[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]





                         AMTRAK REFORM PROPOSALS

=======================================================================

                                (109-31)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                               RAILROADS

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 21, 2005

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure


                                 _____

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-    JAMES L. OBERSTAR, Minnesota
Chair                                NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York       PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
WAYNE T. GILCHREST, Maryland         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
PETER HOEKSTRA, Michigan             CORRINE BROWN, Florida
VERNON J. EHLERS, Michigan           BOB FILNER, California
SPENCER BACHUS, Alabama              EDDIE BERNICE JOHNSON, Texas
STEVEN C. LaTOURETTE, Ohio           GENE TAYLOR, Mississippi
SUE W. KELLY, New York               JUANITA MILLENDER-McDONALD, 
RICHARD H. BAKER, Louisiana          California
ROBERT W. NEY, Ohio                  ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        EARL BLUMENAUER, Oregon
JERRY MORAN, Kansas                  ELLEN O. TAUSCHER, California
GARY G. MILLER, California           BILL PASCRELL, Jr., New Jersey
ROBIN HAYES, North Carolina          LEONARD L. BOSWELL, Iowa
ROB SIMMONS, Connecticut             TIM HOLDEN, Pennsylvania
HENRY E. BROWN, Jr., South Carolina  BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois         SHELLEY BERKLEY, Nevada
TODD RUSSELL PLATTS, Pennsylvania    JIM MATHESON, Utah
SAM GRAVES, Missouri                 MICHAEL M. HONDA, California
MARK R. KENNEDY, Minnesota           RICK LARSEN, Washington
BILL SHUSTER, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
JOHN BOOZMAN, Arkansas               ANTHONY D. WEINER, New York
JIM GERLACH, Pennsylvania            JULIA CARSON, Indiana
MARIO DIAZ-BALART, Florida           TIMOTHY H. BISHOP, New York
JON C. PORTER, Nevada                MICHAEL H. MICHAUD, Maine
TOM OSBORNE, Nebraska                LINCOLN DAVIS, Tennessee
KENNY MARCHANT, Texas                BEN CHANDLER, Kentucky
MICHAEL E. SODREL, Indiana           BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania        RUSS CARNAHAN, Missouri
TED POE, Texas                       ALLYSON Y. SCHWARTZ, Pennsylvania
DAVID G. REICHERT, Washington        JOHN T. SALAZAR, Colorado
CONNIE MACK, Florida                 JOHN BARROW, Georgia
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
JEAN SCHMIDT, Ohio

                                  (ii)



                       SUBCOMMITTEE ON RAILROADS

                  STEVEN C. LaTOURETTE, Ohio, Chairman

THOMAS E. PETRI, Wisconsin           CORRINE BROWN, Florida
SHERWOOD L. BOEHLERT, New York       NICK J. RAHALL II, West Virginia
JOHN L. MICA, Florida                JERROLD NADLER, New York
SPENCER BACHUS, Alabama              BOB FILNER, California
JERRY MORAN, Kansas                  ELIJAH E. CUMMINGS, Maryland
GARY G. MILLER, California           EARL BLUMENAUER, Oregon
ROB SIMMONS, Connecticut             LEONARD L. BOSWELL, Iowa
TODD RUSSELL PLATTS, Pennsylvania    JULIA CARSON, Indiana
SAM GRAVES, Missouri                 PETER A. DeFAZIO, Oregon
JON PORTER, Nevada                   JERRY F. COSTELLO, Illinois
TOM OSBORNE, Nebraska                EDDIE BERNICE JOHNSON, Texas
MICHAEL E. SODREL, Indiana           JOHN BARROW, Georgia
LYNN A. WESTMORELND, Georgia, Vice-  JAMES L. OBERSTAR, Minnesota
Chair                                  (ex officio)
DON YOUNG, Alaska
  (ex officio)

                                 (iii)

                                CONTENTS

                               TESTIMONY

                                                                   Page
 Chambers, Ray B., Preseident National Railroad Construction and 
  Maintenance Association, Inc...................................    44
 Liberatore, Dominic J., Executive Director, All Aboard Ohio.....    44
 Laney, Hon. David M., Chairman, Amtrak Board of Directors.......    12
 Mead, Hon. Kenneth M., Inspector General, Department of 
  Transportation.................................................    12
 Reistrup, Paul, Chairman-Elect, Railway Service Corporation.....    44
 Rosen, Hon. Jeffrey, General Counsel, U.S. Department of 
  Transportation.................................................    12
 Scardelletti, Robert A., International President, Transportation 
  Communications International Union.............................    44
 Serlin, Robert, President, Rail Infrastructure Management, LLC..    44

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Brown, Hon. Corrine, of Florida..................................    64
Costello, Hon. Jerry F., of Illinois.............................    89
Cummings, Hon. Elijah, of Maryland...............................    91
Menendez, Hon. Robert, of New Jersey.............................   136
Mica, Hon. John, of Florida......................................   138
Nadler, Hon. Jerrold, of New York................................   139
Oberstar, James L. of Minnesota..................................   143

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

 Chambers, Ray B.................................................    78
 Laney, Hon. David M.............................................    97
 Liberatore, Dominic J...........................................   120
 Mead, Hon. Kenneth M............................................   124
 Reistrup, Paul..................................................   151
 Rosen, Hon. Jeffrey.............................................   168
 Scardelletti, Robert A..........................................   186
 Serlin, Robert..................................................   201

                       SUBMISSIONS FOR THE RECORD

Brown, Hon. Corrine, a Representative in Congress from Florida, 
  letter from George Francisco, Chair, Transportation Trades 
  Department, AFL-CIO, Rail Labor Division, October 8, 2004......    58

 Laney, Hon. David M., Chairman, Amtrak Board of Directors:

  Responses to questions from Rep. Brown.........................   102
  Response to a question from Rep. LaTourette....................   114
 Reistrup, Paul, Chairman-Elect, Railway Service Corporation, 
  responses to questions from Rep. Brown.........................   165
 Rosen, Hon. Jeffrey, General Counsel, U.S. Department of 
  Transportation, responses to questions.........................    38
 Scardelletti, Robert A., International President, Transportation 
  Communications International Union, responses to questions from 
  Rep. Brown.....................................................   197
 Serlin, Robert, President, Rail Infrastructure Management, LLC, 
  responses to questions from Rep. Brown.........................   212

                        ADDITIONS TO THE RECORD

Houlihan, Lokey, Howard & Zukin, Louis A. Paone, Managing 
  Director, letter, September 8, 2005............................   220
International Brotherhood of Teamsters, John F. Murphy, 
  International Vice President Eastern Region, statement.........   222
National Association of Railroad Passengers, Ross B. Capon, 
  Executive Director, statement..................................   228

 
                        AMTRAK REFORM PROPOSALS

                              ----------                              


                     Wednesday, September 21, 2005

        House of Representatives, Subcommittee on 
            Railroads, Committee on Transportation and 
            Infrastructure, Washington, D.C.
    The subcommittee met, pursuant to call, at 10:30 a.m., in 
Room 2167, Rayburn House Office Building, Hon. Steven 
LaTourette [chairman of the subcommittee] Presiding.
    Mr. LaTourette. The subcommittee will come to order this 
morning. Good morning to everyone. I apologize for being a 
little tardy. I was at the White House attempting to convince 
the administration that the suspension of Davis-Bacon on the 
gulf coast was a bad idea.
    This subcommittee hearing will come to order. I want to 
welcome all of the members today and also the witnesses on 
today's hearing concerning Amtrak reform proposals.
    Back on April 27 of this year, the full committee approved 
H.R. 1630, the Amtrak Reauthorization Act of 2005. This 
legislation would provide Amtrak with $2 billion of 
authorization per year for 3 years beginning in fiscal year 
2006. The bill would also impose certain reforms, such as the 
requirement that Amtrak provide a separate accounting for each 
of its lines of business. It would also require that the 
Federal Railroad Administration oversee all Amtrak 
expenditures.
    Since our passage of H.R. 1630, a number of other Amtrak 
reform proposals have begun to gain attention. Some of these 
proposals involve spinning off Amtrak routes to some 
financially strapped States. Other proposals have taken a more 
positive approach and seek to establish a new public funding 
mechanism or promote private financial investment in Amtrak 
lines. I find the latter proposals particularly intriguing, as 
they dovetail with the rail provisions that we tucked into the 
new highway bill.
    In case you haven't read all of the fine print in TEA-LU, 
the bill contains about $35 billion in low interest loans for 
passenger and freight rail, as well as a $100 million annual 
authorization for high-speed rail corridor development. I want 
to commend Chairman Young and Ranking Member Oberstar for all 
of their hard work on this issue, and wish to thank the members 
of this committee on both sides, particularly my ranking 
member, Corrine Brown, for their support of passenger rail.
    Today the subcommittee will hear testimony from a range of 
parties, including the Transportation Communication Union, 
which represents the largest share of Amtrak employees. I look 
forward to hearing their recommendations regarding the future 
of passenger rail.
    From a personal standpoint, I just want to say it is my 
11th year in the Congress, and it seems when we deal with 
Amtrak, every year we do this kabuki dance and have to fight 
and scrap. This year the budget that was sent up was zero, then 
it went to $550 million, thanks to some great work by Ranking 
Member Oberstar and Ms. Brown, up to a decent level. But it 
seems that we always give Amtrak just enough money to fail, and 
I would hope that we listen to anybody that has a good idea, a 
bright idea as to how we can do it better with the goal of 
having a good, viable, well-financed, well-structured, good 
infrastructure passenger rail system in this county. That is 
why we gathered today.
    Before yielding, I have one brief housekeeping matter. I 
want to ask unanimous consent to allow 30 days for members to 
revise and extend their remarks and to permit submission of 
additional statements and materials by the witnesses. Without 
objection, so ordered.
    It is now my pleasure to yield to Corrine Brown, our 
ranking member, for any opening statements she might have.
    Ms. Brown. Thank you, Mr. Chairman, for holding this 
hearing. I would like to commend you for your strong and 
consistent advocacy for Amtrak. If it wasn't for your efforts 
and for the hard work of Ranking Member Jim Oberstar, thank 
you, Mr. Oberstar, and other members of this committee, Amtrak 
would have been forced to cease operations this fall. I want to 
thank you for the people.
    At a recent poll, it showed that I guess 70 percent of the 
people thought that Congress did not share their values, and 
that was truly an example of not sharing the American people's 
values.
    Last year, Amtrak achieved record ridership of 25 million 
passengers nationwide, the equivalent of 125 fully loaded 757 
airplanes. This is a substantial increase in ridership, which 
shows me that support for Amtrak is growing. This is a real 
credit to Amtrak management and David Gunn. I want to publicly 
thank Mr. Gunn.
    Recent polls show that 66 percent of the American people 
support Amtrak. Not 66 percent from the red States or the blue 
States, but 66 percent of the people of America.
    Congress also supports Amtrak. Now more than ever. The 
LaTourette-Oberstar amendment to the fiscal year 2006 
transportation appropriations bill increased funding for Amtrak 
by over $1.176 billion. That is $1.176 billion more than the 
administration requested for Amtrak, and $626 million more than 
the House Appropriations Committee provided. That amendment 
passed the House by a voice vote. On the same day, my amendment 
to preserve long distance routes passed the House by 269 to 
152. Now it looks like the Senate is going to pass a $1.45 
billion bill, and I understand the Senate will soon pass a 
reasonable, sensible Amtrak reauthorization bill.
    The fact is that support for Amtrak has never been greater. 
Amtrak works and the American people depend on it. When our 
commercial aviation system shut down on 9/11, stranded 
passengers, including Members of Congress, turned to Amtrak to 
reunite themselves with their families.
    Most recently, Amtrak helped evacuate families in Louisiana 
displaced by the hurricane. Amtrak fed them and gave them 
water, more than the Federal Government did. Just think what 
would have happened if Amtrak was broken up into different 
companies and if the States had to run the railroads 
themselves.
    But a small minority in this Congress, and I want you to 
know small, and you know who you are, and one person is not 
here today, but I want you to let him know I called his name, 
Mr. Mica, thinks that Amtrak should be eliminated and that we 
should starve it to death and then privatize the system.
    Don't you realize that Amtrak was created because the 
private railroads could not handle passenger service and didn't 
want it? They lost money on it. They came to Congress and asked 
us to take it up. They told us to take their equipment, take 
whatever we needed and begged us to allow them to abandon the 
passenger rail business.
    Amtrak opponents claim that the private sector can do 
something cheaper and more efficient. All we have to do is 
remember this summer when the Acela crisis happened, to realize 
it is not going to happen. Here we had a private corporation, 
the Northeast Corridor Maintenance Company, which failed to 
fulfill meaningful maintenance and inspection responsibility.
    Just look at the British experience with privatization and 
separation of operations from infrastructure and maintenance to 
understand the devastation such practices can cause.
    In March, the chairman and I traveled to Europe to look at 
the rail network. We learned that former British rail 
infrastructure management had outsourced all of its maintenance 
and engineering work. As a result, the conditions of the track 
deteriorated rapidly. Two fatal accidents in 1999 and 2000 
revealed the extent of the deterioration and the company's poor 
understanding.
    Thankfully, the British government learned from their 
mistakes. The government took back control of the rail network 
and is now investing billions of dollars in infrastructure, 
maintenance and other improvements to get the trains back on 
track.
    We should be doing the same thing. We should be investing 
in our railroad system, just like we invest in other modes of 
transportation. We spend trillions of dollars to subsidize 
every form of transportation, highways, aviation, transit, 
maritime, and Amtrak gets the short end of the stick, and just 
over $1 billion a year from the Federal Government.
    We spent $18 billion on aviation security since 9/11, but 
nothing to secure Amtrak passengers. I read recently that the 
airlines are looking for another handout from Congress because 
of fuel prices, about $600 million in tax relief. I don't see 
any relief for Amtrak.
    We spend $4 billion a month in Iraq, that is $1 billion a 
week, but we can't find $3 billion to get the Northeast 
Corridor to a state of good repair.
    Halliburton wastes $7.2 billion of Federal funds at 
inflated costs billed to the Federal government for nothing but 
things like sodas, movie rentals, tailor services and 
equipment. But they just get swept under the rug.
    Halliburton billed the Federal Government for 37,000 cases 
of soda every month at $45 per case. And we complain about $3 
beverages for Amtrak?
    Halliburton spent $10,000 a day of hard-earned taxpayer 
dollars to house their employees in Kuwait at a 5-star hotel, 
instead of moving them to air conditioned tent facilities like 
the ones used by our troops for under $600 per day, and we 
complain about the costs of Amtrak sleeper service.
    Halliburton leases SUVs and trucks for as much as $7,500 a 
month per vehicle, and then turn around and bill the Federal 
Government for it. Yet some in Congress complain about the cost 
of Amtrak workers, most of which will never be able to afford a 
vehicle that costs $7,500 per month.
    Then there is the TSA, which spends $1,200 for 20 gallons 
of Starbucks coffee, $1,500 for 14 extension cords, $500,000 to 
rent tents that flooded in a rain storm, $250,000 for artwork 
for TSA's new Crisis Management Center in Virginia, $30,000 for 
silk plants and flowers, $13,000 for lamps, and $29,000 for art 
consultants, just to name a few things. And we complain about 
$1 billion for a service that millions of Americans rely upon.
    We should be ashamed of ourselves. Let us stop nickeling 
and diming Amtrak to death. Let us stop looking for ways to get 
rid of our passenger rail. Let's start giving Amtrak the 
support it needs, and let's get back to solving the real 
problem this country is facing.
    Thank you, Mr. Chairman, for having this hearing, and I am 
looking forward to the presentations and to asking questions.
    Mr. LaTourette. I thank the gentlelady. It is now my 
pleasure your to yield to the ranking member of the full 
committee, Mr. Oberstar.
    Mr. Oberstar. Thank you, Mr. Chairman. Maybe after that 
recitation of the ills of Halliburton, I had best submit my 
statement for the record.
    I think you stated the case very well at the outset, Mr. 
Chairman, when you said over the years, the Congress has given 
Amtrak just enough to fail. That is a very apt description of 
it.
    I am grateful for your continued support and advocacy for 
passenger rail transportation, your chairmanship of the 
subcommittee has certainly demonstrated your commitment to 
improving rail passenger service and keeping it part of our 
national transportation landscape, and I really appreciate the 
ranking member, Ms. Brown, who has led what I can only describe 
as a crusade in support of Amtrak and demonstrating the 
effectiveness, the potential and the continued need for rail 
passenger inter-city service.
    I hope your mission this morning was successful, Mr. 
Chairman. I am sure it was heralded with great applause and 
love and brotherly affection downtown. I sent the President a 
letter saying that this was the wrong thing to do.
    The prevailing wage in Louisiana, my wife is from New 
Orleans, we spend a lot of time there over the years, and the 
prevailing wage is just under $9 an hour. That is not going to 
break the bank for anybody. That is not a good prevailing wage 
in northern Minnesota or Chicago or Cleveland or a lot of other 
places in this country. Why you would want to take it out of 
the pockets of the working people, I don't understand.
    I said if you don't roll back your decision and reinstate 
the prevailing wage, at least do what we did during World War 
II and impose a ceiling on the amount of profit the 
corporations can take out of those contracts. Put a 25 percent 
limitation, if that is the amount you are going to reduce the 
prevailing wage by.
    We are not going to fight that battle in this committee, 
but we have done it and we have done it very well, with your 
support, in favor of decent wages for construction trades work, 
working people.
    As we will hear the proposals today, we are going to hear a 
good deal of the magic of privatization. I just want to remind 
the apostles of privatization that the private sector did run 
passenger rail, and they ran it into the ground, and they and 
U.S. Postal Service are principally responsible for the 
deterioration of passenger rail service in the United States.
    By the time Amtrak was created and the last of the 
railroads had shed their passenger service, the inter-city 
market was down to just under one-half of one percent of 
passenger travel. Daily inter-city passenger trains were down 
to 300 from a high of 11,000.
    I remember in our State of Minnesota how the railroads, one 
after another, petitioned the Interstate Commerce Commission 
for discontinuance with the help of the U.S. Postal Service, if 
the Postal Service would take the mail off the Railway Post 
Office, the RPO, that was worked overnight from city to city, 
then the railroad could declare that segment unprofitable and 
discontinue the operations.
    So the Postal Service had this great idea of regional 
distribution centers and the mail from Chisholm, 5 miles away 
to Buhl, would instead travel 90 miles to Duluth, be worked in 
Duluth and then go 85 miles back to Buhl the next day, instead 
of on the RPO being dropped off that night.
    Everybody thought that was a heck of an idea. I didn't 
understand it. I didn't know why you wanted to travel 170-some 
miles to make a 5-mile journey for a letter. But that is what 
they did. And those cities also lost LTL, less than carload 
service. So small towns shriveled up. Passenger service died. 
Eventually it was all turned over to the Federal Government. 
That is the history of Amtrak.
    When it was turned over, the terminals were rundown, the 
stations were in bad shape, the passenger cars were in terrible 
shape, the amenities were minimal, the equipment was prone to 
failure, and that is what the Congress, in its wisdom before 
you and I, Mr. Chairman, and Ms. Brown, were elected to 
Congress, although I was here as an administrative assistant 
for my predecessor.
    So the Federal Government took all the poor and lonely and 
dispossessed of rail passenger service and put them all into 
Amtrak, and then expected it to run and be successful. And over 
the years, again, I come back to your image, just enough money 
to fail, just to hang on by their fingernails.
    In contrast, there is Europe, there is Japan. When I was a 
graduate student at the College of Europe in Brugge, Belgium, 
in 1956-57, as part of our study programs, we would go to 
different parts of Europe and see different economic models. 
Traveling from Paris to Leon, 288 miles, 4-1/2 hours. As a poor 
university student, I could only buy a seat in the last car of 
the train, so all the soot dumped on us in the last car of the 
train.
    I came back in 1989 as chair of the Aviation Subcommittee, 
traveled that same linkage, from 4 hours and a half to 2 hours 
and 1 minute. 184 miles an hour. They did it in Europe. They 
made the investment.
    It was $12.5 billion the French government invested to 
build the TGV, and then Germany came with the ICE and Spain 
with the Talgo and Italy with their high speed train service.
    Now, how in this country can you insist on Amtrak being 
profitable, when the freight rails themselves, year after year 
after year, have said, and the Surface Transportation Board 
affirms in every one of its decisions, that they have not 
achieved revenue adequacy? Well, if they are hauling goods that 
don't need to be fed and watered and pampered and arrive in the 
space of a few minutes, then how do you expect the passenger 
service to do that?
    Well, the Brits thought that their system was in such bad 
shape that it would be a good idea to privatize it. 
Privatization. Chairman Shuster and I and others on the 
committee did an infrastructure tour of Europe. We saw the ICE, 
the TGB, we had briefings on the Spanish Talgo folks. And then 
we took the TGV through the Chunnel at 186 miles an hour, got 
into England and went down to 79 miles an hour, and there we 
chugged along until we got to London.
    There we met with the British Parliament Transport 
Committee and the Transport Minister, who briefed us on their 
decision in parliament just a few days earlier to 
appropriate600 million pounds for the private sector operators 
of their privatized rail system to bail them out, and the money 
went to the shareholders. And we asked them, why is it going to 
the shareholders? Because if you don't pay them off, they will 
lose faith and pull their money out, and then the whole system 
will collapse.
    Since then, the British government has taken back their 
inter-city passenger rail and created a government not-for-
profit-operation called Network Rail, and are putting billions 
of dollars in to restore the rolling stock and the rail beds 
and try to revive their system.
    We can learn the lessons. There has been a successful 
privatization in Japan. The Shinkansen, after years of 
government investment and government shouldering of the burden, 
spun off this now highly successful rail passenger system to 
three or four private companies.
    But remember, these are high density passenger corridors. 
You ride the Shinkansen from Tokyo to Osaka, and you are the 
distance from here to the witness table from homes, from tea 
bushes, from residences. Every one of those trains is packed, 
because they don't have a highway system as we have. Their air 
travel is limited because of the topography. So they have been 
very successful.
    But we can be successful in this country with very 
different geography, with the vast territory that we have, if 
we would just simply make the capital investment and not just 
enough to whet the appetite and let Amtrak limp along.
    So I look forward to the hearing today. I am grateful for 
Chairman Young's strong support of our bill that we moved 
earlier this year, the $2 billion that we have approved for 
Amtrak is $2 billion a year, I think is a very important start. 
The Senate now has legislation they are about to move from 
committee, and I am very hopeful that we can do something good 
and lasting and beneficial. Thank you, Mr. Chairman.
    Mr. LaTourette. I thank the gentleman. I would just remark 
that in the charts that I delivered in my earlier meeting, the 
labor in Alabama, the wage rate is $5.15 an hour.
    The gentleman from Florida, Mr. Mica.
    Mr. Mica. Thank you so much, Mr. Chairman, and thank you 
for holding this hearing and the hearings that you have held on 
reviewing some of the performance of Amtrak and also raising 
the question today about operation of the Northeast Corridor.
    Mr. Chairman, I have a bill that I will be introducing this 
afternoon, and I hope every member of this subcommittee will 
join me. This is a very simple piece of legislation. It 
requires in 90 days that the Secretary of Transportation 
conduct a competitive tender, a bid offer, to privatize the 
Northeast Corridor within. Within 2 years, it also would 
transfer any and all assets to a board.
    Hopefully, we could have a Northeast Corridor Compact 
operating and overseeing the operation of a truly high speed 
service in the Northeast Corridor. It is long overdue in the 
United States, and I think this could be a model for high speed 
service in a dozen corridors across the United States. I think 
that we will be able to pass this.
    First of all, there is a lot of misinformation about 
operations and privatizations around the world. I want to use a 
specific model. I spent part of the recess visiting with 
representatives of Virgin Rail in England.
    You have heard a lot of gobbledegook today about what is 
going on. I have the facts of what is going on and let me 
compare what we can do in the Northeast Corridor and the 
lessons we can learn from England.
    First of all, the biggest lesson to learn from England if 
you are privatizing, is not having too many franchises or 
individual operations. I think they started out with more than 
28. They are down to nine or ten, and that was one of the 
errors that they made. This is a perfect example, what I am 
going to tell you here, of what we can do and what has been 
done.
    Virgin, some of you know, I guess, Richard Branson. He has, 
of course, operated air service very successfully and has 
become very wealthy in the process. He took over two franchises 
8 years ago, 1997. So far he has expended more than2 billion 
pounds, that is nearly $4 billion if you look at when the pound 
was even higher, $4 billion in two fleets of rolling stock. He 
acquired the two main routes. The two main routes have 34 
million passengers a year. I believe Amtrak has 28 million. 
These two high speed routes have 34 million.
    Virgin's trains have made a profit every year since 1999. 
From 1999 to 2003, Virgin trains reinvested its profits and in 
further improvements. In the last 2 years, Virgin's trains have 
made enough profit to pay a dividend. This is the fact. These 
are the financial sheets.
    In addition, each year they paid an additional 400 to 450 
million pounds in infrastructure access charges to network 
rail. Network rail is the one that actually operates the 
infrastructure. That did at one point go bankrupt some years 
ago and it did require a government subsidization. However, 
they have paid close to $1 billion almost every year as opposed 
to the $1.2 billion or whatever on average we have been giving 
Amtrak.
    In addition, they have paid $50 million to $100 million to 
rail network for infrastructure improvements, and some of 
that--wait a second, I take that back. There is a subsidization 
of50 to 100 million pounds from the Federal Government in U.K. 
towards that operation. They do bid out all of the services, 
and the one who provides the service with the best frequency 
and record of service and performance and the lowest 
subsidization is paid. So there is a small subsidization, 
nothing like we have.
    So we have a model. The on-time performance was 84 percent 
last year.
    You have heard the ranking member criticize also some of 
the performance and the time it has taken over the past few 
years. That is because massive amounts of private capital have 
been put into the infrastructure, massive amounts, not just 
from Virgin Express, but also in the system.
    So, we can continue to run a half-baked railroad and high 
speed service.
    Now, why am I interested in this? I chair Aviation, and 
aviation, we are approaching back in LaGuardia, Newark, JFK, 
maximum capacity. At National Airport, we are approaching again 
maximum capacity. I visited last year Philadelphia Airport. 
They are at or exceeding maximum capacity.
    So this is an excellent model which we can adopt. Yes, 
mistakes were made, but the dollars and cents, the facts are 
here, and it is a sin to abuse taxpayers in the way we are 
doing.
    I don't want to get into the litany of things that we found 
in these hearings, the loss of hundreds of millions of dollars 
in food service, the bungling of the Northeast Corridor 
acquisition, which all of this is now infamous and sets a 
standard for poor operations.
    We also have had, and I think we are going to hear from the 
folks from Wall Street who are willing to take this corridor 
over, willing to invest the money and can operate high speed 
service. It may even make a profit like these folks have made a 
profit with an absolute minimum of subsidization.
    So I ask you to join me, members of this panel, in 
cosponsoring this legislation. We won't mess around. We will 
direct the Secretary to do this and we will get it done by 
legislative mandate sooner rather than later. I thank you for 
the time and yield back any balance of the time.
    Mr. LaTourette. I thank the gentleman.
    Mr. Oberstar.
    Mr. Oberstar. I would just inquire of the gentleman from 
Florida which of my statements he wants to characterize as 
gobbledegook.
    Mr. Mica. Gobbledegook--
    Mr. Oberstar. What did I say that is gobbledegook?
    Mr. Mica. No, I didn't hear you. I didn't hear anyone.
    Mr. Oberstar. I resent that characterization, since you 
didn't hear it. You also recited a fact that I cited, so how 
can that be gobbledegook? If you want to engage in a dialogue, 
let's have a dialogue, but let's not mischaracterize.
    Mr. Mica. I do have notes that were given to me that, 
again, that no one makes money on passenger rail service. 
However, I did hear you at the end, and that wasn't 
gobbledegook, that the Japanese had converted their system. So 
I would definitely say for the record that that part was not 
gobbledegook.
    I have notes from what Ms. Brown said, that $3 billion, for 
example, to Amtrak would get it in a state of good repair. That 
is gobbledegook.
    Mr. LaTourette. I think we are going to get back to regular 
order. I would just ask members to engage in court easy to each 
other. We also note that Mr. Branson had a very good reality 
television program.
    Mr. Nadler.
    Mr. Nadler. Thank you, Mr. Chairman. I will not call the 
legislation we have been talking about simple-minded, because I 
will observe the proprieties.
    Mr. Chairman, I have a statement here which I will submit 
for the record because of the passage of time. I want to just 
make a couple of observations.
    Number one, it is clear, that it is clear we have been 
starving Amtrak and most of the problems Amtrak is having is 
because they haven't had an adequate budget, that we have been 
starving them. Someone, I think Corrine said, Congresswoman 
Brown said we have given them just enough money to fail, or 
just enough money to limp along.
    Most of the problems is they didn't do prototype testing, 
trying to save money, and you have the Acela problem. You have 
to fund a railroad adequately. We haven't done so, number one.
    Number two, nobody in the environment of the United States 
has been able to figure out in the last 50 years how to make 
passenger rail profitable. Now, maybe if the administration's 
policies succeed, as they seem to be doing, and we get $6 or $7 
a gallon gasoline, maybe then we will be able to have 
profitable private passenger railroads.
    I co-chaired hearings in the New York State assembly back 
in 1989 on the feasibility of Maglef. At that time it looked 
like it would cost about $50 million, in 1989 dollars, $50 
million a mile for capital investments for Maglef.
    Our conclusion was that there was no transportation in 
corridor in the United States where the density of traffic was 
such that it would with justice that kind of investment. Maybe 
in Europe or Japan, because they then had $5 a gallon gasoline. 
And if we want to follow the policy that would give us $5 a 
gallon gasoline in 1989 dollars, then you could have lots of 
profitable, private railroad, Maglef investment and so forth.
    But to cite the marginal success in England, where they are 
charging, I think currently, about $6 a gallon for gasoline as 
a precedent for the United States is, shall we say, fallacious.
    My district has, or had, the World Trade Center in it until 
September 11, and I very distinctly remember that when I had to 
get home from here after the attack that morning, there was no 
way into New York except by Amtrak. They shut the bridges, they 
shut the tunnels, the airports were down, everything was down. 
The only thing that was running was Amtrak. Thank God for 
Amtrak. You must have redundant systems of transportation.
    Again, as Mr. Oberstar has pointed out, the reason Amtrak 
was formed in the first place is that every single one of the 
private railroads petitioned the ICC to abandon the passenger 
services because they couldn't make money on it.
    To go with some fanciful, speculative reform plan, so-
called reform plan, that would eliminate what is a very 
successful service now, 25 million passengers last year, for an 
experiment, an experiment that probably will not work until we 
have $6 or 7 a gallon gasoline, which I hope is not the 
administration's secret goal, would be to put the safety as 
well as the economy this country at risk.
    I hope we will not indulge in such a fantasy. What we ought 
to do is adequately fund Amtrak and let it work properly.
    I thank you. I yield back, and ask that this be submitted 
for the record.
    Mr. LaTourette. Without objection.
    Mr. Simmons.
    Mr. Simmons. Thank you, Mr. Chairman, and I thank the panel 
for their presentation. I have long been an advocate of Amtrak, 
but I have also long been an advocate of reforming Amtrak to 
try to rationalize the program in how it operates in certain 
parts of the country, to invest in those areas where it seems 
to be successful and to consider divesting ourselves of some of 
those routes that seem to be unsuccessful, to provide our 
constituency with safe, reliable and reasonably priced service.
    I am somebody who used Amtrak service for a decade when I 
taught in New Haven and lived in Stonington, Connecticut, and I 
rode it every other day, every week, for the academic year. 
What I looked for was safe, reliable, modestly priced service.
    In the State of Connecticut, we also participate in Metro 
north, which is a tri-state consortium which provides also 
safe, reliable and somewhat cheaper service, although over a 
shorter haul.
    I look at the investment that we need to make in our 
movable bridges in New England. Three of the five bridges 
slated for investment are in my district, the two non-moveables 
are also in my district, and the failure of any of those 
bridges, the newest of which dates back to 1918, could disrupt 
the service.
    So as we look at this issue and we look at these problems, 
I would be interested is to know what proposals can be made for 
the future.
    I thank the Chair, and I yield back.
    Mr. LaTourette. I thank the gentleman. Mr. Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman. You set us off on 
the right tone, both by being brief and to the point, and 
identifying, as you characterized it, the kabuki dance in 
Congress: giving just enough money for it to fail. I will 
reserve my debate with my colleagues for another day.
    There are enough flaws in how Amtrak was set up and its 
history. We can go through all that. There is enough 
responsibility, I think, left over for problems that we have, 
including Congress and congressional oversight. We can all 
accept some of that. I am interested in actually hearing from 
our witnesses.
    The two things that are on my mind are the notion of a 
system, because we need a passenger rail system. And if there 
are proposals to change the system, how these provide a 
nationwide system is critical, because the sum of the parts 
actually adds up to something that is greater and that people 
rely upon. At the end of the day, we don't want something that 
cannot function as an integrated system.
    Second, I am perfectly willing to subsidize rail passengers 
as we subsidize every other transportation mode. This is 
important. I want to understand that we will get the most out 
of the subsidy with which we are involved.
    But the final point that Mr. Nadler touched on that I think 
ought to be overarching when we are looking at the long run is 
that there is no investment that we can make that will be more 
energy efficient. I don't know if it is going to be $3-a-gallon 
gasoline, $6-a-gallon gasoline, but the point is they are not 
creating more dinosaurs and petrochemical resources. It is not 
going to be cheaper over time, and rail passenger service is 
the most energy efficient mode of inter-city transport that we 
can come up with. This fact is going to loom larger and larger, 
and I think will inform what these gentleman and the others 
will be presenting to us today.
    Thank you, Mr. Chairman. I look forward to actually hearing 
from our witnesses.
    Mr. LaTourette. Thank you, Mr. Blumenauer. Mr. Osborne.
    Mr. Osborne. Mr. Chairman, I have no comments at this time. 
I am anxious to hear the witnesses. I think we have had plenty 
of commentary. So I will pass at this time.
    Mr. LaTourette. Thank you very much. Ms. Carson.
    Ms. Carson. I will pass.
    Mr. LaTourette. Mr. Sodrel.
    Mr. Sodrel. Thank you, Mr. Chairman. I guess first I would 
like to take exception to the statement that highway 
transportation is subsidized. A trucker pays over $7,500 until 
Federal excise tax for the privilege of buying a new power 
unit. They pay $550 a year in Federal heavy vehicle use taxes 
for the privilege of owning a heavy truck. In Indiana, they pay 
over $1,300 a year to buy a license plates for the privilege of 
putting that truck on public highways. In addition, they pay 
the State and Federal motor vehicle tax for the purpose of 
building and maintaining the Nation's highways. Very often they 
pay a toll in addition to all of the above.
    If you never buy a motorized vehicle, if you ride a bike or 
city transit vehicle never pay to build or maintain our 
Nation's highway system. But if you earn income in the United 
States, you are paying for Amtrak, whether you use it or not.
    The second point, the USPS responded to passenger rail 
service curtailments. They were not responsible for them. You 
will notice from the chart that passenger rail service began a 
serious decline in schedules at the end of World War II. The 
USPS could not meet service standards on the few remaining 
passenger schedules, so as schedules were curtailed, the USPS 
shifted to alternate modes.
    I am confident the Nation's private railroads would heavily 
provide passenger service if it could be provided at a profit. 
I am not against so much passenger rail service as I am 
enormous subsidies for that purpose. If memory serves me right, 
the first 10 years of Amtrak, from about 1970 to 1980, it 
averaged about $365 million a year in subsidies. We are now 
looking at some really enormous sums
    Another issue I would like to respond to is Indian Trail, a 
private bus company, was operating somewhere between eight and 
ten schedules a day from Detroit to Chicago pre-Amtrak. When 
the tax using entity Amtrak began service between Detroit and 
Chicago, Indian Trail dropped their schedules to one over a 
relatively short period of time. I don't know if that one is 
still operating. But it is not in the Nation's best instance to 
have tax users running taxpayers out of business.
    Lastly, the last deal last DOE report that I saw said in 
terms of British thermal units, an inter-city motor coach was 
the most fuel efficient form of transportation between cities, 
not passenger rail.
    I thank you.
    Mr. LaTourette. I thank the gentleman.
    To our panel, thank you very much for coming. As you can 
see, we are of one mind on the subcommittee as to what should 
be done, so we look forward to hearing from you.
    On the first panel we have the Honorable Jeffrey Rosen, who 
is the General Counsel for the United States Department of 
Transportation; the Honorable Kenneth Mead, who is the 
Inspector General for the Department of Transportation; and the 
Honorable David Laney, who is the Chairman of the Amtrak Board 
of Directors.
    I want to thank you all for coming. We have received your 
written testimony and it will be made part of the record. We 
look forward to hearing from you.


    TESTIMONY OF HON. JEFFREY ROSEN, GENERAL COUNSEL, U.S. 
 DEPARTMENT OF TRANSPORTATION; HON. KENNETH M. MEAD, INSPECTOR 
GENERAL, DEPARTMENT OF TRANSPORTATION; AND HON. DAVID M. LANEY, 
              CHAIRMAN, AMTRAK BOARD OF DIRECTORS

    Mr. LaTourette. Mr. Rosen, you are first.
    Mr. Rosen. Thank you, Mr. Chairman and ranking member Brown 
and members of the subcommittee. I appreciate the opportunity 
to share some thoughts at this hearing and also to be here on 
behalf of Secretary Mineta and the Department of 
Transportation.
    What I would like to do in my oral remarks here is focus on 
three propositions about which I think there is either 
consensus, or at least the possibility of developing a 
consensus.
    Let me say, first, the objectives of inter-city passenger 
rail. I think in having discussions with a wide group of people 
about this, there is really a consensus that we would all like 
the same thing. We would all like a system of inter-city 
passenger rail that was really outstanding in terms of the 
service that was available and that was provided, was 
comfortable and convenient, reliable and on time, and perhaps 
most importantly, took people to the destinations to which they 
wanted to go in a reliable and timely way. The administration 
is supportive of the role of inter-city passenger rail in our 
overall transportation system.
    So the choice is not one as sometimes framed of having 
Amtrak or nothing. I think there is wide consensus that there 
is an important and useful role for inter-city passenger 
trains. The question is how do we get to that situation of 
having an outstanding inter-city passenger rail system that I 
think, as I say, if there could be consensus, we would all like 
to have.
    The second proposition, we are not there. Amtrak, if we are 
candid, is not currently a system that we would say is an 
outstanding, word-class kind of system. I have never heard 
anybody say that Amtrak is the model that other countries and 
their people would want to emulate. I have heard members here 
today point to the Virgin Express in England or to the Japan 
Central Railroad or some other railroads. But I don't hear 
people say it the other way, "why aren't those systems more 
like Amtrak?"
    When we look at our other modes of transportation in this 
country, our highway system, our airport and aviation system, 
our freight rail system, I think that people do look at those 
as being outstanding models, not immune from criticism, but in 
the aggregate outstanding systems that others would emulate and 
praise and want to be more like.
    If you think about inter-city passenger rail and where we 
are now, would anybody, if they were starting with a blank 
slate or a green field, design inter-city passenger rail to 
look like what we have in the United States today? I think not. 
But we have spent, because sometimes I hear the only problem is 
money and the administration doesn't agree with that, but the 
taxpayers of the United States have spent in excess of $30 
billion on Amtrak over the last three decades, and at this 
point it seems to us that it is fair and appropriate for the 
taxpayers to expect a better system.
    That takes me to the third proposition about which I think 
there is consensus, or at least the possibility of consensus, 
at least for those who agree with the first proposition that we 
would like to have an outstanding system of inter-city 
passenger rail.
    The third proposition about which I would suggest we have 
or ought to have consensus is that reform is urgently needed; 
that whether you characterize yourself as an Amtrak supporter 
or an Amtrak critic or somewhere in between, it seems to me 
that we all ought to be able to agree that reform and 
improvement of the system is urgently needed.
    So, part of why I think this hearing is a very welcome 
event is if we can agree that reform is needed, then we turn to 
the discussion of what are the reforms? What are the changes 
that would be desirable to get us to a better system?
    The administration had provided our proposals in the bill 
that is now designated H.R. 1713. I will not take the time this 
morning to try to walk through all of its provisions. But I 
will note that the key principles of that legislation are set 
out in my written testimony at pages 14 and 15, and there are 
five key principles.
    Since I see my time running down, I will not enunciate 
them, but I will look forward to referencing them perhaps if 
there are questions. I welcome, and of course invite, any 
questions you may have.
    Thank you.
    Mr. LaTourette. Thank you very much, not only for your 
testimony, but for your observance of the subcommittee's time 
limits.
    Mr. Mead, thank you for being here. We would like to hear 
from you.
    Mr. Mead. Thank you, Mr. Chairman. I would like to focus 
today on solutions. On the problems with the current model, 
they can't be solved by simply giving more dollars to Amtrak. 
There are a number of reasons for that. I don't think controls 
are adequate in a sense to ensure cost-effective or reliable 
service, there is not even a threat of competition, critical 
repair needs are not being adequately addressed and States 
don't have enough say in the matter.
    Our prepared statement details those results. There is no 
point in belaboring them here. Now is the time to focus on 
solutions.
    I know there are numerous proposals in the Congress. I 
think that is a real step forward. They are not, to understate 
things, all of the same mind, but they do seem to have a common 
goal of improving passenger rail service.
    To reach a consensus on balance, I think reauthorization 
ought to focus on improving mobility in short distance 
corridors, not just the Northeast Corridor, and in 
restructuring long distance services to compliment those 
corridor services.
    Based on our work over the years, we see three central 
themes that will draw out successful reform. First, there must 
be some incentives for cost-effectiveness. Amtrak doesn't have 
any right now, other than the annual threat of budget cuts and 
the dance the chairman went through that we go through 
annually.
    Here is a quick case in point: We did a recent analysis of 
Amtrak's long distance services to determine whether cost 
savings could be had without eliminating any routes, any 
station stops, and not eliminating or reducing any frequencies.
    Eliminating large subsidies for long distance first class 
services, dining cars and other amenities could reduce net 
operating losses by $75 million to $158 million per year and 
avoid an additional $79 million per year in planned capital 
expenditures.
    We found, Mr. Chairman, on one route, we found the first 
class subsidy exceeded $600 per passenger. The subsidy for 
first class was often more than double the subsidies for coach. 
We are still waiting to hear what action Amtrak will take. The 
Inspector General did this study, not Amtrak. It should have 
been done years ago.
    Second, there should be a larger voice for States in making 
decisions. They are in the best position to decide what the 
transportation needs ought to be between their population 
centers; they would not be the sole decision-makers, but they 
need a stronger voice than they have now.
    The third issue of course, is the funding. The funding has 
been woefully inadequate. You need adequate and stable funding. 
Now, because we don't have that, you are in a continuing state 
of decline on every front except in some situations where the 
States are providing their own funds.
    Earlier this year, we offered some options to the Congress, 
not reauthorization proposals, but a proposal that contains six 
core elements. I would like to quickly overview those.
    First, formula grants to States for capital and operating 
costs without a State matching requirement. We think this is 
important, especially for the 16 states in this country that 
only have long distance service at the present time. That is 
all they have. You can forget these states talking about the 
potential for corridor development, because there aren't dense 
population centers. That is 16 states.
    Second, a program to restore the current system to a state 
of good repair, to provide Federal funds to do this without the 
requirement for a match. For the Northeast Corridor, you are 
probably talking a price tag of $4 to 5 billion. I don't see 
why anybody would want to buy this corridor, unless the 
requisite investment is made in it.
    Third, a program for capital grants to States for the 
development of corridor services. We would say a reasonable 
match requirement is 15 to 30 percent. This is the way you are 
going to get corridors developed in this country, to invest in 
them. We are now talking principally outside the Northeast 
Corridor.
    Fourth, the Secretary would have authority to evaluate 
Amtrak's debt, which has grown from $1.7 billion in 1997, to 
over $4.5 billion in 2004, and, if necessary, to take action 
economically advantageous to the U.S. and inter-city passenger 
rail to resolve the issue of this debt, that we, incidentally, 
pay for every year.
    Fifth, the Federal funding of these programs would stay at 
adequate levels. We can go into in the Q&A period what those 
funding levels might be, but I see you looking at something in 
the neighborhood of $1.7 billion to $2 billion by the year 
2010. All of that assumes additional state contributions and 
some implementation of the cost saving initiatives, such as 
those I mentioned earlier.
    Six, ownership of the Northeast Corridor ought to be 
resolved. If the Federal Government is going to invest in that 
corridor and bring it to a state of good repair, I think at the 
end of that period, the Northeast Corridor States should be 
expected to make some contribution to keep it in a state of 
good repair, along with the Federal Government.
    I think the quid pro quo on that would be that the Federal 
Government ought to be taking title from Amtrak. Amtrak may 
very well be the operator of it, but if we are going to make 
that kind of investment, there ought to be a quid pro quo.
    That concludes my statement. Thank you.
    Mr. LaTourette. Thank you, Mr. Mead.
    Mr. Laney, we welcome you. We look forward to hearing from 
your testimony, and if you could, as part of your testimony, 
give us an update on the Acela train service. I would obviously 
be interested in that.
    We look forward to hearing from you.
    Mr. Laney. Thank you, Mr. Chairman. I will be glad to.
    Mr. Chairman, members of the committee, I appreciate the 
opportunity to speak and to be able to go into more detail 
during the Q&A afterwards, but let me gloss over the surface of 
current operating activities and results, as well as our 
strategic planning; and I will mention the Acela operations.
    For current operating results, we have made solid progress 
both in rebuilding plant and equipment and maintaining the 
financial and organizational stability of the organization. 
During this fiscal year, Amtrak continued to show positive 
results in a number of important areas. Amtrak will finish 
fiscal year 2005 under budget, and will set a new ridership 
record. This is remarkable in light of the unforeseen Acela 
service interruption which stopped all Acela train service 
earlier this spring. Amtrak responded to that event very 
effectively, in my judgment, integrating other equipment very 
quickly into the timetable so that there was no measurable 
impact on our Northeast corridor ridership.
    We are now back to full Acela service, and we are 
operating, so far this month, at a 92 percent on-time 
performance level, which is the highest on-time performance in 
Acela history.
    More recently, we have confronted an indefinite truncation 
of three of our long distance trains resulting from the impacts 
of Hurricane Katrina, the Sunset Limited, the City of New 
Orleans and the Crescent. On that note, I should also add that 
we made trains and were able to make trains available to FEMA 
to ferry evacuees, relief workers and supplies from New Orleans 
to Houston in the days immediately following the tragedy. They 
were not used, but they were certainly available and waiting 
for a number of days and ready to go.
    This year we continue to chip away at the mountain of 
deferred maintenance that we have inherited of both plant and 
equipment. In fiscal year 2006, we expect to continue this type 
of capital investment--renewal of track, signals, wire, 
equipment switches and interlockings. But we will also begin 
major multiyear projects to rebuild structures critical to the 
Northeast Corridor operations. These include replacement of the 
failure-prone movable bridge spans referred to by Congressman 
Simmons, I believe, your "favorite bridges", those on the 
Thames and Niantic Rivers in Connecticut; also, replacement of 
the 1930s-era cables in the Baltimore tunnels and major track 
work on the Harrisburg-Philadelphia line. In fact, at this time 
next year we expect to have that corridor updated and operating 
at higher speeds and with additional frequencies.
    Completion of the bridge and tunnel work is essential; 
without them, we risk the type of fundamental failure that 
could impact the entire Northeast Corridor service.
    The fiscal year 2006 operating request is lower than in 
previous years and reflects Amtrak's ability to hold operating 
costs flat, despite inflation, rising insurance costs, and the 
high cost of fuel. Adequate capital investment, of course, will 
help us keep operating expenses under control.
    I support the fiscal year 2006 Senate Appropriations 
Committee proposed at 1.45 billion. With an operating budget 
lower than last year, every additional dollar, in my judgment, 
goes into capital, whether equipment or infrastructure, and 
adds lasting value for whoever operates on Northeast Corridor 
tracks. In the Northeast Corridor, of course, it is freight 
operators, commuters, as well as Amtrak.
    During the past 3 years, we have not borrowed any 
additional funds nor have we assumed any new debt, except for 
the DOT loan during the summer of 2002, which is being paid 
back in annual installments. Our workforce has been reduced in 
size from 25,000 in fiscal year 2001 to 19,500, its current 
level, a reduction of about 20 percent. With that reduction, 
our payroll and benefits costs are down dramatically. Our 
deficit per train-mile has decreased from $22 in fiscal year 
2000 to $13 in fiscal year 2004.
    As I mentioned earlier, ridership has continued to 
increase. In fact, during the period of 2000-2004 ridership 
grew from 22.5 million to 25.1 million, or 11.6 percent, 
insignificant relative to aviation and highways, of course, but 
remarkable considering the challenges presented by years of 
unfortunate decisions that we have inherited and Amtrak's 
prolonged financial starvation diet--remarkable, but in the 
judgment of the board, still unsatisfactory. We have very 
ambitious reform goals.
    A few words about our reform initiative package:
    The reform plan outlines a detailed set of initiatives, 
some of which Amtrak will accomplish on its own and others of 
which will require government action. We have begun and will 
accelerate the implementation of those that we can institute on 
our own.
    Our plan advances four essential objectives: first, 
development of passenger rail corridors based on an 80/20 
Federal/State capital match program, with States becoming 
purchasers of a variety of competitively bid corridor services. 
And let me reiterate, States become the purchasers at that 
point.
    Second, return the Northeast Corridor infrastructure to a 
state of good repair and operational reliability with all users 
gradually assuming increased financial responsibility for their 
share of corridor operating and capital needs. And frankly, in 
my judgment, state of good repair is not ambitious enough, 
considering the number of transportation challenges converging 
on the Northeast Corridor over the next decades.
    Third, preservation of our national long distance system. 
We have long distance routes that over time will have to meet 
minimum financial performance requirements and, in some cases, 
will require state assistance.
    And finally, the opening of the intercity passenger rail 
industry to competition and private commercial participation.
    Rather than going into detail, let me simply refer you to 
that plan. I had hoped that the Lott/Lautenberg bill would 
provide the platform for moving Amtrak and, indirectly, 
passenger rail much more dramatically into the 21st century 
along the lines of our plan--I presume it is a work in 
progress--and I hope we have the opportunity to work with the 
Senate staff as it is reworked, or with you in connection with 
any counterpart legislation.
    One critical issue central to the future of intercity 
passenger rail competition is, in my judgment, not adequately 
addressed. The Lott/Lautenberg bill in some ways still leaves 
Amtrak too much in control and does not, in its current form, 
provide adequate access to private operators and, more 
importantly, private capital, but it is a very constructive 
start. You will hear from a number of possible interested 
competitors this afternoon, and I don't think any of them will 
disagree.
    In any case, the end result of any reform is a genuine 
opportunity for the revitalization of the intercity passenger 
rail system, and we are not there yet.
    In closing, let me just say that we hope to work with all 
of you in connection with any legislation. In the meantime, we 
can't wait and we are pursuing our reforms on our own, and I 
think we are making considerable progress. In the meantime, I 
can't overemphasize that adequate funding for Amtrak in 2006 
will be a critical first step in advancing the objectives of 
our Strategic Reform Initiatives plan.
    I appreciate your time and attention and look forward to 
answering any questions. Thank you, Mr. Chairman.
    Mr. LaTourette. Thank you very much, and I thank all of you 
for your testimony this morning.
    Mr. Rosen, I want to start with you because in your 
testimony you talk about the inherent flaws of what you call 
the 1970 model of rail passenger service, but I think that I 
would fast-forward to 1997, when the Congress passed the reform 
legislation. And I would just ask your--and rather than looking 
at the structure that was created in that 1997 bill--I mean, I 
think horrendously bad judgment has been exercised by the board 
of Amtrak in some situations post-1997, and an example is not 
dissenting on mere half-funding requests, quadrupling the 
company's debt load and making no attempt to modernize or 
modify the route network.
    And so, I mean, would you agree or disagree with me that 
the structure, the intention of the 1997 act was to stop 
micromanaging, in Congress, of the Amtrak system? And I, at 
least from where I sit, I think some bad decisions were made 
post-1997. Can you share with me what your thoughts are?
    Mr. Rosen. Well, I think, in the big picture, I would agree 
with you that the basic method of the 1997 act was to empower 
Amtrak to fix itself, to remove some of the legal impediments 
that had previously existed and some of the obligations the 
company had to enable it to contract out and do other--do joint 
ventures with bus companies, and to have more authority to try 
to fix itself; but unfortunately, the company didn't do that. 
And I would agree with you that then piling on the debt to the 
point where it is at 3.8 billion of nondefeased debt now, which 
is an annual payment this year of something like $273 million 
of just debt service, was not the appropriate course of action. 
And it hamstrung Amtrak in different ways because--Mr. Laney 
alluded to the fact that they haven't done any additional 
borrowing in the last couple of years, but of course it is hard 
to imagine that there is anybody out there that would be 
willing to lend them any more because the amount of debt is so 
high already.
    So I would agree with you that the decisions that were made 
turned out not to be in the best interest of intercity 
passenger rail and that on this next go-round it would be 
desirable to have some more prescriptive requirements and 
desirable to have greater oversight mechanisms. And let me be 
specific about what I mean by that.
    In the 1997 act, the primary consequence of Amtrak not 
achieving self-sufficiency and, in a sense, reforming itself 
was going to be a so-called "sunset trigger," by which, in a 
sense, in the end everything blew up. Well, that provision 
wasn't adhered to, in part because it is so drastic, and so the 
accountability mechanisms along the way were not really there.
    As we go through a reform process at this point, I would 
say it would be desirable to have more oversight mechanisms, 
including, through the Department of Transportation, the 
Federal Railroad administration, and more opportunity for 
corrective actions to be called for along the way. And that was 
the intention of the 1997 act, that I think was quite 
commendable, and many of the things in it were good things, but 
in the end it didn't succeed.
    Mr. LaTourette. Let me--I think you mentioned that no 
legislation to date has incorporated all of the 
administration's principles. Has the administration taken a 
position on the Lautenberg bill, S. 1516?
    Mr. Rosen. No. We are having discussions with the committee 
and the committee staff and hoping to work further with them on 
ways of developing a bill that eventually might be successful, 
but we have not yet taken a position on it in the aggregate.
    Mr. LaTourette. The administration position for the most 
part, I think, was encapsulated as a courtesy in H.R. 1713. I 
have been hearing rumblings recently that perhaps the 
Department isn't as crazy about those proposals as they were at 
the time they were first sent up to the Hill. Is that an 
accurate observation?
    Mr. Rosen. I think that would be an overstatement. I think 
we continue to support the reforms that were in H.R. 1713. I 
think what we have indicated is that in some instances we are 
more interested in the objective--and in the principle than in 
the exact mechanism.
    As an example of that, H.R. 1713 calls for the Northeast 
Corridor to be separated away from Amtrak so that there is 
separation of infrastructure management and operation of the 
trains. And then with regard to the infrastructure, after a 
transition period in which the Federal Government owned it and 
brought it to a good state of repair, they would have given it 
to a compact of, if I remember, eight or nine of the Northeast 
States.
    Well, the compact is not the only mechanism by which you 
can get to that result. And so I think we have indicated that 
we have some flexibility about the exact mechanisms by which 
goals are achieved.
    But the underlying principle I think we adhere to, in 
particular, is that the role of the Federal Government should 
be the support of infrastructure development, maintenance, 
improvement, and not the subsidization of operating companies; 
in the same way that the Federal Government supports airports, 
but not subsidies to airlines, and supports highway 
infrastructure, but not direct subsidies to trucking companies, 
and that kind of principle.
    And so what I would say is the administration continues to 
support H.R. 1713, but the underlying principles of the reform 
that it embodies are more important than any particular, exact 
term or mechanism.
    Mr. LaTourette. Thank you very much.
    The last question I have is for you, Mr. Laney, before I 
yield to Ms. Brown. In Amtrak's Strategic Reform Initiative 
that was published last May there was an indication that the 
company was going to establish route performance metrics 
beginning in 2005, and that routes not meeting established 
metrics would be terminated beginning in 2008 unless the States 
affected provided an additional subsidy. It's a multipart 
question.
    The first one, if you could share with us what the status 
of these metrics is and which lines might be facing 
termination.
    And then the second one is, in that recommendation, does 
Amtrak ever consider alternatives other than complete 
termination, such as reduced service or seasonal service?
    My dad, for instance, lives in Meadville, Pennsylvania, and 
he called me up and he said, If you ran a train from Cleveland 
to Pittsburgh for the Browns-Steelers game, you would be making 
money hand over fist. So is it all or nothing based upon these 
metrics, or do you also consider seasonal or reduced service?
    Mr. Laney. Well, let me first respond by saying we have not 
finished the analysis, but I expect at this week's board 
meeting to have presented by staff to the board, in effect, a 
template for the metrics and basically the measures for 
performance of various routes. But--we have not begun the 
process, but it will begin over the next 30, 60, 90 days. And I 
would be able to give you a better sense if you were to ask 
that question a month from now or 2 months from now. But we 
have been waiting for the response from the staff.
    And with respect to the various alternatives as to any 
particular route, let me assure you we will consider every 
conceivable workable solution to make it work. We are committed 
to try to hold the system together, but at a reasonable cost. 
And we are not going to be able to make them profitable, but we 
do, I think, have the ability to make them much more efficient, 
much more attractive to the users of that service, and much 
less expensive than they currently are.
    Mr. LaTourette. I thank you very much.
    Ms. Brown.
    Ms. Brown. Mr. Rosen, where is Mr. Minetta? Has he been on 
the Hill, to the House or the Senate, to testify any time this 
year about Amtrak? I know he hasn't been to the House.
    Mr. Rosen. With respect, Congresswoman, actually he has, to 
the Budget Committees, the Appropriations Committees. He 
testified in both the Senate and the House Appropriations 
Committees, about the Department's overall budget, but he 
specifically addressed Amtrak in both of those hearings.
    Ms. Brown. I know that we requested him to come today; I am 
sure we did. I guess you are his designee.
    Mr. Rosen. I am his designee. I am also his designee as the 
Department's representative on the Amtrak board of directors, 
and so the Secretary asked me.
    Ms. Brown. That is very good, because I have a question 
then.
    The board came forward and recommended 1.8 billion, the 
administration came up with zero. I mean, I guess--can you 
explain to us how you voted and what did you do to shake the 
package? What was your vote on that committee? The board had 
something different from the administration.
    Mr. Rosen. Well, I will tell you that neither I nor the 
administration supported a $1.8 billion request for Amtrak. And 
I will tell you that with regard to the administration's 
proposals on the budget, or appropriation, side of this, we 
have consistently said, and the Secretary said publicly on a 
number of occasions, that the administration's budget was 
intended to, and I would suggest has had the effect of, calling 
attention to the need for action and reform, because the 
existing system, the existing model, does not work well, and 
that it does not make sense to put good money after bad, it 
makes sense to put good money after good.
    So if you reform and improve the system, then the 
administration--
    Ms. Brown. Mr. Rosen, I don't have much time. Did you hear 
me talk about Halliburton?
    Mr. Rosen. Yes, I did.
    Ms. Brown. Okay. So we need to know that this 
administration doesn't have all of the wisdom in Washington, 
D.C., and certainly they don't--you don't have all the answers 
as far as Amtrak is concerned, and you don't have--I mean, this 
is the people's House; maybe I am the only one who thinks so, 
but the people should have some input. And all of the wisdom is 
not up there, wherever you all preside, to sit down, the bean 
counters, and make the decisions about Amtrak, but I need to go 
on.
    The chairman of--let me ask you a question. First of all, 
let me just thank you for all of the people, because what you 
all did. When FEMA was a complete disaster, you all were able 
to pull yourselves together. In fact, that is, the only people 
that worked were in the private sector, and Amtrak, along with 
the other railroads, was able to pull together and create 
equipment from Baltimore to New Orleans to help evacuate the 
people. And I want to thank you because the rest of America saw 
how inept this government operated and how inept FEMA operated, 
and I thank you.
    My question is that it appears that Amtrak is on the right 
track, and you have undertaken new capital equipment and you 
are closing the maintenance gap. Why is it that you think these 
people continue to talk about, you know, privatizing or just 
really destroying Amtrak? I mean, do they not read the polls, 
or do they think the people are stupid? What is it?
    Mr. Laney. Congresswoman, I appreciate your question. I 
think everyone involved and interested in Amtrak, from the 
riders to people in the position like mine or yours or DOT, 
believes that there is considerable room for improvement, 
everybody has their own ideas. I think the board has its own 
ideas, and unfortunately, I think we are in a position to begin 
to move on those ideas and to see the impacts of those. So 
while the debate rages, we are going to work, and I think we 
are making progress.
    But I don't think anybody wants to destroy Amtrak--I know 
some people do, but I don't think any right-thinking person 
does; nor do I think they want to do away totally with 
intercity passenger rail because there is a vital role, at 
least in some parts of the country more than others, for 
intercity passenger rail.
    Ms. Brown. Well, you know, the proof is in the pudding, and 
when I zero-fund you, I am not trying to get your attention, I 
am trying to--I am destroying you. I mean, we throw money here, 
we passed $62 billion for the hurricane victims that I support; 
however, we put it in an agency, FEMA, that is inept, that is 
not operational, so I don't know. But I do know that zero 
funding means no support.
    I yield back the balance--wait, no, I have a question for 
someone else.
    Mr. Mead, do you think it is wise to separate Amtrak 
operation from infrastructure like they did, I guess, over in 
England where they had to reverse themselves?
    Mr. Mead. No, not until you have a corridor that is in a 
state of good repair. I think you have to get the corridors in 
a state of good repair before you can even talk about that. At 
that point, you may have different decision-tree paths, but you 
don't want to close the door on that.
    What they did in Great Britain was, they didn't get the 
infrastructure right and they had a safety problem.
    Ms. Brown. The question about food service, can you 
elaborate on that? Because some people recommend that Amtrak 
should do away with food service because it is this, it is 
that; but when people take the Amtrak train, many are diabetics 
or older people, they need to be able to purchase foods for 
these routes.
    Can you--
    Mr. Mead. Yes, they do. Our point is that the taxpayers 
should not be subsidizing first-class meals, there is no 
justification for that, at least that I see. I think Amtrak--
obviously people when they are going on a train trip for a 
thousand miles, you have got to give them food, but there are 
alternatives that can be explored--
    Ms. Brown. Sir, I talked about meals earlier, and clearly--
I just took the train from here, it wasn't no first-class meal 
that I had, and I purchased it.
    Mr. Mead. You must not have been on a long distance train.
    Ms. Brown. Well, no, I went from here to Baltimore.
    Mr. Mead. These are the long distance routes with the 
sleepers on them, that the subsidy that the taxpayers are 
paying for the meals is very substantial. Obviously, you have 
got to provide alternatives, you can outsource, you can stop at 
train stations.
    I wouldn't recommend going as far as the airlines do where 
you get nothing.
    Ms. Brown. That is right.
    Mr. Mead. Or pretzels.
    Ms. Brown. Let's don't go there.
    Did you also evaluate what this would do to the Amtrak 
revenue.
    Mr. Mead. No, we haven't done that, and I will tell you 
why. The revenues that are coming in for the long distance, the 
sleeper car service, were so far below the cost of providing 
that service that we thought that could wait until another 
hour. That needs to be in arrears. The recommendation for 
making relative to sleepers and food is not a one-size-fits-
all. Our point is that Amtrak ought to be evaluating those. 
They committed to do so. They should have done it 10 years ago; 
it should not have to be something that waits for an inspector 
general report.
    And I noticed that in Amtrak's statement--or in their 
summary, I haven't read their prepared statement--I don't see 
this, the recommendations that we made in that report, 
addressed; and I think that it is incumbent upon Amtrak to move 
forthwith on that, expeditiously.
    Ms. Brown. Well, I am sure that they will take a look at 
your recommendations. I make a lot of recommendations and 
nobody takes a look at it, so--
    Mr. Mead. I do.
    Ms. Brown. I yield back the balance of my time.
    Mr. LaTourette. I thank the gentlelady.
    And Mr. Mica.
    Mr. Mica. Thank you. And I want to thank, first of all, the 
new chairman of the Amtrak board of directors, Mr. Laney, for 
taking on the challenge, and also for your initial efforts. I 
can't think of--I can think of few people who have taken on 
such a challenge.
    I have been on this panel for 13 years, and I have been 
through the Amtrak Reform Council, and through countless 
hearings, unfortunately, nothing gets done; and I am pleased 
that you have begun to make some progress.
    We had a discussion, Mr. Laney, about privatization, and I 
think you had told me that Mr. Gunn was not willing in the past 
to meet with those that had brought forth private proposals; is 
that correct?
    Mr. Laney. No, sir, I don't believe I did, and I know he 
has.
    Mr. Mica. No, I thought you told me in the past--in fact, I 
thought your words were, he threw them out of the office, or 
something when you sat with me. But in any event, in the past, 
he wasn't willing to meet with them.
    He has met with them?
    And you told me you were going to meet with the Wall Street 
folks after--or investors, on the Northeast Corridor; is that 
correct?
    Mr. Laney. I think I have met with anybody who wants to 
meet and throw an idea or concept over the transom, 
figuratively speaking.
    Mr. Mica. Did you meet with--
    Mr. Laney. I know I have met with everybody you and I spoke 
about.
    Mr. Mica. I did present here the Branson model, which 
does--I mean, this is certifiable, they have made money. It is 
a minimal subsidization. They have also paid for the 
infrastructure, and the privatization has attracted billions of 
dollars in capital.
    Are you looking at one of these as a model to take over the 
Northeast Corridor?
    Mr. Laney. I think the board will consider anything that 
could reduce the subsidy and improve the quality of the service 
we provide.
    Mr. Mica. I think you have most of the authority to 
actually do this; this directs it. But you could put this out 
for tender with very specific requirements, could you not?
    Mr. Laney. Yes, I think we could.
    Mr. Mica. And you could also have performance requirements, 
et cetera.
    Now, we have to deal with the debt, we are going to--we are 
really going to have to deal with the debt, and that is $4 to 
$6 billion, I am not sure exactly. Do you know? In that range?
    Mr. Mead.
    Mr. Mead. Yeah, it is about--the part that has to be paid 
back that doesn't already have the separate accounts is about 
2.7, I think.
    Mr. Mica. Okay. In any of event, I think that is something 
we should assume, especially if they are willing to put this 
money in. And I have met with folks that are willing to put in 
anywhere between $8 and $12 billion.
    I was told by two previous studies--Mr. Mead, you are not 
paying attention, I am going to direct this to you.
    I was told by at least two previous studies that it is 
going to take $15 to $20 billion to really get the Northeast 
Corridor--in order to perform high speed services; is that 
correct? I mean, you have seen some of the previous studies.
    Mr. Mead. I have seen those numbers, and--
    Mr. Mica. That is with Amtrak doing it or the government 
doing it. I think the private sector could probably do it for a 
little less. It is still going to be pretty hefty.
    Have you seen anything, Mr. Rosen.
    Mr. Rosen. Not as to the Northeast Corridor, in particular. 
I think I have seen some information on--
    Mr. Mica. Well, if you haven't seen it, you need to look at 
it. Can we get staff to pull those up? And we have had 
testimony before this committee before--I am telling you it is 
$18 to $20 billion, which brings me to, the point is--and I 
have given this speech many times because we can give Amtrak 
1.4 billion, we can give them 1.2 billion this year with a $6 
billion maintenance backlog. With a requirement to put the 
Northeast Corridor in truly high speed operating condition, it 
is going to take $18 to $20 billion.
    The private sector is willing to put up, from what I am 
told, anywhere from $10 to $12 billion, and that would require 
a minimal subsidy and we would have truly high speed service.
    Do you think that is possible, Mr. Mead?
    And, Mr. Mead, you also need to get the latest information 
on these operations. In fact, I will write you a letter, and I 
want you to come back to the committee and verify the figures 
that I have given today.
    Mr. Mead. Okay.
    Mr. Mica. Do you think it is possible?
    Mr. Mead. I think it is possible. But those proposals, you 
stipulated, if I understood you right, that they were ready to 
do this. I am not aware of a proposal where they are ready to 
do this without the Federal Government coming up with $17 or 
$18 billion.
    Mr. Mica. Well, I am. And we can try to put this proposal 
out there. We have nothing to lose; I mean, the worst we can do 
is not get an offer.
    Would you be willing to try that, Mr. Laney?
    Mr. Laney. As I said, there is nothing off the table as far 
as I am concerned, whether it is the Northeast Corridor or 
anywhere else in the country.
    Mr. Mica. That is great, and I think we need to try this.
    Once you do that--now, one of the problems with Amtrak--I 
am not an Amtrak opponent. I am the strongest advocate of 
transit alternatives in the United States Congress; I strongly 
support investing in that. It is a great, cost-effective 
alternative. It is good for the environment. No matter how you 
do it, we can move people around.
    Once you do that, one of the problems we have had is, we 
can't get a handle--and I have been here 13 years; we cannot 
get a handle on Amtrak finances. Mr. Laney and Mr. Gunn 
probably began that process, and as we get a handle on them, it 
is scary, we found.
    Mr. Young and I did the food service, a couple hundred 
million dollars. Every dollar for food service paid, it cost us 
two dollars.
    We are going to see a legal--I have asked for a legal 
review--GAO is doing that study--that is going to make your 
eyeballs pop out.
    You, Mr. Mead, have said and testified Amtrak's own numbers 
show about 175 million in annual unallocated overhead costs; is 
that correct?
    Mr. Mead. Yes.
    Mr. Mica. So we still do not have a figure. If we take out 
the Northeast Corridor, we have an independent operation, we 
get private investment coupled with Federal investment, then we 
have Amtrak long distance service left over. I love your 80/20 
or 90/10, 100 percent, whatever we do, but we can also conduct 
that.
    And, Mr. Mead, wouldn't that make it possible to tell what 
Amtrak finances truly are, if we separate that out--
    Mr. Mead. Oh, it would--you have to look at it separately. 
It does have to be--that does have to be done from an 
accounting standpoint.
    Mr. Mica. --where the potential is for getting high speed 
service in our most important corridor to relieve congestion in 
that corridor, stop and think, in less than 2 hours? Nobody 
would ever get on another plane; we would be able to deal with 
congestion, actually put more planes going longer distances 
bringing people in. We won't lose any air traffic because they 
will always need that capacity. So this proposal has a great 
deal of potential.
    Now, I have tried the Amtrak reform proposals, and I have 
got an 82-page one here, and I have tried a 62-page one.
    This is a simple thing: We put the Northeast Corridor up 
for bid for the private sector. That gets them out of--Mr. 
Rosen, you said this is all sort of a structural problem.
    Mr. Rosen, if you are losing hundreds of millions of 
dollars in food service, that is not a structural problem. Mr. 
Rosen, if you are bungling a multibillion dollar high speed 
acquisition and operation of a high speed service in the 
Northeast Corridor, that is not an operational problem. If you 
can't account for $175 million in unallocated overhead costs, 
that is not an operational--a structural problem.
    Mr. Rosen. Congressman, let me just clarify; I think I 
agree with you. I wasn't saying that structural was the entire 
problem; it is multiple problems.
    Mr. Mica. No. Again, structural is a big problem, but that 
is in the Northeast Corridor.
    Mr. Laney, the only asset that you own, real, hard asset 
that you own, is the land, really, in the Northeast Corridor; 
and I think--
    Mr. LaTourette. Mr. Mica, could I ask you to ask the 
question, and it be your last question so we can move on?
    Mr. Mica. Yes.
    How much do you really own of track? And am I correct in 
that it is the Northeast Corridor plus that little Michigan 
piece?
    Mr. Laney. Yes, that is pretty much it.
    Mr. Mica. So we take that out of the equation, we put that 
up--and I met with Sweeney from AFL-CIO years ago and I said, 
we can guarantee every labor position, every benefit, and still 
operate and there will be twice as many people involved in high 
speed service because if we make that a success, we will have 
operations across the United States which will be providing 
high speed service.
    So I look forward to all three of you gentlemen lobbying--
    Mr. LaTourette. I thank the gentleman and his time has 
expired.
    Mr. Oberstar.
    Mr. DeFazio.
    Ms. Carson.
    Ms. Carson. Yes, I will be very brief. Thank you all for 
your input into this conversation.
    I want to contrast what we, the Federal Government, gave, 
15 billion, to the airlines right after 9/11; and the airlines 
were in deep financial trouble before 9/11, as we all know. We 
didn't put in any restrictions or requirements, and CEOs bailed 
out with a substantial--quote, unquote--"bonus." Mr. Wolf at 
USAir got around 8 million and left like a bandit, and I guess 
that is what it was, banditry.
    With regards to Amtrak--and I was very impressed by how 
Amtrak is addressing the cost of running Amtrak, the fact that 
you have reduced some of the cost of doing business with 
Amtrak. And I am sure all three of you gentlemen know that when 
we did have the catastrophe of 9/11, the ridership of Amtrak 
went up, you can almost say that it skyrocketed.
    What difference do you anticipate with a private enterprise 
coming in and doing Amtrak better than what Amtrak is doing on 
its own? Because it continues to improve.
    And the last part of that question is whether or not you 
believe Mr. Gunn is doing a good job.
    Mr. Laney. Let me start with the last question first. Mr. 
Gunn has done, as far as I am concerned, a splendid job. He 
took Amtrak from the day he landed on the platform, in effect--
in 2002, I believe it was--and has righted a ship that was 
listing and about to spill over, as far as I am concerned. And 
David Gunn is a terrific operator, and at least a career-long 
railroad man understands it.
    We have shifted gears in a way and moved from an operating 
focus--which will remain a principal focus, operating 
efficiencies and so forth--to sort of recasting the future. And 
the board has assumed a little bit more initiative than it has 
in the past.
    And so we are working carefully with David, and his 
principal focus seems to be more and more focus on the day-to-
day operations, and the board is focused more on the future. So 
there is a balance to be struck there, and we are attempting to 
through that.
    And the other question I believe you asked was with respect 
to what a private entity might be able to do; I don't know. And 
a number of proposals that I have seen for assuming 
responsibility for operation of an entire set of routes or an 
entire self-contained system like the Northeast Corridor--and I 
think the chairman alluded, or someone earlier alluded, to the 
risk of an experiment.
    We, at the board level, have to look at everything, but 
ultimately we are responsible for the future of Amtrak; and 
Amtrak is the only housing for intercity passenger rail in the 
country, so in effect, we are responsible for the future of 
intercity passenger rail.
    So we have to be very careful in analyzing and 
understanding any moves we might make like that, and their 
ramifications. And a lot of the actions I think you might see 
in that regard over the next few months or years will likely be 
pilot programs, kicking the tire so to speak to make sure it 
works, and if it works, there is no reason why it can't be 
expanded.
    But I think there is enormous potential value in the 
competencies, skills and financial strengths, as well as the 
operating capabilities that private operators can bring to 
intercity passenger rail in this country, and they need to be 
given a shot.
    And I think there is potential for Amtrak to improve as 
well, because if Amtrak ultimately competes for its future 
against these kinds of performers, then Amtrak is going to have 
to compete at the levels of those performers. And competition 
can, at its best--there are some downsides to it--improve the 
performance of anybody.
    But we have to be very careful, and ultimately, I think the 
board feels very responsible in terms of the steps that it 
might take, and it cannot put an entire system at risk.
    Mr. Mead. I would like to make a comment on this 
competition issue.
    First, I am not prepared to say that there is or will be a 
good deal of competition out there.
    And I think that the playing field has to be open to allow 
for competition.
    And third, I don't think Amtrak should be in the decision-
maker seat as to whether or not there should be competition. I 
think that is a decision that Congress has to make in the 
reauthorization.
    Mr. LaTourette. Does the gentlelady yield back?
    Ms. Carson. Yes.
    Mr. LaTourette. Mr. Simmons.
    Mr. Mica. Mr. Chairman, just a unanimous consent request.
    I would ask that in the record we include at this point the 
fact that there was $5 million given to airlines that could 
show damage from the events of September 11th. We did create a 
$10 billion loan guarantee program, not a loan program, which 
expired--
    Mr. LaTourette. Excuse me. Mr. Mica, I would ask you--
    Mr. Mica. I would just like--
    Mr. LaTourette. I would ask you to respect the Chair for 
just a second, if you would.
    Do you have a document that you would like to submit?
    Mr. Mica. Yes, with that information.
    Mr. LaTourette. Without objection.
    Mr. Simmons.
    Ms. Brown. Mr. Chairman, I want to show an objection.
    Mr. LaTourette. Objection is heard.
    The gentleman from Connecticut.
    Mr. Simmons. Thank you, Mr. Chairman. A couple of quick 
thoughts and then a question.
    Mr. Mica raised the issue of getting true high speed on the 
Northeast Corridor and what the cost would be. My recollection 
is that before Amtrak invested in the Acela service there was 
an analysis of the Northeast Corridor from New York City to 
Westerly, Rhode Island, which is a shoreline portion of the 
track. And it was determined that between Boston and New York 
you have 12 full circles of turns, nine of those 12 full 
circles or turns are from Westerly, Rhode Island, to New York 
City, which means that you add up the degrees of turns and you 
get complete circles.
    With nine full circles of turns between Westerly, Rhode 
Island and New York City, you could not ever have truly high 
speed service--there is only a 4-mile stretch, I believe, where 
you are authorized to go 125 miles an hour--and therefore, an 
inland route was considered, which would be a modern, straight 
route which could achieve high speed service. The costs for 
that were very substantial, in the range of $15 to $16 million, 
so I think that is perhaps where those numbers come from.
    But when I talk about a safe, reliable service at a 
reasonable price, it is with the idea that as long as you are 
running Acela on the shoreline, you are never going to 
straighten out those circles. You just can't do it, because the 
Connecticut coast was settled in the 1640s, and there is where 
a substantial portion of our infrastructure is, and you simply 
can't do it unless you go underground.
    Point two: Over the last several years Amtrak has 
repeatedly threatened access fees for other users as well as 
threatening higher fees for riders. Metro North owns the track 
from New Haven to New York City. Metro North carries a very 
substantial number of Connecticut citizens in and out of New 
York City every day. So the politics of all of that, of those 
user fees, is that probably 10 to 15 times as many people will 
be beating on my door should the user fees affect Metro North 
as would be if the reverse was true.
    So I think it is important for people to understand the 
local politics, or the regional politics, of rail transit in 
trying to make some of these decisions. That being said, I do 
have a question.
    One of the testimonies, Mr. Laney's, says that one of the 
four essential objectives is to preserve our national long 
distance system. The other testimony, by Mr. Rosen, says that 
when it comes to long distance services, Amtrak has had little 
or no success in responding to competition with bus and air, 
and Amtrak's presence in this segment of the intercity 
transportation market has dwindled.
    I mean, I think that is an accurate statement. And when I 
think about it, and when I think of the four transcontinental 
services and some of the overnight services, I think, and I 
would be interested to know, if people in this room had to be 
in San Francisco or Los Angeles or Seattle Monday morning, how 
many people would call up Amtrak? Please raise your hands.
    Okay, if people in this room had to be in New York City 
tomorrow afternoon, how many people would consider calling 
Amtrak? Raise your hands.
    I mean, that is really where we are at. I mean, that is 
reality. Who in the heck is calling the trains for 
transcontinental trip other than for tourism purposes or to 
give the kids an experience or, yeah, 30 years ago I took the 
train to L.A., and now my wife and I are retired, let's try it 
again.
    But the feedback that I get from people who are making many 
of these trips is that it is not successful, it is a disaster.
    And I guess my question is, when one of our witnesses says 
preservation of the long distance systems is an essential 
objective, essential objective, and another says that Amtrak 
has little or no success responding to competition in long 
distance services, what is the story? What is the deal? What 
are we, as Members of Congress, members of the subcommittee, 
supposed to gather from this apparently conflicting testimony?
    Mr. Mead. I have a suggestion. I think that--let me just 
quote you some numbers quickly.
    Of the total 25 million riders on Amtrak, 11.5 million, 
about, rode on the Northeast Corridor; 9.8 million rode on what 
are called "quarter routes," these are between the population 
centers; about 4 million rode on these long distance trains. 
All that number, who knows, 500,000, end to end, you know, the 
transcontinental, the average distance traveled on these long 
distance routes is about 700 miles. So therein lies a tension.
    There are several million people riding these things. They 
are not--it is not necessary, air travel between those 
locations, and some of these States; it really is an essential 
mobility requirement. So there is this tension.
    We are trying--what we were trying to do in the, study we 
did, was look at long distance travel and say, all right, is 
there a balance that can be drawn where you keep the trains and 
you save some money?
    And we found that there is, but Amtrak hasn't taken 
advantage of it; and it amounted to, you know, almost $250 
million a year.
    Mr. Rosen. Another way to look at that, Congressman, is 
that 4 million passengers are on the long distance trains 
compared to the airlines carry--oh, I think it is in excess of 
700 million passengers annually, and yet for Amtrak the cost of 
the long distance routes is disproportionate. And as the 
inspector general studies showed, the cost of providing first-
class service--that is, the sleeper cars, the dining cars--is 
even greater. And I don't see how anyone can justify the 
Federal taxpayers' subsidizing somebody in excess of $600 per 
passenger per ride to take a long distance first-class trip.
    So the harder question is, well, is there long distance 
service that makes sense? And part of the challenge for all of 
us is to identify whether, in essence, as I said in my initial 
statement, is the way Amtrak does it the only way to do it? 
Because the way Amtrak does it is wildly costly for relatively 
little benefit.
    But might there be other ways to structure this where some 
of these, as Mr. Mead said, 700-mile distances might be 
preserved and made more cost effective? Might there be some of 
these vacation or tourism routes, say, through the Northwest, 
where there would actually be demand if the service was 
structured differently? So there is a need to look at that, it 
may not be a one-size-fits-all answer, but it is clear that the 
status quo doesn't work.
    Mr. Simmons. Mr. Chairman, my time is up. But my response 
would be that just as the taxpayer should not subsidize first-
class meals, taxpayers should not subsidize essentially 
vacations and tourism. And it seems to me the cruise lines and 
others have managed amenity train travel for people who are on 
vacation, and if they don't make money, at least they break 
even.
    And again, I thank the Chair and the ranking member for 
this hearing. This is a critically important issue for America, 
and we have got to come to some resolution on this problem. And 
I yield back.
    Mr. LaTourette. I thank the gentleman.
    Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. I have a couple of 
questions about the debt.
    The debt is substantially privately held, as I understand 
it. Is there some which is attributable to the Federal 
Government?
    Mr. Rosen. Yes, there is Federal debt; it is not in the 
numbers. The 3.8 billion is the privately held debt.
    Mr. DeFazio. What is the average interest rate on that? 
Because the interest costs are awfully high. It is either 
short-term debt or it is very high interest rates.
    Mr. Laney. Most of the debt that carries the highest 
interest rates is equipment financing.
    Mr. DeFazio. Okay. So that is shorter term?
    Mr. Laney. No, it is long term.
    Mr. DeFazio. So what are the interests? What is the 
average?
    Mr. Laney. I don't have it.
    Mr. DeFazio. It looks like, I don't know, I just did a 
rough--it must be at least over 7, closer to 8.
    Mr. Mead. It is about 7, it is about 7. It goes up. I think 
one of the worst is Penn Station; that is a little over 9 
percent.
    Mr. DeFazio. Okay. So what is today's 30-year T-bill, 3-
point what? Anybody know? 3-point something, whatever. Okay.
    So if the Federal Government--does anybody believe that the 
debt is not guaranteed by the Federal Government, it is only by 
Amtrak; and if Amtrak were somehow to become insolvent that the 
private bondholders would get zero? Does anybody believe that?
    Mr. Rosen. Well, we believe that is certainly the case.
    Mr. DeFazio. Do you think that would happen? Do you 
recommend that?
    Mr. Rosen. Well, I would say a couple of things about that, 
Congressman. One is, in the early 1980s, Congress previously 
did wipe out the Amtrak debt and had the taxpayers take 
responsibility for it; and a lot of good that did. Here we 
are--
    Mr. DeFazio. Right, but they didn't have a plan.
    But let's just say I am just asking you a question: Do you 
think the private bondholders are at risk under the current 
scenario with the recommendation, the administration proposing 
zero funding for Amtrak?
    Would that then cause a default, since I don't know how are 
you going to pay the interest? Would the private bondholders 
just eat it, or do you think the Federal Government would bail 
them out? Would you recommend the Federal Government bail them 
out? Would you recommend the Federal Government not bail them 
out?
    Mr. Laney. I can't speak for the Federal Government, but 
let me speak for Amtrak.
    I don't think those bondholders either believe or should 
believe that the government stands behind Amtrak; and I think 
it is reflected to some extent in credit rating, it is 
reflected to some extent in our credit ratings. Bondholders see 
those ratings, and it makes them very, very nervous.
    Mr. DeFazio. But if we are going to continue to have an 
Amtrak, it seems that you could cut that interest obligation in 
half just by substituting Federal bonds. But, okay, that is a 
discussion for another time. And then if you linked that to the 
reductions in first-class service and food, I mean, we would be 
talking somewhere in the vicinity of $300 million a year, which 
would be a nice piece of change toward getting the obligations 
of Amtrak down.
    Mr. Mead. Well, i can't let this go unsaid. I mean, the 
fact of the matter is that, as a practical matter--apart from 
the legalisms, apart from the morality, the practical matter is 
that Amtrak's budget has an item in it where they are asking 
you for the money to pay their debt. So year after year after 
year--
    Mr. DeFazio. So the taxpayer--if Amtrak continues, the 
taxpayers are going to continue to subsidize debt at 8 or 9 
percent, or 7 or 8 percent in the private sector, as opposed to 
the taxpayers assuming more obligation for debt at a lower 
interest rate as a Federal obligation. But that is--
    Mr. Rosen. Can I just make an observation on that?
    It is true that the taxpayers subsidize Amtrak's debt; it 
is not true that they totally pay it, because Amtrak gets 
revenue from multiple sources--right now, about 40 percent from 
the taxpayers. So you could say 40 percent of the debt is--
    Mr. DeFazio. Right. Well, it depends on how fungible the 
money is. But in any case, it seems to me if we are going to 
continue to have an Amtrak, lowering the debt obligation costs, 
in addition to first-class service and other cost-saving 
measures, and maintaining a national network--I mean, we had 
the gentleman from Connecticut and others from Florida who have 
pretty much discounted any need for a national system.
    I guess I would look at today's prices of gasoline, I would 
look at the fragility of the airline industry, I would look at 
what happened post-9/11 when my regional power marketing 
administrator had to get back to Oregon, couldn't find a rental 
car; he took Amtrak, planes didn't fly.
    And Mr. Mica would agree with me on this point: What is 
going to happen the day after we have multiple planes fall out 
of the sky because we are not doing an adequate job of keeping 
explosives off airplanes? I think Amtrak will be pretty heavily 
subscribed.
    So to become the only major nation in the world without a 
national rail service seems to me to be folly in light of 
higher energy costs and an industry which is--the airline 
industry which is mostly bankrupt and has--is a proven target 
of terrorism, although obviously rail isn't exempt.
    That is an observation, not a question.
    I would ask a question about the rail debt. I don't 
understand, Mr. Mead, how one of the biggest problems in my 
region is--we do have a very nice growth path, which I believe 
Amtrak would recognize, on our rail service, particularly in 
the northwestern United States, which was one of the earliest 
designated high speed corridors.
    But we have made precious little progress toward delivering 
on the promise of high speed, although we have some very nice 
train sets running on it which weren't custom made, unlike 
Acela, and they are very dependable. But that is another issue.
    But the big problem is the freight. And I don't understand 
the--how are we going to--and I have tried to talk to the 
freight people and said, maybe we could have some sort of 
coordinated approach here; you need some double tracking, we 
need double tracking, can't we get into this on a unified basis 
with some cost-sharing between the two entities, et cetera?
    Can you address that question? How would we ever realize, 
even in short corridors where we don't own the track--everyone 
is focused on the Northeast. I don't live in the East, a lot of 
us live in the West, so how would that work?
    Mr. Mead. Well, I don't want to be the only voice on the 
panel on this, but when I was just giving my testimony, I think 
it was before you came in, I mentioned six points that I 
thought were key to any reauthorization proposal. One of them 
was a capital program to the States.
    In some of these situations, such as probably the one you 
are describing, you are going to have to invest in your rail 
bed. You are going to need money to invest in your rail bed, 
probably run another track, maybe around an existing track, so 
you can deal with the congestion between the freights and the 
passengers. That is why you need a capital program that is 
oriented toward clearer development, so you can do that and you 
can make those types of investments.
    Now, the State is going to have to contribute, but what we 
would recommend is a match somewhere between 15 and 30 percent. 
And I would think it would be--you need a pretty robust 
program.
    Mr. DeFazio. Either of the other panelists want to respond 
to that?
    Mr. Laney. Congressman, if I could respond, it is already 
happening to some extent, but to a very minor extent relative 
to the potential, without a match program.
    California has contributed, I think, over the last decade 
probably approaching $2 billion. Washington State, as you know, 
if you add it all up, I think it is close to a billion dollars; 
that is with no match, and the improvements--the impact of the 
improvements is very measurable and the need is there. So there 
is an appetite from a transportation standpoint. With a match 
program, the state contributions would have been greater in 
amount and more accelerated I think.
    There is a healthy interaction between the freights and a 
number of States regarding passenger rail, principally 
California and Washington that we don't see yet in the rest of 
the country.
    Mr. DeFazio. Well, we have done a little bit in Oregon. We 
happen to be more poor than either of those States; and we 
didn't have the dedicated revenue source that Washington State 
used to have, which is now gone, so they are probably going to 
be in the same boat we were are--but a match program would be 
distinctly preferable to my governors scrambling around, trying 
to find small amounts of money.
    Mr. Rosen. Congressman, can I just mention, in the 
administration proposal embodied in H.R. 1713, we did include a 
matching grants program as well, more a 50/50 kind of match, 
more like the New Starts transit-type program. And the key to 
that again is to move a system to one where the Federal 
Government is supporting infrastructure, not operations of 
actual operating companies.
    Mr. DeFazio. And if I could, just one last question, Mr. 
Chairman; I realize my time is--I would like to ask about the 
Acela.
    I think that the Federal Railroad Administration safety 
standards are antiquated at best--absurd, perhaps. You know, 
Europe successfully operates a lot of high speed trains. They 
call the Acela "the pig," "the fat pig," and obviously it has 
failed because of that.
    In the Northwest, we operate a Spanish train set, the 
Talgo, which happens to work really well. The problem is that 
it has to have a waiver from the FRA standards because the FRA 
has a 1900 mentality that weight is the thing for safety, not 
dealing with couplings and other safety issues.
    I would like to--has the administration or Amtrak taken any 
sort of an active role in trying to update those things so we 
can move to proven technology? I am not saying we have to buy 
the trains overseas, but we can license the technology and 
manufacture proven, functioning, lighter, more efficient high 
speed trains here in the United States of America as opposed to 
buying and continuing to build things that don't work, that are 
more expensive.
    Anybody got an observation on that?
    Mr. Rosen. Well, I am not sure that we would agree with the 
premise that FRA safety rules are all just--
    Mr. DeFazio. Well, I am talking about the one that goes to 
weight as the biggest safety factor and the fact that you have 
to get a waiver to operate something that is safely operated in 
Europe carrying tens or hundreds of millions of people a year.
    Mr. Rosen. The test from the FRA standard is not weight, 
but strength and how they will perform in accidents; and I 
don't think any of us would want to move to a system that was 
less safe.
    Mr. DeFazio. Well, I am not talking about less safe, I am 
talking about the European system, which I think is arguably as 
safe or more safe with proven technology, because it can 
actually operate as opposed to having failed brakes because the 
damn thing is so heavy that it can't even support its own 
brakes.
    Mr. Rosen. Okay, there are two different things there.
    Mr. DeFazio. No, they aren't. I mean, we designed this 
gigantic fat pig, and the thing is very inefficient, it had 
substantial operating problems, and it is under the theory that 
it is safer because it is big and fat and heavy and carries 
bigger, fatter and heavier cars, whereas the Europeans get the 
same performance with a whole different system of couplings.
    I would urge you to study this and not dismiss it and not 
say, I am trying to recommend something less safe. I ride on 
the Talgo, it is not less safe, it just gets to safety through 
a more efficient way than the Acela.
    Mr. Rosen. I have ridden a train in Spain myself. It is not 
an issue of whether we agree that Acela or Talgo is better;that 
is not the issue. The issue is, is Acela like it is because of 
FRA? I can't agree with you on that.
    Mr. DeFazio. Well, then someone else should take a hit 
other than FRA on the issue because it is really kind of an 
embarrassment.
    Thank you, Mr. Chairman.
    Mr. LaTourette. I thank the gentleman.
    Mr. Mica. Mr. Chairman, I have a unanimous consent request.
    Mr. LaTourette. Go ahead.
    Mr. Mica. I request that I put this written statement into 
the record that says, "I am a strong advocate and supporter of 
the National Passenger Rail System and Service, always have 
been, always will be."
    Mr. LaTourette. Without objection. At the "be," without 
objection.
    Ms. Brown. Mr. Chairman, there is an objection.
    Mr. LaTourette. The objection is heard.
    Mr. Oberstar.
    Mr. Oberstar. Thank you, Mr. Chairman.
    I listened with interest and watched with fascination the 
slide presentation by the gentleman from Florida on Virgin Rail 
Group. And I subsequently have then gone back to my staff to 
call up on the Web the report of the British Strategic Rail 
Authority's 2004-2005 annual report. British Strategic Rail 
Authority is now Network Rail, but its last report is by that 
name. And found that Virgin's cross-country and West Coast 
franchises, according to this report, the official agency, 
received a total of over 200 million pounds, which in that 
year's evaluation is $360 million in subsidy from the British 
Government.
    The Virgin Rail Group, under British law, is authorized to 
book the subsidy as revenue, which then makes its operations 
appear to turn a profit.
    Would the gentleman from Florida disagree with that.
    Mr. Mica. No, that is exactly what I quoted. It is 
subsidized, and they have 34 million passengers as opposed to 
Amtrak's 25 million passengers.
    Mr. Oberstar. They receive a significant subsidy, and it 
should not be trivialized; it runs roughly 11 cents a passenger 
mile--
    Mr. Mica. Can I just add--
    Mr. Oberstar. Just a moment; I will yield to the gentleman 
in due course.
    -- and operates high speed service in very high population 
density corridors. That is very significant, and it is 
considerably different from the Amtrak situation.
    And I yield to the gentleman.
    Mr. Mica. Thank you.
    And that is what I pointed out, that if we take out the 
Northeast Corridor and we give it the same opportunity, the 
subsidization--again, they have 34 million passengers in those 
two north-south lines. We have one line, and we are running--
what did you say, Mr. Mead, how many million of the 20--
    Mr. Mead. Eleven million in the Northeast Corridor.
    Mr. Mica. And if you will look further in the report, you 
see how many billions of pounds reporting in an infrastructure 
investment, not just--well, not just private money; I also know 
there is federal--British federal money in it.
    But, with that combination, I think we can take that out, 
operate it at high speed service and create a model; and then 
you have the balance--and I always have supported long distance 
service--and will have a good financial picture and State 
public-private partnerships. Florida has had millions of 
dollars ready to go to increase ridership as a partner.
    Mr. Oberstar. I thank the gentleman for those observations 
and just want to clarify the record. It was somewhat 
oversimplified and glossed over in the earlier presentation, 
and I would note that in the Boston-to-Richmond corridor there 
are probably 35 million people. We could have substantially 
greater ridership on Amtrak if in that corridor we had the 
quality ride, if the catenaries were upgraded, if the switches 
were improved, if the Connecticut gap were closed, if the rail 
were upgraded and the track upgraded and the locomotives also 
upgraded. All of that also requires capital investment and you 
will have the ridership.
    I noted the situation in Japan where you have high 
population density corridors with substantial government 
investment to bring the whole infrastructure up to a level 
needed to attract ridership. That is what we are talking about. 
It is not very complicated. It is a matter of political will, 
and we seem to lack the political will to make the decision.
    Again, I compliment the chairman of the subcommittee for so 
succinctly summarizing the issue: giving Amtrak just enough to 
fail. We have to give them substantially more to succeed.
    I yield back the balance of my time.
    Mr. LaTourette. I thank the gentleman.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    I just want to go back to this whole issue of safety. How 
do we--you know, under your proposals, how do we guarantee 
safety? Certainly it is a concern. I think when the British 
system went through its changes, we had a situation where there 
was a crash; and I want to know that our passengers are 
guaranteed safety. Do you have concerns about that, and how do 
we make sure we guarantee that?
    Mr. Rosen. Two thoughts about that, Congressman. One is, 
Amtrak is subject to the Federal safety regulations and so 
would any competitor or other passenger rail operator. We would 
start there.
    Second thing, I would observe about a year ago the World 
Bank issued a study of the British rail system; and, among 
other things, they specifically looked at the question of what 
the safety record had been, because there had been a crash that 
got a lot of publicity. And their conclusion was that the 
British rail system was, in fact, at least as safe as the 
United States system and perhaps more so.
    It is an unfortunate fact of life that from time to time 
there are train accidents, and there have been in the United 
States. So we want to minimize and avoid and prevent those. But 
that is the purpose of our Federal rail standards.
    Mr. Cummings. Anybody else?
    Ms. Brown. Mr. Chairman, I would like to speak to that 
point.
    Mr. Cummings. I yield to the gentlewoman.
    Ms. Brown. I would like to speak to that point. That is not 
totally correct. We met with the British officials and 
legislators--they do not call themselves legislators but our 
counterparts--and they were very, very clear that there was a 
serious deterioration of the rail system when they turned it 
over to the private entity; and it was not--and that is why 
they had to go in and take it over. Then they are spending 
billions more additional dollars to bring the system up to 
snuff. And, in addition, it wasn't one accident; it was two, 
but several lives. It was not a minor thing, and they realized 
that they had to take recontrol of the system.
    Mr. Cummings. Reclaiming my time, did you have something, 
Mr. Mead?
    Mr. Mead. Thank you.
    The description of the British infrastructure is 
essentially correct, and one of the ways railroads deal with 
infrastructure problems is they slap on what they call go-slow 
orders. You can't do that in aviation. At 35,000 feet, you 
can't say, well, let's deal with this problem by going slower. 
But the railroads do. What you really need for this Northeast 
Corridor is a multiyear, probably 5, maybe 8-year plan for 
bringing it into a state of good repair; and you need to watch 
the go-slow orders that get put on because that not only--they 
may create a safe situation, but it also results in your trains 
not going more than at a snail's pace.
    Mr. Cummings. Going back--I will come to you in a moment. 
Thank you.
    But going back to what Ms. Brown was just saying and going 
back to what you said, Mr. Rosen. You said, "as safe as the 
United States," is that what you said?
    Mr. Rosen. That is right.
    Mr. Cummings. Is that the gold standard?
    Mr. Rosen. Is the United States the gold standard?
    Mr. Cummings. Yes.
    Mr. Rosen. In terms of safety regulation, I believe it is.
    Mr. Cummings. Not safety regulation. Safety, period. The 
President said after Katrina the efforts were okay, but he did 
not like the results. They were unacceptable. So I want to draw 
a line there.
    Mr. Rosen. I am not sure I understand.
    Mr. Cummings. It is simple. What I am asking you is it is 
one thing to say the gold standard is the United States. It is 
another thing to say the results of the efforts are the gold 
standard. When you sit there and you compare something to the 
United States, I am assuming that we have the very best 
results, too, not just effort.
    Mr. Rosen. Well--
    Mr. Cummings. Let me take a step further. You seem to be--I 
may be confusing you. It is my understanding that in one of 
these crashes it was like 31 deaths. So I am trying to figure 
out, you go to privatization you have 31 deaths, and so what 
does that mean? I am just concerned that when we start talking 
about privatization, I know we have Federal regulations, but I 
want to be very careful that we do not slip.
    I can't help but have the backdrop of FEMA on my mind, I 
have to tell you. I just want to make sure that government is 
going to continue to do what government is supposed to do, 
because people rely on us to do that.
    Mr. Rosen. Let me offer maybe two disconnected thoughts on 
that. One would be in terms of the administration's proposal, 
as embodied in H.R. 1733, specifically, would require that the 
Federal Rail Administration do a safety review of the 
qualifications of any new company that would operate trains and 
compete with Amtrak. So I think we would be attuned to what I 
think is your concern, which is somebody unqualified or unsafe 
going to run these trains. We would specifically want to 
address that.
    But the other thing I would say is sometimes the issue of 
privatization gets a little confusing because, of course, 
Amtrak is itself a private company. It is federally subsidized, 
but it is a private company that operates the trains and is 
itself regulated through the Federal standards. So a new 
competitor would have to likewise meet the standards but at 
least under the administration proposal would have to undergo a 
specific FRA safety review of its qualifications and 
capabilities.
    Mr. Cummings. Did you have something to say?
    All right, thank you.
    Mr. LaTourette. I thank you, Mr. Cummings.
    The Chair would advise that we have been told that our 
first series of votes on the floor is going to be about 1:50. I 
have a couple of requests to make to the panel, and I will 
yield to Ms. Brown for one question, and then what I would like 
to do is try to get the testimony of the second panel in before 
we have to go vote. I know that is a rosy--I and will yield to 
Mr. Mica for one question as well.
    My request is, Mr. Rosen, we had a hearing with the new FRA 
Administrator, Mr. Boardman; and Mr. Bachus, who is not with us 
today, made a request during that hearing. There was some 
confusion about the date when the implementation of the new 
whistle rule went into effect. There was a vigorous discussion 
between how an interim rule could really be a final rule for 
the tolling of the statute, and we were promised an opinion by 
the Department of Transportation.
    The second question goes to you, Mr. Rosen, and also you, 
Mr. Laney. There have been doubts raised in the public domain 
about the notion of, one, whether or not the Amtrak Board has a 
quorum; and, two, if it does not have a quorum, if it can 
operate without a quorum. We have received a number of 
references to legal opinions, but never have I seen one in 
writing that explains that position as to whether the Board as 
currently constituted even has the authority to enter into 
contracts which would be of great concern to a lot of people.
    I would ask DOT and Amtrak if you are relying on some legal 
opinion that you presently have a quorum or that you do not 
need a quorum. If somebody could get the subcommittee that in 
writing, we would appreciate that very much as well.
    Ms. Brown, your one question.
    Ms. Brown. I would like to ask unanimous consent for 
members to submit additional questions to the witnesses for the 
record.
    Mr. LaTourette. Without objection.
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    Ms. Brown. My additional question is for all three, because 
I want to get this on the record. Do you know of any developing 
country where they have private operators come in and run the 
railroads successfully, do it within budget, provide good-
quality service and earn a profit without any assistance from 
public funds?
    And the other question for the chairman of the Board, I 
have some written questions pertaining to labor organizations. 
Are they operating under an expired contract? When did the 
contract expire and how have the negotiations been going on? I 
would like that in writing.
    Would you three please answer my question?
    Mr. Mead. No, I am not aware of any.
    Mr. Rosen. As to your first question, I would point to the 
picture on the wall and note that the Alaska railroad is a 
profitable operation. The Japan central railroad, I am told, is 
such, the Hong Kong railroad.
    Ms. Brown. Sir, are you sitting there telling us that the 
Alaska railroad does not receive any Federal money? Now, the 
chairman would be shocked to hear you say that, and he is not 
here.
    Mr. Rosen. For operations, as opposed to infrastructure.
    Ms. Brown. Sir, the capital costs is the problem, we all 
know that, and the infrastructure. And we also know that the 
administration has not done a durned thing since 9/11 as far as 
securing the safety of the railroads, the tracks, and security. 
So, as you go back wherever you are going, I would like for you 
to discuss that area.
    Mr. Rosen. Maybe we could have some definitional things as 
to what counts, and you could clarify the question, but I will 
be happy to respond.
    Ms. Brown. I do know that the Alaskan receives Federal 
dollars.
    Mr. Rosen. Well, again, Congresswoman, we will be happy to 
respond to the question with some clarification.
    Ms. Brown. And I am sure the chairman has a lot to do with 
it. He is doing his job.
    Mr. Laney. The answer to the question, is no, I do not know 
of any.
    Mr. LaTourette. Mr. Mica, your one question?
    Mr. Mica. My one question maybe will be towards Mr. Mead.
    Again, I think it is important that we look at the models 
that we have for privatization. The British model, again, I 
think there has been some incorrect information. They did have 
problems at the beginning, I understand, Mr. Mead. They let, as 
I said in my opening remarks, some 28 franchises; and that is 
now down to either eight or ten. And, also, they did have an 
accident. They had accidents before, but they also inherited an 
entire nationwide network of rail passenger and commuter 
service which was in total disrepair.
    And isn't it correct, Mr. Mead, that they had private 
investment I believe somewhere between 15 and $20 billion U.S.? 
Because it is over 10 billion pounds in the infrastructure.
    And isn't it further correct--and I think Mr. Laney and Mr. 
Rosen also agreed with this--Amtrak only owns two pieces of 
rail infrastructure, one the Northeast Corridor and a little 
bit of Michigan?
    The rest you pay track access charges to freight companies. 
Most folks on this panel do not even understand how Amtrak 
operates. Are those points correct?
    And, finally, isn't it correct that Amtrak's last report 
booked its Federal appropriations as revenue?
    That is my one question.
    Mr. Mead. Actually, it was two. But I think the answer to 
the series of questions that were the first question is yes. 
And the point I was making during the testimony is that--the 
state of repair of the Northeast Corridor, and it is probably 
about 5 billion, and it is a definite plus-up way above that to 
make it high speed. And that is a true investment.
    The second question, whether they book it as revenue or 
not, I would have to get back to you. Maybe Mr. Laney knows 
that.
    Mr. Laney. Well, it is not debt.
    Mr. Mica. That is what I am told by my staff.
    Mr. LaTourette. We thank you all for being here. We thank 
you for your testimony and your answers to our questions and 
you go with our thanks.
    Mr. Rosen. Thank you, Mr. Chairman, for having us here 
today. We look forward to working with you and the entire 
subcommittee as the process of new authorization goes ahead.
    Mr. LaTourette. We do, too; and please give our regards to 
the Secretary.
    Mr. Rosen. I will be happy to do that, from the ranking 
member as well.
    Mr. LaTourette. The second panel will be comprised of Ray 
B. Chambers, National Railroad Construction and Maintenance 
Association, Inc.; Robert Serlin, President of Rail 
Infrastructure Management LLC; Paul Reistrup, Chairman-Elect of 
the Railway Service Corporation; Dominic Liberatore, Executive 
Director, All Aboard Ohio; and Robert Scardelletti, 
International President, Transportation Communication 
International Union.
    Mr. Mica. Mr. Chairman, I have a unanimous consent request. 
I have an IG, GAO and Amtrak Reform Council Report--at least we 
would like to include portions of them--that detail it would 
take 18 to $20 billion to make the Northeast Corridor a truly 
high-speed corridor, and I would like reference to that in the 
record.
    Mr. LaTourette. Without objection.
    Well, hopefully, Mr. Reistrup will come back. In the 
meantime, gentlemen, we want to thank you very much for coming 
today, and you come with our thanks.

  TESTIMONY OF RAY B. CHAMBERS, PRESIDENT, NATIONAL RAILROAD 
CONSTRUCTION AND MAINTENANCE ASSOCIATION, INC.; ROBERT SERLIN, 
PRESIDENT, RAIL INFRASTRUCTURE MANAGEMENT, LLC; PAUL REISTRUP, 
    CHAIRMAN-ELECT, RAILWAY SERVICE CORPORATION; DOMINIC J. 
LIBERATORE, EXECUTIVE DIRECTOR, ALL ABOARD OHIO; AND ROBERT A. 
     SCARDELLETTI, INTERNATIONAL PRESIDENT, TRANSPORTATION 
               COMMUNICATIONS INTERNATIONAL UNION

    Mr. LaTourette. Mr. Chambers, you are first.
    Mr. Chambers. Thank you.
    I am Ray Chambers, President of the National Railroad 
Construction Association, the NRC. I appreciate the opportunity 
to testify.
    We believe strongly, strongly in the future of intercity 
passenger service in this country. We build the tracks, and we 
maintain the tracks. We have obviously a vested interest in 
this. As a result of that, I was instructed in January to 
review all of the proposals on the table and come up with an 
analysis and try to make recommendations to the Board of 
Directors to see if they wanted to take a position in this 
battle.
    I was given a little budget, so we hired an outside expert, 
Lou Thompson, formerly with the World Bank and the Federal 
Railroad Administration. The NRC Board met in Geneva, Ohio, on 
the 20th of July, 2005, in a meeting hosted by our Vice 
Chairman, Larry Laurello, in his vineyard. We did not sample 
his other products until after we made our decisions. We 
endorsed a reform agenda and a program which is covered in my 
written statement.
    I want to comment on just a couple of things. We have heard 
today a very interesting and lively debate between Ms. Brown, 
Mr. Mica, Mr. Oberstar and others. Mr. LaTourette said 
something I think that was very, very important at the 
beginning of this debate. He said that we have been going 
through a kabuki dance for 20 years, and we have. It is time to 
move to real reform. I believe that this debate and discussion, 
as lively as it was, is real. We are starting to come to grips 
with issues.
    In terms of the specific proposal that we are putting 
forward, as we reviewed and analyzed everything, Lou and I came 
to the conclusion, and our Board agreed, that the initiatives 
put forward by David Gunn and Mr. Laney, the strategic reform 
initiatives, were very well thought through and very well 
analyzed and should be the core of the process going forward.
    We also decided it is time to make a start. So we have 
proposed what we are calling Advanced Reform 2006, which is 
done through the existing statutes. What we are calling for, 
Mr. Laney has pretty much said he is going to do. Under 
existing statutory authority, the Board can do a great deal.
    Secondly, we have some objectives for a long-term reform 
process for 2006 to 2010. These proposals are based on a number 
of bills that are on the table. We are also looking at a final 
system plan process which successfully reorganized the bankrupt 
Northeast railroads in the 1970s and 1980s as a way to move 
this thing forward. We think it can be done.
    In terms of our Advanced Reform 2006, we support--there has 
got to be adequate appropriation. We support the $2 billion 
request coming through this committee, but it should be as high 
as possible.
    Secondly, we believe the Amtrak Board of Directors should 
take it to the max in terms of beginning a real test of reform. 
We support breaking the business lines down to the five lines 
of business which was in the Gunn-Laney Strategic Reform 
Initiatives. We would go a little bit further. We think that 
the NRC infrastructure should be separated but within the 
Amtrak family, so you can focus on infrastructure and you can 
focus on making Amtrak a more private-like company as it moves 
along.
    We would like to see the appropriation by the Secretary not 
go just to one pot to Amtrak but be divided by those five lines 
of business to create additional accountability. A subsidy 
should go to NEC infrastructure. The long distance system 
should receive a subsidy. We support it and believe Amtrak 
should continue to run it, and it should be subsidized 100 
percent.
    Our major proposal, which protects our own vested interest, 
is the State corridor operations. I was delighted with Chairman 
Laney's comments today. We think it is time to launch pilot 
projects. We would propose that money be set aside in the 
appropriation for the State-subsidized operations.
    Gunn-Laney took 15 lines, and they said that should be the 
national system. We agree. They took 25 lines and said they 
should be State subsidized. We would like to see appropriations 
go directly to the States. The States could begin to launch 
demonstrations in alternative operations or could continue with 
Amtrak under the existing arrangement. We think that would be a 
good start. We would find out whether competition for operators 
work or do not work.
    I would like a side comment. I just returned from a week in 
Europe where most of the private operators made presentations 
to the Eastern Europeans. The private operations in Europe that 
have replaced state operations have almost uniformly grown 
passengers, they have uniformly improved safety and are 
renewing equipment, including in Britain. I know it is a 
controversial issue.
    My colleague, Lou Thompson, was responsible for the World 
Bank report on Great Britain; and I would like to take an 
executive summary of that and submit it to the subcommittee to 
get at some of these issues that were discussed. I will share 
it in advance to get to the questions that Mrs. Brown and 
others might have.
    Finally, we need to get to the long-term restructuring 
framework. There are a lot of great ideas on the table and a 
lot of stakeholders. We need time. We believe H.R. 1630 should 
pass--it is a good bill and gives us a start--and then we can 
begin a real process and an honest dialogue between all the 
parties to get to real reform.
    Thank you very much.
    Mr. LaTourette. I thank you, Mr. Chambers.
    There were two things that I particularly liked about your 
testimony. One is that you left tourist dollars in Geneva, 
Ohio, and the second was that I said something smart once. So I 
appreciate that.
    Mr. Serlin. Thank you for being here. We would like to hear 
from you.
    Mr. Serlin. My name is Robert Serlin, President of Rail 
Infrastructure Management, an entity that develops innovative 
rail passenger solutions.
    One such solution is the infrastructure management 
organization plan, or IMO plan. Today I would like to talk with 
you about the elements of the IMO plan, the statutorily 
provided IMO plan stakeholder protections, and the IMO plan 
benefits.
    The plan's origins lie in Chairman Bud Shuster's 1997 Blue 
Ribbon Panel. It found that Amtrak has two distinct businesses, 
a transportation service provider and infrastructure manager. 
Under the IMO plan, Amtrak is separated to two federally owned 
entities.
    The first Federal entity, Amtrak, remains exactly as it is 
today, continues to operate in the current intercity Northeast 
Corridor and contract commuter trains and to own its 
reservation service, rolling stock, et cetera.
    The second federally owned entity would own the 600 route 
miles of Amtrak's own infrastructure, the passenger stations on 
that infrastructure and catenary. This infrastructure would be 
managed by an infrastructure management organization, an IMO, 
which is responsible for managing the infrastructure for a 
period of 50 years. The right to be that IMO, the 
infrastructure management organization, is awarded on a 
competitive basis by the STB.
    While some have expressed concern about this separation, it 
is worth noting that, though Amtrak operates passenger trains 
over roughly 23,000 route miles, it owns and manages only about 
2 percent of those route miles. Moreover, Amtrak did not own 
any infrastructure during its first 5 years. It was solely a 
transportation service provider.
    With respect to the protections, we have reached out and 
met with the key stakeholders and have gone to great lengths to 
address their concerns by embodying in our statutory proposal 
that we have prepared here the following protections:
    Firstly, labor is protected because the IMO is 
automatically subject to FELA, the Railroad Labor Act, Railroad 
Retirement and the Railway Safety Acts.
    Secondly, Amtrak's infrastructure employees are protected 
because the IMO must offer to employees all current 
infrastructure employees an honor representation and seniority.
    Thirdly, passengers are protected, because the IMO is 
deemed a railroad, making it automatically subject to the 
jurisdiction of the FRA's Office of Safety.
    Fourthly, commuter carriers are protected, because the IMO 
is obligated to continue offering commuter carriers subsidized 
access fees.
    Beyond these protections, the IMO plan promises tremendous 
benefits. It retains Amtrak's national system with a subsidy 
level of about $500 million annually, a level which we believe 
Congress can and should support.
    Secondly, the IMO plan delivers a vastly upgraded Northeast 
Corridor infrastructure. To realize our vision of expanded 
passenger rail traffic, the IMO increases corridor expenditures 
from an average of $200 million annually to a statutory minimum 
of $600 million annually. Our business plan contemplates 
spending at least a billion dollars annually on the corridor.
    The IMO plan eliminates the Federal Government's obligation 
to fund the looming deferred maintenance liability currently 
estimated between 5 and $8 billion. The IMO plan also increases 
high-quality rail construction and maintenance jobs.
    Congress would benefit from this plan in two important 
ways: It improves the transparency of Amtrak's train operating 
costs by removing the allocated Northeast Corridor 
infrastructure costs; and, secondly, it reduces Amtrak's 
required appropriation by close to a billion dollars a year.
    This ongoing approach to creation and saving is achieved by 
using private-sector funding of Amtrak's Northeast Corridor. 
The IMO, using private-sector funds, pays for all rail 
infrastructure operations and improvements. All improvements 
become the property of the Federal Government as they are made.
    Funding is achieved through a $17.5 billion zero scoring 
RRIF loan. Prior to receiving the RRIF loan, the infrastructure 
management organization, or IMO, must furnish the Federal 
Treasury a third-party investment grade repayment guarantee in 
the full amount of $17.5 billion. In this way, taxpayers get 
the benefit of this private-sector investment with absolutely 
no financial risk to the Treasury.
    Amtrak itself benefits. The IMO would be mandated to 
transfer $2 billion in cash to Amtrak and assume automatic two-
quarters of a billion dollars of debt from Amtrak. And, 
ultimately, the biggest beneficiary of this plan is the 
traveling public. The IMO must increase the number of 
passengers in order to generate new revenue. Revenue increases 
come from new train services that pay trackage fees to the IMO 
and from which the IMO pays for infrastructure improvements.
    In closing, the IMO plan is a comprehensive, workable 
proposal that protects the stakeholders and, unlike any 
proposal under consideration, provides a funding solution. It 
meets the needs of the traveling public and will stimulate a 
new age of rail travel with new stations, expanded service 
patterns, faster trip times, greater reliability and new 
trains.
    We urge Congress to implement the IMO plan so that all 
America can realize this positive vision of passenger rail 
service in the United States. Thank you.
    Mr. LaTourette. Thank you, Mr. Serlin, for your testimony.
    Mr. Reistrup, welcome. We look forward to hearing from you.
    Mr. Reistrup. Thank you, Mr. Chairman.
    I am Paul Reistrup, Chairman-Elect as of this Monday, the 
19th, of Railway Service Corporation, Wilmington, Delaware.
    You may remember I was the second president of Amtrak 
during the period we acquired the Northeast Corridor under the 
direction of Congress. On that watch, most of the equipment 
that still is out there running today, the Amfleet and 
Superliners, were ordered and introduced into service.
    We have today, RSC, several things we would like to propose 
to you. The first is that there be a pilot project. That has 
been discussed today. We have specifics. Also very important is 
the beginning of an Infrastructure Trust Fund for railroads, 
passengers in particular, and then the private sector 
initiatives, which would be responsive to many of the concerns 
of the members that I have heard today.
    The capital costs of new equipment would be covered by the 
group that I am involved with. The pilot project would be on an 
existing Amtrak route using existing Amtrak equipment that 
would be upgraded for a quick start-up, hopefully in year 2006. 
It would not require Federal funds. The other routes would roll 
out, should this be successful, and that lowers the risk, of 
course, because this would just be one pilot route. The 
Infrastructure Trust Fund is a definite must before any 
subsequent pilot projects would be rolled out because the 
infrastructure is capacity constrained throughout the United 
States.
    We are committed, RSC, to a union operation. We want Amtrak 
to operate this, and I will go into specifics on this. We also 
have a commitment of $20 million for start-up money and $100 
million for financing the equipment, and that is debt 
financing.
    This obviously is to, on this route, double the ridership. 
That is the goal in this decade.
    The very important bottom line is to reduce the operating 
costs per seat mile, similar to what Southwest Airlines has 
done in competition with the other airlines. Got to have faster 
door-to-door service than driving. And we want also to point 
out, I have exhibits.
    Exhibit 1 establishes the organizational structure with 
Amtrak with a new company called Amtrak Railroad Operations, 
ARO; and you can see it for yourself, RSC basically is the 
business development, not the operator in this case.
    Also, I have the details of the infrastructure, which is 
Exhibit 3; and Exhibit 2 is the specifics of the pilot project.
    Mr. Chairman, I would like permission to introduce a letter 
from Louis--we call him Lou--Paone of Houlihan Lokey Howard & 
Zukin, a restructuring firm that has worked with Conrail, also 
in the airline restructuring ports, has worked many times with 
labor unions and basically outlines the specifics of financing 
this pilot project with private funds without Federal support.
    Mr. LaTourette. Without objection.
    Mr. Reistrup. Thank you.
    Mr. LaTourette. Thank you very much.
    Our next witness is a good friend from the State of Ohio, 
does a great job on behalf of the rail passengers not only in 
Ohio but around the country, Dominic Liberatore.
    Dominic, thank you for being here. We are looking forward 
to hearing from you.
    Mr. Liberatore. Thank you, Mr. Chairman.
    Good afternoon. I am Dominic Liberatore, Executive Director 
of All Aboard Ohio. We are a not-for-profit citizen-based group 
that advocates for improved passenger rail service and 
increased freight capacity within Ohio and the region. I want 
to thank you Mr. LaTourette, Ranking Member Brown and the other 
members of the subcommittee for having me here today.
    I thank you, Mr. LaTourette, for your efforts in advancing 
H.R. 1630 and 31, as well as the appropriations that Amtrak is 
currently under.
    All Aboard Ohio also strongly supports Senate bill 1516, 
the Passenger Rail Investment and Improvement Act introduced by 
Senators Lott and Lautenberg and trusts that this committee 
will continue to work with its Senate counterparts. And I would 
like to mention that Senator DeWine from Ohio has also 
cosponsored this bill.
    I am here on behalf of all Ohioans who wish to ride 
passenger trains and to speak in support of these pieces of 
legislation.
    Ohio and the Nation needs a stable, cohesive and innovative 
national passenger rail system under Amtrak, but they have been 
unable to provide such service due to the lack of stable, long-
term Federal funding and the lack of a mandate to provide the 
kinds of service that meet the needs of Ohioans.
    As the graphic on the monitor illustrates, Columbus, Ohio, 
is the second largest metropolitan statistical area in the 
United States with no passenger rail service. However, since 
Phoenix is served indirectly by service 35 miles away Columbus, 
Ohio, is actually first.
    Within the United States, within the State of Ohio, our 
State capital is the largest city in the country with no 
passenger rail service. It is not an honor that our 
organization is proud of, nor are the citizens of Ohio.
    Even more ironic is the fact that the Cleveland, Columbus 
and Cincinnati corridor has a higher population corridor 
compared to France; and the French have much better passenger 
rail service.
    I would like to discuss privatization a little bit. Some 
believe that privatization is a magical idea to improving 
passenger rail. I am greatly concerned about these statements, 
especially in light of the service failures and incredible 
government waste expense incurred in Great Britain. Rather than 
privatize, I believe House Resolution 1630 will provide 
stability, improved accountability, encourage better and more 
service, allow Amtrak to develop new routes, purchase more 
modern equipment, and make badly needed repairs to both 
existing equipment and infrastructure.
    Ohio is one of the 24 States that are developing or 
implementing planning for regional passenger rail service with 
fast, frequent and timely trains and designated short haul 
corridors. The Ohio Help plan calls for six to eight trains a 
day running at speeds of up to 110 miles an hour serving 
virtually every major city in Ohio and connecting them with 
major international airports and business hubs like Chicago, 
Detroit, Pittsburgh, Toronto, New York, Philadelphia, and even 
Washington, D.C. It would also greatly expand capacity and 
eliminate bottlenecks for movement of freight rail.
    Within the State of Ohio we have a serious capacity crisis 
with the lack of track to move the increasing amount freight 
coming from the coast. Preliminary economic impact studies 
indicate that the Ohio hub system, if built, will be a strong 
tool for developing new businesses, expanding existing 
businesses, creating more and prevailing wage jobs which cannot 
be outsourced, and putting more dollars into local economies. 
Just building the Ohio hub will create over 6,000 jobs within 
Ohio and the region.
    But as the hub plan advances through the planning process 
at the State level, it is impeded by the lack of a Federal 
funding mechanism that would allow States and the Federal 
Government to partner in the funding of this plan and other 
plans.
    Please direct your attention to the monitors. When 
discussing transportation funding disparities, the former 
chairman of this committee, Representative Jack Quinn, said: 
You get what you pay for. He could not be more correct. All of 
this discussion about a little dollars here and a little 
dollars here is taking away from a large discussion and the 
reality of the situation.
    That is the reality. The reality is we invest in our 
highways, we invest in our airports, we have world-class 
airports, and we have a world-class highway system. And we have 
a third-rate passenger rail network due to the lack of Federal 
funding. Do not be confused by anything else. That is the 
truth.
    House Resolution 1631 I believe begins to answer this 
critical problem. It establishes the same 80/20 Federal-to-
State funding match that other modes like highways and airports 
enjoy. This is absolutely necessary if we are to bring balance 
to our transportation system.
    I don't think I am exaggerating when I say this need is 
critical even now, as gasoline prices rise, highways become 
more crowded and our Nation's airlines face financial 
uncertainty and current bankruptcy in many cases. Ohioans and 
other Americans are looking for an option to driving and 
flying, but that option too often is either not there or too 
inconvenient in terms of time or location. If you want to get 
on a train, Amtrak, within the State of Ohio, you have to do it 
in the middle of the night due to lack of frequency and Federal 
investment.
    The illustration shows just how our national transportation 
system is fundamentally unbalanced and a handicap to the 
mobility of all Americans. Ironically, in spite of these 
limitations, Amtrak has seen a steady increase in ridership on 
all of these trains both short and long distance. State-
supported train service in California, the State of Washington, 
Illinois, and Maine have seen ridership increases to the point 
where funding to buy or lease more passenger cars is 
desperately needed.
    Members of the committee, House resolution 1630, 1631 and 
Senate bill 1516 will help Ohio and the rest of America get on 
track.
    Thank you for having me at your subcommittee hearing today 
and for your work to improve and invest in Amtrak. If there was 
ever a time to bring passenger rail to the forefront now is 
that time. Thank you.
    Mr. LaTourette. I thank you very much, Mr. Liberatore, for 
not only coming but for your fine testimony.
    Our final witness today is Robert Scardelletti, who is the 
International President of the Transportation Communications 
International Union.
    Mr. Scardelletti, thank you for being with us; and we look 
forward to your testimony.
    Mr. Scardelletti. Thank you, Mr. Chairman, Ranking Member 
Brown.
    I am the International President of Transportation 
Communications Union. We represent about 47,000 of America's 
working men and women, and we are now proudly affiliated with 
the 700,000 member International Association of Machinists. On 
Amtrak, TCU represents more than 8,500 employees who work as 
clerks, carmen, supervisors and onboard service workers.
    I start from the premise that Americans want, need and 
deserve a truly national rail passenger service, not one that 
just serves a few corridors on each coast. I believe that most 
of the reform proposals being circulated will result in just 
that, a handful of subsidized corridors and the rest of the 
country being deprived of any train service at all. Those who 
suggest that breaking Amtrak into various components somehow 
would reduce its public subsidy ignore its own history.
    Amtrak was created in the first place because the Nation's 
private freight railroads sought to eliminate passenger trains 
because they simply could not make a profit from them. 
Recognizing that rail passenger service was an important piece 
of the Nation's transportation network, Congress created the 
National Rail Passenger Service.
    There is no question that, since its inception, Amtrak has 
required continual Federal support, just like every single 
other mode of transportation in this country. But I submit that 
those who suggest that somehow privatization would be a magic 
bullet that would cure passenger rail service of the need for 
public subsidy are far off the mark. If anyone could have made 
a profit, it is the freight railroads who operated passenger 
service more than 100 years. They did not and they cannot. They 
do not advocate it today. They haven't expressed a smidgen of 
interest of going back to the future of private passenger rail 
service, even with Government subsidies.
    Today, we have heard from entities who say they are 
interested in running passenger trains. With all due respect, I 
believe the profit they foresee would be from the public 
trough, not from passenger operations themselves. And we need 
only look at Great Britain's failed experiment. Passengers were 
saddled with increased fares, shoddy maintenance practices, 
excessive job reductions, resulting in an unprecedented slew of 
train derailments, drastic deterioration of service and a 
coordination problem with a maze of poorly managed providers. 
The private contractors walked away with billions of public 
dollars, and the British taxpayers were left paying the tab.
    The various privatization proposals that are circulating 
share another feature of the failed British experiment. They 
would break Amtrak up into a crazy quilt of uncoordinated 
regions and entities. This is one of the reasons that these 
proposals are opposed by the Nation's freight railroads. Nor is 
there any reason to expect that breaking up what is now a 
coordinated, fully integrated system would somehow result in 
cost savings.
    Another misconception is that partial privatization or 
contracting out somehow would result in savings to Amtrak. My 
own union has direct experience with this approach. We were 
involved with Amtrak's biggest venture in contracting out in 
recent years.
    We lost approximately 300 jobs when, in 1999, Amtrak 
contracted out commissary operations. We were told that Amtrak 
would realize tremendous savings by being able to close their 
commissary facilities since the contractor would have its own 
more modern facilities offsite. However, the contractor quickly 
discovered that offsite commissaries did not logistically work. 
Amtrak ended up having to maintain most of its facilities, and 
we have good reason to believe that the venture has been a 
financial and managerial disaster for Amtrak. Amtrak lost a 
significant amount of control over inventory and food selection 
and suffers from the vendor overstocking trains and not 
receiving full credit for unsold items.
    Contracting out is not a panacea but is symptomatic of a 
common theme in many of the proposed reforms and that is to 
blame Amtrak workers. The Amtrak Board of Directors, for 
example, in its fiscal year 2006 grant request launched an 
outright assault on employee pensions, working conditions and 
job security. The Board went so far as to propose that Congress 
take new employees out of the railroad retirement system that 
is healthy and well funded. They also asked Congress to allow 
the Amtrak labor contracts to expire so that the company could 
impose work rule changes on its employees with no regard to the 
collective bargaining process.
    The Board argued that this radical departure from long-
standing labor law is necessary to ensure an equitable legal 
and regulatory framework for labor among Amtrak and its 
competitors. This rationale is completely without merit, and 
every rail carrier is subject to the same rules that Amtrak is 
seeking to exempt itself. Other modes, such as aviation and 
intercity bus, are subject to fair labor laws and do not allow 
the company to unilaterally impose new terms and conditions.
    In short, Amtrak's Board is not looking for an even playing 
field. They want an advantage over their workers that is not 
enjoyed by others in the industry and would represent a clear 
rejection of fair and balanced collective bargaining.
    Amtrak workers have sacrificed for more than 30 years to 
keep Amtrak alive in the form of lower wages and a host of work 
rule and other concessions. Furthermore, Amtrak employees, 
through their representatives, their unions, have always been 
able to reach agreements with Amtrak, even though it has been 
extremely difficult to negotiate with a company that is 
chronically short of funds.
    An Amtrak liquidation which would be the result of the 
administration's plans if enacted would have a devastating 
impact on the rail retirement system. Thousands of rail workers 
on the freight and commuter side would have their retirement 
and unemployment benefits threatened, and rail employers would 
see railroad taxes soar.
    Is Amtrak perfectly run today? Of course not. There are 
areas of improvement, and we want to work with the carrier and 
this committee on that effort. But how is dividing the 
franchise into various parts inherently better than the current 
framework?
    Amtrak is drowning under a deficit, struggling to turn 
around a significant deferred maintenance cost, paying less 
than standard rail industry wages and subject to unpredictable 
and highly volatile funding sources. These are the real 
problems that need the immediate attention of this committee.
    In the face of these incredible obstacles, Amtrak 
nevertheless does improve both in terms of ridership and 
operations; and towards this end, TCU salutes the Chairman, Don 
Young, Ranking Member Jim Oberstar, Subcommittee Chairman 
LaTourette, Ranking Member Brown and other members of the 
committee for their support of H.R. 1630 and 1631 which would 
provide Amtrak with the resources it needs to evolve into an 
efficient, modern national intercity passenger system.
    True reform of Amtrak would be, for the first time ever, to 
provide it with substantial funding levels necessary to provide 
quality service that Americans deserve and need. Soaring gas 
prices only highlight the benefits that Amtrak could provide if 
properly funded, as does national security issues such as 
transportation during September 11th and our recent national 
disaster under Katrina.
    In conclusion, I would emphasize that Amtrak was created 
precisely because a private system did not work. The private 
carriers who operated passenger trains wanted out because they 
simply could not make a profit. If they could not make a 
profit, there is absolutely no reason to believe that the 
privatization today would be any more successful; and when we 
speak of the national freight railroads we are dealing with 
some of the most efficient and profitable companies in this 
country.
    Mr. Chairman, thank you for allowing TCU to present our 
views on the future of Amtrak and intercity passenger rail 
service.
    Mr. LaTourette. Mr. Scardelletti, I thank you very much.
    A housekeeping matter that I should have mentioned before, 
we have a lot of important people in our audience, but we are 
honored to have Jolene Molitoris, the Administrator for the 
Federal Rail Administration under the Clinton administration, 
with us. Glad to see you, Administrator.
    Mr. Scardelletti, I am glad you talked about the food 
service and that decision. I know that you and your 
representatives were present at the hearing that we had on 
that; and I think it is as a result of your observations and 
other folks' observations--Mr. Crosby, who was here on behalf 
of Amtrak, and when I talked with Mr. Laney the other day in my 
office, they admit that they made a bad contract--not they, but 
a bad contract was made. I think some of the observations you 
have made have sunk in on that administration, and I think that 
they are going to do--I trust that they are going to do what 
they have to do to fix and make it right.
    I just have a few questions, Mr. Serlin, of you. You heard 
Mr. Scardelletti, and I assume those observations are not new, 
and I assume your IMO proposal would involve a new franchise or 
manager of the corridor and that you would somehow assume all 
of Amtrak's existing labor contracts and obligations and sort 
of hold harmless relative to labor. Am I correct on that?
    Mr. Serlin. Yes, you are.
    Mr. LaTourette. So anybody who works on the Northeast 
Corridor today would work on the Northeast Corridor tomorrow if 
you were successful in achieving this IMO status?
    Mr. Serlin. We would be offering them a job. We can't 
obligate them to accept it. But, yes, you are right.
    Mr. LaTourette. When folks from your group visited me 
earlier, is it the contemplation that this IMO would become a 
second national railroad?
    Mr. Serlin. No, sir. The IMO would simply manage on behalf 
of the Federal Government Amtrak's owned infrastructure, which 
is the 500 route miles roughly in the Northeast, 100 miles in 
Michigan and Chicago's Union Station.
    Mr. LaTourette. And the $2.75 billion that you mentioned, 
the $2 billion in cash and the assumption of about $750 million 
of obligations, I assume that that would be guaranteed or 
mandated by statute or guaranteed by contracts?
    Mr. Serlin. That would be by statute or we would be 
obligated to make those payments.
    Mr. LaTourette. The last question is the RRIF loan that you 
were talking about sounds a little bit better than the regular 
RRIF loan, which is a guarantee that the government--but I 
thought you were describing something that was more concrete 
than the regular RRIF loan. Am I right about that?
    Mr. Serlin. You are, sir.
    One the issues in the standard RRIF loans is the nature of 
the collateral. Here, prior to the RRIF loan being granted, 
collateral equal to 100 percent of the RRIF loan, a third-party 
investment grade instrument would have to be provided to the 
U.S. Treasury.
    Mr. LaTourette. I did have one more question before I move 
on to somebody else.
    There have been a lot of proposals--not only those 
presented today but others--dealing with the spin-off of the 
Northeast Corridor. One of the things--and when I get to Mr. 
Reistrup I want to talk to him about it--is that when there was 
a perpetual freight easement given to Conrail, which has now 
been assumed by their successors in interest, CSX and Norfolk 
Southern Railroads, does your plan envision altering that 
relationship, that easement? Or, with or without those 
railroads, does it envision an expansion of freight travel as 
well on the Northeast Corridor?
    Mr. Serlin. It is a two-part question. Let me answer 
individually.
    Firstly, all the existing statutes, all the existing 
contracts would continue forth post separation of the 
infrastructure so that IMO would have to assume all of the 
agreements with the freight railroads whereas as is.
    Secondly, we fully acknowledge that the corridor is, first 
and foremost, a passenger corridor, but within the rubric, if 
working with the freight railroads, the freight railroads can 
increase their business. We would look forward to working with 
them to achieve that.
    Mr. LaTourette. Appreciate that
    If it is all right with Ms. Brown, I have a few more 
questions. We have a series of votes. I would like to recess 
now and come back and ask a few more questions. Is that all 
right with you? We have three votes, so we will stand in recess 
and try get back together at 2:15, if we could. Maybe you could 
get a bite to eat, and we will see you at 2:15.
    The subcommittee stands in recess.
    [Recess.]
    Mr. LaTourette. If the witnesses will return to the table, 
we will try to move through this so that we can get you on your 
way.
    I have a few more questions before I yield to Ms. Brown.
    Mr. Reistrup, I think I was listening to your testimony, 
but--and when you were talking about a pilot project, but I 
don't think I heard you identify whether or not you and those 
that are working with you have identified what area of the 
country or what line you would be interested in running this 
pilot project on.
    I ask you that question because I find the idea of a pilot 
project to be an interesting proposal, but there will be those 
who say if you cherry pick a certain line--so I would like to 
know if you have identified where you would like to make this 
pitch and if you can tell us a little bit about how you came to 
choose that site.
    Mr. Reistrup. I would be happy to, Mr. Chairman, if you put 
Plexiglass between me and my new friend from Ohio. And we lived 
in Ohio, Cuyahoga Falls and also Painsville, early in my 
career.
    I really, a couple of years ago when I began advising RSC, 
suggested that they could not roll out the entire Amtrak 
operation, particularly all over the country, so I suggested a 
rollout plan. And we, from the beginning, talked about 
something that had relatively light freight traffic, two or 
three trains a day, so that the freight capacity is not a big 
issue, that the line is in relatively good condition and at 
least one friendly freight railroad. So we picked, and at my 
suggestion, Milwaukee through Chicago to St. Louis; and we 
would run as many as five round trips, five frequencies there.
    The line--as you may know, Federal funds have gone into 
positive train control to St. Louis. About half of that line is 
set up now for 110 miles an hour. It rides like a dreamboat. I 
have ridden the whole thing on a UP inspection train.
    The other is the former Milwaukee--a high-speed line that 
used to run 120 miles an hour with steam when I was a kid. That 
line today is limited to 79 miles an hour. But it is Canadian 
Pacific, and they also work with the passenger carriers and 
have light freight traffic. That is why we did it. We wanted to 
have a hub where there is maintenance for the locomotives and 
cars and right downtown Chicago is where that is.
    Mr. LaTourette. Do you need legislation to make this pilot 
project a reality? Or do you believe that the current statutory 
framework under which Amtrak is operating could give them the 
ability to move forward on what you have suggested to us today?
    Mr. Reistrup. I am not an attorney, but we do have one that 
is with Metro North in our group, Walter Zelig, and we do not 
feel that legislation is necessary. Amtrak, being a corporation 
in the District of Columbia, could do it with us because they 
would be running this.
    Mr. LaTourette. Have you talked to the powers that be at 
Amtrak about your proposal?
    Mr. Reistrup. Yes, sir, we have.
    Mr. LaTourette. Two other--and I thought you heard you 
say--or maybe in a previous meeting that I had where folks 
outlined your proposal--that you think you could have this 
pilot line up and operational by spring of 2006?
    Mr. Reistrup. Yes, sir.
    Mr. LaTourette. You mentioned a trust fund dedicated for 
rail. I know that one of my other postings is the Water 
Resources Subcommittee, and a lot of people are now thinking 
about a trust fund, because we have a huge deficit in our sewer 
and water line capacities in this country. And the question, 
the $64,000 question, is where do the funds come from that goes 
into the trust fund?
    I know that people in the bottled water industry, for 
instance, are all up in arms because they think the easiest 
thing for us to do is put a nickel on these bottles of water. 
Where do you envision the funds coming from for a trust fund?
    Mr. Reistrup. Part of the funding would come from the 
passenger ticket revenues along the lines, which would be the 
Amtrak ARO operation, but also any commuter operators, users. 
And where the improvements included freight, double-tracking, 
for instance, freight capacity, freight would be part of that.
    Mr. LaTourette. And the last, Mr. Scardelletti had to catch 
an airplane, but you also heard a number of his concerns and 
the concerns that I share and I know the ranking member does as 
well. How would the issue of existing labor contracts be dealt 
with on this line that you envision running as a pilot program?
    Mr. Reistrup. In brief, the existing labor agreements would 
be in place, Amtrak contracts, because Amtrak would be the 
operator; and if there had to be a slight change in crewing, it 
is not really a union consideration, but a local agreement, 
running through Chicago being an example of that.
    But we would live within the existing rules. For example, 6 
hours for a lonesome engineer without an assistant, and that 
would be the limit. Or there would be two.
    Mr. LaTourette. Okay. And, last, it is a pleasure to have 
you here as a former President of Amtrak and maybe you can help 
me with something that has troubled me. I think about the time 
you were at Amtrak. I recall the 4R act authorized Amtrak to 
enter into agreements, and one of the agreements that Amtrak 
entered into was the granting of this perpetual easement of 
freight to Conrail, now defunct and inherited by CSX and 
Norfolk Southern. So whether the corridor in the future is 
operated by Amtrak or anyone else, no freight can operate 
without the consent of those two freight railroads unless the 
easement that was negotiated is bought out. Can you share with 
us what motivated Amtrak at that time to give away forever a 
freight monopoly? Now it is a duopoly on the railway on the 
Northeast Corridor.
    Mr. Reistrup. At that time--from my standpoint at that 
time, Mr. Chairman, I felt that having Conrail, who was 
interested in survival, did not like passenger trains. Much of 
its management, they inherited that attitude. We could not have 
them running metroliners and have Amtrak survive very long. So 
we basically accommodated them with this easement.
    Now, there are three operators, Norfolk Southern, CSX, but 
I call it Little Conrail up in New Jersey as well. That 
easement does exist, and it is exclusive, as I read it. I am 
not an attorney.
    Mr. LaTourette. It is, too. And it is not a question but my 
district office in Painsville, Ohio. So, like Mr. Liberatore, 
you are well represented.
    Ms. Brown.
    Ms. Brown. Thank you, Mr. Chairman.
    First of all, I have a letter here from the Transportation 
Trade Department, AFL-CIO, which states their opposition to the 
IMO plan. Mr. Chairman, with your permission, I would like to 
insert that into the record.
    Mr. LaTourette. Without objection.
    [The information received follows:]
    [GRAPHIC] [TIFF OMITTED] T5911.006
    
    Ms. Brown. My question is for Mr. Serlin. Do you have a 
detailed business plan and a detailed capital plan which states 
how much will be invested, where and when it will be invested, 
and on what specific projects and the costs of the projects? If 
so, can you provide that to the committee for the record?
    Mr. Serlin. We do have such a plan, and we would be very 
happy to share it with the committee. It is proprietary, so we 
are restricted from entering it into the record, but we would 
be very happy to meet with you and share it with you and your 
staffs.
    Ms. Brown. Okay. Your proposal asks for $17.5 billion of 
RRIF loans with no clear mechanism for repayment. How can you 
justify such a request, given your limited experience in the 
railroad industry? How you would repay the loan?
    Mr. Serlin. It is a multipart question, so let me address 
each part individually.
    Firstly, the way the RRIF loan--there are two ways in which 
the loan can be repaid. Most critically, the U.S. Government 
holds a third-party investment grade instrument in the value of 
$17.5 billion, which means in the event that the IMO--in our 
case, RIM--would default or be unable to pay the full amount, 
you have the full amount or Treasury has the full amount in its 
hand. That guarantee instrument is the full amount of the RRIF 
loan.
    Ms. Brown. Just another follow-up question. What fees would 
you impose on users or passengers that are above and beyond the 
fares as paid already? Would it be imposed on States and local 
governments? In other words, what are your revenue streams?
    Mr. Serlin. There are a multitude of revenue streams. You 
have from the freight railroads--we do not foresee any 
increases on--there are three freight railroads: CSX, Norfolk 
Southern, PNW. We do not see any increases, and we would look 
forward to working with them on additional business at agreed-
upon rates.
    You have the commuter carriers that are currently protected 
under title 45. They would have exactly the same title 45 
protections. None of that is being modified. So there would be 
no increases unless it was agreed to between them and the IMO. 
But there is no basis for that unless they ask for it. They are 
protected under title 45.
    So--and there is no imposition of charges on the States. 
The States are the beneficiary of the improved infrastructure 
network and of the increased--of the new stations we would be 
building as part of this and of the additional trains and the 
additional throughput.
    Ms. Brown. Thank you.
    In closing, Mr. Chairman, let me just say that there is no 
mode of transportation that pays for itself, irregardless of 
what any member of this committee says or any Member of 
Congress says. I have been on the Transportation Committee for 
13 years, but I had 10 years of experience before I came here 
on the Transportation Committee in the Florida house, and I 
know someone here says Florida is ready to come up with 
millions of dollars. I hope you are not waiting for the check.
    So I know we have our challenges before us as far as Amtrak 
is concerned. But it has been the stepchild of this 
administration and the Congress as far as that is concerned. 
But, clearly, the American people support Amtrak and they would 
like for us to work to make the system a world-class system.
    I thank you, Mr. Chairman, for holding this hearing.
    Mr. LaTourette. I thank the gentlelady.
    Mr. Mica.
    Mr. Mica. Mr. Chairman, just for the record, the State of 
Florida--you can snicker and laugh, but the State of Florida 
had $70 million prepared to put into one of the corridors, and 
I see people shaking their head in the affirmative.
    I will also put that in the record with permission and 
document it, Mr. Chairman.
    To fully implement--to continue the discussion on the $17.5 
billion, what kind of a timetable would you need to get into 
that kind of a arrangement, to actually provide service?
    Mr. Serlin. I am sorry. Would you mind--I am not quite sure 
I follow the question. What service?
    Mr. Mica. You are talking about putting $17 billion 
investment through a loan. How long would it take to actually 
put that investment in and see it realized?
    Mr. Serlin. Thank you for restating the question.
    The $17 billion--again, if RIM is selected for the IMO by 
the Surface Transportation Board, because this is not being 
sole sourced by our business plan we would start investing that 
literally on day one. Now, obviously, it is a slow and steady 
process. You cannot do this too quickly. You do not want to 
disrupt train service, operations of Amtrak or the commuter 
carriers or the freight carriers, so this has to be done in a 
slow systematic fashion. The word slow means safe. It does not 
mean--does not mean lackadaisical. Safety is clearly the first 
thing that goes here, and everything is done to address the 
safety issues.
    Congressman Simmons, bridges in Connecticut. The State 
bringing--continuing the work of Amtrak on the Susquehanna 
River bridge on the southern tier where there has been little--
relatively little investments spent to date. We would 
anticipate being able to complete bringing not only just to a 
state of good repair but beyond a state of good repair in parts 
starting within just several years. We look at this of having a 
turnaround starting about 15 years now. Starting year 16, our 
projections are to be cash positive.
    Mr. Mica. Okay. Also, for the record, there is 
transportation that does make money. Of course, they cited the 
cruise ship industry and some of the pleasure rail passenger 
services. Some run by the cruise industry does make money.
    I just met with representatives of Greyhound. They provide 
our national bus network, and they do make money. They are 
listed on the stock exchange if anyone wants to see them.
    Not that we have to make money on this. I am just trying 
to--I have always said we would have to subsidize some 
essential service, and we do that in airlines and other areas. 
What we want to do is minimize the subsidization and also 
maximize the service.
    One the problems I have with any of the privatization 
proposals is that we have to have some accounting; and I think, 
Mr. Chambers, your association suggests a line of business 
basis. We can't take a proposal and do a small demo project and 
not know what Amtrak's true costs are, and we have had 
testimony again today that confirms that they have $175 million 
in unaccounted-for expenses. So to try to find out what it is 
costing Amtrak and compare that service with some private 
sector demo will never work until we get the finances 
straightened out. That is part of your plan, isn't it, Mr. 
Chambers?
    Mr. Chambers. Yes, that is correct. In fact, we have a 
another element in it. And I haven't studied your Mica plan 
carefully.
    Mr. Mica. The biggest problem I see, too, is the only rail 
infrastructure that they really maintain is that Northeast 
Corridor and that 100 miles we talked about in Michigan. That 
is why I say if we could take that out and also have a private 
operator from the operations standpoint you can see exactly 
what your dollar costs are in the balance.
    Now, Amtrak should be out of the commuter business. There 
are plenty of vendors that do commuter business and do it very 
well. We have them in Florida, and they do make money. Part of 
it is subsidized by the government, but they do make money and 
provide service; is that correct?
    Mr. Chambers. Yes. I would like--
    Mr. Mica. Like Herzog, for example?
    Mr. Chambers. Herzog operates in Florida. In fact, several 
of the commuter agencies are going to the model that we are 
recommending of going to competition with private vendors to 
run the commuter operation.
    Mr. Mica. But a private operator that provides--and we know 
that Amtrak gets into the commuter business--cannot compete 
with Amtrak when they bid against a government entity that is 
grossly subsidized, where we can't figure out even the bottom 
line their finances, can we?
    Mr. Chambers. That is the position--that is correct. That 
is the position of NRC. Amtrak is working on it. But until they 
are operating on the same kind of a private basis as the other 
carriers with their inherent subsidies and inherent political 
relationships and so on, they provide competition that you 
can't compete against in a transit environment.
    Mr. Mica. If necessary, if it takes me 13 additional years, 
I will get audits or GAO reports on every aspect of their 
operation until we figure out what the costs are; and the next 
one is going to be a doozy coming up.
    Mr. Chambers. I would like to go to your first question, 
because it is an important one.
    You are right. What we are proposing is the Gunn-Laney 
proposal to break Amtrak grat subsidies down to lines business. 
We also have a proposal that a study should take place on the 
Northeast Corridor on financing mechanisms including the RIM 
proposal, commuter fees, efficiencies, and so on should be part 
of that study.
    Our key proposal--goes back to your dialogue with Ms. 
Brown. A key part of our proposal is that there should be 
subsidy available for the Secretary to be able to make direct 
grants to the States to launch demonstration projects using 
alternative operators.
    Florida, since there has been debate about that, is a good 
example of exactly what we are proposing here. We are proposing 
that you take the amount that Amtrak would be subsidized for 
operating subsidy and for capital and make that available to 
the State Department of Transportation. The Florida State 
Department of Transportation then could select Amtrak or they 
could go into a competition. And Florida is a good example. 
Florida does not have one of those State-subsidized routes 
today so this would be a new operation.
    You are correct that Florida has made some commitment of 
funds, which I understand is still there. Amtrak backed away 
from it because they were losing money and did not want to 
launch new service. The last time that I talked to the Florida 
East Coast they were still interested in launching that 
service. Under this proposal then, the Secretary of 
Transportation from the State of Florida could make a proposal 
to the Secretary to provide--a grant; and then the State of 
Florida could select Amtrak if they chose or they could put it 
out to bid or ask Trirail to run the service. Which would be 
good for me because my client, Herzog, operates the Trirail 
trains. So that could work out well. They would have these 
kinds of options, and then we would get some testing of the 
private market and how it really works.
    Ms. Brown is absolutely right. There are very few rail 
passenger operations anywhere that are not subsidized. The 
question is how the subsidy is going to come. We feel--and this 
is the key to this proposal. We feel that the subsidy should 
not be considered a subsidy but should be a public service 
obligation contract that goes from the USDOT to the operator to 
provide a service. Amtrak can compete for that, other operators 
can compete for that, and that is the model that is working 
now, starting to work around the world.
    In terms of Amtrak and privatization specifically, will we 
ever get there? I don't know. But I do believe if you deal with 
the legacy debt that several of you talked about, you go to the 
idea of public service contracts, that Amtrak itself could 
become a private operation over time, and I think we need to 
get on with it and try some of these demonstrations.
    Mr. LaTourette. Thank you, Mr. Mica.
    I thank all of the members who participated today. It was a 
robust hearing of ideas attempted.
    I want to thank our panel for your testimony. I want to 
thank you for your organizations, for taking the time to take 
an interest in the passenger rail in this country.
    I think that everybody agrees--I did not hear anybody 
disagree anyway--that we need to make sure that we have a good, 
viable, competitive passenger rail system in this country; and, 
hopefully, some of the ideas that came forth on this panel and 
the first panel will assist us in doing that.
    I would just make an observation. It was mentioned a couple 
of times about the Lautenberg bill, and I think it has good 
provisions and bad provisions. One of the provisions that 
troubled me is that it relies heavily on bonding, which I don't 
think has much chance of success in the Ways and Means 
Committee here, and I know it exceeds the current President's 
observations relevant to the Federal Government's bonding 
authority.
    So we hope to work with Ms. Brown and take some of the 
ideas that we have talked about today and fashion a House piece 
of legislation in the true bipartisan tradition of this 
committee and see if we can convince our Senate counterparts 
that we maybe have some ideas that they had not thought about.
    But, again, I thank you very much for being here, and you 
go with our thanks.
    This hearing is adjourned.
    [Whereupon, at 2:47 p.m., the subcommittee was adjourned.]
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