By Andrew Selden, Vice President, URPA October 14, 2005The Amtrak Board’s initiative to reorganize the internal structure of the National Railroad Passenger Corporation - Amtrak’s real name - by separating the NEC infrastructure into a new, separate, subsidiary of NRPC, is a standard corporate technique to focus management resources - both capital and management attention - on core functions and avoid distraction and dissipation of both time and money.
The move will have several effects that are enormously beneficial to the cause of intercity rail service. Among them:
- Transparency of what costs are where, and exactly where the annual federal subsidy grants are being consumed;
- Introduction of a pricing mechanism, that great “invisible hand” of classical economics, to allocate finite track/time capacity in the NEC to its highest and best use, as among local and regional commuter movements, Amtrak conventional trains, Amtrak transient long distance trains, and higher speed express services.
Oddly, NJT local commuter trains probably have the same track/time needs as an Acela Express, but draw far less power and impart much less track damage, so their usage fees may be much less than Acela’s even though both need about the same track/time “window” for each frequency. Two-thirds-empty Acelas may be combined to avoid track fees; and trains like the Crescent may not travel north of Washington, and rely on Acela as a feeder service, for the same reason.
This is all to the good, as it all helps to better match capacity to demand, and introduce economic rationality to Northeast Corridor train operations.
Amtrak will retain adequate control over its fortunes in the Northeast under this plan, because the structure proposed by the Board makes it an actual partner with the US Department of Transportation, and with each state along the Corridor. This will facilitate, not hinder, cooperative use of the NEC by each of the various operators of passenger trains there. It will also facilitate allocation of finite track/time to whatever use is the most valuable to the participants, and place ownership, stewardship, and resource responsibilities in the hands of more people (particularly, the states) who are much more closely accountable to the taxpayers and customers of the NEC. Partners who most desire or most benefit from capital improvements will have the ability to bring them about in an orderly process, without undue subsidization from other users.
The exact form of the reorganized NEC infrastructure company is less important than the concept, but several good models exist on which the new entity can be based. One is the Port Authority of New York and New Jersey, an interstate compact agency of long standing and great success in owning and operating the infrastructure for rail, water, aviation, and roadway systems.
A similar NEC partnership could be formed, with state participation driven by CONEG, the coalition of governors of the several states in the Northeast.
Another model would be the old railroad practice of creating a jointly-owned terminal district railroad, through which each of several competitive carriers would be enabled, for negotiated compensation, to use valuable trackage in congested terminal areas where joint use of infrastructure was unavoidable. This model would treat the NEC as a linear terminal district, where each stakeholder has a voice in governing its use.
Yet another model would be in the structure used in many real estate syndication and development deals, the limited partnership. Under this corporate model, each investor has a limited partnership interest, and a negotiated voice in governance of the entity, which is managed by a general partner operating under the terms of the Limited Partnership Agreement. In this model, Amtrak could serve as the managing general partner of the NEC infrastructure entity, and the economic costs and benefits of ownership of the assets of the enterprise would be shared in accordance with the negotiated terms of the Limited Partnership Agreement.
Agreements between or among states, under the terms of our Constitution, may be made only with the consent of Congress, so any agreement concerning the NEC that involves mutual participation by more than one state will require review and approval by Congress, thus assuring full consent by the elected representatives of all of the people in the United States.
This structure actually only re-creates on a multi-state basis the highly successful existing single-state arrangements used in Florida for Regional Rail service (The South Florida Regional Transportation Authority or “Tri-Rail”) and in California for regional and intercity rail service in the Southern California LOSSAN corridor.
The only real change in the NEC after this change in ownership of the infrastructure is that each stakeholder, including Amtrak, will have a formal voice in NEC investment strategy and usage policies, rather than having all of those decisions centralized as now in an unelected Board that lacks effective accountability to the people it serves. That is surely a major improvement in how intercity, and commuter, rail passenger services are to be provided in the Northeast.