The following are comments by Michael R. Weinman, Managing Director, PTSI Transportation, in response to the “reasoned and considered thoughts” expressed by Dr. Francis P. Mulvey in the Guest Blog published by Railway Age on June 30, 2015, “We must do something transformational about Amtrak.” Dr. Mulvey’s original words appear in italics.—William C. Vantuono, Editor-in-Chief, Railway Age
Amtrak’s May 12th Philadelphia train derailment has renewed focus on funding Amtrak. With more than 200 people injured and eight fatalities, the debate has shifted from “Can we agree to do anything for Amtrak?” to “How much can we agree to do for Amtrak?”
Would that this had been a universal sentiment in the Congress! Half of Congress never shifted its debate, merely asking “How fast can we eliminate Amtrak?”
There is agreement that the current model has serious shortcomings, and simply repeating yesterday’s legislative solutions will not result in improving tomorrow’s outcomes. In 1971, Amtrak was conceived as an experiment. It’s an experiment that has failed because it isn’t sustainable in today’s fiscal environment.
Amtrak was not conceived as an experiment. It was conceived as a solution to freight railroad bankruptcies, and the Nixon Administration, which gave birth to it, strongly believed that it would die of its own shortcomings and disuse within two years. Though well-planned by some brilliant minds within USDOT/FRA, it was burdened by enabling legislation that named it a “for profit” corporation, without defining the term. Clearly, this should have referred to what most railroads and regulators had defined as “avoidable costs,” also known as “above the rail” costs. In other words, the system, on the, should have paid its operating costs, and perhaps a bit more, while the funding sources should have provided a sufficient stipend to get it going, and then, on an ongoing basis, to fund its capital needs. A portion of these needs would have, of course, made it more efficient, and lowered operating costs. Sadly, this was not done. Further problems in the 44 years since Amtrak was founded were generated by management conservatism, and unwillingness to innovate or take risks, and the fact that the training ground for passenger transportation expertise, to stock both a chief executive and senior management, had dried up and was never rekindled. Thus, there have been many Amtrak CEOs, but very few with a proper background and imagination, as well as that rare combination of operational, customer-related and political expertise. This might have killed a private company, but it simply cast Amtrak and its indices into aspic.
Federal spending caps, massive federal transportation infrastructure needs, entitlements and defense make it unlikely that Amtrak will receive significantly increased appropriations. As a result, the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) sought to increase Amtrak’s funding by shifting rail passenger service costs to the states, but they, too, have no money.
Rail advocates cite Amtrak’s growing total ridership and record revenues as proof of success, but Northeast Corridor (NEC) ridership has been stable for more than 40 years, having peaked in 2000 with 12.9 million trips, while only state-supported services have significantly increased.
Amtrak’s total ridership has not quite doubled in 44 years, even though the travel market has grown by some 300%. Its overall market share has decreased from about 1% in 1971 to about 0.5% in 2015.
Meanwhile, Amtrak’s expenses have grown to annual losses of more than $1 billion, losses requiring offsetting appropriations.
Ignoring the rail industry’s difficulties deploying PTC, the NEC for decades has utilized an ATC cab signal system that successfully protected passengers from violations of operating authority, while dispatcher-controlled software provided positive protection for track workers. In 1995, Amtrak began to implement its Advanced Civil Speed Enforcement System (ACSES), which 20 years later has yet to be completed south of New York.
The ATC cab signal system has successfully protected passengers from signal violations. Operating authority is not exclusively conveyed by signal indication.
Connecticut’s Governor Malloy recently complained to the USDOT that Amtrak has repeatedly proven incapable of executing major projects on time and budget. Amtrak received about $3 billion under the American Recovery and Reinvestment Act of 2009—the Stimulus Act. Much of Amtrak’s stimulus money remains unspent, while Amtrak’s approved and funded infrastructure work remains unimplemented.
As well, some minor investment with substantial payback (in terms of dollars spent per minute of travel time saved) go undone.
This is not an Amtrak workforce issue. Amtrak’s workers have labored hard and successfully to provide a reliable, safe passenger railroad. It’s a project delivery and infrastructure funding process issue.
This requires a new transformational process, which generates a steady, reliable source of non-appropriated money for Amtrak’s infrastructure. “American Intercity Railroad Network for the 21st Century” orAlRNet-21, is such a new process. It creates an “off-budget” funding stream that causes more than a billion dollars annually to be invested in Amtrak’s owned infrastructure. It includes incentives and penalties to achieve project delivery focused on fixed project budgets and hard final completion dates using construction and project management techniques the private sector routinely employs. It eliminates the allocation of Amtrak’s NEC costs to non-NEC trains and, consequently, it increases Amtrak’s political viability and broadens its political support.
The definition of a non-NEC train can be tricky. Does this include Keystone, Empire Service, Downeaster, Carolina and Virginia trains? And of course, there are some erudite advocates who make a case that some long distance trains may be “subsidizing” NEC trains.
AlRNet-21, by means of a stock spin-off, separates Amtrak into two federally owned entities:
• Amtrak remains the nation’s rail passenger carrier operating long distance, regional, NEC, and contracted state and commuter trains. Amtrak retains all its rolling stock, workshops, reservations and sales organizations, and back-office people and assets.
• A new federal infrastructure entity owns Amtrak’s infrastructure. It is managed by an infrastructure management organization (IMO) that the Surface Transportation Board selects on a competitive basis. The IMO, under a 50-year revocable concession, funds, manages, grows rail services and constructs new infrastructure to bolster capacity and eliminate deferred maintenance. The IMO is mandated to offer non-discriminatory dispatching over Amtrak’s NEC and Midwest infrastructures, and is prohibited from running its own trains. The NEC Infrastructure and Operations Advisory Commission publicly develops and coordinates annually a rolling five-year infrastructure investment plan.
This is vaguely reminiscent of the Robert Serlin plan, but is even more aligned with Britain’s Network Rail (which also has a problem managing capital improvements to ensure on-time and within-budget completion).
Existing commuter carriers continue to pay avoidable-cost access fees. Amtrak’s current schedule patterns are protected and different service patterns, city pairs and service classes are opened to new train operators and Amtrak to exploit. The result gives rail travelers increased intercity service frequencies, shorter trip times and more fare options.
If Amtrak’s current schedule patterns are protected, it would likely contend that there is no further capacity to host new operators and services, short of adding wholesale new capacity, likely beyond the early vision of this plan.
AlRNet-21 causes substantial northeast and midwest investment and workforce development. As the IMO’s annual $1 billion investments accumulate, NEC chokepoints will be removed, and the fastest New York-Washington trip times will be reduced to about 2 hours. It permits Chicago/Michigan infrastructure to serve as a development platform for new, high-quality passenger services emanating from a Chicago hub.
There does not seem to be a problem with Amtrak’s Midwestern ownership, as it has been upgraded to 110 mph operation with PTC installed—even though Amtrak and Michigan chose to add few trains until the entire corridor (including that not owned by Amtrak) is upgraded. The big choke points in the Midwest are those owned by freight railroads, and some are being addressed by projects such as the Englewood Flyover (CREATE) and the Indiana Gateway (NS), although it is clear that some wholesale new railroad will be needed for substantial capacity increases in the future. This also recognizes the importance of Chicago and is clearly visionary, but at present the Governors of Illinois and Wisconsin seem to want fewer passenger trains, rather than more.
The IMO is funded through private equity and a RRIF loan, repayment of which is fully guaranteed by a third-party investment-grade financial instrument. Loan interest is paid through investments in the federally-owned infrastructure—ensuring more than $50 billion of infrastructure improvements over the concession life. All improvements become property of the U.S. government.
The IMO makes its return by shifting as little as 10% of NEC intercity trips from highway to rail—Amtrak’s market share is currently only 6%—increasing train ridership by offering shorter travel times, increased passenger train frequencies and new passenger services built around new station gateways where rail, highway and aviation infrastructures intersect shortening door-to-door travel times.
Clearly, shorter travel times are attractive. Examining Amtrak’s national and NEC service offerings, there are few cases where travel times today are shorter than they were 50, or even 80 years ago. Even in the NEC, regional trains are slower than the New Haven Railroad managed in 1950, although they are allowed some 35 mph faster maximum speeds. Motor coach service, though, is about the same travel time as it was in 1950, and its market share has dramatically increased because it understands the market. Unless innovative means of attracting passengers to trains are devised (and there have been some recent proposals of this sort), the nimble bus companies will continue to eat rail’s market share. Further, the IMO cannot, by definition, determine service patterns, nor pricing. Amtrak has sometimes appeared to be a carrier which would rather carry one passenger for $1 million than 1 million passengers for $10.
AIRNet-21 is good public policy. It fully protects the public sector. Amtrak’s infrastructure and improvements thereto remain publicly owned and collaboration is promoted between stakeholders to leverage commuter agencies’ funding resources.
AlRNet-21 is also good business policy, achieving better rail service, guaranteeing that more than $50 billion of non-appropriated monies are invested in Amtrak’s NEC and midwest infrastructures, fully protecting Amtrak’s passengers and workers, and removing Amtrak’s infrastructure losses from Amtrak. The private sector IMO managing Amtrak’s infrastructure must, at all times, bear the financial risk of its undertakings, may only benefit from its lMO role to the extent operating surpluses are produced, and be unable to bail out when outcomes are worse than forecasts I believe we must do something transformational, now. Today’s Amtrak experiment hasn’t worked, but we can learn from it. DOT Secretary Foxx has stated multiple times that public/private partnerships may be the only way the government can fund the maintenance and construction of transportation infrastructure mega-projects. AIRNet-21 was once thought “too good to be true,” but it is true. Change is banging on our door asking to be embraced. Why are we not embracing AlRNet-21?
Some would suggest that there are no infrastructure losses—only investment needs. The eventuality of the IMO going belly up of its own volition, or being put into such position (think Britain’s Railtrack) must be considered.
One answer to the last question is that the case for full vertical integration is made every day on our freight railroads, and the failure of vertical integration is demonstrated every day in the UK and other European undertakings. Certainly, Amtrak has separated the NEC management and re-integrated it several times, as it has centralized and decentralized. The bottom line, for the customer, and for the financial report, has not varied that much regardless, and the operation has not become much more facile.
There is nothing wrong and everything right about finding a means to attract private funding sources to infrastructure investment. Removing the political impediments will be difficult as the opposing viewpoints become more deeply entrenched (there are actually those in politics who think passenger trains are inherently evil). But as these words are written, the first high speed railway in Africa has just received its first vehicles. Might there be such a railway on every continent including Antarctica before the Americas? And while this rhetoric has appeal, a plain, non-high-speed operation with sufficient offerings and market appeal would make the difference between a flat or declining market share and a growth mode, and all the benefits that would accrue therefrom.
Crackerjack management of the passenger railways can be achieved and occasionally has been seen within our lifetimes (think Canadian National’s 1960s-era efforts, Amtrak’s Coast Starlight, which came within a heartbeat of above-the-rail-profitability, Auto-Train, New York Central’s Empire Service, which WAS profitable above-the-rail, and a few others). An AIRNet-21 scheme may or not succeed, but it will not succeed if passenger rail management is not honed to a razor edge. Combined, they make the big difference.
Michael R. Weinman is Managing Director of PTSI Transportation, a 43-year-old railway consultancy he founded. He has three degrees in Passenger Transportation, and was a classmate of Dr. Mulvey in the New York University School of Commerce, Accounts and Finance, Class of 1966. He was one of Amtrak’s first officers in 1971, having even worked with the incorporators to select the initial fleet.