This Week at Amtrak; August 10, 2009
A weekly digest of events, opinions, and forecasts from
United Rail Passenger Alliance, Inc.
America’s foremost passenger rail policy institute
1526 University Boulevard, West, PMB 203 • Jacksonville, Florida 32217-2006 USA
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Volume 6, Number 29
Founded over three decades ago in 1976, URPA is a nationally known policy institute which focuses on solutions and plans for passenger rail systems in North America. Headquartered in Jacksonville, Florida, URPA has professional associates in Minnesota, California, Arizona, New Mexico, the District of Columbia, Texas, New York, and other cities. For more detailed information, along with a variety of position papers and other documents, visit the URPA web site at http://www.unitedrail.org.
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1) The magnificence of the wisdom of other allows us to think beyond normal boundaries. This issue is devoted to thoughts and information from three impeccable sources.
First, the latest issue of Innovation NewsBriefs from Ken Orski, Volume 20, Number 14, dated Sunday. Mr. Orski can be reached at www.innobriefs.com.
August 9, 2009
What Can We Expect from Congress in September?
Congress has adjourned for the summer recess with neither house taking action to extend the federal surface transportation program. Understandably, the transportation community is rife with speculation about what is likely to happen in September when the existing program authority is scheduled to expire. Here are our thoughts, based on informal conversations with congressional sources and members of the Washington transportation community.
Hope for a timely enactment of a long term transportation bill this year all but vanished when Rep. James Oberstar (D-MN), chairman of the House Transportation and Infrastructure Committee, acknowledged that he does not favor raising the gas tax at this time to pay for the $500 billion transportation authorization ($450 billion for highways and transit, $50 billion for high-speed rail). He made this admission in testimony before a hearing of a House Ways and Means Subcommittee on July 23. "Although increasing and indexing the gasoline and diesel user fee is a viable financing mechanism, ... I do not believe that the user fee should be increased during the current recession," Oberstar stated in his opening statement, echoing the posture previously taken by the White House.
Instead, the T&I Committee chairman and Peter DeFazio (D-OR), chairman of the Highways and Transit Subcommittee, suggested several potential sources of additional revenue to supplement the gas tax and close the funding gap. Among them were: (1) Restoring funds to the Highway Trust Fund owed to it for Emergency Relief and forgone interest; (2) Issuing $60 billion worth of Treasury bonds (the bonds would be repaid over a period of ten years, possibly using additional revenue generated from indexing the gas tax); (3) Imposing a fee on barrels of imported and domestic crude oil; (4) taxing crude oil futures transactions (a bill to this effect has been introduced by Rep. DeFazio in the House, HR3379); (5) Freight-related fees to finance freight-related infrastructure improvements. None of the options, however, come near to raising the $214 billion in additional revenue needed to finance the six-year program.
Committee Ranking Republican John Mica (R-FL) took a somewhat different view. "The gas tax is basically dead," he declared. Instead, he said, we should adopt a flat sales tax on the purchase of gasoline. Mica also saw added revenue potential in public-private partnerships, expansion of the Transportation Infrastructure Finance Innovation Act (TIFIA) credit assistance program, and the creation of an infrastructure bank.
U.S. Department of Transportation Undersecretary for Policy Roy Kienitz, testifying at the same hearing, threw cold water on all such proposals. The Obama Administration will not back any new funding sources at this time, he said.
In the end, Chairman Oberstar deferred to the Ways and Means Committee. "The Committee on Ways and Means," he said in concluding his testimony, "must undertake the difficult task of identifying the revenue to finance this bill...We’ll take any dollar you can scare up for us for the trust fund."
Meanwhile, in the Senate...
In the meantime, the three Senate committees having jurisdiction over the surface transportation program (Environment and Public Works (EPW) Committee; Commerce, Science and Transportation Committee; and Banking, Housing and Urban Affairs Committee) completed action on their bills to extend the existing program for 18 months, as proposed by the Administration. These bills are to be merged with a measure (S 1474) introduced by Finance Committee Chairman Max Baucus (D-MT) to replenish the Highway Trust Fund through a transfer of $26.8 billion from the General Fund. The funds are said to represent reimbursements for lost interest payments owed to the Fund since 1998 and for past disaster emergency expenditures.
Shortly before adjourning for a month-long summer recess, the House and the Senate approved a transfer of $7 billion from the General Fund to the Highway Trust Fund's Highway Account to avert an immediate cash shortfall in the Trust Fund. The transfer represents about one-third of the amount requested by the Administration for its proposed 18-month extension. As approved by the House and the Senate, the bill does not contain an extension of authority for the federal surface transportation program. That issue will be considered in September, after Congress returns from its summer recess. In the Senate, committee action has been largely completed. All that remains is pulling the 18-month extension bill together (with its proposed $26.8 billion funding authorization, probably reduced by the $7 billion transfer) and bringing it up to the floor for a full Senate vote. Senate approval of the measure is virtually assured.
As for the House...
In the House, the situation is more complicated. Rep. Oberstar has announced that he will hold a full committee mark-up of his $500 billion, six-year surface transportation authorization bill when Congress returns from its summer recess. Sources tell us he has a commitment from the House leadership to bring the bill to the House floor by the third week of September if the Ways and Means Committee can come up with the revenue title to the bill. That's a big "if". So far, the W&M Committee has given no indication where the money might come from. According to press reports a majority of the members of that committee are opposed to any tax increases as a means of funding the proposed $500 billion bill. Significantly, only 15 of the 41 committee members have gone on record in a letter to committee Chairman Charles Rangel (D-NY) supporting prompt action (i.e. in September) on a revenue package for the bill.
By taking the gas tax increase off the table, Rep. Oberstar acknowledged a political reality but also removed from consideration the most logical source of additional revenue. Other funding options are limited. One possible solution would be to use general tax revenue to fund a transportation-focused "Stimulus II" bill. Such a measure might conceivably be rationalized as helping to bring down the level of unemployment – should high joblessness persist. A second option could take the form of a major bond issue to be financed by additional revenue generated from indexing the gas tax at some future date. Both options have been hinted at by Rep. Oberstar and Rep. DeFazio in recent interviews. But political analysts consider them a remote possibility because of a lack of congressional or Administration support. Neither Congress nor the White House are eager to add to the already sky-high budget deficit.
Another alternative would be to reduce the size and scope of the transportation program to match the expected income to the Highway Trust Fund (HTF). According to Rep. Oberstar's testimony before the House Ways and Means subcommittee, the fuel tax and other excise taxes are expected to generate $236 billion at current rates over the next six year period – or roughly $40 billion/year. However, the appropriation bills for FY 2010 (as approved by the House and the Senate appropriations committee) contain respectively $51.6 billion and $53.6 billion for highways and transit, suggesting that congressional appropriators are prepared to supplement the HTF income with some general tax revenue. Scaling down the program to the proposed FY 2010 levels might find lukewarm support from Rep. Oberstar – but it cannot be taken off the table.
There remains the Senate option: to postpone enactment of a multi-year authorization legislation for a period of 18 months. Supporters of this option argue that by early 2011, a more favorable economic climate might allow a significant boost in federal fuel taxes. To cover the full annual $35.6 billion shortfall in a $450 billion program would require an increase of 20 cents/gallon. In the meantime, the proposed authorization of some $20 billion in the continuing resolution, combined with the stimulus funding that still remains unspent, will provide more than an adequate level of funding in the interim period.
But others contend that delaying the bill past the midterm elections would solve nothing. As one colleague remarked, "The U.S. presidential race will begin in earnest the day after the November 2010 elections. Given this reality, do you really think getting a gas tax increase or any other new transportation revenues is going to be any easier politically? No way!"
This is essentially correct. There may be no such thing as "a good time" for passing a substantial gas tax increase. But postponing the multi-year authorization until 2011 would offer two other benefits. It would provide more time to develop a broad-based consensus among the stakeholders on the nature of the needed reforms – a consensus that, as our survey has shown, has not been convincingly demonstrated to date (see, NewsBrief, July 11.) And it would give the Senate and the Administration a chance to participate more fully in the overhaul of the nation's transportation policy. These two points, it may be argued, provide a good and sufficient reason for adopting a more deliberate pace of reform and not trying to rush an important piece of legislation without bicameral congressional support.
2) Wise gray head Gil Carmichael, former Chairman of the Amtrak Reform Council, made an appearance in the commentary section of the Journal of Commerce on July 27, 2009. The JOC can be accessed at www.joc.com.
INTERSTATE 2.0: GETTING RAILS ON TRACK
PRESIDENT OBAMA’S PROPOSED high-speed, intercity passenger rail network is a major step toward creating a sustainable, ethical, 21st century solution to our nation’s badly congested, polluted and eroding transportation system. High-speed intercity passenger rail is a logical and necessary next step forward from President Eisenhower’s massive Interstate Highway System of the last century.
Many in the rail freight industry have mixed emotions about allowing passenger trains on their rail network because it involves using their largely single-tracked rail system. They don’t understand how they can successfully partner with the rail passenger industry to ensure with the nation.
While this new intermodal transportation vision would utilize their wide, existing freight rights-of-way for safe passenger transit, these two transportation sectors are not mutually exclusive if the rail network is properly upgraded for both highspeed freight and passenger use.
As far back as 1912, when many of our cities were born out of railroad expansion, approximately 80 percent of intercity passengers rode the trains. So did 80 to 90 percent of the nation’s freight.
By the 1970s, with a rapidly growing population, mobile society, low gas prices and our love affair with automobiles, this new highway system became the darling of the federal and state governments, and passenger transportation segued to the nation’s roads.
At the same time, many freight railroads were downsizing or bankrupt and asked the federal government to take over passenger transportation. The railroads, with this covenant, helped create Amtrak for passenger movement, and promised to give passenger trains priority.
With the economy in recession, massive energy and environmental concerns, and a badly stressed, underfunded and congested U.S. transportation system, it is again necessary for passenger trains to operate on freight railroads’ rights of way.
This vision of a shared rail system offers a superb opportunity for developing commuter, intercity and light-rail services in addition to solving the much-needed freight capacity problem. We have a 240,000-mile rights-of-way network in North America that government and private railroads have invested in for 150 years.
But after years of downsizing, it is probably operating at only 20 to 25 percent of its true capacity. By double- or triple-tracking at least 20,000 to 30,000 miles of the railroad mainline, we can build an ethical, rail-based transportation system in the next 20 years.
Concerns such as liability, grade crossing safety, signaling, train-control requirements and capacity constraints remain within the freight industry. But there are solutions. Amtrak for years has operated on 20,000 miles of freight track and has generally indemnified freight companies for every accident. It can continue to do so.
The new high-speed tracks can be grade-separated, enabling Amtrak and its partners to run 110- to 125-mph passenger trains frequently and safely. With global positioning systems and positive train control, we have the technology to do this. It should cut highway fatalities by at least 50 percent. The degree of additional freight capacity built into a transportation system like this is obvious because freight train speeds can increase.
If we are to alleviate highway congestion, develop new energy alternatives and improve economic conditions, our rail network must reliably move people and freight. By 2050, there will be 400 million in the United States. Population density will continue to be a mobility problem. For this reason, we must build “Interstate 2.0” — 20,000 to 30,000 miles of high-speed rail in partnership with the private freight railroads and state transportation departments.
Private railroads should be encouraged to upgrade and double and triple-track their mainlines to increase speeds and double freight capacity by providing them with the 25 percent tax credit they requested.
The Interstate Highway System was paid for with a highway trust fund gas tax that is outdated and expiring. We should support this new intermodal freight and passenger transportation system with an “intermodal trust fund,” one that taxes and supports all four modes of transportation. We should have an “intermodal freight trust fund” and an “intermodal passenger trust fund.”
By using existing rail rights-of-way to run modern, intermodal freight and passenger trains, we will have a high-speed rail network that reconnects our center cities, major airports and ports, and recaptures the vital role of the intercity bus and transit industries, all in concert with freight operations.
This efficient, ethical transportation system will be safe, will not pollute and can be environmentally benign; it will not waste fuel, will not cost too much and will not destroy more green electrify this rail network, providing the cleanest source of energy for our transportation system.
By building “Interstate 2.0,” the U.S. can have a better transportation system than Europe has built or Asia is building, and one the freight industry, railroads and shippers alike, can depend on and grow with.
Mr. Carmichael is Founding Chairman of the Board of Directors of the Intermodal Transportation Institute at the University of Denver. He can be contacted at: gil@ missouth.com.
3) And, by great coincidence, Jim Coston, the former Vice Chairman of the Amtrak Reform Council, appeared in today’s issue of Crain’s Chicago Business. More information at www.chicagobusiness.com.
From this week's In Other News
Locals line up for rail bonanza
By: John Pletz August 10, 2009
Jim Coston is betting that the billions of federal dollars aimed at a high-speed rail system could reassert Chicago's place as the nation's rail center — and jump-start his attempt to resurrect a business that flourished here a century ago: building passenger rail cars.
Mr. Coston, a Chicago lawyer and railroad veteran, is just one of the entrepreneurs and business owners lining up to share in what could be a huge boon to the region, in terms of jobs and transit improvements, once President Barack Obama unleashes $8 billion in high-speed rail funds.
"This is the real deal," says Joe Schwieterman, director of the Chaddick Institute for Metropolitan Development at DePaul University. "The Midwest has become the odds-on favorite to bring home big dollars."
The competition could be fierce. Already there are about 300 applications from around the country with a collective price tag of more than $100 billion chasing the feds' $8 billion.
But insiders say Illinois could snare as much as $2 billion, leading to thousands of jobs in manufacturing, construction and railroads.
Much of the high-speed rail money likely will be spent on laying track, says Joseph DiJohn, director of the metropolitan transportation support initiative at the University of Illinois at Chicago. "The first step toward high-speed rail is to separate passenger traffic from freight."
The Chicago-St. Louis corridor, for instance — at the top of the Midwest's high-speed rail plans — would require a second line of track from Joliet to St. Louis that would be laid by railroad employees. Such an extensive project would require hiring, says Mike Payette, vice-president for governmental affairs at Union-Pacific, which owns the line.
The plan also would require investment in new cars. The Chicago-St. Louis route alone would double the number of trains to eight daily from four. That's where Mr. Coston comes in.
With the stimulus, he figures, the state of Illinois will finally have the money to order the dozen Amtrak trains that have been on its wish list since last fall. "We see the stimulus as a way to restart the rail-car industry in this state," says the head of Chicago-based Corridor Capital, an investment company that bought options on 50 former Amtrak cars that he says could be rebuilt within the two-year time frame required for stimulus projects.
If he won even part of the order, Mr. Coston says, he could immediately put 25 people to work, doubling employment at Gateway Railcars in Madison, near St. Louis, a contract partner. Since Pullman Co. ceased production in 1981, Gateway is the state's sole maker of passenger rail cars.
New train orders also could help National Railway Equipment Co., a locomotive manufacturer based in Downstate Mount Vernon, return to full employment of about 1,100. Its workforce has dropped 20% since last year because of the downturn. "It would fill the void," Vice-president James Wurtz says.
Stimulus funding also would mean additional hiring at Kustom Seating Unlimited Inc., a Bellwood company that makes seats for Amtrak, Metra, the CTA and rail operators across the country. Employment already is up about 20% to 120 workers because of a surge in mass-transit spending, says Gene Germaine, director of business development, and stimulus funding is fueling additional demand. The company expects to boost its payroll by another 20% next year.
Illinois hasn't put a number on the jobs that stimulus money would create if its projects were funded, though the Midwest's high-speed rail plan could generate up to 15,000 construction jobs and 57,000 permanent ones, Michigan Gov. Jennifer Granholm has estimated. Chicago is at the heart of that plan, which includes high-speed lines to St. Louis, Madison, Wis., and Detroit.
CREATE A WINNER
The biggest stimulus winner likely will be the six-year-old Chicago Region Environmental and Transportation Efficiency program. It includes 78 rail projects to speed up freight traffic, separating passenger and cargo trains from each other and from vehicles. Until now, it only had about $200 million in funding, mostly from five freight railroads and the federal government, to pay for an estimated $1.5 billion in improvements, leaving the major construction projects waiting for backing.
Already the state has set aside $322 million in its capital budget to fund projects under the program. If the big-ticket items, such as highway overpasses and railway "flyovers," get stimulus funding, it will trigger a flurry of work for construction companies, says Tom Livingston, a vice-president at CSX Corp.
And while it would take years to complete all the rail work, more jobs could be in the offing once the trains start rolling.
"Eventually, after all the infrastructure work is done, that means operating jobs at the back end," says Bob Guy, legislative director in Illinois for the United Transportation Union, which represents railroad workers. "If everything comes through, it should be a boost in railroad employment across the board."
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J. Bruce Richardson
United Rail Passenger Alliance, Inc.
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