United Rail Passenger Alliance

Vol. 2, No. 21 – August 20, 2005

1. There have been lots of questions this week about S. 1516, the Amtrak reauthorization bill authored by Senator Trent Lott. Here are some of the questions and answers.
   • Will S. 1516 be the silver bullet that will solve all of Amtrak’s financial problems?

     No. Amtrak’s financial problems cannot be solved by legislation. Only the Amtrak Board of Directors can solve the company’s financial problems by making new policy. For now, this will continue to be difficult since the hired management help that runs the company on a daily basis is firmly mired in the transit culture (which is fine if you’re running a transit operation), and will likely fight any major changes in the direction of the company. Accompanying this is Amtrak’s one-note, unwashed socialist planning department, that seems to incredibly and wrongly believe that only transit operations will be the savior of Amtrak.

     Amtrak’s financial results will not – and cannot – change until management and the board of directors change their investment strategy to start putting capital (mostly free federal monies) into applications that have a positive rate of return on invested capital, measured by incremental output (revenue passenger miles, or RPMs) and revenue per dollar of capital invested. The uses to which they put 90+% of their capital now (as for the last 25 years) have had mostly negative rates of return, or at the very best, far lower rates of return, than the applications to which they have put (historically) less than 5% of their available capital.

     Investment must be shifted from the short corridors to the national network NOT because one or the other is “good” or “bad” in any policy or normative sense, but because of the incontestable economic truth that dollars invested into the national network produce a far higher and invariably positive rate of return. Dollars invested in short markets, high density or low density, invariably return very low rates of return and often actually negative rates of return (That is, as in the Northeast Corridor and especially with the Wondertrain Acela project, the total loss has increased and continues to increase, while changes in total output and return on investment have been modest at best.).

   • Whose ox is likely to be gored by S. 1516? Who will raise a rumpus and try to have the bill amended or killed?

     Several prominent oxen are candidates for goring, starting with the private host railroads, which, if this bill becomes law as written, will be financially responsible to Amtrak for the sloppy and tardy operation of passenger trains. One would expect that the Association of American Railroads will lead the charge against this part of the bill.

     Digging a little deeper, though, one discovers that this part of the bill will work two ways. If Amtrak is going to expect near perfect handling of its trains, then Amtrak is also going to have to be a responsible railroad and maintain its equipment in good condition. It’s not likely that the host railroads will continue to tolerate the deplorable number of locomotive breakdowns on main lines because of Amtrak’s shoddy maintenance practices, nor will late departures from originating terminals be looked favorably upon because rolling stock has to have last minute repairs or substitutions, again, because of shoddy maintenance practices. So, this part of the bill could vastly work to the advantage of the host railroads, forcing Amtrak to maintain its equipment in at least as good of shape as the host railroads do.

     The socialist ox is theoretically headed for goring, too, since this bill have a provision for the operation of private passenger trains in place of current Amtrak trains. There is likely to be a high pitch whine, screaming, and great gnashing of teeth of Amtrak apologists and cultists and socialists and their ilk over this part of the bill.

     The theory will be proposed that by allowing even the possibility of private railroads of running passenger trains on par with Amtrak (even though the process for this is long and cumbersome, and labor is fully protected), that the proverbial camel will have his nose under the tent and all hope will be lost for a purely socialist Amtrak that could only be optimally run by government. Considering Amtrak’s past performance, the privatization of some routes can’t happen fast enough for many clear thinking people. There is nothing wrong with competition as part of a healthy economy. Amtrak has been too long without any competition.

     The NEC’s ox is going to be gored, too. S. 1516 sets up requirements for more rigorous accounting of actual operating expenses versus capital expenditures. No longer will Amtrak be able to play “hide the bean” with expenses from the NEC, especially hiding them in the costs of other routes that are far, far away from the NEC.

     One ox that is staying healthy is organized labor. Nothing in S. 1516 is anti-labor, and safeguards for labor are built into the process if routes are privatized. Overall, S. 1516 should act as a catalyst for the growth of Amtrak, which, in turn, will require more union members to operate the trains and run the company.

     As mentioned in the analysis last week, S. 1516 is sponsored by a wide cross section of the senate political spectrum. Senator Lott has also talked in writing about how many individuals, groups, and organizations were consulted during the composition of this bill. Plus, a startling number of organizations and groups have already come out in favor of the bill. Therefore, it must be presumed that some of the caretakers of oxen to be gored by this bill knew in advance what was coming, and perhaps their input in one area will pave the way to approval in other areas.

   • Will Amtrak remain a child of government? Since privatization is included in the bill, will Amtrak become a private company?

     Amtrak will regrettably remain a full ward of the federal government, forever to operate in the shadow of politics and the winds of political fortune. Through the years, Amtrak has conveniently been a private company when it wanted to keep its dirty laundry away from the public washing machine, and then a government agency when it was looking for its annual free federal monies handout. The company flip-flopped more than a losing presidential candidate trying to find votes at the last minute. As a result of this, S. 1516 and some predecessor bills have required Amtrak to have more stringent and transparent financial reporting requirements, and be more under the direct guidance of the United States Secretary of Transportation. Essentially, many in government, in both political parties, have come to the realization that Amtrak could not be trusted with sharp instruments or not to run while holding scissors.

   • Won’t this bill make Amtrak the most heavily regulated railroad in the industry? Why?

     Yes, Amtrak will be more heavily regulated than any commuter railroad or private freight railroad. As mentioned directly above, through the last three decades, Amtrak has been very naughty about honesty and in dealings with its banker and shareholder, the federal government. As a result, S. 1516 adds even more regulation for Amtrak to follow. As long as the present hired management help is in place, these new regulations are going to be needed. Once a responsible new president and CEO arrives at Amtrak, many of these regulations are likely to be a hindrance to quick prosperity. But, such is the price Amtrak is paying for the failed and awry stewardship of the Transit Trio of Tom Downs, George Warrington, and the current Amtrak President and CEO, David Gunn.

   • Does S. 1516 mean what I think it means when it comes to the Northeast Corridor?

     Yes, it does, if you think S. 1516 means that all of Amtrak commuter railroad tenants on the NEC will stop having heavily discounted use of infrastructure provided by Amtrak. The bill requires, over a generous six year period, for all NEC tenants to pay a like amount for use of the NEC. No more favors, no more transit welfare from Amtrak.

     Ever since that dark and stormy day during the Ford Administration, when the decision was made to free the fledgling Conrail of the NEC and push ownership of the corridor onto Amtrak, the commuter agencies have whined and cried that they were unable to pay the full fare for use of the NEC because it would bust their budgets, and force their riders to pay higher fares. So, they have been most happy for Amtrak to go hat in hand begging to Congress each year for subsidy monies so Amtrak could, in turn, provide a subsidy for the commuter railroads. That will end, poste haste, albeit over six years.

     There is no defensible reason for Amtrak passengers in other parts of the country outside of the NEC to suffer poor service and neglect because fat cat NEC commuters want low fares going to and from work. Everybody who uses the NEC will pay for use equitably.

     One interesting note is the freight railroad’s use of the NEC. Amtrak, itself an Academy Award candidate for whining about having no money, pays way under market value for use of tracks and dispatching by host freight railroads. It pays only avoidable costs (the actual cost of running one train, one mile), and not fully allocated costs (which includes avoidable costs, plus all other costs of doing business associated with the avoidable costs). However, Amtrak charges the freight railroads that use the NEC fully allocated costs when traveling on the NEC, citing Amtrak’s lack of funding, and how it has to squeeze every penny out of every customer. And, socialists and Amtrak apologists and cultists and their ilk wonder why the host freight railroads don’t feel they are receiving a fair deal in their relationship with Amtrak?

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.