United Rail Passenger Alliance

Vol. 2, No. 20 – August 11, 2005

1. Its official title, beyond Senate Bill 1516, is the Passenger Rail Investment and Improvement Act of 2005. Some are calling it PRIIA 2005, and others are simply calling it what it really is, which is the Amtrak reauthorization bill. (Link to S.1516 on Thomas at the Library of Congress)

   This bill was originated by Republican Senator Trent Lott of Mississippi, the chairman of the Subcommittee on Surface Transportation and Merchant Marine, and has had five other distinguished senators join including Senate Committee on Commerce, Science and Transportation Chairman Ted Stevens, Republican of Alaska; Senator Conrad Burns, Republican of Montana; Senator John Rockefeller, Democrat of West Virginia; Senator Daniel Inouye, Democrat of Hawaii; Senator Frank Lautenberg, Democrat of New Jersey; and Senator Kay Bailey Hutchison, Republican of Texas.

   What is most interesting about the gaggle of Senators sponsoring this bill is the diversity of the group. Mr. Lott and Mrs. Hutchison as well-known as two “national system or nothing” senators who refuse to support anything less than Amtrak’s original, full mandate. Senator Burns is from a mostly rural state which the Empire Builder traverses, providing common carrier transportation where often none other is offered, and Senator Lautenberg of New Jersey is a die-hard Amtrak Northeast Corridor supporter. Senator Rockefeller represents a state where the Capitol Limited barely clips the outer edges of his state, and the Cardinal, the only train mandated by federal statute to operate, thanks to the senior senator from West Virginia, Robert Byrd, which operates only three times a week. Senator Inouye represents Hawaii, which is about as far away from Amtrak service as a state can be found. It would be a VERY long bridge and tunnel system between California and his state.

   So, this bill represents a powerful consensus in the senate that strongly suggests the opposite of what Amtrak’s hired management seems to want. This bill indicates that a national Amtrak system is here to stay, and must be made more robust and healthy. Corridors are OK, but Amtrak is a national passenger railroad, not a regional railroad serving only a handful of states. This bill also helps set up a reversal of what the Transit Trio of Tom Downs, George Warrington, and current Amtrak President and CEO David Gunn wants Amtrak to become, which is a model for transit agencies.

   One notable part of this bill, which contains lots and lots of opportunities for free federal monies, is that the eventual curtailment of the need for huge annual subsidies can occur over time. Free federal money is defined as any money which is awarded to an agency or company that doesn’t have to be accounted for, repaid, or reduces the amount of ownership in the company. As an example, private corporations, when a need arises to raise capital, have to either sell stock, sell bonds, or borrow money from sources which charge interest and must be repaid. Amtrak does not have this burden. It simply continually receives a constant flow of previously unregulated money from the federal treasury that it spends, and when it is gone, asks for more. This had led to a culture of non-accountability at Amtrak that has not only been ruinous, but has strangled the company’s ability to become robust and healthy. Despite the constant and always irritating whine emanating from socialists and Amtrak apologists and cultists and their ilk, nowhere in the Constitution, our handbook for how our country is governed (excluding the frightening efforts of judicial activist judges), is there a guarantee of passenger rail service. While many of us feel that adequate passenger rail service is an important part of our domestic transportation network, there are more ways to provide this service than at the constant expense of the federal and state treasuries. This bill fixes that problem adequately, with mechanisms for the eventual probability of the return of private passenger rail service. It does not mandate that this will happen, but it does provide the mechanism. This perhaps will be S. 1516’s greatest legacy well into the future.

   There are many little nuggets of hope tucked into this bill, seemingly innocuous, but with big impacts. As an example, “Amtrak To Continue To Provide Non-High-Speed Services – Nothing in this Act is intended to preclude Amtrak from restoring, improving, or developing non-high-speed intercity passenger rail service.” Many will interpret that to mean that Maglev, the Wondertrain Acela, and other fantasies are not the sole hope nor future for Amtrak or passenger rail service in this country.

   A rather startling nugget is the inclusion is the creation of a schedule of penalties by the Surface Transportation Board that will be assessed against the long distance train host freight railroads if the railroads fail to handle Amtrak trains by a minimum set of standards. The penalties will be designed to “fairly reflect the extent to which Amtrak suffers financial loss as a result of host rail carrier delays or failure to achieve minimum standards, and will adequately deter future actions which my reasonably be expected to be likely to result in delays to Amtrak.” Any of these penalties may be forwarded to Amtrak by the board. Wow. Today, when Amtrak trains are poorly handled by host railroads, the railroads simply lose their incentive bonus for good performance. Under this provision, actual penalties may be assessed. This is both dramatic and revolutionary for Amtrak, even though this type of contract may be found in the private sector. While this means the host railroads will have to act responsibly, this also correctly puts a huge burden on Amtrak to maintain its locomotives and rolling stock in such a manner that breakdowns will not occur out on the railroad main lines, nor initial terminal delays will occur because a train has not been properly inspected for dispatching. This provision alone could do more to improve relations between Amtrak and its host railroads than almost any other concept.

   Here’s a third nugget. The bill encourages (but does not mandate) the Amtrak board of directors to develop an incentive pay program for Amtrak employees. This moves the company further away from acting like a government agency, and more like a private business. This also would help attract a better class of employee than some of the people Amtrak employs today. As one former Amtrak manager said 10 years ago, “Amtrak needs the courage to fire the people it never should have hired in the first place.” While there are many, many good Amtrak employees and managers, the ones that should not be there only work to the detriment of the company and passenger rail in general.

   One large item that is not in this bill is most distressing. Nowhere to be found is the splitting of the NEC infrastructure from the operating part of Amtrak, thus creating two separate entities. This is a huge flaw. Most of Amtrak’s funding heartaches over the years have simply been because of the ever growing needs of the NEC, and not necessarily the needs of the operating part of Amtrak. As long as the NEC infrastructure and Amtrak remain one entity, there will be an eternal struggle for dominance in the company, especially if the current hired management team is allowed to stay in place much longer. Amtrak’s primary mission, from the day it was conceived, has been to operate a national passenger rail system, not the NEC and a national system, too, when convenient.

   S. 1516 still has to pass the full senate, and must be passed by the House, too, and then a conference on the bill, if it is passed by both chambers will be held. Therefore, nothing here is a done deal, and nothing is set in concrete. However, considering how this bill is structured, and the reforms that it proposes, it is a strong bill that has a good chance for success.

   Here are some of the highlights of the bill and what they mean for passenger rail in the future for our country.
   

   • S. 1516 sets authorization for Amtrak capital and operating expenses and state capital grants, all separately. The amounts are specified for what goes where, and defines uses for the amounts of free federal monies. This has a real chance of finally bringing some accountability of where and how free federal monies will be spent, without the muddying of waters when Amtrak autocratically in the past has shifted designated monies around like pieces on a chess board.
   • Separate free federal monies are designated for the elimination of Amtrak’s past sins in the form of the enormous debts incurred under the first two of the Transit Trio of Tom Downs and George Warrington. This bill allows current Amtrak President and CEO and third of the Transit Trio, David Gunn, and his successor, to run a company that is not burdened with past debt mistakes that were the fault of his predecessors and the extremely poor stewardship of past Amtrak boards of directors that were unqualified to guide the company.
   • Excess Railroad Retirement payments are also addressed as separate free federal monies. This constant bugaboo for Amtrak each year adds tens of millions of dollars to Amtrak’s subsidy needs without any direct benefit to the company nor passengers. The bad part of this is that the Railroad Retirement amounts paid is subtracted from the operating subsidy grants made. This needs to be a separate amount that does not have anything to do with the operating grant amount. Amtrak for too long has been a convenient conduit for paying bills not accrued by Amtrak (such as the sweetheart deals for the original transit agencies on the NEC), and Amtrak has had to beg Congress for money to pay bills it had nothing to do with. S. 1516 is the opportunity to stop this nonsense, and Railroad Retirement is a good place to start.
   • S. 1516 calls for the establishment of an improved financial reporting system, perhaps one of the most critical sections of this bill. The bill says the Amtrak board of directors “shall implement a modern financial accounting and reporting system that will produce accurate and timely financial information in sufficient detail – (A) to enable Amtrak to assign revenues and expenses appropriately to each of its lines of business activity, including train operations, equipment maintenance, ticketing, and reservations; (B) to aggregate expenses and revenues related to infrastructure and distinguish them from expenses and revenues related to rail operations; (C) to allow the analysis of ticketing and reservation information on a real-time basis; and (D) to provide Amtrak cost accounting data.”

     This may well be the greatest challenge of the bill for the Amtrak Board of Directors to properly implement. The current board is fortunately made up of a majority of members who are highly regarded professionals and well versed in the ins and outs of proper corporate accounting. The board’s hired help, in the form of Amtrak’s socialist-bent management, is well versed in the ins and outs of the obfuscation of corporate accounting as related to non-transparency and the free-wheeling use of capital monies for operating expenses. There is likely to be a giant tug of war between these two factions. There is no question the board’s position should win this tussle, and if Amtrak management tries to continue with its accounting hocus-pocus, that will be more than adequate reason for a immediate change in the hired help management of Amtrak.

   • Here’s the big one: S. 1516 establishes an alternate passenger rail service program that allows today’s Amtrak host railroads to petition the FRA to be considered a passenger rail service provider in lieu of Amtrak over routes the railroad hosts for Amtrak. There is a lengthy and slow process set up, rightfully so, and the provision also provides for the subsidies for the route to be transferred to the new carrier away from Amtrak. A number of other features amenable to the new providers are also provided, to keep them on an equal basis with Amtrak as the operator. The word for this is “privatization,” a word which brings horror, fear, and loathing to Amtrak apologists and cultists and socialists and their ilk. For the rest of the civilized world, this is a move that is long overdue and most welcome. This provides for experimentation. The process is slow and cumbersome. It gives other views and schemes a chance to succeed, beyond just continuing to pour free federal monies into a broken Amtrak. If no other part of this bill passes, just passing this provision will forever provide the opportunity for positive change in passenger railroading in the United States.
   • The Amtrak Board of Directors has been expanded to nine members, including the President of Amtrak and the Secretary of Transportation (or his staff member designee). This seems a political move, especially since there is a provision that no more than four members of the board may be members of the same political party, but good provisions include the requirements of “general business and financial experience, experience of qualifications in transportation, freight and passenger rail transportation, travel, hospitality, cruise line, and passenger air transportation businesses, or representatives of users of passenger rail transportation or State government.” A provision is also noted to attempt to provide balanced representation of the major geographic regions of the country served by Amtrak. In other words, no more stacking the board with NEC denizens.
   • One fascinating but small part of the bill is a $5,000,000 expenditure for grants to Amtrak and states participating in the Next Generation Corridor Train Equipment Pool Committee for the purpose of designing, developing specifications for, and initiating the procurement of an initial order of one or more types of standardized next-generation corridor train equipment and establishing a jointly-owned corporation to manage that equipment. First, this rather loudly bespeaks to the problems of the Wondertrain Acela. Even the Senate apparently has little faith in the future service life of Acela, with no plans to use that equipment anywhere else. Considering that now there are the California Cars on the Left Coast, the Talgo trainsets in Washington State, the Horizon fleet in the Midwest, and Acela and Amfleet on the NEC, perhaps it is time to create a one-size fits all pool of equipment that will provide adequate service into the future. While there will always be high platform/low platform issues for corridor stations, it is possible to develop equipment that is more uniform.
   • Relief for the states that have been paying Amtrak to operate state-supported trains is included in this bill. Under the new provisions, Amtrak will no longer be able to give one state a sweetheart deal, while another state is given the Jesse James treatment. Now, all state contracts will be created under similar criteria, and no state will pay more than another for basic train services, including food service cars. For too long, Amtrak has used the excuse “we need the money” to extract huge, undue and unseemly amounts of money to operate short distance, low amenity trains under state contracts. Now, the states will have equal standing and accountability for their contracts.
   • An independent auditor is directed to establish methodologies for Amtrak route and service planning decisions, including new routes, existing route expansions, and possible elimination of existing routes. Also addressed are concerns for performance, cost recovery, on-time performance and minutes of delay, ridership, onboard services, stations, facilities, equipment, connectivity with other routes, needs of communities for transportation, and the methodologies of other countries which have passenger rail service. There are also provisions for the Federal Railroad Administration and Amtrak, in consultation with the Surface Transportation Board and the host freight railroads to develop new or improve existing standards measuring all of the just listed criteria, bringing the performance of the host freight railroads, on whose tracks Amtrak operates all of its long distance trains, into account. All of this seems to be a reaction to Amtrak’s ambivalence to expanding its system, and the heavy-handed way the current hired help management slices long distance routes without good justification. While this adds layers of bureaucracy to the company for any competent future Amtrak administration to have to deal with, it adds protections for routes and passengers as long as David Gunn remains in daily charge of Amtrak.
   • Similar criteria are established for developing a separate annual performance improvement plan for the long distance system that includes a host of information, such as data on sleeping cars and diners. The end result of this, as the plan is provided to the FRA, is that the FRA will hold Amtrak accountable for routes that are not improved internally by Amtrak, and may withhold free federal monies designated for these routes. This will help the national system to stop being the red headed stepchild of Amtrak, and force management to focus on the huge potential of the national system versus the constant and wrong focus on the socialist corridors and the NEC.
   • On the NEC front, S. 1516 addresses how the NEC capital funds shall be spent in an orderly fashion, and also establishes a Northeast Corridor Infrastructure and Operations Advisory Commission plus a Safety and Security Committee. Membership will include officers from Amtrak, the FRA, and one member from each state that contains part of the NEC. The committee will oversee the future of the NEC, including capital investments, operational improvements for intercity passenger rail, commuter rail and freight rail services, equipment design, marketing of rail services and future capacity requirements. For the first time, there will be a seat at the table for everyone who is a stakeholder in the NEC. This can only lead to positive results, even though the commission is only advisory.

     Here’s the good part of this commission’s charge: the “Commission shall develop a standardized formula for determining and allocating costs, revenues, and compensation of northeast corridor commuter rail passenger transportation that use Amtrak facilities [infrastructure and services] that ensure that there is no cross-subsidization of commuter rail passenger, intercity rail passenger, or freight rail transportation, and each service is assigned the costs incurred only for the benefit of that service, and a proportionate share, based upon factors that reasonably reflect relative use, of costs incurred for the common benefit of more than one service …” So, even though this will take six years to implement (which is very reasonable), this means that everyone on the NEC is on an equal footing; no more favorites, no more special deals because of longevity using the corridor, no more Amtrak having to beg for money that benefits state agencies instead of Amtrak. This is a huge improvement over the current law.

   • Even passenger rail operations like the American Orient Express are addressed in S. 1516. The bill encourages Amtrak to seek and operate more trains on behalf of such companies as the AOE to help reduce the need for free federal monies. This will also be a huge boost for private rail car owners and associations which seek to operate excursion trains and similar functions.
   • Money for state grants, at 80% federal funding follows a long, but rational process. Just about every contingency is accounted for, and the availability of grants going back to projects in 2004 and 2005 is included, hoping to help states that started projects on their own initiative. There is some grumbling among some state folks that going back two years isn’t far enough, such as in California, where the majority of that state’s improvements were made in the late 1990s and before 2004. While this is an admirable thought, the concept of going back further than 2004 needs study and discussion among wise people. Is it more important to repay states for past projects that are either completed or near completion, or provide funds for creating new projects that continue to expand infrastructure and state participation everywhere? Would going back more than two years just be a welfare program for states that already had money to spend? There is no quick answer to this question, and more debate is needed.
   • As part of the state grant process, a public-private partnership is included that wisely may be part of the equation under S. 1516, which gives even wider leverage to the possibility of new projects and upgrades. Included in this section is the ability to fund freight rail capital projects that are on a state rail plan developed under certain guidelines that provide public benefit. This means that yes, the freight railroads have benefit from this bill, too. This also will provide help for short line and regional freight railroads that will eventually host passenger trains, providing more opportunities for the expansion of passenger rail in this country.

2. URPA has updated and upgraded our Internet web site, located at http://www.unitedrail.org. Included in the changes are a section featuring biographies and photos of officers, and also a new section featuring editorial use of materials and a speakers bureau. You are invited to view the changes and updates.