Saturday, June 18, 2011

Washington Politics, Amtrak and High-Speed Rail

The best way to understand what the California High-Speed Rail project will be like (if it is ever built), is to see what is going on with Amtrak today.  It's not a pretty picture.

Where do the passenger rail advocacy organizations stand?

There are numerous organizations representing the interests of passenger rail riders.  Usually they as sponsored and supported by the passenger rail industry which seeks to encourage more passenger rail riders. Most passenger rail providers see themselves in a business; not a public service utility. Clearly, this article, below, from such a passenger rail advocacy organization, is long and detailed, and has a strong anti-Amtrak and anti-government bias. The author and his association are strongly pro-privatization.

There is a certain irony insofar as passenger rail in the US has been government subsidized since the '70s, when Amtrak was created out of the all the money-losing passenger services previously provided by the private rail operators who made lots of money carrying freight, and lost money carrying people.

So, now the passenger rail organizations are delighted to bite the hand of the same government that has fed them for decades. There's gratitude for you!

The basic debate between public and private is usually over-stated.

It's hard to know where one should stand if the debate has to be between private or government operated passenger rail.  One thought is that there really isn't enough passenger rail business to bother with anyhow. (The 28 million annual Amtrak riders are an extremely tiny portion of the total transiting population of the US.)  

Why not improve cars, highways, planes and airways?  Make them far more fuel efficient.  Improve the current transit options, including the use of super-buses on dedicated bus lanes, etc.  All these current transit systems could be greatly improved, and for far less than what HSR will cost to build and operate.

How much better would public mass transit be if every infrastructure system now eroding, decaying, crumbling and otherwise falling apart were to be repaired and brought up to date?  We don't know because we are not asking.   

As we are told repeatedly, there are very few "corridors" for passenger rail that make cost-benefit sense due to massive population density, the Northeast Corridor being one of those few.  The LA to San Diego route is another such.

But, it is not an either/or question about passenger rail operation, between the government, as in Amtrak
on the one hand, and private operators on the other.

There is a spectrum, a continuity, with ample overlap of both.  It must be said here and now that regardless of which entity or combination thereof actually operates these trains, they can do it poorly, as it appears to be with Amtrak, or it can be done well, although no passenger rail example in the US comes to mind. 

Whether private or public, with subsidies or without, train operation quality -- or shall we say, positive performance outcomes and cost-benefit ratios -- are not dependent on which form of operation, public, private or in-between, but on the effectiveness of parsimonious management.  

In short, government or private, passenger rail can be done badly or well.

The complexities of public/private partnerships. 

The government sustains, oversees and holds accountable (or should) many social public utility operations, such as water, gas, sewage and electricity, provided by sole-source private organizations.  Some are well managed and give good value to their customers; others aren't. I don't see why passenger rail should be any different. 

Unless, of course, it is structurally impossible to operate ANY rail system for passengers without subsidies, regardless of circumstances.  In which case, a host of other questions need to be asked.  Who actually benefits from such tax based support? Everyone? Only a few?  Where does the mission of "the greatest good for the greatest number" come in? In my mind, HSR fails totally on that score.

With high-speed rail, does it even matter if it's public, private or in-between?

Obama states that high-speed rail will be proximate and available to 80% of the US population in several decades.  Is HSR therefore a justified?  What if only 3% of that population can afford to ride those trains? What if, even with the most expensive train tickets one could possibly buy, each seat requires several hundred dollars of additional subsidy for each trip? Who, then, are the beneficiaries?

My point here is to open discussions about issues which are now discussed only in superficial, unsubstantiated and ideological terms; such as private being better than government for operating Amtrak. The fact is that private is incapable of operating a passenger service without the government's constant assistance.  And, if the government does it badly, why is that and why can't that be corrected?

So, this article from the United Rail Passenger Alliance discusses the politics of Amtrak and passenger rail. The press-release, included in the article, describes a new draft legislation by Mica and Shuster the intent of which is to privatize Amtrak. Whether this legislation will make it through the Senate or with the President's signature is highly questionable. 

Conceivably, this legislation is an indirect effort to terminate Amtrak entirely, throw passenger rail into the mercies of the market place, and watch if fail. It would appear that this is a Republican goal. I do not see it as succeeding.

Perhaps I should say this one more time.  As goes Amtrak, so goes High-Speed Rail.  HSR will not bail out Amtrak, even if the Northwest Corridor route does break even.

The Business and Politics of Passenger Rail; 2011-06-17
June 16th, 2011

Volume 1, Number 9

Not a moment too soon, here’s the latest press release from United States House of Representatives Committee on Transportation and Infrastructure Chairman John Mica of Florida.

For Immediate Release
June 15, 2011
Contact: Justin Harclerode
(202) 226-8767
Mica, Shuster Roll Out High-Speed & Intercity Passenger Rail Plan
Washington, DC – A dramatic new direction that focuses on bringing competition to high-speed and intercity passenger rail service across the country was presented today during a national briefing by Committee leaders. The plan incorporates competitive bidding and private sector involvement to bring high-speed rail to the Northeast Corridor and improve intercity passenger rail service nationwide.
U.S. Rep. John L. Mica (R-Fla.), Chairman of the House Transportation and Infrastructure Committee, and U.S. Rep. Bill Shuster (R-Pa.), Chairman of the Railroads, Pipelines and Hazardous Materials Subcommittee, presented their new direction for U.S. passenger rail service to national and state transportation officials and passenger rail stakeholders across the country, and enable their participation via webcast and teleconference. The Mica/Shuster initiative is called the “Competition for Intercity Passenger Rail in America Act.”
“After 40 years of costly and wasteful Soviet-style operations under Amtrak, this proposal encourages private sector competition, investment and operations in U.S. passenger rail service,” Mica said. “Competition in high-speed and intercity passenger rail will cut taxpayer subsidies, improve service, and bring our nation into the 21st century of passenger rail transportation.
“Our plan will create jobs by finally bringing real high-speed rail to the one region of the country where it makes the most sense – the Northeast Corridor – and do so in a dramatically shorter time than Amtrak’s 30-year plan, at a fraction of their proposed $117 billion cost,” Mica said.
“Amtrak has repeatedly bungled development and operations in the Northeast Corridor, and their new long-term, expensive plan to try to improve the corridor is simply unacceptable,” Mica continued. “The nation cannot afford to continue throwing money away on this highly subsidized, ineffective disaster.
“It is time for a new direction. Around the world, other nations and the private sector have successfully competed to develop high-speed and passenger rail service,” Mica said. “There is no reason we cannot do the same in our most densely populated and congested region. By giving the private sector the opportunity to bring its resources and expertise to the table, we can lower costs, increase efficiency, and improve high-speed and intercity passenger rail service across the country.”
The Mica/Shuster proposal will also give states greater control and authority over their intercity passenger rail services, currently operated by Amtrak. Ridership on state-supported routes has increased significantly over the last 15 years, and incentivizing private sector competition for rail services on these routes will ensure states and taxpayers get the best possible deal and the best possible service. The initiative will also open up other Amtrak long-distance money-losing routes to competition, allowing the private sector the opportunity to bid on any intercity route and potentially improve service.
“It is time to deregulate America’s passenger rail system, and give intercity passenger rail the same opportunity for success that the freight rail and commercial truck industry have benefited from” Shuster said. “We must look for more effective and innovative approaches to providing modern and efficient passenger rail service by focusing on projects that make sense, leveraging private sector investment, increasing competition, and opening the door to public-private partnerships
“Both around the world and right here in the United States we have seen that competition works,” Shuster continued. “When Virgin Rail began operating the West Coast Line in Britain, the company doubled the corridor’s ridership in six years and turned a profit. Here at home, in an open bid process, Veolia won over Amtrak for Florida’s Tri-Rail South commuter line at $97 million to Amtrak’s $162 million. Success and cost savings like this can happen here if we end the Amtrak monopoly on intercity passenger rail and open it to competition. Done right, what in the past has been a liability can become an asset, generating jobs, economic development, and value for hardworking taxpayers.”
Northeast Corridor Competition
The Mica/Shuster initiative will bring real high-speed rail to the nation’s Northeast Corridor (NEC) between Washington, DC, New York City and Boston. The NEC is the region of the country where high-speed rail offers the greatest chance of success and the most national benefits. The corridor is already owned almost in its entirety by Amtrak. It is the most densely populated and congested area of the United States, and has the essential transit connections necessary for a successful high-speed system. Unfortunately, Amtrak’s Acela currently averages only 83 mph between Washington and New York, and just 65 mph between New York and Boston. The Mica/Shuster initiative will:
End the Amtrak Monopoly
•• Separates the NEC from Amtrak, spinning it off as a separate business unit
•• Transfers the title for the NEC to US DOT, including all assets, property and trains
•• US DOT enters into 99-year lease with Northeast Corridor Executive Committee
•• Executive Committee manages NEC infrastructure and operations
Bring Private Sector Expertise and Financing to the Table
•Requires a competitive bidding process for development of high-speed rail on the NEC
•Allows private sector to recommend best PPP framework
•Establishes performance standards for competitive bidding process:
-Real high-speed rail on NEC – less than 2 hours between WDC and NYC
-Double total intercity rail traffic on NEC
-Highest level of private sector participation and financing
-Lowest level of federal funding
-Full implementation in 10 years or less
•Winning bids selected by NEC Executive Committee
Protect the Public Interest
•5-member NEC Executive Committee represents federal and state interests
•All current commuter and freight operations on NEC are protected
The Time is Now
•NEC high-speed rail in one-third of the time as Amtrak’s proposal, with firm deadlines
•Within 20 months of enactment, the NEC will transition from Amtrak monopoly to PPP
Create and Protect Jobs
•New jobs for rail construction and operations
•New jobs associated with development around rail stations
•Hiring preference to any displaced Amtrak employees
Intercity Passenger Rail Competition
Fifteen states around the country currently pay Amtrak to operate intercity passenger rail. Unlike the Northeast Corridor, most state-supported routes run on track owned by freight railroads. The Mica/Shuster proposal encourages private companies to compete on these state-supported intercity routes. Because these routes still require federal subsidy, and because they are operated by Amtrak, there is significant room for improvement in service quality and financial performance. The Mica/Shuster initiative will:
Create Competition and Improve Service
•Promotes competition by encouraging states to initiate a competitive procurement process for a menu of services
•Incentivizes competition by redirecting funds from Amtrak to state DOTs
•Establishes an expert panel for recommending competitive best practices
Save Taxpayer Dollars
•Allows states to keep money saved through competitive bid process
•Saves federal taxpayer dollars by requiring a new allocation process in 2020 to reflect cost savings achieved through competition
Protect Freight Railroad Interests
•Involves host freight railroads through market-driven access negotiations
Create and Protect Jobs
•Requires states to maintain current levels of service
•Creates private sector jobs
•Provides hiring preference to any displaced Amtrak employees
Long-Distance Passenger Rail Competition
This initiative will finally allow for competition to Amtrak’s least successful lines in an effort to reduce federal subsidies and improve service. Amtrak’s long-distance routes are subsidized at an incredible $117.84 per passenger on average. For example, the Sunset Limited, traveling between New Orleans and Los Angeles, lost $407.92 per passenger in 2010. Amtrak’s failing long-distance routes need to be opened to competition to reduce the burden on taxpayers and improve service for the traveling public. The Mica/Shuster initiative will:
Create Competition and Improve Service
•Promotes competition by allowing private sector operators to compete with Amtrak to operate long-distance routes
•Requires winning bids to be selected based upon the lowest possible level of federal support
•Allows private sector operators to make a profit, incentivizing improved service and ridership growth
Save Taxpayer Dollars
•Mandates that operating subsidies for contracted long-distance services be lower than Amtrak subsidies
Protect Freight Railroad Interests
•Involves host freight railroads through market-driven access negotiations
Create and Protect Jobs
•Creates private sector jobs
•Provides hiring preference to any displaced Amtrak employees

[The documents are provided in the following links]
•Rail Competition Bill Package
•Rail Competition Bill, Section by Section
•Rail Competition Bill Discussion Draft

To absolutely no one’s surprise, Democrats and Amtrak officials took exception to the concept put forth by Mr. Mica and Mrs. Shuster.

Democratic Congresswoman Corrine Brown, the ranking member on the Railroad Subcommittee of the House Transportation and Infrastructure Committee had this to say in an article by reporter Larry Hannan of The Florida Times-Union daily newspaper here in Jacksonville, Florida on June 16th:

“While Congressman Mica refuses to focus on critical infrastructure issues, he is bent on destroying Amtrak,” Brown said. At the very time that we should be working together to solve the problems plaguing this nation’s transportation infrastructure, Chairman Mica is introducing divisive legislation that is dead on arrival in the Senate.”

Mr. Mica addressed a timeline for passage of the bill in his opening remarks, saying it could take up to 36 months for the bill to become law. If it did take that long, that would be after the November 2012 elections and a new Congress would be in session, with perhaps a Republican majority in the Senate as well as the House, and possibly a new occupant of the White House.

Congresswoman Brown, great lover of higher taxes and who never met a government program she didn’t like and wants to spend other people’s money on, and usually instantly dislikes anything proposed by anyone who is a Republican, represents a district which directly abuts the district of Congressman Mica in Northeast and Central Florida.

Amtrak President and CEO Joseph Boardman wasn’t a big fan of the proposal, either. Immediately after Wednesday’s announcement, he had this to say to reporters on a conference call and included in The Hill’s Transportation Blog of June 15th:

“This is broader than the northeast at this point,” Boardman said on a conference call with reporters. “This is the Privatize Passenger Rail for America Act. The overall impact is this takes Amtrak apart, from an infrastructure standpoint, and replaces it with a government entity.”

Mr. Boardman’s statement is somewhat odd, since Amtrak is a government entity, especially when it wants to be so it can feed at the public trough and have direct access to the federal treasury.

All the rhetoric aside, here’s what will frost the shorts of anyone with an ounce of common sense.

As reported by David and Daniel Carleton in the June 3, 2011 edition of This Week at Amtrak, the company claims most of its financial woes are due to allegedly unprofitable long distance trains. If only the world could see that future of passenger rail in America lies in the success of the Northeast Corridor and other services such as the Pacific Surfliner trains in California, there would be no more problems so Amtrak and its various supporters constantly lament.

Except, of course, the great majority of Americans would be completely cut off from even minimal passenger train services.

[Edit. charts removed. See web-site]

Hmmmmm … In FY 1998 there was a small $202 million operating grant which covered the entire system. In FY 1999 through FY 2001 there were no grants, but that was in the “Acela will save the world” years when Amtrak went on a borrowing spree and hocked just about every asset the company has, thinking when Acela finally was operating the world would be perfect. But, we know how that worked out, because by FY 2004, the federal operating grant ballooned to $756 million, dropped down to $475 million in FY 2008, but now is on the upswing again, with Amtrak saying its long distance routes needed a federal operating subsidy of $527,300,000, plus what was needed from state supported trains.

Doesn’t all of this exactly prove the point of Congressmen Mica and Shuster?

For whatever reason anyone chooses, Amtrak seems incapable of running an efficient system, and constantly blames its problems on any handy excuse, including the dog ate its homework.

During all of these years of ballooning subsidies, Amtrak hasn’t hesitated to trumpet the increases in ridership it has recorded – specifically – for the long distance trains.

In the real, non-Amtrak world, when you have an increase in volume, you have a decrease in costs due to natural laws of efficiency.

As Congressman Mica pointed out in his remarks at the beginning of the presentation, in the past decade, Amtrak has shed 10,000 employees, going from 29,000 employees to 19,000 employees today.

It has reported increases in ridership while its train consists have been constantly shrinking, thus its operating costs should be shrinking, too.

So, why are costs going up, when in every real world scenario, they should be going down? Amtrak even has good fuel costs because it buys diesel in bulk on long term contracts.

While new, much overdue union contracts raised employee wages, Amtrak was shedding employees at the same time.

What’s going on here?

How is Amtrak cooking the books to make the long distance trains look bad?

One favorite train for everyone to criticize is the beleaguered – but lovable – Sunset Limited, currently operating on its “temporarily shortened” route of Los Angeles to New Orleans, instead of its authorized route of Los Angles to New Orleans to Orlando, Florida.

Politicians and critics alike love to quote an exceptionally high loss per passenger figure for the Sunset Limited. But, few ever ask why that alleged loss figure is so high over the 1,995 mile route. The answer is because the train only operates three days a week in each direction, the single most inefficient way to operate passenger train service. The station costs are the same, the management structure costs are the same, and the marketing costs are the same for a tri-weekly train as a daily train. Yet, the income potential is only a fraction of that of a daily train because there are so few travel choices for tri-weekly trains.

The same holds true for Amtrak’s only other tri-weekly train, the Cardinal, operating between Chicago and New York City via Indianapolis and Cincinnati.

There is a very good reason the new entrepreneurs looking at privatized passenger train service are looking at daily service instead of non-daily service. “Build it and they will come” does not apply to passenger trains which operate on inconvenient schedules.

The conversation started over the past few weeks by Congressmen Mica and Shuster which escalated yesterday with their formal announcement of legislation only strengthens the hand of the members of the Association of Independent Passenger Rail Operators and anyone else considering or planning independent passenger train service.

Once this legislation passes, many more opportunities for competition will be available.

Why does ANYONE think competition is a bad idea?
Why does ANYONE think only government can run a passenger train?
Why does ANYONE think Amtrak is ever the right answer?

Look at what yesterday’s presentation made note of on the commuter rail front: Here in Florida, the Tri-Rail commuter system which operates between West Palm Beach and Miami now uses Veolia Transportation as its operator. Veolia took over the service in 2007 and has a contract in place until 2014 with some additional time options. Veolia’s bid for the contract was $97 million; Amtrak’s bid for the same contract was $162 million, a difference of $65 million. Over the last five years, there has been an average annual increase of 10.8% in ridership every year (In the commuter world, ridership is an acceptable measure of success, but not in the non-commuter rail passenger train world.).

Why was Amtrak’s bid so very high?

For the Virginia Railway Express service, operating between Washington Union Station and south on two routes into the far exurbs of Washington in Northern Virginia, Keolis replaced Amtrak as the system operator about a year ago, coming with a bid of $1 million less than Amtrak for a five year contract. Amtrak fought hard to keep the contract, but VRE stewards said they had to go with the lowest bid for the benefit of the taxpayers of the Commonwealth of Virginia. VRE has enjoyed an annual increase of 1.43% in ridership over the past five years.
Amtrak was close, but couldn’t bridge the final $1 million gap to win the contract on its home turf.

Other private operators (all AIPRO members) in Massachusetts, Texas, and Washington State have all successfully operated commuter systems which have constantly sustained growth.

It is important to note that Amtrak took away a contract from Veolia in Los Angeles for the operation of Metrolink commuter trains after the Chatsworth crash, and one of Amtrak’s very best managers is running that operation today.

But, the overall point is competition is good; Amtrak as a mostly public entity is expensive because it has little reason to be lean and efficient. Whenever money troubles arise, it’s always much too easy to just go to Congress and ask for a supplemental appropriation. That’s a strategy that has never failed in Amtrak’s 40 year history.

The future of passenger rail will be some combination of private and public operators. If Amtrak cleans up its act, it can be one of those public operators. If it doesn’t, with the momentum started, the members of AIPRO have a much brighter future than Amtrak.

No comments: