. We've made some mistakes in the past,
there's no question mistakes were made, but if you look at this
year's results, I think we're making real progress and I'd be
happy to go through that with you, but this is the first year
you haven't had a budget crisis. We're coming out of this
year----
The Chairman. Excuse me, I think you said that if you don't
get more money that you're going to have to shut down Amtrak.
That seems to me you're facing a rather significant crisis.
Mr. Gunn. I did not say that we would have to shut down
Amtrak. I said that--what I have said in the past is that $900
million would be a shut-down number.
The Chairman. That's what I mean, yes.
Mr. Gunn. That I said, and that's merely math, the
operating subsidy is 500
The Chairman. I wasn't questioning your prediction. I'm
just questioning your statement that everything's going fine.
Mr. Gunn. I didn't say it's going fine, Senator, but what
I'm saying is that if you look at results, where we are today,
we have come in on budget or under budget. We have, as the IG
said, we have cash in the bank, we're coming out of the year
with cash in the bank. Ridership is going to set a record
throughout the system. We have revenues in August are getting
stronger gain and they are exceeding last year's revenues----
The Chairman. Excuse me again, I don't mean to be rude. I
was just handed by the staff that you're 363,563 less than last
year as of July.
Mr. Gunn. I'm sorry, in terms of?
The Chairman. Metroliner and Acela Express.
Mr. Gunn. No, I'm talking system ridership. It's the long-
distance trains where the ridership is up and on the corridors
in the West. The Acela and Metroliners are down but the
regionals are up. If you look at the total, ridership for
August was 7.3 percent systemwide above last year.
The Chairman. Again I hate to interrupt, but it says the
NEC total is 303,362 down.
Mr. Gunn. I talked about system ridership, Senator. I'm
talking about systemwide including long-distance trains. NEC is
just the Northeast Corridor. System ridership is up 7.3 percent
over last year. I'll be happy to go.
The Chairman. Thank you.
Mr. Gunn. But you've got to look if you just look at Acela
and Metroliner, they are down, but the regional trains in the
corridor are up. The corridor's basically flat, but the growth
is occurring in the long-distance trains and on the corridors
in California and in the Northwest. But the thing that I think
we've also been demonstrating, I hope to you and to others, is
that we have our costs under control. We're actually our wages,
salaries, overtime, and fringes in 2002 were less than 2001, in
2003 they'll be less than 2002 and we're budgeting them flat
basically next year. So we're not going to declare a dividend,
but we're making progress.
The thing that I'm proudest of is that we have made some
real progress, I think, in beginning to attack the deferred
maintenance. Despite all of the problems we have, we will have
rebuilt seven of our AM-7 electric locomotives this year. We
will have rebuilt more than 20 wrecked and damaged cars. We are
restoring heavy overhauls of our long-distance cars and Amfleet
cars, which serve both the corridor and some long-distance
trains. We're going back to a 90-day inspection cycle and we
have 2,500 fewer employees, and we did that's half of that is
the MBTA.
So I don't want to say that we're out of the woods, that's
not what I'm saying, but I think we've made progress, and I
think when it comes to the Acela----
The Chairman. Could I--I'm sorry I have to interrupt you.
Frank I think we've got just a couple of minutes left in
the vote.
Senator Lautenberg. No, please finish up. I'll submit my
questions in writing.
The Chairman. OK.
Senator Lautenberg. But I'm interested in the response to
your question.
The Chairman. OK, go ahead.
Mr. Gunn. Let me just--then I'll finish real quickly on the
maintenance piece then go to the Acela. But on the corridor, on
the engineering part, we have installed, as of last week we had
installed more than 130,000 ties, we have converted 40 miles of
timber track to concrete, upgrading the speed on one piece, one
22-mile piece, from 60 miles an hour to 125. I mean, what we
have done, I think, is we have demonstrated that we are able to
carry out complex maintenance activities under budget. We've
really made some progress with the controls we've put in.
Now, this is looking at it from my point of view, the
operating point of view, but we will, I think, come out of--if
we get half a break next year, if we get the kind of funding
that the IG talked about--we will make a real dent in the
deferred maintenance in plant and equipment. And it won't make
it perfect, but it will give you time to figure out what to do
with Amtrak, because obviously this debate is not going to be
settled.
The risk we run is if we don't get a chance to do some of
this essential maintenance work, and it's all nuts and bolts,
there's nothing sexy about it, you run the risk of having some
really severe service disruptions, and whether it's long-
distance or whether it's the corridor. We really are playing
with time here if we don't put some money into the nuts and
bolts of the system while we debate where we're going. And
that's been my plea is that I think the cheapest thing we can
do in the short-run is to give us enough money to replace the
worn rail, to fix some of the electrical problems and rebuild
our car fleet, the existing car fleet, don't buy new cars, just
the car fleet.
The Chairman. Thank you. We'll be submitting some questions
to you for the record, including the status of your lawsuit
with the Bombardier people as to how you expect that to come
out. We thank you for being here today, and again, everyone
applauds your leadership. I hope you understand my skepticism
from time to time. Thank you very much for joining us, Ms.
Howells. This hearing is adjourned.
[Whereupon, at 4:05 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. John D. Rockefeller IV,
U.S. Senator from West Virginia
Thank you, Mr. Chairman, for holding this hearing on Amtrak's
plans. I believe it is imperative for Congress to be realistic about
the future of Amtrak. I have been a consistent supporter of Amtrak
during my time in the Senate, and despite the efforts of the Amtrak's
current leadership to cut costs and improve performance, I believe that
the Administration's proposed funding is completely inadequate to meet
the needs of this critical national service.
Many Americans directly depend on Amtrak for their transportation
needs, and every American indirectly benefits from the rail system's
operation. Every passenger taking the train represents one fewer car on
our Nation's highways, and that brings decreased congestion, cleaner
air, and reduced maintenance costs for these roads, saving all
taxpayers money. In addition, rail service provides a critical element
of choice in transportation. In our country, it is essential that we
have options built into our transportation system to ensure that
neither accidents, nor natural disasters, nor terrorist strikes will
impede our ability to transport people and goods. Congress should be
increasing Amtrak's funding and easing restrictions, instead of
hobbling it with impossible objectives and reducing funding to the
point where it cannot survive.
I say very respectfully, Mr. Chairman, you are well aware that
there is no passenger rail system in the world that earns a profit.
Repeated Congressional efforts to privatize Amtrak will not change that
fact. For decades, Congress has neglected to authorize the funds
necessary to maintain the capital and equipment that are necessary for
a world-class rail system. This neglect has come at the cost of
reliable service and high-speed trains which are standard in much of
Europe and Asia. We must stop dismissing Amtrak as a failing business
and begin recognizing it as a crucial national asset. We must see that
the nearly $6 billion required for backlogged capital improvements is
provided. Congress devotes, correctly I believe, considerable resources
to maintain our Nation's highways, which are a model for the world to
admire. We rightly spent billions of dollars to ensuring the continued
viability of our national air transportation system after the events of
September 11. Amtrak is the only major method of transportation without
a dedicated revenue stream to invest in necessary capital maintenance
and upgrades.
I am a proud co-sponsor of The National Defense Rail Act. This bill
will provide $2.8 billion annually in funding to Amtrak, which would
allow them to not only continue operating, but also to make critical
and necessary infrastructure improvements. The Administration's
proposal should be recognized for what it is: a death sentence for
Amtrak. Before Congress even considers privatizing our national
passenger rail system-with the inevitable results being reduced
service, congested highways, and dirtier air--we should remedy the
problems we have caused through decades of pretending that Amtrak can
and should operate as a for-profit business.
Thank you.
______
Prepared Statement of Hon. John F. Kerry,
U.S. Senator from Massachusetts
Mr. Chairman, I want to thank you for holding this hearing and
thank the witnesses for coming to testify. We convene today to discuss
the state of intercity passenger rail and the administration's reform
legislation, introduced in the House as the Passenger Rail Investment
Reform Act. We also need to address Amtrak's budget, which I believe to
be inadequate. It is important to note that Amtrak's budget will likely
be resolved in the absence of a reauthorization bill. Including a line-
item in an appropriations bill to cover Amtrak has become a bad habit.
As I stated in April, this is no way to do business. We need to pass
the Holling's reauthorization bill and send a message to the
administration that there is wide-spread support for passenger rail in
both Houses. Finally, we need to address the four vacancies on the
Board of Directors that have the potential to stifle management
decisions at Amtrak.
Let me begin by addressing the administration's bill. I have come
to the conclusion that the President's proposal is untenable. Instead
of investing in Amtrak through budget increases and infrastructure
improvements, the President wants to break the railroad apart into
three separate entities, two of which would be run privately, and force
states to pick up the entire bill for operations and half of all
infrastructure projects. It is an attempt to abdicate responsibility
for providing a national rail system, and its premise is so unrealistic
that no one other than the bill's drafters believe it could work.
Indeed, it is the brainchild of an administration that opposes Amtrak
and wants to undermine any hope for a state-of-the art national
passenger rail system. Given that the bill creates new bureaucracies,
and that most states are struggling financially in the worst economy in
a generation, passage of this bill would mean the end of Amtrak as we
know it. I strongly oppose this bill and I urge my colleagues to oppose
it as well.
Although this legislation is unlikely to pass the Congress, it
alters the debate on Amtrak's budget by providing ammunition for
members that dislike the railroad. Mr. Chairman, the facts surrounding
Amtrak's budget are clear. For the past two years David Gunn has
requested what he believed to be the minimum amount that Amtrak would
need to operate. Last year he requested $1.2 billion for FY 2003, and
received $1.043 billion. This year he requested $1.8 billion, and
though the Transportation Appropriations bill has not yet passed the
Senate, one can assume that the final figure will be considerably less.
The House passed bill included only $900 million for Amtrak, while the
Senate Appropriations Committee included $1.34 billion in its bill.
However, when the bill comes to the floor I will support Amtrak's $1.8
billion request. It is important to reiterate that this figure
represents only what the railroad needs to operate under current
conditions, without any improvements to service or infrastructure.
Amtrak's long-term viability can only be achieved through comprehensive
legislation and a commitment from the Executive Branch.
Finally, I would like to address the vacancies on the Amtrak Board
that have left it without a quorum. Although the three remaining
members have formed an executive committee which allows for decision
making, it is imperative that those vacancies are filled as soon as
possible. Amtrak needs a full board of directors to run effectively,
and a delay in filling these positions will impair its management
structure. In recent weeks major news outlets have suggested that the
President has three nominees ready to send to the Senate. Although I
will withhold judgement on these nominees until they have the chance to
testify, I suspect that they were hand-picked by the administration to
help implement its ill-conceived plan for Amtrak.
Mr. Chairman, I believe that a substantial investment in Amtrak
will create jobs, reduce pollution, and provide Americans with a
reliable transit alternative to driving or flying. There is bi-partisan
support for Amtrak on the Commerce Committee, and I hope that
translates into passage of the Holling's reauthorizaton bill and a
better future for passenger rail. Thank you.
______
Prepared Statement of Frank J. Busalacchi, Secretary,
Wisconsin Department of Transportation
On behalf of Governor Jim Doyle and the state of Wisconsin, thank
you for the opportunity to submit this written testimony to the U.S.
Senate Committee on Commerce, Science and Transportation at its hearing
on Amtrak and intercity passenger rail issues.
I am privileged to serve as Secretary of the Wisconsin Department
of Transportation, an agency that has responsibility for all modes of
transportation. Governor Doyle is a strong supporter of intercity
passenger rail development as a part of a comprehensive multimodal
transportation program. The Governor's new economic development
initiative, Grow Wisconsin, recognizes the need to invest in rail and
all modes of transportation. Both he and I call on the Federal
Government to provide sufficient funding to Amtrak and to enhance the
national passenger rail system.
Wisconsin, along with the state of Illinois, has supported the
Amtrak Hiawatha Service between Milwaukee and Chicago since 1989. We
have partnered with Amtrak and the Federal Government to steadily
improve this important mobility and economic development link to
Chicago. Last fall, working with Amtrak, we increased the number of
frequencies from six to seven round trips. The Hiawatha is now the
busiest line in the Nation outside of California and the Northeast
Corridor. It also has the best on-time performance in Amtrak's system.
This summer, the Hiawatha Service posted double-digit percent
increases in ridership compared to last year's counts. In June, July
and August of this year, Amtrak averaged over 1,320 passengers per day
for the corridor. Customers were attracted to the service's
reliability, as over 95 percent of Hiawatha Service trains arrived on-
time so far this year. Recent surveys document customer appreciation
for the trains' fast trip time (89 minutes) and availability of service
(seven daily round trips).
Wisconsin is partnering with the Federal Government to make
continued improvements in the Hiawatha Service. With the support of
Senator Herb Kohl, the state of Wisconsin is constructing a new
passenger rail station at Milwaukee's General Mitchell International
Airport and is rehabilitating and redeveloping the Amtrak Station in
downtown Milwaukee. The village of Sturtevant is preparing to construct
a new depot to replace its existing station--again with federal funding
support.
In addition to the Hiawatha, connectivity to the Amtrak national
system is also provided by the Empire Builder Service. The Empire
Builder serves the Wisconsin cities of Milwaukee, Columbus, Wisconsin
Dells, Tomah, and La Crosse and provides connectivity from Wisconsin to
the Pacific Northwest and points along the way.
The Hiawatha Service and all other intercity passenger rail routes
are threatened by a lack of Federal funding for Amtrak. Congress needs
to provide Amtrak with sufficient funding to maintain existing
operations and address basic capital needs. Cuts in Federal funding
could jeopardize this vital transportation service in Wisconsin.
The Intercity Passenger Rail Report released earlier this year by
the American Association of State Highway and Transportation Officials
(AASHTO) documents over $17 billion in capital needs over the next six
years for state-sponsored passenger rail improvements in all parts of
the country. This national report highlights the Midwest Regional Rail
Initiative, a nine-state plan for a 3,000-mile high-speed rail system
hubbed in Chicago. In Wisconsin, this plan extends high-speed service
from Milwaukee to Madison and the Twin Cities.
With improvements we have already made, I believe the Milwaukee-
Chicago Corridor can serve as an anchor for future high-speed rail
development in the Midwest. A high-speed extension of Amtrak's Hiawatha
Service to Madison would be an effective demonstration of state-of-the-
art passenger rail service. Preliminary engineering and environmental
work has already been completed for this project and it is ready to go.
However, we absolutely need a major Federal funding share to make this
a reality.
A long-term Federal capital funding program is needed to advance
intercity passenger rail service throughout the United States. Funding
is needed for capital investments in new equipment and infrastructure
improvements. These capital investments are needed for increased
frequencies, speeds, and passenger amenities, as well as for improved
schedule reliability in the face of heavy freight traffic.
Such a program must include a mechanism to insure that funding can
be reliably provided over multiple years. Like other major
transportation infrastructure projects, passenger rail corridor
improvements can take several years and new equipment can take up to
three years from order date to delivery.
States are willing to pay their fair share, but we believe the
capital program should be modeled on the Federal highway and transit
programs, which have statutory 80/20 federal/state cost shares. States
have developed a great deal of experience in delivering major
transportation infrastructure projects under existing Federal
transportation programs and states should be responsible for passenger
rail project selection and project management. Until the capital
program investments for enhanced service are fully in place, the
Federal Government should share the cost of operations with the states.
These concepts provide what I believe to be a basic framework for a
new federal-state partnership to move America's passenger rail system
into the 21st Century. Some of these concepts are reflected in S. 1501,
the Administration's ``Passenger Rail Investment Reform Act.'' While
the S. 1501 recognizes that a national capital program is needed for
infrastructure and equipment, there are a number of problems with the
bill from Wisconsin's perspective.
First, S. 1501 turns over the financial responsibility for Amtrak's
long distance service to the states. This is unacceptable and
unworkable, given the interstate nature of long distance trains like
the Empire Builder, which runs from Chicago through Wisconsin to the
Pacific Northwest across eight states. These long distance trains
provide connectivity between regional corridors and provide an
integrated national network. They should remain a Federal
responsibility. It is difficult to envision the formation of a compact
made up of eight diverse states reaching from the Pacific Ocean, across
the Rocky Mountains, the Great Plains, and into the heart of the
Midwest. It was for such undertakings that our founding fathers
originally envisioned the need for a Federal Government. More
pragmatically, the current fiscal condition of state governments across
the country prevents even the consideration of such a concept.
Wisconsin DOT also has concerns about the capital program
envisioned under the bill. A 50/50 federal/state grant share for
capital funding is not consistent with other Federal capital programs
for transportation. A level playing field is needed for the equitable
development of all transportation modes.
Most importantly, the lack of a specific authorizing amount for the
capital program in the bill suggests a lack of Administration
commitment to fully fund the program. The bill is structured so as to
require the passage of an annual appropriation for the program, which
does not assure funding for multi-year projects. Witness the Amtrak
appropriations process where historically appropriations have barely
been 50 percent of authorized amounts. As I noted previously, AASHTO
has identified $17 billion in passenger rail capital needs over the
next six years.
Finally, the bill assumes that the states will begin providing 50/
50 capital cost share funding for equipment on all existing Amtrak
operations. This includes long distance and state-supported services
such as the Hiawatha Service in Wisconsin. Currently, this is solely a
Federal responsibility. If this responsibility were to revert to the
states, the cost implications could be significant. For example, the
two train sets operated by Amtrak on the Hiawatha Service Chicago-
Milwaukee corridor are in need of replacement at a cost that could run
over $20 million per set.
S. 1501 does recognize the important role of the states in the
provision of transportation services in the United States. However, the
federal/state partnership as envisioned by the Administration tilts the
responsibility for passenger rail service too far in the state
direction, given the fundamental interstate nature of intercity rail
service. The bottom line from a public policy perspective is that since
intercity passenger rail service is not that dissimilar from the
interstate highway system, it should be funded using a similar federal/
state funding model.
I appreciate this opportunity to share our views on this important
national transportation issue. Wisconsin and other states throughout
the country stand ready to continue this dialogue as we move together
towards an enhanced national passenger rail system.
______
Prepared Statement of Henry Hungerbeeler, Director, Missouri Department
of Transportation (MoDOT)
We are encouraged the administration's bill encourages competitive
bidding and recognizes the importance of a national capital investment
program for infrastructure and equipment.
However, there are many concerns with the bill that make it less
than optimal for Missouri.
First, the operating burden for the national passenger rail system
is being placed on the states. The national passenger rail system
provides national transportation utility. Missouri does not have the
resources to participate in a state compact to operate and fund its
national routes, specifically the Texas Eagle and the Southwest Chief,
in addition to the state supported route between St. Louis and Kansas
City. Missouri does not have a dedicated funding source for passenger
rail, and from 1979 through June 2003 has provided $67,900,005 from the
state's general revenue to provide service between St. Louis and Kansas
City.
The bill provides for only fifty percent Federal funding for
equipment on existing routes; currently 100 percent of this cost is
provided at the Federal level.
The bill provides for funding only half the capital cost for
passenger routes. This is not consistent with the assistance provided
to other modes of transportation.
There is no authorizing amount for the capital program, leaving
states to question the actual commitment to passenger rail.
Missouri has experienced other very significant issues not directly
related to capital and operating costs in providing passenger rail
service. Trackage fees and access rights between Amtrak and the host
railroad are not extended to other passenger rail providers. In
addition, the bill does not address the freight railroad infrastructure
needs. Another significant and costly item is providing insurance to
the host railroad equivalent to the total indemnification currently
provided by Amtrak.
Although Missouri is encouraged the administration is addressing
the national passenger rail system, the importance of a national system
and the necessary financial commitment for operating and capital costs
are not recognized. We also believe other significant issues such as
trackage fees and insurance should be addressed.
______
Response to Written Questions Submitted by Hon. John McCain to
David L. Gunn
FY 2004 Funding
Question 1. Mr. Gunn, you have been quite adamant about your
request for a $1.8 billion appropriation for Fiscal Year 2004. How
would a $900 million appropriation force a shut down if the repayment
of your $105 million government loan is again postponed and Amtrak has
a $200 million capital carryover?
Answer. Amtrak will require $744M to support operations in FY04 and
an additional $126M for debt service payments not included in
operations. At a $900M appropriation level, that leaves only $30M for
capital investment. The Northeast Corridor infrastructure alone is not
sustainable at that level. As the infrastructure deteriorates, the
maintenance costs increase dramatically. This is exactly the position
Amtrak finds itself in today. In addition, a significant portion of the
mandatory maintenance required to run the fleet will be completed along
with the capital overhaul program. If sufficient capital were not
available to complete the overhauls, the maintenance would be still be
required and would increase operational expenses well beyond the $900M
funding level. The infrastructure and equipment is old and in many
instances verging on failure. It is only a matter of time, absent an
adequate level of investment, before a failure occurs that will shut
down some or all of the Northeast Corridor.
The capital carryover from the FY03 appropriation was $108 million,
not the $200 million referred to above. The $108 million carryover is
obligated and projected to be spent by the end of December 2003.
FY 2003 Financial Results
Question 2. Mr. Gunn, you mentioned in your statement that Amtrak
will report record ridership for Fiscal Year 2003 of nearly 24 million.
With a subsidy of $1.05 billion, that works out to a cost of $43.75 for
every passenger carried. If Congress were able to increase your
appropriation next year to the level you have requested, how many
additional passengers does Amtrak expect to gain?
Answer. Your question is a red herring. I have requested $1.8
billion for Amtrak for Fiscal Year 2004 to prevent the imminent
deterioration of the system to a point where Amtrak could no longer
operate a safe and/or reliable service. As you know, the $1.8 billion
would begin to address the tremendous backlog of capital maintenance
projects that has developed over the years primarily due to Congress's
refusal to sufficiently invest in Amtrak as well as the fantasy of
operational self-sufficiency that Congress required Amtrak to follow in
its 1997 reauthorization. If Amtrak were to receive the funding that I
have requested in our five year plan, we would return the railroad back
to a state of good repair. I presume that more travelers would then
choose to ride our trains because we would be able to provide a more
reliable and efficient intercity passenger rail service.
Question 3. Again, you have stated that Amtrak will report record
ridership for Fiscal Year 2003. But what happened to Acela ridership,
our $3 billion dollar investment? Through July (10 months of Amtrak's
fiscal year), ridership was down 364,000 riders, and revenue was down
12.4 percent compared to the same period last year.
Answer. There are several factors that contributed to Acela's
ridership downtrend in FY03 when compared to FY02. First and foremost,
the poor economy--underscored by an unemployment rate of at least 6
percent for most of 2003 and the highest unemployment rate in nearly a
decade-caused a 12 percent reduction in total travel (by all modes) in
the northeast region versus the 2001 high water mark, and a 22 percent
reduction in total business travel (by all modes) in the northeast
region versus the 2001 business travel high water mark. Acela's
ridership is nearly 90 percent business travel, and as such, sensitive
to economic fluctuations. Despite these adverse market conditions,
Acela ridership was only 8.6 percent below FY02. Consequently, Amtrak's
air-rail market share (based on Jan-March 03 which is the most current
quarter available) is 53 percent in the NY/DC market and 36 percent in
the NY/Boston market vis-a-vis pre-Acela (1999/2000) Amtrak shares of
36 percent and 18 percent, respectively.
Secondly, continuing reliability issues around the Acela trainsets
have also contributed to some FY03 ridership losses. Because of the
unpredictability of the equipment, not only was Amtrak unable to run
the full complement of service that was originally planned for FY03,
but we actually ran 7 percent fewer departures in FY03 than in FY02
(Acela/Metroliners combined 10,898 FY03 departures vs 11,651 FY02
departures), most of which affected the NY/DC segment where demand is
highest. Also, the equipment's performance contributed to Acela's FY03
OTP of 71 percent, a full eight point reduction from FY02's 79 percent.
However, Acela's ridership losses due to service/equipment issues were
not all lost to Amtrak, as many of these trips diverted over to
Regionals. As you noted from the monthly ridership and revenue reports
sent to your committee, the Acela ridership loss through July was
364,000 riders. However, Regional ridership increased by 184,000 riders
during the same time frame as many Amtrak customers shifted to the
Regional trains that, in FY03, were punctuated by good reliable
service, with many if not more departures than Acela, and less
expensive fares.
And lastly, FY03 was characterized by several events-all external
to Amtrak-which had negative consequences on all modes of domestic
travel, including Acela: the war, the February blizzard in the
northeast, the August power blackout, and September's Hurricane Isabel.
Question 4. Given that you expect Amtrak to report record ridership
for Fiscal Year 2003, does that mean we can also expect another record
for operating losses? Through July (10 months of Amtrak's fiscal year),
Amtrak's loss was already over $1 billion and was $178 million worse
than the same period last year.
Answer. Amtrak's preliminary net loss (net loss without adjustment
for depreciation, OPEB's or state capital payments) for FY03 was $1.2 B
or $113M worse than for FY02. As stated above, this was driven by the
$152M revenue shortfall resulting from the poor economy and from other
events in FY03 external to Amtrak, which negatively impacted all modes
of travel.
However, operating expenses were $46M favorable to FY02 primarily
due to staff reductions and reduced discretionary spending. This
improvement would have been even greater if it were not for higher
costs resulting from accounting treatment changes in FY03 for certain
mechanical activities previously classified as capital expenditures.
Versus recent history, FY03 results were approximately $3M better
than FYOl results and $34M better than plan.
Administration's Intercity Rail Plan
Question 5. You mention in your statement that your testimony
reflects comments you shared with the Amtrak Board. Does your statement
today represent the views of the Board or your personal views?
Answer. The statement that I offered represents my views on the
Administration's proposed plan for Amtrak. I shared these views with my
Board of Directors and they were aware that I would testify before your
Committee on this subject. I do not know whether my views are shared by
some or all of the remaining members of Amtrak's Board.
Question 5a. Once the new Board is put in place, will the views
Amtrak presents on Capitol Hill be those of the Board (even if the
Board strongly endorses the Administration's plan)?
Answer. If the new Board wishes to make its collective views known
on Capitol Hill, the appropriate Amtrak representatives will present
those views when and where it is appropriate to do so.
Question 5b. If the new Board should vote to initiate restructuring
internally, including making changes to Amtrak's route structure, would
you comply with the Board's actions?
Answer. If the Board, after review of all of the facts and
information available, exercises its fiduciary responsibility to the
Corporation and determines that a change to Amtrak's route structure is
appropriate, the President and CEO, whoever that is, would be obliged
to carry out those wishes. The Board is the governing body of Amtrak
with full authority to make such decisions.
Question 6. Amtrak has been critical of privatization. But under
Federal law (section 24301 of Title 49 of the U.S. Code) isn't Amtrak a
``for-profit corporation'' and ``not a department, agency, or
instrumentality of the United States Government''? What, then, does the
Administration's plan privatize which you find so alarming?
Answer. Yes, you are correct in that Amtrak was created in 1971 to
be a private corporation organized under the laws of the District of
Columbia. My criticism of ``privatization'' relates not to the question
of whether Amtrak is a government entity or private corporation, but
rather to the questions of whether Amtrak or any other intercity
passenger rail carrier can make a profit, in the traditional sense of
the word private. Let me be clear about one thing: intercity rail
service will never again be profitable in the traditional sense of the
word. There will always be a need for subsidy. The decision then falls
on who is that subsidy to be paid to.
Question 7. Why do you believe the plan would ``radically alter the
relationships between Amtrak and commuter authorities''?
Answer. I'm glad the question is asked. Transferring operational
control of the Northeast Corridor from Amtrak to eight states that
provide commuter rail services over the Corridor (plus the District of
Columbia) would be, in my view, a disaster. Since 1976, Federal policy
has recognized that the important national interest in developing and
maintaining high speed rail service between Washington and Boston would
be best served if Amtrak, the operator of that service, was also
responsible for operational control and maintenance of the Northeast
Corridor. This arrangement has worked well for all parties. High speed
rail service was firmly established and improved between Washington and
New York, and more recently extended to Boston. At the same time, the
number of commuter trains operating along the Northeast Corridor has
more than doubled. To the best of my knowledge none of the states to
who this control would migrate to, have endorsed this approach. In
fact, most have ardently opposed such a change.
Today much of the Northeast Corridor is at capacity. If control of
the Corridor, and primary responsibility for funding it, is effectively
shifted from a single entity responsible to the Federal Government to
local commuter authorities, those commuter authorities will (quite
understandably) favor their own services, and local rather than
national interests, when it comes to allocating peak hour capacity,
determining priority of trains, and making decisions regarding
infrastructure investments and maximum speeds.
Finally, the Administration's plan would not provide any funding to
address urgent deferred maintenance needs until the third year
following enactment, and there is no indication of what level of
Federal funding would be provided to address these needs or future
capital requirements.
Question 8. I understand that Amtrak told the Amtrak Reform Council
several years ago that Amtrak would separate operations from
infrastructure on an accounting basis so that Amtrak could better
identify the costs relating to the Northeast Corridor. Why has this
never been done? Are you willing to begin accounting separately for the
Northeast Corridor infrastructure for the new fiscal year?
Answer. At ARC's request, Amtrak worked to develop a methodology to
delineate operations from infrastructure. I understand that data was
shared with the ARC at that time. Since then, the ARC has ceased to
exist and management has changed at Amtrak. Since I have started at
Amtrak we have made public information about the company's financing
and internal structure well beyond what was provided before. Last year,
Congress through the appropriations process required that Amtrak
receive its funds from the FRA through a grant process, which we have
done. This requires a significant amount of detailed reporting. I think
the information about what we spend and where we spend it is clear and
available.
Question 9. Does Amtrak have any restructuring plan of its own or
does Amtrak simply plan to continue operating the same trains . . .
over the same routes . . . with millions more in operating losses . . .
forever?
Answer. Forever is a long time but during the past year and a half,
Amtrak has:
Undertaken a major management restructuring resulting in
2,400 less employees;
Implemented major financial reforms that have taken the
company from the verge of bankruptcy and recently enabled it,
for the first time since 1995, to complete a fiscal year
without borrowing or obtaining emergency funding to cover
operating expenses;
Developed a Strategic Plan that details the investments that
are required to bring its infrastructure and equipment to a
state of good repair; and
Refined its long distance train operations (eliminating two
trains) in connection with the rationalization of its mail and
express business;
Undertake a number of large maintenance projects designed to
begin restoring a state of good repair on platform equipment.
Significant future changes to Amtrak's route structure would
require:
Policy direction from Congress through reauthorization; and
Funding to cover the significant startup and/or shutdown
costs of restructured routes.
Question 10. For some time, Amtrak insisted that it owned very few
stations. I believe the number cited was less than 20. But when
pressed, Amtrak finally provided the Committee a list showing that it
still owns over 100 train stations. Wouldn't it make sense for station
ownership, maintenance, and even the manning of the stations to be a
local responsibility? After all, the airlines don't own and operate the
airports.
Answer. Amtrak serves 519 stations, of which it owns 82 buildings
or shelters. An additional 53 stations that Amtrak owns are exclusively
served by commuter trains and are leased to state DOT's, local transit
agencies and others. Most of these are in Pennsylvania. The leases
require that the local agency assume full responsibility for
maintenance and improvements. Most of the station structures that
Amtrak owns were conveyed to the company by predecessor railroads.
Nonetheless, Amtrak supports the principle that stations should be
locally owned and maintained, with the exception of large stations that
incorporate office space or other support functions; that generate
revenue through the lease of retail space to offset operating expenses,
or that require skilled, safety-trained maintenance staff in some
close-quartered, high traffic environments. An obstacle to the transfer
of station buildings to local ownership is the lack of dedicated
funding, similar to funding mechanisms in the airline industry, that
could be used to as a source for state and local improvements to
stations.
Question 11. In your view, could any of the long distance trains be
converted to linked corridors that could attract more riders and lower
operating losses along the lines of Mr. Mead's suggestion? For example,
could the Texas Eagle be transformed into linked corridors between
Chicago and St. Louis; St. Louis and Little Rock; Little Rock and Ft.
Worth; and Ft. Worth and San Antonio?
Answer. Amtrak strongly supports the development of short distance
corridors. Several of the current long-distance routes could, over
time, form the basis for the development of connected corridors.
However, as is demonstrated by the successful corridor development
efforts in California and elsewhere, developing such corridors requires
significant capital investment in freight railroad infrastructure,
equipment, and equipment maintenance facilities, as well as funding for
operating subsidies.
It is also important to note that converting long distance trains
into short distance trains covering segments of the same route would
serve only a small portion of the passengers who utilize those long
distance trains, and therefore would increase operating losses. Most
passengers on long distance trains are taking relatively long trips
that are not confined to points within a single short distance
corridor.
Ridership patterns on the Texas Eagle illustrate this. During
FY2002, the Eagle carried an average of 246 passengers per trip. Of
these passengers, 54 per trip took trips confined to the Chicago-St.
Louis segment, an existing state-supported ``corridor'' on which Amtrak
operates three round trips per day. However, on average, only 29 of the
192 passengers (15 percent) south of St. Louis took trips that both
began and ended within one of the ``corridors'' suggested in the
question. The other 85 percent took trips that crossed corridor
boundaries. None of these ``through'' passengers, who provide the vast
majority of the trains' revenues, would be served unless the four
``linked corridor'' trains connected with each other. However, such
connections would require middle of the night arrivals and departures
at corridor endpoints that would defeat efforts to develop additional
short distance ridership.
Question 12. Could you provide the Committee a detailed explanation
of Amtrak's potential labor protection exposure due to restructuring
and the specific events that trigger labor protection. For example,
when Amtrak cut the Kentucky Cardinal at Indianapolis, was any labor
protection obligation incurred?
Answer. Predicting potential labor protection exposure is difficult
in general, but in particular absent specifics on what future
restructuring proposals might provide both with respect to service
changes and employment opportunities for employees.
Amtrak has two (2) labor protection scenarios. The first is the
arbitrated labor conditions which replaced Appendix C-2 pursuant to the
terms of the Amtrak Reform and Accountability Act of 1997. The trigger
in this labor protection is train or route discontinuance below ``tri
weekly'' service. The second is labor protection for shopcraft
employees who are adversely affected by a transfer of work across
seniority districts or abolishment closure of shops.
Labor protection was triggered for employees associated with the
Kentucky Cardinal, south of Indianapolis, when this route was
discontinued. Three (3) employees were certified as protected and,
since none lost employment, they are eligible to file for income loss
only, if any, during their protection period. One employee has two
years' protection; two have three years' protection. This is because
the Kentucky Cardinal was a very small operation and its elimination
had very little impact on our workforce.
Question 12a. Are all Amtrak union employees subject to labor
protection, or are there some exceptions? Please be specific as to the
employees involved, their number, and what different severance
provisions may apply.
Answer. All agreement-covered employees are subject to the labor
protection due to train or route discontinuance below ``triweekly.'' As
of the end of August, the number of employees so covered was almost
18,000.
Shopcraft employees working primarily in the maintenance of
equipment function are subject to the transfer of work across seniority
district lines (and abolishment/closure of shop rule). As of the end of
August, the number of employees so covered was 5,000.
Question 13. In a follow-up question from the full Committee's last
hearing on Amtrak, I asked ``If Amtrak is able to use its Federal
subsidy to cover overhead, how can there be fair and open competition
with the private sector?'' Your response began with the statement that
``The current statutory scheme is not intended to create 'fair and open
competition' between Amtrak and private entities that wish to operate
selected intercity passenger rail services currently operated by
Amtrak''. If other companies ready, willing, and able to operate
intercity service, why should they not be able to compete with Amtrak
on a fair and open basis?
Answer. As stated in the prior Amtrak response quoted in the
question, a number of statutory changes would be required to create
``fair and open competition'' between Amtrak and other entities that
wish to operate intercity rail passenger service, including:
Making all such entities subject to Railroad Retirement
taxes, as Amtrak is; and
Giving these entities the same statutory access rights that
Amtrak possesses to use tracks and facilities owned by freight
railroads and regional transportation authorities.
Question 13a. Is Amtrak opposed to competition?
Answer. No.
Northeast Corridor High-Speed Rail Project
Question 14. What is the status of Amtrak's litigation with
Bombardier and what progress has been made to settle the lawsuits
through mediation?
Answer. After litigating issues relating to the proper forum for
the case for the past two years, Amtrak is currently at the beginning
of the litigation process with Bombardier. In addition, since May of
2003, the parties have been engaged in mediation in an effort to settle
the disputes among the parties. A stay on litigation was agreed to by
the parties to permit them to focus on settlement efforts. To date, no
settlement or resolution of disputes has been reached though we
continue to talk among the parties. The stay on litigation between the
parties was set to expire on November 3, 2003 but was extended through
to January 2, 2004.
Question 14a. What evidence can you provide that Amtrak is
participating in mediation in good faith?
Answer. Due to a confidentiality arrangement between the parties,
Amtrak is not permitted to disclose the details of the mediation
sessions or to reveal or opine on the positions of the parties therein.
That said, I am confident that Amtrak has acted with the utmost of
good faith. We have expended considerable time and resources and
devoted effort at the highest levels within Amtrak to resolve the
disputes between the parties.
Question 15. What is the current status of the Northeast High-Speed
Rail Improvement Project and when, if at all, does Amtrak expect to
meet the goals of this project (particularly the 3 hour trip time from
Boston to New York City)?
Answer. All construction for the Northeast High-Speed Rail
Improvement Project (NHRIP) on the Amtrak-owned portion of the Boston-
to-New York line has been completed except for the following:
Boston-New Haven
Replacement of Niantic Moveable Bridge (entire new
structure)-In Amtrak 5-year Capital Program. Environmental
documentation complete, RFP for design advertised.
Replacement of Thames River Moveable Bridge (moveable
bascule span being replaced with new vertical lift span)--In
Amtrak Capital Program. Environmental documentation and design
complete. Construction scheduled for summer 2004.
Guilford (CT) Sidings-Tracks 3 and 4. Track 4 is under
construction and scheduled for completion by December 2005.
Construction of Track 3 has been deferred in accordance with
our agreement with Connecticut Department of Transportation to
alter Shore Line East commuter service patterns, making
completion of the siding unnecessary at this time.
Switch heaters for some industrial tracks. Amtrak has
proposed an alternative method.
Minor catenary installations, primarily on secondary tracks
in the Boston commuter territory. Much of this work is planned
for completion in coordination with other non NHRIP projects to
minimize track outage related delays.
Advanced Civil Speed Enforcement System (ACSES): All ground
installations complete for Phase I. Coordinating final cut-
overs for ACSES in commuter territories with completion of on-
board equipment installations to commuter equipment. Phase II
under development. The manufacturer is reviewing certain design
elements found to be underperforming in Phase I prior to
initiating Phase II installation.
Shell Interlocking (New Rochelle, NY). Design complete and
procurement underway. Estimated completion by 2008.
Hell Gate Line (New Rochelle, NY to Harold Interlocking in Queens,
NY)
Manor Interlocking-Construction scheduled for FY 2005.
Catenary and Catenary Pole Replacements--Scheduled for
completion by FY 2007
Curve Modifications -Included in catenary replacement
program
Direct Track Fixation over Hell Gate Bridge--Scheduled for
FY 2008
The 56-mile portion of the Boston-New York route between New Haven,
CT and New Rochelle, NY is operated and controlled by Metro North
Railroad. Amtrak is currently paying Metro North $15-20 million per
year towards the following projects:
New Haven Station-All construction complete
Stamford Station--Scheduled for completion December 2003
Catenary (overhead wire) Replacement-Multiyear program
underway
Bridge Replacement Projects-Multiyear program underway.
Curve Speed and Signal Improvements -Coordinated with
catenary and bridge replacements
The work that remains to be done on Metro North is significant in
terms of both scope and the funding required from both Metro North and
Amtrak. Amtrak is unable to predict when Metro North will complete it.
Running Times
As part of the development of the high-speed service, Amtrak
prepared a projected three hour Boston-to-New York schedule (two hours
and 45 minutes trip time, plus 15 minutes of recovery time for en route
delays) using a computer program known as a 'TPC' (Train Performance
Calculator). The TPC was prepared based upon the planned NHRIP
infrastructure improvements (including improvements on the Metro North
portion of the route), four intermediate station stops, and the
equipment performance specifications developed by Amtrak that bidders
on the train set procurement were required to satisfy.
Current schedule times (approximately three hours and 25 minutes
for trains making the planned four stops) do not achieve the three hour
goal. The primary reason for this are (i) failure of the equipment to
meet specifications, which is the subject of litigation between Amtrak
and Bombardier, the equipment manufacturer, (ii) the projected
infrastructure improvements times on the Metro North segment that have
not been completed, and (iii) inadequate funding to complete certain of
the infrastructure projects listed above on the Amtrak-owned portion of
the route that would eliminate or reduce speed restrictions.
Completion of the remaining projects that impact speeds on the
Amtrak-owned portion of the Boston-to-New York route will reduce
running time by approximately three minutes. Completion of the
remaining work on the Metro North segment will permit additional
reductions in running time that have not yet been quantified or
negotiated with Metro North. Because the high speed train sets do not
meet specifications, achieving the three hour goal would require
equipment modifications.
Question 16. Amtrak claimed that this project would provide $180
million in net income to its bottom line and help the Corporation
achieve operational self-sufficiency. What have been the actual
financial results of this project?
Answer. In early 1998, Amtrak forecast the following results for FY
2001-2002's Northeast Corridor High Speed Rail versus 1997's existing
Northeast Corridor:
Gross incremental revenue of $290 to $300M
Debt service of $45 to $55M
Incremental operating expenses of $50M
Net incremental benefit of $180 to $200M
For FY2002 Amtrak's Northeast Corridor performance to these
measures was:
Gross incremental revenue of $287M
Debt service of $34M
Incremental operating expenses, utilizing the FRA
definition, of $37M
Net incremental benefit of $216M
Question 17. Amtrak claims it has recently adopted various ``best
practices'' for managing future infrastructure projects. What best
practices have been adopted and how will they improve project
management?
Answer. For major construction programs performed by outside
contractors, Amtrak uses the management model that was developed for
the $900 million Fire and Life Safety project in the six tunnels in New
York. The business model incorporates normal best practices in the
development and management of large scale construction projects.
The project scope is developed by the effected stakeholders
including but are not limited to commuter agencies, Federal Railroad
Administration, municipalities, and civil emergency response agencies.
The program office estimates the cost of the project and develops a
cost and resource loaded schedule. When approved, the project is
submitted for design and the stakeholders review these designs. When
design is final a project manager is assigned, risks are identified, a
base line schedule developed and the budget is then finalized. The
project manager is solely responsible for management of all
contractors, the project scope, schedule and budget. The project
manager reports project progress and performance utilizing DOT
acceptable earned value methods and systems to the program office on a
monthly basis. All budget variances are tracked and explained, along
with areas of concerns being identified for resolution.
Professional construction management firms (CM) are employed for
day-to-day project management. Their compensation varies with the
results they achieve. They can earn no profit, if a project goes
poorly, or double their standard profit, if a project goes very well.
For the CM to double its profits, the total cash cost of the project
including the CM fee must be substantially below the original cost
estimate.
The Fire & Life Safety Program Office has direct oversight on all
projects and is staffed with a program director, finance manager,
project integration manager, contracting officer, document control
officer and an independent auditor. This office reports monthly to all
stakeholders on program performance, project performance and financial
performance. This office maintains all construction and commercial
documents and is responsible for stakeholder interface.
A separate report is available on the current financial and
completion status of the F&LS program.
For projects performed by Amtrak forces, Amtrak has implemented a
new planning and project management system for 2004. For the
approximately 500 projects planned for 2004, the system consists of a
clear scope of work, detailed cost estimates, a project schedule and
monthly cash flow estimates. A project manager is responsible for the
project from estimate to close out. Project monitoring consists of
weekly reporting of physical progress and cost as well as a comparison
of projected final cost vs. budget. Monthly reporting consists of the
same reporting as weekly, plus explanations of cost and schedule
variances and a review of schedule and projected cash flows. The
combination of clear project scope, detailed estimates and weekly
monitoring give Amtrak Engineering a strong control over in-house work.
______
Response to Written Questions Submitted by Hon. John McCain to
Kenneth M. Mead
Question 1. Mr. McCain. Mr. Mead, what did the Nation get for its
$8.4 billion investment in Amtrak over the past six years? Amtrak's
ridership only increased 14 percent over this period and its operating
losses soared.
Answer. Of the $8.4 billion, $6.2 billion came from the Federal
Government and $2.2 billion was secured through external borrowing.
Operating expenses, including RRTA payments and debt principal,
consumed $3.8 billion of the Federal funds. The remaining $2.4 billion,
along with the $2.2 billion in borrowing, was spent on capital
investment in infrastructure and equipment. This investment enabled
implementation of high speed rail service on the Northeast Corridor
including electrification of the track from Boston, Massachusetts to
New Haven, Connecticut, and acquisition of the Acela train sets and
maintenance facilities. Other capital investment during this period
included improvements in conventional services in the Pacific Northwest
and California and acquisition of two Talgo train sets being used in
the Pacific Northwest. While unable to address its growing backlog of
capital needs during this period, Amtrak did maintain a minimum
reliability of service over the system.
Finally, between 1998 and 2003, Amtrak's cash operating loss
increased by $118 million, $77 million of this came from increased
interest expenses from the external borrowing of $2.2 billion to
supplement its capital investment.
Question 2. Mr. McCain. Mr. Mead, your statement notes that only 16
percent of Amtrak's passengers rode the long-distance trains in 2002,
and that the long-distance trains accounted only for 30 percent of
Amtrak's revenue. What percentage of Amtrak's operating loss is
associated with the long-distance trains?
Answer. Based on the estimated 2003 fully allocated costs developed
by the Federal Railroad Administration in coordination with Amtrak,
approximately 76 percent of Amtrak's fully allocated operating loss
(excluding depreciation and interest) is associated with the long-
distance trains. However, two issues affect this percentage. First, the
only service that shows an operating profit without state operating
subsidies is the Acela/Metroliner service. If this profit is excluded
and the calculation is made only on conventional service, long distance
makes up 69 percent of the loss. (See attachment). Second, state
contributions to the corridor services are included in the fully
allocated loss calculations creating the impression that the cost of
operating these services is actually less than it really is. Also, it
should be noted that it is not likely that discontinuance of the long
distance services would save an amount equal services would need to be
borne by the remaining routes.
Question 3. Mr. McCain. Mr. Mead, you recommend against separating
Amtrak's train operations nationally from the Northeast Corridor
infrastructure. Is your concern that there needs to be centralized
decision-making on the Corridor about operations and infrastructure,
and if so, can't this be accomplished in a manner that would still
allow for some degree of separation? Would your recommendation preclude
subcontracting out maintenance, train operations, and other services?
Answer. We recommend that the Northeast Corridor be maintained as
an integrated railroad. Operations in the rest of the country may be
split off and operated separately. With regard to the Northeast
Corridor, some or all operations could be subcontracted as the
competition for such subcontracts may yield savings. The point, we
believe, is that management of the infrastructure and operations on the
Northeast Corridor be maintained in a single entity.
Question 4. Mr. McCain. Mr. Mead, help put into perspective the
cost of the Administration's proposal to the states. How does the $1.2
billion funding responsibility in the Administration's plan compare to
what cities and states spend annually on transit?
Answer. Transit funding in 2001 (the most recent full year for
which data are available) is broken down as follows:
FV 2001 Transit Funding
[$ in millions]
----------------------------------------------------------------------------------------------------------------
Funding Source Operating Capital Total
----------------------------------------------------------------------------------------------------------------
Passenger Fares and Other $9,319.5 $0.0 $9,319.5
----------------------------------------------------------------------------------------------------------------
Local Funds 7,393.3 4,345.1 11,738.4
----------------------------------------------------------------------------------------------------------------
State Funds 5,127.3 1,011.1 6,138.4
----------------------------------------------------------------------------------------------------------------
Federal Funds 231.7 6,354.0 6,585.7
----------------------------------------------------------------------------------------------------------------
Total $21,528.8 $11,710.2 $33,239
----------------------------------------------------------------------------------------------------------------
Source: 2001 National Transit Profile
Local and state sources provided nearly $18 billion in funding for
transit in 2001. Thus, the $1.2 billion is less than 7 percent of the
local and state funding for transit in 2001.
Question 5. Mr. Mead, what implications would restructuring some
long-distance trains into corridor feeder services have for capital
costs?
Answer. Restructuring some long-distance trains into corridor
feeder services is likely to decrease capital costs for those services
while capital costs for corridor services are likely to increase. Long-
distance train capital costs will decrease as dining, baggage, and
sleeper cars are retired rather than maintained and rebuilt. However,
to realize the full potential of the corridor services, capital
spending for infrastructure and rolling stock will likely need to
increase to improve transit times and frequencies.
Question 6. Mr. McCain. Mr. Mead, in your statement, you suggest
that some long-distance trains may need to be funded indefinitely
because they are not conducive to being restructured as feeder service.
My concern, in addition to the high operating losses on these trains,
is that this approach would treat those trains differently and frankly
more favorably. Can't we find a way to treat all the states and all of
the trains the same way for purposes of cost-sharing?
Answer. Choosing to retain some of the long-distance services for
national interests and fund them at the Federal level is clearly a
policy decision that should be made in the context of reform and
reauthorization. In my opinion, it is appropriate to ask states to
directly contribute to services in which they can decide the frequency
and amenities and that clearly serve their constituents. It does not,
however, make sense to ask them to carry the entire burden or to fund a
service over which they have little or no control and only minimally
serves their constituents. If restructuring of some of the long-
distance routes is successful (losses are reduced and ridership
increases) and states see the benefits of focusing on corridor
development, it is possible that restructuring other long-distance
routes could be re-considered.
Question 7. Mr. McCain. Mr. Mead, I'm not sure I agree with your
suggestion that the complexity and detail requirements for an
application for capital funding should depend on the amount of funding
being requested. Wouldn't this encourage states to segment major
projects into small pieces that might understate the significance of
the overall project and the larger project's total price tag?
Answer. We would not support such segmentation. We believe
regulations could be written that prohibit such manipulation of the
application process and that provide strong Federal oversight of it.
Attachment
Estimated Fully Allocated Contribution/(Loss) FY 2003
[$ in millions]
------------------------------------------------------------------------
Amtrak Route Excludes Amtrak Route Excludes
---------------------- Depreciation ----------------------- Depreciation
and Interest and Interest
(1) -------------- (1) -------------
(2) (2)
------------------------------------------------------------------------
Corridor Routes Long Distance (LD)
Routes
1 Acela Express/ $69.7 1 Silver Star ($30.1)
Metroliner
2 Ethan Allen Express (2.7) 2 Three Rivers (33.9)
3 Acela Regionai/ (50.0) 3 Cardinal (12.8)
NEDNermonter
4 Twilight Shoreliner (15.2) 4 Silver Meteor (20.6)
5 Maple Leaf (4.6) 5 Empire Builder (45.4)
6 The Downeaster (5.1) 6 Capitol Limited (23.5)
7 Clocker Service (6.3) 7 California Zephyr (52.9)
8 Keystone Service (17.9) 8 Southwest Chief (68.3)
9 Empire Service (35.3) 9 City of New Orleans (17.7)
10 State House (13.0) 10 Texas Eagle (29.0)
11 Hiawathas (11.0) 11 Sunset Limited (34.5)
12 Wolverine (17.6) 12 Coast Starlight (37.6)
13 Lllini (1.7) 13 Lake Shore Limited (40.6)
14 Illinois Zephyr (2.2) 14 Palmetto (29.7)
15 Heartland Flyer 1.4 15 Crescent (32.8)
16 Pacific Surfliner (18.4) 16 Pennsylvanian (24.9)
17 Cascades (10.4) 17 Auto Train (12.4)
------------------------------------
18 Capitols (6.3) Total Long-Distance ($546.6)
Trains
19 San Joaquins (11.0)
20 Adirondack (3.3) LD % of Total 76%
21 International (2.1) LD % of Total Excl 69%
ACELA/Metroliner
22 Kentucky Cardinal (7.5)
23 Mules (1.0)
24 Pere Marquette (1.4)
25 Carolinian (3.3)
26 Piedmont (0.5)
------------------------------------
Total Corridor ($176.5)
Trains
------------------------------------------------------------------------
______
Response to Written Questions Submitted by Hon. John B. Breaux to
Kenneth M. Mead
Mr. Breaux. Mr. Mead, the Administration's proposal shifts half of
the capital costs and all of the operating costs to the states where
passenger rail will be operated.
Question 1. Has your office conducted any studies or surveys to
calculate what it will cost a state to maintain passenger rail in their
state?
Answer. Each state will ultimately need to define the level of
service it requires and then work with Amtrak or other operators to
determine the cost of that service. To do this type of analysis at this
point in time would require too many assumptions regarding the
appropriate level of service and the costs. For these reasons, we have
not performed such an analysis.
That having been said, the Federal Railroad Administration (FRA)
worked with Amtrak earlier this year to estimate the fully allocated
contribution/(loss) for each Amtrak route for Fiscal Year 2003.\1\
Based on those fully allocated estimates, the shorter distance corridor
trains were projected to lose a total of $177 million excluding
depreciation and interest and long distance trains were projected to
lose a total of $547 million excluding depreciation and interest.
Although FRA did not report these costs on a state by state basis, the
following table shows some examples of the fully allocated costs for
corridor trains that operate within one or two states and those that
operate over the Northeast Corridor.
---------------------------------------------------------------------------
\1\ These calculations were included as Appendix 1 in the Deputy
Secretary of Transportation's, Michael Jackson, statement before the
Commerce, Science, and Transportation Committee, U.S. Senate, April 29,
2003.
Table 1.--FY 2003 Estimated Fully Allocated Net Profit/(Loss)
Excluding Depreciation & Interest
------------------------------------------------------------------------
State(s)/ Corridor Train ($ in millions)
------------------------------------------------------------------------
NEC Acela $69.7
------------------------------------------------------------------------
NEC Regional (50.0)
------------------------------------------------------------------------
NEC Clocker (6.3)
------------------------------------------------------------------------
CA Capitols (6.3)
------------------------------------------------------------------------
CA Pacific Surfliner (18.4)
------------------------------------------------------------------------
CA San Joaquins (11.0)
------------------------------------------------------------------------
NC Piedmont (0.5)
------------------------------------------------------------------------
IL/MI Pere Marquette (1.4)
------------------------------------------------------------------------
OK/TX Heartland Flyer 1.4
------------------------------------------------------------------------
IL/WI Hiawathas (11.0)
------------------------------------------------------------------------
A summary of FRA's projected FY 2003 fully allocated costs for all
of Amtrak's trains is included as an attachment. We have not developed
a mechanism to allocate the operating and capital costs of any of these
services on a state-by-state basis.
Question 2. Mr. Breaux. Mr. Mead, how will states be able to judge
whether it is feasible for them to join a multi-state compact or to
commit to financing passenger rail within the state?
Answer. A state's determination of feasibility will be dependent
upon what continuing service it wants, how much it can afford, and what
benefits will be achieved. If the benefits outweigh the costs, the
states will either fund the service themselves or join a multi-state
compact.
Attachment
Attachment
Estimated Fully Allocated Contribution/(Loss) FY 2003
Excluding Depreciation and Interest ($ in millions)
------------------------------------------------------------------------
Amtrak Route FY 2003 Contr/
------------------------------ (Loss)
------------------
(1) (2)
------------------------------------------------------------------------
Corridor 1 Acela Express/Metroliner $69.7
2 Ethan Allen Express (2.7)
3 Acela Regional/NED/ (50.0)
Vermonter
4 Twilight Shoreliner (15.2)
5 Maple Leaf (4.6)
6 The Downeaster (5.1)
7 Clocker Service (6.3)
8 Keystone Service (17.9)
9 Empire Service (35.3)
10 State House (13.0)
11 Hiawathas (11.0)
12 Wolverine (17.6)
13 Illini (1.7)
14 Illinois Zephyr (2.2)
15 Heartland Flyer 1.4
16 Pacific Surfliner (18.4)
17 Cascades (10.4)
18 Capitols (6.3)
19 San Joaquins (11.0)
20 Adirondack (3.3)
21 International (2.1)
22 Kentucky Cardinal (7.5)
23 Mules (1.0)
24 Pere Marquette (1.4)
25 Carolinian (3.3)
26 Piedmont (0.5)
------------------------------------------------
Total Corridor Trains ($176.5)
Long Distance 1 Silver Star ($30.1)
2 Three Rivers (33.9)
3 Cardinal (12.8)
4 Silver Meteor (20.6)
5 Empire Builder (45.4)
6 Capitol Limited (23.5)
7 California Zephyr (52.9)
8 Southwest Chief (68.3)
9 City of New Orleans (17.7)
10 Texas Eagle (29.0)
11 Sunset Limited (34.5)
12 Coast Starlight (37.6)
13 Lake Shore Limited (40.6)
14 Palmetto (29.7)
15 Crescent (32.8)
16 Pennsylvanian (24.9)
17 Auto Train (12.4)
------------------------------------------------
Total Long-Distance ($546.6)
Trains
------------------------------------------------------------------------
______
Written Questions Submitted by Hon. John B. Breaux to
Hon. Allan Rutter
The Administration's proposal would require states to substantially
increase their financial support of Amtrak. I suppose the logic is that
those states that wish to have passenger rail service should have to
pay for it. States are facing serious budgetary constraints as their
tax bases erode in a soft economy and as the Federal Government
provides less and less support for all sorts of public programs. In
fact, the Alabama state legislature recently voted to reduce its
funding by 18 percent, meaning that funds for school textbooks, for
healthcare, and for police patrols will be substantially reduced.
(Washington Post, ``Alabama Lawmakers Cut Budget 18 percent,''
September 26, 2003). Alabama is not alone in this budget battle;
Louisiana is also facing these difficulties.
Question 1. How does the Administration expect that states who are
having to cut funds for things like health care, education, and police
protection are going to find additional funds for passenger rail?
The Administration's proposal would necessitate the formation of
state compacts to maintain passenger rail service along corridors that
travel through the states in the compacts.
Question 2. What advantages are to be gained from having a
passenger rail system that is comprised of several disparate rail
corridors rather than one, consolidated national system?
Question 3. What happens in the formation of the state compacts
when one state along the corridor refuses to join the compact? Wouldn't
this system give some states the incentive to refuse to participate in
a corridor compact simply to pressure its neighboring states into
picking up the whole tab for the costs of operating a rail corridor
that benefits all of the states on the corridor?
The witness did not respond.
______
Written Questions Submitted by Hon. Frank R. Lautenberg to
Hon. Allan Rutter
Question 1. You sit on the Board of Amtrak and represent the
Secretary of Transportation. Do you agree with the approach that Mr.
Gunn is taking in terms of stabilizing the railroad? Or is there
something you feel he could be doing better?
Question 2. Administrator Rutter, you are the Nation's top safety
enforcer for our railroads. Is a $900 million Federal appropriation for
Fiscal Year 2004 adequate to address all of the safety defects cited by
FRA inspectors? If not, which of Amtrak's operations/infrastructure
will be most vulnerable to safety defects? How much does Amtrak need to
spend on capital maintenance and improvements to ensure a safe railroad
operation?
Question 3. I understand that the Administration has recently
released the names of three people that it intends to nominate for the
Amtrak Board. Were these individuals selected by the Administration for
the purpose of sitting on the Board to oversee the dismantling and
break-up of the carrier? Were they selected for their acceptance of the
Administration's vision of Amtrak?
The witness did not respond.
[all]
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