Monday, May 02, 2011

This Week in Amtrak - Amtrak's 40th Anniversary Edition

Acela Express power car 2000 at BWI Rail StationImage via Wikipedia
Volume 8, Number 8

From the Editors…

For those who have not noticed, Amtrak is now a four-decade-old reality. Is this the best we could hope for?

Fix Amtrak First

May 1, 2011 marks a major anniversary in American railroading. For some it is a celebration. For others it is a bittersweet regret. For a few, it means keeping their vocation. Then there are those who find political opportunity.

To be sure, the world which led to the creation of Amtrak is now a distant memory. In 1970, despite ever growing ton-miles, America’s railroads were in trouble. In the Northeast over a half-dozen carriers were mere decrepit shells of their former glory, and one by one would follow Penn Central into bankruptcy. The Milwaukee Road and Rock Island of the Midwest teetered on the brink of insolvency, seeking relief by shrinking their physical plants or by mergers. Out West, the Southern Pacific, once the third largest industrial corporation in the country, sought relief through merger and passenger train-offs. Otherwise healthy roads in the Southeast and West knew only too well that their future fortunes were inextricably tied to continued interconnectivity in the nation as a whole. Over six decades of burdensome Federal overregulation was threatening to wipe railroading from the American landscape.

Meanwhile, the rest of the country was aiming ever higher. Man landed on the moon. Commercial supersonic flight was becoming a reality. The basic interstate highway system framework was complete with no impediment, financial or physical, to its construction. Nevertheless, America could not survive without its railroads, and the powers-that-be knew this.

The simple reality is that Amtrak was created, not to save the passenger train, but rather to save the freight rail network. In a stopgap move created to relieve the railroads of their financial malaise, the government established the National Railroad Passenger Corporation, first known as Railpax, and today known as Amtrak. All eligible (non-commuter) railroads were invited to participate. All but seven joined. This was merely a Band-Aid for the industry. A much larger bandage would be the Federal takeover of the Northeast railroads in 1976, in the form of Consolidated Rail Corporation, or ConRail. The ultimate corrective surgery would be passage of the Staggers Act of 1980 and deregulation of much of the industry. ConRail would be privatized in 1987 and ultimately broken up in 1999. Through it all, the Band-Aid that is Amtrak remains.

Now with nationalized intercity passenger service a reality for four decades, the world is a much different place. We are no longer a nation capable of visiting the moon. Commercial supersonic flight ended almost a decade ago. The cost to return the interstate highway system to a state of good repair is estimated in the “hundreds of billions of dollars,” money the nation simply does not have. Now more than ever the nation is in need of a comprehensive and coherent passenger rail system, not a Band-Aid. In order to achieve this there is one unavoidable step: Fix Amtrak first.

True, there have been past attempts at fixing Amtrak’s woes. The most recent was the Amtrak Reform Council of the last decade. It was during this period that many Amtrak apologists obfuscated, and demanded from any who questioned Amtrak’s worthiness to “define reform.” Well, in just the last 18-24 months Amtrak has fired its Inspector General for ostensibly doing his job; after losing the contract to operate Virginia’s commuter trains, Amtrak began systematically harassing the winning bidder, Keolis, in what may or may not have been an attempt to get the contract back. In Florida, Amtrak demanded unnecessary concessions from a not-yet-running commuter railroad, SunRail, for reasons that are still nebulous. Suffice it to say there is plenty of room for improvement at Amtrak; actions such as the above at any private corporation would have warranted legal and/or disciplinary action.

Amtrak’s foibles have not been lost on the current administration. The cry for High-Speed Rail was followed by requests of interest; not from Amtrak, but rather from the states, directly. With this end-run around Amtrak, it was hoped the rebuilding of passenger railroading could be achieved sans the bureaucratic black hole of business as usual. The results were spectacular failures in Ohio, Wisconsin, and Florida. If there is to be a renaissance of passenger trains, Amtrak is no longer a can to kick down the road.

Although there is no quick fix, there are steps which could aid in the recovery of national passenger rail service. The best place to start would be at the top: The Amtrak board of directors. Since 2008, the Amtrak Board should have had nine members; currently there are eight. Of these, seven are life-long bureaucrats with only one from a professional railroading background. As Amtrak is a ward of the State, this is to be expected, but it was not the original intent:

"Once the corporation was set up, it was placed under the responsibility of management working under a 15-man board of directors. Eight of the directors were to be appointed by the President, and one of the eight always was to be the Secretary of Transportation. None of these eight directors nor any officer of the corporation was allowed to have any connections with the railroads. Three additional directors were to be elected by common stockholders and four by preferred stockholders. Initially, common stock was to be issued only to railroads and preferred stock only to persons other than railroads. In short, the corporation mainly was to be owned by the railroads, but all the decisions were to be made by a board composed largely of Presidential appointees." - Don Phillips, Railpax Rescue, Journey to Amtrak, 1972.

Obviously, the original plan for the Board did not pan out. All of Amtrak’s preferred stock is held by the government and much of the common stock is still held by the railroads. As these shares are deemed worthless, they are not much of a basis upon which to run a corporation; however, there is a very significant difference between then and now. In 1971, there were over five dozen Class One railroads. Today there are only seven, six of which handle daily Amtrak trains.

Adding seven seats to the existing nine-member Board would come close to the original plan of 15 members. Of these seven new seats on the Amtrak Board of Directors, six seats would be from those Class Ones, and one would be a representative from the American Short Line and Regional Railroad Association (ASLRRA). Why? This ensures there are at least seven people on the Amtrak Board who understand business and understand railroading. By design, Amtrak is meant to be a quasi-public corporation. The addition of seven members from the private sector will ensure a professional atmosphere in accordance with generally accepted business practices. These seven new members would balance with the existing nine board members, selected and confirmed from the public sector, guaranteeing the public’s input to “America’s Railroad.” If leadership from the private sector were allowed to re-allocate available Federal capital to applications that would yield the highest return per dollar invested (as opposed to political goals), then Amtrak’s financial outlook might not be so dismal. Also, as seen with commuter passenger services provided under contract by some freight railroads such as BNSF in Chicago, they still know a thing or two about passenger operations.

Every aspiring manager is warned of a common human tendency of subordinates: The ever-present gravitation toward those projects that are favorites, to the neglect of other projects which may be priority. To that end, it becomes necessary to remove the Northeast Corridor from Amtrak. This is not to imply a lack of importance for the NEC. A large number of people live in the Northeast, but the majority of Americans do not. Even before Amtrak, the U.S. Department of Transportation singled out fast trains as reflected in the High Speed Ground Transportation Act of 1966, which led to the DOT's sponsorship of the Metroliners on Penn Central. Ever since the NEC was ceded to Amtrak in the fire sale that was the end of the Penn Central, Amtrak’s myopic attention has continuously returned to those 450 miles of track between Boston and Washington, D.C., consuming a half billion dollars or more a year in Federal support. What about the other 20,000 miles? Due to the unique nature of the NEC, it should be grounded in its own reality; a separate board of governance, and its own budget separate from the national network. Congress has mandated that all corridor services be operated in a uniform manner (read, state subsidy) by 2015. Now would be an opportune time to place the NEC where it belongs.

Obviously there are other issues plaguing American passenger railroading: Deteriorating equipment, eyesore stations, growing tonnage on the rationalized freight railroads, outdated labor practices, etc. These will all have to be addressed in time. For now, it is time to take that “first step,” the initial change in direction departing from the status quo, intent on a new destination. Up until now, Amtrak has been deemed too small to register with the body politic, but too large to simply dispense with entirely; now, however, is a different time. Passenger rail is no longer a luxury subsidized out of the national largesse. Passenger trains are the ever-present and ever-growing lynch pin of transportation. Future growth will be predicated on the present amelioration of the business-as-usual Amtrak. Is this not what we, the people, should deserve and should expect?


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