No Funeral for Amtrak

by George F. McClure

IEEE-USA Policy Forum

Even though Amtrak, the national passenger railroad system, faced a funding crisis last year before it got the $200 million it requested from Congress, it keeps rolling along. At the time, critics said the system was not economical on a stand-alone basis, while proponents pointed out that federal support is much greater for both air and highway travel than for rail and that without rail travel we would have to build more highways at taxpayers’ expense.

Amtrak is nearly profitable on the northeast corridor, where it runs the Metroliner and Acela Express between Washington, New York and Boston. For short distance travel (up to 300 miles), rail service is the fastest transportation option for going from city center to city center. The long-haul routes, however, are another story.

The Sunset Limited, for example, which traverses the 2,764-mile route between Orlando and Los Angeles three times a week, cost an average of $347 more per passenger to operate in 2001 than ticket revenues and is in danger of termination. But states served by Amtrak are loathe to see passenger rail vanish. The Texas Eagle, which makes a 1,306- mile route daily from Chicago through Missouri, Arkansas, and Texas — where passengers can transfer to the Sunset Limited and travel as far as California — is another candidate for termination. Operating costs for the Texas Eagle in 2001 were 70 percent higher than revenues. But reports of its demise are premature. Rider groups have organized along the route to defend it, pointing out that ridership was up 37.2 percent in April, 39.4 percent for March and 13.5 percent for February, compared to a year ago.

Congress had mandated that Amtrak had to break even by the end of 2002, but it didn’t. It even mortgaged Penn Station in New York to raise operating capital. The Amtrak Reform Council (ARC), set up by Congress several years ago to recommend directions for the service, had advocated its breakup; by law, ARC went out of business in May.

Amtrak Attempting Reform

Amtrak’s new CEO, David Gunn, an articulate and telegenic retired railroad operating veteran, was recruited to turn Amtrak around. He is candid in pointing out that Amtrak is a public good, and that it is fanciful to expect that it would operate at a profit. Nonetheless, he has put several needed reforms in place. One now makes operating statements available by the end of the following month; formerly, managers operated in the dark for three or four months before knowing where they stood. Gunn is also overseeing much-overdue maintenance, including rebuilding wrecked and damaged cars and laying new roadbeds with concrete ties. He is also cutting out previous management’s attempt to build a latter-day version of Railway Express by adding baggage cars to trains. When the former Railway Express Agency existed, Federal Express and United Parcel Service did not. And even then, Gunn noted, the agency's baggage cars traveled empty most of the time.

Regional Operations Boost Revenue

Amtrak also operates several commuter rail lines, including Virginia Railway Express (VRE) and Maryland Rail Commuter (MARC), which travel into Washington, D.C., from northern Virginia and Maryland. The organization’s commuter operations account for about 13 percent of Amtrak’s $2.1 billion in revenue expected this year.

In addition, Amtrak operates some trains that are subsidized by the states they serve. The modern, tilt-car, Talgo-style Cascades, for example, runs along a scenic oceanside route from Vancouver to Seattle and offers such value-added extras as a bistro car and Internet access. Oregon agreed to pay Amtrak $5 million per year to extend the service to Portland and Eugene. The state also promised $15 million for capital improvements to the Union Pacific Railroad-owned rail line the Cascades uses. Oregon leaders see the rail service as an aid to the state’s tourism business development, but acknowledge that some naysayers consider it social welfare.

Unfortunately, many states are currently operating in deficit — a poor position from which to invest in better rail service. Oregon would like to invest $100 million in new train equipment and a like amount in capital improvements so the Union Pacific tracks can accommodate rail and passenger service efficiently, but it simply doesn't have the funds.

Amtrak’s FY 2004 Funding Request

Amtrak has asked Congress for $1.8 billion for fiscal year 2004. This includes $1 billion for capital investment (trackage and signal improvements and rolling stock repairs), and $768 million for operating support. In contrast, France and Germany spend more than $4 billion per year for their national rail systems. The United States ranks between Estonia and Tunisia in expenditures for its national railway system, according to Amtrak Vice President Gil Mallery. The $1.8 billion would start a five-year plan to restore reliable service to Amtrak.

The FY2004 budget includes a $900 million subsidy for Amtrak, half the amount needed to avert continuing financial crises, according to Amtrak. Senator Ernest Hollings (D-S.C.) sponsored a bill to create a national railroad with various high-speed corridors, costing some $4.5 billion per year over the next five years. Senator Kay Bailey Hutchinson (R-Texas), who chairs the Commerce surface transportation subcommittee and has seen the Texas Eagle in jeopardy, argues the government should spend more on passenger rail, not less. She has a plan to provide $12 billion over six years for passenger system operations and $48 million in 80/20 federal-state-matched funds for capital rail projects.

Privatize Amtrak?

Critics have called for the privatization of Amtrak, as was done with British Rail in the United Kingdom. But that experience was uneven; more than 25 firms operate U.K. passenger trains now (www.o-keating.com/hsr/companies.htm), but the infrastructure unit failed after being sold off and came back for government investment as RailTrack, then spun off again as Network Rail (www.railtrack.co.uk/).

According to a study published by the Economic Policy Institute (www.epinet.org/books/amtrak/amtrak_intro.pdf), privatization would be disastrous for Amtrak. Elliott Sclar, the study’s author, said private business models are not appropriate for a public entity. While private companies can fail, go bankrupt, merge or sell off assets, he said a public entity has an obligation to maintain public services. “The fact is that no transportation mode in the United States pays for itself. All modes have always been subsidized.” Subsidies for intercity passenger trains are consistent with public policy. Without them, more passengers are forced onto other modes of transport. The reverse was shown on September 11, 2001, when air travel was grounded. Amtrak filled all the seats on its most popular runs and all rental cars were put on the road.

Professor Sclar called British Rail’s privatization experience “disastrous,” with its aftermath of serious accidents, financial insolvency, and further public subsidies — including profits for the private investors.

Other critics say that the need for Amtrak to show a profit has caused tickets to be overpriced, when lower prices would fill more seats and relieve other congested travel modes. Amtrak recently reduced ticket prices for its popular northeast corridor Acela Express.

The Bush Administration proposes to reorganize Amtrak into three companies, to manage long-distance trains, high-speed rail and infrastructure needs. States would control separate regional organizations, which would decide which intercity routes they want to keep and then hire Amtrak to run the trains.

Is the Future in High-Speed Rail?

Amtrak is upgrading the northeast corridor tracks to permit the Acela to reach 125 miles per hour for more of its run. Currently, this corridor represents the only trackage owned by Amtrak; freight railroads control all of the other tracks it uses.

Other regional high-speed rail proposals have been announced in the United States, usually with states' support. The U.S. Department of Transportation has established 10 corridors around the country where high-speed trains could relieve congestion in other transportation sectors. But states are having trouble funding present programs, let alone new transportation initiatives.

In Florida, for example, voters approved a constitutional amendment in 2000 that provided for a high-speed rail system between Orlando and Tampa, eventually linking other cities, but without any funding mechanism to pay for it. Construction was to begin by November 1, 2003. The cost for the Orlando-Tampa leg could be $2.2 billion, and it could cost 10 times that to connect other Florida cities. The governor is thinking of vetoing funds for further work, after having spent $20 million on planning, thus precipitating a constitutional crisis. Earlier, he stopped work on a $5 billion high-speed rail program contracted during a previous administration on grounds that it could never be self-supporting.

Illinois Governor Rod Blagojevich opposes the Bush plan because low-cost travel provided by Amtrak is essential for north-south travel in southern Illinois. If the service were left up to private companies, those companies would want to serve high-traffic areas such as links between Detroit, Chicago and St. Louis, not rural southern Illinois. And in California, which is operating with a deficit budget, no funds are available for state support now, although the state has already poured billions into passenger rail.

Other Ideas

Other proposals for Amtrak include selling off its profitable Auto-Train service; doing away with the northeast corridor, where passenger loads nearly match those traveling by air; and leaving Amtrak only with such long-distance service as the money-losing Sunset Limited.

Will financially debilitated states want to adopt parts of Amtrak? Will Congress let it go away? The answers are more political than technical — after all, some rail technology has changed little in a hundred years. Stay tuned.

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George F. McClure is chair of IEEE-USA's Career and Workforce Policy Committee and IEEE-USA’s Technology Policy Editor.