Wednesday, June 15, 2011

The Republican Privatization of the NorthEast Corridor for High-Speed Rail, minus Amtrak

We've been following John Mica's determination to pull the rug out from under Amtrak for some time.  He sees a place for high-speed rail on the Northeast Corridor (NEC), but not operated by Amtrak.  He ignores the fact that Amtrak was identified by the FRA to spearhead any such improved rail corridor developments leading to a multi-state HSR on the NEC.  Now it's become a turf war.

Mica wants to take the NEC away from Amtrak and privatize that corridor.  The Republican claim being that private enterprise can build and operate HSR faster, cheaper and better than the bureaucratized Amtrak organization.  "Them's fightin' words" says John Boardman, CEO of Amtrak, protecting his trains and his salary.

Let's get this straight.  Amtrak, the passenger rail system created out of all the rejected private passenger rail services enthusiastically abandoned by the freight operators which owned them, is a money loser.  

Passenger rail was a money loser for those rail operators that ran the passenger rail system, somewhat like a 'loss-leader.'  Now Congress, having created Amtrak, has to keep it on a huge allowance since it is incapable of earning money on its own. It costs much more to operate than its farebox returns.

It's not enough that Amtrak can't break even except for that one NEC operation of Acela, they want to take on High-Speed Rail, which is tons more expensive to operate and is guaranteed to lose even more money; that is, will require even greater subsidies from Congress, forever. 

So here comes the problem.  The Republicans would like to privatize the entire government.  At least, right now they want to privatize, or re-privatize Amtrak's route on the NEC.  And, Mica definitely wants to privatize the high-speed rail program on the NEC.  As you know, we've been pointing out, over and over, that HSR will require vast and continuous subsidies FROM THE GOVERNMENT!  It's a money loser; not a money maker. It is Republican ideology that the government can't make money; it can only lose it.  

(Excuse me, but I thought that's what governments are supposed to do; collect taxes and spend them to our collective benefit.) It is also Republican ideology that private enterprise can do anything government can do, but better (and profitably).  High-Speed Rail included.  Just a quick look around the world suggests that this is not the case elsewhere.  But, whatever!

In which case, if HSR is a money loser, how does a private investor recoup his investment and make profits on that investment?  Well, that's where the "partnership" part comes in.  Public/Private Partnerships (PPP) is where the government puts up most of the money and then the private investors come along and make money off that capital development and also require continuous subsidies as interest payments during the life of the investment.  

I must have this picture all wrong. 

A.) The Democrats are happy to spend dollars the government doesn't have and must borrow in order to build a vast mega-infrastructure project that will continue to cost the taxpayers operating fees forever.  

B.) The Republicans are happy to have the government put up that same money, but want to call it a public/private partnership with additional private investments which the government must also cover.

So, you're probably asking, where will those profits for private investors come from, after Amtrak relinquishes control over the only break-even segment of their national rail system?  Well, here's a partial answer taken from the draft legislation that will create the Public/Private Partnership that Shuster and Mica are seeking:

(a) IN GENERAL.—Effective upon notification to the Secretary of Transportation that a program participant  has entered into a competitive procurement process under this title, the portion of any Federal subsidy to Amtrak that is attributable, under the methodology described in section 202, to the State-supported route with respect to which the competitive procurement applies shall be transferred to the program participant.

If you read the entire legislation, and you just about have to be an attorney to make sense of it, you will see that the private participants get lots of government financial help to conduct this operation.  

And, each side -- Democrats and Republicans -- says that they can do it better.  

What's the bottom line on this?  Petra Todorovich says it clearly:  "You can’t have a public/private partnership without public money.” 

Frankly, I would rather not have HSR done at all.  Why don't we just try this PPP business without Amtrak as it now is, a regular passenger and commuter rail system, and see whether a PPP is a good idea or not?  This draft legislation fails to take into account just how huge and complex HSR really is. It's not Amtrak-only-faster.  It's entirely different.   One step at a time!

Republicans: Privatizing Amtrak Will Bring High Speed Rail to the NE Faster
By Kate Hinds | June 15, 2011 – 4:53 pm

Republicans said today that privatizing the Northeast Corridor would bring high-speed rail to the country faster — and more cheaply — than Amtrak can.

Congressman John Mica, the chair of the House Committee on Transportation and Infrastructure, has never hidden his disdain for Amtrak — or his enthusiasm for partnering with the private sector.  In a statement today, he said:  “After 40 years of highly-subsidized, poorly-managed Amtrak operations, it’s time for Congress to change the direction of America’s failed high-speed and intercity passenger rail service…After spending billions of dollars, Amtrak and its snail speed, last-century level of service have reached the end of the line.”

The plan, which Mica unveiled today along with Congressman Bill Shuster, is called the  “Competition for Intercity Passenger Rail in America Act.”  The pair introduced it in a video conference.

A draft of the legislation can be found here:

The goal is to separate the Northeast Corridor — Amtrak’s busiest route — from the rest of the system, transfer title from Amtrak to the US Department of Transportation, and put development of high-speed rail along the corridor out for bid. Republicans said this plan would increase ridership, lower costs, and bring fast trains to the corridor in less than ten years.

Amtrak, which had been going on the offensive this week about its high-speed rail plans for the Northeast Corridor, reacted swiftly to Mica’s proposal. Joseph Boardman, Amtrak’s president and CEO, aired his dismay in a  phone conference call held earlier this afternoon.  “There seems to be a lack of recognition that Amtrak is the right organization to deliver better intercity passenger rail service in this country,” he said. 

Boardman said that Amtrak had made headway in reducing debt and improving equipment, and was already looking at a public-private partnership for high-speed rail in the Northeast. “This asset, this transportation artery is critical, and that … is lost in this, because the focus of this particular proposal is about financing and real estate, not transportation first.”

Democrats did not greet the proposal warmly. New Jersey Senator Frank Lautenberg, who sits on the Senate’s transportation committee, said that “the Republican proposal to privatize rail on the Northeast Corridor would increase costs for passengers and make rail travel less reliable. I will fight in the Senate to stop any plan that threatens Amtrak and commuters on the Northeast Corridor.”

Other responses were more measured, if lukewarm. Petra Todorovich, a high-speed rail expert at the Regional Plan Association, said “we don’t think it’s the worst idea in the world.” 

She added that Mica’s proposal was useful in that “he’s starting a conversation about what it would take to implement world-class high speed rail in the Northeast Corridor. This is the first time we’ve had this conversation at the congressional level.” But she added that “I think it’s unlikely that private companies would bid unless federal money is on the table. You can’t have a public/private partnership without public money.”

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