[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                 NORTHEAST CORRIDOR FUTURE: OPTIONS FOR

                    HIGH-SPEED RAIL DEVELOPMENT AND

                    OPPORTUNITIES FOR PRIVATE-SECTOR

                             PARTICIPATION
=======================================================================


                               (112-115)

                                HEARING

                               BEFORE THE

                              COMMITTEE ON

                   TRANSPORTATION AND INFRASTRUCTURE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           DECEMBER 13, 2012

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey            Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 EDDIE BERNICE JOHNSON, Texas
BILL SHUSTER, Pennsylvania           ELIJAH E. CUMMINGS, Maryland
SHELLEY MOORE CAPITO, West Virginia  LEONARD L. BOSWELL, Iowa
JEAN SCHMIDT, Ohio                   TIM HOLDEN, Pennsylvania
CANDICE S. MILLER, Michigan          RICK LARSEN, Washington
DUNCAN HUNTER, California            MICHAEL E. CAPUANO, Massachusetts
ANDY HARRIS, Maryland                TIMOTHY H. BISHOP, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHAEL H. MICHAUD, Maine
JAIME HERRERA BEUTLER, Washington    RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida        VACANCY
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
    Tennessee
VACANCY

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................     v

                               TESTIMONY
                                Panel 1

Hon. Carolyn B. Maloney, a Representative in Congress from the 
  State of New York..............................................     9

                                Panel 2

Hon. Karen J. Hedlund, Deputy Administrator, Federal Railroad 
  Administration.................................................    14
Joseph H. Boardman, President and Chief Executive Officer, Amtrak    14
Hon. Joan McDonald, Chair, Northeast Corridor Infrastructure and 
  Operations Advisory Commission; and Commissioner, New York 
  State Department of Transportation.............................    14
R. Richard Geddes, Adjunct Scholar, American Enterprise 
  Institute; Associate Professor, Department of Policy Analysis 
  and Management; and Director, Cornell Program in Infrastructure 
  Policy, Cornell University.....................................    14
J. Perry Offutt, Managing Director, Morgan Stanley and Company 
  LLC............................................................    14
John P. Tolman, Vice President and National Legislative 
  Representative, Brotherhood of Locomotive Engineers and 
  Trainmen.......................................................    14

           PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS

Hon. Eddie Bernice Johnson, of Texas.............................    41

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Hon. Carolyn B. Maloney..................................... \\
Hon. Karen J. Hedlund............................................    43
Joseph H. Boardman...............................................    60
Hon. Joan McDonald...............................................    78
R. Richard Geddes................................................    84
J. Perry Offutt..................................................    91
John P. Tolman...................................................   102

                       SUBMISSIONS FOR THE RECORD

Hon. John L. Mica, a Representative in Congress from the State of 
  Florida, request to submit the Amtrak chart entitled, ``Stair-
  Step Service Milestones''......................................    25
Hon. Karen J. Hedlund, Deputy Administrator, Federal Railroad 
  Administration:

    Responses to questions for the record from Republican members 
      of the Committee on Transportation and Infrastructure......    53
    Responses to questions for the record from Hon. Corrine 
      Brown, a Representative in Congress from the State of 
      Florida....................................................    58
Joseph H. Boardman, President and Chief Executive Officer, 
  Amtrak:

    Responses to questions for the record from Republican members 
      of the Committee on Transportation and Infrastructure......    69
    Responses to questions for the record from Hon. Corrine 
      Brown, a Representative in Congress from the State of 
      Florida....................................................    74
Hon. Joan McDonald, Chair, Northeast Corridor Infrastructure and 
  Operations Advisory Commission; and Commissioner, New York 
  State Department of Transportation, responses to questions for 
  the record from Hon. Corrine Brown, a Representative in 
  Congress from the State of Florida.............................    82
J. Perry Offutt, Managing Director, Morgan Stanley and Company 
  LLC, responses to questions for the record from Hon. Corrine 
  Brown, a Representative in Congress from the State of Florida..   100
John P. Tolman, Vice President and National Legislative 
  Representative, Brotherhood of Locomotive Engineers and 
  Trainmen, responses to questions for the record from Hon. 
  Corrine Brown, a Representative in Congress from the State of 
  Florida........................................................   108

                         ADDITION TO THE RECORD

Coalition of Northeastern Governors, written statement for the 
  record.........................................................   111

----------
\\ Hon. Carolyn B. Maloney did not submit a written 
  statement.
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                   NORTHEAST CORRIDOR FUTURE: OPTIONS


                  FOR HIGH-SPEED RAIL DEVELOPMENT AND


                    OPPORTUNITIES FOR PRIVATE-SECTOR


                             PARTICIPATION

                              ----------                              


                      THURSDAY, DECEMBER 13, 2012

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                            Washington, DC.
    The committee met, pursuant to call, at 10:05 a.m., in Room 
2167, Rayburn House Office Building, Hon. John L. Mica 
(Chairman of the committee) presiding.
    Mr. Mica. Good morning. Welcome to this hearing of the 
House Transportation and Infrastructure Committee. And I 
welcome everyone this morning. Pleased you could join us.
    The title of today's hearing is the ``Northeast Corridor 
Future: Options for High-Speed Rail Development and 
Opportunities for Private-Sector Participation.''
    The order of business will be opening statements by 
Members. And we have another Member who has joined us. We will 
have an individual panel made up of Mrs. Maloney. Then we will 
go to our next panel of witnesses and question them and proceed 
with the hearing in that order.
    Let me make just a couple of custodial announcements. I 
apologize, the other day we tried to get the official committee 
room photo of the committee, and notice went askew, but we will 
reschedule that. And if votes are cancelled on Monday, which I 
don't know if they have made that announcement, but if they do, 
we will probably shift the official photo to Wednesday 
morning--folks may not come back until Tuesday--and probably 
about 10:15 because there is a Republican conference and 
Democrat caucus, usually, from 9:00 to 10:00 here and, we want 
to make certain everyone is notified.
    In addition, I would like, to the Members in the official 
photo, if we could have staff from both sides of the aisle, 
too, join us for one of the photos so that we can include them 
in one of the photographs that morning. It shouldn't take more 
than 5 or 10 minutes to get that done, but we would like to 
invite everyone and put everyone on notice. And we will try to 
get triple notification out to everyone for that.
    This morning's hearing is a continuation and will be, 
actually, the last full hearing of the committee. I am pleased 
to have chaired the committee during the past 20-some months 
and focus on our transportation needs and requirements. The 
very first hearing that I held as chairman was, I believe, 
January 27th, 2011. It was a field hearing in Grand Central 
Station, and it focused on the same issue, the development of 
the Northeast Corridor and high-speed rail.
    This hearing is also a part of a series of hearings to 
examine some of the operations of our primary transportation 
long-distance and high-speed carrier, which is Amtrak. And as 
you know, I have been one of the most vocal critics of Amtrak 
and its operations, but I also consider myself one of the 
strongest proponents of high-speed rail, intercity passenger 
service, commuter and mass transit in the Congress and in the 
United States. But what we want are projects that make sense 
for the taxpayers. What we want are projects that operate where 
we have the greatest need and the lowest subsidization by the 
Federal Government for those activities.
    But today we will focus almost entirely on the Northeast 
Corridor, where we started. And let me make a few comments 
about that.
    First, I have to say that the history of Amtrak and 
attempting to provide high-speed rail in the Northeast Corridor 
has been sort of a horrible history. And maybe I can highlight 
some of the problems we have had. And I don't want to focus 
just on the problems we have had, but you have to learn by your 
experience.
    First, the original intent to develop high-speed rail in 
the corridor, we came up with the Acela project. We have had 
regional service in the Northeast Corridor in the area from 
Washington, DC, to New York and to Boston.
    And let me say, I think it is absolutely critical that we 
develop that corridor. It is in not only the regional interest 
but in the national interest. We have the highest concentration 
of population. We have the most sophisticated delivery system 
and interconnection. We have light rail, subway, we have Metro, 
we have connecters all up and down the corridor so that high-
speed rail is not something that will run by itself.
    As opposed to, last week we heard about the major 
administration effort to produce high-speed. They are doing it 
between, I think, Bakersfield and Fresno in California, where 
there are very few people. Their intention is long-term, to 
connect it into population centers in San Francisco and Los 
Angeles, but it will be a long time before that is 
accomplished.
    Right now we do have the connectivity that we need, we have 
the population. And then we also have the only corridor, this 
430-some-mile corridor, is almost entirely owned by Amtrak, the 
American people and the taxpayers. That is as opposed to the 
rest of Amtrak service, 20,000 miles of service, long distance 
and some intercity service, on which Amtrak runs on private 
freight rail that is maintained and paid for on a lease basis 
to the private sector. And we, in fact, again, own this 
corridor.
    We have also highlighted before--actually, when I took the 
chairmanship in October of 2010--a report, and the title is 
``Sitting On Our Assets: The Federal Government's Misuse of 
Taxpayer-Owned Assets.'' The first part deals with GSA, and we 
have taken on GSA and some of the idle buildings that have sat 
vacant. In fact, met with Mr. Tangherlini a few minutes ago to 
continue that effort to get empty buildings filled.
    But if you read through this report, it also talks about 
the Northeast Corridor, which is one of the most valuable 
assets, transportation infrastructure assets, in the entire 
world, not just the United States. And it is an asset that we 
are sitting on that the taxpayers own. It probably never will 
be developed to its fullest potential by Amtrak. The Federal 
Government just has trouble operating a two-car train set, let 
alone developing a corridor with incredible real estate 
development potential and as a transportation and 
communications corridor. But this outlines, again, part of our 
goal was to take this asset, turn it into a valuable return and 
a transportation system for the American people.
    So we did our first hearing January 27, 2011. We had heard, 
at that time, I think the plans by the administration were to 
spend--and they had developed these plans in September 2010. 
They were going to develop the Northeast Corridor. It was going 
to cost $117 billion and take 30 years. The most recent 
projection that we have--and part of this hearing is to focus 
on where we stand with that effort to move forward and making 
this truly high-speed--but they are looking at $151 billion and 
also 30 years. My premise is that it can be done in a third of 
the time and probably at much less cost.
    You will hear Amtrak come forward in a few minutes, and 
they are going to tell you how their ridership is over the top, 
they are at 31 million, something like that. We probably have 
that many passengers in the DC Metro system in 1 month. But 
then they will also tell you their success in the Northeast 
Corridor. The figures we have from their reports are the 
Northeast Corridor had 12.9 million riders in 2000. In 2012 
recently released figures--and this is on the fiscal year, not 
the annual year--they had 11.4 million riders. Most of the 
increase has been in the State partnerships and other 
partnerships rather than, again, totally in the Northeast 
Corridor.
    The Northeast Corridor--and I think their projections are 
right; I have looked at their study--predict that you could 
have as many as 40 million riders in the Northeast Corridor, 
which is a number of times more than we currently have. 
Unfortunately, the train runs about 83, 84 miles per hour, 
average. They will tell you that they can get up to speeds of 
150 to 160 miles per hour. That is not high-speed. The way it 
is calculated, it is average miles per hour. The minimum, 
actually, if we have a standard, is 110. Almost every high-
speed train in the world is running today at 130-some, 150 
miles per hour, average. And here we are in the dark ages, as 
far as 83 miles. You will probably hear from Mrs. Maloney in a 
few minutes. The segment from New York to Boston is, I think, 
around 68 miles per hour, average. Pitiful.
    Again, I started to talk about some of the horrible history 
highlights of Amtrak's attempts to get into high-speed rail. 
They did acquire a train some years ago; called it the Acela. 
The acquisition was a total disaster. There were extended, very 
expensive lawsuits that went on and on.
    They acquired a European design and they acquired a 
European sleek model that was allowed to tilt because you could 
get faster speed and you had curves and other things that could 
enhance the speed. Unfortunately, Amtrak, in the way it handled 
first the acquisition and then the redesign of the equipment, 
redesigned the vehicle so they were wider. And they 
miscalculated because when the train got to higher speeds and 
it tilted, the wider trains would hit. So to compensate for 
that, they had to put metal shims into the expensive high-speed 
rail tilt trains that they bought so that they wouldn't tilt.
    So that was the beginning of the fiascos, but, 
unfortunately, the failure went on and on. For about a half a 
year, we closed down most of the Acela operations because they 
didn't have brake parts. They bought equipment for which they 
didn't have parts. And, again, another sad chapter in both 
their acquisition and operation and ability to operate and 
maintain any semblance of intercity passenger service in that 
corridor.
    They will tell you that they do make money, but they don't 
tell you that most of the capital that we provided, both from 
the Congress and also the subsidization and the stimulus money, 
has been spent for capital improvements. I defy anyone who is 
in business to not include some capital costs in your expenses.
    So that is part of the problem that we face. I want to say, 
we have some friends from labor here. First of all, I kind of 
like leaving my position of chairman because I have had so many 
items to say grace over. And I might add, at this juncture, 
too, I am very pleased of the progress of this committee in 20 
months, 20-some months. We passed almost every major piece of 
legislation. We passed a transportation bill that they said we 
couldn't pass. We passed an FAA bill that had 17 extensions. We 
passed a pipeline safety bill. Last night, the Senate passed 
our Coast Guard bill, and it is on its way to the President of 
the United States for his signature. And we are negotiating 
reauthorization provisions for FEMA, which would be the only 
remaining item that hasn't been addressed. So I think it is a 
record that speaks for itself.
    We have made some progress--well, I started to say about 
labor, I want to tell our labor folks that I remain committed 
to making certain that the benefits, the wages, the retirement 
opportunities remain constant for our Amtrak employees. 
However, their future is dim. If you continue down this path, 
which some of the labor leaders have led our workers on, we 
have gone since I came to Congress from 29,000 Amtrak employees 
to 19,000. And if you continue down this path, I don't think 
that is hopeful. If we actually expand the service in the 
Northeast Corridor and create true high-speed service, I 
believe it will be replicated where it makes sense across the 
United States, and opportunities for workers will expand, not 
contract.
    Finally, we have made some progress. We have finally gotten 
a designation of the Northeast Corridor by the administration 
as a high-speed corridor, which wasn't done before. We are now 
undertaking an environmental review. I am hoping we can assist 
them--and we will hear more of the progress of that--in 
speeding this up. We have provisions that were written under 
PRIIA, which I actually helped author, and we need to look at 
improvements in PRIIA so that we can move forward on an 
expedited basis, not only with environmental review but also 
with construction, operation, and future maintenance of these 
systems.
    And, finally, I am pleased with the progress of the 
Northeast Corridor Infrastructure and Operations Advisory 
Commission. We will hear from them today. They are moving in 
the direction that we set by law, but we want to make certain 
that we move that timetable forward. The Northeast Corridor is 
vital not only because of the mention I made of congestion and 
the interconnectivity and that we own the corridor, but also 
the entire country benefits because 70-plus percent of our 
chronically delayed airplane flights emanate from the Northeast 
Corridor. And everyone will benefit by having true high-speed 
rail in that corridor.
    So, with those extended comments, and I had to take a 
little bit of extra time--being chairman, you get that 
discretion. That is the bad news. The good news is you won't 
away to put up with that again after this hearing.
    So let me yield to my delightful, trusted, and wonderful, 
pleasant colleague and the former chair of the Rail 
Subcommittee, current ranking member, Ms. Brown, my colleague 
from Florida.
    Ms. Brown. Thank you.
    First of all, I want to sincerely thank the chairman for 
his service as chairman of this committee. I do know that you 
really have a deep love for transportation. And I would ask 
that the committee and the people in the audience give you a 
hand for your service. Thank you.
    [Applause.]
    Ms. Brown. And I wanted to welcome my classmate. We all 
came together, Mrs. Maloney and Mr. Mica. We are all in the 
great class of 1992.
    I am happy that we are having this hearing today, but I 
really kind of wish it was on the Water Resources Development 
Act, which is something that we have not dealt with. I held a 
meeting yesterday between the Port of Jacksonville and the 
Corps of Engineers to try to find a way to fix the navigation 
hazards at the port. But because this committee has failed to 
even work on developing a water bill, those ships will continue 
to be in danger and the economic development of the port will 
continue to suffer.
    Again, I am pleased that the current leadership of this 
House wasn't in charge when the Northeast Corridor was 
originally developed because it would not exist today. Just 
like high-speed rail in California, the Republicans' fondness 
for division on transportation is going to impact our Nation's 
economic development in a very negative way for a very long 
time.
    Let's be clear: The Republicans are no friend to rail. They 
have plenty to say about what others are doing wrong, but they 
never put their money where their mouth is. Their only goal 
during 8 years of the Bush administration was to focus solely 
on destroying Amtrak, which is clearly still the purpose of 
this Republican House of Representatives Transportation 
Committee. There is no plan to improve our Nation's rail 
system, no investment made in creating a new system or our 
current system. In fact, the Bush administration and the 
Republicans in Congress spend most of their money rebuilding 
transportation infrastructure in Iraq and Afghanistan, they 
have spent more money there than right here in the United 
States of America.
    So after 8 years of lip service from the Republicans, 
President Barack Obama committed real money to improve our 
Nation's rail system, including the development of high-speed 
rail. And, lo and behold, the same Members who didn't dedicate 
1 cent to high-speed rail when they were in charge are 
complaining that the money wasn't spent the way they wanted it 
to be spent.
    Mr. Mica's unhealthy obsession with privatizing the 
Northeast Corridor has eliminated support and even violates the 
U.S. Constitution. The chairman's privatizing language in the 
Passenger Rail Investment and Improvement Act of 2008 garnished 
no private-sector proposal for the Northeast Corridor, and his 
Rail Competition Act introduced last year was determined by the 
nonpartisan Congressional Research Service to be a violation of 
the Appointments Clause of the Constitution that would raise 
costs for States and commuter authorities and eliminate long-
distance service.
    I fully agree that we need true high-speed rail in the 
Northeast Corridor, but we need to have a serious conversation 
about how this is going to happen. And those hearings that 
focus solely on privatizing with the goal of making the 
administration look bad and ``gotcha'' politics need to stop.
    I want to welcome today's panelists and thank them for 
joining us, and I look forward to their testimony.
    And I yield back the balance of my time.
    Mr. Mica. I thank the gentlelady.
    And I also thank her for her comments. I agreed with the 
first part of her statement rather than the----
    Ms. Brown. Last part, right.
    Mr. Mica [continuing]. Latter part.
    But you could tell we do have a good rapport.
    Who seeks recognition?
    Mr. Sires?
    Mr. Bucshon?
    Oh, Mr. Sires, you are recognized.
    Mr. Sires. Well, thank you very much. I just want to say 
thank you for all the hard work that you have done in the last 
20 months. We may not agree on a lot of things, but, certainly, 
transportation is important to you.
    I also want to commend you on your portrait. You look like 
you are 30 years old. It looks great.
    Mr. Mica. Thank you.
    Mr. Sires. And, you know, as someone who rides the rail 
just about every weekend, you know, this corridor is really 
important to me because I am a rider, and I see how it is 
packed all the time.
    Do I wish we had a super-speed? Absolutely. You know, it 
takes me about 2\1/2\ hours to get from Newark to Washington, 
DC. And could we make it a lot better? You know, absolutely.
    This region, the northern region, is a very congested area. 
And if you really want to see it, drive up once in a while like 
I do and get on the New Jersey Turnpike at Exit 1, and you will 
see how you want to get back on the train because it is so 
congested and so much work.
    I would hope that in the future we can really seriously, 
seriously think about high-speed rail. This is a region of the 
country that generates jobs, and more important than anything 
else, it has the ridership to sustain such an investment. So I 
look forward to working in this committee toward that.
    And I want to thank the people at Amtrak, who week-in and 
week-out do a great job of trying to accommodate the people 
that ride. Could it be better? Absolutely.
    Thank you very much.
    Mr. Mica. Do other Members seek recognition?
    Ms. Johnson?
    Ms. Johnson. Thank you very much, Mr. Chairman and Ranking 
Member Brown.
    The Northeast Corridor is the transportation artery through 
some of the most populous metropolitan areas and regions in the 
entire U.S. And it is essential for commerce, in that we are 
able to move goods and people up and down the eastern seaboard 
efficiently.
    But with increased congestion both on our roads and in our 
skies, our current system is reaching its capacity. Not only 
are we currently reaching that capacity, but it is estimated 
that an additional 15 million residents will live in the 
already congested Northeast Corridor by 2050, a 30-percent 
increase. It is for this reason that our continued investment 
in passenger rail is so essential.
    The recent Thanksgiving holiday set a record for Amtrak 
ridership with 737,537 passengers. The record ridership brought 
in $56.1 million to Amtrak, an 8.4-percent increase over 2011. 
The Northeast Corridor is profitable and serves as a model for 
what we can accomplish with small investments in infrastructure 
in other parts of the country.
    What is unclear to me is why there has been a constant 
drumbeat to privatize Amtrak and to starve it of its much-
needed funding. As everyone on this committee knows, funding 
for infrastructure, whether it is for rail, transit, or surface 
transportation, has always come from the public sector. And 
only after we have made significant investments does it become 
attractive to the private sector. No one on this committee 
would suggest that it would be a good idea to privatize our 
roads or would suggest that it would be a good idea to 
privatize our bridges, yet we come back to this issue again and 
again with rail.
    I would suggest that a more worthwhile endeavor for this 
committee would be to check the partisan politics at the door 
and examine how we can improve and expand all modes of 
transportation that the American people depend upon.
    I thank you, Mr. Chair and Ranking Member, for calling this 
hearing and look forward to the witnesses' testimony.
    I yield back.
    Mr. Mica. I thank the gentlelady.
    The gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    And I could not let this moment go by without thanking you, 
Mr. Chairman, for your leadership. You and I have served on 
this committee for many years, and we have also served on the 
Oversight and Government Reform Committee. And I know that you 
have worked very hard to bring about a lot of change in our 
Nation and to our rail system. We may not always agree on those 
changes and how they should be made, but I have a tremendous 
amount of respect for you, and, certainly, I want to thank you 
for your service.
    And I also want to thank Ms. Brown, Ranking Member Brown, 
for her leadership and her staunch advocacy for the rail system 
and particularly Amtrak.
    Mr. Chairman, I could not let this moment go by, again, 
without at least expressing some disagreement with you with 
regard to unions. Unions are very, very important. It was 
unions that allowed my parents to raise seven children and, as 
former sharecroppers with only a second-grade education, in one 
generation to send their kids to college and allow me to be a 
Member of the Congress of the United States of America. It was 
unions. And I will fight until I die for the strength of unions 
because they do play a very significant role.
    Now, as a representative from Maryland, I know how critical 
the Northeast Corridor is to ensuring mobility from the mid-
Atlantic to New York and Boston. The corridor is also critical 
to local mobility and hosts many commuter rail lines, including 
Maryland's MARC system. Every year, 11 million passengers, our 
constituents, ride Amtrak in the Northeast Corridor, ridership 
that, as Secretary LaHood told this committee last week, is 
only expected to increase with population growth. Isn't that 
wonderful?
    While the creation of the Acela service moved us in the 
direction of high-speed rail, the Acela service simply isn't as 
fast as we need. We need modern high-speed rail service, and we 
particularly need it in the Northeast Corridor. I remind us 
that this is America, this is the United States of America, the 
greatest country in the world. We should have the very best 
service in the world. For that reason, I strongly support the 
vision for high-speed rail set forth by President Obama, as 
well as the Department of Transportation's decision to 
designate the Northeast Corridor as a high-speed corridor.
    At last week's hearing, I was pleased to hear Secretary 
LaHood discuss some of the progress that is being made in the 
efforts to modernize this essential infrastructure. I also 
applaud Amtrak's moves to develop a business plan that will 
attract appropriate private investment.
    That said, I strongly oppose any proposal that would turn 
responsibility for the development of the corridor over to the 
Northeast States. Development of the corridor will cost 
billions of dollars, and it is simply unrealistic to think that 
the private sector will make that investment alone. And I know 
that my home State of Maryland, like the other States in the 
corridor, does not have the resources available to develop it.
    I know that last week we heard from Edward Hamburger, 
president and CEO of the Association of American Railroads, who 
argued that there should only be one passenger rail operator, 
and that operator should be Amtrak. He stated that Amtrak is a 
leader in safety/security, operations, labor issues, and is a 
great partner for the private freight sector.
    Of course, significant infrastructure improvements are 
needed all along the corridor to modernize it and enable it to 
meet the growing demand. In Maryland, for example, the B&P 
Tunnel, which carries every train traveling into Washington, 
DC, from points north of the city, must be replaced. The tunnel 
was open in 1873, and its antiquated design limits train speeds 
to 30 miles an hour. We can do better; we must do better. This 
is the United States of America.
    In an effort to begin the long process that will be 
required to eliminate this bottleneck, I supported inclusion of 
a provision in the 2008 rail safety legislation that directed 
the Federal Railroad Administration to work with Amtrak, the 
Service Transportation Board, the city of Baltimore, the State 
of Maryland, and rail operators to select and improve a new 
rail tunnel alignment through Baltimore that will permit an 
increase in train speed and service reliability.
    This provision requires environmental reviews for the new 
alignment to be completed by September 30, 2013. The project 
subsequently received from the Recovery and Reinvestment Act 
$60 million in funding authorized in the rail safety bill to 
support the studies necessary to enable a new alignment to be 
selected. And so, Mr. Chairman, we move forward. And I know 
that we move forward with your blessings.
    Again, I want to thank you for your tremendous leadership. 
And I want to thank all of our witnesses for being here today.
    And with that, I yield back.
    Mr. Mica. Thank you.
    Do other Members seek recognition?
    If no other Members seek recognition, then we will welcome 
our colleague, the Honorable Carolyn Maloney, who represents 
New York, and we will recognize her for a statement.
    Thank you, and you are welcome.

TESTIMONY OF THE HONORABLE CAROLYN B. MALONEY, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF NEW YORK

    Mrs. Maloney. Thank you so much, Chairman Mica and my good 
friend and colleague Corrine Brown, and the members of the 
Committee on Transportation and Infrastructure, for inviting me 
to speak at this hearing.
    I am truly honored to be here at the chairman's final 
hearing, and I want to thank him for his focus on bringing 
high-speed rail to the Northeast Corridor and for his support 
of the Second Avenue Subway. I appreciate that last year's 
field hearing was held in New York.
    To begin with--and I would just like to say, Mr. Chairman, 
I know this is your last hearing, and I hope you will keep your 
focus on the Northeast Corridor. And I would like to challenge 
you to start a bipartisan caucus of Republicans and Democrats 
to work together on the Northeast Corridor, all the affected 
States and communities, because we know how hard it is to push 
proposals through Congress and to make them happen.
    I truly agree with your analysis that we could cut this 
price down a third and that we could cut the time down a third 
and build it in 10 years if those of us who care about it 
decided to focus on it, and if Corrine would help us out, who 
has always been such a great advocate on high-speed rail. So I 
hope you will think about that, and I appreciate what you have 
done already.
    I just want to begin my comments by thanking the men and 
women of Amtrak, Metropolitan Transit Authority, the Long 
Island Rail Road, and all transit transportation workers who 
have worked around the clock to restore the services in New 
York after the terrible flooding from Hurricane Sandy. It was 
the worse destruction in 108 years of our transportation 
system, but because of their hard work, our trains are up and 
running again.
    In tough economic times, it is critically important to make 
needed investments that will modernize our aging 
infrastructure, advance our mass transit systems, and 
strengthen our communities and workforce. High-speed rail and 
improved mass transit networks can play a central role in 
helping America keep its competitive edge in a global economy.
    By comparison to rail systems in the rest of the world, our 
trains crawl along. As the chairman has pointed out, even our 
most ambitious plans aren't even anywhere near truly high-speed 
rail. Acela averages only 83 miles per hour along the Northeast 
Corridor, while some European and Asian trains race by at more 
than 180 miles per hour. The connection between two major 
business districts in our country, between Boston and New York, 
it inches along at 68 miles per hour. And imagine, if we could 
cut that and speed that up, how those business districts would 
boom and expand with a more efficient and productive economy.
    Where once American ingenuity brought rail service through 
the wilderness from coast to coast, in recent decades the U.S. 
has systematically failed to invest in the modern rail system. 
I thank President Obama for making high-speed rail a priority. 
Instead of developing energy-efficient mass transit, we have 
allowed our rail system to deteriorate. We are not just 
lagging, we are not even trying to innovate. That is just not 
the American way.
    As a resident of New York City, I fully understand the 
tremendous value of access to high-speed passenger rail service 
along the Northeast Corridor. It is the busiest rail line in 
the United States, and it is the only Amtrak segment that runs 
an operating surplus. It is making a profit. Of all the places 
in our Nation, high-speed rail makes most sense along the 
Northeast Corridor, which features the most congested roads and 
airspaces, the densest population, and the most interconnected 
cities. And it has the ridership to make a profit for the 
investment in this rail system.
    From Washington to Boston, the Amtrak stations are located 
right in the city centers, making them more accessible to 
business travelers in the airports. The northeast region also 
has the densest population in the country. Fully 20 percent of 
the Nation's entire population lives in just this 2 percent of 
our land area in our great country.
    Seventy percent of all chronically delayed flights 
originate in the New York area airspace, causing delays across 
our country. And 60 percent of the northeast region's road 
miles are considered heavily congested. Last year, when 
Florida's Governor rejected high-speed rail funding for his 
State, I urged our President, our mayor, our Governor, the New 
York delegation, and other delegations to redirect some of the 
money to New York. I was pleased he responded, with the help of 
the chairman and the New York delegation, our Governor and our 
mayor, by directing $295 million of these funds to a project 
that will improve what is called the Harold Interlocking, a 
century-old intersection of 14 train tracks, where hundreds of 
trains travel east and west of New York are sorted out each day 
and is very confusing in a very delaying area.
    Located in my congressional district, this project helps 
eliminate a bottleneck that has plagued train travelers for 
years. Investing in these improvements will help relieve delays 
and pave the way for high-speed rail from New York to Boston. I 
consider it the first link in this important vital rail system. 
It will create over 9,000 jobs and will boost economic activity 
in our region by over half a million dollars.
    While I commend this investment, Amtrak estimates that at 
this rate it will take until the year 2040 before the U.S. has 
high-speed rail. The need for high-speed rail is so pressing 
today, we cannot afford to wait another generation. We used to 
lead the world in rail. We are now trailing far behind.
    There is general agreement that public and private 
partnerships should be included in a larger Federal planning 
strategy for the Northeast Corridor. Amtrak's long-term plan 
provides a template for joint ventures that is worth 
discussing. New York's Governor has met with the New York 
delegation and asked us to include public-private partnerships. 
And the MTA, which is strapped for cash, as is our State--and I 
join my colleague, Mr. Cummings. The States cannot afford this; 
we don't have the money. So the MTA is open to partnerships as 
long as unions and worker rights are protected and all the 
rights that are put in place for the protection of workers, the 
environment, pension and other rights.
    Investing now in world-class high-speed rail would pack a 
double punch. It would create high-paying jobs and spur 
economic development throughout the program. We are long 
overdue for high-speed rail, and it is time to put this country 
on the right track. I thank the committee for drawing attention 
to the importance of high-speed rail, and I look forward to the 
day when high-speed passenger rail is operating in the 
Northeast Corridor.
    In closing, Mr. Chairman and Ranking Member, if we really 
support high-speed rail, then projects that we fund have to be 
successful and they have to be profitable. Right now, the 
Northeast Corridor is profitable. It is the only corridor that 
is profitable in the whole Nation. So investing in high-speed 
rail now would boom. My colleague, Congressman Capuano from 
Boston, we both travel between New York and Boston, usually a 
3\1/2\-, 4-hour ride. If we could cut that down to an hour and 
a half or 2 hours, it would be a boom to economic development 
in two important business employment districts in our great 
country.
    So I applaud your attention to it, and I want to be on your 
team in helping to implement and support transportation in any 
way. It is vital to our country, but particularly high-speed 
rail.
    How did the great country, the great United States, fall so 
far behind the rest of the world? How did the most prosperous 
country, the most innovative country, fall so far behind the 
rest of the world? You can be in Paris and in an hour and a 
half be in London, riding their high-speed rail. You can move 
across China throughout their many provinces on high-speed 
rail. We do not have it. We aren't even close to it in the 
great United States of America. And if it is going to happen in 
America, it has to happen with the leadership of you, the 
leadership of this committee.
    Thank you for listening to me. Thank you for all the work 
that you do for transportation across our great country. And I 
welcome any questions.
    Mr. Mica. Well, thank you.
    I don't think we will question you, but I will ask 
unanimous consent that Mrs. Maloney be extended the courtesy to 
sit on our panel. And after other Members have been heard or 
questioned, you will have the opportunity to participate, if 
you like.
    Without objection, so ordered.
    Thank you so much for your testimony.
    Mrs. Maloney. Thank you, Mr. Chairman.
    Mr. Mica. I will just say two things.
    One, you asked about the caucus. I don't make many pledges. 
Didn't even pledge to term limits, but that is another story. 
But I did make a pledge when I first ran not to join caucuses, 
and I actually spent part of my early part of my career 
dismantling select committees and things that had grown into 
huge bureaucracies. Filled the whole building next to us, where 
the parking lot is; now we took that down. So I can't do that.
    But I can tell you, I will be focused on two projects, and 
one will be the high-speed rail and the Northeast Corridor, 
whatever it takes. And I will work with you and others in that 
positive regard.
    So thank you. And we will let you go, and we will turn--we 
are going to have a vote, so we will turn to our witnesses and 
try to get them up.
    Mrs. Maloney. May I thank the gentleman and chairman for 
allowing me to join the committee. I am in another committee--
--
    Mr. Mica. This will be going on for some time.
    Mrs. Maloney [continuing]. That I have a responsibility to 
be asking questions and participating. So thank you for that 
honor. If my other committee meeting finishes, I will come back 
and join you.
    Mr. Mica. Thank you so much. We will welcome you. And thank 
you again for coming to the committee and testifying.
    Ms. Brown. I did have one question.
    Mr. Mica. OK. Real quick.
    Ms. Brown. I just had one question. Because, you know, I am 
100 percent supportive of high-speed rail in the Northeast 
Corridor. And one of the problems or one of the challenges, it 
is not just high-speed; it is making sure the train is there at 
a certain time, you know, making sure it is reliable and it is 
going to be there every day at 10 o'clock or whatever time.
    But the time from, I think Boston to Washington is about 8 
hours, which is ludicrous. And as you said, that corridor 
between New York, Boston, and Washington is key. However, part 
of the problem is that you have so many local communities. And 
even in your area, where we had the hearing in New York, it is 
not just Amtrak, it is several agencies, several communities 
that are involved.
    And so it is not just that Big Government can't come in and 
say that we are going to do it this way, it is pulling all of 
those communities together. And what is your--and you don't 
have to do it now, but it is just that we can't come in as a 
Federal Government and say, We are going to do it this way. 
These communities are already built up.
    Mrs. Maloney. Uh-huh. I thank Corrine for your question.
    When the high-speed money was returned and we discussed it, 
because you were distressed that Florida was sending it back 
and----
    Ms. Brown. I am still distressed.
    Mrs. Maloney. And I appreciate that, you know, you were 
pushing to have it in Florida, but your Governor made another 
decision, so we reacted to that.
    But I went to MTA, which is the transportation hub and 
director in our region, and first proposed that they go after 
getting the high-speed rail between New York and Washington. 
And they said that would be so difficult because of what you 
just said: It is extremely built up along the corridor, very, 
very built up. And they couldn't see how they could build that 
quickly because of the communities that were blocking it and 
the fact that we did not own the rail. They said they owned the 
rail. The Federal Government and the MTA owns the rail lines 
between New York and Boston and that that would be much easier. 
And they said, Shift your focus to New York and Boston. And 
with the Governor's support and the mayor's support, that is 
what we did.
    Now, that is why we need, exactly what you are saying, why 
we need a task force or a meeting, I don't care what you call 
it, of Members of Congress that are affected by that rail line 
to get together and make it happen, to get the communities 
behind it. And, you know, it goes through many States, and so 
it would have to be a collective State-led--Members of Congress 
from those States working to help make it happen.
    But according to the MTA, they own a lot of the lines, 
meaning the MTA owns it and the Federal Government owns it. And 
it is not as dense. It goes through the countryside, the rail 
now; it is not going through cities as much. But they said 
going between New York and Washington. You know I would love to 
cut that time down since I am on that train every week.
    Ms. Brown. That is right. That is right.
    Mrs. Maloney. But they said Boston and New York made sense, 
would be more economical, there would be less hindrance of 
already-built-up neighborhoods, and that it could be done 
quicker and cheaper.
    And I think it is important for those of us who support 
high-speed rail to have a success. We want it to make money. We 
want to show America that this is something we should invest in 
and that it is going to pay dividends back and that we should 
be building it in every State and we should be building it 
clear across America.
    But there are certain areas in New York where it is not 
going to make money because the ridership isn't great. The 
ridership between New York and Boston is packed to the limit 
every single day. I am convinced if we could build that line it 
would make money. I am convinced.
    Mr. Mica. I thank the gentlelady.
    We don't want to get into too much of a debate with the 
Member at this point because we do have a large panel of 
witnesses and we are going to have votes.
    So thank you so much, Mrs. Maloney.
    I will ask the other witnesses if they can begin occupying 
their seat.
    We have Karen Hedlund, and she is the Deputy Administrator 
of the Federal Railroad Administration. We have Joe Boardman, 
the president and CEO of Amtrak, as a witness. We have Joan 
McDonald, chair of the Northeast Corridor Infrastructure and 
Operations Advisory Commission and also commissioner of the New 
York State Department of Transportation. We have Dr. Richard 
Geddes, adjunct scholar of the American Enterprise Institute. 
We have Mr. Perry Offutt, who is a managing director at Morgan 
Stanley. And Mr. John Tolman, who is vice president and 
national legislative representative of the Brotherhood of 
Locomotive Engineers and Trainmen.
    I want to welcome all of our witnesses. We are trying to 
get to as many as we can. They are going to call a vote in a 
few minutes. If you have a lengthy statement, it will be 
submitted, by unanimous consent, to the record. I would like to 
have you summarize, and then when we finish with everyone, we 
will go to questions. So thank you so much for joining us.
    And we will turn first to Karen Hedlund. And she is the 
Deputy Administrator of FRA.
    Welcome. And you are recognized, ma'am.

      TESTIMONY OF THE HONORABLE KAREN J. HEDLUND, DEPUTY 
   ADMINISTRATOR, FEDERAL RAILROAD ADMINISTRATION; JOSEPH H. 
 BOARDMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMTRAK; THE 
      HONORABLE JOAN MCDONALD, CHAIR, NORTHEAST CORRIDOR 
    INFRASTRUCTURE AND OPERATIONS ADVISORY COMMISSION; AND 
 COMMISSIONER, NEW YORK STATE DEPARTMENT OF TRANSPORTATION; R. 
RICHARD GEDDES, ADJUNCT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE; 
    ASSOCIATE PROFESSOR, DEPARTMENT OF POLICY ANALYSIS AND 
  MANAGEMENT; AND DIRECTOR, CORNELL PROGRAM IN INFRASTRUCTURE 
POLICY, CORNELL UNIVERSITY; J. PERRY OFFUTT, MANAGING DIRECTOR, 
   MORGAN STANLEY AND COMPANY LLC; AND JOHN P. TOLMAN, VICE 
PRESIDENT AND NATIONAL LEGISLATIVE REPRESENTATIVE, BROTHERHOOD 
              OF LOCOMOTIVE ENGINEERS AND TRAINMEN

    Ms. Hedlund. Chairman Mica and Ranking Member Brown, thank 
you very much for inviting me----
    Mr. Mica. Pull that up as close as you can. It is a little 
hard to hear. Thank you.
    Ms. Hedlund. Thank you for inviting me to speak to this 
committee.
    And, Mr. Chairman, I want to say it is a great honor to 
testify before this committee during its final hearing with you 
at the helm. You have achieved significant legislative 
accomplishments during your tenure, and your oversight and 
interest in rail programs has really strengthened our agency 
while improving transportation options throughout the country. 
And we look forward to continuing to work with you in the 
coming session.
    This morning, on behalf of President Obama and Secretary 
LaHood, I also thank you for this opportunity to discuss our 
planning and development efforts in the Northeast Corridor, 
which, as has been stated, is one of the most valuable 
transportation assets in the United States. And the details 
about these efforts, which are called NEC FUTURE, are detailed 
in my written submission.
    Today, as we look ahead, we know the northeast region's 
passenger rail market is as strong and full of potential as any 
in the country, but clearly the time has come to plan for and 
invest in the future of the Northeast Corridor. And so we are 
moving forward with a strategy that is focused on both its 
immediate and long-term needs.
    We are overseeing a comprehensive regional planning effort, 
and this multistate transportation planning project is one of 
the largest ever undertaken in the United States. As we look to 
invest in the next generation of NEC services, our initial 
focus with this planning project is to thoroughly understand 
the true needs of the market. This is going to be a market-
based assessment, and we will know from the very beginning what 
types of rail services will be needed to meet future demand.
    We are also seeking innovative ways to enhance the overall 
planning and environmental process. I know that is an important 
issue for you. So as part of that effort, early this year NEC 
FUTURE was selected by the Council on Environmental Quality as 
a pilot project that aims to better engage stakeholders and, 
importantly, all the Federal and State resource and regulatory 
agencies early on in the planning process. And we expect that 
that will produce significant time savings as we go through the 
entire planning and environmental process.
    It is important that we continue to invest in all 
transportation modes, not just rail, but the public benefits of 
the Northeast Corridor are central to transportation planning 
for the following reasons: Transporting more people by trains 
will take pressure off the region's highways and airports, 
which, as we all know, are both overburdened and out of room to 
grow. And when targeted to the market, rail is the most cost-
effective, least oil-reliant, and most environmentally friendly 
mode.
    Our current investments are adding or upgrading track, 
untying bottlenecks, modernizing power systems; as has been 
mentioned, reducing delays at spots such as the Harold 
Interlocking. We are working to upgrade stations from New York 
to Boston. And we are moving forward with engineering projects 
to replace some of the most complex and oldest infrastructure--
the Portal Bridge, the Susquehanna Bridge, and, as been 
mentioned, Baltimore's B&P Tunnel. These will be enormous 
undertakings in and of themselves.
    But I think we can all agree, in order to truly position 
the Northeast Corridor for future demand, we need a vision, we 
need a framework that will allow this vision to move forward, 
one that will provide us with an immediately actionable rail 
investment plan, a blueprint to guide our actions. And we are 
going to complete this process with an exhaustive public 
engagement over the next 38 months.
    Already we have seen what can happen with a big leap, how 
Amtrak's Acela service came gradually to dominate the air-rail 
market in the region. But we know there is demand out there 
currently that is unmet, and that demand will continue to rise, 
and ultimately we can't meet that demand without a sustained 
commitment from the Federal Government. Today it is up to us to 
rise to that challenge, just as we have so many times in the 
past.
    And we have been recently reminded of this after Hurricane 
Sandy, which caused unprecedented damage to the Northeast 
Corridor. After around-the-clock efforts to restore services, 
to de-water the tunnels, we saw a crystal-clear picture of just 
how essential the Northeast Corridor is to both the economy of 
the region and our way of life.
    It makes you think: What if Alexander Cassatt, the 
president of the Pennsylvania Railroad, had listened to his 
critics back in 1900 and had given up digging those two tunnels 
across the Hudson River, tunnels that connect New Jersey to 
Manhattan? Today, Penn Station accommodates 550,000 passengers 
a day. That is double the passengers that go through the three 
airports of New York. But in 1900 those tunnels were called a 
boondoggle, too expensive, impossible to build. Some of the 
Cassatt's shareholders probably thought he was nuts. But today 
could you imagine New York without it? Well, Sandy showed us 
what New York looks like without it.
    So it is up to us now to create the vision, to do the 
planning, to execute the projects that will ensure we hold true 
to a basic promise, as the Secretary said last week, that the 
America we leave for future generations is even greater, even 
stronger than the America our parents and grandparents left for 
us.
    And I look forward to answering your questions.
    Mr. Mica. Thank you.
    And we will hold the questions. I just have one quick 
thing. Have you read ``Conquering Gotham''?
    Ms. Hedlund. Yes, sir, I have, with great interest.
    Mr. Mica. OK. I was going to make sure you had a copy if 
you didn't.
    Mr. Boardman, our Amtrak president and CEO, you are 
recognized. Welcome back.
    Mr. Boardman. Thank you, Mr. Mica, and thank you for your 
service.
    One of the other things I would like to thank you about is 
that you have put a focus on the Northeast Corridor, and I 
appreciate that. We put a vision out in September of 2010, and 
by January 2011 you began with a hearing.
    By February of that year--and I would just like to 
summarize quickly because I know you want to move through here 
quickly--we proposed the Gateway project to support that vision 
of high-speed rail. In March, the U.S. DOT named us as a 
Federal corridor; you already identified that. By May, we were 
awarded $450 million to improve the speed in New Jersey on what 
we call the ``Raceway.''
    By June, we were in a situation where we had a peer review 
by our European and Asian high-speed rail operators, validating 
our proposal of next-generation high-speed rail. In August, we 
began work on a business and financial plan with KPMG to 
understand how we can work in the private sector; how the 
public-private partnerships might work in that process. In 
November, the board approved the Amtrak strategic plan, which 
included the creation of the NEC Investment in Infrastructure 
Development business line.
    In February of 2012, the FRA launched the Northeast 
Corridor FUTURE, which was a comprehensive planning initiative 
to prepare this corridor, which was necessary for us to move 
forward with. By July, Amtrak was--and you were there, and we 
appreciate that--Amtrak was a signature sponsor and a 
participant in the eighth World Congress on High-Speed Rail. It 
was the first to take place in the United States. We also 
updated and integrated the high-speed rail vision, at that 
point in time, with the Northeast Corridor Master Plan. And we 
completed the Northeast Corridor Business and Finance Plan at 
that point.
    Just this past September, we ran tests with the Acela 
Express equipment. We operated at speed tests of up to 165 
miles an hour in order to demonstrate that we could do those 
kinds of speeds in several locations along the corridor 
designated for improvement.
    And this morning what I want to tell you is that we are not 
going to add any additional cars to the Acelas the way that we 
had originally planned. They are too expensive, and also what 
we really need to do is to replace the Acelas with a new set of 
train and equipment. And our expectation is that we will have 
an RFI, a request for information, in February or early this 
next year to make that happen.
    I have told our folks they need to get this done by the 
time I am 70, and I will be 64 next week. Thank you.
    Mr. Mica. Thank you.
    And let me now recognize and welcome Joan McDonald, who is 
the chair of the Northeast Corridor Infrastructure and 
Operations Advisory Commission.
    Welcome, and you are recognized.
    Ms. McDonald. Thank you, Chairman Mica. Good morning.
    Good morning, Congressman Nadler, it is good to see you, 
from my home State, and members of the committee.
    The Northeast Corridor Commission was authorized by 
Congress in recognition of the inherent challenges of 
coordinating, financing, and implementing major system 
improvements that cross multiple jurisdictions. The 
expectation, as you laid out, is that by coming together we 
will take collective responsibility for the Northeast Corridor.
    Realizing a bolder vision for the future does require 
unprecedented collaboration. Comprehensive planning is 
difficult for a system that spans eight States and the District 
of Columbia, supports nine passenger rail operations, supports 
four freight railroads, and has four separate infrastructure 
owners.
    The Northeast Corridor line, as everyone knows, is one of 
the busiest and most complex railroads in the world. It carries 
over 2,200 commuter, intercity and freight trains every 
weekday. These trains carry over 750,000 passengers daily.
    The Northeast Corridor must balance acute investment needs 
just to maintain the safety and reliability of current services 
with the need to address growing service demands. Hundreds of 
the corridor's bridges and tunnels are more than a century old 
and major portions of the corridor's electric power supply were 
installed in the 1930s, and echoing my fellow colleagues on the 
panel, we see what happened with the electric system during 
Hurricane Sandy.
    The fact that commuter and Amtrak services intersect at 
common facilities inevitably means delays to any one service 
could quickly cascade and adversely affect the on-time 
performance of all rail services. With major segments at or 
near capacity, all services that utilize the corridor are 
increasingly susceptible to service disruptions resulting from 
infrastructure failures.
    In January the Commission will be releasing a report on the 
corridor's critical infrastructure investment needs. Input to 
the report was provided by Amtrak, the corridor States and 
other freight railroads through a collaborative process. While 
nine States are part of this organization and this Commission 
and we recognize that the assets are in individual States, we 
recognize that those assets transcend geographical boundaries. 
It is one corridor.
    The Commission's authorizing legislation directs that we 
develop a cost-allocation methodology for use in the corridor 
that ensures that there is no cross-subsidization between 
intercity, commuter and freight rail service. Our aim is for 
this process to set a foundation for increased Federal and 
State investment in the corridor's infrastructure. In return 
for increased State investment, we are exploring options to 
address the governance of the corridor to ensure that the 
States are equal partners in the decisionmaking process. Our 
goal is to have a recommended cost-allocation methodology by 
the end of this fiscal year. We are also engaged in activities 
examining the long-term rail needs in partnership with the 
FRA's Northeast Corridor FUTURE program.
    Hurricane Sandy gave us all a vision into the chaos that 
would ensue without the vital rail assets that are so critical 
to the economy and our region. We all watched as our elected 
leaders prioritized the reconnection of rail service to get the 
region moving again. We commend the railroad and transit 
employees who made heroic efforts to restore these services as 
quickly as possible.
    The Northeast Corridor is a national resource, and, along 
with the I-95 corridor, the transportation backbone of the 
northeast region. However, the corridor's current path is 
unsustainable. The reliability of existing service is 
threatened by capacity chokepoints and significant state-of-
good-repair needs. Meeting our future needs, due to increasing 
demand for these services, is simply not possible without 
significant investment in new capacity. In short, the 
Commission is planning for the future at the same time that we 
are looking to address the very significant challenges that the 
corridor is facing today.
    On behalf of my fellow commissioners, in closing I want to 
extend our appreciation for this committee's strong support for 
the Northeast Corridor, and we look forward to continuing this 
partnership. And in particular, I want to thank you, Chairman 
Mica, for your support of the Northeast Corridor, and we look 
forward to a continued dialogue with you. Thank you.
    Mr. Mica. Thank you.
    And we will now recognize Mr. Geddes, and he is an adjunct 
scholar at the American Enterprise Institute.
    Welcome, and you are recognized.
    Mr. Geddes. Thank you, Mr. Chairman Mica. I appreciate the 
opportunity to be back and speaking to the committee once 
again. And I just wanted to note that in addition to my 
affiliation with the American Enterprise Institute, I am an 
associate professor at Cornell University in the Department of 
Policy Analysis and Management, and that just this semester, 
with a Cornell grad, John Foote, a class of 1974 engineering 
grad whose company developed E-ZPass, we have started a new 
program in infrastructure policy at Cornell. And I have some 
information about that, and that is to educate future 
generations of students and young people on the important 
issues that this committee addresses.
    And I hope to be able to work with the committee in the 
future and hopefully with yourself in developing this program. 
In fact, I think it is one of only two such programs that are 
currently operational in the United States focusing on 
infrastructure policy, the other one being at the University of 
Minnesota. So I would just like to draw everyone's attention to 
that and seek your advice on that.
    I want to address a few things regarding the topic that the 
committee is focusing on today, which is the Northeast 
Corridor's future and options for high-speed rail development 
and private-sector participation in transportation.
    There are a couple of key issues I would like to address. 
The first is to get a concept on the table that I think is 
extremely relevant for this debate that is, I believe, absent, 
which is the concept of a residual claim. Sounds like sort of 
an academic concept but I think very important, a residual 
claim as well as residual claimants. Second, I want to be clear 
about the value that I think private participation in the 
Northeast Corridor can bring to the Nation in several different 
ways. And third, I would like to emphasize that the gains from 
private participation, as judging from a number of economic 
studies that focus on this, do not come from reducing wages or 
reducing employment once you get more private participation. 
They come from increased value creation and value capture due 
to the incentives and the skills of the private-sector partners 
that you bring in.
    I also want to emphasize that through competitive public-
private partnerships, it is possible for the public sector to 
realize the value associated with private participation now 
through upfront concession payments that we have seen. So the 
public sector does not have to wait to realize these benefits.
    I want to emphasize that a residual claim is defined as a 
property right to the profits from a given economic activity; 
that is, who actually has a right to obtain the value that they 
create from undertaking new efforts and economic activity. This 
is a key public policy issue for the Northeast Corridor. The 
question is, are the property rights to the value creation from 
additional investment and effort clearly assigned to some well-
defined group? I think it is difficult to overstate the 
importance of this, and I don't think they are at present.
    One of the key things that private participation does is to 
introduce clear, well-defined residual claimants who have a 
right to capture the value that they create by better using the 
current assets that we have on the Northeast Corridor. Private 
participation creates such well defined residual claimants.
    From this fact of the impact of bringing in private 
participation and residual claimants, a number of important 
social benefits can be obtained. Those include the expertise 
and skills of the private sector, those include the sharp, 
focused incentives that you get from private participation that 
you do not currently have, and they also include access to new 
types of capital, particularly equity capital, which is risk-
taking capital that is critical. Those three aspects of private 
participation create enormous social benefits from increased 
private participation on the Northeast Corridor.
    I want to note also that there are inherent risks, 
substantial risks in these types of activities that are 
currently entirely being borne by taxpayers. One of the key 
benefits of bringing private participants into this situation 
is that you have people who are experts in bearing risk, that 
is a service that they provide, is a risk-bearing service, and 
they make the cost of that risk bearing transparent. I think 
that is actually an enormous benefit of bringing private 
participation in.
    I will just close by noting that one of the, I think, 
underappreciated benefits of private participation is the fact 
that the public sector can realize that value immediately 
through competitive bidding by competing groups of potential 
private participants in a number of areas. Suppose it is 
operating a train station, for example, and you can concession 
that out, receive an upfront concession payment, as Maryland 
did on some of the I-95 rest stops that I noted in my 
testimony, and that that is one major advantage of bringing in 
private participation that is not reliant on negative effects 
on labor.
    So, thank you, Mr. Chairman, and I will stop there.
    Mr. Mica. I thank you.
    And what we are going to have to do, we have a vote going 
on right now, we have 2 minutes to get to the floor. So our two 
panelists, we will return. I think we can be back here at 
11:45. We will reconvene at 11:45. We will hear both of our 
remaining witnesses.
    So with that, the committee will stand in recess for one-
half hour. Thank you.
    [Recess.]
    Mr. Mica. Like to call the Committee on Transportation and 
Infrastructure back to order. And we had three votes and now 
return to the hearing of our witnesses that remain. So we will 
proceed. It is the designated time that I indicated we would 
resume.
    So with that, pleased to recognize the managing director of 
Morgan Stanley, Mr. Perry Offutt.
    Welcome, sir. You are recognized. Sorry about the delay.
    Mr. Offutt. No problem, Mr. Chairman. Thank you for having 
me. My group works----
    Mr. Mica. Might pull that up right close because we can't 
hear you.
    Mr. Offutt. Hopefully that is better. Thank you again for 
having me this morning.
    My group works with clients both on the public and private 
sector trying to seek out opportunities where private capital 
could be used to invest in U.S. infrastructure. As a financial 
adviser focused on this area, I appreciate the opportunity to 
share my perspective on some of the key considerations that 
could affect interest from the private sector--financial 
investors, construction companies, and rail operators--in 
participating in the design, construction, operation, 
maintenance, and financing of a high-speed rail project along 
the Northeast Corridor.
    Public-private partnership structures have been used for 
numerous construction projects and have demonstrated that the 
private sector, one, can often build a project more quickly and 
at a lower cost; two, drive efficiencies over time by 
introducing technology solutions; and, three, develop 
incremental revenue sources by delivering additional services.
    While there hasn't been a public-private partnership, or P3 
transaction, involving a U.S. high-speed rail project, there 
are similar greenfield P3 transactions that can provide a 
guideline for financing this project. I also believe that there 
are numerous companies interested in high-speed rail in the 
U.S. given their experience building and operating high-speed 
rail systems internationally, specifically in Europe and Asia. 
These operators and construction companies would join bidding 
groups with financial investors to bid on the right to design, 
build, operate, maintain, and finance this project. After being 
prequalified, the winning bidder is usually chosen based on 
lowest cost.
    One of the key considerations is, if the project generates 
enough operating cash flow, the private sector would be 
compensated over time for their investment by receiving the net 
revenues generated from the project. However, if the project 
does not generate adequate annual net revenue, the bidding 
groups will require an ongoing revenue supplement from a 
Government entity, known as an availability payment, to ensure 
that they will be able to cover their cost and earn an adequate 
return on their investment.
    If the revenues reach a certain level, the availability 
payments could go away and the concessionaire would only be 
entitled to the project's revenue. As a result, the 
availability payment could be structured as a floor to support 
an investment grade financing and attract maximum private 
investor interest.
    Given the existing passenger rail footprint in the 
Northeast and high-population density in key urban areas, the 
project would be a very profitable operation, and the private 
sector could also rely heavily on significant historical 
traffic information along the Northeast Corridor and be very 
confident about their estimates regarding ridership.
    As I previously mentioned, one of the primary reasons for 
entering into a P3 transaction is to transfer risk of 
construction and operations to the private sector. However, 
private investors will also expect some comfort from the 
Government on a few important risks associated with the 
project. One, how potential cost overruns will be dealt with, 
especially if they occur as a result of Government action; two, 
ensuring some level of protection against Government 
investments in future competing transportation infrastructure; 
and, three, assessing the political support for the project at 
the Federal, State, and local levels.
    Thank you very much for the opportunity to testify this 
morning on this very important topic, and I would be glad to 
answer questions later.
    Mr. Mica. Thank you, and we will hold questions.
    We have now the vice president and national legislative 
representative of the Brotherhood of Locomotive Engineers and 
Trainmen.
    Welcome back, Mr. Tolman.
    Mr. Tolman. Thank you, Mr. Chairman, and appreciate the 
opportunity to be here on behalf of the 36,000 active members 
of the Brotherhood of Locomotive Engineers, Teamsters, and over 
70,000 Rail Conference members. I appreciate the opportunity to 
speak to you, Mr. Chairman, and for your services to this 
committee. It is truly an honor to me to be here at your last 
hearing as the chairman of this committee. I have appeared 
before this body many times in the last several years and 
always enjoyed your questions and comments, and look forward to 
working with you and members of this committee into the 113th 
Congress. But thank you.
    Today I would just like to talk about a personal experience 
as a locomotive engineer on Amtrak, as well as the BLET's 
position on Amtrak's progress and successes in the Northeast 
Corridor. Also would like to compare to other countries' 
passenger rail high-speed service as they relate to 
privatization.
    I was an Amtrak engineer and operating trains in the 
Northeast Corridor in the mid-1970s and early 1990s. From its 
inception, I remember Amtrak being chronically underfunded. As 
a young man, I remember coming down here some two decades ago 
trying to secure some funding for Amtrak to preserve a safe and 
reliable rail passenger service and save the jobs of my fellow 
employees, all professional and highly skilled workers. Now, 20 
years later, I am still fighting the same fight.
    I remember running test trains on the Northeast Corridor at 
150 miles an hour with a 40-year-old diesel and passenger cars 
that were over 40 years old. I have seen the growth and I have 
seen improvements in the Northeast Corridor, from 
electrification of the main line and improved crossovers for 
high-speed trains. You know, while positive train control made 
national headlines the last several years, Amtrak has had a 
form of PTC in the Northeast Corridor for almost 20 years, all 
this while Amtrak's funding is a fraction of that spent on 
other modes and by other countries.
    It is, frankly, embarrassing to compare Government funding 
for Amtrak with U.S. Government funding for domestic aviation 
and highways, and passenger rail funding for European and Asian 
countries. To build and maintain one of the best highway 
systems in the world, we have spent $114 billion and built it 
over 35 years. In today's dollars it would be $426 billion.
    But times have changed. Congestion on our roads are at 
historic levels, and by the year 2020, 90 percent of urban 
interstates will be either at or over capacity. And anyone who 
has had the pleasure of flying recently knows the serious 
problems that plague our Nation's airports, flight delays, 
cancellation, overcrowding planes. In fact, in spite of all 
this, Amtrak now carries more riders from New York to Boston 
than all other airlines put together, 50 percent of all the 
people that travel this distance, and between Washington, DC, 
and New York City Amtrak carries more than twice as many 
passengers as all airlines combined. Today it carries 75 
percent of intercity travelers between New York and Washington.
    Amtrak has done all this with the threat of funding cuts 
and privatization, especially of the profitable Northeast 
Corridor, hanging over its head. We know that in other parts of 
the world, privatization of high-speed passenger rail has been 
tried and has failed to solve the problems it was intended to 
solve. These plans were almost always preceded by funding cuts, 
systemic safety and reliability problems, caused a great deal 
of upheaval in transportation, and forced countries to 
renationalize their system.
    With that being said, we think that Amtrak's long-term 
NextGen Plan for the Northeast Corridor provides a template for 
a public-private partnership that is worth discussing if the 
partnership does not reduce the public interest or the 
interests of the Brotherhood of Locomotive Engineers' members 
and Amtrak's other professional and skilled workers. Further, 
the BLET believes that Amtrak should continue to be the service 
provider for the Northeast Corridor and across the United 
States because they have provided progressive quality service 
despite many, many obstacles and continue to look for ways to 
increase train speed, reliability, and service in spite of 
these obstacles.
    Thank you, Mr. Chairman.
    Mr. Mica. Thank you.
    And thank all of our panelists, particularly for your 
patience while we had to exercise our constitutional 
responsibility, and that is vote. We are back now to finish the 
panel and we will turn to questions.
    Let me just comment to Mr. Tolman, and welcome, too, on 
behalf of labor representing the men and women that work for 
us. We appreciate your role. As I have said repeatedly, and 
sometimes I wonder if people have a hearing disability, can't 
comprehend what I am saying, I have always advocated 
maintaining the benefits, the salary, the wages, the retirement 
for Amtrak employees in whatever structure we adopt, making 
certain that is protected. I have also been here and watched 
the number of personnel from Amtrak go from 29,000 to 19,000, 
and I say that doesn't portend a bright future for labor, 
either if you are the head of a union or labor organization or 
a member.
    I have been there fighting for labor when labor had to 
fight Amtrak and the Federal Government for benefits and wages. 
In fact, that was a prolonged and difficult experience for the 
people who work for Amtrak, those union members who were denied 
benefits and wages. And always used the example of freight 
rail, which has taken over, which very often gives better 
salary, better wages, and reaches agreements without that type 
of imposition.
    As far as my record, I have always supported the right of 
Americans to join a labor union. When we wrote the TSA 
legislation I insisted that we have that right. I also take the 
position that no one should be forced to join or compelled to 
join a union. But I think that is an important right, and I 
think that labor has done an incredible job over the years. 
There have been some problems here and there, but in raising 
the standards, the compensation, the working conditions for the 
people that get out there and roll up their sleeves and 
actually make things happen, rather than, like Congress or 
bureaucrats, just talk about it.
    So I want to make that perfectly clear. And as we move 
forward, I think that, again, there are just unlimited 
possibilities. If we can have 4 time the numbers of passengers, 
I know we can increase the employment.
    Actually, technically, Amtrak is a private corporation. It 
does have some quasi-governmental characteristics and certainly 
substantial Government support. There have been debates about 
the level of support. But furthermore I have always supported 
long-distance service, a national system. But we want that to 
be operated and managed on the very best basis, because the 
chief underwriters of the subsidies of the private-sector 
corporation that we have with Amtrak and created in 1971, the 
main underwriters are the taxpayers of the United States. So 
that is all I have asked for.
    And then I think our goal is to have high-speed rail in the 
Northeast Corridor. I think that is your goal, Mr. Tolman, 
correct? You would support that?
    Mr. Tolman. Positively.
    Mr. Mica. OK. But we want to do that, rather than in 30 
years, 30 years to my calculation brings us in their chart, 
which we will put in the record without objection, shows us not 
getting to really high-speed operations until 2030 to 2040.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 77444.008
    
    Mr. Mica. At that juncture I won't be around to see that, 
given my DNA and longevity as far as male members of my family 
are concerned. So my goal is to see it while I am alive and not 
have it happen after I am pushing daisies out of some better 
setting.
    But with those words, questions. Let me go to Hedlund 
first. I brought a copy of ``Conquering Gotham.'' Has everybody 
read that on the panel? Have you read that, Boardman?
    Mr. Boardman. No.
    Mr. Mica. Mr. Boardman has not. Would the staff please take 
this down, present this copy, and I am going to autograph it 
for him. If you think----
    Mr. Boardman. That is how I get books.
    Mr. Mica. ``To Joe, from John, with love.'' But if you 
think you are having problems, after you read this story of 
Alexander Cassatt's attempts to bring rail service into 
Manhattan, the tunnels that he built, Union Station that he 
built, you think your politics have been tough, wait until you 
read this story. It is one of the most fascinating volumes I 
have ever read and it encapsulates all the issues that we are 
going through. And he was determined to do this. They were 
originally going to build another bridge up in the northern 
part of Manhattan to connect. Up to that time about 10, 12 rail 
lines went in. The major one, I guess, was the Pennsylvania 
Railroad that he had. And then people had to take a ferry from 
New Jersey to New York.
    And his sister was an accomplished artist, Mary Cassatt, 
who had a studio in Paris. So during his visits he observed the 
French tunneling, and so he came back and said, hell, if the 
French could tunnel, we can, too, and adopted that plan. They 
had actually failed, and you will read that story, too, in this 
volume, in trying to build a tunnel previous to that. But he 
did succeed. It is just an incredible story of vision and just 
the type of determination to get the job done.
    But would one of the staffers deliver that at this point to 
Mr. Boardman? Thank you.
    Mr. Boardman. Thanks for bringing it up.
    Mr. Mica. But, again, it does take that vision, and it 
takes also the determination, and also, to be quite blunt, it 
takes the cash.
    Now, I was excited about President Obama committing to 
high-speed rail. However, I did express my disappointment in 
that the money was diverted among 150 projects. Most of the 
money went to California for a true high-speed rail. The rest 
is intercity enhanced passenger service and a number of other 
improvements and grants.
    For the FRA representative and administrator, deputy 
administrator, what is the intent of the Administration for 
high-speed rail in the future, the next 4 years?
    Ms. Hedlund. Well, I think the President's vision is in his 
budget, and it includes additional billions of dollars for 
high-speed rail. And so it is spelled out in his budget. He 
continues to be quite committed to it, and we hope that the 
Congress will follow through on that.
    Mr. Mica. OK. Well, Mr. Boardman, you started out with, I 
think, less than $100 million, and some of the money that came 
into the Northeast Corridor came in sort of, I guess, at the 
same time we designated the corridor high-speed, which I 
commend you on doing, but secondly, with the return of money 
from at least Florida, Wisconsin and Ohio, and designated.
    Mr. Boardman, you are using that in some, I don't mean this 
to be critical, but it is sort of a band-aid approach, because 
you don't have the money, but you are trying to pick projects 
that would make a major impact and improvements in the speed of 
that corridor.
    Where are you on Gateway as far as funding, planning, 
execution. Where do you see it now and how much to get that 
done? Maybe you could describe that, too, for the record.
    Mr. Boardman. Sure. Gateway is a project that basically 
goes from just past Newark into Penn Station, New York. It 
involves two new tunnels, a new Portal Bridge, some new tracks 
that basically go from Lautenberg Center all the way to the new 
two tunnels. And it also includes space within Penn Station 
especially for New Jersey Transit trains. These trains don't 
have the same ability that the Long Island Rail Road does to 
stop quickly and store their trains in the Hudson Yards or the 
West Side Yards.
    Mr. Mica. And where are you with that?
    Mr. Boardman. We are in a planning stage. Some of the 
projects could move a little bit quicker than others. We 
included that in the after-Sandy request, $336 million. What we 
really need to do is make sure we secure a space under the 
Hudson Yards, it is about an 800-foot section, at about $190 
million, because once that real estate development actually 
occurs, it would close off the ability to get those two new 
tunnels in.
    The second thing we really need to do, that also was going 
to be done under ARC, is to raise onto a platform or to a 
different location that Substation 41 that was flooded during 
the storm. And also add high-density signal systems in the East 
River tunnels, not so much to add capacity to the station, but 
to give us the ability to move trains through those East River 
tunnels more quickly. We could have restored the same level of 
service quicker had we been able to do something like that.
    Mr. Mica. OK, two things. One, we are trying to complete an 
environmental study in the corridor. That is scheduled to be 
done about 2015, is that correct?
    Ms. Hedlund. That is right. It is the Tier 1 for the 
corridor which will set the framework for the entire corridor. 
And then you go into Tier 2, and that process looks at 
individual projects. Some of the delays that occur in the 
environmental process come when the individual projects are 
considered, and the advantage of bringing the resource agencies 
in early, in the beginning of the planning process, is that 
when we get to Tier 2 we can save, we think, significant time 
because the alternatives will have been narrowed, the resource 
agencies will have bought into that, you won't have them coming 
in the way they sometimes do at the end and say, well, we don't 
like the way you did the analysis so you have to redo the 
analysis or you have to look at two or three other alternatives 
that were dismissed early on, but they weren't at the table 
when that analysis was done.
    So we are hoping to, as I said, complete the Tier 1 by 
2015. By the way, we do need additional funding. The first 
phase of that, we had $9 million for, that will be completed in 
February. But the next two phases will cost an additional 
approximately $30 million and we need additional funding to 
complete that.
    Mr. Mica. Has that been requested in the budget?
    Ms. Hedlund. I believe so, but I will get back to you on 
that.
    Mr. Mica. Let us know on that. Also, anything we can do to 
speed that process up. The other thing is, does that include 
the entire corridor, all 437, or is it just parts of it?
    Ms. Hedlund. It is the entire corridor.
    Mr. Mica. Is it? I was wondering again if any of this could 
be divided up and expedited, and that is something else I would 
like to look at, discuss with you all. I will have a little bit 
more time to focus specifically on the Northeast Corridor after 
the beginning of the year and I would like to make that a 
priority, moving it forward. But you will need the money if you 
are going to complete the plan. Then when we get that, we will 
have alternatives analysis?
    Ms. Hedlund. Yes.
    Mr. Mica. OK. At that point and juncture, now, we had 
Secretary LaHood here and he was talking about overall high-
speed rail, and he said, we will also need the money. He said 
he would be open to opening these opportunities to private-
sector competition. Do you see any problem with that?
    Ms. Hedlund. No. As he said last week, and I think he has 
been quite consistent on this, we welcome private-sector 
investment to be able to leverage the limited public funds that 
are available. We are going to want to make sure that where 
that money comes in makes the most amount of sense, is the most 
cost-effective way to do it, that the contracts are put 
together in a way that protect the public interest.
    Mr. Mica. I would concur with all of those, particularly 
our job is protecting the public interest. And also I think it 
is important that we maintain the ownership of that 
infrastructure that we are contributing to build along the way. 
But I think, one, you are never going to get the Congress to 
give you $151 billion, even over a period of 30 years, but I 
think if we could attract private capital, and that is where 
our managing director of Morgan Stanley maybe could shed some 
light.
    Right now we take in about a billion dollars. We have about 
11 million or 12 million passengers on that run. If that was 40 
million passengers, of course, there is costs, not just adding 
passengers, but capacity and the infrastructure to support 
that. How much money do you think could be raised? Any 
thumbnail idea of what that kind of activity would support, 
that revenue?
    We would probably have about $4 billion coming in from 
passenger revenue at that stage and it could be amortized over 
a number of years. Maybe you could tell us what that might 
foretell or forecast for investment. I know you said there have 
to be conditions, Government guarantee and backup, which could 
be done. But with that kind of revenue, what kind of investment 
would it support?
    Mr. Offutt. Thank you, Mr. Chairman. It is hard to put a 
precise number on this, of course, but what I would say is we 
are in an environment where there is more and more capital 
being raised to invest in infrastructure projects globally than 
there are actual opportunities to invest that. And I say that 
because there are a lot of projects that really are not 
profitable and are very difficult to make the math work from a 
business standpoint. The Northeast Corridor, I believe, is 
definitely an exception to that. It is profitable currently and 
I think with additional investment could be a lot more 
profitable.
    Mr. Mica. Again, if we had $4 billion in revenue versus $1 
billion, what would that support? Any idea? I mean, you take 
that to the market.
    Mr. Offutt. Right.
    Mr. Mica. There are a lot of expenses involved, but there 
is still going to be a nice net return. Would it support $20, 
$30, $40 billion in investment? I don't know.
    Mr. Offutt. It could. It would definitely come in two 
forms--private debt capital and private equity capital. I think 
with steady cash flow, people would get comfortable with the 
cash flow that is available for debt service. Let's assume 
after all the costs, you get to something in excess of $2 
billion, you could argue that there is at least--well, 
basically it is hard to give an exact number, but clearly 
multiples of that, that would come from the markets. It is hard 
to answer, there is no other project like this because it is so 
huge relative to what people have been investing in the past.
    Mr. Mica. But again, there would be interest, there is 
capital now seeking projects of this nature. One, of course, of 
this magnitude might have a great deal of interest. My main 
thing is to get our alternatives, get this environmental study 
done, then look at the possibility and take proposals from the 
private sector to build this out. Of course, whoever the 
operator is or working with Amtrak has to also honor the labor 
agreements, right?
    Mr. Offutt. Right.
    Mr. Mica. Well, I think, you know, I am looking at it, 
trying to look at it from a positive standpoint of what we 
could do. There are so many benefits, as I said. The air 
traffic congestion, even with Next Generation air traffic 
control, which won't be developed in the quickest, I am trying 
to speed that up, too, with some things we are doing, maybe 15 
years, you can only fly so many planes so closely together. 
They can only land so many planes at LaGuardia, JFK and Newark. 
Been there and watched them land and can see that we are 
maximizing. Even with the Stewart addition of the fourth 
airport, you still will run out of air space. But taking this 
traffic to the corridor and then the connections that we have.
    A question was raised by Ms. Brown about impeding some of 
the service along the way. Actually, if it is properly done and 
there is separation we can enhance local passenger service, 
commuter service, and we can also increase freight traffic by, 
again, separation within the corridor with the right plan.
    So I look forward to working with you, Mr. Boardman, with 
the deputy administrator and others, and thank you for 
participating today.
    We are going to leave the record open until the 31st of 
December. How is that for a date, Ms. Norton? Without objection 
so ordered. We may have additional questions we will submit to 
you.
    May I yield to Ms. Norton now.
    Ms. Norton. That is a fine date, Mr. Chairman. We will 
either be over the cliff or not by that time.
    I very much appreciate this hearing. I want to say that I 
have been an aficionado of public-private projects in my own 
Subcommittee on Economic Development where it is better known, 
better understood and extensively used, and therefore I am very 
interested in its conceivable application to a railroad. If we 
did more public-private partnerships in construction and real 
estate in my other committee we would have saved billions of 
dollars. Now I want to see whether or not that is the same if 
we are talking about railroads.
    I noticed in Mr. Offutt's testimony, I am looking at page 
9, that your examples where you were recently advised, as you 
say, on transactions tend to be examples like parking systems, 
concessions, parking concessions airports and the like. Have 
you ever advised on any project as large or as extensive as the 
Northeast Corridor?
    Mr. Offutt. I would say there are a lot of projects that I 
work on that are very similar. In terms of airports, there is 
lots of complexity that is very unique to airports. But I would 
say this is a very unique project relative to anything that I 
have seen in the U.S. or around the globe in terms of the scope 
of what this project could be, especially as it relates to 
cost. It is not just me speaking--anyone in the financial 
community would say that an equity check from a large 
institutional investor of a billion dollars is considered 
large, and this would be something which could support 
significantly more than that if structured appropriately.
    Ms. Norton. Now, you testified that capital is available 
for investment in such a project like the Northeast Corridor. 
Now, I would like you to describe what you think is the reason 
for our recent experience where the Department of 
Transportation put out requests for proposals, did get a few, 
but none for the Northeast Corridor. Why do you think that the 
DOT got none for the Northeast Corridor, since that is the only 
really profitable one?
    Mr. Offutt. I would start by looking at the example of the 
Florida high-speed rail project which had been considered at 
one point in time, and there was a list of groups that had 
formed that expressed interest in that and they were some of 
the best operators around the world for high-speed rail, some 
of the best construction companies, and some very well known 
equity sources as well. So I think there is a lot of interest 
in general.
    But what the private sector has seen multiple times before 
are projects that are still very much in the conceptual stage 
and are very concerned about spending significant dollars today 
until there is some more clarity on the projects, because it 
does cost a lot of money to have consultants and others analyze 
it. And that is why I mentioned the concept of political will 
in my testimony. On both sides of the House there is clearly 
support for projects like this, but there is a lot of details 
that need to be dealt with in terms of what the actual 
economics may be, and then once those are determined, then I 
think there would be a lot of interest from the private sector.
    Ms. Norton. Now, you say, and now I am looking at page 6 of 
your testimony, that equity contribution from private investor, 
that tends to be approximately 10 to 15 percent of the total 
project cost given its cost of capital. Does that sound like it 
would be sufficient for a bidder who wanted to be the private 
partner in the Northeast Corridor?
    Mr. Offutt. I think that is a question for a lot of other 
people that would be involved in the project, if that is 
enough. If you think about the total needs for capital, how 
much would you need from the private sector to close that gap. 
But when you look at precedent, public-private partnership 
transactions in the U.S.--still a more limited subset than if 
you look over in Australia, Canada and the U.K.--only about 10 
to 15 percent of the money comes from the private sector, in 
terms of equity that is, and it really is because the cost of 
capital for that equity is definitely, based on precedent 
deals, north of 10 percent cost of capital.
    So usually for projects such as this they would start with 
any potential grant money available first, then any potential 
subsidized or low-cost loans, such as the RRIF program, and 
then eventually figure out how much more additional capital 
would be needed and could the private sector be able to come up 
with that amount. And, again, given the size of the total 
project, I can't say if there is enough capital to do that, but 
in segments, and given the general interest in rail, I believe 
that if structured appropriately there should be a way to do 
this.
    Ms. Norton. But you do say 10 to 15 percent of the total 
project cost would come from private capital. Now, where would 
the rest come from?
    Mr. Offutt. That is right. So if you look at a lot of the 
projects, for example, some of the toll road projects that were 
built in Florida, a lot of it comes from either Federal or 
State funds. It is not to say these are grants, but a lot of 
times they are programs like TIFIA, which are low-cost loans 
that would be supported by the project that represent roughly 
50 percent of the total project cost.
    Ms. Norton. It might be low-cost loans guaranteed by the 
Government?
    Mr. Offutt. That is where a large percentage have come from 
historically.
    Mr. Denham. [presiding.] Mr. Offutt, we are going to move 
on. We will come back. We are going to have several rounds 
here.
    Along that same line of questioning, when you are looking 
at a project, what percentage of the project do you normally 
look at as being needed to be funded before private capital 
comes in and what type of return are you looking for?
    Mr. Offutt. The clients on the private side that I spend 
time with are going to look at a return that is consistent with 
the risk of a project. If there is an availability payment as a 
floor, as I mentioned in my testimony, there is at least some 
comfort that no matter what the volume of traffic is, there is 
some base level of cash flow. That drives the return 
expectation down to somewhere in the low double digits, so 
maybe 11 or 12 percent. If you are talking about a project 
where there is a lot more volatility, then the project for a 
greenfield new construction project could be in the 17-, 18- to 
20-percent range.
    So I think the reality is, is that these investors who 
represent pension fund money or endowment money are looking to 
deploy that capital on a global basis and will find projects 
that meet those return hurdles. So that is why usually the 
percentage is a much smaller percentage of the total cost.
    I think the first part of your question as it relates to 
figuring out when that money is available, there is definitely 
money that has been raised. But I think when it comes down to 
thinking about any given project, if the total cost for a 
theoretical project was $1 billion, there would be very much a 
calculation of given the project's future cash flows and given 
what other sources of capital could be available from both 
Federal, State, local funds, forms of debt capital that could 
be funded on a project basis, on a taxable basis or even a tax-
exempt bases, then how much would be left over for this private 
equity capital. And that usually happens after significant 
studies have happened in terms of either ridership, 
environmental and so on, and that there is enough certainty on 
what the timeline of that project might be as well.
    Mr. Denham. So at what point, and also what type of 
information do you need before you present this to your 
investors on investing in the Northeast Corridor?
    Mr. Offutt. I believe there are a couple of processes that 
are going on right now in terms of a ridership study. That 
would be incredibly helpful. There is additional work, I 
believe, in terms of analyzing what, if any, kind of 
environmental work would be needed. Things that would enable 
the development of a financial set of projections based on 
certain reputable advisers or consultants that would be backing 
those numbers.
    I think once there is a real set of projections, both on 
the capital side and the operations side, then I think it 
becomes a very tangible analysis that the private sector can 
get involved in, at least on the equity investment side.
    Mr. Denham. And what type of information are you looking 
for coming from--or what type of commitment are you looking for 
from Congress on the overall project? Is there a percentage 
that you are looking for? If it is a $100 billion project, are 
you looking for 80 percent of it to be initially funded or are 
you normally willing to jump in halfway through the process?
    Mr. Offutt. Sure. There definitely is not a specific 
percentage that is required. It truly comes down to math. It is 
math in terms of making sure that the return is reached. There 
is a limit in terms of how much equity capital would be 
invested in any one given project.
    So while I mentioned in my testimony and there has been 
hundreds of billions of dollars that has been raised, that is 
true. Clearly a large chunk of it has been invested. But any 
different fund adviser is going to be limited by how much they 
are going to be able to put in one given project. So, again, 
the numbers we have talked about are unprecedented relative to 
deals that have actually happened.
    Mr. Denham. I am just curious on what point you actually 
get the information and take that back to your investors and at 
what point you are able to not only present that to them, but 
give a commitment overall to the project. This is a $151 
billion project that has a little over $3 billion already 
allocated to it. Do you get involved in a phase or do you need 
to see a certain amount of budget allocated before you are able 
to put your financial picture together for your investors?
    Mr. Offutt. I think there is definitely the ability, again, 
for the broader private sector, not only the investors, but 
clearly the operators and construction companies to be getting 
involved in early stages to try to give their thoughts and try 
to structure things in a way that they think will ultimately 
get to the right conclusion. And given the size and the scope 
of this project, I would think you clearly would have different 
phases for that to happen.
    They will spend most of their time and effort when there is 
a better sense of when that first phase will actually start or 
get close to the construction portion, and 6 months leading up 
to that, all the funding will have to come together, and all 
the private and public funds will be available.
    Mr. Denham. So in a huge project like this, it does not 
make your investors nervous to get involved in a phase one or a 
phase two or an early part of the process, even though the 
overall budget is not put together?
    Mr. Offutt. I think it is just a matter of managing their 
cost and time. A lot of people would believe in this project in 
the long run and would be happy to dedicate a fair amount to 
try to make the process move forward. I think it is a matter of 
spending millions of dollars trying to analyze the project and 
come up with constructs that might make the procurement of it 
work, but they will also be concerned about whether that money 
is going to be able to recover eventually if there is a 
process.
    This is a long way of saying that they are very mindful of 
how much they do spend upfront, but I do find that they would 
probably be very much willing to engage at some point early on 
and then hope that they have kind of helped give some guidance 
that could actually turn into a process they could be involved 
in later.
    Mr. Denham. So you would write a clause into any contract 
that said if the project significantly changes, then there is 
some type of payment back to your investors?
    Mr. Offutt. That is one way of doing it. There are people 
in the private side that are willing to have funds at risk that 
they would not expect to be recovered at all. There have been 
discussions about ways in which you can engage the private 
sector and give them some comfort that if things do deviate 
dramatically, that there could be some recovery, that would be 
helpful.
    Mr. Denham. And how much does that compensation change 
depending on the risk that is allocated, or how much does the 
risk change depending on how early the project is?
    Mr. Offutt. Obviously, the earlier and less defined a 
project is, the riskier it is. There aren't any specific, at 
least in terms of the equity capital side, specific funds 
dedicated just to kind of passenger rail projects. So I think 
it would be trying to figure out which groups would be the most 
interested in taking that risk. And the groups that I have 
heard of would be a lot of the international operators. Amtrak 
has teamed up before with SNCF, the French operators. I think 
they are very much believers in this project and other projects 
in the U.S. I believe they have been willing to give guidance 
and not expect any kind of compensation in return.
    Mr. Denham. Thank you. And one final question. This is a 
$151 billion project with $3.3 billion allocated from the 
Federal Government. Is there a local bond on this? State bond? 
Any type of bond? No bond.
    OK. So comparing that to California, where you have a now 
$68 billion project with $3.6 billion coming from the Federal 
Government, a $9.5 billion bond, you have a bigger percentage 
already allocated between State and Federal dollars for the 
California high-speed rail, which is a better risk? Which would 
be a better investment for Morgan Stanley?
    Mr. Offutt. I think the investors would definitely view 
that the Northeast Corridor, given at least the view that you 
are going to be able to go from Boston to Washington, DC, even 
if it is, again, not all done in one segment initially. It is 
already profitable and it clearly has room to be significantly 
more profitable.
    California could work when you are able to get from the two 
major areas of density in San Francisco to L.A. If you are only 
talking about the Central Valley, I think that becomes a 
problem. Unless there is a guaranteed availability payment that 
I had mentioned before, no one is going to be willing to take 
that traffic risk because there is no history of large traffic 
between Bakersfield and Fresno.
    Mr. Denham. But at some point you are still going to 
connect by the California plan San Francisco to L.A. If you 
have a $68 billion project and you have a much larger 
investment between State and Federal dollars, why wouldn't that 
be less risk, unless you really have a huge question about the 
ridership numbers between the two corridors?
    Mr. Offutt. Yes, it also goes to phases. I think it is hard 
to say which is better. If both of them were built tomorrow and 
they were done, I think they are both very interesting and 
potentially very viable projects.
    I think it is just difficult to be able to convince the 
private sector that the timeline is going to be within a 
reasonable amount of time. Most of these funds have been raised 
to try to be invested over the next 10 years, and a project 
such as the California one clearly has a timeline that could be 
well beyond that.
    Mr. Denham. Thank you.
    Mr. Hanna?
    Mr. Hanna. Nothing.
    Mr. Denham. Ms. Norton?
    Ms. Norton. I would like to--I am fascinated by the public-
private notion and how real it is.
    Did you say you would expect an 11- to 12-percent return on 
investment?
    Mr. Offutt. When you think about the private capital, there 
is definitely debt capital and equity capital. On the equity 
side, I would say that the base rate, so the lowest possible 
rate, that equity would be willing to receive would be a return 
of 10 to 11 percent. And that would be under a structure where 
most, if not all, of their key risks were mitigated, such as 
the traffic risk for a portion or all of the system.
    That just gives you a sense of how much more expensive that 
is relative to the RRIF program, which is based on treasuries.
    Ms. Norton. For the record, the $3.3 billion that was 
spoken of earlier, that is really Recovery Act money and some 
appropriation money. It is going into, for lack of a better 
word--Mr. Boardman could perhaps elaborate--I would call basic 
upkeep, not even upgrade of the kind that would be necessary to 
prepare for high-speed rail.
    Is that true, Mr. Boardman? Isn't this just getting Amtrak 
so that those trains can run safely and on time, as they say?
    Mr. Boardman. Ms. Norton, I am not entirely familiar with 
the $3.3 billion number; what it consists of. In terms of the 
Recovery Act piece, we talked about $336 million. And in terms 
of investment for high-speed, the only thing I really know 
about is the $450 million that came out of the Florida project 
that we are now using on the corridor in New Jersey.
    Ms. Norton. So no investment that we could call high-speed 
investment yet.
    I am asking this because I need clarification from Mr. 
Offutt on infrastructure. Does your view of the private 
investment assume that the Government has in place and has 
already funded all the needed infrastructure? Or is the private 
investor part of the infrastructure of the high-speed rail?
    Mr. Offutt. It could definitely be structured either way. 
There are examples when the Florida high-speed rail project was 
considered. One hundred percent of the capital cost could have 
been funded through Government funds and then the private 
sector would be taking the responsibility of all the operating 
costs going forward. That was one concept that had been 
discussed. I think it was a really----
    Ms. Norton. Moving right along.
    Mr. Offutt. Right.
    I don't know if the Northeast Corridor would be that way or 
not. I think there clearly are examples where a large 
percentage of the capital costs would also be covered by the 
private sector. I think that in this case, just given the 
magnitude, it is unprecedented. So it is not to say it can't be 
done; it is just----
    Ms. Norton. Well, I can understand, Mr. Offutt, and some of 
the questions we are asking are almost impossible. I think one 
of the reasons that perhaps if anyone is going to do anything, 
they ought to do it on the section of the Northeast Corridor 
and see what you got.
    But we do have some rough analogies that trouble me when I 
try to apply them to a railroad that has to go and can't stop 
and is depended upon, and that is the FAA. You know, I saw the 
FAA bill held up here year after year after year. Neither party 
seemed to be able to move it. It finally got to the point where 
in the airports around the country they had to stop all of the 
work on those airports because Congress had failed to pass its 
bill, its public part of the bill.
    Could I ask you whether, you know, the public-private 
partnership of the kind you are talking about is even suited 
for the way we fund projects? We fund projects on an annual 
basis. That means that the Federal--on an annual appropriation 
basis. So that means that unless there was also negotiated a 
way to keep whatever Government funds were part of this deal 
coming, wouldn't the private-public partnership be in the same 
position as the FAA was? Some years where there is nothing, 
because there is no agreement in Congress--this is a democracy, 
and the way in which it works, particularly when it comes to 
money, is sometimes Congress does and sometimes Congress 
doesn't.
    And I am trying to apply that to a railroad which depends 
through the annual appropriations on Congress coming up with 
its share of the operating funds and then having trouble.
    Mr. Offutt. I completely agree with that point. For much 
smaller scale projects--for example, a courthouse was built in 
Long Beach, California. All of the funds are also subject to 
appropriation that are coming from the Government each year. 
But given the scale of that, being so much smaller, the 
investor felt comfortable that money will come.
    I think when you are talking about the magnitude here and 
the costs associated with significant delays, it raises it to a 
whole other level. That is right.
    Ms. Norton. It seems to me that the infrastructure of the 
Government would have to also be changed to account for any 
such new and important inroad into a public-private partnership 
for railroads.
    Thank you very much.
    Mr. Denham. Thank you.
    Ms. Hedlund, you said in your testimony that you have the 
right pieces and the right people in place. Do you currently 
have any private investment in the project?
    Ms. Hedlund. Is there currently any private investment in 
the Northeast Corridor?
    Mr. Denham. Correct.
    Ms. Hedlund. Yes, there is, and it is in the stations. As 
Ms. Norton is familiar with, the redevelopment of Union Station 
involves a significant public-private partnership with a 
private real estate developer. And the same is true with the 
proposed redevelopment of Moynihan Station in New York.
    So, yes, with respect to stations, there is a great 
opportunity to leverage private investment for the development 
of those stations to pay for the transportation function of 
those stations.
    Mr. Denham. And how about as far as phase one of the rail 
or the environmental process?
    Ms. Hedlund. What we will be doing in phase one is to 
evaluate what potential private investment might be. That is 
definitely part of the scope of work of phase one, so we will 
be studying that.
    Mr. Denham. And how about phase two? What type of private 
investment are you looking for in phase two?
    Ms. Hedlund. Well, we will find out in phase one what we--
you know, that is what phase one is to find out, what the 
potential is for private investment for projects going forward.
    Mr. Denham. Unlike in California, the Northeast Corridor 
service provides, my numbers here show, 75 percent of the rail-
air market. What is the proportion of passenger rail transport 
in the air-rail market for California?
    Ms. Hedlund. I don't have those numbers, but I know there 
has been a study of what the impact of the high-speed rail 
project would be on the congestion between San Francisco and 
Los Angeles, how much of that traffic is expected to shift to 
rail. I don't have those numbers with me, but I would be happy 
to get those from the Authority and make them available to you 
in the record.
    Mr. Denham. And you also would have, or the Authority, I 
assume, would also have a 30-year projection?
    Ms. Hedlund. I don't know exactly what the nature of the 
projections are, but we will get the information that they have 
and make it available to you.
    Mr. Denham. Thank you. And you currently have a 30-year 
projection for the Northeast Corridor?
    Ms. Hedlund. For the air-rail split?
    Mr. Denham. Yeah.
    Ms. Hedlund. That I do not know. I would defer to Mr. 
Boardman on this.
    The introduction of the Acela service itself in 2000, I 
think the air-rail split was something like, you know, 30-70 or 
40-60, and then it flipped; it is now 75-25. You know, the 
overwhelming number of people going between Washington, DC, and 
New York prefer to take the train. And it is not because that 
it is always cheaper because the Acela service is not. It is 
because of the time savings and the convenience.
    Mr. Denham. Mr. Boardman, for the Northeast Corridor, 80 
percent of the population lives within 25 miles of the 
Northeast Corridor, making the rail very, very accessible. How 
would you compare that with California?
    Mr. Boardman. It depends on the part of California. One of 
the things I can answer, Congressman, is that the air-rail 
service between San Diego and L.A. is entirely rail because of 
how close they are to each other and the way that it operates. 
But when you get to something like the L.A. to San Francisco, 
you really only have the Coast Starlight. And so there isn't a 
sufficient amount of data that would really tell you what would 
really happen here.
    So, from that regard, the old train--and I can't remember 
right now what they called it; I guess it was the Coast 
Daylight--was the primary way they moved, up until 50 years ago 
or so, between San Francisco and L.A. And it was probably the 
most profitable of the private railroad operations back years 
ago in regard to that.
    In terms of the Northeast Corridor, we have a projection of 
what the revenues would be 30 years down the line. There would 
be probably very little air service in terms of Boston to New 
York and New York to Washington, because you would be at an 
hour and a half between Boston and New York and then another 
hour and a half or an hour and 34 minutes between New York and 
Washington. So you would really wind up with very little air 
service.
    And if you remember back in 2008, and you may not, there 
was a great deal of discussion by the former aviation 
executives that that is something we really should do in the 
Northeast, so that those airports today could really be used 
for longer distance travel and that we use the mode that made 
the most sense, which would be rail, in those corridors. That 
would garner us, our expectation is, pretty close to $5 billion 
in revenue a year, with about $1 billion, plus or minus, coming 
out of that in terms of profit.
    Mr. Denham. So you cannot draw a direct correlation between 
California's high-speed rail and Northeast Corridor? I mean, 
they are just two completely different----
    Mr. Boardman. Well, not here. I mean--excuse me. I don't 
know if your question is done.
    I can't draw that conclusion here because you don't have 
the right data sets. We may have some folks that have an 
analysis, and I can look at that and get you an answer back.
    Mr. Denham. Perfect. Thank you.
    Mr. Hanna?
    Mr. Hanna. Thank you, Chairman.
    Hi, Ms. McDonald. How are you, Commissioner? Nice to have 
you here.
    On the Advisory Commission, you are in the process of 
developing several other reports analyzing the pressure that 
would be taken off, projected pressure, off of airlines, off of 
roads and what that means to the Northeast Corridor.
    Will that report be done? And what will we be able to get 
out of it to tell us about the savings that might be incurred 
just by virtue of the pressure taken off of those other two or 
three modes of transportation?
    Ms. McDonald. It is nice to see you, Congressman.
    Mr. Hanna. Thank you.
    Ms. McDonald. We are undertaking right now several 
different initiatives.
    Number one, what you will get in early January is, segment 
by segment up the corridor, what the various infrastructure 
investment requirements are. And it is important to note that, 
while it is done in a segment-by-segment basis, the Commission 
views the corridor as geographically silent. We don't look at 
the borders between States. We really look at the investments 
that are needed for the corridor overall. So you will get that 
in January.
    Number two, in coordination with the I-95 Corridor 
Coalition, we are doing a highway intercept study. And what we 
are doing there is looking at, in cooperation and collaboration 
with the Northeast FUTURE study, what types of people who 
currently use automobiles would then transfer to the train 
intercity passenger rail. And that is going to be completed 
sometime in the spring, and you will get various updates on 
that.
    And, lastly, our primary initiative that we are undertaking 
right now is the cost allocation methodology, which is part of 
the PRIIA legislation that Congress enacted which created the 
Commission, to see what types of cost-sharing allocations need 
to be done between the States, Amtrak, and the Federal 
Government.
    Mr. Hanna. Will you be projecting the cost savings of any 
anticipated improvements in those facilities in the absence of 
the Northeast Corridor build-out?
    Ms. McDonald. You know, I think what we have all been doing 
as standalone States and as part of the corridor is looking at 
what those cost savings are. For example, in New York, we just 
instituted a major change in how we do business on the service 
between Poughkeepsie and Schenectady, New York, and it was a 
wonderful collaboration with Amtrak, CSX, and the State as to 
how those costs are allocated. And those are the things that we 
will continue to be doing.
    Mr. Hanna. Uh-huh. So that won't necessarily be broken out 
in terms of potential Federal savings or Federal offsets, 
investments?
    Ms. McDonald. You know, I think the challenge that we are 
facing is, first and foremost, we are talking $150 billion here 
if something like the Amtrak plan is the agreed upon path 
forward, and we see significant capital investments that need 
to be made. So one of the primary questions that needs to be 
answered is, what are the funding sources to make those capital 
investments? And what we are evaluating is, you know, there 
will be public dollars, as we have been discussing here this 
morning. What is the capacity and the ability and the risk 
associated with private-sector investment, and how does that 
all come to pass?
    Mr. Hanna. Uh-huh.
    Ms. McDonald. And then, as we do that, we will look at, 
along with Amtrak and the Federal Railroad Administration, 
where the potential savings are on the operating side once you 
make those capital investments.
    Mr. Hanna. Uh-huh. I understand. I am just thinking of, in 
total, there could be a great many savings that this body might 
want to see and understand. It is going to be a hard sell.
    Ms. McDonald. You know, it is going to be a hard sell. In 
my 20 years working with both commuter railroads and in 
transportation, one of the reasons we are at the point we are 
right now, not to anybody's fault, but there hasn't been the 
type of investment made that needs to be made.
    We have all pointed to Superstorm Sandy, and fortunately 
the tunnel connecting New Jersey and New York, even though it 
flooded, it did not breach. And that is huge. And a lot of 
times, people talk about the tunnel and the Gateway project as 
a New York-to-New Jersey project. It is not; it is a corridor 
project. If that tunnel had collapsed, just think of what would 
have happened in the Northeast--not the Northeast Corridor, but 
in the Northeast. It would have paralyzed the region and the 
country.
    And we need those investments in additional tunnels in 
Baltimore, in New York, improvements on the bridges in 
Connecticut, to make this system, to attract the ridership that 
we need to make those cost savings and that calculation work.
    Mr. Hanna. Uh-huh. I guess what I am referring to, also, is 
the fact that the $4 billion in revenue that is projected, that 
is just one number, one benefit, one source. It is certainly 
far from what we should be talking about, and obviously 
everybody knows that. But the more you can give us, the more 
you can parse this, the different angles you might take, I am 
sure it is all going to be helpful.
    Ms. McDonald. And we will absolutely do that with Amtrak 
and our partners at U.S. DOT.
    Mr. Hanna. Thank you.
    My time is up.
    Mr. Denham. Any further questions from any members of the 
committee?
    Seeing none, I would like to thank each of our witnesses 
for your testimony today.
    I ask unanimous consent that the record of today's hearing 
remain open until such time as our witnesses have provided 
answers to any questions that have been submitted to them in 
writing, and unanimous consent that the record remain open for 
15 days for additional comments and information submitted by 
Members or witnesses to be included in the record of today's 
hearing.
    Without objection, so ordered.
    I would like to thank our witnesses again for your 
testimony today and appreciate your working with our 
legislative calendar today.
    If no Members have anything to add, the committee stands 
adjourned.
    [Whereupon, at 12:54 p.m., the committee was adjourned.]
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