United Rail Passenger Alliance

Vol. 2, No. 29 - October 11, 2005

1. A major event has happened in the checkered life of Amtrak that, if successful, will change Amtrak forever for the better. On September 22, 2005, the Amtrak Board of Directors voted to begin an exploration process of creating a separate subsidiary of Amtrak to own and operate the infrastructure and real estate of the Northeast Corridor. This will be a wholly owned and controlled subsidiary of Amtrak, and will have its own president and management structure, and the president will report directly to the Amtrak Board of Directors. The original part of Amtrak - the national system and the NEC trains - will operate as originally intended in the Amtrak charter of nearly 35 years ago; Amtrak will be an operating company that owns passenger rail cars and locomotives, based on the successful century long Pullman Company model.

   This development has been a long time coming, and, thanks to the foresight and business acumen of Amtrak Chairman of the Board David Laney and the other board members, Amtrak will finally be able to be run as it was originally intended, without the millstone of the NEC around its corporate neck. This concept was initially proposed by URPA Vice President and guiding light Andrew Selden in 1986; some things just take a little longer than others to occur. The creation of the subsidiary was opposed by Amtrak President and CEO David Gunn (the third of the Transit Trio of Tom Downs, George Warrington, and Mr. Gunn) and other hired help managers. Mr. Gunn has publicly said from the beginning of his stewardship of Amtrak that he was opposed to any separation or breaking up of Amtrak.

   The process of creating the new subsidiary will be a complicated one. A complete list of assets will have to be drawn up, and decisions made as to what assets will be in the new subsidiary, and what assets will remain with the parent company. The same will be necessary for employee rosters at all levels, the separation of benefits, creating a new name, setting up a new legal structure, what tax matters may be involved, and a number of other fairly technical legal issues, including the creation of a huge stack of legal documents to make all of this happen. Most of the work is being done in-house by Amtrak staff. The target date is to have this substantially completed by early in calendar year 2006.

   None of this will occur until the new legal structure of the subsidiary is formed, the legal issues are completed, and a date is set for the actual transfer.

2. This new development for the NEC is a huge victory for those who believe in fiscal transparency for Amtrak. No longer will Amtrak be able to cascade hidden NEC costs onto the long distance system. No longer will trains in California unwittingly help pay for costs associated with unrelated NEC expenses.

   Now, the NEC infrastructure will have to stand on its own, with a group of customers that will include local and regional transit agencies, Amtrak long distance trains such as the Florida service trains, the Crescent, Cardinal, and the Lake Shore, and NEC operated trains including Wondertrain Acela, Metroliners, and Regional services.

   If Senator Lott’s bill, S. 1516, the Amtrak reauthorization bill that has wide support in many quarters outside of Washington becomes law, there is a provision in that bill that every entity and commuter agency using the NEC has to pay the fair market value for use of the tracks and infrastructure. This same will apply to Amtrak long distance and NEC trains. In other words, for the first time, Amtrak will have to charge against NEC trains the real cost of running train miles on the NEC, not playing “hide the bean” with those expenses as it has done for so many years.

   The financial transparency aspects of this new subsidiary are stunning to consider. Capital costs of maintaining and upgrading the NEC will be readily apparent. Routine maintenance costs will be readily apparent. Likewise, the actual operating costs of NEC trains operating over the infrastructure will now, for the first time, be readily apparent. This should also be a fascinating exercise in determining how many employees are really needed to operate the NEC. Amtrak should be losing huge numbers of employees on all levels to the new subsidiary, reducing headquarters costs dramatically for the parent company.

   Annual requests for subsidies through free federal monies will also be more transparent. Importantly, Amtrak senior managers such as David Gunn will no longer be able to threaten a nationwide shutdown of passenger rail service or Amtrak bankruptcy because the NEC didn’t receive enough capital funds to quench his desires. Amtrak’s subsidy requests of free federal monies for the national system and NEC train operations should shrink, too, because of less overhead.

3. Passengers riding on the NEC should notice very little difference if this new subsidiary is created in 2006. Passengers will ride in the same cars, pulled by the same locomotives with the same Amtrak name and logos on them, with the same employees in the same uniforms manning the trains and stations. The only difference will be the new name and logo on maintenance of way equipment and the hard hats of maintenance of way employees. Everything else will stay the same from a passenger standpoint.

4. Labor unions will be a big beneficiary of this new plan. Both the parent company and the subsidiary will be more clearly defined and funded, and therefore, in a position to grow. A growing company means more jobs and more union workers working under more prosperous conditions. This will be a huge step towards changing the culture of gloom among Amtrak employees that work for long stretches of time wondering if their jobs will exist from year to year. The stability the new subsidiary will bring will be a welcome change for everyone.

5. Because the parent Amtrak company will be exclusively focused on passenger train operations without the distraction of rebuilding bridges and catenary poles on the NEC, everyone will benefit from a company with a clearly defined mission and job to accomplish. With the right management leadership, Amtrak’s true potential as an operations company can be unleashed, and a healthy, robust national system, without the everlasting constraints and worries of NEC infrastructure, can flourish.

6. Politicians along the NEC will benefit from this new subsidiary because they will be able to focus putting aid directly into an entity that directly benefits their state or district. For too long, Amtrak has been thought of politically as the NEC and then the rest of the country. Now, the parent company Amtrak will be thought of as the national endeavor which it is, and the NEC can be the regional darling that is in truth a national nightmare now. From newspaper editorial page editors to passengers to local politicians, the thought process along the NEC has always been, “I’ve got mine, who cares when you get yours?” when it comes to NEC service versus passenger rail service in the rest of the country. At last, Nebraska or Montana or Texas will be considered just as important as Delaware or New Jersey.

7. The only losers in this process are the obtuse socialist worshipers of Amtrak President and CEO David Gunn who unfailingly and falsely believe that for Amtrak to be a true railroad, it must own track and bridges and be a leader in operating high cost and low rate of return corridor operations. This gigantic fallacy is about to be exposed for the world to see how wrong that focus has been for decades, and how Amtrak has been held back at huge taxpayer expense because of the delusions of hired help management and previous rubber stamps boards of directors that believed in the junk science of the late 1940s and 1950s that glamorized corridors.

8. A new white paper, Concepts of the Successful Long Distance Train of the Future, is now available on the URPA web site, http://www.unitedrail.org.