- The Washington Times - Sunday, February 24, 2002

Amtrak's chances of continuing as the same national passenger railroad Congress organized 31 years ago all but disappeared in one week this month.On Feb. 1, Amtrak's president said the railroad needed not a mere half-billion-dollar subsidy next year, but $1.2 billion. Otherwise, much of the railroad system would have to be shut down in October.
Six days later, the Amtrak Reform Council the congressionally appointed panel charged with overseeing Amtrak's finances recommended the railroad be broken up and have its routes auctioned off as franchises to private companies, operated under state and federal oversight.
Now Congress must decide whether to give Amtrak the billions of dollars it needs or how to replace it.
"Amtrak does not have any effective oversight of its business plans, its funding requests or its financial and operational performance," Gilbert Carmichael, the reform council's chairman, told the House Transportation and Infrastructure Committee's railroads subcommittee last week. "Nor are its many business operations flexible, innovative or responsive to customer needs."
Democrats seemed most skeptical of the reform council's recommendations, but even some Republicans hesitated to abandon the rail service.
Rep. Jack Quinn, New York Republican and chairman of the railroad subcommittee, doubted private companies would provide the same extent of service as Amtrak.
"We expect Amtrak to operate where the country needs it, yet any profit-oriented business would refuse to serve money-losing routes," he said.
Nevertheless, sentiments in Congress are strong enough against Amtrak's relentless requests for more money that state governments soon might oversee passenger rail routes operated by private contractors.
"Your report proves again that we have a disaster on our hands," Rep. John L. Mica, Florida Republican, told the reform council's chairman.
In the Washington area, state transportation officials from Virginia say they would consider operating the routes through their state. Maryland transportation officials say they are monitoring the situation but leaving their options open.
Private railroads say only that they are studying the effect of Amtrak's plight on their businesses. Union leaders say the railroads do not want to reveal their true intentions too early namely, to operate passenger routes over their own tracks.
Other transportation groups, such as Peter Pan Bus Co. and Delaware-based Railway Service Corp., openly acknowledge they might be interested in operating routes.
The big "if" for all of them is money.
"This business model does not work," Amtrak President George Warrington said as he announced the need to double the federal subsidy.
Each year, Amtrak officials say they need a little more government money to help them build a network that can operate profitably, free of subsidies.
The subsidies crept up from $24 million when Amtrak started operating in 1971 to $521 million this year. With each increase, the cries of outrage in Congress grow more intense.

Where the buck stops
The Amtrak Reform Council, which blames the rail service for having a bloated management, calls its current funding scheme "debt financing." In other words, the railroad runs up a debt and Congress pays it off.
No scenario recommended by the reform council would eliminate passenger rail. A survey the panel sponsored showed that Americans want a national passenger railroad system and, "They want it passionately," Mr. Carmichael said at a recent reform council meeting.
The panel recommends that state transportation departments form "compacts," or agreements, to jointly manage routes along key corridors. Examples include the Northeast Corridor between Washington and Boston, Midwestern routes that use Chicago as a hub to connect St. Louis, Detroit, Milwaukee and Minneapolis, and a California Corridor running from San Francisco to Los Angeles and possibly San Diego.
In addition to maintaining regulatory oversight, the federal government might help pay for tracks, stations and equipment. States also could be required to contribute. Private companies that win route franchises would operate the trains and provide the concessions.
Many long-distance routes, such as coast-to-coast service, or even shorter routes such as Washington to Chicago, would simply disappear.
"Long-distance trains are and always will be money-losing enterprises," Mr. Warrington said. "I think it's important that no one be deluded into believing you can run this business without public support."

Competition chips away
Throughout the 19th century and the first part of the 20th century, railroad barons were among the nation's wealthiest captains of industry, partly because of passenger service. Horses or walking were the only alternative for most travelers.
First, automobiles and then airlines chipped away at railroads' near-monopoly on long-distance travel. By the 1960s, most railroads wanted to drop their passenger rail service to focus on more profitable freight service.
Congress responded in 1971 by forming the National Rail Passenger Corp. known more familiarly as Amtrak out of a group of bankrupt regional passenger railroads. The railroad, a hybrid of "American" and "track," embarked on the road to profitability with high hopes and its first federal subsidy, which was supposed to be interim funding until revenue from passenger fares rose.
Thirty years later, revenue has reached $2.1 billion in fiscal 2001 but has never come close to eliminating the need for subsidies. Last year, Amtrak lost a record $1.1 billion.
Even members of Congress angriest at Amtrak admit they do not expect to eliminate passenger rail subsidies, just reduce them to a more reasonable level.
The reform council says private franchises might be profitable, but only if their sole obligation is to operate trains on a rail network somebody else funds.
Competition from airlines and the interstate highway system rule out a national passenger rail system that can operate without subsidies. Only about half of Amtrak's total seats are filled each year.
The reform council's proposal for auctioning passenger rail operating franchises is based on privatization of the British rail system in recent years. The move reduced the need for government subsidies in England, but it fell victim to its own success.
Private industry brought cheaper tickets and more convenient service. However, ridership increased so much railroads lacked adequate tracks and enough rail cars to keep up with the demand. The railroads are supposed to pay for track improvements but hesitate because of the high costs.

Opportunity, questions
"We would certainly be interested in any compact situation," said Leo Bevon, director of the Virginia Department of Rail and Public Transportation. "We have a very active high-speed rail service proposal that we've been working on for the Richmond-to-Washington corridor. We've also been working with the state of North Carolina for the line that would run between Washington to Charlotte."
The rail service could be magnetically levitated trains or traditional wheels-on-steel.
Maryland transportation officials are taking a wait-and-see approach.
"They're looking at the Amtrak situation as one that is continuing to evolve," said Jack Cahalan, Maryland transportation department spokesman. "It's too early to tell which way it is going to go."

Their own agenda
Any state interest would need to be shared by private companies that would operate the rail service.
Union Pacific Raiload spokesman John Bromley explained the concerns of railroads: "Money. There's no money in it."
Another issue is the government oversight. "We're extremely unlikely to get involved in anything involving government support because there are always a lot of strings that come with it," he said.
"We're not studying the possibility of operating passenger service, but we are studying the impact of what might happen with Amtrak could have on us," he said. "We don't know yet. We know there's a lot of activity this year."
A likely immediate impact would be the loss of Amtrak's right-of-way leases over Union Pacific tracks, which Mr. Bromley said made little money for his company.
Norfolk Southern officials will say only that they are looking into the situation but have not announced plans to resume passenger service. Until 1971, Norfolk Southern operated several passenger rail routes, including one between Washington and New Orleans.
Like other railroads, Norfolk Southern gave them up as money-losers. Industrywide, passenger rail lost about $1 billion a year before 1971.
"All the railroads are looking to see what ramifications it might have on their business," said Susan Terpay, spokeswoman for the Richmond-based railroad.
CSX Transportation officials said they are not considering operating passenger rail routes.
Leaders of the United Transportation Union, which represents 65,000 railroad workers nationwide, say major railroads that deny they are considering a return to passenger service are doing something between playing their hand close to the vest and fibbing.
"We do have inside information they are looking at it," union spokesman Frank Wilner said. He said the information came from "senior management" at the railroads who do not want to be identified.
He mentioned Union Pacific and Norfolk Southern as two railroads considering passenger service.
Both railroads lease thousands of miles of rights-of-way on their tracks to Amtrak. Union Pacific, for example, leases rights of way for Amtrak's Sunset Limited (Los Angeles to New Orleans, with a transfer to CSX Railway tracks from New Orleans to Florida), the California Zephyr (Los Angeles to Chicago), and the Texas Eagle (St. Louis to San Antonio).
The railroads would take over passenger service if they receive a substantial federal subsidy and if the alternative were that some other company wins the right to operate trains on their tracks, Mr. Wilner said.
The freight railroads consider Amtrak an "interloper" on their systems, he said.
"They are even more terrified that Peter Pan Bus Lines could wind up with a franchise to operate passenger trains on freight railroad tracks," Mr. Wilner said. Freight railroads would operate passenger trains only as a "last resort decision" to avoid giving control of their tracks to someone else.
"It doesn't mean that it's something they want to do. It's just one of a panoply of alternatives they're looking at," he said.
Wall Street financial analyst Anthony Hatch said the federal subsidies for the freight railroads would need to be high enough to avoid the kinds of losses they incurred before 1971. Otherwise, any chances they might return to passenger service are "slim."
"It makes sense for them to study it, but I wouldn't say it's likely," Mr. Hatch said. "They got out of it for good reason in the past. I'm not sure that freight railroading and passenger railroading really fit together under the same roof."

Choices for the future
The congressional hearings that began last week are supposed to determine what went wrong and how to fix it.
Amtrak has friends in Congress but also powerful enemies. Among them are Sen. John McCain, the Arizona Republican who is ranking member of the Senate Commerce, Science and Transportation Committee, and Rep. Don Young, the Alaska Republican who is chairman of the House Transportation and Infrastructure Commitee.
Both of them can influence the outcome of Amtrak's dilemma.
"Amtrak loses money on almost all of its 41 routes, but instead of cutting even one unprofitable route, Amtrak adds routes," Mr. McCain said. "One such route, initiated in Janesville, Wis., resulted in a per passenger subsidy of over $1,000. Clearly, the time for restructuring is overdue."
Democrats, such as South Carolina's Sen. Ernest F. Hollings and New York's Sen. Charles E. Schumer, are saying the federal government made unrealistic demands and that subsidies should be doubled.
"For too long, the federal government has been all too willing to criticize, but none too willing to subsidize this vital transportation resource," Mr. Schumer said. "It is time for a change, and time for Congress to step up its support for our nation's rail system."
Mr. Hollings, chairman of the Senate Commerce, Science and Transportation Committee, criticized the reform council's recommendations to privatize Amtrak's routes.
"I would not look for division," Mr. Hollings said. "You've got to have one, reliable system that's funded."
Passengers waiting for trains at Union Station recently seemed more concerned about price and service than whether Amtrak is restructured and private companies begin operating routes.
"If they give you the same service or better, what difference does it make?" said Yvonne Moody, a nurse in Washington going to New York. "The primary issue is whether you get the same service."
Barbara Hagstrom, a psychiatric nurse from New York on a school trip to Washington with her daughter, said there is nothing unique about Amtrak.
"I'm not personally attached to Amtrak," she said. "I got over Ma Bell being broken up."
Said McKinley Posely, a U.S. Department of Agriculture program analyst: "They're forever losing. Private industry might do a better job."



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