Amtrak reform: Attention must be paid

Watching Washington, October 2018: From operating plans to marketing to pricing, change is relentless in railroading. Where railroaders once every five years looked with suspicion at all aspects of their system, and made substantial changes after 10, scientific advances, new processes and innovative applications propelled by unremitting competition have put the transformation process on steroids.

The exception is Amtrak, which clutches an outdated business model, performs as if shielded from competition, and formulates strategy in a rear-view mirror. A near half-century of flailing and failing begs for a new order less reliant on subsidy.

Consider that for similar reasons, Conrail and Amtrak each began as taxpayer-dependent nationalized railroads, but exposure to geographic, product and modal competition focused Conrail on efficiency producing innovation, allowing it to return to the private sector, while Amtrak still wallows in a fetid swamp of inefficient socialist despair.

A September 2012 report by professional staff of the House Transportation & Infrastructure Committee (T&I) itemized Amtrak’s inability to engage, innovate, compete and succeed. An example was Amtrak’s repeated failures over 10 years to win operating contracts from commuter rail agencies when facing more innovative and efficient private-sector competitors, including Herzog, Keolis and Veolia.

On 29 increasingly popular state-supported intercity routes fewer than 750 miles now operated under contract almost exclusively by Amtrak, First Transit, Herzog, Keolis, TransDev and Veolia are preparing new competitive challenges to Amtrak.

Amtrak’s statutory monopoly on operating state-supported routes was ended by the 1997 Amtrak Reform and Accountability Act (ARAA). Passage of the 2008 Passenger Rail Investment and Improvement Act (PRIIA) and the 2015 Fixing America’s Surface Transportation (FAST) Act encouraged states to seek competitive bids, and created mechanisms to ease transfer of state-supported lines from Amtrak to alternative operators consistent with the commuter model.

When Connecticut responded by seeking bids on operating an additional service across a 62-mile New Haven-Hartford-Springfield line owned by Amtrak, Herzog emerged victorious.

Additionally, Florida East Coast Industries subsidiary Brightline has launched a subsidy-free private-sector passenger service between West Palm Beach and Miami over 78 miles of track shared with freight trains. A higher-speed extension to Orlando is planned and, in September, Brightline acquired Xpress West, with intent to operate a second subsidy-free corridor between Las Vegas and Southern California using higher-speed trainsets.

Ray Chambers, President of the Association of Independent Passenger Rail Operators—and who represented freight and passenger rail interests in Washington for four decades, and has advocated rail-passenger privatization since 1995 when working under a Gates Foundation grant to the Discovery Institute—terms the Connecticut and Brightline models “a new frontier defined by competition-driven innovation.”

Although private-sector competitors to Amtrak who have succeeded on commuter routes are emerging to challenge Amtrak on state-supported routes, and show interest in utilizing another provision of the FAST Act encouraging private-sector operation of up to three Amtrak long-distance routes, there are impediments to unleashing additional market forces. Chambers suggests three initiatives.

First, Congress should move to harmonize policies, programs and safety regulations where there are overlaps among the USDOT, FRA and FTA.

Second—as first suggested by the congressionally created Amtrak Reform Council in 1997—Congress should create a National Passenger Railroad Agency to attract private capital, and encourage and manage the transformation to greater private-sector involvement. This would be similar to the role played by the United States Railway Association in creating Conrail and preparing it for its return to the private sector.

Third, liability attaching to passenger train accidents must be solved. While the ARAA capped liability for all rail passenger accidents, the apportionment of liability between passenger train operators and governmental entities having the option of declaring sovereign immunity are not fully defined, and there are doubts as to the cap on third-party claims. Guidance can come from commuter operators and the Herzog/Connecticut corridor agreement, where terms are memorialized by contract.

The most logical vehicle for passenger rail privatization advancement is reauthorization of the FAST Act, expiring in 2020. Its highway funding title promises attention must be paid, while its Amtrak title provides relevance to Amtrak reform.

Frank N. Wilner is author of six books, including Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and Railroad Mergers: History, Analysis, Insight, all published by Simmons-Boardman Books. Wilner earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals. Wilner drafted the railroad section of the Heritage Foundation’s Mandate for Leadership (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.