[Senate Hearing 113-235]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 113-235

 THE FUTURE OF PASSENGER RAIL: WHAT'S NEXT FOR THE NORTHEAST CORRIDOR?

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 17, 2013

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation





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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           ROY BLUNT, Missouri
FRANK R. LAUTENBERG, New Jersey      MARCO RUBIO, Florida
MARK PRYOR, Arkansas                 KELLY AYOTTE, New Hampshire
CLAIRE McCASKILL, Missouri           DEAN HELLER, Nevada
AMY KLOBUCHAR, Minnesota             DAN COATS, Indiana
MARK WARNER, Virginia                TIM SCOTT, South Carolina
MARK BEGICH, Alaska                  TED CRUZ, Texas
RICHARD BLUMENTHAL, Connecticut      DEB FISCHER, Nebraska
BRIAN SCHATZ, Hawaii                 RON JOHNSON, Wisconsin
WILLIAM COWAN, Massachusetts
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                     John Williams, General Counsel
              David Schwietert, Republican Staff Director
              Nick Rossi, Republican Deputy Staff Director
   Rebecca Seidel, Republican General Counsel and Chief Investigator
























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 17, 2013...................................     1
Statement of Senator Rockefeller.................................     1
Statement of Senator Blunt.......................................     3
Statement of Senator Cowan.......................................    15
Statement of Senator Johnson.....................................    42
Statement of Senator Nelson......................................    44

                               Witnesses

Joseph H. Boardman, President and Chief Executive Officer, Amtrak     5
    Prepared statement...........................................     7
James P. Redeker, Commissioner, Connecticut Department of 
  Transportation, on behalf of the Northeast Corridor 
  Infrastructure and Operations Advisory Commission..............    15
    Prepared statement...........................................    17
Jim Steer, Founder and Director, Steer Davies Gleave.............    20
    Prepared statement...........................................    21
John P. Tolman, Vice President and National Legislative 
  Representative, Brotherhood of Locomotive Engineers and 
  Trainmen.......................................................    29
    Prepared statement...........................................    30
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.....................................    32
    Prepared statement...........................................    34

                                Appendix

Hon. Frank R. Lautenberg, U.S. Senator from New Jersey, prepared 
  statement......................................................    53
Response to written questions submitted to Joseph H. Boardman by:
    Hon. John D. Rockefeller IV..................................    54
    Hon. Frank R. Lautenberg.....................................    58
Response to written questions submitted to James P. Redeker by:
    Hon. John D. Rockefeller IV..................................    60
    Hon. Frank R. Lautenberg.....................................    61
Response to written questions submitted to Jim Steer by:
    Hon. John D. Rockefeller IV..................................    63
    Hon. Frank R. Lautenberg.....................................    64
Response to written questions submitted by Hon. Frank R. 
  Lautenberg to:
    John P. Tolman...............................................    67
    R. Richard Geddes............................................    69

 
 THE FUTURE OF PASSENGER RAIL: WHAT'S NEXT FOR THE NORTHEAST CORRIDOR?

                              ----------                              


                       WEDNESDAY, APRIL 17, 2013

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:39 p.m., in 
room SR-253, Russell Senate Office Building, Hon. John D. 
Rockefeller IV, Chairman of the Committee, presiding.

       OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    The Chairman. Ladies and gentlemen, I apologize for being 
late. And I also apologize that because we are having at least 
nine votes on gun issues this afternoon, that my distinguished 
friends' and my schedule are just completely ransacked. So I am 
going to give my opening statement.
    I am tremendously interested in the content, in the 
substance, when doing prep last night, for what we are going to 
be talking about, something which is so totally impossible to 
contemplate and yet which is so totally impossible to 
contemplate not somehow figuring out a way to do. It is sort of 
a metaphor for whither America.
    Should I start my statement? Wouldn't that be better?
    Senator Blunt. Probably be good.
    The Chairman. Yes. Yes.
    OK, when trains first began to roll from Baltimore to 
Washington in 1835, highways did not exist. They probably did 
in Missouri, but they didn't in West Virginia. Roads between 
towns and cities were made of dirt, and traveling between 
cities took days. The arrival of trains, obviously, changed 
that.
    Trains were initially built to move freight from ports to 
commercial centers; moving commuters was an afterthought. Then 
railroads found that trains could move a large number of people 
very efficiently, and that is what people wanted.
    Passenger train travel became a viable alternative, but it 
was not fast. And I am staggered by what I am about to say. The 
first train traveling from Baltimore arrived in Wheeling, in my 
home state, although West Virginia did not yet exist, it took 
16 hours. But, then again, when you think about it, that is not 
too surprising, is it? Early trains. The point is that it got 
there.
    The rise of the automobile and the interstate bus companies 
caused a plunge in the popularity of rail travel. The 
Interstate Highway System, a strong example of how the Federal 
government can strategically plan for our transportation needs, 
was the catalyst for passenger rail's decline.
    By the 1970s, the system was on the verge of collapse. 
Passenger rail was not financially viable, so Congress created 
something called Amtrak. However, it failed to establish a 
viable strategy for passenger rail to succeed. Amtrak, and 
passenger rail in general, has limped along financially since 
it was created.
    Unpredictable Federal financial support has been a 
detriment to Amtrak's core responsibility to provide travel for 
millions of Americans and continues to hamper its long-term 
planning. Amtrak is caught in the worst possible of all places, 
doing the right thing, doing it efficiently, but not knowing 
what the next year will bring.
    The transportation system that we rely on to travel through 
the Northeast and the rest of the country is from another era. 
Commercial expansion has resulted in vast economic powerhouses 
of cities that grew to this level because of their strategic 
commercial significance. Transportation networks were developed 
around and between them, creating a dense, interconnected 
region.
    With this economic density comes complex transportation 
challenges. Spend some time traveling in the Northeast and one 
thing is very clear: it is very, very busy. The highways are 
jammed beyond capacity, overloaded with cars and trucks. The 
airspace is the busiest in the country, where delays are 
frequent and have nationwide consequences. Even the passenger 
rail systems are at capacity.
    The transportation network is overwhelmed, and it is 
beginning to have consequences. That has been true for quite a 
while. The region is responsible for 20 percent of the 
country's gross domestic product. This translates into $2.4 
trillion annually. When traffic congestion and delays cost the 
region $22 billion in lost productivity each year, it is no 
longer just a transportation issue, it becomes an economic 
issue.
    It is clear that a healthy transportation network in the 
Northeast is vital to the Nation's economy. However, building 
more highways are either infeasible or astronomically costly in 
this dense region.
    More and more every day, the system is creaking under the 
stress of more and more users. Our transportation 
infrastructure is old, it is crumbling and in too many places 
obsolete. In the Northeast Corridor, dramatic investment is 
needed right now just to maintain existing capacity.
    Everyone in this room knows that simply maintaining what we 
have in the Northeast Corridor is not enough. We need to 
provide expanded capacity to meet future needs of the region. 
Throwing $22 billion down the drain annually in this economy, 
all because we cannot agree that transportation infrastructure 
is a priority, is shameful.
    I truly believe our country's lack of focus on investing in 
our infrastructure is endangering our ability to continue as a 
global leader. I could take 20 minutes to expand on that. What 
is it in Americans that will not confront the most obvious 
parts of their having a decent future infrastructure in so many 
respects? It is deplorable, it is curious, and it is wrong.
    The Federal Government can lead on rebuilding our 
infrastructure. We can put together a coherent, long-term plan 
for how to position this country's interconnected 
transportation system for the future. But we need the will to 
do it, which is something that has been lacking in this 
building in recent years. We need the stakeholder community to 
push and work with us to fully meet the present and future 
needs of the corridor.
    I have an infrastructure fund bill. I say that back home, 
and people don't know what I am talking about. You know, 
infrastructure bank and infrastructure fund, they don't know 
what you are talking about. But it is so critical. It would 
leverage private funds to maximize the return on Federal 
taxpayer dollars. This is one way to help fill the funding gap, 
but all funding ideas and options must be on the table.
    The bottom line is that investment in our rail 
transportation infrastructure is only part of the solution. In 
the last week alone, this Committee has looked at how freight 
mobility will change in the next decade and how the aviation 
industry is modernizing to compete on a global level, and then 
also discussing whether or not sequestration and other things 
is going to allow that to happen.
    The private sector has plans for how it will adapt to this 
century's technological advancements and opportunities. We will 
hear today that Amtrak is working on a plan for the corridor's 
future needs.
    However, our Federal transportation programs are divided by 
jurisdictional and programmatic silos. It is just like post-9/
11 and the intelligence community and all of those various 
agencies. They just hold on to their turf. All the middle-level 
people stop what the top-level people know has to be done, and 
they just stop it. It is called inertia. It is rampant.
    My good Ranking Member, Mr. Blunt, I used to be something 
of a Confucian scholar, and that was considered very good, 
except the Confucians were so bureaucratic. You took this test, 
and if you made it, you got into the bureaucracy. Once you got 
into the bureaucracy, you forgot all about your country and 
what its needs might be; it was just about holding on to your 
position. And we have a lot of that here in this country.
    However, my final page----
    [Laughter.]
    The Chairman.--our Federal transportation programs are 
divided by, as I said, silos in a way that prevents us from 
developing a comprehensive strategy for rail, for highways, and 
air traffic. We in Congress are not acting in a way that allows 
for a comprehensive intermodal strategy to guide investment. 
The future of America in the world economy depends on us rising 
to the challenge, all of us.
    Your Excellency, I turn to you.

                 STATEMENT OF HON. ROY BLUNT, 
                   U.S. SENATOR FROM MISSOURI

    Senator Blunt. Thank you, Chairman.
    The Chairman and I are good friends, and we spend some time 
together, and anytime we do, I always learn something. And 
today it was that bureaucracy is the reason for the decline in 
Confucianism.
    [Laughter.]
    Senator Blunt. So this is good to know, this is good to 
know, and I am glad to know it.
    And, Chairman, thank you for coming and chairing this 
hearing today.
    I do want to mention specifically Senator Lautenberg, who 
was certainly no--I think there is no bigger advocate for rail 
travel, passenger rail, or the Northeast rail corridor than 
Senator Lautenberg has been. And he is the chairman of our 
subcommittee. Not able to be here today, but we look forward to 
him getting back to work quickly.
    The Northeast Corridor that we are going to be talking 
about today is one of the most important and valuable 
transportation assets in the United States. The comments that 
the chairman has made about the challenges to that corridor are 
real.
    From an Amtrak perspective, Mr. Boardman, it is the crown 
jewel of Amtrak, the part of Amtrak that makes money, the part 
of Amtrak that serves a big and consistent population every 
day.
    And while the population center of the country continues to 
move further west and further south, we need to remember that 
there are still 50 million people who live in close proximity 
to this critical corridor that we are talking about. Whether it 
is on Amtrak or the numerous commuter networks which use a part 
of this line or through the freight traffic which shares the 
line, millions of Americans every day are dependent for their 
jobs, their livelihood, and in getting to their jobs, on this 
corridor.
    I am interested to hear from our witnesses today about 
their view for the future of the Northeast Corridor. And, 
specifically, will ridership increase as our population 
hopefully continues to grow? And how do we deal with that 
ridership in the best way, in a way that encourages the use of 
this asset and maintains this asset?
    I understand that there is a 30-year master plan conducted 
by the Federal Railroad Administration, which highlights both 
the near-term and long-term need for this line. And I am going 
to be interested to hear more about the implementation of that 
plan and the continued sharing of this asset by freight and by 
passengers.
    Specifically, as the freight industry continues to invest 
in our rail infrastructure over the past several years, we see 
that that industry has dramatically improved its position and 
is investing its own money in a way that allows its 
infrastructure to be maintained and improved and bigger than it 
was before.
    Knowing how important this line is to our country, I know 
at least one witness is going to be talking about some of the 
potential for private-sector involvement and private-sector 
resources, how they might be able to be leveraged. I look 
forward to hearing that.
    I think the Chairman's views of the critical use of rail if 
we are going to be anywhere nearly as competitive as we would 
hope to be and if we are going to compete with the people we 
have to compete with is something we all need to understand and 
appreciate better.
    And on behalf of Chairman Lautenberg from our Subcommittee 
and others on the Subcommittee, I am pleased we are having this 
hearing, Mr. Chairman. And that is all I have.
    The Chairman. Well, I have so many questions, but I am 
going to have to ask them from some other building, so you 
probably won't hear me. So I may send you some questions.
    In any event, I just consider what you represent, what you 
represent, frankly, to my state, people who come from 
Martinsburg on the MARC train every single day to work in 
Washington, take it back at night. It is sort of an ideal life. 
It is efficient. And yet you are under such stress. And what 
you need to do to improve costs so much money, and that is hard 
to come by these days.
    But I admire you, and I am glad that you are fighting for 
this. And I hope that you will forgive me if I get up and 
leave.
    Mr. Blunt may actually be quite relieved if I get up and 
leave.
    [Laughter.]
    Senator Blunt. No. Always disappointed.
    The Chairman. So now we will hear your testimony, starting 
with you, sir.

STATEMENT OF JOSEPH H. BOARDMAN, PRESIDENT AND CHIEF EXECUTIVE 
                        OFFICER, AMTRAK

    Mr. Boardman. Thank you, Mr. Chairman. And thank you for 
your tireless support in terms of the Cardinal service in West 
Virginia and also the Capitol Limited service that is vital in 
connecting and creating economic opportunities for communities 
in West Virginia. Further, your support for the national 
network over the years is noticed and deeply appreciated, along 
with Senator Lautenberg's and yours, Senator Blunt.
    With that being said, this hearing is about the Northeast 
Corridor. While investment has been heavy in improving and 
sustaining the Northeast Corridor since Amtrak took it over in 
1976, the fact is that much of the infrastructure, particularly 
major components such as the electrical system and the bridges, 
were built between 1900 and 1930, and some components are even 
older. This infrastructure is carrying a much greater load than 
its original designers ever anticipated, and the steady 
expansion of traffic over the last 3 decades has consumed the 
available capacity.
    For a while, the Northeast Corridor carried about 1,200 
trains a day in 1976. Today, it carries almost double that 
number. While approximately 150 Amtrak trains today use the 
Northeast Corridor, it also hosts more than 2,000 daily 
commuter trains run by 8 separate agencies. Some 70 daily 
freight trains also use the infrastructure. The Northeast 
Corridor is among the most heavily used rail lines in the 
world, moving approximately 260 million passenger trips and 14 
million car-miles of freight per year.
    Now, this is a good thing, because all of those services 
deliver tremendous value to the region. But we are eating our 
assets alive. Many segments of the Northeast Corridor are 
already at capacity, particularly during peak periods, and it 
is not easy to add more capacity. Furthermore, Northeast 
Corridor rail ridership is projected to increase by over 50 
percent by 2040. So while the operators are succeeding, we are 
running out of ways to cram more trains into the 
infrastructure, and we are severely underinvesting in a 
national critical infrastructure.
    Penn Station, New York, is the busiest place in the system. 
It is the best example of the absolute failure there will be 
for all operators who try to cram more trains under the newest 
real estate development that is being built on top of an 
inadequate infrastructure.
    We have become a nation that does not act upon our beliefs. 
We talk about them as if talk will build tunnels or rail lines 
or bridges. At rush hour, trains move through the underwater 
tunnels between New Jersey and Manhattan every 2 minutes. This 
means the slightest delay can trigger backups in the whole 
network. There is literally no spare infrastructure capacity. 
And the only time we can maintain these tunnels, or anything in 
Penn Station for that matter, is a 55-hour period from Friday 
night to very early Monday morning.
    Five pages and 10 miles. Five pages in the report (http://
www.nec-commission.com/wp-content/uploads/2013/01/necc_cin
_20130123.pdf) that Jim Redeker will put into the record next, 
pages 38 to 42, in the critical infrastructure needs on the 
Northeast Corridor. That report identifies the most critical 
issue of capacity in this 457-mile rail asset: the Gateway 
Program. It is the single most important investment needed to 
unlock the capacity constraints in the Northeast Corridor and 
the many states it serves for the next generation.
    When implemented, the Gateway Project will bring additional 
capacity to the spot where it is most needed, the bottleneck 
between Newark and New York, Penn Station. Today that segment 
of the Northeast Corridor is a double-track line that serves 
Manhattan through a pair of underwater tunnels built in 1910. 
These are among the same tunnels that filled with over 13 
million gallons of saltwater during Superstorm Sandy, shutting 
down some service in the Northeast Corridor for nearly a week 
and underscoring the importance of adding critical redundancy 
to this central chokepoint on the corridor.
    But as important as redundancy is, this investment is about 
having the fortitude to say that the United States of America 
is confident in the future of its people and is willing to stop 
talking and start building.
    Mr. Chairman and Members, join Amtrak in building two new 
tracks and tunnels from Newark to serve an expanded Penn 
Station and the future Moynihan Station. It is essential to 
this nation's economic performance. It is essential if we are 
to cram more commuter trains into our crowded space. It is 
essential to support reliability for Amtrak, New Jersey 
Transit, Long Island Rail Road, and now the plans that Metro-
North has to add even more trains. It is essential for the 
success for the real estate development being built over the 
West Side Rail Yard in New York City, a development that will 
contain more commercial space than all of downtown Minneapolis, 
Minnesota.
    We are at a crisis point right now, today. Sandy showed our 
hair trigger vulnerability. We are going to need more than just 
Federal capital funding to address this crisis. We are going to 
need a new model, one that ensures equitable contributions by 
all users of the Northeast Corridor to the upkeep and 
sustainment of our infrastructure. If we do not obtain one, the 
outlook for the system's capacity and subsequently the rail-
dependent Northeast economy is grim.
    Amtrak is ready to embrace innovations, build new 
partnerships, and pursue private-sector opportunities, but none 
of this will replace the need for the Federal government to 
make a significant, long-term investment commitment to the 
Northeast Corridor. We must not dither away our time with great 
talk. We must build great futures for those who follow us. And 
the time is now.
    Thank you.
    [The prepared statement of Mr. Boardman follows:]

          Prepared Statement of Joseph H. Boardman, President 
                  and Chief Executive Officer, Amtrak
    Thank you very much for the opportunity to testify today, Mr. 
Chairman. I would like to begin by thanking you and your many 
colleagues on this Committee for all of your efforts, which have 
spanned decades, on behalf of Amtrak, the Northeast Corridor (NEC) and 
the cause of public transportation more generally. Your work here in 
the U.S. Senate has made a real difference in the travel experience of 
millions of people every year, and your contributions are enduring and 
distinctive. While we're here primarily to discuss the Northeast 
Corridor, we appreciate your visionary support for a multimodal 
transportation network that meets America's future needs, including a 
strong and healthy national intercity passenger rail network. And, of 
course, upon your upcoming retirement, we're going to miss your 
tireless support for the Cardinal Service that is so vital in 
connecting and creating economic opportunities for communities in West 
Virginia.
    So with all that being said, I hope you'll pardon me for beginning 
with a quick review of the NEC, including some key data points and some 
information about its history and function.
Historical Overview
    Although portions of the Northeast Corridor routes were built some 
180 years ago, the modern NEC dates from the High Speed Ground 
Transportation Act of 1965, an early form of a public-private 
partnership between the Federal government and the Pennsylvania 
Railroad (which at the time owned and operated the portion of the NEC 
from Washington to New York) that resulted in improved trip times and 
performance. Through the following decade, ownership of the NEC was 
gradually consolidated through the creation of the Penn Central 
Railroad and then transferred to public and Amtrak control between 1971 
and 1976 as part of the recovery plan for the Penn Central bankruptcy.
    At the time we took the NEC over in 1976, the railroad was in a 
deplorable state of disrepair and required major investment. To address 
this need, the Federal Railroad Administration (FRA), Congress and 
Amtrak worked closely together to establish, fund and carry out the 
Northeast Corridor Improvement Project, or ``NECIP.'' This project, and 
its follow-on, the Northeast High Speed Rail Improvement Program, or 
``NHRIP'', invested a total of about $4 billion in the NEC between 1976 
and 1998. Over time, the NEC was transformed from a rundown mid-century 
railroad into a modern, electrified, high speed line capable of 
handling twice the number of trains and suitable for our 125mph 
Northeast Regional services, as well as the 135-150mph Acela trains 
which entered service in 2000.
Current Operations
    As a result, in part, of these investments, Amtrak's system-wide 
ridership has risen by almost 50 percent since 2000, and we've set nine 
annual ridership records in the last ten years. The NEC has been a 
major driver of that growth, and our market share in the region has 
risen dramatically. In 2000, we carried about one passenger between New 
York and Washington for every two carried by the airlines; today, we 
carry three passengers for every single airline passenger. Similarly, 
we carried one passenger between New York and Boston in 2000 for every 
four who flew; today, we carry more people between these two cities 
than all of the airlines put together. This is not something that I 
would portray as a ``win'' for one mode or the other, but rather, a 
case of modal optimization: Amtrak is now providing efficient and 
effective service on a passenger corridor that's ideally suited to its 
operational characteristics, and the airlines can free up capacity to 
improve service on longer routes where there are currently fewer 
service choices, including international flights.
    But we are only a part of the story--for today's NEC handles a lot 
more than just Amtrak services. This is a blessing to the communities 
that are served by the route, but it is also a very severe challenge to 
the infrastructure. While we have invested heavily in improving and 
sustaining the NEC, the fact is that much of the infrastructure--
particularly major components such as the electrical system and the 
bridges--was built between 1900 and 1930, and some components are even 
older. This infrastructure is carrying a much greater load than its 
original designers ever anticipated, and the steady expansion of 
traffic over the last three decades has consumed the available 
capacity--for while the NEC carried about 1,199 daily trains in 1976, 
today it carries almost double that number. While approximately 150 
Amtrak trains use the NEC every day, it also hosts more than 2,000 
daily commuter trains, run by eight separate agencies. Some 70 daily 
freight trains also use our infrastructure. The NEC is among the most 
heavily used rail lines in the world, moving approximately 260 million 
passengers and 14 million car-miles of freight per year.
    This is a good thing, because all of those services deliver 
tremendous value to the region, but it's also a challenge. Many 
segments of the Northeast Corridor are already at capacity, 
particularly during peak periods. And it's not easy to add more 
capacity. Furthermore, NEC rail ridership is projected to increase by 
over 50 percent by 2040. So while the operators are succeeding, we're 
running out of ways to cram more trains onto the infrastructure. Penn 
Station in New York, for example, is the busiest place in the system 
and is the best example of the challenges we face at various locations 
along the NEC. At rush hour, trains move through the underwater tunnels 
between New Jersey and Manhattan on 120 second headways. This means 
that the slightest delay can trigger backups on the whole network. 
There is literally no spare infrastructure capacity, and the only way 
to acquire more is to add two more tracks to the NEC across the New 
Jersey Meadowlands and another set of tunnels under the Hudson River.
Addressing the NEC Capacity Challenge
    To address this issue of capacity into New York, we created the 
``Gateway Program'' which is perhaps the single most important 
investment needed to unlock the capacity constraints on the Northeast 
Corridor and the many states it serves for the next generation. When 
implemented, the Gateway project will bring additional capacity to the 
spot where it's most needed--the bottleneck between Newark and New York 
Penn Station. Today, that segment of the NEC is a double track line 
that serves Manhattan through a pair of underwater tunnels built in 
1910. These are among the same tunnels that filled with over 13 million 
gallons of salt water during Super Storm Sandy, shutting down service 
on the Northeast Corridor for nearly a week, and underscoring the 
importance of adding critical redundancy to this central chokepoint on 
the corridor. Adding two new tracks and tunnels from Newark to serve an 
expanded Penn Station and the future Moynihan Station is essential to 
both reliably support the roughly 450 trains that use the current 
tunnels today and permit future growth across the entire corridor.
    Across the NEC, Amtrak is working on creating plans like the 
Gateway program to address existing capacity and performance 
constraints. At Washington Union Station, and beginning next year in 
Baltimore and Philadelphia, we are advancing terminal master plans to 
expand our facilities for the growth ahead while simultaneously 
unlocking commercial development opportunities. Thanks to funding from 
the FRA and in cooperation with states all along the NEC, we've been 
advancing design and environmental review for major new pieces of 
infrastructure like the Baltimore and Potomac tunnels and Susquehanna 
Bridge replacements in Maryland. These will all be multi-billion dollar 
projects of regional significance, but they are the sorts of things 
that we must do if we are to create the capacity we need to accommodate 
the projected ridership growth.
    In the meantime, we are using the funding we can obtain to advance 
discrete projects on the existing infrastructure that will deliver 
incremental trip time, capacity, and reliability improvements for both 
intercity and commuter services. The largest such project that's 
currently ongoing is the ``New Jersey High Speed Rail Improvement 
Program,'' which will deliver upgrades to the track, electrical and 
signal systems between Trenton and New Brunswick to increase capacity 
and reliability and allow higher train speeds. Perhaps most 
importantly, the project gives us a prototype for modernizing the 
entire south-end of the NEC from New York to Washington.
User Pay Model
    Measures like these--incremental steps designed to deliver specific 
improvements--have helped Amtrak restore and improve the NEC, and 
introduce important service developments such as Acela. But they have 
also brought on something I would call a ``crisis of success.'' We've 
rehabilitated a railroad corridor, and made it into something far more 
productive than its builders could have imagined. But our success has 
meant that we've used up the legacy capacity of the existing railroad 
while further depleting its infrastructure assets, leading us to a 
major coming investment crisis that, without a solution, will mean 
strangled growth and deteriorating service. We are going to need more 
than just Federal capital funding to address this crisis--we are going 
to need a new model, one that ensures equitable contributions by all 
users of the NEC to the upkeep and sustainment of our infrastructure. 
If we do not obtain one, the outlook for the system's capacity and 
condition is grim.
    The first step in this direction was provided by the 2008 Passenger 
Rail Investment and Improvement Act (PRIIA). Section 212 mandated the 
development through the Northeast Corridor Infrastructure and 
Operations Advisory Commission of a standardized cost allocation 
methodology designed to ensure that all users of the NEC pay a fair 
share of the infrastructure capital and operating costs. This is an 
important beginning to creating the sound financial foundation for the 
NEC infrastructure necessary to support its continued improvement and 
growth. But, ultimately achieving this goal will require the creation 
of a new, long-term and reliable partnership between the Federal 
government, Amtrak and the other NEC railroads, the states, and local 
communities along the route that ensures adequate investment.
Planning for Future Generations
    While infrastructure age and condition are major issues, over the 
longer term, the question of capacity is the greatest issue. The 
Northeast is a very productive and densely inhabited region, supporting 
17 percent of the Nation's population on 2 percent of its land--and 
generating 20 percent of its GDP. About 80 percent of this population 
lives within 25 miles of the NEC. This population is expected to grow 
significantly in coming years, and that growth will translate into 
increased demand for both Amtrak and commuter rail service--but the 
existing infrastructure cannot accommodate this demand.
    Amtrak has created a vision and a strategy that will address this 
issue. Our recent report, titled The Amtrak Vision for the Northeast 
Corridor (NEC Vision), updates the work first published in 2010, and 
outlines a vision for a high-capacity, high-performance railroad 
featuring a major upgrade of the existing Northeast Corridor to 
accommodate increased and improved commuter, intercity, and freight 
service and augmented by new, dedicated high-speed trackage, on new and 
existing right of way, that will allow us to dramatically increase 
train frequencies, raise speeds and reduce trip times to world-class 
levels.
    Our NEC Vision is now serving as one of the many inputs into FRA's 
``NEC FUTURE'' planning process. This important process will help 
determine the options for Corridor service and infrastructure 
development over the coming decades and we hope this Committee will 
continue to support FRA's ongoing work in this area. In addition to 
this important planning work, we are taking near-term steps to help 
make this vision a reality, including working with the California High 
Speed Rail Authority to jointly pursue new high speed train sets. 
Through a recently released ``request for information'' (RFI), we are 
in the process of hearing from leading train manufacturers from around 
the world on what high speed rail equipment they could provide to both 
organizations and we hope to begin a procurement process this year for 
new trains to augment and then replace our Acela train sets.
    To implement the strategies I have outlined, and in recognizing 
that the NEC consists of two distinct Amtrak businesses--train 
operations and infrastructure management--we've created business lines 
devoted to each of these. Our ``Northeast Corridor Infrastructure 
Investment and Development'' group is tasked with the management of the 
infrastructure, including creation and implementation of long term 
strategies, development of financing options, and the management of our 
relations with other NEC users.
NEC as part of a National Network
    Among the trains that use the NEC, I would note, are seven of 
Amtrak's 15 long distance trains. While it's easy to think of the NEC 
as the exclusive province of Acela, the Northeast Regionals, and the 
eight commuter services that use it, we shouldn't forget that the long 
distance services deliver up to half a million passengers a year onto 
the corridor. It also hosts no fewer than seven state-supported 
services, which provide direct service to off-corridor cities and towns 
such as Charlotte, North Carolina, Pittsburgh, Pennsylvania, and St. 
Albans, Vermont. The NEC is a key part of an integrated network that 
serves the United States from ``coast to coast and border to border.'' 
As such, it is both a regional and a national asset, and its future is 
both a regional and national responsibility.
The Investment Imperative
    These statistics tell you a lot about why the NEC is an asset of 
national significance, and why it will require an ambitious investment 
program to keep pace with the demands coming decades will make on it. 
While these costs may seem high, they would be dwarfed by the impacts 
of failing to invest in this asset. The whole of the investment 
required to implement our plan over a twenty year period, for example, 
is about half of the current annual cost of highway congestion in 
America--and the capacity improvements that come with the NextGen plan 
deliver the capacity equivalent of three lanes on I-95 in each 
direction.
    This is an ambitious vision for a project of regional and national 
significance--and it is therefore going to have to be funded 
accordingly. The investment to realize these plans will have to come 
from a variety of sources, principally Federal, but states and cities 
in the region will also have to play a part. Private financing will 
need to play a role, too, but these contributions will only be truly 
possible once the public sector has committed to this project and such 
contributions won't come for free. A significant share of the funding 
will have to come from the Federal government, just as it has in our 
other major transportation modes. The first step toward a necessary 
Federal commitment is already underway through the FRA's NEC FUTURE 
process. We are hopeful that this service development plan and 
comprehensive environmental impact statement for the entire NEC--the 
first since the 1970s--will provide the springboard needed to launch a 
new era of NEC improvement.
    The upcoming reauthorization of Amtrak and passenger rail programs 
provides a unique opportunity to advance these initiatives, both for 
present and future generations. PRIIA's authorizations will expire in 
September of this year, creating an opportunity for Congress to make a 
definitive statement about plans and policy for high speed and 
intercity passenger rail service--on the Northeast Corridor and 
nationwide--in the coming years. We look forward to working with the 
Committee as we shape the conversation about what that policy will be. 
We are in the process of developing Amtrak's principles for the 
reauthorization or PRIIA, and look forward to sharing them with you at 
the appropriate time.
    In the meantime, if there is one thing we are sure the 
reauthorization must accomplish, it is coming up with an increased and 
more reliable source of capital investment. This is especially true for 
the Northeast Corridor. In recent years, Amtrak has spent an average of 
about $259 million annually in NEC infrastructure spending from 
Federal, state and local sources from FY09 through FY13, excluding 
stimulus. Even though Recovery Act funding provided more than $600 
million worth of investment in the NEC, at current annual levels, we 
can afford to fund only normalized replacement of assets. This level of 
funding is not sufficient to address the backlog of deferred 
maintenance needs, or to build capacity for further growth. Our current 
estimate is that we will need something in the vicinity of $2 billion 
annually to address state of good repair needs and accommodate growth 
for all the users.
    While I am confident in our collective ability to address the full 
range of environmental impacts, design needs, and technical challenges 
of modernizing this railroad for the 21st century, what does not 
currently exist is a reliable funding mechanism to make this all 
happen. Federal funding and financing, the life-blood of all of the 
world's major high speed rail systems, must come in a steady, 
predictable, and reliable manner that will allow us to execute projects 
costing multiple billions of dollars over a period of many years. The 
existing appropriations process is barely adequate for the purposes of 
keeping Amtrak operating and our infrastructure in a state of basic 
maintenance; it cannot sustain a program of this magnitude. 
Consequently, I believe that if we are to succeed in realizing our 
vision, Congress must act to create a funding program that will support 
multi-year, multi-billion dollar projects, and that will require and 
incent local and regional contributions.
    In this day and age, as we look to recapitalize our aging 
infrastructure and deploy new capacity strategically across constrained 
networks nationwide, intercity passenger rail stands apart as the 
fastest-growing transport mode.\1\. To support this continued growth, 
Amtrak is ready to embrace innovations, build new partnerships and 
pursue private-sector opportunities, but none of this will replace the 
need for the Federal government to commit to the NEC. Today, we have 
pushed the current infrastructure about as far as it can go, but the 
end of demand and growth is nowhere in sight. A new model for 
investment and development is needed, and I hope in the coming year 
that the Committee will consider this need carefully--because however 
costly these investments may appear, the cost of failing to act will 
ultimately be far higher, as the mobility and economic success we and 
the entire Northeast have enjoyed in recent years will be relentlessly 
eroded under the conditions of a deteriorated and capacity-constrained 
railroad.
---------------------------------------------------------------------------
    \1\ Puentes, Robert, Adie Tomer and Joseph Kane. A New Alignment: 
Strengthening America's Commitment to Passenger Rail. Washington, D.C.: 
Brookings, 2013.
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               STATEMENT OF HON. WILLIAM COWAN, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Cowan [presiding]. Thank you, Mr. Boardman.
    Chairman Rockefeller had to step out for a second. I will 
step in to the best of my abilities. Awfully big shoes to fill. 
I think we will just continue with the testimony over the 
course of the panel before we begin the questioning.
    Mr. Redeker?

          STATEMENT OF JAMES P. REDEKER, COMMISSIONER,

           CONNECTICUT DEPARTMENT OF TRANSPORTATION,

    ON BEHALF OF THE NORTHEAST CORRIDOR INFRASTRUCTURE AND 
                 OPERATIONS ADVISORY COMMISSION

    Mr. Redeker. Good afternoon. And I appreciate Chairman 
Rockefeller's kicking off the meeting, Ranking Member Blunt, 
and Committee members. I would also like to recognize Senator 
Lautenberg, a mentor of mine from my New Jersey Transit history 
and a great leader in the Northeast Corridor over the years.
    I am Jim Redeker, Commissioner of the Connecticut 
Department of Transportation. I am the owner of 56 miles of the 
Northeast Corridor, a principal investor in the New Haven-
Hartford-Springfield intercity high-speed rail corridor, and 
beneficiary of great service provided through the state of 
Connecticut and within the state of Connecticut by Metro-North 
and Amtrak.
    Today, I represent the Northeast Corridor Infrastructure 
and Operations Advisory Commission, and I am pleased to have 
the opportunity to discuss our activities and our long-term 
needs assessment of the corridor.
    The Commission was authorized in recognition of the 
inherent challenges of coordinating, financing, and 
implementing major system improvements that cross the multiple 
jurisdictions of the Northeast Corridor. The expectation is 
that, by coming together and taking collective responsibility 
for the Northeast Corridor, our members will achieve a level of 
success that far exceeds the potential reach of any individual 
organization.
    Realizing a bolder vision for the future requires 
unprecedented collaboration. Comprehensive planning is 
difficult for a system that spans eight states, and the 
District of Columbia, supports nine passenger rail operators, 
serves four freight railroads, and has four separate 
infrastructure owners. A key charge for the Commission is to 
work with its members to develop strategies for coordinated 
action.
    To put the Commission's work in context, the Northeast 
Corridor region is home to over 50 million people and generates 
$1 out of every $5 in GDP. And it does so on less than 2 
percent of the Nation's land area.
    The Northeast Corridor has some of the Nation's longest 
commutes. I-95 is congested, and one-fifth of all the flight 
departures are delayed in major airports in the New York and 
Philadelphia area.
    The Northeast Corridor is one of the busiest and most 
complex railroads in the world, carrying 750,000 passengers and 
2,000 commuter, intercity, and freight trains every weekday. 
And to put it in perspective, the New Haven Line has added this 
year alone over 45 weekend trains and will be adding over 8 
weekday off-peak trains and 2 reverse-peak trains, the largest, 
most unprecedented increase in service in our rail line's 
history.
    The Northeast Corridor must balance acute investment needs 
to maintain the safety and reliability of current services with 
the need to address the growing service needs. Hundreds of the 
corridor's bridges and tunnels are a century old. Electric 
power supply systems were installed in the 1930s, and signal 
systems rely on decades-old technologies.
    The wear on existing infrastructure and the demand for 
passenger rail services continue to increase dramatically. When 
you look at commuter and Amtrak services, we are sharing the 
same tracks, along with freight trains. Delays on one service 
can cause ripple effects on others. Major segments are at or 
near design capacity, and all services that utilize the 
corridor are susceptible to disruptions, and as Joe said, to 
infrastructure failures. We need significant and sustained 
levels of infrastructure investment to support the operations 
of the Northeast Corridor or the economic benefits will 
diminish.
    Hurricane Sandy did give us a vision into the chaos that 
would ensue without these vital transportation assets. We 
watched political leaders act and prioritize the reconnection 
of rail service to get the region moving again. We applaud the 
railroad and transit employees who made heroic efforts to 
restore these critical services as quickly as possible.
    In January, the Commission released a report on the 
Northeast Corridor critical infrastructure investment needs 
that details specific projects in a manner that is accessible 
to a broad audience. Input to the report was provided by 
Amtrak, the Northeast Corridor states, and other railroads 
through a collaborative process.
    I ask that the report be included in the hearing record. 
[Go to http://www.nec-commission.com/wp-content/uploads/2013/
01/ne
cc_cin_20130123.pdf ]
    Mr. Redeker. This process sets the foundation of a 
partnership for all stakeholders to develop a comprehensive 
infrastructure program this year. The 5-year program will 
document annual state-of-good-repair needs and capacity 
enhancements, outlining the timing and funding needs through 
2018.
    The commission has established committees to oversee its 
work and to develop cost-allocation methodologies for 
proportional sharing and partnership in funding the needs of 
the Northeast Corridor over the next several years.
    We have also engaged in activities to look at the long-term 
rail needs of the Northeast Corridor, partnering with FRA in 
its rail corridor investment plan called NEC FUTURE. We are 
coordinating closely with the FRA to examine funding and 
financing strategies to implement recommended Northeast 
Corridor improvements.
    The Northeast Corridor is a national treasure and resource 
and, along with I-95, the backbone of the Northeast region. But 
the trajectory we have is unsustainable. Reliability is 
threatened by capacity chokepoints and state-of-good-repair 
needs. And meeting future needs for demand for commuter, 
intercity, and freight service is not possible without 
significant investment in new capacity.
    If our region is going to----
    Senator Cowan. Mr. Redeker, I just want you to be----
    Mr. Redeker. Yes?
    Senator Cowan.--mindful of the time. Another 30 seconds, 
please.
    Mr. Redeker. Fine.
    If our region is going to continue to grow and remain an 
international competitive powerhouse, we must make necessary 
investments.
    We are committed as a commission to working together, and 
we thank you for this opportunity to testify.
    [The prepared statement of Mr. Redeker follows:]

   Prepared Statement of James P. Redeker, Commissioner, Connecticut 
   Department of Transportation, on behalf of the Northeast Corridor 
           Infrastructure and Operations Advisory Commission
    Good morning Chairman Rockefeller, Ranking Member Thune, and 
Members of the Committee. I am Jim Redeker, Commissioner of the 
Connecticut Department of Transportation, representing the Northeast 
Corridor Infrastructure and Operations Advisory Commission (Northeast 
Corridor Commission). I am pleased to have the opportunity to discuss 
the activities of the Commission as we work together to address the 
short and long-term needs of the Corridor.
    The Northeast Corridor Commission was authorized in the Passenger 
Rail Investment and Improvement Act (PRIIA) in recognition of the 
inherent challenges of coordinating, financing, and implementing major 
system improvements that cross multiple jurisdictions. The Commission 
is comprised of members from each of the Northeast Corridor states, 
Amtrak, and the U.S. Department of Transportation and includes non-
voting representatives from freight railroads and states with 
connecting corridors. The expectation is that by coming together to 
take collective responsibility for the Northeast Corridor (NEC), these 
disparate stakeholders will achieve a level of success that far exceeds 
the potential reach of any individual organization.
    Realizing a bolder vision for the future requires unprecedented 
collaboration. Comprehensive planning is difficult for a system that 
spans eight states and the District of Columbia, supports nine 
passenger rail operators--including four of the five largest commuter 
rail services in North America, serves four freight railroads, and has 
four separate infrastructure owners. It is also a challenge to ensure 
that near-term capital projects align with long-term infrastructure and 
service plans. A key charge for the Commission is to work with its 
members to develop strategies for coordinated action.
    To help place the Commission's work in proper context, the 
Northeast Corridor region itself is home to over 50 million people, or 
one out of every six Americans. It is an economic powerhouse, 
generating $1 out of every $5 in gross domestic product (GDP). One out 
of every three Fortune 100 companies has its headquarters in close 
proximity to the NEC.
    All this activity occurs on less than two percent of the Nation's 
land area. The density that supports this immense productivity, 
however, also creates congestion challenges for our transportation 
network. Since 1990, the average commute in the region has increased by 
six minutes, to some of the highest levels in the county. According to 
the Texas Transportation Institute's 2012 Urban Mobility Report, 
automobile traffic in the region results in approximately $26 billion 
per year in lost productivity, with the average driver wasting 47 hours 
per year stuck in highway traffic. During rush hour, over half of I-95 
is rated heavily congested. At Northeast airports, one-fifth of all 
flight departures are delayed (2012). Bottlenecks at Northeast airports 
have national repercussions. The major airports in New York and 
Philadelphia are the originating source of half of the Nation's flight 
delays.
    The Northeast Corridor rail line is one of the busiest and most 
complex railroads in the world. It carries some 2,000 commuter, 
intercity, and freight trains every weekday. These trains carry over 
700,000 commuters and 40,000 intercity passengers daily; people who 
might otherwise use the region's congested highways and airports. 
Feeder routes, such as New York's Empire Corridor, the New Haven-
Hartford-Springfield Line through Connecticut and Massachusetts, 
Vermont's Ethan Allen service, and Pennsylvania's Keystone Corridor 
extend the reach of the NEC to additional communities. In turn, the 
connecting corridors contribute to the total Northeast Corridor 
ridership.
    The Northeast Corridor must balance acute investment needs just to 
maintain the safety and reliability of current services with the need 
to address consistently growing service demands. Hundreds of the 
Corridor's bridges and tunnels are more than a century old (built 
before the debut of the Ford Model T); major portions of the Corridor's 
electric power supply system were installed in the 1930s; and signal 
systems rely on decades-old installations. Despite the age of the 
Corridor's infrastructure, the demand for passenger rail services 
continues to increase dramatically.
    To illustrate this point, Amtrak's share of the air/rail market has 
increased from 37 percent to 76 percent for trips between New York and 
Washington and from 20 percent to 54 percent between New York and 
Boston since the introduction of Acela service in 2000. As this trend 
continues it increases the need for Amtrak to provide additional seats 
and service frequencies along the Corridor. The simultaneous rise in 
commuter rail services puts substantial pressure on the operational 
capability of the infrastructure on a daily basis. For example, Metro-
North's New Haven Line is adding significant numbers of new trains to 
its schedule to accommodate continued growth, especially outside of the 
traditional commuting period. In fall 2012, Metro-North added twenty-
eight weekend trains and two weekday trains including new reverse peak 
service from Grand Central Terminal on the New Haven Line. This April 
Metro-North added nine new trains to the weekend schedule. And in 
October, 2013, eight new weekday midday off-peak trains will be added 
which will provide half-hourly service to/from New Haven for this 
discretionary travel market. These changes represent the most 
significant increases in service in the history of the New Haven Line.
    Commuter and Amtrak services intersect at common facilities and use 
shared tracks. Delays on any one service quickly cascade and adversely 
affect the on-time performance of other rail services. With major 
segments at or near design capacity, all services that utilize the 
Corridor are increasingly susceptible to service disruptions resulting 
from infrastructure failures. Without significant and sustained levels 
of infrastructure investment, the operations of NEC rail services will 
suffer and its economic benefits will diminish.
    We often ponder what might happen if we lost this invaluable 
resource and Hurricane Sandy gave us all a vision into the chaos that 
would ensue without these vital rail assets that are so critical to the 
economy of our region. While the details of the disruption and its 
impacts are still emerging, we all watched as political leaders 
prioritized the reconnection of rail service to get the region moving 
and functioning again. We should also applaud the railroad and transit 
employees who made heroic efforts to restore these critical services as 
quickly as possible.
    Today, the reality is that deferring replacement of key components 
of the NEC is no longer an option--infrastructure inherited from past 
generations can no longer provide the mobility needed to support 
continued, robust economic growth. New investment is essential to 
modernize systems, reduce failures, ensure safety and reliability, and 
expand capacity for increased service.
    In January, the Commission released a report on the NEC's critical 
infrastructure investment needs that details specific projects in a 
manner that is accessible to a broad audience. Our goal is to educate 
the public, elected officials and other key stakeholders as to the 
types of infrastructure investment projects that are necessary to 
improve the Corridor. Input to the report was provided by Amtrak, the 
Northeast Corridor states, and other railroads through a collaborative 
process.
    The process used to develop the report on critical infrastructure 
needs sets a foundation of partnership for these stakeholders to 
develop an NEC Comprehensive Infrastructure Investment Program this 
year. This five-year capital program will document annual state-of-
good-repair needs and capacity enhancements, and outline the timing and 
annual funding requirements for infrastructure upgrades through 2018.
    Through a series of regional meetings, the Commission is ensuring 
all owners and operators have the opportunity to contribute their 
project priorities and service goals for integration into the planning 
process.
    Coordination is particularly important for non-Amtrak-owned 
portions of the NEC, such as the New Haven Line, a 56-mile section of 
the NEC owned by the state of Connecticut and the New York MTA, and 
operated by Metro-North Railroad.
    Later this spring, the Commission will release a report documenting 
the current state of the Northeast transportation network across all 
modes so that we can have a clear understanding of the transportation 
challenges facing the region today as the Commission formulates its 
recommendations. As required by statute, later this year we will also 
publish a report on the economic impacts of Northeast Corridor rail 
service on the region to help inform our short-and long-term 
recommendations and investment strategies.
    Section 212 of PRIIA also directs the Commission to develop a cost 
allocation methodology for the NEC that ensures that there is no cross-
subsidization between intercity, commuter, and freight rail services. 
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 in the Corridor, we will explore options to 
address the governance of the Corridor and related institutional 
structures to ensure that the states are partners in the decision-
making process.
    The Commission has established a Cost Allocation Committee with 
broad participation by states, commuter railroads, Amtrak and FRA that 
is leading this effort. The state of Connecticut is uniquely involved, 
both as a Northeast Corridor owner and as a provider of commuter 
service on Amtrak-owned track. Our goal is to have a recommended 
methodology this fall followed by significant work on implementation 
over the next couple of years.
    At the same time that we are making recommendations related to 
near-term infrastructure needs and developing a cost allocation 
formula, we are also engaged in activities to examine the region's 
long-term rail needs. The FRA, in cooperation with the Commission, the 
Northeast states, and Amtrak, is undertaking a Passenger Rail Corridor 
Investment Plan called NEC FUTURE to develop service and infrastructure 
plans for the Northeast Corridor in 2040, including examining the 
market for high-speed rail service.
    The Commission is closely coordinating with the FRA and providing 
supplemental research and analysis that will inform the effort. The 
Commission will also examine funding and financing strategies to 
implement long-term NEC improvements. Our goal is that through the 
Commission's work and our close partnership with NEC FUTURE, we will be 
able to unify our members and other key stakeholders behind a long-term 
plan and investment strategy for the Corridor.
    The Northeast Corridor is a national resource and, along with 
Interstate 95, the transportation backbone of the Northeast region. 
However, the Corridor's current trajectory is unsustainable. The 
reliability of existing services is threatened by capacity chokepoints 
and significant state-of-good-repair needs. And meeting future needs 
due to increasing demand for commuter, intercity, and freight service 
is simply not possible without significant investment in new capacity.
    If our region is going to continue to grow and remain an 
international economic powerhouse, we are going to need to make the 
necessary investments in our highway, rail and aviation infrastructure 
to allow us to continue to compete internationally for businesses and 
knowledge workers.
    The members of the Northeast Corridor Commission are committed to 
working together and with Congress and other stakeholders to ensure 
that the Northeast Corridor is up to the challenges of the future. The 
Northeast Corridor Commission is dedicated to informing sound policy 
development, providing a centralized means to generate input about the 
future of the Corridor, improving communication among NEC stakeholders, 
and bringing the region together behind a unified vision through 
coordinated regional leadership.
    Thank you for the opportunity to testify today.

    Senator Cowan. Thank you.
    Mr. Steer?

         STATEMENT OF JIM STEER, FOUNDER AND DIRECTOR, 
                      STEER DAVIES GLEAVE

    Mr. Steer. Good afternoon, Mr. Chairman. And I hope to be 
able to answer some of the challenges that Chairman Rockefeller 
and Ranking Member Mr. Blunt put to us. And thank you very much 
for inviting me to testify this afternoon.
    I am the founder and director of Steer Davies Gleave 
transportation consultants and of Greengauge 21, which is a 
research group looking at high-speed rail, mainly in Europe. I 
am also president-elect of the Chartered Institute of Logistics 
and Transport, which is the leading professional body in the 
U.K., where I guess from my accent you can tell I come from.
    But I have worked extensively here in the States. I worked 
through 2011, 2012 on behalf of Amtrak in helping develop the 
business and finance plan. I acted as technical lead on that 
project. But I have also had a lot of experience from other 
countries. I worked for Sir Richard Branson in 1997, when I led 
Virgin Trains' successful bid to run intercity services over 
Britain's West Coast Main Line, which I mention because it is a 
corridor with very close parallels with the Northeast Corridor 
here in the U.S.
    The West Coast Main Line was the flagship of the U.K.'s 
privatization program. Under this franchise, a major upgrade of 
the existing line was carried out, and now, some 16 years 
later, ridership on that route has tripled, nearly tripled. The 
net result, to keep the story short, is the U.K. government has 
decided to build high-speed rail in the very same corridor, a 
250-mile-an-hour, 50 billion, two-stage investment.
    And there are very valuable lessons, I think, that can be 
drawn out from this experience, and some of it, I think, could 
be applied in the Northeast Corridor. And the Committee may 
wish to look at some of those things.
    But basic question: Why have so many countries around the 
world chosen to invest in high-speed rail? I believe the reason 
really is very simple. They have concluded that the economic 
benefits at a national scale far outweigh the costs. High-speed 
rail enables obviously faster but also more reliable and more 
convenient travel. Shorter, more dependable travel improves 
business efficiency, attracts travelers who would otherwise fly 
or drive, and takes pressure off the wider transportation 
network.
    It basically builds capacity. It allows major cities--and, 
boy, do you have major cities--to expand, to continue to grow. 
It brings jobs in construction, manufacturing. And those will 
arise not just in the corridor of the investment. That is a 
very important point, I think. The economic returns are huge. 
The investment may be large; the economic returns are huge.
    On funding, I know of no national high-speed line or 
network that has started out successfully reliant on private-
sector funding. All have required substantial up-front 
investment to be met by their national governments. True, that 
can take different forms, including loan guarantees that 
provide the private sector the opportunity to borrow at low 
interest rates. But for the private investor, there really are 
too many risks up front to take on these big challenges. As a 
network is built out, these risks diminish, and the opportunity 
for the private sector to step forward emerges. And there are 
good examples of that.
    In the NEC, there are proposals both to improve the 
existing corridor--and Jim Redeker has just outlined those very 
clearly--and to introduce high-speed rail, NextGen. In my view, 
it would be wrong to suppose that one type of investment should 
necessarily precede the other. Upgrading existing lines and 
building new high-speed rail both create capacity. They do it 
in different ways. You have choices as to what blend to go for 
in terms of upgrade and new-build. And that really is the key 
planning challenge.
    So I think the key things to be thinking about are really 
these. Major investment in the Northeast Corridor has to be 
broken down into manageable stages. And I totally back what Mr. 
Boardman explained about the priority to be given to the 
Gateway Project.
    There needs to be, however, a very clear mandate, in my 
view, from the Federal and, indeed, the state governments 
setting out the desired outcomes. Implementation is going to 
spread over decades, so a significant level of bipartisan 
support is going to be necessary if we are going to avoid a 
kind of stop-go situation.
    I have mentioned the importance of up-front funding, but 
may I say this? Amtrak's adoption of business lines that 
separate the management of the infrastructure in the Northeast 
Corridor from Amtrak's operations is an inspired step. It 
retains an integral organization, a single organization with 
overall responsibility, while giving the opportunity to create 
a means for charging operators for use of the infrastructure.
    And that is a key to what I believe can happen in the 
Northeast Corridor in the future, which is the introduction of 
private-sector funding. The track fees charged by the 
infrastructure owner are the device to remunerate private-
sector investment.
    And I will draw a hold there, Senator Cowan, because I 
realize I have used up my time. Thank you.
    [The prepared statement of Mr. Steer follows:]

        Prepared Statement of Jim Steer, Founder and Director, 
                          Steer Davies Gleave
    Good morning Mr. Chairman and members of the Committee. Thank you 
for holding this hearing and for the invitation to testify today.
    I am Jim Steer, the founder and Board Director of Steer Davies 
Gleave, international transportation consultants; and the founder and 
Director of Greengauge 21, a non-profit public interest group which has 
undertaken extensive planning and research into high-speed rail in 
Great Britain. In addition, I am President-Elect of the Chartered 
Institute of Logistics and Transport, the leading association of 
transportation professionals in the United Kingdom.
A close parallel to the Northeast Corridor
    Before discussing the Northeast Corridor, I think it may be helpful 
to the Committee to share the experience of a close parallel, the West 
Coast Main Line in Great Britain. The West Coast Main Line is a 400-
mile rail corridor that connects London with some of the UK's largest 
cities and key economic hubs, including Birmingham, Manchester, 
Liverpool and Glasgow. The geography and population of the UK are 
similar to those of the Northeast Corridor region, with about two-
thirds of the UK's population of 60 million served by the West Coast 
Main Line compared with a population in the Northeast Corridor of 52 
million.
    There are similarities in the constraints faced in the Northeast 
Corridor and those along the West Coast Main Line:

   There is increasing highway congestion between the cities 
        along the corridor and limited opportunity for additional 
        capacity;

   There is pressure on airport capacity;

   There is strongly growing demand for rail travel;

   Intercity, regional and commuter passenger rail and rail 
        freight compete for paths over the same tracks; and

   There is a need to replace and upgrade whole-system 
        infrastructure while keeping the railway open to traffic.

    The existing infrastructure of the West Coast Main Line has been 
subject to a major renewal and upgrade (`Route Modernization') which is 
now substantially complete at a cost of $13 billion. The modernization 
was designed to replace life-expired infrastructure and at the same 
time increase capacity and reduce travel times. The work was undertaken 
over a period of 10 years, and resulted in considerable disruption to 
corridor rail travel during this time. Nonetheless, a much improved 
service has been provided. Intercity train frequencies have been 
doubled and journey times reduced by about one-fifth. Ridership has 
increased dramatically as a consequence, but all of the additional 
capacity provided by this work and subsequent train lengthening is 
expected to be used by the mid-2020s. As a consequence, there is 
limited opportunity for the line to service the needs for growing 
commuter rail and rail freight--or indeed for more intercity travel.
    In the early 1990s, the UK government began a major privatization 
of the railways, establishing a structure whereby track ownership and 
train operations were separated and operators were required to pay 
transparent access charges to use the infrastructure. Today, as with 
nearly all of the UK rail network, the West Coast Main Line track and 
other infrastructure is owned by one organization, Network Rail, but 
passenger services are provided by separate private companies operating 
under a concession structure. The government specifies and organizes a 
competitive bidding process, and awards concessions to private 
operators who then provide passenger services along a route (or series 
of routes). Private sector freight companies operate on an open access 
basis over Network Rail tracks. To implement this structure, the 
government established one public sector agency to regulate the access 
charges and a second public sector agency to award and manage the 
concession (franchise) agreements.
    In 1997, I led Virgin Trains' successful bid for the franchise to 
run inter-city services over Britain's West Coast Main Line, and helped 
Sir Richard Branson build a management team to implement the radical 
changes contained in the franchise bid. After four years in this 
capacity, I joined the Strategic Rail Authority--a Government agency 
newly set up to take over responsibility for awarding and monitoring 
rail franchises while introducing forward planning to the privatized 
railway. I was responsible for industry-wide planning, and I also 
chaired the West Coast Program Board which oversaw the introduction of 
the new fleet of 125 mph inter-city trains, enhanced infrastructure 
(the Route Modernization program described above), and a transformed 
service timetable.
    When the Strategic Rail Authority was dissolved in 2005, I set up 
Greengauge 21 to lead a debate on the case for high-speed rail in 
Britain. In 2007, we proposed that the key first step was a high-speed 
line in the West Coast corridor, and two years later the Government 
initiated the project (`HS2'). This will make possible much faster 
journeys between key city pairs and will also release capacity on the 
West Coast Main Line to deliver benefits to regional and commuter 
passenger rail and rail freight operators.
    My experience with the West Coast Main Line in Great Britain taught 
me several lessons:

  1.  Incremental improvement with proven technology can deliver 
        transformational benefits within 10 years, even when applied to 
        a busy railway--but this entails significant service 
        disruption.
  2.  Even if the private sector provides little equity, it is able to 
        deliver fleet procurement and service upgrades more quickly and 
        more efficiently than Government. In the West Coast case, there 
        was a clear remit and mandate from Government (through 
        contracted franchise commitments) for the private operator to 
        replace a life-expired train fleet procurement and to upgrade 
        services; without both the government's mandate and Virgin Rail 
        Group's firm commercial resolve, these wouldn't have been 
        delivered.
  3.  Success is measured in part by rapidly growing demand and 
        revenue. Ridership more than doubled--and was forecast with 
        reasonable accuracy. While this was built into the franchise 
        bid and plan from the outset, a 15-year franchise term still 
        limits the planning horizon. Somebody has to take an even 
        longer-term view. It is clear that the route will have reached 
        capacity (no more train paths) by 2026, if not sooner, despite 
        capacity increases created by the Route Modernization program.
  4.  Government officials and others question, with hindsight, whether 
        the $13 billion West Coast Route Modernization should have 
        proceeded, and whether it would have been better to build a new 
        high-speed line instead. It's a fair question, but over 75 
        percent of the Route Modernization cost was incurred on a 
        backlog of infrastructure renewals that would have been needed 
        anyway to support continuing operation of commuter services and 
        freight alongside any new construction.
  5.  Virgin Trains, which paid significant surcharges on its track 
        access fees to fund the upgrade, was provided with protection 
        from competitive entry by other passenger train operators 
        buying spare slots on the West Coast line (open access 
        operators) for the full 15 year term of the Virgin franchise. 
        The role of an independent Rail Regulator to enforce these 
        arrangements, and the contract between Virgin Trains and the 
        infrastructure owner (Railtrack/Network Rail) was essential to 
        the investment model.
International High-Speed Rail
    I have followed the progress of high-speed rail around the world, 
traveling on the first French TGV line soon after it opened in 1982 
with a small delegation from British Rail (then state-owned). At the 
time, I was responsible for developing a strategy for British Rail's 
new business sector (``InterCity'') to turn it from a loss maker 
(meeting only 80 percent of its costs) to a profitable business (which 
was achieved by the late 1980s). I acted as adviser to the consortium 
that won the Public Private Partnership (PPP) to develop the Eurostar 
service and build the new high-speed line between London and the 
Channel Tunnel (mid 1990s). And I was responsible for a major study for 
the Spanish government rail operator RENFE, examining the prospects for 
the Madrid--Barcelona high-speed line before it opened (in 2006). So I 
have seen and experienced various ways of addressing the challenge of 
how best to transform traditional inter-city passenger rail services 
into competitive and prosperous entities.
    Why have countries facing this challenge invested in high-speed 
rail? I believe the reason is simple: they have concluded that the 
economic benefits to the Nation of this investment far outweigh the 
costs. High-speed rail enables faster, more reliable and more 
convenient travel. Shorter more dependable travel improves business 
efficiency. By attracting travelers who would otherwise fly or drive, 
high-speed rail takes pressure off the wider transportation network. 
This also allows time spent traveling to be used more productively. 
There are important safety, carbon and valued regional & urban 
redevelopment benefits too. But most important of all, in my view, is 
the point that high-speed rail builds transportation and thus economic 
capacity. It achieves this though two parallel strands: the extra 
capacity created on the high-speed line itself and the opportunity to 
completely recast timetables for the existing railroad to provide more 
commuter rail and freight services. It therefore supports businesses, 
expands commuting catchments and helps industry and trade. The economic 
returns are huge.
    My colleagues at Steer Davies Gleave have worked extensively around 
the world to develop and apply methodologies that identify and quantify 
the economic impacts of transportation investments--including 
documenting and recommending best practice analytical methods for high 
speed rail for the USDOT Office of Inspector General.
    Alongside the economic rationale for high-speed rail investment, I 
believe that international experience provides lessons that are 
relevant here in the US--and especially in the Northeast Corridor--when 
considering how to advance from a conventional to a high-speed 
passenger rail system. These lessons can be grouped under four 
headings:

   Funding;

   Organization;

   Leadership; and

   Planning.
Funding
    I know of no national high-speed line or network that has started 
out successfully reliant on private sector funding. All have required 
the substantial up-front investment to be met by Government. True, this 
might take different forms--including loan guarantees that provide 
private sector access to borrowing at low interest rates. But for the 
private investor, there are simply too many up front risks, such as:

   Planning consent & environmental approvals;

   Construction cost and timescale;

   Network and/or system integration risks;

   Revenue risks; and

   Regulatory and political risks too.

    As a high-speed line or network is built out, these risks diminish. 
The path through planning consent becomes better understood; 
construction prices get tested in the market-place; and, with a high-
speed service in operation, market shares and revenues are revealed. In 
short, the high-speed rail proposition gets proven, including in 
commercial terms. Provided that political resolve remains unwavering--
and in a democracy, this means there is a broad bi-partisan or cross-
party support for the overall vision--then there is a chance that 
private sector input to funding can be obtained for the next stages of 
the program.
    Let me mention three examples--each one different, reflecting the 
varying circumstances in three European countries--France, Italy and 
Great Britain where this has happened.
    The French TGV network was developed and funded by SNCF, a totally 
state-owned organization from the early 1980s onwards. The first line 
between Paris and Lyon is the busiest, and it remains entirely state-
owned and operated. Right now plans are being progressed to duplicate 
it with a second high-speed line serving the same end-points but new 
intermediate cities.
    The pattern of funding French high-speed lines evolved as the 
network was developed. The line between Paris and Strasbourg (``TGV -
Est''), for example, was funded by the French Government through SNCF, 
but with substantial funding too from the regions and cities served. 
Again, all funding came from the public sector.
    The line currently under construction between Tours and Bordeaux 
(189 miles) represents an extension to an existing high-speed line 
between Paris and Tours (``TGV Atlantique''). The most problematic 
section of the overall route (access to central Paris) has been built; 
the market for services is proven; now it's a matter of shortening an 
already improved journey between Paris and Bordeaux. This project 
(worth $10.3 billion) has been privately funded through a PPP 
structure. As an extension to what is now a core national network, the 
perceived risks are much lower. Political resolve (for now) remains 
intact. And the state, through SNCF, is obligated to ``buy'' a 
specified quantum of train paths from the company that will own and 
maintain the new line on a 50 year concession, thus providing some 
degree of revenue predictability.
    The Italian experience is very different. Construction of the high-
speed line between Milan and Rome/Naples was started before WWII. It 
has opened in stages with fast services (up to 155 mph) starting in 
1988. It has been entirely funded and is owned by the Italian State 
(through the railway owner FS).
    My colleagues in Steer Davies Gleave have acted as advisers to a 
funding group, led by four Italian businessmen, that decided to enter 
the intercity passenger rail market via the provisions of Europe's open 
access regulations; these now require EU countries to provide non-
discriminatory access to the country's track. The new company, NTV, 
commissioned its own fleet of 220 mph high-speed trains, built depots 
to maintain them, recruited its own operating staff and in 2012 
introduced a new service in competition with the State operator 
Trenitalia over the State's high-speed line. NTV pays a track charge, 
as an open access operator, but has not been able to access the busiest 
stations in Rome and Milan.
    In Great Britain, the pace of high-speed rail development has been 
slower. What is now called High-Speed One (or HS1, the $8.5 billion 68 
mile high-speed rail link between central London and the Channel 
Tunnel) was opened throughout in 2007--ultimately on time and on 
budget, but only after a Government-backed rescue of the private sector 
consortium that had won the right to build and operate it. Just three 
years later, the high-speed rail infrastructure (but not the Eurostar 
service which runs over it, linking London with Brussels and Paris) was 
tendered as a 30 year concession. This tender was won by a consortium 
of Canadian Pension Funds, who paid $3.1 billion, in effect to the UK 
Treasury. They will earn a return from track access fees from two train 
service providers (and they hope, in future, a third). So the 
Government was able to recoup a substantial part of its capital outlay 
once the risky period of planning, construction and service 
introduction had been safely negotiated.
    Note that in all three cases, charging for access to high-speed 
infrastructure is a crucial part of the commercial structure that has 
enabled the private sector to participate.
Organization
    In the three cases I have mentioned in Britain, France and Italy, a 
single organization was responsible for the crucial stage of planning 
together the infrastructure and trains--even though, in practice, the 
new lines have been able to accommodate differing train designs and 
operators once built. This unified organizational structure is, in my 
view, important because it removes interface risk. Where this has not 
been the case (the Dutch high-speed line being an example), a more 
complex funding structure has been necessary and the technical 
challenges which lie across the track-train interface (in the Dutch 
case, train control systems) proved problematic.
    In the British case, a dedicated team was established to create a 
high-speed rail project delivery organization that combined expertise 
from British Rail (which was being privatized at the same time) and the 
private sector. This provided the single-mindedness that is necessary 
to deliver complex major construction projects--in this case in a 
sensitive rural environment (across the County of Kent) and through 
East London to a much-loved historic station that was transformed as 
part of the project, in the center of London (St Pancras).
Leadership
    In each country, there has been a continuity of political consensus 
through many changes of government.
    In Britain, the underlying basis for the shared political support 
stemmed from a series of factors:

   Agreement that investment in infrastructure is essential for 
        national economic competitiveness;

   A recognition of the national importance of the corridor and 
        need for transport service and capacity improvements to it;

   Agreement that improvements to other modes serving the 
        corridor are not feasible or as effective;

   Acceptance that the costs are worth bearing and can be 
        managed (HS1 was ultimately delivered on time and budget); and

   Acknowledgement that the private sector can't shoulder the 
        initial financing and consequently that Government has a 
        legitimate role in catalyzing and advancing the project.

    In Britain, the political leadership for HS1 came from Lord 
Heseltine (Conservative) and John Prescott (Labour). The initiative to 
develop the much more substantial HS2 (the dedicated high-speed line 
linking London, Birmingham, Manchester and Leeds) came from Secretary 
of State for Transport Lord Adonis (Labour) a year after the opposition 
Secretary, Theresa Villiers (Conservative) had committed her party to 
develop the project and provide $23 billion funding. The project has 
since been expanded, and now has a price tag of $50 billion, but it 
remains the intention of the current Coalition Government (Conservative 
and Liberal Democrat) to proceed on essentially a Government-funded 
basis. This also has the support of the Labour opposition and of the 
Scottish Nationalist Party.
Planning
    The particular challenge to which I would draw the Committee's 
attention is the need to consider existing rail networks--and their 
attendant expenditures on maintenance and renewal--alongside the 
arrangements needed for new construction. I contend that it would be 
wrong to suppose that one type of investment should necessarily follow 
the other. On the NEC, this is a moment for coordinated strategic 
planning, using common investment appraisal methods to ensure the best 
value return on public funds. New build high-speed rail releases 
capacity that can be used to benefit users of the conventional rail 
network. This type of benefit is one of the prime motivations for 
investments in high-speed rail. In France, it is now accepted that 
investment in existing lines has been neglected while the new build 
high-speed line program has progressed.
    France also provides useful evidence on another benefit of having 
clear forward plans. There, experience with the TGV network suggests 
that urban redevelopment around new high-speed rail stations takes 
place over a lengthy 15 year timescale. The interesting point is that 
this development activity--which is of course private sector-led--
starts well before the new line is open, typically 7-8 years ahead. In 
the UK, the 68 mile HS1 project is estimated already to have led to $15 
billion in private sector investment in urban redevelopment projects 
around the new stations built on the line.
Northeast Corridor
    Here in the US, during 2011 and 2012 I acted as Lead Technical 
adviser to Amtrak, working in a team that blended the expertise of 
Steer Davies Gleave's Boston team specializing in demand and revenue 
analysis of transportation projects and the financial expertise of the 
professional services firm KPMG. Our task was to develop a financial 
and business plan for Amtrak that embraced:

   The Masterplan program, which would return the Northeast 
        Corridor to a state of good repair and accommodate expected 
        expansion in commuter rail, freight and Amtrak services through 
        to 2030; and

   The NextGen high-speed rail program, which would see a new 
        true high-speed rail network implemented by 2040.

    In carrying out this work, I was able to visit the whole of the 
existing corridor and engage closely with Amtrak at the officer and 
Board level.
    As detailed in the charts below, ridership on Amtrak's Northeast 
Corridor services (especially Acela Express) has been increasing 
steadily, and Amtrak is now capturing 60 percent of the air/rail market 
between Washington and New York and 50 percent of the air/rail market 
between New York and Boston. Running more services, whether intercity 
or commuter, is constrained by a series of bottlenecks along the 
corridor. Capacity limits have been reached on the Acela services, and 
more growth is now taking place on the Northeast Regional services as a 
result.
Figure 1 Amtrak NEC Ridership (In Millions) By Fiscal Year


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


Figure 2 Amtrak NEC Annual Ridership Growth


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                 Table 1.--Aamtrak NEC Ridership Growth
------------------------------------------------------------------------
     Train Name             FY05-12 CAGR              FY10-12 CAGR
------------------------------------------------------------------------
Acela Express                            5.1%                      2.7%
Northeast Regional                       2.1%                      5.9%
------------------------------------------------------------------------

    It is clear to me that there is an overwhelming case for major 
investment in rail transportation in the NEC.
    If the United States Government, the States of the Northeast 
Corridor, Amtrak and other key stakeholders come to the same 
conclusion, they will be faced with the challenge of how to implement 
such a large scale program.
    I have ten observations to make on this challenge:

   1.  There are advantages in having a single entity with overall 
        responsibility for at least the early stages of development of 
        a transformational effort such as the introduction of high-
        speed rail. If Amtrak didn't exist, I believe it has been said, 
        you'd have to invent it--and as far as the prospects for the 
        NEC are concerned, I think that is correct.

   2.  Major investment as envisaged for the NEC must be broken down 
        into manageable stages. The sooner the early success of a 
        separable new product can be created--separable in a verifiable 
        commercial sense--the sooner it would be possible to draw in 
        private sector finance to fund subsequent development stages.

   3.  There needs to be a clear mandate from the Federal and NEC state 
        governments setting out the desired outcomes, and--given the 
        implementation timescales, which spread over decades--a 
        significant level of bipartisan support is essential if there 
        is to be efficient progress made, and stop-start is to be 
        avoided.

   4.  There also needs to be substantial up-front Federal (or 
        possibly, multi-state) funding, on a level above and beyond 
        that available through existing programs.

   5.  Amtrak's adoption of business lines is an inspired development 
        that retains the necessary integrity of a single agency (see 
        point 1 above) while facilitating the evolution towards an 
        infrastructure owner-operator business that is remunerated 
        through transparently set track access fees applied to the 
        multiple operators who use the corridor. As required by the 
        PRIIA legislation, it is extremely helpful for decision-making 
        on investment choices and for attracting future private capital 
        to have track charges that reflect costs in a normal business-
        like way. In the longer term, this will serve to drive more 
        efficient operating practices and therefore potentially reduce 
        Amtrak's reliance on Federal funding.

   6.  Along with other interested parties in the Corridor, Amtrak has 
        made submissions to the FRA's ongoing Passenger Rail Corridor 
        Investment Plan (which consists of a Tier 1 Programmatic EIS 
        and a Service Development Plan), setting out differing scales 
        of investment and outcomes. The best overall approach will 
        probably be a combined upgrade/new build program. New build 
        will most likely be to high-speed standards, since study after 
        study shows this delivers the best value return on investment. 
        The right balance requires a serious attempt to look at the 
        alternatives alongside one another in an unbiased way. It would 
        be wrong and wasteful to assume that the priority is to `fix 
        the existing railroad' first--as if that ever reaches a totally 
        acceptable end-state--and then, as that railway gets full to 
        capacity, to start to thinking about new construction (possibly 
        to high-speed standards). You do not face the same situation in 
        the Northeast Corridor as the UK faced 16 years ago with the 
        West Coast Main Line, when new build high-speed rail was not on 
        the agenda at all. Here it is on the agenda, but considered 
        choices still need to be made. New build and upgrade both 
        deliver more capacity and better reliability. New build has the 
        advantages that:

        It is less disruptive on to existing services 
            during construction;

        It can lead to a separation of rail traffics by 
            type and speed, improving overall network efficiency by 
            releasing capacity on existing lines as well as providing 
            separate new capacity for high-speed; and

        It offers the potential for very high-speed 
            service, enabling step change journey time reductions, and 
            it will bring greater benefits including more widely across 
            the other transportation modes in the corridor.

      In short, high-speed rail lines are about capacity--with the 
        ability to bring additional benefits from transformational 
        journey times an add-on advantage. The focus on capacity was 
        the key driving factor in countries such as France at the 
        outset of their high-speed line program, and it is the right 
        way to examine the prospect in the NEC as well.

   7.  My own view is that there are limits to what can be done through 
        upgrading existing lines. The practice adopted in the NEC, 
        which is one of great reluctance to lose continuity of service 
        while upgrades are in progress, leads to very lengthy 
        implementation times. It may be best in some situations to 
        build new lines first so that upgrades can be carried out on 
        the existing corridor with at least some of its traffic load 
        diverted away on to the new line.

   8.  As for where to make a start, the Gateway project is rightly 
        seen as a priority because NEC capacity constraints between 
        Newark and New York City represent a significant bottleneck. 
        Many smaller projects in the Masterplan should also be 
        progressed, once they have been examined together with new 
        sections of high-speed line and incorporated into an integrated 
        program. Sections of new high-speed line such as across the New 
        England States could well be developed away from the existing 
        coastal alignment, perhaps by a third party, as part of an 
        overall plan.

   9.  In our consulting assignment for Amtrak, we identified an 
        improvement to a section of route across Maryland and into 
        Delaware that offers as much as 25 minutes off journey times, 
        requires no new stations and has a cost estimate of $12 
        billion. Along with other options, I believe this should be 
        examined by Amtrak and the FRA for early adoption (by which I 
        mean by the 2020s). It would showcase a genuine high-speed 
        capability and allow full testing of 220 mph operation in the 
        USA.

  10.  In the longer term, with increased capacity available, it would 
        be possible to see new market entrants providing services on 
        the NEC, offering competition and customer choice. It will also 
        be possible to introduce private sector funding and direct 
        returns to the U.S. public account--for instance by a long-term 
        concession for new (or possibly enhanced) sections of route. 
        But these are for the future, and it is essential to realize 
        that the risks around investment in the first place need to be 
        minimized, including competition risk. Once the program is 
        underway and the operating and commercial outcomes are more 
        predictable, additional service providers add the prospect of 
        an upside return for infrastructure investors.

    Once again, thank you for the opportunity to testify today and I 
look forward to answering your questions.

    Senator Cowan. Thank you, Mr. Steer.
    Mr. Tolman?

          STATEMENT OF JOHN P. TOLMAN, VICE PRESIDENT

            AND NATIONAL LEGISLATIVE REPRESENTATIVE,

        BROTHERHOOD OF LOCOMOTIVE ENGINEERS AND TRAINMEN

    Mr. Tolman. Good afternoon, Chairman Cowan, Ranking Member 
Blunt, members of the Committee. I am a Vice President with the 
Brotherhood of Locomotive Engineers and Trainmen, a division of 
the Teamsters Rail Conference, representing 37,000 locomotive 
engineers and trainmen and over 70,000 Rail Conference members.
    I want to express my appreciation for the opportunity to 
speak here today of our position on Amtrak high-speed rail and 
the development of the Northeast Corridor. I will focus on the 
progress Amtrak has made on the Northeast Corridor and the 
future of passenger rail in the corridor.
    Since the Federal Highway Act of 1956, we have spent 
billions on our Interstate Highway System. The system cost $114 
billion and took 35 years to build. Today it would cost $426 
billion simply just to build.
    Congestion on our nation's roads is at historic levels, and 
projections are that by 2020 some 90 percent of urban 
interstates will be either at or over capacity. By 2055, there 
will be at least 400 million automobiles on our highway system. 
This problem will only grow exponentially as the number of cars 
on our roadways increase, with little ability to increase the 
capacity.
    The solution to these problems lies right before our eyes. 
Improvements to passenger rail funding on the Northeast 
Corridor are a necessity to expand service. Increased rail 
service would reduce congestion on other modes of travel, 
especially in the Northeast Corridor. Significant investments 
are sorely needed.
    When Amtrak funding is compared to the majority of European 
and Asian countries, it is, frankly, embarrassing. In 1970, 
Congress passed the Rail Passenger Service Act. Amtrak was 
created as a private company on May 4th, 1971, and began 
running a nationwide passenger rail system. Since then, the 
capital and operating subsidies from the Federal government 
have been at levels that have barely allowed Amtrak's survival.
    There is a need for continued development of passenger rail 
and high-speed passenger rail. There is no doubt about the 
economic benefits of high-speed rail and intercity passenger 
rail. Ridership trends demonstrate that people are willing to 
take trains with reliable and frequent service. On the 
Northeast Corridor, it is especially true. Seventy-five percent 
of all people that travel from New York City to Washington, 
D.C., take the train. Fifty percent of all the people that 
travel from Boston to New York City take the train. Amtrak 
logged its best ridership ever, with more than 31 million 
passengers last year.
    Amtrak trains consume 20 percent less energy per passenger-
mile compared to airlines, 30 percent less than automobiles. 
Its benefits reach across our economy in many, many ways.
    The Teamsters Rail Conference believes that reauthorization 
of the Passenger Rail Investment Improvement Act, PRIIA, 
provides an opportunity for Amtrak to attain long-term funding 
levels. Amtrak supports the jobs of skilled professionals and 
dedicated employees who provide the traveling public with safe 
and reliable transportation.
    It is important to note that these on-board service 
employees provide more than just meals. They provide some of 
the first responders when a safety problem occurs on board. We 
cannot outsource safety to workers who are paid at minimum 
wages without benefits.
    PRIIA provisions expire in Fiscal Year 2013, as you know. 
If the provisions in section 205 of PRIIA were reauthorized, an 
additional 33 leases could be terminated in the next 5 Fiscal 
Years. This would entail an up-front cost of $572 million but 
would save $965 million in future payments, a net savings of 
$393 million. PRIIA reauthorization offers many opportunities 
to sustain and build on the great work that Amtrak is doing.
    The cycle of underfunding Amtrak must end. It is not about 
the Democrats, Republicans, or independents. It is about the 
future of travel in the United States of America, and we all 
should be on board.
    In closing, Amtrak is vital to the Northeast Corridor. It 
must be part of the future, moving toward a higher-speed 
Northeast Corridor. Amtrak's reauthorization offers many 
opportunities for expansion and renewal for the public.
    Thank you.
    [The prepared statement of Mr. Tolman follows:]

   Prepared Statement of John P. Tolman, Vice President and National 
  Legislative Representative, Brotherhood of Locomotive Engineers and 
                                Trainmen
    Good morning, Chairman Lautenberg, Ranking Member Blunt, and 
Members of the Subcommittee. My name is John Tolman and I am Vice 
President and National Legislative Representative for the Brotherhood 
of Locomotive Engineers and Trainmen, which is a Division of the 
Teamsters Rail Conference.
    On behalf of more than 37,000 active BLET members and over 70,000 
Rail Conference members, I want to express our appreciation to the 
Subcommittee for the opportunity to present our position on Amtrak, 
high-speed rail, and in particular regarding the development of the 
Northeast Corridor.
    Through comparison and discussion regarding capacity, costs and 
needs, I will focus on our perspective of the progress Amtrak has made 
on the Northeast Corridor and the future of passenger rail on the 
Corridor.
    In addition, I will discuss other countries' experience with 
privatization of passenger rail and high-speed service.
Brief History
    Since the Federal Aid Highway Act of 1956, we have spent billions 
building and maintaining our interstate highway system. That system 
cost $114 billion and took 35 years to complete. In today's dollars, it 
would cost $426 billion simply to build, and billions more to maintain 
the system because a significant portion of it is in a serious state of 
disrepair.
    Passenger miles on highways increased 18.1 percent between 1997 and 
2004. Congestion on our nation's roads is at historic levels and it is 
projected that by 2020, some 90 percent of urban interstates will 
either be at or over capacity. Projections are that by 2055 there will 
be at least 400 million vehicles on our highway system, further taxing 
our infrastructure. Already, the Texas Transportation Institute 
estimates that--in 2005 alone--$63 billion in time and fuel was wasted 
due to traffic congestion. This will only grow exponentially as the 
number of cars on our roadways increase with little ability to increase 
capacity.
    Our nation's airports are in a similar state, as anyone who has 
flown recently knows. Serious problems plague our nation's airports--
flight delays and cancellations, lost luggage, and overcrowded planes. 
Only 82 percent of commercial flights were on time in February 2009, 
and most of these delays occurred because of overcrowded airspace along 
the East Coast.
    The solution to these problems lies right before our eyes: 
Improvements to passenger rail service on the Northeast Corridor are a 
necessity. Increased rail travel would reduce congestion on our 
highways and in our airports, especially on the Northeast Corridor. 
However, to do this, significant investments are sorely needed.
Comparing Countries
    When you compare the level of government funding provided to Amtrak 
as a percentage of Federal funds provided to domestic aviation and 
highways, with the majority of many European and Asian countries, it 
frankly is embarrassing. And it is clear that in other parts of the 
world, privatization of high speed and passenger rail comes with many 
problems that privatization itself portends to solve. For example, 
systemic safety and reliability problems that were a direct result of 
privatization have led to reversals that caused much upheaval in 
transportation systems in Great Britain and New Zealand, who were 
forced to re-nationalize all or portions of their systems and provide 
significant subsidies. Funding cuts always have been the precursor to 
privatization schemes.
    In fact, we cannot forget our own history of private operation of 
American passenger railroads. Amtrak was founded nearly a half-century 
ago to provide relief for the freight railroads. Congress recognized 
need to protect the profitability of the private freight railroads 
along with the continued need for passenger rail in this country and in 
1970, passed the Rail Passenger Service Act. Thus Amtrak was created, 
as a private company which, on May 1, 1971, began managing a nation-
wide rail system dedicated to passenger rail service. Since then, 
Amtrak has received capital and operating subsidies from the Federal 
government, albeit often at levels that have barely allowed its 
survival. The reauthorization of PRIIA could allow this trend to change 
by providing long-term, stable funding for Amtrak.
High Speed Rail Profits and Amtrak's Northeast Corridor
    In addition to stabilizing Amtrak's funding, there is a need for 
continued development of passenger rail, and specifically, high speed 
passenger rail. There is no doubt about the economic benefits of high 
speed and intercity passenger rail, and Amtrak's Northeast Corridor 
clearly demonstrates that there is a demand for expanded service.
    Ridership trends demonstrate that people are willing to opt to take 
trains in areas with reliable and frequent service. On the Northeast 
Corridor, this is especially true. Amtrak now carries more riders on 
this route than all of the airlines put together. And between 
Washington, D.C. and New York City, Amtrak carries more than twice as 
many passengers than all of the airlines combined. Since introducing 
its Acela service, Amtrak has almost tripled its air/rail market share 
on the NEC, and today carries 75 percent of intercity travelers between 
New York and Washington.\1\ Introducing Next Gen high-speed rail on the 
NEC will improve that performance even further.
---------------------------------------------------------------------------
    \1\ Amtrak, ``State-Supported Corridor Trains, FY 2011-2012,'' 
April 2012.
---------------------------------------------------------------------------
    High speed rail will not operate in a vacuum. All modes of 
transportation can work together as part of the transportation network. 
High-speed rail and airlines also complement one another in providing 
safe, fast and efficient travel to the public.\2\ And multi-modal 
passenger transportation is not limited to comparing rail travel with 
air travel.
---------------------------------------------------------------------------
    \2\ Amtrak NEC Briefing.
---------------------------------------------------------------------------
    Fifteen years ago DOT estimated the savings from reduced highway 
delays range from $489 million to $2.9 billion annually, depending on 
the corridor. Those are savings that can only be realized by providing 
appropriate investment in high-speed passenger rail.\3\ Amtrak trains 
consume 20 percent less energy per passenger mile than airlines and 30 
percent less than automobiles.
---------------------------------------------------------------------------
    \3\ High Speed Ground Transportation for America,'' U.S. Department 
of Transportation, September 1997.
---------------------------------------------------------------------------
    Additionally, countless studies have shown the impact of investment 
in rail. In fact, a recent APTA report, published in July 2012, showed 
that discontinuing high-speed passenger rail investments in the 
Midwest, California, the Pacific Northwest and the Northeast Corridor 
would possibly cause $24.6 billion in net forgone economic benefits 
over the next 40 years.\4\
---------------------------------------------------------------------------
    \4\ ``Opportunity Cost of Inaction High Speed Rail and High 
Performance Passenger Rail in the United States: http://www.apta.com/
resources/reportsandpublications/documents/HPPR-Cost-of-Inaction.pdf
---------------------------------------------------------------------------
    The Teamsters Rail Conference believes that the reauthorization of 
the Passenger Rail Investment and Improvement Act (PRIIA) provides an 
opportunity for Amtrak to finally attain stable long-term funding 
levels, enabling Amtrak to support the jobs and rights of their skilled 
and dedicated employees, who provide the traveling public with safe, 
reliable transportation. PRIIA reauthorization offers many 
opportunities to sustain and build on the great work Amtrak is doing.
    Important to include in a reauthorization of Amtrak are the 
provisions of Section 205 of PRIIA 2008, which allow for the repayment 
or restructuring of Amtrak's debt by the Department of Treasury. Using 
its authority under this provision, the Treasury Department has worked 
with the U.S. Department of Transportation and Amtrak to exercise early 
buyout options on 13 leases held by Amtrak for its train equipment, 
producing savings for Amtrak, and by extension the taxpayer, by 
avoiding future rent and end-of-lease payments--payments which Amtrak 
otherwise would have relied on the government to fund. However, these 
provisions expire in FY 2013, even though additional buyout 
opportunities and their associated savings remain. If the provisions of 
Section 205 of PRIIA were reauthorized, an additional 33 leases could 
be terminated over Fiscal Years 2014 to 2019. This would entail an up-
front cost of $572 million, but would save $965 million in future 
payments, a net savings of $393 million.
    Last year, Amtrak logged its best ridership year ever with more 
than 31 million passengers. Despite this achievement, some political 
leaders refuse to acknowledge the economic advantages of this increase 
in ridership. Unfortunately, some members of Congress are seeking to 
divest in Amtrak or attempt to outsource good jobs for Amtrak's front 
line workers by pointing to straw man issues such as cheeseburger 
costs. It is important to note that these on-board service employees 
provide more than a good meal--they are some of the first responders if 
a safety problem occurs on board.
    And for those critics of Amtrak who demand private investment: 
Amtrak's long-term plan for the Northeast Corridor provides a template 
for a public/private partnership. We believe that such a partnership 
should never be subordinate to the public interest--or the interests of 
the professional rail employees--to private profits or investment 
strategies. That said, such partnerships would improve service and 
provide the public with greater transportation choices in decades to 
come.
    PRIIA's reauthorization should also help foster a sustained 
national rail policy. It will curb privatization schemes that fail to 
acknowledge the history of privatization failures and the problems of 
outsourcing safety to workers who are paid minimum wage and receive no 
benefits. The cycles of funding neglect must end.
    In closing, Amtrak is vital to the Northeast Corridor. It must be 
part of a future moving toward a higher speed Northeast Corridor with 
long term funding. Amtrak is moving in the right direction, utilizing 
programs and provisions already in place, and its reauthorization 
offers many opportunities for expansion and renewal of these programs 
and provisions. Political will is necessary for America to compete 
globally by moving our people safely and efficiently via high-speed 
passenger rail. High-speed rail will also create good middle class jobs 
for a lasting economic recovery, and provide energy security for 
America. Again thank you, for the opportunity to address you today.

    Senator Cowan. Thank you, Mr. Tolman.
    Mr. Geddes?

        STATEMENT OF 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

    Mr. Geddes. Thank you, Mr. Chairman, Senator Blunt, and 
other distinguished members of the Committee. I am Rick Geddes, 
Associate Professor in the Department of Policy Analysis and 
Management at Cornell University, founding director of our new 
Program in Infrastructure Policy at Cornell, and a visiting 
scholar at the American Enterprise Institute.
    I thank you very much for the opportunity to appear today 
on this important hearing regarding the future of the Northeast 
Corridor, which I believe is one of America's most valuable 
infrastructure assets.
    I believe it is critical to the Nation that our policies 
ensure that the public realizes the greatest possible value 
from this critical national asset as possible. And I believe 
that one of the most important improvements that we could adopt 
are policies that help encourage more private investment and 
private participation in the Northeast Corridor through 
increased use of public-private partnerships.
    Increased use of private participation, in my view, would 
generate a number of critical social benefits. First of all, 
you bring in high-powered, focused incentives to innovate and 
to seek new revenue sources. You may not think that economists 
agree on anything, but there is wide agreement in the economics 
profession that this type of physical infrastructure asset is 
exactly the type of activity where public-private partnerships 
can create huge value. And that is mainly because you can 
easily monitor the quality of contract enforcement, of contract 
compliance.
    Second, PPPs bring in additional business acumen, 
knowledge, and experience sourced from a global market. It 
comes from all around the world, like perhaps from the U.K.
    Third, fresh capital. People often talk about fresh capital 
brought in by public-private partnerships, and that is 
obviously critical in the Northeast Corridor, where we have 
heard about all the investment needs. So we need to go to the 
people who have the investment dollars in the private sector.
    But there is another issue related to this that I believe 
is grossly underappreciated, Mr. Chairman, and that is the 
ability of the private sector to efficiently bear risk. Unless 
we transfer some of that risk inherent in operating any massive 
infrastructure asset to some private-sector investment, that 
risk by necessity would be borne by taxpayers. And I think we 
have learned in recent years that taxpayers are simply terrible 
at bearing risk. There are professional risk-bearers, and those 
people are called investors.
    But, fourth, Mr. Chairman, I believe that another massively 
underappreciated benefit is that you can, through a private 
contract, insulate the dollars for maintenance and expansion of 
the asset from the budgetary process that we all know can have 
its ups and downs. These assets require ongoing, constant 
maintenance on a specific engineering schedule, Mr. Chairman. 
And one of the ways we can guarantee that is through a long-
term contract that says maintenance is part of the duty of the 
private-sector partner. That insulates all of that from the 
budget process.
    Finally, I believe that one of the most important elements 
of public-private partnerships is that you introduce what I 
think economists believe is the single most powerful force for 
social good that we know of, and that is competition. In other 
words, you can get competition injected, competition on any 
margin you want--on price, on quality, speed of service, how 
well you maintain the asset--through a contracting approach.
    Essentially, the contracting approach enforces a 
transparent, high quality of service and high-quality asset 
maintenance standards that can be enforced, they can be legally 
enforced, through a PPP contract. Under the current system, if 
there is deferred maintenance, how do you stop that? Well, 
through a private contract, there are legal mechanisms to stop 
that.
    I believe that these benefits can be captured for all of 
America through increased use of public-private partnerships on 
the Northeast Corridor. Greater use of public-private 
partnerships, I believe, would not be a major departure from 
the status quo. As we know, the government is effectively 
already contracting with Amtrak, which is a private company, it 
is a private law company with shareholders, to perform this 
service. It is just that Amtrak is the only one that is able to 
provide that service, but I believe there are many other 
opportunities for using PPPs on the Northeast Corridor.
    A PPP would not merely inject competition. If the P3 were 
for train operations, you would be able to attract all these 
other additional benefits.
    Just to provide one final example that I believe is 
concrete, Mr. Chairman, a public-private partnership could be 
used in the Gateway Tunnel that Mr. Boardman just mentioned 
very effectively because you have a dedicated source of revenue 
specific to that facility, which is a pretty low-risk source of 
revenue, that I believe would effectively attract a lot of 
private investment to help get that project done. As we know, 
it is a critical project, but it lacks funding and financing, 
and I believe that is where the private sector could play a 
large role.
    I could provide many other examples of successful P3s, Mr. 
Chairman, but in the interest of time, I will stop there. And I 
just want to conclude that we should try to encourage that use. 
And I am happy to answer your questions. Thank you.
    [The prepared statement of Mr. Geddes follows:]

  Prepared Statement of 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
---------------------------------------------------------------------------
    \*\ The views expressed in this testimony are those of the author 
alone and do not necessarily represent those of the American Enterprise 
Institute.
---------------------------------------------------------------------------
    Chairman Rockefeller, Ranking Member Thune, and distinguished 
Members of the Committee:

    Thank you for the opportunity to submit testimony to the Senate 
Committee on Commerce, Science, and Transportation hearing entitled, 
``The Future of Passenger Rail: What's Next for the Northeast 
Corridor?'' I am R. Richard Geddes, Associate Professor in the 
Department of Policy Analysis and Management at Cornell University, 
Director of the Cornell Program in Infrastructure Policy, and Visiting 
Scholar at the American Enterprise Institute.
    In my view, one of the most important policy innovations that could 
be undertaken to revitalize passenger service on the Northeast Corridor 
(NEC) is to increase the role of private participants in a variety of 
activities. I thus focus on opportunities to better utilize private 
investment to enhance and expand passenger rail service in the NEC. 
Greater private participation in the design, construction, operation, 
maintenance, and financing of passenger rail service has the potential 
to improve significantly the overall experience of passengers traveling 
on the NEC as well as the value realized by American citizens from this 
critical national asset. Increased private participation is not a 
policy panacea. However, if properly implemented, such participation 
through greater use of public-private partnerships (PPPs) will address 
a set of problems that continue to hamper the development of high-
quality passenger rail in the United States, particularly on this high-
density corridor. Social benefits of PPPs stem from four main qualities 
associated with enhanced private participation:

   High-powered, focused incentives to innovate, to seek new 
        revenue, and to better manage costs in a sector where high-
        powered incentives are socially beneficial

   Business acumen, knowledge, and experience sourced from a 
        global market for infrastructure operators
   Additional capital and highly developed risk-bearing 
        services through access to new debt and equity capital markets

   The utilization of a competitive contracting approach that 
        enforces high-quality service and asset maintenance, and allows 
        the discipline of competition to be harnessed for the public 
        good

    Such benefits of PPPs are currently being realized through enhanced 
private participation in many aspects of the U.S. transportation 
sector. For example, the entire U.S. freight rail system can be viewed 
as a large, multi-faceted PPP. The public sector there provided the 
right of way and created the legal/institutional setting for 
contracting. Freight rail companies maintain and operate tracks, 
signaling, and rolling stock, while private investors provide capital, 
bear risk, focused incentives, and budgetary discipline. It is thus no 
accident that the grade assigned to freight rail infrastructure by the 
American Society of Civil Engineers in its 2013 Report Card for 
America's Infrastructure improved from a C- in 2009 to a B in 2013, the 
largest improvement of any sector. The improvement was mainly due to 
billions of added private investment.
    Private expertise and resources have long been instrumental in 
designing and building highways, bridges, and tunnels in the United 
States. Private partners are increasingly called upon to provide 
capital, bear risk, and offer expertise associated with the operation 
of major transportation facilities such as toll roads and HOT lanes. 
Private firms are also now successfully operating large urban U.S. bus 
systems, such as in Nassau County, Long Island. They are making even 
larger contributions in many developed and developing countries' 
transportation systems. Private participation is also significant in 
other U.S. industries that require heavy investment in physical 
infrastructure, and which share a network structure, including aviation 
water, sewerage, and energy. For example, over half of all electric 
generating capacity in the United States is now provided by investor-
owned utilities.
    PPPs are the key contractual vehicle for incorporating private 
investment into the provision and operation of transportation 
infrastructure such as the NEC. The term ``PPP'' refers to a 
contractual relationship between a public-sector project sponsor and a 
private sector firm or firms coordinating to provide a critical public 
good or service. A PPP is subject to the standard rules of contracting, 
with clear performance standards linked to readily observable metrics. 
It is useful to think of a PPP as one application of a broader 
contracting approach.
    There are many ways in which greater private participation on the 
NEC through PPPs will improve social welfare. Private participation can 
enhance welfare by creating new types of service, by generating more 
revenue from existing assets, by improving the quality of existing 
services, and by lowering the cost of providing a given service. It is 
useful to distinguish between two broad areas through which private 
firms can participate on the NEC. Private investors can be asked to 
make long-lived, sunk investments in transportation infrastructure, 
such as in tracks, stations, yards, right-of-way, signaling, etc. on 
which they will require assurance of a rate of return over time 
sufficient to compensate them for risk assumed. After investing, 
private partners often also maintain and operate the infrastructure. 
Institutional arrangements in this case must be designed to make such 
long-term irreversible investment rational in order to attract risk 
capital.
    In the second area, private partners contribute by bringing 
capital, risk-bearing services, focused incentives, and expertise to 
the management of existing transportation assets. Although substantial 
investment in technology, upgrades, and renovation may be required, 
policy in this case is less focused on ensuring the security of long-
term investment returns than on capturing the social benefits of 
greater innovation and expertise in managing existing assets. I focus 
on the role of private participants in this second capacity because 
many of the long-lived assets required to operate the NEC are already 
in place. It is important to stress that, in all cases, actual 
ownership of transportation assets remains with the public sector, and 
under enhanced public control through transparent contracts that 
include clear, enforceable performance standards.
    Importantly, increased private, for-profit participation may not be 
appropriate for the provision of all goods and services. A consensus 
has emerged in economics that private participation may not be 
efficient where contracting with a private partner is complex and 
costly due to the inability to oversee--or ``monitor''--the quality of 
service provided. To offer a possible example, one may be concerned 
about contracting out the operation of a wildlife sanctuary to a 
private firm for fear that the operator would not maintain the 
environment in the sanctuary to a certain socially desirable standard, 
which is difficult to monitor. Stated differently, the quality of the 
wildlife's environment could be costly to contract over because quality 
of performance is difficult for the public contract sponsor to observe.
    Because they involve ``hard'' assets, the types of activities being 
considered for increased private participation on the NEC are, however, 
precisely those activities where the private partner's performance is 
readily observable. The variety of metrics indicating how well 
stations, yards, signaling, and trains themselves are operated are 
readily observable. They can be provided for in a contract with 
measurable performance standards and clear enforcement provisions. 
Private participation on the NEC is thus likely to improve social 
welfare substantially through better performance. Perhaps more 
importantly, the enormous value locked within this critical national 
asset can be realized for all citizens though upfront concession 
payments, as I describe below.
Opportunities for Value Capture on the NEC
    The entity we refer to as the ``Northeast Corridor'' is in fact a 
large set of transportation assets, each of which is valuable, and many 
of which are vastly underutilized under existing policies. The 
incentives, expertise and resources associated with private 
participation allow for the substantial value latent in those assets to 
be both increased and captured.
    Competitive concession bidding (which can only be achieved by 
including private participants) is the key mechanism through which 
latent asset value can be realized. For example, the substantial value 
inherent in improving the management, maintenance and operation of a 
single station on the NEC can be extracted by requiring potential 
private partners (which may include a consortium of firms) to bid on 
the basis of the largest upfront concession payment they will offer to 
perform those services. Private partners bring high-powered incentives 
to enhance the station's value as much as possible. This is because 
private participation includes well-defined residual claimants who 
stand to capture value created by operating the station more 
efficiently (a residual claim refers to the explicit property right to 
capture the profits from an economic activity). This is in contrast to 
current government operation, where no well-defined group can capture 
the value created, so operation remains inefficient. Because they have 
such a large effect on incentives, the concepts of residual claims and 
residual claimants are critical to understanding how private 
participation generates enhanced value from NEC assets. Indeed, one can 
think of the concept of ``value capture'' as virtually synonymous with 
well-defined property rights, which include the right to capture value 
created by the property in question.
    To continue with the station operation example, a private residual 
claimant generates additional value from operations in numerous ways. A 
private operator has the incentives, skills and resources to generate 
the greatest value possible from the station. This can be done through 
both revenue enhancement and through cost reduction, although economic 
studies of privatization in the former East Bloc countries indicate 
that the largest gains come from innovations to raise more revenue. The 
partner may be able to increase revenue opportunities through more 
intensive use of concessions for food and beverage service, through 
more intensive use of shop concessions, through waiting-room naming 
opportunities, real estate development opportunities near stations, and 
many other possibilities. Through restoration and innovation, revenue 
opportunities can take advantage of the historic nature of the NEC's 
critical infrastructure facilities, some of which predate the First 
World War. By creating well-defined residual claimants and requiring 
them to bid against one another for station operating rights, upfront 
concession payments allow society to immediately realize the new value 
created.
    A highway transportation PPP within the NEC provides another 
example. In January 2012, the Maryland Transportation Authority 
announced approval of a 35-year PPP concession for the redevelopment 
and operation of two travel plazas (Maryland House and Chesapeake 
House) on I-95 in Northeast Maryland. As an illustration of the private 
sector's access to capital, the concessionaire, Areas USA, will invest 
$56 million to redesign and rebuild the aging travel plazas, while the 
State will receive an estimated $400 million in added revenue over the 
life of the concession.
    The travel plaza PPP came on the heels of Maryland's PPP agreement 
with a private partner to renovate and operate the Seagirt Marine 
Terminal in Baltimore. Under that agreement, the Maryland Port 
Administration leased its 200-acre marine terminal to Ports America. In 
return, Ports America will build a container berth with a 50 foot 
depth. This will allow the Port to accommodate ships with a larger 
draft, which will attract more shipping.
    A third example is provided by the PPP completed in June 2011 
between Violia Transportation and Nassau Country, New York to manage 
and operate all aspects of its transit service, which includes almost 
300 buses and 180 para-transit vehicles. With a population of 1.3 
million people, the Nassau County system is now the Nation's largest 
privately operated municipal bus service. Although the PPP is 
relatively new, the early assessment is positive, and holds important 
lessons for the NEC. Buses are cleaner and more reliable due to a 
renewed emphasis on service quality and on customer needs. That 
enhanced reliability has generated greater ridership. Violia adopted a 
new, customer friendly website, and developed innovative visual tools 
that make Nassau's buses more appealing to passengers. Improvements 
have occurred without negatively impacting passengers. Fares were not 
increased and routes were not eliminated. Because of its operational 
focus, the Nassau bus contract has been termed a public-private 
operating partnership, or PPOP.
    To apply this approach to NEC infrastructure, a PPP could be 
utilized to help construct the proposed Gateway tunnel for passenger 
rail traffic under the Hudson River. Such a PPP would rely on private 
financing, but would be funded through charges to the freight, 
commuter, and Amtrak trains that utilize the tunnel. The tunnel could 
be operated under a ``real toll'' PPP in which the private partner 
received the toll revenue directly, or under an ``availability 
payments'' type PPP in which the public sector receives the toll 
revenue, but then compensates the private partner based on pre-
determined, transparent performance metrics. The project is estimated 
to cost $14.5 billion, but funding has not yet been identified. Such a 
project provides an ideal opportunity to leverage the power of capital 
markets to generate the most capital possible from a given revenue 
stream.
    In each example, the use of a PPP identified and tasked skilled, 
motivated, well-defined residual claimants with an incentive to 
maximize facility value. Enforceable contracts that include transparent 
performance standards can be used. The PPPs also brought additional 
capital and risk-bearing skills to bear. The citizens of Maryland and 
New York will share in the value created by private partners. A similar 
approach can be applied to other aspects of the NEC, particularly in 
passenger rail.
    Opportunities for contracting operations, improvements, expansion, 
and management of NEC facilities can occur at different levels in the 
delivery process. The public PPP sponsor must decide how broadly versus 
how deep into the process it wishes to contract. At the highest, most 
aggregated level, operations, maintenance, and expansion of the entire 
NEC, including all train operations, could be contracted to a single 
private entity, which may represent an affiliated group of firms. 
Although the resulting contract would likely be very complex--and would 
require care and expertise to oversee--citizens would share in the 
massive value created by receiving one large upfront concession payment 
for the entire line. Because of the massive value of the transportation 
alternative provided by the NEC, such a payment would likely be very 
large. This is consistent with the substantial values realized by 
concession payments in other recent U.S. transportation PPPs.
    The public sponsor could instead undertake private participation 
deeper down into NEC's operations. For example, station management 
could be competitively bid through a single management contract, with 
the management of ticketing, for example, undertaken through a separate 
entity. Still deeper into operations, the management of on-board food 
and beverage services, as well as in-station food, beverage, and 
newsstands could be competitively awarded through a different PPP. 
Additional on-board revenue opportunities include advertising on 
rolling stock, and advertising along the route. Increased private 
participation presents numerous clear opportunities to capture 
additional value from existing assets. The key decision is how far into 
process details should the public PPP sponsor execute and monitor 
contracts on the NEC versus how much it should delegate those 
responsibilities.
Value Revelation through PPP Bidding
    An important insight from the economics literature on PPPs is that 
it is difficult to know the value inherent in an infrastructure asset 
(such as the NEC) until it has been assigned a value through 
competitive bidding. That is, in addition to allowing citizens to 
capture the value of the infrastructure they own, a key purpose of 
competitive PPP bidding is to reveal the true value of the assets in 
question. Importantly, such bidding will reveal value based on the 
financing and implementation of the latest technological innovations, 
since private partners have strong incentives to adopt such 
technologies. However, the effects of new technology implementation 
that accompany private participation on both revenue opportunities and 
on cost reduction are virtually unknowable until they are implemented. 
This is highlighted by the fact that state and local governments are 
sometimes surprised by the large size of the upfront concession fees 
they are offered for brownfield PPP leases of highway assets, 
indicating that those assets were more valuable than previously 
thought. Importantly, value under-estimation often leads to under-
investment in asset maintenance, which has plagued many U.S. 
transportation assets.
    When more PPPs are used, the role of the public sector changes--and 
becomes more specialized--as private partners' participation grows. The 
public partner's role shifts from being a service provider to being a 
designer and monitor of contracts with private partners. Like any 
business, the public sector must decide where its core competency lies. 
There is little reason to believe that train station operation, for 
example, is a core government competency. Indeed, the benefits of 
contracting out train operations to private operators are being 
realized in other countries.
    An objective assessment of which aspects of the NEC lie within the 
government's core competency as a service provider should be 
undertaken, and those aspects that are not core public sector 
competencies should be contracted to private partners who are expert in 
those activities. Once non-core competencies are determined, the public 
sponsor may need to develop additional skills in contract design, 
monitoring, and enforcement.
    An added social benefit of the PPP approach is simply that a 
transparent contract exists. The contract clarifies such issues as the 
actions that constitute adequate performance. The PPP approach thus 
encourages the public sponsor to reflect upon, and articulate, what 
specific actions by the private partner constitute excellent, moderate, 
or poor performance. This may include metrics about key issues, such as 
the reliability and frequency of train travel, but also more detailed 
considerations such as the cleanliness of cabins, restrooms, and dining 
cars. The PPP approach thus improves the public's control over NEC 
assets by introducing a transparent, enforceable contract into its 
operation.
NEC Value Improvements Generated by Cost Management and Risk 
        Assumption
    An additional way in which citizens are able to realize added value 
via PPP concessions on the NEC is through the private sector's sharper 
incentives, resources, and skill in managing costs. Indeed, such 
incentives are referred to as ``high powered'' in the economics 
literature. Such cost savings will be realized by citizens through a 
larger upfront concession payment. Moreover, a lower cost of service 
may also depend on access to capital markets, since the social benefit 
of new technology often manifests itself through lower costs for the 
same type and quality of service.
    A final, often-stated social benefit of including private partners 
is risk assumption. Train operations on the NEC are inherently risky. 
They include operational risks, such as bridge or tunnel problems, but 
also financial risk associated with changes in ridership. Under the 
current approach in the United States, taxpayers assume virtually all 
of the substantial risks associated with designing, constructing, 
operating, and maintaining passenger rail systems. Through a PPP, some 
of those risks can be allocated to the private partner, thus reducing 
taxpayers' risk exposure. Because private investors are experts in 
pricing and bearing risk, this is an important benefit.
    Finally, a hallmark of the PPP approach is it's inherently 
flexibility. The range of ways in which private participation can be 
incorporated on the NEC appears to be limited only by the creativity of 
the contracting parties. For the reasons I outline above, private 
participation in the provision of passenger rail service in the United 
States through greater PPP use should be encouraged.

    Senator Cowan. Thank you, Mr. Geddes.
    Thanks to the panel as a whole. Very informative testimony. 
Sounds like we are going to have a robust conversation and 
debate once we get into the examination from my colleagues 
here.
    I am going to exercise my prerogative in my pseudo-role as 
Chairman for today just to issue a few brief opening comments 
and then kick it over to questioning.
    First, I want to thank Chairman Rockefeller for convening 
this hearing about the future of the Northeast Corridor. 
Obviously, being a Senator from Massachusetts, this is 
particularly relevant and important to me. And I know it may 
not stretch to the other parts of the country represented by 
the Senators here, but I know they are equally interested, 
passionate, and concerned about the issues we are talking about 
today.
    Passenger rail is an important component of our nation's 
transportation infrastructure no matter where it is located, 
and concerns about safety, capabilities, and speed of our rail 
network are universal. Again, perhaps it is nowhere more 
relevant and important than to those of us in the Northeast, 
where congested highways and airports increase pollution and 
cost tens of billions of dollars every year in lost 
productivity.
    Unfortunately, as you have all said, the infrastructure we 
put in place long ago cannot keep pace with current demands or 
those we anticipate. Our stations and lines are stretched too 
thin, and service is delayed, disrupted, and slower as a result 
of the aging infrastructure.
    It is an opportunity for me to remind you all of South 
Station in Boston, which dates back to 1899. It is a beautiful 
building, but it is not nearly large or sophisticated enough to 
handle the growing passenger rail service needs. That is why 
the state of Massachusetts has proposed a critical expansion to 
the South Station that would not only allow for increased 
ridership on current lines but would also open the door to 
expanding access for residents in the south coast of 
Massachusetts and beyond.
    Our businesses are telling us that we are losing our 
competitiveness because our infrastructure is falling apart. 
Too many bridges and roads are not safe, and experts say it may 
cost as much as $3 trillion over the next decade just to bring 
existing infrastructure to acceptable levels. Thousands of 
needed construction jobs across the country could be realized 
if we fully fund our infrastructure deficit.
    Now, we know that resources are not unlimited, and we have 
a responsibility to be sure we are getting the most out of the 
dollars we spend. But I am a big proponent of the notion that 
investment in infrastructure is a smart investment and a needed 
one.
    And we have to look at new and innovative ways to bring 
private capital into the mix. I am a strong supporter of TIFIA 
grants, but they are clearly not enough, and we have to look 
for new, additional ways to finance the level of investment we 
need, especially those projects that have a national benefit or 
are critical to the economics of a region, particularly the 
Northeast.
    And, with that, I have more, but I will put that into the 
record. And I will exercise my prerogative again and ask 
Senator Blunt if he has questions for the panel at this time.
    Senator Blunt. Thank you, Chairman. I do.
    I mentioned when Chairman Cowan arrived that if he hadn't 
shown up, Senator Johnson and I were going to just privatize 
the entire system. But he got here to----
    [Laughter.]
    Senator Blunt.--protect the hearing, and so we are not 
going to do that.
    I am interested--Mr. Boardman, what about that last comment 
that Mr. Geddes made about a taking a specific asset, like the 
tunnel, that has a stream of revenue, and how dependent are you 
on that stream of revenue for other operations? And just 
respond to that for me.
    Mr. Boardman. I think the real revenue would come from 
other public agencies. For example, Amtrak doesn't have nearly 
the number of trains operating through the new tunnels as would 
New Jersey Transit, for example. So you do have policy running 
into policy, Senator, to some extent, depending on what another 
public agency, such as New Jersey, would want to charge its 
passengers.
    But the kinds of things that Rick is talking about, I 
think, are things that we can consider for the future if you 
have a long-term, reliable source of funding that comes out of 
the Federal Government. It really takes that level of 
investment to make that happen.
    When Perry Offutt was here, who was one of the investment 
folks, he really talked about the private sector being in for a 
project something like that or even smaller, perhaps, at about 
15 percent. But he was also looking at that consistent funding; 
otherwise, the risk level is too high for them to really step 
in and do something.
    So it is complex, and I think Rick has thought about a lot 
of those issues. But the practical nature of making that happen 
on a working railroad, which is I think part of what Jim Steer 
was talking about, is also problematic.
    Senator Blunt. Yes, let me go to Mr. Steer.
    I was going to ask, based on what Mr. Boardman said, the 
idea of a consistent enough governmental funding, what you saw 
on the West Coast corridor, how do you kind of link those two 
comments together of your panelists on either end of the table 
there?
    Mr. Steer. OK, well, I think that there is an awful lot to 
do to get to a position where the kind of private-sector 
funding that Mr. Geddes has talked about actually could be 
realized.
    If you think about it, taking the Gateway as an example of 
the next big project perhaps, the income stream to remunerate a 
private-sector investor under a PPP there would probably be 
what is known as the availability payment. They would look for 
each year, each time a train goes over, I get a return, because 
I am the private-sector investor, I have spent $15 billion 
building these bridges, tunnels, expanding Penn Station.
    So, first of all, I want to be pretty sure those trains are 
going to run. Actually, I want to know if something is going to 
run on the old tunnels, as well, so you are going to have to 
put those in the picture. And I am going to want to know that 
whatever those charges are, and they are set to be at the 
beginning of the contract, that I can rely on them not 
changing. And that might be a tricky thing to do because the 
kind of term of contract here is probably going to be 20, 25 
years to make this work. You are going to need a good period of 
earning.
    Now, look, the concept is great, because we all know there 
is private money looking for this kind of reliable, dependable, 
steady-state, long-term return. But you do have to have the 
apparatus in place to give the assurance to investors that they 
are going to get that return. An independent rail regulator, 
for instance, is what we have in the U.K. We thought we needed 
it in a time when we weren't expanding the railroad. As it 
turns out, it is a fantastic device to help secure that kind of 
private-sector funding. But there is work to be done to get 
that kind of arrangement in place, I would say.
    Senator Blunt. Mr. Geddes, do you envision this to be 
significantly different than, like, Indiana selling some of its 
highways to a private investor to maintain and depreciate--I 
assume they depreciate those highways out, which is another 
advantage to them.
    I am just trying to figure this out. I am not trying to be 
very crafty here in my question. I am just trying to figure out 
how these--these three things don't sound like, to me, they are 
that far apart really.
    Mr. Geddes. Thank you, Senator. That is a terrific 
question.
    To me, yes, there is a critical difference between what 
happened in Indiana on the Indiana Toll Road and what I think 
we are talking about with, for example, the Gateway Tunnel in 
the Northeast Corridor. In my view, a key difference is that 
the Indiana Toll Road was built, it was priced, it was tolled 
already, prior to the PPP being taken over. It is what is 
called a brownfield lease.
    Now, a tremendous investment in the Indiana Toll Road was 
necessary, Senator, to just get it up to standard. And the 
tolls needed to be adjusted, I think. But what we are talking 
about here is more of what we would call a greenfield project, 
which is the construction of a new facility for which we do not 
yet charge.
    So a key, absolutely key issue here is charging for the use 
of the asset, whether it be per mile or per ton, whatever it 
is. And we could even talk about varying that charge according 
to peak times, like we do for electricity and a lot of other 
utilities.
    So if we were building new capacity here, the demand is 
more uncertain. We don't know exactly what the demand is going 
to be. That is a typical problem with a greenfield project. On 
a brownfield project like the Indiana Toll Road, you know how 
many trucks and cars are using it already, so your demand risk 
is lower.
    That is why I think the private sector is so important. As 
I stressed, the private sector is good not only at providing 
capital and operations, they are also good at bearing risk. And 
we as a society would be taking on a lot of risk by building a 
new tunnel, but we still have a pretty good idea that there 
would be a lot of demand for that tunnel. So I think we would 
get a lot of up-front capital going into the construction of a 
new tunnel.
    I don't know if I am getting to your----
    Senator Blunt. No, no, you do.
    Mr. Geddes.--question. But----
    Senator Blunt. And I am going to ask one question----
    Mr. Geddes.--the key thing, Senator, is that pricing issue.
    Senator Blunt. And, Mr. Redeker, I assume in your report 
one of the things you talk about is the additional 
infrastructure you need, whether it is a new tunnel or an 
additional bridge, as well as maintaining current 
infrastructure, whenever I look at that Northeast Corridor 
critical needs report?
    Mr. Redeker. Yes, the critical needs, at this point, is 
really a look at the current infrastructure and what it needs 
to sustain itself.
    Senator Blunt. What the current infrastructure needs.
    Mr. Redeker. It may add capacity by doing investments in 
that infrastructure. We are partnering with FRA on that future 
through the NEC FUTURE process and where that new 
infrastructure needs to be or how much of it to build under 
what scenarios.
    Senator Blunt. I assume I may have time later for a couple 
of other questions, Mr. Cowan, I will--thank you, Chairman.
    Senator Cowan. Thank you, Senator.
    Senator Johnson?

                STATEMENT OF HON. RON JOHNSON, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Johnson. Thank you, Mr. Chairman.
    I am new to the Committee, new to this issue, so I am going 
to ask some pretty basic questions. I am also an accountant, so 
I like numbers.
    Can you give me what level of revenue is going up and down 
the Northeast Corridor right now? Is there a figure on that?
    Mr. Boardman. It is over a billion at this point in time. 
But in terms of the number that is coming to my mind, the 
revenue is between $200 million and $300 million above what our 
costs are to operate on the corridor without capital.
    Senator Johnson. Now, is that just Amtrak or is that total 
revenue?
    Mr. Boardman. That is just Amtrak.
    Senator Johnson. Just Amtrak. Do you know total traffic 
over the Northeast Corridor?
    Mr. Boardman. The total traffic is about 260 million 
passenger trips per year.
    Senator Johnson. OK, I am talking revenue, though, because 
I----
    Mr. Boardman. I don't have that.
    Senator Johnson.--want to get down to dollars.
    Mr. Boardman. Does the Commission have that, Jim? No, I 
don't think so.
    Mr. Redeker. I would say we don't at this point.
    Mr. Boardman. We could get that, but----
    Senator Johnson. OK. That is kind of critical.
    What are we talking about in terms of maintenance 
infrastructure, Mr. Redeker, in terms of just what we need to 
do to invest to maintain what we have? I mean, a ballpark 
figure.
    Mr. Redeker. Yes, so we have put together this needs report 
which breaks it up by segment, into what each segment needs. 
And this is multiple billions of dollars to reach a state of 
good repair on the infrastructure, so capital investments, the 
ongoing operating costs in addition to Amtrak's.
    The commuter railroads are not profitable, typically, 
across the corridor. They are very efficient as a 
transportation mode. I know for the New Haven Line we are 
running at about 75 percent cost recovery. So it is a 
subsidized operation. So when you throw the commuter operations 
on top of the Amtrak operations, from the operating and 
maintenance side, it is not the same as the Amtrak-only 
operation.
    Senator Johnson. OK, ``multiple billions.'' Are you talking 
$10 billion? Are you talking $15 billion?
    Mr. Redeker. Well, so we have identified a period of time 
that we believe there is an infrastructure need. Total number--
--
    Mr. Boardman. I could tell you that. We are behind right 
now about $5.1 billion in terms of bringing it up to a state of 
good repair.
    And we are putting in whatever the Federal Government 
allows us to do on capital for each year. And there is the 
appropriation that comes from the Federal Government. It could 
be a half a billion dollars, and it could be over a billion 
dollars, depending on what is available.
    Senator Johnson. Well, how much does Amtrak lose on the 
Northeast Corridor, then, every year?
    Mr. Boardman. The entire amount of the capital investment, 
the way Congress figures it, is what Amtrak loses.
    Senator Johnson. I am not interested in the way Congress 
figures it. What does your profit and loss look like? I mean, 
so you have a billion dollars in revenue; how much did you 
lose?
    Mr. Boardman. Whatever we put in to the capital.
    Senator Johnson. Which is how much?
    Mr. Boardman. It depends on the year, sir.
    Senator Johnson. Well, last year----
    Mr. Boardman. You only provide money every year. You don't 
give us, as with the highway side for 5 years.
    Senator Johnson. This isn't trying to be hostile.
    Mr. Boardman. No, no, I understand, I understand.
    Senator Johnson. So do you do an annual income statement at 
all?
    Mr. Boardman. Yes.
    Senator Johnson. So how much would you consider your loss 
per year?
    Mr. Boardman. I will get a real number for you and get it 
back to you.
    Senator Johnson. Can you give me a ballpark just for 
discussion here?
    Mr. Boardman. Not in the way you are asking the question, I 
can't, no, sir.
    Senator Johnson. OK, well, that is a problem when you are 
trying to figure out how to privatize something. Wow. So you 
can't tell me how much you lose in a year?
    Mr. Boardman. I can tell you what the whole company loses, 
but----
    Senator Johnson. OK. How much----
    Mr. Boardman. On the Northeast Corridor itself, we make 
about $300 million over the investment--let me see if I can 
figure it out here. I am talking out loud. Between $200 million 
and $300 million over our operating cost. And the Federal 
Government provides an investment for us in the neighborhood of 
$500 million a year. So we are losing probably a couple hundred 
million, $200 million to $300 million, a year.
    Senator Johnson. OK.
    Mr. Boardman. And if you add the ARRA funding or if you add 
the extra funding we have had, we would lose a greater amount 
of that because we would have a greater investment in 
infrastructure.
    Senator Johnson. So, total, what does Amtrak lose a year, 
then, in total?
    Mr. Boardman. It is on our long-distance trains and those 
that are the state corridors. We are losing, this year, I think 
around $400 million to $500 million.
    Senator Johnson. OK. And that is inclusive of what you get 
subsidized by the Federal Government?
    Mr. Boardman. Yes.
    Senator Johnson. So, in other words, the Federal Government 
pumps money in, you count that as revenue, and then you still 
lose $500 million.
    Mr. Boardman. No, we count that all as subsidy. All the 
Federal Government comes in for is considered a subsidy for the 
capital side, which is the Northeast Corridor for the most 
part, and you take all of our profits off the Northeast 
Corridor and you put that into long-distance trains, and then 
what is left is the subsidy for long-distance trains and state 
corridors.
    Senator Johnson. OK. But you say you lose about half a 
billion dollars a year?
    Mr. Boardman. Yes.
    Senator Johnson. $500 million a year.
    Mr. Boardman. $400 million to $500 million.
    Senator Johnson. But is that exclusive of the subsidy, is 
what I am asking you, or is that after the subsidy? So, in 
other words, if you get $2 billion worth of revenue, you get 
half a billion dollars' worth of subsidy from the Federal 
Government, you still lose $500 million.
    Mr. Boardman. Well, it includes all of the subsidy. It 
includes everything from the Federal Government.
    Senator Johnson. Let me just ask one question. Have you 
tried adjusting prices so you don't lose money?
    Mr. Boardman. Yes.
    Senator Johnson. And what happens?
    Mr. Boardman. On the Northeast Corridor, we have increased 
revenue. On the long-distance trains, that is not possible.
    Senator Johnson. OK.
    Thank you, Mr. Chairman.
    Senator Cowan. Senator Nelson?

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Just to interpret what you said, you put it 
all together, what you get in revenue and what you get from the 
Federal Government, and you are losing, the big Amtrak, 
everything, somewhere around $400 million to $500 million a 
year?
    Mr. Boardman. Yes, sir.
    Senator Nelson. OK. That is what I thought was said.
    Now, I am from Florida. Sadly, the attempt to build high-
speed rail was rejected by our Governor, and we had a project 
ready to go. And then when the Florida Department of 
Transportation estimates came out, it would have shown that it 
would have actually made $10 million in the first year on the 
expected ridership. This was the Governor's own department. And 
by the tenth year, it was expected to be making $30 million a 
year.
    So that is gone. And that was just one leg of high-speed 
rail. That was on the least-transited leg, from Tampa to 
Orlando.
    We now have a private enterprise, the Florida East Coast 
Railway, that wants to do a higher-speed rail on their own line 
from Miami up to Cocoa and then do an extension paralleling a 
limited-access highway right to the Orlando Airport. So you 
would now have high-speed rail from Orlando to West Palm, 
slower speed but still fast from West Palm south to Fort 
Lauderdale. That is the second stop, or the third stop with 
Orlando being the first, and the last stop, Miami, and then 
reverse.
    Now, my question to you is, what do you think about that? 
You are the head of Amtrak. This would actually be a competitor 
to you because you don't have a lot of ridership on your line 
that goes down the center of the state.
    Mr. Boardman. We actually have quite a bit of ridership, 
but I think it would be great for Florida if that happened.
    Senator Nelson. Is this entirely a private enterprise, or 
is Amtrak in any way involved?
    Mr. Boardman. Well, they are entirely a private enterprise 
the way it exists now. I have been down to talk to Secretary 
Prasad. We have looked at what Amtrak could do and have talked 
to him about the potential of operating along the Florida East 
Coast because the All Aboard Florida service really was going 
to stop at West Palm Beach and not stop beyond that.
    Senator Nelson. That is correct.
    Mr. Boardman. So I think the Florida folks are interested 
in making sure that it was equitable, but we don't know yet 
what they really want to do, at this point in time.
    Senator Nelson. Well, what I interpret they want to do is, 
they own the tracks----
    Mr. Boardman. No, no, I meant the state, sir. I didn't 
mean----
    Senator Nelson. Oh, what the state----
    Mr. Boardman. I understand what the----
    Senator Nelson. Well, that is true. I mean, the state has 
to give them the ability on the state right-of-way along this 
expressway from the east coast of Florida where the FEC 
railroad tracks are all the way to the Orlando Airport. And the 
good news there is there is a highway expressway, and so there 
is right-of-way there. And so they can put a track there, and 
it can go right to the Orlando Airport.
    And, apparently, according to these folks, Florida East 
Coast Railway, apparently it looks like it could be a 
moneymaker. Because they think they can do the trip in 3 hours 
from Orlando to Miami, and you can't drive it except in 4. And 
if you want to fly, of course, start to finish, even though the 
actual flight time is 40 minutes, you have all the extra that 
you go through going into the airport, et cetera, et cetera.
    So it is intriguing, and I wanted to know what you thought 
about it.
    Mr. Boardman. I agree with you. It is intriguing. I have my 
own real thoughts about how successful it will really be, 
whether they can do what they are talking about doing. But they 
certainly have a plan that, if they can execute it and it turns 
out that way, will be good for Florida, it will be good for the 
people there.
    Could I go back to a question that I think Senator Johnson 
was asking me and probably getting frustrated with me about? 
Somebody sent me a note; he says, OK, boss, the real loss after 
all the money is in there is zero.
    And I wasn't paying attention to your question well enough, 
sir, and I apologize. Once you get the Federal money in, the 
loss is zero. There is not a continuing loss.
    Senator Nelson. So there is not a $400 million to $500 
million loss each year?
    Mr. Boardman. No. Once the Federal money is applied, it is 
a balanced book. And I think that is maybe what you were trying 
to get from me, was there additional loss beyond what the Feds 
put in.
    Senator Johnson. Just answer me, what is the total Federal 
subsidy?
    Mr. Boardman. The total Federal subsidy this year is in 
that $400 million category. And that is what I was trying to 
answer.
    Senator Nelson. OK. So, then, my interpretation was 
correct. You have a $400 million to $500 million loss, but the 
Federal Government subsidizes that----
    Senator Johnson. Correct.
    Senator Nelson.--over and above what the Federal Government 
puts in initially.
    Senator Johnson. No.
    Senator Nelson. Not so? OK. OK.
    Mr. Boardman. They break even with----
    Senator Nelson. All right. So if I can interpolate again--
--
    [Laughter.]
    Senator Nelson.--the Federal Government nationwide puts in 
$400 million or $500 million.
    Mr. Boardman. Yes.
    Senator Nelson. However, in the Northeast Corridor, you 
have a profit of $200 million or $300 million.
    Mr. Boardman. Yes, they take that and apply that, as well. 
So, I mean, in the end, all of that balances us out to zero, in 
the end.
    Senator Nelson. OK.
    Mr. Boardman. No loss, no gain.
    Senator Nelson. With that much loss outside of the 
Northeast Corridor, how can you justify doing what you do, 
other than it is a government service?
    Mr. Boardman. With all due respect----
    Senator Nelson. Which is what it is.
    Mr. Boardman.--it is what Congress has to justify.
    Senator Nelson. That is right. That is right.
    Senator Cowan. Thank you, Senator Nelson.
    I just have a couple questions. I think we have time to go 
back around if folks have more questions, and I suspect they 
may.
    Actually, a question to Mr. Steer.
    Mr. Steer, you spoke about, as you said, that history has 
shown us that there is tremendous potential here, but in every 
successful model, starting with an expectation that the private 
investors will get the ball rolling hasn't proven to be the 
case and that there needs to be some, as you say, national 
government financing.
    In light of what you have heard today and your 
understanding of what the needs and opportunities are, do you 
have an opinion as to what you think, at least in this instance 
as it relates to the expansion of rail and this nation via the 
high-speed, the Northeast Corridor or elsewhere, what you think 
that level of investment might be before we could be in a 
position to effectively leverage private investment?
    And then, Mr. Geddes, if you have an opinion on that, I 
would love to hear from you, as well.
    Mr. Steer. OK. One way of looking at this might be just to 
take the Northeast Corridor first of all, Senator Cowan. And if 
you looked to create what I would consider to be a viable, 
commercial section of high-speed rail, and by that I mean 
something that is new-build so you don't have the risk of 
knowing what is the condition of the asset. It is new-build, it 
is clean, you have created it, which is going to take some 
doing. You have some work to do in institution-building, the 
means to charge operators for using that. That is the income 
stream back to the private-sector investor. Then you could look 
at concessioning that.
    How long would that take, and what would it cost? A 
reasonable section of route, maybe Maryland-Delaware section of 
high-speed line, might be in the range of $12 billion or $15 
billion. You build that, you get it operational. And I am 
suggesting this because I have seen it done elsewhere. Maybe a 
year or 2 after you have opened it, you know what the income 
charges could be, you concession it.
    And you ask for your private sector, your fund, your 
pension funds, these kind of players in the market to come 
along, and they would acquire it, say, from Amtrak. And they 
will say, OK, we will maintain it for 30 years. Amtrak will 
still run the trains over it.
    You could do that. But you really have to build a 
substantial enough piece to make it work, and it is certainly, 
you know, some way downstream. This isn't even the first-
priority project.
    I don't believe it would be anywhere near so easy to do it 
with Gateway, just because of its complexities with the old 
tunnel and Penn Station. You know, there are a lot of 
interdependencies to get the value out of that investment. But 
here, assuming a fairly clean investment of this type, that is 
the kind of scale of money that would be needed.
    So that is public-sector money, Federal dollars, before you 
get to that stage. That is my opinion, anyway.
    Thank you.
    Senator Cowan. Thank you.
    And, Mr. Geddes, if you could opine. And I would also like 
your thoughts on a financing model that might be borne out of 
an infrastructure bank, a Federal infrastructure bank.
    Mr. Geddes. OK. Thank you, Mr. Chairman. I will take your 
first question first.
    I must say I am a little more optimistic than Mr. Steer is 
on the willingness of the private sector to take risks and to 
invest in the Northeast Corridor as it is or with the current 
institutional arrangements.
    I think we need to appreciate that one of the huge 
advantages from the global infrastructure investment 
community's perspective of investing in the United States is 
our strong contractual enforcement in this country through our 
legal system and our strong system of property rights. Both of 
those legal factors make the United States an extremely 
attractive environment for infrastructure investment from all 
over the globe. And I believe that there would be a lot of 
entities that would be willing to take risks on different parts 
of the Northeast Corridor.
    I direct you to a project here in Washington, D.C., which 
is the construction of the HOT lanes on the Northern Virginia 
side of the Washington, D.C., Beltway as a public-private 
partnership between Transurban, which is an Australian company, 
and Fluor, which is U.S., the private sector taking the risk of 
building that new infrastructure asset and constructing it at 
very little government cost.
    So I believe there are huge opportunities here for private-
sector investment. I am a little bit more optimistic than Mr. 
Steer on that.
    Second, Mr. Chairman, I would like to emphasize that the 
private-sector advantage comes from their incentive to use the 
existing assets to raise more revenue. So to say naming rights 
at stations, stations concessioning for shops and restaurants 
more aggressively, a whole series of things that they can do to 
squeeze more value out of those existing assets. I believe 
there is enormous latent value within the Northeast Corridor, 
Mr. Chairman, that a private-sector investor, if we were to 
take the opportunity, would really be interested in investing 
in.
    Now, your second question, Mr. Chairman, on an 
infrastructure bank, I have to say that I believe the devil is 
in the details on a Federal infrastructure bank. The one 
proposal from a few years ago regarding--the structure of the 
infrastructure bank is important. One structure I heard was an 
independent agency within the executive branch, which is 
exactly the same structure as the U.S. Postal Service. And I am 
not optimistic that that structure would lead to investments 
purely on the basis of economic value. And so I would have to 
see the structure of the bank itself, Mr. Chairman, to answer 
wisely.
    Senator Cowan. So I am going to take that as a ``maybe.''
    And I am going to ask Senator Blunt if he has further 
questions.
    Senator Blunt. Let me ask a couple, Chairman.
    Mr. Tolman, I am assuming that, in terms of infrastructure, 
you want it to be as safe and as upgraded, as up-to-date as it 
can be. And do you have a particular view of how that happens, 
as long as it happens?
    Mr. Tolman. We do have a view about that. And the key is, 
and I think Mr. Boardman testified to this, we need a long-term 
funding for Amtrak. And then you are going to get, as the two 
gentlemen to my right and left have emphasized, then you get 
some potential investors. But until you give Amtrak an 
opportunity, a 10-year investment plan, I don't see either one 
of these plans working, personally.
    Senator Blunt. Well, certainty in all areas is usually a 
helpful thing for decisionmaking, no doubt about that.
    The other thing I wanted to ask you, you mentioned the 
Passenger Rail Investment Security Act----
    Mr. Tolman. Yes.
    Senator Blunt.--that expires this year. What is your advice 
on that?
    Mr. Tolman. Long-term funding----
    Senator Blunt. So long as we could go with a long-term 
point of view on this bill, this act that expires this year?
    Mr. Tolman. Yes, positively. I said 10 years. I would say 
20 years, 25 years, whatever you could do.
    I mean, I have testified and been coming down to D.C. back 
in the 1990s from Boston, you know, praying that we are going 
to get some type of subsidy to keep it running for years. We 
have had professional people, employees, working tirelessly to 
keep it going, as well as a wonderful relationship currently 
with Amtrak management. And I think we have done a really nice 
job working together on both sides of the aisle. We would like 
to continue that.
    And it would be extremely helpful to anybody employed in 
the industry to have some type of long-term funding and not be 
worrying whether they are going to be there tomorrow.
    Senator Blunt. Yes.
    Mr. Redeker, you mentioned that in the area of your 
responsibility, you had the largest increase in service in the 
history of--what do you attribute that to? Obviously demand, 
but what do you attribute the demand to? Is it all demand, and 
what do you attribute the demand to?
    Mr. Redeker. Yes, I think that rail investment really does 
create the economic engine for the state of Connecticut. The 
Shore Line, which is the New Haven Line, Northeast Corridor, is 
one of the busiest commuter railroads in the country. The 
utilization of that not just to the New York CBD but actually 
in the reverse direction, as well, now--there are more folks 
coming into Connecticut than leaving Connecticut going the 
other way. This is the core of our economy. And it is the 
competition to the congested I-95 corridor.
    So it is growing, it is growing consistently. It is growing 
on top of fare increases that have been put in place to raise 
revenues. And so our response to that is to add service.
    At some point, we will reach congestion limits, capacity 
limits. But in response to that, we have added, particularly on 
weekends, we have added a significant increase, almost 45 
trains, on the weekends, and then off-peak trains as well.
    So it is a market that is not just peak work hours. It is 
all day long, it is all directions, it is all purposes. And I 
think that is because of the quality and the dependability.
    Senator Blunt. And do some of these commuter lines actually 
not lose money?
    Mr. Redeker. No, actually, all the lines in----
    Senator Blunt. So the more service you add, the more money 
you lose?
    Mr. Redeker. No, actually, most of the service we are 
adding now is break-even or profitable. Weekend service tends 
to be, for us, incrementally relatively inexpensive to add, and 
the revenues cover that. But we are one of the more efficient 
commuter rail services in the country, recovering over 75 
percent of those costs.
    Senator Blunt. And who makes up the 25 percent?
    Mr. Redeker. That is the state of Connecticut.
    Senator Blunt. The state of Connecticut.
    Mr. Redeker. Yes.
    Senator Blunt. Thank you, Chairman.
    Senator Cowan. Senator Johnson, further questions?
    Senator Johnson. Yes. Thank you, Mr. Chairman.
    Again, I am a private-sector guy, so I believe in it. Can 
you just describe to me the difference between the freight rail 
system and the commuter rail system? And tell me where I am 
wrong, because I think I know a little bit more about the 
freight rail system, but what percentage of the freight rail 
infrastructure, the track, is owned by the freight companies?
    Mr. Boardman. A hundred percent. And their plan is to 
invest about $24 billion a year in their infrastructure. About 
17 percent of that is capital investment, and the rest of it is 
maintenance cost. They maintain their railroad at a Class 4 
track, which is a lot lower speed. And we also operate much 
lower speed, about 79 miles an hour, on those tracks than our 
own. And they have done a good job with that.
    Senator Johnson. OK. But the freight rail system is pretty 
profitable, correct?
    Mr. Boardman. It is now, yes.
    Senator Johnson. Mr. Geddes, you seem wanting to hop in 
here.
    Mr. Geddes. Thank you, Senator. I had to raise my hand 
there, I am sorry. But if you take a look at the most recent 
report from the American Society of Civil Engineers, 2013, it 
came out about a month ago, they rate all sectors of 
infrastructure in the United States.
    The sector that had the largest--so it comes out every 4 
years. The sector that had the largest improvement in its grade 
was the freight rail system. And they attribute that to the 
billions of dollars of--so it went from a C+ to a B+ or 
something. I can't recall the exact grades. But they attribute 
that to the massive additional private-sector investment in the 
infrastructure of the freight rail system to bring it up to a 
much better standard.
    Senator Johnson. Would you say that one of the reasons is 
because of the discipline of a private-sector marketplace, the 
competition and the fact that not only do you have to break 
even, you actually have to build a surplus, and so you have a 
certain market discipline or pricing discipline?
    Mr. Geddes. Yes, Senator, I would attribute it to market 
discipline on a number of margins. You have the discipline of 
the capital markets. As we know, Warren Buffett bought BNSF 
Rail. There is a lot of capital market discipline there. There 
is discipline on the margin of product market competition. 
There is market discipline in a whole--bond markets discipline 
these companies through the bond rating agencies.
    A whole series of market disciplines are brought in. And I 
believe we can capture that on the Northeast Corridor through 
the judicious use of public-private partnerships.
    Senator Johnson. Well, I am just listening to the ridership 
and the use of those tracks. It looks like it is really at 
capacity. To me, from the private sector, when you are 
operating that close to capacity, you ought to be----
    Mr. Geddes. Expanding.
    Senator Johnson.--expanding or at least charging for the 
utilization so you can actually make a profit. I mean, is it 
true, because the numbers are still a little confusing, is it 
true that the Northeast Corridor without government subsidy 
makes a profit, or not?
    Mr. Geddes. Are you asking me or----
    Senator Johnson. Whoever might know.
    Mr. Geddes. I believe that economically speaking, so your 
Econ 101, the Northeast Corridor is an enormously profitable 
asset. Now----
    Senator Johnson. But, again, I am not talking about the 
infrastructure surrounding it. I am talking about just the rail 
system itself.
    Mr. Geddes. I am, too.
    Senator Johnson. Does it operate at a profit?
    Mr. Geddes. I don't believe under the current arrangements, 
probably not. But with the proper policies and institutional 
arrangements, I believe that the Northeast Corridor could be a 
very profitable asset.
    Senator Johnson. Why not just with proper pricing?
    Mr. Geddes. Yes. Yes.
    Senator Johnson. I mean, when you are at that level of 
capacity, shouldn't you be able to increase prices to be able 
to make a profit on the use of the asset?
    Mr. Geddes. Yes, Senator, I agree entirely. And I believe 
that another underappreciated benefit of private involvement is 
the incentive and the skills to properly price use of the 
asset. Pricing, as you know, is a----
    Senator Johnson. So let me ask the other folks, why can't 
you, when you are operating at that high a capacity, why can't 
you at least break even with your own operations, without 
government subsidies? I mean, what prevents that from 
happening?
    Mr. Steer. If I can attempt an answer here, I think the 
first key difference between the Class 1 freight railroads, 
which have performed very well, and the Northeast Corridor is 
the Northeast Corridor is a mixed-use railroad. So you have one 
organization, Amtrak, that owns most of it, not all of it but 
most of it, and runs intercity rail service, but it also 
supports a huge number of commuter rail services, and it 
supports some freight services.
    So the key to getting into this and saying, oh, well, it is 
full, can't we charge more, which is really, you know, a pretty 
basic and commonsense question----
    Senator Johnson. There you go.
    Mr. Steer.--if you will forgive me, is, well, where is the 
pricing for the use of the infrastructure? And the fundamental 
first step has to be to charge for the infrastructure on a 
cost-reflective basis. Because----
    Senator Johnson. So wouldn't that be the policy 
prescription, the first policy prescription is make sure that, 
rather than have the taxpayers subsidize that, we come up with 
a model where the people utilizing the track are actually 
paying for it?
    Mr. Steer. Well, yes, but--and here is the ``but.'' And I 
do mean ``yes'' before I get to the ``but.'' And the ``but'' 
is, in particular, when you look at the biggest usage in the 
corridor, it is actually commuter rail. Commuter rail the world 
over needs subsidy. You will not find commuter railroads around 
the world--and I don't really see why the U.S. on this is----
    Senator Johnson. But is that totally dependent on capacity 
utilization, though?
    Mr. Steer. Well, it is just----
    Senator Johnson. And I have been on the New York-
Washington, D.C. That is a very full train almost every time.
    Mr. Steer. Absolutely. But it is also a very peaky 
business. It is a lot of equipment that is used a couple of 
times in the day. Absolutely flat-out in the middle of the day, 
it is not used as much. And people try to make better use of it 
in the off-peak and weekends and so on.
    The reality is you could increase the charges. The 
commuters won't love you for it, but you could do it.
    Senator Johnson. Taxpayers would like it, though.
    Mr. Steer. Well, yes. And no doubt those adjustments have 
been made. I think Mr. Redeker is saying the prices have been 
going up. I don't have the detail on that.
    But to think that you will get to a stage where those 
commuter rail operations, paying properly for their access to 
the track, are going to be profitable in the way that rail 
freight is profitable in the U.S., I think the evidence is you 
are unlikely to reach that position.
    Senator Johnson. But, again, you are using your kind of 
global perspective, in general, commuter lines, versus a 
specific corridor that, to me, is operating at a very high 
level of capacity.
    Mr. Steer. It is.
    Senator Johnson. And, again, as a business guy, I am going, 
boy, that is something that ought to be profitable.
    Mr. Steer. Yes.
    Senator Johnson. So that is my only point.
    Thank you, Mr. Chairman.
    Senator Cowan. Thank you, Senator Johnson.
    I just have one final question. Actually, it is to Mr. 
Boardman.
    Mr. Boardman, you heard in my opening comments, obviously I 
represent the great Commonwealth of Massachusetts, where South 
Station is located. It is very much near and dear in our 
hearts. And we believe South Station expansion is a vital 
opportunity for economic growth in our region.
    My question to you simply is, do you agree with my 
assessment, sir?
    Mr. Boardman. We not only agree with that, I personally 
have supported that and Amtrak, as a policy, is supporting 
that. We absolutely need more space in South Station.
    Senator Cowan. Well, it seems to me there is no better 
place to leave it, then, gentlemen.
    [Laughter.]
    Senator Cowan. I want to thank the panelists for their 
testimony today. This is an important issue. The information 
you provided to this Committee is important to the future of 
rail in America and Amtrak and the expansion of the Northeast 
Corridor and will help us make better decisions going forward. 
And I look forward, I know I speak on behalf of Chairman 
Rockefeller, to working with the Committee and many of you to 
sort of move us in that direction.
    The record will remain open for 2 weeks, and this hearing 
is otherwise adjourned. Thank you.
    [Whereupon, at 4:04 p.m., the hearing was adjourned.]
                            A P P E N D I X

            Prepared Statement of Hon. Frank R. Lautenberg, 
                      U.S. Senator from New Jersey
    Mr. Chairman,

    Our nation has a proud history of prioritizing investments in 
transportation. Great public-works projects--from the Transcontinental 
Railroad to the Interstate Highway System--have expanded our horizons, 
brought this country together, and helped make us a global economic 
power.
    Some will say now isn't the time to make public investments. Some 
will say we can't afford it. But some of America's greatest 
infrastructure investments were made during economic downturns. And 
just as we had to make these previous investments to adapt to a 
changing country and world, new demands on our transportation system 
mean that we must invest in new ways to connect people and get them 
where they're going faster.
    Over the past 40 years, our population has grown by more than 100 
million, straining the infrastructure we depend on every day. Sufficed 
to say, the next 100 million will come much faster--so we must begin to 
prepare today.
    Nowhere is this need more clear than in the Northeast, where the 
cities along the Northeast Corridor have a huge impact on the economic 
health of the whole country. While the area only takes up two percent 
of the Nation's land, we produce more than 20 percent of our nation's 
GDP.
    The investments we need must go beyond filling potholes or fixing 
broken traffic lights. Simply building more highways in this highly 
congested region is not the answer either. Our economic success depends 
on improving our passenger rail system and bringing faster trains to 
the region. Passenger rail service on the Northeast Corridor helps 
businesses thrive, connects our economic centers, and helps clear the 
air by getting thousands of cars off our congested highways.
    The Northeast Corridor plays a critical role in the region's 
transportation network. Rail is the preferred method of travel between 
New York and Washington, D.C. with rail making up 77 percent of the 
air-rail market. Without Amtrak service, thousands more people would be 
clogging our nation's highways and airspace every day. And demand 
continues to grow as ridership on the Corridor climbs. In 2012, more 
than 11 million passengers used the Corridor, a nearly five percent 
increase over the year before.
    However, despite its success, the Northeast Corridor is operating 
at capacity in many places on the Corridor and constantly battling to 
repair aging infrastructure. In my state of New Jersey, we face 
problems with this aging rail infrastructure every day. Amtrak and New 
Jersey Transit trains that travel on the Northeast Corridor frequently 
face capacity and infrastructure failures traveling through the Hudson 
River tunnel or over the Portal Bridge, both of which are more than 100 
years old. Aging electrical infrastructure also causes frequent shut 
downs that disrupt service and create delays for riders. When a single 
disruption occurs, it can create a ripple effect throughout the entire 
system--a delay of just 15 minutes can affect as many as 15 Amtrak and 
New Jersey Transit trains.
    That's why I have been working with Amtrak to advance the Gateway 
Tunnel project, which will build a new tunnel under the Hudson River 
and replace the Portal Bridge--adding much needed capacity, improving 
aging infrastructure, and allowing for higher speed rail service. 
Running underneath the Hudson River, it will ease congestion, shorten 
travel times for commuters, and create good jobs for working families.
    The Gateway Tunnel will also provide a critical transportation 
option in the case of a future disaster. Superstorm Sandy, which hit 
the East Coast last year, was a wake up call to the national and 
regional significance of the Corridor. When flood waters inundated the 
Hudson River rail tunnel and electrical systems, the Northeast Corridor 
was shut down and service was limited for more than a month. As a 
result, thousands of New Jerseyans had long, arduous commutes. 
Importantly, the Gateway Tunnel will ensure that the Corridor is 
protected from flooding and provide an alternate route when disasters 
strike.
    The message could not be simpler: investments in these critical 
infrastructure projects are urgent and vital to our country's future. 
We cannot continue to underfund Amtrak and turn a blind eye to the 
needs of one of our Nation's greatest assets. We must provide Amtrak 
the dedicated funding they need to bring the Corridor into a state of 
good repair, increase capacity, and add higher speed rail service.
    Making these investments won't be easy or cheap. Everyone must play 
a part, including the Federal government. But we must remember that 
these are investments in our people and our future prosperity. They are 
well worth it.
    Take it from me. When I was building my business, I learned 
firsthand--if you want to be successful tomorrow, you must begin laying 
the foundation today. And the same principal applies here. If we want 
our children and grandchildren to enjoy a better, stronger, and more 
dynamic country, we must make smart investments on their behalf--and 
that means investing in Amtrak and the Northeast Corridor.
    This year, I will be working on a bill to reauthorize Amtrak and 
improve our passenger rail systems. One key area will be ensuring the 
success of Amtrak's Northeast Corridor and providing the tools they 
need to bring our infrastructure into the 21st Century.
    I thank the Chairman for calling this hearing to launch our 
discussion on the next passenger rail bill and I thank our witnesses 
for coming to speak on the future of the Northeast Corridor.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                         to Joseph H. Boardman
    Question 1. Many stakeholder groups are affected by the NEC. Recent 
rail legislation, PRIIA, set up a new organization--the Northeast 
Corridor Commission--to bring many of these stakeholders together. The 
law requires that the Commission advise on NEC's future needs and work 
with the stakeholders to set up fees that passenger and commuter trains 
must pay to access the NEC. The Commission plans to establish the ways 
fees should be set up by the end of 2013. Once the Commission develops 
the approach to setting up fees, it is unclear how the fees will be 
implemented and administered. Also, members of the Commission may be 
more interested in the NEC's projects, now they are financially 
contributing to these projects. Who should be responsible for 
implementing and administering the cost-allocation methodology; and how 
would that work?
    Answer. The Commission has not made any decisions on these points, 
as it is first focused on development of the cost allocation 
methodology and will soon turn to implementation questions. However, 
paragraph (c)(2) of Section 212 of PRIIA clearly answers some aspects 
of this question by requiring that the methodology developed by the 
Commission be implemented through the access agreements between Amtrak 
and the NEC commuter agencies, with the Surface Transportation Board 
providing enforcement authority if the parties fail to implement such 
updated agreements. We anticipate that the Commission will monitor 
implementation progress, provide a forum to raise and address 
implementation issues, and continue to serve as the decisional body 
responsible for any prospective changes to methodology over time after 
its initial adoption.
    Once the new methodology has been developed, existing access 
agreements between Amtrak and the commuter agencies will need to be 
amended to incorporate the new methodology. As the one entity that is 
party to every agreement that will be required to be amended, Amtrak 
faces a unique challenge in meeting this responsibility.
    Business processes and systems will need to be modified to support 
the new methodology. This responsibility will mostly fall to the major 
infrastructure owners, including Amtrak, Metro-North Railroad, 
Connecticut Department of Transportation, and Massachusetts Bay 
Transportation Authority.
    As for the general administration of the new methodology, we 
anticipate that the Commission will retain this role. As the new 
methodology is implemented, periodic reviews, updates and refinements 
will likely be warranted. While the allocation of costs consistent with 
the methodology will be handled by each infrastructure owner, cost data 
and operating statistics must be consistent and transparent.

    Question 2. What role should states play in NEC decision making, 
now that they are financially contributing to it?
    Answer. Section 212 of PRIIA, which required the formation of the 
NEC Commission, does not assume that states themselves will be funding 
the Northeast Corridor. Rather, PRIIA requires development of a 
methodology in which users of the corridor, including Amtrak and 
commuter agencies, pay a ``proportional'' share for use of the corridor 
(most agencies are state entities, but not all--for example, Virginia 
Railway Express and SEPTA). It is also important to note that commuter 
agencies have been financially contributing to the Northeast Corridor 
for as long as they have operated on it. What will change once the new 
cost allocation methodology is implemented is that all users will 
contribute based on a uniform ``fully allocated'' methodology for both 
operating and capital costs.
    That said, we expect that commuter agencies, freight railroads, and 
Amtrak all stand to benefit from more collaboration in the decision 
making affecting the NEC network. The need for a more collaborative 
effort has become more crucial as demand for intercity, freight and 
commuter rail services has grown and is now outstripping available 
capacity on the NEC in many segments. To make the most efficient use of 
existing infrastructure and to prioritize investment in new capacity 
projects requires region-wide, all-services, approach. The Commission 
has already begun to help facilitate this regional approach through the 
development of the Critical Infrastructure Needs report, submitted to 
Congress in January 2013. As stated in the report, ``the expectation is 
that by coming together to take collective responsibility for the NEC, 
these disparate stakeholders will achieve a level of success that far 
exceeds the potential reach of any individual organization.'' The 
Commission is currently supporting this effort by helping to coordinate 
data gathering in support of NEC-wide 5-year capital programs developed 
by the infrastructure owners and users that, when taken together, will 
create the first prioritized, near-term comprehensive investment 
program for the whole NEC.

    Question 3. The Railroad Rehabilitation and Improvement Financing 
program (RRIF) has provided loans and loan guarantees to help finance 
railroad infrastructure including passenger and freight rail. Amtrak 
has used RRIF to replace aging rolling stock and increase capacity. 
However, loans have been sporadic and roughly $33 billion of loan 
authority still exists. The Administration has suggested a National 
Infrastructure Bank for a broad range of infrastructure projects 
including transportation. In addition, it has suggested establishing 
bonds similar to the Recovery Act's Build America Bonds. How could RRIF 
program loan and loan guarantees be more helpful in supporting 
infrastructure investment in the NEC?
    Answer. As a RRIF program participant, Amtrak believes there are a 
number of targeted improvements that could be made to improve the 
applicability and attractiveness of the RRIF program for intercity rail 
projects and will be happy to provide such suggestions to the 
Committee. Amtrak may apply again in the future for RRIF loans to 
purchase new equipment or make investments in new infrastructure 
capacity that would generate new revenue, assuming RRIF's terms are 
advantageous compared to other forms of available financing.
    Central to any financing strategy for NEC improvements is the 
identification of repayment streams to service outstanding debt. Under 
the current circumstances where the net contributions from Amtrak NEC 
train operations are utilized to cover other Amtrak business line costs 
and access fees paid by other NEC users primarily only cover marginal 
operating costs and minimal capital contributions, it would be 
difficult to utilize the RRIF program or other financing tools to 
finance the backlog of state-of-good-repair and normalized replacement 
needs on the NEC unless federal, state or local grants could be 
provided to cover debt repayment, as was done with Amtrak's initial 
RRIF loan in 2002. If such Amtrak train operations contributions were 
made available for this purpose or if, under Section 212, anticipated 
commuter access fees increase, then such financing methods may become 
potential options.
    Additionally, in applying for a RRIF loan Amtrak has an unusual 
problem. When determining Amtrak's risk of repayment and associated 
credit risk premium, the Administration has in the past maintained that 
it cannot consider the enactment of future legislation, including 
appropriations bills. Therefore, Amtrak's risk is dealt with in the 
context of an insolvent corporation, despite its 40-plus year history 
of Federal support. In order for Amtrak to take full advantage of the 
RRIF program, a more realistic way to appraise the risk that it will 
repay a loan--perhaps in line with the way a private lender would price 
Amtrak's risk and view its ability to repay loan--is necessary.
    Amtrak generally supports the development of new infrastructure 
financing options, including an infrastructure bank aligned with USDOT, 
Build America Bonds, or other tax policy changes that incent investment 
in long-term infrastructure projects. Most critical for the future of 
the NEC are financing mechanisms that can help the timing challenge 
associated with the significant differential between early capital 
outlays and eventual increased financial returns, either though ticket 
revenues in Amtrak's case or access fees in the case of commuter and 
freight railroads. Because the NEC is at or near capacity and many of 
the major structures are at or past the end of their useful lives, 
major capital outlays must be undertaken before new capacity can be 
created and generate increased revenues that could help support such 
capital outlays.

    Question 4. Would a broader infrastructure bank be more helpful in 
attracting private investment to the NEC than RRIF, and why?
    Answer. A broader infrastructure bank that considers projects that 
integrate elements across sectors such as transportation, economic and 
community development and utilities and public works could be of use to 
Amtrak for many projects at key stations that involve many other 
sectors and have wide benefits beyond transportation.
    Some versions of the infrastructure bank that have been proposed 
include both grants and loans. An infrastructure bank that provides 
grants in addition to loans would be a welcome funding source for 
portions of the significant capital needs on the Northeast Corridor.
    An infrastructure bank that provides low interest or subsidized 
loans directly to private partners could provide attractive financing 
for capital projects and open up new opportunities for PPPs. However, 
as with all debt, these would need to be projects that have the 
potential to generate increased revenues to Amtrak that could be 
channeled back to repay debt costs, or would need to be backed by new 
and increased Federal funding streams.

    Question 5. Identifying funding for addressing the maintenance 
backlog and making capacity improvements on the NEC would benefit 
intercity, regional and commuter passengers and freight movements. 
However, making the level of investment laid out in many planning 
documents is difficult given the current fiscal situation in the U.S. 
Please explain in detail examples of private investment that might be 
applicable along the NEC in the U.S.
    Answer. Despite the difficult fiscal situation in the U.S., Amtrak 
believes that the Federal Government must be a significant partner in 
funding the NEC maintenance backlog if this work is to get done. The 
financial need to fix the backlog is simply too great to be borne by 
the users or private sector alone. However, there are several models of 
private investment that could be applied in the NEC and which may play 
a role in a funding and financing package to augment Federal funding of 
the existing infrastructure and to support the building of new 
capacity. Amtrak researched the role of private financing in its 2010 
report, A Vision for High-Speed Rail in the Northeast Corridor and 
found that private capital financing could play a role in this program, 
but that the best opportunities for such investment come once systems 
are built and running, have demonstrated market appeal, and are 
generating sufficient revenue streams to attract the private sector.
    Experience around the world, as the Committee has heard from other 
witnesses, has demonstrated that private investment in high speed rail 
and rail infrastructure generally only occurs after significant 
majority investment by the public sector, such as a national or state 
government, is made and that the private sector investment usually only 
accounts for a small share of total project costs. The use of PPPs 
throughout passenger rail is not widespread, and is usually focused on 
new, high-speed rail projects. For example, France, a leader in high-
speed rail for more than 30 years only recently completed into its 
first major PPP, to build a rail tunnel under Pyrenees Mountains 
between France and Spain.
    In the near term, the most likely private sector participation 
model in the NEC is through public-private project delivery models, 
such as design-build, and partial financing and/or equity for high-
return, capacity increasing projects.

    Question 6. What resources, legal basis, etc. need to be in place 
to take advantage of private capital funding?
    Answer. As discussed above, a major hurdle to Amtrak entering into 
any version of PPPs is revenue stream risk. Under an availability 
payment model of PPPs, unless Amtrak has a more dependable source of 
revenue to repay loans, such as segregated NEC revenues, private 
financing will come at a premium, making this source of financing more 
expensive to secure. This could potentially be overcome with Federal 
backing that secures private loans, which would make private financing 
more attractive.
    Even if Federal backing negates the effects of revenue risk, 
private financing may be more expensive than public financing because 
of the premium that a private sector partner would place on any of the 
risks it assumes through the transaction, such as construction risk, 
and the relatively quicker returns the private partners typically 
expect with their investments. It is important for Amtrak to weigh 
whether the cost of private financing in this case outweighs the 
potential benefits (i.e., sharing risk, leveraging public funding, and 
outside expertise).
    U.S. Department of Transportation/Federal Railroad Administration 
approval is likely to be required for any PPP, especially one that 
includes the transferring of an Amtrak asset, new or existing, to a 
private entity for ownership or management or the taking of new debt.

    Question 7. The nation's passenger rail infrastructure is not 
currently in a ``state of good repair''. If the Nation invests in the 
NEC infrastructure to bring it in a state of good repair and move it 
into the 21st century, ensuring its continued maintenance and upkeep is 
expected to be an important protection for private sector investment. 
Once the NEC is in or near a state of good repair, what steps will be 
taken to help ensure it is maintained and that infrastructure, such as 
bridges, is replaced by the end of their useful lives?
    Answer. The main impediment to bringing and maintaining the NEC to 
a state of good repair (SOGR) is the lack of reliable capital funding. 
The Northeast Corridor Master Plan (2010) estimated that the NEC has a 
total SOGR backlog of $8.8 billion, which included $5.2 billion on the 
363 miles of the NEC Main Line and branches owned by Amtrak, $3.2 
billion on the CT-owned portion of the 56-mile NEC Main/New Haven Line, 
$100 million on the NY-owned portion of the NEC Main/New Haven Line, 
and $240 million on the NY-owned Albany Line. It is important to note 
that a significant issue to be addressed through the NEC Commission's 
current cost allocation efforts is what role current NEC users have in 
funding a portion of this backlog (largely inherited from the Penn 
Central era and bankruptcy), as a use-based allocation of backlog costs 
to users would far exceed the financial capacity of operators, agencies 
and states.
    Once the backlog is taken care of, the corridor still requires 
normalized replacement, i.e., regularly scheduled maintenance (such as 
switch and rail replacement, bridge repainting, etc) of aging 
infrastructure assets to replace worn out and broken components or 
systems which are functionally obsolete. The projected cost of 
normalized maintenance, from 2010 to 2030, is $9 billion, or $450 
million per year. This is the cost of recapitalizing the existing 
corridor to keep it in a state of good repair and does not consider the 
addition of any new capacity. Amtrak believes that the users of NEC 
should generally be expected to cover this normalized replacement cost, 
once the NEC is brought up to a state of good repair.

    Question 8. PRIIA required FRA and Amtrak in consultation with the 
Surface Transportation Board, rail carriers over whose rail lines 
Amtrak trains operate, States, Amtrak employees, and other groups 
develop new or improve existing metrics and minimum standards for 
measuring the performance and service quality of intercity passenger 
train operations. What performance measures have been developed and how 
has the NEC done against these new or revised performance and service 
quality standards?
    Answer. Under Section 207 of PRIIA, metrics and standards were 
issued for various performance aspects of intercity passenger rail 
service, including for services on the NEC. The metrics and standards 
generally fall under 5 broad categories: Financial; On-Time 
Performance; Train Delays; Other Service Quality; and Public Benefits. 
See Docket No. FRA-2009-0016 for a listing of all the metrics and 
standards that were issued, including those that apply to the NEC.
    The FRA publishes quarterly reports that measure performance 
against the metrics and standards. The latest report, published in June 
2013, covers performance for the second quarter of Fiscal Year 2013 and 
provides an indication of how NEC services performed against the 
standards. To briefly summarize, the Acela Express and Northeast 
Regional services both met the financial performance standard of 
achieving ``continuous year-over-year improvement on a moving eight 
quarter average basis'' for the ``Percent of Fully Allocated Operating 
Costs Covered by Passenger-Related Revenue'' and ``Passenger Miles Per 
Train-Mile'' metrics. Northeast Regional service out-performed each On-
Time Performance standard for the second quarter of FY 2013 (Change in 
Effective Speed, Endpoint OTP, All-Stations OTP). Acela Express out-
performed the All-Stations OTP standard, and is essentially at standard 
(-0.1 percent deviation) for Change in Effective Speed and Endpoint 
OTP. NEC services (Acela Express, Northeast Regional and Keystone 
Services) met the Delay Standard while operating on Amtrak NEC 
territory. NEC services that operate over non-Amtrak Host Railroad 
territory generally met the standard for Off-NEC Host-Responsible 
Delays, with the exception the Richmond/Newport News/Norfolk Northeast 
Regional service on CSX railroad while Amtrak Responsible Delays for 
NEC services that operate over non-Amtrak Host Railroad territory out-
performed the standard for Acela Express, but under-performed against 
the standard for some Northeast Regional services. The ``Overall 
Service'' Customer Service Indicator scores out-performed the standard 
for Northeast Regional but underperformed against the standard for 
Acela Express. The report also contains metrics for service 
interruptions caused by equipment-related problems and various 
passenger complaints, though no standards were issued for these 
performance metrics.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                           Joseph H. Boardman
    Question 1. Amtrak is in the process of building the Gateway 
Tunnel, a new rail tunnel under the Hudson River. Once completed, the 
project will increase capacity for Amtrak and New Jersey Transit 
trains, as well as provide necessary resiliency against future extreme 
weather events. If we don't address much-needed capacity projects on 
the Northeast Corridor like the Gateway Tunnel, what will be the impact 
on service, ridership, and revenues?
    Answer. The obsolete condition of aged and insufficient 
infrastructure assets in the territory between Newark, NJ and New York 
Penn Station will continue to threaten the reliability of service on 
the entire Northeast Corridor, inconveniencing daily commuters and 
intercity travelers, and restricting existing ridership and revenues. 
Furthermore, there is no practical means of meaningfully expanding 
intercity or commuter rail service to New York until these assets can 
be replaced with the Gateway Program.
    Currently, the greatest bottleneck in the Northeast Corridor is 
between Newark, NJ and New York Penn Station, where only two tracks 
serve 450 trains per day. These 450 trains, serving Amtrak and NJ 
Transit customers, must travel over the Portal Bridge over the 
Hackensack River, a 100-year-old movable swing-span bridge, which opens 
and shuts to accommodate maritime traffic and occasionally gets stuck 
in the open position, causing cascading delays along the NEC. The 
replacement of the Portal Bridge with two new, 52-foot high, fixed-span 
bridges is part of the Gateway Program. Design and NEPA are complete 
for the first replacement bridge--Portal Bridge North--and it is 
estimated to cost $900 million.
    The 450 trains per day in the Newark to NYC territory must also 
pass through Hudson River Tunnels, completed in 1910, which were 
flooded with seawater during Superstorm Sandy, shutting down the NEC 
for three days and leaving longer-term damage to the system. These cast 
iron, early twentieth century tunnels require frequent and expensive 
maintenance that is performed on the weekends. The infrastructure 
programs cannot be performed efficiently without reducing the Northeast 
Corridor to one-track service through Manhattan and restricting 
combined intercity and commuter service to just six trains per hour all 
weekend. This condition will continue permanently until two new tunnels 
can be built with the Gateway Program, providing added capacity, 
redundancy, reliability and flood resilience, and allowing the existing 
tunnels to be taken out of service for an extended period of time to be 
rebuilt.

    Question 2. The Northeast Corridor Commission included portions of 
the Gateway Tunnel in its report Critical Infrastructure Needs on the 
Northeast Corridor. How will the Gateway Tunnel project help bring the 
Northeast Corridor into a state of good repair?
    Answer. The Gateway Program encompasses both replacement of 
existing, obsolete assets, such as the Portal Bridge, ``Sawtooth'' 
Bridges, and Hudson River Tunnels, between Newark and New York City and 
new capacity in the form of two additional tracks that will travel over 
new bridges and through new tunnels in the same territory. The 
replacement of Portal Bridge, Sawtooth Bridges, the Hudson River 
Tunnels, and additional track improvements along that territory will 
bring that section of the NEC to a state of good repair. Portal Bridge, 
Sawtooth Bridges, and other track work can be replaced in the near term 
as soon as funding is secured, whereas the reconstruction of the 
existing Hudson River tunnels must wait until new Gateway Tunnels are 
built under the Hudson River to absorb the existing rail traffic before 
the existing tunnels can be taken out of service.

    Question 3. Superstorm Sandy wreaked havoc on New Jersey's 
transportation system and shut down or limited service on the Northeast 
Corridor for more than a month. In what ways will the Gateway Tunnel 
help prevent a similar shutdown from happening in the future?
    Answer. The new Gateway Tunnels will be designed in a way to 
greatly reduce the potential for and the impact of the type of flooding 
experienced during SuperStorm Sandy and future storms. While no asset 
can ever be said to be completely impervious to such risks, Amtrak's 
goal will be to design a tunnel that would resist likely flood levels 
in the future and to ensure that the tunnels could be quickly restored 
to service in the unlikely event that the tunnels would be flooded. 
This includes designing the tunnels with elements such as flood gates, 
greater pumping capacity, higher emergency access shafts, enhanced 
drainage capabilities, and tunnel pump discharge outlets that are 
independent of the municipal sewer systems in New York and New Jersey.

    Question 4. The Gateway Tunnel project will provide additional 
capacity between New Jersey and New York, but it will also impact the 
entire Corridor. How will the project improve service for all states on 
the Northeast Corridor?
    Answer. The Gateway Program, by doubling capacity in the most 
constrained stretch of the Northeast Corridor, will allow for the 
increase in rail services by all the users of the corridor through 
better optimization of all train schedules which are currently 
compromised due to the tunnel restrictions, and roughly double the 
number of trains that can travel between New York and New Jersey every 
weekday.
    The project will remove the restriction on weekend service that 
currently exists because of the outage of one Hudson River tunnel every 
weekend, greatly benefitting visitors from New Jersey and points north 
and south who wish to travel to and from New York on the weekends.
    The Gateway Program is a prerequisite for introducing Next 
Generation high-speed rail service on the Northeast Corridor, which 
will dramatically reduce trip times in the Northeast Corridor, bringing 
cities on the East Coast closer to each other with greater frequencies 
of trains per hour.
    The Gateway Program will be designed in such a way to allow for 
construction of the ``Bergen Loop,'' through Secaucus, NJ, which would 
allow for one-seat NJ Transit service from Bergen and Passaic Counties 
in NJ and Orange and Rockland Counties in NY to New York City.
    The Gateway Program is necessary for any meaningful future 
expansion of services throughout the Northeast Region, such as Metro 
North Service across the Hell Gate Line into New York Penn Station, and 
expansion of services from upstate New York, New England, and points 
south, such as Virginia, Pennsylvania, and North Carolina.

    Question 5. The Northeast Corridor is Amtrak's most popular and 
successful route. Yet, some have suggested that fully privatizing the 
Northeast Corridor is the only way to bring it into a state of good 
repair and advance high-speed rail service in the Northeast. What would 
be the impact on our national passenger rail system if we separated and 
privatized the Northeast Corridor?
    Answer. Privatizing the Northeast Corridor, whatever form that 
might take, does not address the chronic undercapitalization of the 
NEC, which has resulted in an $8.8 billion state of good repair 
backlog, deteriorating service quality, and more frequent delays. A 
private sector partner taking over the NEC in its current form would 
inherit the same investment needs faced by Amtrak, the same need for 
Federal capital subsidies, and the same obligation to make the NEC 
available to the 2,000 daily commuter trains and 60 freight trains that 
share the corridor with Amtrak's intercity services.
    Claims that HSR service on the NEC could be significantly expanded 
at greatly reduced costs and time frames are not based upon a realistic 
understanding of the current needs on the existing corridor, the cost 
of building a new, 427-mile two-track right-of-way along the most 
densely populated and valuable coastline in the United States, or the 
complexity of delivering this project alongside an active railway that 
already moves 2,200 trains per day.

    Question 6. In New Jersey, the Northeast Corridor is a vital 
component of our transportation network, providing access for hundreds 
of thousands of commuters using Amtrak and New Jersey Transit every 
day. What impact would full privatization of the Northeast Corridor 
have on passengers, commuter rail service, and the states along the 
Northeast Corridor?
    Answer. Private sector investors will seek a return on their 
investment. We can assume that if a private sector entity were to take 
over the management of the NEC infrastructure from Amtrak, it would be 
seek to charge increased track access fees to NJ Transit, Conrail, the 
territory's primary freight carrier, and other commuter railroads for 
use of the corridor and for their share of new capacity improvements. 
These access fees could very well be above and beyond those that are 
currently being contemplated through the Section 212 process for cost 
allocation, as the private investor seeks to generate returns rather 
than just cover the fully-allocated capital and operating costs of the 
NEC, as Amtrak is seeking to do under the Section 212 process. These 
increased fees would likely be passed along to the passengers, freight 
customers and/or the states.

    Question 7. Unlike highway and transit funding, intercity passenger 
rail lacks a dedicated multi-year funding source. How does the lack of 
dedicated, multi-year funding impact the ability to plan and budget for 
major capital projects on the Northeast Corridor?
    Answer. It cannot be overstated that the absence of stable, multi-
year funding is one of the greatest structural challenges faced by 
Amtrak and other agencies funding intercity service. Railroad 
infrastructure investments typically require many years to go from 
planning to implementation. Sporadic, uncertain annual funding levels 
forces Amtrak and all other agencies to adopt the most conservative 
construction assumptions to compensate for the absence of steady, 
multi-year funding to permit a logical progression of work. Not only 
does this lead to construction and project delivery inefficiencies for 
all stakeholders, it adds unnecessary costs and labor inefficiencies, 
provides a disincentive for planning and long-term development, 
challenges Amtrak's ability to maintain a culture of continuous 
improvement, creates market uncertainty for suppliers that retards 
growth and innovation, and shackles Amtrak's ability to establish 
partnerships and take full advantage of private sector opportunities. 
Resolving this issue should be considered Amtrak's top priority.

    Question 8. What public benefit would be provided by dedicated 
funding for passenger rail similar to highways and transit funding?
    Answer. Projects would be completed sooner and/or at less cost. 
Outcomes and deliverables would be much more predictable and would 
enable focusing on completing state-of-good-repair projects before they 
become a backlog problem. It would become easier for all agencies, 
Amtrak, and other partners, to commit to contractual project delivery 
dates, since the risk of funding deficiencies would be eliminated or 
greatly reduced.

    Question 9. Many countries have heavily invested in passenger rail 
systems and continue to make substantial public investments to expand 
and maintain their systems. If we fail to invest in our transportation 
infrastructure, what will it mean for our country's economic 
competitiveness?
    Answer. Countries that have invested in passenger rail systems have 
made this choice understanding rail provides efficient, if not the most 
efficient, mobility in an environmentally friendly, energy-saving 
manner. Passenger rail has no equal in linking cities with convenient, 
short journey times for cities up to 400-500 miles apart and for 
connecting major city hubs with radial commuter routes. The result, as 
is demonstrated by the Northeast Corridor, is a broad regional network 
that forms the backbone of the region's economy, for business, 
educational and recreational travel. The Northeast Corridor provides a 
globally competitive edge that makes the region such a powerful 
economic force. Failure to nurture it with new investment will almost 
certainly lead to measurable diminishment of the region's competitive 
attractiveness in favor of other locations across the world.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                          to James P. Redeker
    Question 1. Many stakeholder groups are affected by the NEC. Recent 
rail legislation, PRIIA, set up a new organization--the Northeast 
Corridor Commission--to bring many of these stakeholders together. The 
law requires that the Commission plan for the NEC's future needs and 
work with the stakeholders to set up fees that passenger and commuter 
trains must pay to access the NEC. The Commission plans to establish 
the ways fees should be set up by the end of 2013. Once the Commission 
develops the approach to setting up fees, it is unclear how the fees 
will be implemented and administered. Also, members of the Commission 
may be more interested in the NEC's projects, now they are financially 
contributing to these projects. Who should be responsible for 
implementing and administering the cost-allocation methodology; and how 
would that work?
    Answer. The PRIIA legislation tasks the Northeast Corridor 
Commission (``the Commission'') with bringing the parties together to 
develop an allocation methodology and transmitting a timetable for 
implementation of the methodology to the Surface Transportation Board 
(STB).
    It is our goal that agreement to a cost allocation methodology is 
voluntary in nature and will not require petitioning the STB to make a 
determination. The Commission is developing a policy document of the 
proposed methodology which will serve as the basis for new contractual 
arrangements among the parties. It is the view of the Commission that 
the contractual arrangements must be transparent to all owners, 
operators, and funding partners across the NEC to ensure adherence to 
the adopted methodology and related policy principles. The Commission 
will serve a valuable role in the implementation of the methodology by 
working with the parties in an open and collaborative manner to settle 
any policy disputes to avoid any escalations to litigation.

    Question 2. What role should states play in NEC decision making, 
now that they are financially contributing to it?
    Answer. First, it is important to clarify that the states (in 
varying levels of magnitude) have always financially contributed to 
Northeast Corridor infrastructure and its related facilities although 
this has not been in a uniform manner. For example, in the last 10 
years, Connecticut has invested over $3.2 billion in the New Haven 
Line. Of the $3.2 billion, two-thirds, or over $2 billion has been 
funded by state bond funds, while the remainder is Federal Transit 
Administration rail formula or discretionary funding. In addition, both 
New Jersey and Maryland have joint benefit capital programs with Amtrak 
and other states and agencies partner on an ad hoc basis to make 
capital improvements in addition to the access charges currently paid.
    To address near-term needs, the membership of the Commission should 
collaboratively agree on the capital improvement priorities and 
projects that need to be planned, designed, and constructed over the 
next five years beyond the baseline level of maintenance required to 
maintain existing service levels.
    The Federal Railroad Administration's NEC FUTURE process, which is 
comprised of a programmatic Tier 1 Environmental Impact Statement and a 
Service Development Plan, offers states a considerable opportunity in 
defining the framework for the future investments needed to improve 
passenger rail capacity and service through 2040 and beyond.
    The future of the NEC is dependent on a shared vision for its 
service potential and the development of an implementable capital 
program, the foundation of which that is a multi-year Federal funding 
commitment. This is required to leverage state, local, and private 
sector resources.
    The financial implications of cost allocation and project planning 
and prioritization are tied to the overall governance of the NEC. To 
address these and other key policy topics, the Commission has recently 
established a Governance Committee to make recommendations to help 
enable the NEC to reach its maximum potential.

    Question 3. What benefits, if any, do you see of having states more 
involved in the NEC, both financially and in planning?
    Answer. There are many benefits to a strengthened partnership among 
the owners and operators of the NEC. Shared financial and planning 
responsibilities create opportunities to implement operational 
efficiencies and make strategic investment decisions that lower 
operating costs over the long term for all users.
    A partnership instead of a landlord-tenant relationship also 
recognizes that long-term goals become more achievable when everyone 
feels like an owner and has a direct stake in the success of the NEC.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                            James P. Redeker
    Question 1. If we don't address much-needed capacity projects on 
the Northeast Corridor like the Gateway Tunnel, what will be the impact 
on service, ridership, and revenues?
    Answer. Amtrak's Gateway Program comprises many projects, including 
new tunnels under the Hudson River. Simply put, the biggest impediment 
to increasing service and improving reliability on the NEC is the 
current pair of one-track tunnels connecting NJ to Manhattan. The two 
existing tunnels carry a maximum of 24 trains per hour. During rush 
hour, there is simply no remaining capacity to add trains to meet 
ridership demand.

    Question 2. The Northeast Corridor Commission included portions of 
the Gateway Tunnel in its report Critical Infrastructure Needs on the 
Northeast Corridor. How will the Gateway Tunnel project help bring the 
Northeast Corridor into a state of good repair?
    Answer. The current tunnels were completed in 1910 and due to their 
considerable age, require extensive maintenance and are in need of 
substantial repair. This portion of the NEC faces reliability 
challenges due to the age and intensity of current use. New tunnels and 
the reconstruction of the existing tunnels will be built to 21st 
century standards for structural integrity, operations, fire and life 
safety, and resiliency to flooding and other potential emergencies, 
enabling increased operational reliability. In addition, the tunnels 
will unlock capacity to provide for future expansion all passenger rail 
services throughout the Northeast region.

    Question 3. Superstorm Sandy wreaked havoc on New Jersey's 
transportation system and shut down or limited service on the Northeast 
Corridor for more than a month. In what ways will the Gateway Tunnel 
help prevent a similar shutdown from happening in the future?
    Answer. The current system lacks both redundancy and reserve 
capacity. Even when the tunnels are functioning properly, a lack of 
reserve capacity increases maintenance costs because this important 
work must be done at night and on weekends to avoid service disruptions 
during the day. New tunnels will create system redundancy so that in 
the event a tunnel needed to be taken out of service for maintenance, 
severe weather or other unforeseen event, the service could still run 
smoothly. Further, the new tunnels will be built to provide enhanced 
protection from future storm surges and flooding.
    Question 4. The Gateway Tunnel project will provide additional 
capacity between New Jersey and New York, but it will also impact the 
entire Corridor. How will the project improve service for all states on 
the Northeast Corridor?
    Answer. Growth in the demand for commuter and intercity services in 
the face of aging infrastructure and capacity constraints has caused 
increased system failure rates and higher levels of congestion, which 
negatively impacts the reliability of existing services.
    Mitigating these consequences of the current rail network with new 
tunnels under the Hudson will improve service reliability, enhance 
connectivity, and ensure future generations do not inherit the even 
more expensive consequences of a failure to invest in these projects 
today.

    Question 5. The Northeast Corridor is Amtrak's most popular and 
successful route. Yet, some have suggested that fully privatizing the 
Northeast Corridor is the only way to bring it into a state of good 
repair and advance high-speed rail service in the Northeast. What would 
be the impact on our national passenger rail system if we separated and 
privatized the Northeast Corridor?
    Answer. There are many types of privatization structures and 
without a specific example it is difficult to comment. As Connecticut 
is also an owner of a portion of the Northeast Corridor right-of-way, 
any potential scenarios that only address the Amtrak-owned segments 
ignores the realities of the complex governance issues of the Northeast 
Corridor.
    Privatization is not a cure all for the Corridor. Significant 
Federal investment will first be necessary to help bring the Corridor 
up to a state of good repair before any serious conversations can be 
had on a potential role for the private sector on the Corridor.

    Question 6. In New Jersey, the Northeast Corridor is a vital 
component of our transportation network, providing access for hundreds 
of thousands of commuters using Amtrak and New Jersey Transit every 
day. What impact would full privatization of the Northeast Corridor 
have on passengers, commuter rail service, and the states along the 
Northeast Corridor?
    Answer. It is correct that the NEC is a vital component of the 
region's transportation network and any future discussions on 
privatization would have to ensure that the significant public interest 
at stake would be protected.
    That said, it is difficult to contemplate a private investor 
stepping in to take on the massive financial, construction, and 
liability risks without a far greater Federal financial commitment than 
exists today.

    Question 7. Unlike highway and transit funding, intercity passenger 
rail lacks a dedicated multi-year funding source. How does the lack of 
dedicated, multi-year funding impact the ability to plan and budget for 
major capital projects on the Northeast Corridor?
    Answer. Simply put, it means a lot less efficiency and higher 
costs. When planning major, multi-year projects on an annual basis, it 
is much more difficult to size the workforce appropriately, procure 
goods and materials in a timely manner, and delivery projects on 
schedule, which results in a higher overall price tag. Perhaps the most 
important thing Congress could do to help the Northeast Corridor would 
be to create a dedicated multi-year funding source to help restore the 
NEC to a state of good repair. The gains in efficiency of the 
infrastructure spending on the Corridor would be significant and the 
improvements in system reliability would mean significantly reduced 
risk to the national and regional economies from a major service 
disruption.

    Question 8. What public benefit would be provided by dedicated 
funding for passenger rail similar to highways and transit funding?
    Answer. As noted above, we would see substantial improvements in 
the efficiency of our investments and much greater reliability for 
commuter, intercity, and freight services on the Corridor.

    Question 9. Many countries have heavily invested in passenger rail 
systems and continue to make substantial public investments to expand 
and maintain their systems. If we fail to invest in our transportation 
infrastructure, what will it mean for our country's economic 
competitiveness?
    Answer. Without investment in our transportation infrastructure, 
the country becomes a less attractive to place to invest and less 
competitive internationally.
    Failing infrastructure means that the U.S. becomes a place where 
goods become more expensive to bring to market, mobility is hampered, 
and productivity is lowered due to ever-increasing congestion. On the 
Northeast Corridor, we are relying on investments made a century ago. 
Our aging rail infrastructure is asked to do more and more as demand 
continues to increase for commuter, intercity, and freight traffic. We 
cannot continue to fail to do our part while we rely on investments 
made by previous generations. It is time for us to step up to the plate 
and make the investments necessary to maintain and improve this rail 
corridor that is so critical to our national and regional economy, our 
international competitiveness, and our overall transportation network.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                              to Jim Steer
    Question 1. Identifying funding for addressing the maintenance 
backlog and making capacity improvements on the NEC would benefit 
intercity, regional and commuter passengers and freight movements. 
However, making the level of investment laid out in many planning 
documents is difficult given the current fiscal situation in the U.S. 
Please explain, in detail, examples of private investment that might be 
applicable along the NEC in the U.S.
    Answer. There are many examples of private investment being used to 
finance either upgrading of existing railroad infrastructure or of 
construction of wholly new lines, but their specific applicability to 
the NEC needs careful consideration.
    Great Britain's West Coast Route Modernization (WCRM) was paid for 
by private sector infrastructure manager Railtrack, which borrowed the 
funds on the commercial market against its balance sheet but was paid 
back by the principal operator buying the capacity through increased 
access charges.
    France has developed high speed lines using a public private 
partnership (PPP) in which the design, construction, maintenance and 
financing risk of new infrastructure is transferred to a private sector 
company, which borrows at least part of the finance required on the 
commercial market.
    France and Spain jointly used a PPP approach to procure the 
Perpignan-Figueres high speed line linking the two countries with a 
tunnel under the Pyrenees. The project finance structure enabled 
greater transparency than if each country had been responsible for 
building the line in its own territory.
    Great Britain's High Speed 1 (HS1) line was ultimately delivered by 
the private sector within the planned timescale and budget using public 
money. The infrastructure was then leased as a long term concession 
allowing the government to recoup a proportion of the initial 
construction costs.
    The critical component in this (and other private financing/funding 
models) is the existence of track access fees which provide a largely 
foreseeable income stream to a private sector investor. As required by 
PRIIA Section 212, steps have been taken through the NEC Commission to 
develop a standardized formula that determines and allocates costs, 
revenues and compensation between the NEC infrastructure owners and the 
various rail operating companies, which is necessary to get track 
access fees on a more commercial basis. This is a good start towards 
being able to attract private funding.

    Question 2. To the extent of your knowledge, what resources, legal 
authority, etc. need to be in place to better take advantage of private 
capital funding?
    Answer. Major programs of maintenance, renewals and upgrades cannot 
normally be achieved without some contribution of public funds. This 
does not mean, however, that the private sector cannot be involved in 
the process. Private sector investment can only be expected to be 
attracted if the right conditions exist. First, the investor's exposure 
to risks needs to be limited to those it is able to manage and for 
which it can earn a reasonable reward. Secondly, investor's rights and 
responsibilities, and those of other parties, should be clearly set 
out. These may be either set down in contract or, to provide 
flexibility for changing requirements, subject to review by an 
independent regulator who will, among other things, protect the private 
sector investors from changes or risks that could not be foreseen or 
managed.
    In the case of the NEC, this is likely to mean establishing and 
agreeing a unified approach to the whole corridor, based on clear 
economic and competition principles, establishing what capacity and 
rail services should be provided in the longer term. Then it will be 
possible to define and agree the roles and responsibilities of all 
parties, including the Federal Government, the states, and their 
agencies, including Amtrak, and the private sector. Once this framework 
is agreed it will be possible to identify the specific resources and 
authority needed for each stakeholder and to obtain private capital 
funding. This may be achievable through commercial contract, or may 
require new legislation, for example to establish the powers, 
responsibilities and funding of an independent regulator.
    These arrangements may include structural separation of the 
operation, maintenance, renewal and upgrading of the infrastructure 
from the provision of train services, although this need not be the 
case. Debate in Europe is currently finely balanced between whether 
separation or integration of infrastructure and operations delivers the 
more effective results, and the advantages and disadvantages of each in 
different circumstances.
    Such an approach could then be applied to leverage private 
investment across the corridor and/or in specific parts of the 
corridor, for example, Gateway. A similar approach has typically been 
adopted in Europe for cross-border links where both infrastructure and 
operations will best be planned and managed on a cross-border basis.

    Question 3. Rail in Europe, including rail in the U.K., has been 
through different governance, ownership and funding/financing designs 
over the last number of years. What lessons learned from those 
experiences do you believe the U.S. could apply to the NEC?
    Answer. Europe's many national railroads provide a range of models 
of governance, ownership and funding/financing. A wide range of lessons 
can be drawn from specific projects and in relation to specific 
circumstances, but some general points are worth making:

        A clear approach is needed to managing the competing 
        requirements of long distance and commuter operators, which are 
        likely to change over time. Contractual rights may need to be 
        supported by processes for independent oversight through 
        arbitration or a regulator with duties to strike a reasonable 
        balance between the aspirations of all the parties.

        Even if the private sector provides relatively little equity, 
        it can be incentivized to manage rapid and cost-effective 
        delivery.

        The private sector's commercial focus on the needs of the 
        traveler can be highly effective at growing ridership and 
        revenue, and improving performance and wider aspects of 
        quality.

        In return, any private sector operator will expect reasonable 
        protection from other operators entering, and poaching from, a 
        travel market which has been built largely through its own 
        investment and effort.

        There are limits to the scale of project risk that the private 
        sector can bear. Early consultation with potential investors 
        helps to identify the appetite for risk and the packages of 
        rights and responsibilities, and risks and rewards, which can 
        most effectively be transferred to the private sector.

    Related to this last point, the models which have been tried in 
Europe have developed, in most cases, by first agreeing broad economic 
principles. With principles established, more specific proposals are 
developed, in consultation with relevant stakeholders and potential 
private investors, with the aim of finding the most effective way of 
harnessing their resources to deliver the required outcome.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                               Jim Steer
    Question 1. The Northeast Corridor is Amtrak's most popular and 
successful route. Yet, some have suggested that fully privatizing the 
Northeast Corridor is the only way to bring it into a state of good 
repair and advance high-speed rail service in the Northeast. What would 
be the impact on our national passenger rail system if we separated and 
privatized the Northeast Corridor?
    Answer. Separation and privatization are two distinct actions. 
Separation need have no material impact on the remainder of the 
national passenger rail system, providing the appropriate funding and 
contractual interfaces remained in place. It would of course lead to 
greater transparency on where Federal dollars were being applied.
    Complete privatization of the Northeast Corridor, in theory need 
have no impact on the remainder of the national passenger rail system. 
It is inevitably the case that a fully privatized NEC would require 
Federal or other source grant funding, all the more if the backlog of 
renewals is to be made good to achieve a state of good repair.

    Question 2. In New Jersey, the Northeast Corridor is a vital 
component of our transportation network, providing access for hundreds 
of thousands of commuters using Amtrak and New Jersey Transit every 
day. What impact would full privatization of the Northeast Corridor 
have on passengers, commuter rail service, and the states along the 
Northeast Corridor?
    Answer. Experience in Europe is that privatization of some or all 
of the activities of a railroad corridor can be compatible with the 
rights and interests of different national, federal, regional, local 
and urban governments. However, for this to be achieved, the first 
requirement is a new legislative and regulatory structure with 
appropriate safeguards on minimum levels of services, fares levels, 
retailing obligations, depot access rules, etc. This can then allow the 
reasonable interests of all the stakeholders, and changes to them over 
time, to be accommodated. Incentives can be set through contracts, 
where necessary supported by performance and compensation regimes and/
or subject to oversight by an independent regulator, setting out the 
rights and obligations of each party.
    Depending on their requirements, the states could retain full 
control of local commuter service timetables and stopping patterns, 
station facilities, fares and ticketing arrangements, including 
integration with other local transportation. Passengers could be 
offered guarantees related to any of these aspects of the quality of 
their services.
    However, to avoid complete fossilization of existing timetables, 
and to allow timetables to be changed and improved to mutual advantage, 
it may be necessary to have independent regulation or arbitration of 
competing requests for capacity. In the NEC context, there is no entity 
that has these responsibilities. Privatization would mean at the least 
a major extension of the role and responsibilities of the FRA, or a 
new/different regulatory organization.

    Question 3. You have considerable experience working on high-speed 
rail projects around the world, and you have analyzed Amtrak's plans to 
improve the Northeast Corridor and incorporate private sector support. 
Is full privatization of the Northeast Corridor feasible given the 
current state of the Corridor? If not, what level of private sector 
involvement would be appropriate on the Corridor? And, what are some 
examples of where the private sector could play a role in improving the 
Corridor?
    Answer. We have identified a range of potential approaches to 
private sector involvement in the Northeast corridor. Full 
``privatization''--transferring operations, maintenance, renewal, 
upgrade, financing, ridership and revenue risk--to the private sector 
might be feasible but, even if it were, it would probably not deliver 
the most cost-effective outcome to the Federal Government, the states, 
and the long-distance and commuter travelers. In other words, the cost 
in terms of tax dollars would likely rise.
    This is primarily because the private sector would require a high 
level of reward to accept the risks of asset condition uncertainty and 
the threats to ridership and revenue of modal competition and 
externalities. Furthermore, while the scale of investment needed would 
no doubt benefit from an injection of private sector expertise to 
strengthen the existing resource-base, there is no precedent for 
private sector funding of the levels needed in the NEC to achieve state 
of good repair (say, $40bn), or enhancement to 21st century world 
standards (perhaps a further $100bn).
    Private sector involvement is likely to be more effective if it is 
exposed to smaller or more manageable risks, through mechanisms such 
as:
    Separating the risks associated with delivering an upgrade (which 
starts early) from the risks associated with operating a future service 
(which starts later); and/or
    Independent regulation to limit the exposure of the private sector 
to risks which it cannot foresee or over which it has no control.
    Thus, the private sector could be involved in activities, or 
combinations of activities, such as supplier contracts for 
infrastructure, design, build finance and maintain contracts for 
infrastructure upgrades, asset management, maintenance, fleet 
provision, fleet maintenance and preparation for service, train service 
planning and operations and ridership and revenue risk.

    Question 4. From a business perspective, are Amtrak's plans to 
bring high-speed rail service to the Corridor rational? Are they the 
right entity to handle this service?
    Answer. Amtrak has created a number of business lines with a clear 
management focus, two of which relate to the Northeast Corridor. It 
would have been a failure on Amtrak's part if it had not developed and 
offered proposals for how the corridor can better contribute to the 
Nation's transportation requirements and to the economic growth 
opportunity in the Northeast ``mega-region.'' The proposals are 
rational, setting out a program which embraces both improvements to the 
existing line of route and new build to accommodate high-speed rail. 
The challenge is getting the right blend of these approaches, and 
Amtrak is the only entity which sensibly can make the trade-offs and 
choices in this area and develop a coherent program that meets customer 
needs while improvements are made. It is not, however, the only 
potential operator of intercity and longer distance services in the 
NEC. With increased infrastructure capacity, competitive service 
provision becomes possible, as has happened on Italy's high-speed 
network.

    Question 5. In other countries with successful high-speed rail 
systems, what level of Federal support has been necessary to make the 
system work? Is the United States currently providing the necessary 
level of investment?
    Answer. The experience has been that federal/national commitment is 
needed to fund at least the early building blocks of national rail 
systems. Every nation, having built a first line, has gone on to add 
further routes, and it is at this second stage that private funding 
options become worth considering. New high-speed rail lines are 
distinct assets to which a commercial value can be ascribed and funding 
can be attracted--but not from the outset, when usually the planning, 
political and commissioning risks are too high to attract private 
finance. In each case, a proven concept with a largely predictable (if 
incentivized) payment stream has to be ``visible.''
    This is much harder to achieve in the case of upgrades to existing 
assets where the question of asset condition--there are always 
``legacy'' components to consider--remain and where full separability 
of an income stream is harder to achieve.
    Major programs of maintenance, renewals and upgrades cannot be 
achieved without some contribution of public funds. Government funding 
and guarantees are in recognition of public benefits not captured 
through ridership and revenue, such as reductions in highway and 
airport congestion, improved economic competitiveness, and reduced 
noise and pollution.
    Determining an optimum level of investment in the maintenance, 
renewal and upgrading of the existing transportation infrastructure and 
potential investment in high speed rail, requires a balanced analysis 
of the wider political, social and economic impacts. Underfunding, 
which has been the case in the NEC for several decades, means that 
economic benefits have been foregone. The ultimate level of support, 
however, is dependent on the policy aims of a high speed rail system 
and the subsequent specification. Consideration should be given to 
different investments in high speed rail and their costs compared with 
the considerable economic benefits which they deliver. This type of 
analysis will help to inform policy makers of the optimum level of 
investment in high speed rail.

    Question 6. Unlike highway and transit funding, intercity passenger 
rail lacks a dedicated multi-year funding source. How does the lack of 
dedicated, multi-year funding impact the ability to plan and budget for 
major capital projects on the Northeast Corridor?
    Answer. Much rail infrastructure is long-lived and can be most 
effectively maintained, renewed and upgraded if it benefits from a long 
range planning horizon, giving the ability to program work in the most 
efficient way. Funding uncertainty acts as a constraint to efficient 
implementation, leads to sub-optimal decisions, and can result in 
expensive ``patch and mend'' rather than lowest cost over the long 
term. In practice, a 5-year horizon is the minimum for sensible 
resource planning, but with at least an agreed outline of a longer term 
strategy to set the context for short term investment.
    If Amtrak, or another entity responsible for implementing capital 
projects, were offered multi-year funding it should in return offer a 
clear agreement on what will be delivered in exchange, ideally 
supported by incentives to deliver within time and budget targets. 
European experience provides many examples of how such contracts can 
specify delivery of specific outputs and incentivize performance and 
adherence to an efficient asset management plan which maintains asset 
quality. Mechanisms have been developed to:

        Define output requirements;

        Assess the efficient level of funding required to deliver them;

        Ensure that funding is not diverted into other activities; and/
        or

        Allow flexibility of funding draw-down to allow work to be 
        carried out at the most cost-effective time.

    Question 7. What public benefit would be provided by dedicated 
funding for passenger rail similar to highways and transit funding?
    Answer. Dedicated funding can provide two principal streams of 
benefit:

    Efficiency, as described above, through mechanisms to ensure that 
expenditure generates maximum value, is carried out efficiently, and 
delivers the required output and performance; and
    Certainty, in that once contracted there is a clear understanding 
by all parties of what will be delivered and when and, if appropriate, 
with performance and compensation regimes to penalize and compensate 
for any late or under-delivery.

    Question 8. Many countries have heavily invested in passenger rail 
systems and continue to make substantial public investments to expand 
and maintain their systems. If we fail to invest in our transportation 
infrastructure, what will it mean for our country's economic 
competitiveness?
    Answer. Under-investment, or poorly-targeted or inefficient 
investment, will reduce the effectiveness of the transportation system 
and connectivity, leaving business and other travelers reliant on poor 
and unreliable service across the various transport modes available. 
The effect of this is that productivity and competitiveness are 
adversely affected.
    There is a wide body of evidence that efficient transportation, 
with adequate capacity and service levels, facilitates the benefits of 
agglomeration which feed through to a more competitive economy.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                             John P. Tolman
    Question 1. Amtrak is in the process of building the Gateway 
Tunnel, a new rail tunnel under the Hudson River. Once completed, the 
project will increase capacity for Amtrak and New Jersey Transit 
trains, as well as provide necessary resiliency against future extreme 
weather events. If we don't address much-needed capacity projects on 
the Northeast Corridor like the Gateway Tunnel, what will be the impact 
on service, ridership, and revenues?
    Answer. Without needed capacity expansion, along with bringing the 
Corridor to a state of good repair, service, ridership and revenues 
will be negatively impacted. Amtrak's Gateway Tunnel would run from 
Secaucus to the south side of an expanded New York Penn Station in 
Manhattan and allow 13 more NJ Transit trains during peak hours--for a 
total of 33--and eight additional Amtrak trains, which is just the sort 
of capacity expansion the corridor will need in the future. Even now, 
the capacity expansion is vital with more than 2,000 trains per day and 
major segments at or near capacity on the Corridor. According to 
Amtrak, Northeast Corridor rail ridership is projected to increase by 
over 50 percent by 2040, so this problem will only get worse as 
capacity projects, such as the Gateway Tunnel fail to be addressed.

    Question 2. The Northeast Corridor Commission included portions of 
the Gateway Tunnel in its report Critical Infrastructure Needs on the 
Northeast Corridor. How will the Gateway Tunnel project help bring the 
Northeast Corridor into a state of good repair?
    Answer. Gateway Tunnel is intended to augment tunnels that were 
completed over a century ago. Along with other vital infrastructure, 
they are currently showing their age and require constant maintenance 
and repair.

    Question 3. Superstorm Sandy wreaked havoc on New Jersey's 
transportation system and shut down or limited service on the Northeast 
Corridor for more than a month. In what ways will the Gateway Tunnel 
help prevent a similar shutdown from happening in the future?
    Answer. There are currently only two tracks--one in and one out--
and more capacity is sorely needed. While Superstorm Sandy shined a 
spotlight on the weaknesses of the system, even simple breakdowns of 
trains on these tracks create problems that cascade into delays 
throughout the whole system. Hurricane Sandy emphasized that the 
Gateway Tunnel project is vital because it will provide redundancy and 
system stability.

    Question 4. The Gateway Tunnel project will provide additional 
capacity between New Jersey and New York, but it will also impact the 
entire Corridor. How will the project improve service for all states on 
the Northeast Corridor?
    Answer. Capacity expansion, through the Gateway Tunnel project, 
will have a positive impact on Amtrak, commuter rail agencies and 
people throughout the Corridor region.

    Question 5. The Northeast Corridor is Amtrak's most popular and 
successful route. Yet, some have suggested that fully privatizing the 
Northeast Corridor is the only way to bring it into a state of good 
repair and advance high-speed rail service in the Northeast. What would 
be the impact on our national passenger rail system if we separated and 
privatized the Northeast Corridor?
    Answer. The privatization of the Northeast Corridor would have a 
grave impact on the rest of our nation's passenger rail system and 
railroad workers. Without the corridor, Amtrak would shut down. Amtrak 
makes an operating profit in the Northeast Corridor; that profit 
offsets operating losses on Amtrak's other routes. Amtrak further uses 
those revenues to help finance and maintain its rolling stock, as well 
as more than 500 stations, mechanical and equipment shops, and other 
facilities it owns or operates in 46 states. Unless the Federal 
Government or states are willing to pick up those costs, Amtrak and 
several commuter rail agencies that depend on Amtrak for service would 
be out of business. Long distance service, that is the only rail 
service for 23 states, 223 local communities and over 4.5 million 
passengers, could be cut. Alternative modes of transportation would 
also have to be found by the residents of 106 cities without air 
service. States like California, Maryland, and Connecticut, where 
Amtrak is the contract operator of commuter rail service, would have to 
find a new operator for their service, and to bear the associated costs 
despite already tight budget constraints.
    The privatization of the Northeast Corridor would also impact 
railroad workers. If Amtrak goes bankrupt as a result of the 
privatization, railroad workers--both freight and passenger--would 
suffer dire consequences. Amtrak's workforce makes up 10 percent of the 
Railroad Retirement and Unemployment system. In 2005, the Railroad 
Retirement Board estimated the financial impact of a decline in Amtrak 
employment on the Railroad Retirement and Unemployment Insurance trust 
funds. According to the RRB, a decline in Amtrak employment would 
result in a loss in tax income which would trigger an increase in the 
taxes paid by other railroads (including freight railroads).

    Question 6. In New Jersey, the Northeast Corridor is a vital 
component of our transportation network, providing access for hundreds 
of thousands of commuters using Amtrak and New Jersey Transit every 
day. What impact would full privatization of the Northeast Corridor 
have on passengers, commuter rail service, and the states along the 
Northeast Corridor?
    Answer. As for commuters, agencies such as NJ Transit, may have 
their access fees increased by the new operators, and will then have to 
either have the states increase their budgets or pass the increased 
costs on to riders. Passengers on the Northeast Corridor could find 
themselves without the consistent, reliable service that Amtrak has 
provided. As we have seen in other countries, privatization has caused 
safety and reliability issues when new operators come in.

    Question 7. Unlike highway and transit funding, intercity passenger 
rail lacks a dedicated multi-year funding source. How does the lack of 
dedicated, multi-year funding impact the ability to plan and budget for 
major capital projects on the Northeast Corridor?
    Answer. This is a critical issue. From the stand point of any 
organization, it is important to be able to project funding for long-
term projects. You cannot start a large scale, multi-year project 
without knowing from year to year if you will have the money to 
complete it. Amtrak and the Northeast Corridor are no different. The 
yearly fight for funding makes it difficult to plan major capital 
projects. Just recently, the House Transportation-HUD appropriations 
bill slashed Amtrak's capital and debt budget by a third (29 percent) 
and its operating budget by 19 percent, threatening Amtrak's very 
existence. The bulk of what was cut was from Amtrak's capital and debt 
service request. Amtrak requested $2.065 billion for capital and debt 
assistance. The House bill appropriates $600 million. The funding that 
Amtrak requested was intended to maintain the Northeast Corridor and 
other Amtrak-owned or maintained infrastructure and equipment; advance 
the Gateway Program to expand track, tunnel and station capacity 
between Newark, N.J., and New York Penn Station; acquire new equipment; 
and improve accessibility for passengers with disabilities. Many of 
these projects will be left undone without additional appropriations.

    Question 8. There are several good ideas, including a gas tax, an 
infrastructure bank and a VMT, in order to ensure stable funding. This 
would provide Amtrak with less debt and more stability. What public 
benefit would be provided by dedicated funding for passenger rail 
similar to highways and transit funding?
    Answer. Amtrak has released an interesting statistic. Since 2010, 
for every dollar of Federal investment, Amtrak has placed nearly $3 
back into the economy. Last year, Amtrak covered 88 percent of its 
operating costs through its ticket revenue. This clearly has a 
financial benefit to the public. But more importantly, having a 
dedicated funding source would allow Amtrak to expand services, provide 
better service on current lines and ensure the safety of the travelling 
public even better than they already do.

    Question 9. Many countries have heavily invested in passenger rail 
systems and continue to make substantial public investments to expand 
and maintain their systems. If we fail to invest in our transportation 
infrastructure, what will it mean for our country's economic 
competitiveness?
    Answer. In today's global economy, the need to move people from 
place to place grows ever-more important. There is a mindset with some 
in Congress that we cannot spend the money to upgrade our 
infrastructure, but around the world other countries are identifying 
the importance of doing so and are pouring money into it. Our 
infrastructure isn't going to take care of itself. It is crumbling, 
while our international competitors are building and maintaining 
theirs. China, now one of our biggest global competitors, has the 
world's longest high speed rail network with about 5,800 miles of 
routes in service as of December 2012. They have spent billions over 
the past 20 years to upgrade their infrastructure. In early July, 
Italy's national rail service Trenitalia, unveiled its new very high 
speed train sets, the Frecciarossa 1000, with regular passenger service 
to begin using the trains in early 2015 at speeds of up to 250 miles 
per hour. The Japanese have been operating high speed rail since 1964, 
with trains that now go at speeds of up to 200 miles per hour with 
impeccable safety records. If these countries are doing this, we need 
to be doing it to maintain our competitiveness. It is simply an 
embarrassment for The United States to sit back and watch the world 
innovate in high speed rail while we listen to the pessimists bellow 
that the system is too expensive and will not work.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to 
                           R. Richard Geddes
    Question. Many countries have heavily invested in passenger rail 
systems and continue to make substantial public investments to expand 
and maintain their systems. If we fail to invest in our transportation 
infrastructure, what will it mean for our country's economic 
competitiveness?
    Answer. The competitiveness of the United States economy will 
decline if we fail to invest adequately in the country's transportation 
infrastructure. It is critical, however, to ensure that such 
investments are not haphazard or piecemeal, but instead are targeted 
and are economically justified.
    Investments are economically justified if the value to the 
customers enjoying the services provided by that infrastructure (such 
as to riders in the case of high-speed rail) exceed the overall social 
costs of those transportation infrastructure investments. High-speed 
passenger rail in the United States is likely to be most economical in 
the highly traveled Northeast Corridor (NEC) between Washington, D.C. 
and Boston. In fact, it may be the corridor in the United States that 
best meets the necessary requirements to have self-sustaining HSR. This 
conclusion is based on the following characteristics of the NEC:

   Sufficient population density: There are currently in excess 
        of 50 million people in the corridor, which constitutes less 
        than 2 percent of the U.S. land mass.

   Demonstrated demand as measured by existing intercity auto, 
        bus, air, and rail traffic: Three of the top 25 U.S. intercity 
        air travel city pairs are among NEC cities, 60 percent of the 
        top 25 U.S. intercity air travel pairs include one or more NEC 
        cities, in excess of one-third of all of Amtrak's intercity 
        traffic is among NEC cities, and NEC intercity bus traffic 
        growth has been explosive in recent years.

   Unfettered access to the rights-of-way necessary to enable 
        HSR trains to achieve sufficient speeds between stations.

   Existence of robust local transit systems, which facilitate 
        potential passengers' arrival at or departure from HSR stations 
        along the route: The NEC route encompasses Washington, 
        Baltimore, Philadelphia, New York, and Boston, all of which 
        possess local transit systems that are among the most extensive 
        in the U.S.

    The demographics and demonstrated ridership within the NEC make it 
an appealing route for both public and private investment. HSR makes 
economic sense on such a route since the revenues from rates paid by 
riders, as well as other revenue sources generated by HSR activities, 
are likely to be sufficient to cover the operating costs of providing 
HSR.
    It is thus socially beneficial for investment dollars to flow into 
the highly used NEC. Recent attempts to improve HSR in the United 
States have, however, not focused public resources on critical 
renovations within the NEC, or on leveraging private investment there. 
Private investment in HSR is critical because it helps to ensure that 
scarce infrastructure investment is in fact allocated to those 
activities where the social benefits are the highest.
    There are several additional reasons why it is socially beneficial 
to develop public policies to facilitate additional private investment 
in the NEC. Public-private partnerships (PPPs) are the main vehicle for 
incorporating private investment into the provision and operation of 
infrastructure. It is important to first define PPPs in general. The 
term PPP refers to a contractual relationship between a public-sector 
project sponsor (where the project may include operation and 
maintenance of passenger trains as well as improvements to the 
underlying infrastructure) and a private sector firm or firms 
coordinating to provide a critical public good or service. The PPP 
contract is subject to all of the standard rules of contracting, and it 
is useful to think of a PPP as one application of a broader contracting 
approach.
    Before discussing the benefits of the PPP approach, let me review 
the structure of PPPs, and how they can be adapted to meet differing 
social objectives. A passenger rail PPP, either on the Northeast 
Corridor (NEC) or on lower-density, less economical routes, can be 
structured in different ways depending on the objective of the public 
PPP sponsor.
    Under one approach, the public sponsor may wish to maximize the 
amount of private sector investment available for infrastructure 
renovation, such as upgrading tracks and expanding rights-of-way, which 
reduces the amount of public dollars necessary for that upgrade. 
Alternatively, the public project sponsor may conduct competitive 
bidding for the grant of a concession or lease of operational rights, 
while retaining responsibility for infrastructure.
    In the latter example the public project sponsor would determine 
all the key attributes of the desired service, such as train speed, 
frequency of service, allowable rates, lease length, and other 
contractual details. This proposed contract would also allocate various 
risks between the private partner and the public sponsor, such as the 
risk of cost overruns on system expansions and renovations.
    Although some commentators focus on revenue from rates paid by 
riders, there are additional possible sources of revenue that can be 
used to attract private sector investment, which may make private 
investment in HSR more feasible than first imagined. For example, the 
winning private partner could be granted commercial or residential real 
estate development rights in areas adjacent to stations. Other possible 
revenue sources include naming rights for stations and bulk purchases 
of tickets by corporate entities, among many others.
    The public PPP sponsor may have a goal other than maximizing 
private investment in passenger rail infrastructure. The goal may be 
obtaining the best fare/service quality combination, for example. In 
that case, the sponsor can set the basic parameters of the contract, 
announce the precise criteria on which the winner will be determined, 
and accept bids. The key insight is that the PPP contracting approach 
is flexible enough to accommodate a variety of public sector sponsor 
objectives.
    There are multiple salient benefits of the PPP contracting approach 
including the introduction of competition with all of competition's 
attendant benefits, the shifting of risk from public to private 
entities, and the provision of fresh capital:

        The introduction of competition. One important social benefit 
        of the PPP approach is that it allows for competition to be 
        introduced into HSR service provision. Competition encourages 
        firms to provide quality service at low cost, to be responsive 
        to customer's needs, and to encourage competitors to innovate. 
        The competitive benefits of PPPs can be realized on both NEC 
        and non-NEC routes.

        The articulation and enforcement of clear key performance 
        indicators. An important social benefit of the PPP approach is 
        simply that a contract exists. The contract includes details 
        regarding what actions constitute adequate performance on the 
        contract. The PPP approach thus encourages the public sponsor 
        to reflect upon, and articulate, what specific actions by the 
        private partner constitute excellent, or poor, performance. 
        This will improve service provision. This may include metrics 
        about major issues, such as the reliability and frequency of 
        train travel, but also more detailed considerations such as the 
        cleanliness of cabins, restrooms, and dining cars.

        The provision of fresh capital. One key consideration is that 
        the PPP approach allows fresh capital to be injected into 
        passenger rail in the United States. In many cases, the public 
        sector simply does not possess the necessary resources. 
        Reliance on private capital is thus the only way to complete 
        necessary renovations, upgrades, and maintenance that result in 
        safer, faster, and more efficient service. But it also results 
        in substantial savings, since a project will be completed 
        faster under the PPP contracting approach where the private 
        capital is readily available to get work done quickly.

        The introduction of new technologies and the fostering of 
        innovation. One key advantage of the PPP approach is that the 
        private sector has incentives to develop new technologies, and 
        has the resources to implement them. This results in lower 
        costs and improved service.

        The assumption of risk by private partners. Under the current 
        approach in the United States, taxpayers assume virtually all 
        the risks associated with designing, constructing, operating, 
        and maintaining passenger rail systems. In a PPP, some of those 
        risks can be allocated to the private partner, which reduces 
        risks borne by taxpayers.

    Private participation in the provision of passenger rail service in 
the United States through PPPs should be encouraged. Unfortunately, 
recent attempts to expand funding for HSR in the United States did not 
include appropriate mechanisms to attract and retain private investment 
in rolling stock, stations, or rail infrastructure. It is important 
that future efforts to improve the Nation's HRS system include such 
mechanisms.

                                  
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