Testimony

• The Honorable Allan Rutter
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  Testimony

  The Honorable Allan Rutter

  Chairman McCain, Senator Hollings and members of the Committee, I am honored to appear on behalf of Secretary of Transportation Norman Y. Mineta and the Bush Administration to discuss our legislative proposal, the Passenger Rail Investment Reform Act (the PRIRA), and the future of intercity passenger rail service. This year marked the first time in the last several years that there was no summer Amtrak crisis. There was no impending financial meltdown that required the Congress and/or the Administration to bail Amtrak out yet again. That was not a happy accident. Much of the credit goes to Congress: in the Department of Transportation’s FY 2003 Appropriation Act, you imposed on Amtrak the discipline and oversight of the formal Federal grant process. This is a process that is common throughout the Department’s other programs but which had not applied to Amtrak for decades. FRA used the grant process effectively to hold Amtrak accountable. Much credit also goes to David Gunn and his senior management team who have embraced the need to change the way things have been done at Amtrak. They have recognized the need for accurate and reliable financial reporting, and improved fiscal controls. They have also recognized their accountability for the sound and effective expenditure of the public’s funds. These are essential values for any organization that depends upon the public’s investment and trust. The lack of a crisis this year does not mean that the Congress and the Administration can put intercity passenger rail service policy on the back burner. We must confront the reality, as the Department’s witnesses have stated in our past testimony before this Committee on April 29 and June 5 of 2003 and during the previous year that this Nation’s present business model for intercity passenger rail service cannot be sustained indefinitely. It will take more than authorizing mountains of cash to address the need for improved intercity passenger rail service in this country, particularly since we know that such mountains will look more like molehills in the final versions of the appropriations acts. The Department believes significant structural reform is required. Only forceful action will permit this form of transportation to be anything more than an afterthought in transportation plans of our citizens. Any objective analysis of intercity passenger rail today leads to the conclusion that this form of transportation is slowly withering away under the current system. After $25 billion of Federal subsidies and countless Congressional hearings, studies, and new business initiatives by Amtrak, intercity rail passenger traffic volumes have remained essentially constant over the past 25 years, while airline enplanements have increased to 250 percent of their mid-70s levels, and traffic volumes for both commuter rail and intercity automobile travel have more than doubled. But the picture is not bleak across the board, not by any means. When the Administration undertook an effort to reform the way we make passenger rail investments, we looked at where passenger rail is working and growing. Those places have a few things in common: broad public support for passenger rail and support from local communities and states, often in the forms of capital investment and operating assistance. We have strived to build a system based on those descriptors of success, rather than on the cobbled-together remnants of the failed passenger rail operations of freight railroads. We need a passenger rail system that is dynamic, one whose services and route structure can adapt to changing consumer needs, one coordinated with the rest of our intermodal transportation system. In every other mode of transportation, we get that flexibility and that degree of planning and investment through a state-federal partnership. The federal government cannot do good highway investment without partnering with states on where those highways should go. We cannot do good work on maintaining and growing our maritime or aviation infrastructure without state and local partners making some key decisions. Thus, our proposal’s foundation is built on a strong, stable federal-state relationship. Before I talk about the specifics of the Administration’s legislative proposal to accomplish this reform, I wish to reiterate the consistent message of the Department before this Committee and before other forums for the last two years. This Administration believes that there is a vital role for intercity passenger rail service as part of this nation’s system of passenger transportation. That is the reason Secretary Mineta reluctantly approved Amtrak’s proposed mortgaging of its rights to use Penn Station in 2001, and why the Department expended substantial effort to provide Amtrak a loan under the Railroad Rehabilitation and Improvement Financing Program in 2002. Without either of those actions, Amtrak would today be in the hands of the Bankruptcy Court. The Administration’s commitment to successful reform of intercity passenger rail can also be seen in the President seeking out truly gifted citizens such as David Laney, Robert Crandall, Floyd Hall, and Lou Thompson to serve on Amtrak’s Board of Directors. It is the Administration’s belief in intercity passenger rail transportation that also led to the first serious review of intercity passenger rail service in a generation and the first new Administration proposal for how that service should be provided in three decades. In the Administration’s reform bill, we have addressed how to best structure the decision-making and public financial assistance this form of transportation requires, taking into account the changes that have taken place in this country’s transportation needs and patterns over the last three decades and the changes yet to come. And, quite frankly, we have also tried to recognize the realities and limits of the federal treasury. The Fundamental Issues of Intercity Passenger Rail Reform The Administration’s legislative proposal for the Passenger Rail Investment Reform Act contains a very detailed sectional analysis that describes not just the specifics of each section but how they work together. Rather than use this testimony as an opportunity to say the same thing a different way, I will append that analysis to this testimony. Instead, I will focus this testimony on the issues that are addressed by the reform bill and must be addressed by any other serious effort to provide for viable intercity passenger rail service over the long-term. After almost two years of internal Administration analysis, review of options and debate, I am convinced that the Administration and Congress must resolve these eleven fundamental issues, loosely grouped in three broad categories. These categories are: · Governmental Roles and Relationships · Constituency Issues · Money Governmental Roles and Relationships Defining the future Federal/State and local roles in the provision of intercity passenger rail service: The Federal Government and 12 State Governments have taken on essential roles in the provision of intercity passenger rail service either for that service in general, or for specific routes and services. It is difficult to imagine the absence of a public sector role in this form of transportation, particularly over the upcoming five or six years covered by the next authorization legislation. But are the current relationships in the public sector the optimum or most desirable? In the proposed reform bill, the Administration says they are not. The dominant decision-making and funding role of the Federal Government in this form of transportation is inconsistent with Federal involvement with other forms of transportation. This over-reliance on Federal initiative may be a contributing factor to intercity passenger rail’s inability to effectively address the changing transportation demands of this country. The Administration’s legislative proposal looks to the successful highway and transit programs as models for intercity passenger rail. The bill would establish a strong Federal/State partnership much like those that exist for highways and transit where the Federal Government is responsible for safety, is a partner in capital investment, and establishes certain minimum standards that services must meet to receive this funding. The States, however, will be the initiator and implementer of actions. And states are already taking that initiative. More than $136 million in passenger rail investments were made by the states in FY03. Not coincidentally, those investments are being made in places where demand for passenger rail is high, where state and local commitments are strongest, and where the service has the greatest chance for success. Right now, states are making those investments largely unsupported by the federal government. The Administration’s proposal considers that kind of state supported investment as the most important sign for where federal investment should be directed. Planning and Decision-making: Currently, intercity passenger rail planning is primarily the responsibility of Amtrak. Amtrak’s exercise of that duty is marked more by a defense of the route system it inherited in 1971 rather than initiative to address changing demographics and travel patterns. While the reluctance to change before 1997 might be attributable, in part, to the statutory restrictions on the route system, neither highways nor transit nor aviation are subject to centralized planning of this sort. These are the forms of transportation that have seen explosive growth while Amtrak ridership has stagnated. The Department does not believe this is some sort of unrelated coincidence. Highway and transit programs require comprehensive statewide and metropolitan area planning performed by the State departments of transportation and metropolitan planning organizations. These are the organizations most in tune with changing regional and local mobility needs. The Administration believes they must play a primary role in passenger rail planning, deciding when, where, how, how much and who provides intercity passenger rail service as part of a coordinated, comprehensive and multi-modal transportation system. Addressing Commuter Service Concerns: The intertwining of Amtrak and commuter rail operations has resulted in the latter being periodically held hostage over issues relating to the financial condition of Amtrak but otherwise unrelated to commuter service. In recent years we have even witnessed a commuter agency that prepaid for its Amtrak services having been threatened by an Amtrak shutdown because Amtrak had commingled the commuter agency’s funds with other funds in Amtrak’s accounts. The Administration strongly believes that, while intercity and commuter rail service are complementary in many ways, commuters should not go through the periodic stress and uncertainty brought on by Amtrak’s regular flirtation with financial catastrophe. Under the Administration’s legislative proposal, infrastructure currently owned by Amtrak but on which commuters depend will be transferred to public bodies. These new owners can structure contracts for the operation and maintenance of these facilities that are independent of the financial condition of the intercity rail service provider. Equally important, the States will be given the opportunity to select the operators of the intercity rail service important to them. In making such selections, the States can balance the risks versus the advantages offered by different operators. Indeed, some States might decide that the best approach may be to have one entity provide both commuter and intercity passenger service. But these will be local decisions based upon local issues, not ones that result in threatened national shutdowns of commuter service because of the failure of a single national intercity passenger rail carrier. Addressing Intercity versus High-Speed Passenger Rail Concerns: Some believe that high-speed passenger rail requires a federal policy completely distinct from other forms of intercity passenger rail. We don’t see it that way. The Administration sees intercity passenger rail as one form of transportation that encompasses a wide range of speeds that reflect the mobility needs of the transportation market being served. We should view high-speed rail, not as a distinct and separate goal, but as a possible end state of current investment in passenger rail. The Administration’s legislative proposal is consistent with this perspective. Section 7101 of the proposed Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2003 (SAFETEA), would transform the existing program of “high-speed” corridor planning into a program that supports State planning for conventional as well as high-speed rail service. This planning program would help States make informed decisions on the where, what and how intercity passenger rail service can play an appropriate role in enhancing passenger mobility. PRIRA would create a Federal/State capital investment partnership modeled after that now used for the transit new starts program. This program would provide capital grants, including full funding grant agreements, to implement State-based intercity passenger rail initiatives that are the product of sound State planning. The scope of the planning and capital improvements that can be undertaken under these programs allows the States more flexibility to choose whether to support or expand services currently provided by Amtrak, or to develop new or improved (including high-speed) intercity passenger rail service on new or existing rail rights-of-way. Constituency-Issues The Role of Competition: One of the greatest challenges facing intercity passenger rail is how to assure that the service provides the best value in terms of cost and quality to the passenger and the public, both of whom must foot the bill. This has always been an issue where States have provided financial support for specific trains. To them, Amtrak has looked like the monopoly utility, dictating prices and conditions of service with little or no apparent connection to the actual costs of that service. Missouri knows what Amtrak charges to provide the State-supported Mules and Ann Rutledge, but how does the State determine whether that is the best possible price? Is Amtrak’s menu of service options all that can be done or are there service innovations that warrant consideration? How can the State motivate Amtrak to reduce its enormous overhead burden, which is currently about $400 million annually? In aviation, in trucking, indeed in most commercial enterprises in this country, the best possible price is determined by competition. Competition also is the incubator of innovation. As Amtrak has stagnated for three decades, lower cost commercial aviation and intermodal package delivery have seen creative and successful new companies grow and flourish. The Administration proposes to phase in the ability of States to use competition to select the operators of services they deem important enough to justify State financial support. If the reconfigured Amtrak operations group, which the Administration’s bill calls the Passenger Rail Service Provider, is indeed meeting the State’s needs by offering the best possible price and the highest quality service, then it will keep the business. If it is not, competition will force it to improve. The riding public and the State and Federal taxpayers will be the beneficiaries. In discussions on the Administration’s bill, I have been struck by how some people confuse the concepts of competition and privatization. They argue that because few if any passenger rail systems are profitable, our proposal, which they mistakenly assume transfers the responsibility for intercity passenger rail service solely to the private sector, is not workable. In fact, under our proposal, the responsibility for intercity passenger rail rests with the States and Federal Government, just as it does for the National Highway System. States do not build these highways. They competitively select design teams and contractors to fabricate the bridges and pour the pavement. The States pay these contractors for their services. However, through competitive selection, the States assure themselves they are getting a quality product and a fair price. But this role for competitively selected contractors doesn’t make I-95 or any other highway private. Passenger Rail Access to the Freight Railroad System: A corollary to the issue of competition is how to provide access to the freight railroad system by service providers other than the current Amtrak operating entity. The Administration recognizes the reluctance of many of the freight railroads to host any passenger rail service of any kind, but their preference is that Amtrak should provide passenger service, if it has to be provided. The freight railroad system is too important to this Nation’s economy to create uncertainty that could adversely affect freight service. At the same time, intercity passenger rail cannot survive without access to the freight railroads. The Administration’s proposal attempts to reconcile these two positions. First, the Administration’s bill provides a workable and legally sustainable way to provide access to freight railroad lines for non-Amtrak providers of intercity passenger rail service. Then the Administration’s bill addresses concerns expressed by some freight railroads that they would have to deal with multiple new, small passenger operators. The Federal Railroad Administration will review and approve the qualifications of any operator the States might propose. Such a review would go to all significant issues needed to assure that the carrier can meet its obligations to operate over the specific freight railroad in a safe and reliable manner. No more than one service provider will operate over any route thus eliminating the possibility of having multiple intercity passenger operations on one line except in limited areas around terminals. Going beyond this, the Administration’s bill limits the current access to the freight rail system at incremental cost to those routes and service frequencies currently operated by Amtrak. This amounts to less than 15 percent of the freight rail system currently operated by the Class 1 railroads. An “arm’s length” agreement between the State and freight railroad would be required to establish service over a new route or expand service on an existing route. Addressing the Concerns of Liability: One of the recurring issues related to intercity passenger rail service revolves around issues of liability and insurance. The Administration believes that the Amtrak Reform and Accountability Act adequately addressed this issue by setting liability limits. The issue then becomes the ability of States or their designated operators to obtain insurance up to those liability limits. Experience with Amtrak has shown that insurance is generally available for the higher levels of liability – in the $10 million to $200 million range. It is the first dollar of coverage that is more difficult to obtain because of the greater likelihood of successful claims in amounts less than $10 million. The Administration’s bill addresses this issue by making first dollar of insurance coverage an eligible cost under the proposed capital program. What Happens to Amtrak’s Employees: It is natural that Amtrak’s employees are very concerned about the future of intercity passenger rail service. The short-term prospects for Amtrak’s financial condition should raise greater questions for them than the long-term effects of the potential introduction of competitive selection of operators and of maintainers of the Northeast Corridor. Over the long run, the reforms of intercity passenger rail service will result in stable if not growing employment in this industry, much as has occurred in the commuter rail industry. But that prospect provides little solace for someone facing this transition. The Administration’s bill seeks to address these concerns in a number of ways. It provides a relatively long transition in areas that affect employment; requires that current collectively-bargained agreements transfer to Amtrak’s successor corporations; provides current employees with priority consideration for employment with new operators; requires that new operators be subject to the Railway Labor Act, railroad retirement and other railroad laws in the same way as Amtrak; and, provides an employee transition program modeled after the program that helped ease the impact on employees of the changes that made Conrail financially viable. Money Operating Assistance: One of the lessons learned from the Amtrak Reform and Accountability Act of 1997 is that Amtrak requires operating subsidies. While many of the other reforms the Administration proposes will help reduce the size of the subsidy requirements for specific routes and services, some amount of operating assistance will be required for almost all of these routes and services for the foreseeable future. Such subsidies should be the responsibility of the State or States that believe these services are important enough to warrant their support. The Administration really sees no difference between commuter and intercity passenger rail in this regard. Having said that, the Administration is cognizant of the challenges many States will face in first determining whether a particular train or service warrants financial support, then identifying the sources of that financial support. For those reasons, our legislative proposal would not seek the State operating assistance requirement for corridor trains until two years after enactment and phase in this assistance for long distance trains over five years. The extended phase-in period is also intended to provide opportunities and incentives to improve the financial performance of these trains. Moreover, the gradual reduction in financial support on an even-handed basis across the system will necessitate addressing first the trains that perform the worst. That should yield important improvements in financial performance each year. By the end of the period covered by this authorization bill, the proposed reforms would also provide financial equity among the States supporting intercity passenger rail. The States that choose to pay for more service would receive more service. No State would get for free that for which another State must pay. Design of the Capital Assistance Program: One of the Federal Government’s continuing responsibilities for intercity passenger rail will be as a capital investment partner of the States. Intercity passenger advocates aspire for a capital program that is like those for other modes of transportation, and our legislative proposal contains such a program. The proposed structure of the capital program in the Administration’s proposal is closely modeled after the Federal Transit Administration’s Transit New Starts program. It will have the same sort of eligibility criteria. It will require the same rigorous planning and analysis by applicants, including the development of project management plans with regular updates. Finally, it will include the same safety, procurement, management and financial compliance reviews and audits as the Department undertakes with recipients of FTA funding. Amounts and Sources of Capital Funding: The Administration has consistently said that it is willing to invest in a reformed system of intercity passenger rail service. The Administration’s willingness to support funding for intercity passenger rail recedes the less the system is reformed and the more it resembles the flawed business model we currently use. The Administration also believes that this funding should be upfront and honest and thus come from the General Fund of the Treasury. The Administration cannot support the use of the Highway Trust Fund nor can we support back door approaches to financing from the federal treasury such as those using tax credit bonds. A National System One other issue that should be addressed as part of intercity passenger rail policy is the meaning of a “national system”. Must such a system involve a single carrier national in scope? The Administration does not believe so. Indeed, before the creation of Amtrak, there was no national carrier of rail passengers. Our Nation’s system of intercity passenger rail service was really composed of regional services provided by multiple carriers that came together in precursors of what we today call intermodal terminals but back then were frequently called “union stations.” The Administration’s proposal envisions a modern view of a national system that has attributes of the past. This would be a coordinated system of passenger transportation that takes advantage of the strengths of all forms of passenger transportation; a system where connections to rail, air, highway and personal transportation come together in intermodal terminals. This is the promise of the Statewide and metropolitan area planning that are part of the surface transportation program. The Administration’s intercity passenger rail legislative proposal would provide additional encouragement to the States to consider the merits of all forms of passenger transportation in their planning and to prioritize their investments based upon how the different forms of transportation can work together to provide for effective passenger mobility throughout this country. The Passenger Rail Investment Reform Act is a serious effort to address a serious problem, the declining state of intercity passenger rail transportation in this country. For the first time in 30 years, an Administration has made a proposal that actually has a chance of providing long-term stability for this form of transportation. It deserves thoughtful consideration by this Congress. Secretary Mineta and I look forward to working with this Committee and Congress to craft a meaningful authorization of intercity passenger rail service that looks beyond the failures of the past to the needs and opportunities of the future.

• The Honorable Kenneth Mead

  Inspector General

  U.S. Department of Transportation
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  Testimony

  The Honorable Kenneth Mead

  Mr. Chairman, Senator Hollings, and Members of the Committee: We appreciate the opportunity to testify on the reauthorization of intercity passenger rail service and Amtrak, and the Administration’s proposed reauthorization legislation. Fiscal year 2004 represents the second year that Amtrak will have received Federal funding without new authorizing legislation providing guidance on how that money should be spent. In the interim, Congress has provided that direction in piece-meal fashion in the appropriations process. At this crossroads for passenger rail service, a comprehensive reauthorization that provides new direction is needed to move the current system beyond the unsatisfactory status quo. Current Model Is Broken. We want to start today by reiterating a point we made to this Committee last spring which is that the current, overall approach to designing, governing, and funding the intercity passenger rail system in this country is broken. As shown in the following table, these problems are evident in the persistence of Amtrak’s cash operating loss, growing debt service burden, and declining on-time performance. 1999 2000 2001 2002 2003* Cash Operating Loss $579 $561 $770 $631 $671 Debt Service (Principal & Interest) 139 131 145 233 247 On-Time Performance 79% 78% 75% 77% 74% * 2003 figures are forecast except for on-time performance which is for the 11 months through August 2003. Cash operating loss and debt service are in millions of dollars. What is not commonly understood is that these results have developed in an environment in which Amtrak has had access to external funding of $8.4 billion over the last 6 years (1998-2003). This is an average annual amount of $1.4 billion per year—more than twice the average $670 million in appropriated funds during this period. These funds consist of Federal funds of $6.2 billion split between $4 billion of annual appropriations and a one-time infusion of $2.2 billion in Taxpayer Relief Act funds. To supplement these Federal funds, Amtrak tapped private financial markets to borrow an additional $2.2 billion in this period. In spite of the resulting $1.4 billion per year in funding, the accumulated backlog of capital investment has grown to at least $6 billion. Reauthorization Guidance Is Essential. The problems with our current approach to intercity passenger rail service extend beyond issues of funding to questions of who decides on the types and amounts of services provided, who controls the investment in infrastructure and operations, who provides service, and who selects the providers. Without a reauthorization that answers these questions, we are likely to see an unfortunate continuation of the status quo that provides too little money to adequately fund the current system—a system that, as a result, provides unsatisfactory service. Although that sounds critical of current operations, on the contrary, we think the Department, the Amtrak Board, and David Gunn and his management team have all done a good job over the last year of controlling expenses—an issue we have consistently cited in our annual Assessment Reports as a key to improving Amtrak’s financial performance. Nevertheless, such efforts will not free us from a limp-along Amtrak without either significant increases in funding for the current system or fundamental changes to it. As we have noted before, Amtrak can’t save its way to financial success—pinching pennies alone won’t make this model work. The Administration’s bill confronts several key issues in a straight-forward and comprehensive manner while leaving others less clear or unanswered. In particular, its provisions on governance and corridor development are well-developed. It leaves unanswered, however, what level of Federal capital funding it supports. Also, we would suggest a different approach to organizing the Northeast Corridor (NEC)—separating operations and infrastructure may risk disruptions to service—and the timing of the phase-out of Federal operating support could prove problematic, especially in the current fiscal climate. The elimination of all Federal operating support over a short timeframe, in conjunction with stepped-up requirements for the states to match Federal capital funds, would create significant financial difficulties for states wishing to preserve long-distance train service. Although we make clear in this testimony the trade-offs that may need to be made between long-distance and short-distance service if funding remains at recent levels, we recognize that resolving this is a policy call for the Congress and the Administration. Focus on Short-Distance Corridors. The Administration’s bill proposes to focus Federal capital funding on developing and investing in short-distance corridors (routes with end-to-end distances of less than 500 miles). This would target service improvements to the services that are most patronized today and that hold the greatest potential for passenger growth in the future. Specifically, Amtrak ridership in 2002 totaled about 23.4 million passengers, and short-distance corridor trains carried 19.8 million (84 percent) of them—47 percent in the Northeast Corridor and 37 percent on other corridor trains. The remaining 16 percent of passengers (3.6 million) rode the 17 long-distance trains. (Attachment 1 provides more details on ridership and revenue by route for 2002.) In addition, most long distance trains overlap at least one and often two or more corridors. As a result, many of the passengers on long-distance trains are traveling only between stations located on existing corridors and could be served by improved service on corridor trains rather than riding on long-distance trains that continue on beyond the corridor. For example, on the Coast Starlight from Seattle to Los Angeles, only 5 percent of passengers (about 27,000) in 2000 rode from one end of the route to the other. Over 50 percent of passengers (277,000) boarded and alighted within one of the three corridors on the route. In other words, if the Coast Starlight had not run, 55 percent of the passengers it carried had alternative rail service on either the Cascades, Capitols, or Pacific Surfliner services. (Attachment 2 provides the “end-to-end” and “corridor” passengers for each of the 17 long-distance trains in 2000.) Maintain Integrated NEC and Slow the Pace of Operating Subsidy Phase-Outs. We would take a different tack than does the Administration on certain issues, however, particularly on the separation of NEC infrastructure from operations and the pace of the phase-out of operating assistance. Maintaining the NEC as an integrated railroad is likely to introduce the least risk to the successful transfer of its governance to the northeastern states or of disruption to operations in the period leading up to that transfer. The proposed phase-out of long-distance subsidies is likely to prove logistically and financially difficult for the states to deal with in the timeframes contemplated. In today’s state budget climate, requiring a large, rapid increase in state operating subsidies for both long- and short-distance trains is more likely to lead to their elimination than restructuring and improvement. Funding and Fiscal Capacity Are Open Questions. We note also that the Administration’s proposal leaves open the question of the level of funding committed to short-distance corridor development and its source. This lack of clarity has fostered the perception that the burden of funding system operating losses would fall on the states with no compensating Federal commitment to significantly expanded Federal capital funding. Such a perception weakens support for the governance reforms in the proposal, particularly given the current fiscal climate in the states. The basic equation confronting the Congress in reauthorizing intercity passenger rail service is that, without a substantial increase in funding, the entire current, interconnected system cannot be adequately maintained while also investing in short-distance corridor development. In fact, it will require an increase in appropriated funds of nearly 50 percent compared to 2003 enacted levels just to maintain the current system ($1.50 billion versus $1.05 billion). To significantly increase investment in the corridors, which serve the majority of passengers, would require an additional increase of a like amount. If such funding increases are not feasible, new investments in corridors could only come from either cuts to long-distance train services or, as reflected in the Administration’s bill, the transfer of the funding responsibility for their operating losses to the states. A number of reauthorization proposals have been made in addition to the Administration’s bill. Although each has its strengths, the incremental improvements we discuss in this testimony could be lost if this contention between funds for new investments or for long-distance train subsidies results in a stalemate. Then we are likely to see a continuation of the ugly status quo into the indefinite future. Amtrak’s 2004 Funding Needs. We think that Amtrak can maintain reliability on its system and meet its other obligations if its 2004 appropriation were near to or matched the Senate figure of $1.346 billion. Although Amtrak has requested $1.8 billion, about $300 million of this amount is for reducing the backlog of capital investments on the system or for lower priority investments. Therefore, we estimate that Amtrak can get by with about $1.5 billion in 2004 by limiting capital spending to the minimum needed to maintain reliability. Amtrak should be able to cover the difference between this amount and the Senate mark from its carryover funds from 2003, which are about $200 million. One should keep in mind, however, that the Senate level of funding merely postpones the day of reckoning and that day is surely coming. Amtrak cannot continue to operate the current system without eventually and soon addressing the backlog of investment needed to bring that system to a state-of-good-repair. Otherwise, unacceptable and unpredictable equipment and infrastructure problems will surely begin a downward spiral of diminished service levels and disappearing passenger revenue. Cost of the Administration’s Bill. The Administration’s bill provides no guidance on funding levels, but merely authorizes “such sums as may be necessary.” As a result, providing a projection of the costs in the bill requires making assumptions about the annual spending totals and the amount of funds to allocate among capital backlog investment, corridor development, and debt amortization. We have made the following assumptions to give the Committee an illustration of how the bill might work. First, we have assumed that, given the fiscally constrained Federal budget environment, total annual funding would remain flat throughout the reauthorization period at about $1.5 billion. This is the amount we have estimated Amtrak needs in 2004 to maintain system reliability and have arbitrarily adopted that as the 2005 baseline. We note this is more than Amtrak has ever received in a single appropriation. After allocating funds to cover projected operating requirements, we have allocated the remaining funds in each year between capital and debt based on the following approach: we have dedicated sufficient funds to amortize about two thirds of Amtrak’s non-defeased equipment debt while providing sufficient funds to increase capital funding continuously over the period. The slow but steady growth in capital funding should permit the parties to plan for and efficiently invest the new capital funds. The reduction in debt would provide the needed flexibility to either use Amtrak’s legacy equipment or retire it depending on each route’s future operating requirements or alternative equipment opportunities. Otherwise, this legacy expense will fall on the states, saddling them with a burden they did not create, or new service providers, reducing their inclination to compete to provide existing services. The detailed projection of the bill’s cost based on these assumptions is provided as Attachment 3 and the table below provides an abbreviated version of that estimate. Amtrak OIG OIG Estimate Of Administration’s Bill Request Estimate Total 2004 2004 2005 2006 2007 2008 2009 2010 2005-2010 Capital (except debt) $927 $600 $600 $650 $700 $800 $1,000 $1,200 $4,950 Debt Principal 117 117 113 88 177 138 126 120 762 Net Added Debt Service 0 0 0 4 37 272 276 83 672 Total Capital $1,044 $717 $713 $742 $914 $1,211 $1,402 $1,403 $6,384 Operating Loss $607 $607 $634 $664 $476 $189 $ 2 $ 2 $1,966 Interest Expense 163 163 153 118 111 104 98 92 676 Total Operating $771 $771 $787 $782 $587 $293 $100 $94 $2,642 Total Request $1,814 $1,487 $1,499 $1,524 $1,500 $1,503 $1,502 $1,497 $9,026 Keep in mind, however, that the Administration’s bill and these figures assume that the Federal government would share in capital investments, but the states will pick up the full cost of subsidizing operating losses on both the long-distance and corridor trains. After the 3-year phase-in period in the bill and absent any restructuring, this would amount to $650 million per year. In addition, for the states to fully tap the capital funding we have projected, the Administration’s proposal would require a 50 percent capital match at full phase-in, totaling $600 million per year. Thus, the $1.5 billion in Federal funding we have projected for 2010 would require a state match of about $1.2 billion. We note that the Administration’s proposal has an increasing state capital match requirement over the course of the reauthorization period. Both highway and transit programs over their histories have had changing state matching requirements, some as low as 5 or 10 percent, that grew over time as the programs matured. Because of the tough fiscal climate facing the states, setting the value of the state matching percentages as well as the timing of the phase-out of operating support will be points for negotiation and compromise in this reauthorization. In the remainder of our testimony, we would like to comment in more detail on six reauthorization issues and how the Administration’s bill proposes to address them: · Targeting system development and capital investment to short-distance corridors; · Implications for long-distance trains of refocusing investment; · Maintaining the Northeast Corridor as an integrated railroad and addressing its capital needs; · Improving the governance of intercity passenger rail service by giving the states more control; · Funding the legacy expenses of the current system including debt and excess retirement costs; and, · Providing reliable Federal funding for passenger rail service. The first two issues address the nature of intercity passenger rail service, the second two focus on how to produce and govern that service, and the last two address funding issues. Targeting development and investment to short-distance corridors The Administration’s bill would target investments in intercity passenger rail service to short distance corridors with the goals of increasing speeds, increasing frequency, and improving the quality of the services offered. Short-distance corridors are those routes whose endpoints are less than 500 miles apart. This distance lends itself to services that can compete with the automobile for both leisure and business travelers and with air service if the trip times are low enough and frequencies of service are high enough. Because constraints on Federal and state budgets are likely to persist for many years, investments in these corridors by necessity must be made on an incremental basis. Track capacity, train equipment, and signaling and control improvements will have to be added as funding permits and in phases that gradually increase speeds, decrease travel time, and improve service quality. Realistic goals are to achieve eventual top speeds of 110 miles per hour, end-to-end travel times of 3 to 4 hours, and 5 to 15 round trips per day in these corridors. Section 301 of the Administrations’ bill proposes a capital investment program for these corridors that would match Federal capital funds to those raised by the states. Successful development of the corridors will require such a dedicated program with a separate funding allocation. Success, however, requires more than a program, it will hinge on identifying reliable levels of funding. Corridor services currently exist in the Northeast, in the Pacific Northwest on the Cascades route between Vancouver and Eugene, between San Diego and Santa Barbara on the Pacific Surfliner service, and between Chicago and Milwaukee on the Hiawathas. Examples of emerging service corridors are Chicago-Detroit and Chicago-St. Louis in the Midwest and Washington-Richmond and Richmond-Charlotte in the East. Implications for long-distance routes of investment in short-distance service There is no magic answer to the fundamental dilemma of corridor development versus long-distance service facing the Administration and Congress. Without a significant boost in funding from some source, whether Federal or not, investment in short-distance corridors is not possible without reducing funding for long-distance service. However, as we pointed out last spring, the long-distance trains have been the political glue that has held the Amtrak system together for the last 30 years. One option that might provide some fiscal relief is the restructuring of some long-distance trains into corridor feeder services. Much of the territory and stations covered by the 17 long-distance trains are also covered by short-distance corridors and trains today. In fact, on some long-distance trains, significantly fewer than half of the passengers travel the entire route from endpoint to endpoint. (See Attachment 2.) By redesigning train services that operate in the gaps between corridors, but not overlapping them, feeder services could continue to provide services to stations currently served by the long-distance trains and do so on more convenient, daytime schedules and likely on more frequent schedules. This restructuring can be accomplished over a period of years that would minimize transition costs and would allow for the growth of the complementary short-distance corridor services. Some long-distance trains are not well-suited for restructuring as corridor feeder services, particularly the trains from Chicago to the West Coast. To maintain services to the stations on these routes may require the indefinite continuation of operating subsidies. Corridor feeder services may require operating subsidies as well, but are likely to be less expensive to operate and generate more revenue resulting in lower losses and subsidy requirements. Restructuring most long-distance trains into feeder services mitigates the “free rider” problem in cost sharing with the states. If one state in the middle of a route refuses to contribute to the operating subsidy, bordering states may be required to bear an increased burden to maintain the service. Because most of the feeder routes would operate in only one state, funding responsibility and operating control would reside with that state alone. Maintain the Northeast Corridor as an integrated railroad The Administration’s bill proposes to divide activities on the Northeast Corridor among two companies, separating train operations from the maintenance and control of the infrastructure. Separating operations from infrastructure increases the risk that conflicts will arise between operations and investment because each company will be responding to different incentives that may not be reconciled. The result could be disruption to service and a decline in on-time performance. Outside the Northeast Corridor, operations and infrastructure are separated and system performance there is markedly worse than on the NEC. The fundamental goal of the Administration’s proposed realignment is to facilitate the eventual transfer of control of the NEC to the northeast states. Maintaining the NEC as an integrated railroad, however, can achieve this goal just as well while also providing additional benefits. In particular, keeping operations and infrastructure integrated offers advantages of simplicity, performance, efficiency and risk. Simplicity. Realigning the NEC as an integrated railroad would merely involve reestablishing something similar to the old NEC Strategic Business Unit (SBU). A combination of the old Intercity and Amtrak West SBUs would constitute the nationwide passenger rail service provider. Performance. Consolidated control of infrastructure and operations would produce substantially better on-time performance based on current experience with on- and off-corridor results, (on-time performance in the 90 percent range versus 70 percent and below for intercity services). Efficiency. An integrated NEC provider of track maintenance, capital programs, operations, and dispatching is likely to be more efficient and less costly than two providers, each having a monopoly over a subset of these services. Risk. A bifurcated approach would require a fully functional oversight and control organization at the outset lodged in the NEC Compact to coordinate between operations and infrastructure. If the NEC Compact is delayed, there could be disruptions to smooth operation of the corridor. Improving system governance through greater state control The Administration’s bill proposes to vest primary control of intercity passenger rail services in the states. It also proposes to shift significant funding responsibilities to the states as well. We support this refocusing of decision-making authority onto the state level because a new relationship must be established among Amtrak, the Federal Government, and the states if higher speed, higher frequency, short-distance corridors are going to be successfully developed. Many interested parties have raised concerns that multi-state compacts will be needed for many of the routes currently operated and that, depending on the number of states involved, they will either be impossible to negotiate or unworkable in practice. This concern is overstated. Most corridor and feeder services will be primarily in one or two states. A few will extend to 3 states. Though not without potential difficulties, negotiating these compacts should not present an insurmountable obstacle to corridor development. The most complicated compact will involve the NEC states (nine states). Although the potential problems in developing a workable governance, operating, and funding structure are perhaps great, the potential benefits to the states are great as well from assuming control of the NEC. There should be sufficient incentive to reach a workable consensus on the NEC because the problems for these states for their commuter operations as well as intercity services would be severe without a rebuilt and efficiently functioning corridor. The Administration proposal models a Federal passenger rail program on the current transit program for New Starts. Under this approach, states would: 1) decide on the corridor service attributes such as speed, frequency, and quality, 2) choose who operates the service, and 3) negotiate with freight railroads to operate and invest in the services, and 4) apply for Federal capital grants for equipment and track investment. We have heard concerns about how complex and time-consuming the application and other processes might be that are developed to implement the program. One way of dealing with this issue is to tie the level of Federal requirements and control to the Federal funding requested for a project. As the Federal funding percentage exceeds certain thresholds, then additional criteria and procedures would apply, and where state and private funds exceed some percentage of a project’s total cost, maximum local flexibility and minimum filing requirements would apply. Funding the current system’s legacy expenses, principally debt Adopting a new approach to organizing, investing in, and operating intercity passenger rail service as proposed by the Administration raises the question of what to do about the legacy expenses of the current system. Amtrak has long-term debt with amortization periods as long as 25 years that must be financed. In addition, Amtrak pays excess railroad retirement taxes (excess RRTA) because of the decline in freight railroad employment over the last 30 years that is unrelated to passenger railroad employment which has been essentially constant over the same period. Direct and separate Federal funding of these legacy expenses would facilitate the development and experimentation with alternative operating models and route structures. Otherwise, these legacy expenses, principally debt, will fall on new service providers and the states, reducing their inclination to compete for existing services and, in the case of Amtrak’s debt load, saddle them with a burden they did not create. · Long-term Debt. Because Amtrak requires Federal operating and capital subsidies greater than its debt principal and interest payments, these obligations are currently financed by Federal funds. Just to service the current long-term debt and capital lease obligations will require an average of $285 million per year through 2010. Because all current and future Amtrak debt would likely be paid by the Federal Government, Amtrak’s ability to incur additional long-term debt should be permanently frozen, except for refinancing opportunities that lower interest expense and do not increase the outstanding principal. Furthermore, because Amtrak borrows at higher interest rates than the Federal Government, a one-time appropriation that repays immediately any debt that can be economically amortized would produce long-term Federal savings. · Excess RRTA. Future retirement tax payments for any passenger rail providers that would qualify today as excess Railroad Retirement Tax Act payments should be funded through a direct appropriation to the Railroad Retirement Board. The estimated annual cost to Amtrak for excess RRTA is about $160 million per year. Direct funding would establish and maintain a level playing field for all competitors to provide intercity passenger rail services. Securing a Federal consensus for consistent funding As we have noted before, the Federal quid pro quo to a stepped-up state funding role in passenger rail services should be the provision of some assurance to the states that past uncertainty concerning the levels of Federal funding would not recur. Investments in corridor development can proceed most efficiently where long-term decisions and multi-year investments can be made without the threat of a disruption in Federal funding. This is, perhaps, one of the toughest nuts to crack considering the tight fiscal constraints facing the Federal budget. Highway, transit, and aviation trust fund revenue projections are down and, as a result, those programs are likely to add new demands on the general fund over the next few years. Alternate funding arrangements, such as tax credit bonds, have not found favor. In spite of these difficulties, a reliable Federal funding commitment will likely be needed to generate state support for a new Federal-State financing partnership. A broad and committed consensus needs to be reached so that achieving the authorized funding levels and Federal capital funding commitments will be much more tractable in future budgets. Mr. Chairman, this concludes our statement. I would be pleased to answer any questions.

Witness Panel 2

• Mr. David Gunn

  President and CEO

  National Railroad Passenger Corporation -- Amtrak
  Read statement

  Witness Panel 2

  Mr. David Gunn

  Mr. Chairman, Ranking Member Hollings, and distinguished members of the Committee, thank you for the opportunity to testify at today’s hearing on the Administration’s proposal for Amtrak reauthorization. I have read the Administration’s proposal. Let me give you my general observations about their plan and approach. I want you to know that the testimony I am presenting today reflects comments I shared with the Board of Directors and employees shortly after the plan was unveiled. I realize that the Administration’s proposal is one of several bills and in many respects the reauthorization discussion is in its early stages. While I have strong concerns about the Administration’s plan, I appreciate their intentions through their bill to play an active role in the debate. As you know, Allan Rutter is not only the Secretary’s representative to the Board, but he also provides regulatory oversight on a number of fronts as it relates to our operations, not the least of which is the responsibility for managing our federal grant. He has been a good member of the Board and has been fair to us in his other roles. Therefore, I wish I could offer more positive views on the Administration’s proposal. In short, I believe that the timelines set are unrealistic and the overall approach is unworkable. As you know, the timelines in the bill start with passage of the legislation and extend for six years. The Amtrak board is given six months to prepare a transfer plan. As I understand it, this requires creating three independent companies: · Residual Amtrak · Passenger services operating company · Infrastructure company At the end of the first year, the transition must be complete and the companies incorporated, which would require articles of incorporation, by-laws, changes in board structure, and additional management changes. Also at the end of the first year, you would have to have contracts for service to have been negotiated between the entities. I believe this would be a very complex, and needlessly distracting, undertaking. Simultaneously, with the above mentioned activities, and by the end of year one, a proposal for an interstate compact for service and maintenance of the Northeast Corridor would have to be presented to the eight Northeast states and the District of Columbia. This arrangement would in essence be controlled by the Department of Transportation through a new Northeast Corridor Compact Commission. My reading of the proposal left me in some doubt as to what will occur if the Compact is not formed. One could infer that absent the compact the Administration would have to propose and submit to Congress new legislation to provide for the continuation of NEC service—intercity, commuter, and freight. What is clear is that at the beginning of year two, there would be three aforementioned companies: Residual Amtrak; Passenger Services Operating Company; and Infrastructure Company. The legislation provides for the federal government to fund capital grants to overcome deferred maintenance in years three to six, but only if the Northeast Corridor Compact is formed. It is not clear who would advocate for the ongoing funds necessary to run service and the costs for the creation of these new entities. It is also not clear how this funding would be obtained, but presumably it would be through the appropriations process but without any specific levels of funding authorization for appropriations. All of this occurs with a $50,000 voluntary severance available to existing Amtrak employees. As I indicated to the Board in my summary of the bill, one can appreciate the enormity of the task that would be at hand. The Amtrak Board will be attempting to run a railroad, which is in serious physical difficulty. There is apparently no attempt to address deferred maintenance until year three. All the while, Amtrak will be losing skilled hourly workers and a significant portion of management to the severance arrangements or resignations. The Board will be responsible for the operation, safety, and reliability of a company whose assets are deteriorating and whose organization is in turmoil. Key existing vacancies and newly created positions will have to be filled in the surviving companies while the Board will have to continue to address existing financial control issues by a finance department that could be in chaos. Furthermore, every decision the Board makes would be subject to approval by the new Asset Transition Committee of the Department of Transportation to “ensure” that the pubic interest is being served. There are many other provisions in the proposed legislation concerning: long distance routes; liquidating real estate; debt; exclusive rights; common stock and preferred stock, etc. In particular, this bill will radically alter the relationships between Amtrak and commuter authorities who will have to pay substantially more for access to the corridor. Additionally, it proposes stringent new financial standards for long distance trains that will result in the extinction of all long distance trains within three years of enactment if not sooner. Eventually, any route that survived the test would go on the auction block for privatization. As I said, I realize that the reauthorization of Amtrak is no easy task and there are many different ideas for reforming Amtrak. I also know that none of this will happen overnight. So, I am proceeding to carry out the capital and operating budgets, which were approved by the Board. I recognize that large organizations tend to be resistant to change. It is easy to be critical and sometimes it is human nature to resist change. I am not being critical for the sake of being contrary. But I do not believe that the Administration’s plan is workable. The closest parallel would be the privatization of British Rail, which began in 1993, and the separation of their operations and infrastructure maintenance. In that case, it took years to accomplish and it consumed billions of dollars in government funding. For 25 years the NEC states and Amtrak have worked to improve capacity, reliability and utility for rail passengers. One of the key reasons for its success is that Amtrak largely controls the infrastructure and operations on the NEC. I will say that I do agree with the Administration’s proposal that states ought to pay operating support for services that they request and that there be federal matching funds for states for capital investments. Before I conclude, I want to say a word or two on some of fiscal year 2003’s highlights and give you some preliminary year-end figures. For the first time since 1995, we did not have to seek emergency funding or borrow money to cover our costs and get through the year. Despite the war, blackout, hurricane and weak economy, Amtrak finished the year with an all-time high ridership record. We expect to record nearly 24 million trips, breaking the record of 23.5 million in 2001. Similar to the rest of the travel industry, our ticket revenues will fall short of last year and budget. We expect that our revenues will be about 6% below last year and 10% below plan. We have made substantial progress overhauling damaged and wrecked cars returning 22 cars to service (when I came to Amtrak we had about 110 wrecked and damaged cars, so we have chipped away about 20% of the total), and we have successfully replaced 40 miles of wood ties with concrete ties and replaced old rail with new rail where needed. We have undercut an additional 22 miles of rail. We also have exited the express business and eliminated two routes. As we look ahead, what is clear to me is that the railroad is in desperate need of investment for both plant and equipment. In the absence of any reauthorization legislation, I am moving forward with a capital plan and reforming Amtrak’s internal structure. No matter what happens, work on both fronts must occur. The work we have begun this year is work that would have been done no matter which plan is adopted and has set the foundation for fiscal year 2004, the first year of our five-year capital plan that, with adequate funding, will bring the railroad to a state-of-good-repair. Again, thank you for the opportunity to testify and I look forward to responding to your questions.

• Ms. Claudia Howells
  Read statement

  Witness Panel 2

  Ms. Claudia Howells

  My name is Claudia Howells, Administrator of the Oregon Department of Transportation Rail Division. In that capacity, I am responsible for the planning and development of Oregon’s passenger and freight rail initiatives, as well as for railroad, rail transit and crossing safety oversight and regulation, in partnership with the Federal Railroad and Federal Transit administrations. I am here today to testify on the Passenger Rail Investment Reform Act (S. 1501), and I very much appreciate being given this opportunity. Background on Oregon’s Passenger Rail Program Oregon began state funded train service in 1994, as part of a Pacific Northwest Corridor Initiative. In 2000, we added one state-funded roundtrip train, bringing the total round trips between Eugene and Portland to three round-trip trains, including Amtrak’s Coast Starlight. We also fund Amtrak Thruway Motor Coaches, providing connections to the State of Washington’s additional train frequencies. In 2002, the state funded corridor trains and buses, exclusive of Amtrak’s long distance train, carried 120,000 passengers. The entire Pacific Northwest Corridor, including the Cascades and the Coast Starlight, carried nearly 1,000,000 people. For a system that has been in existence for not quite ten years in a part of the country that is generally viewed as being in love with automobiles, we believe this is extraordinary. Public support is solid. Nearly every major newspaper in Oregon, even some survey communities outside the corridor, strongly support the growth of passenger rail, the continuation of state funding, and the continuation of Amtrak. They also stress the need for federal support. State funding for our program is very fragile. We managed, again, to maintain barely adequate funding levels and secured a small amount of funds for capital investment, but only because of extraordinary support from our governor and key members of our legislative assembly. The Passenger Rail Investment Act The Passenger Rail Investment Act clearly recognizes successes like the Cascades, as well as new service in other states. We are very encouraged that the discussion about passenger rail is getting beyond the discussion of what to do about Amtrak. S. 1501 establishes that intercity passenger rail is an essential part of the nation’s transportation system; that it should be treated like all of the other transportation modes and that the states and the federal government are legitimate partners in the management and development of passenger rail. S.1501, as well as other proposals, suggest very real progress. We are also flattered that the Pacific Northwest Corridor has been touted as a model for passenger rail development. I need to tell you though, that it has not been easy, and we are now at the point, despite our success, that if we as a state have to continue to fully support both capital and operating expense, Oregon will likely be the first casualty. Passenger Rail Funding As S. 1501 recognizes, we need a stable, reliable federal contribution as exists with all other modes. There also needs to be parity among the states. Oregon, like Washington, California and Oklahoma, fully pays for our trains. Other states pay only part, or in some cases, none of the operating costs. While we are very sensitive to the need for an adequate transition period for those states that currently benefit from full federal funding, Oregon cannot continue to fully fund the trains on our own in the interim. More critical is capital investment. After a one time federal appropriation in 1991 of $20 million dollars, we have received no federal funds to improve the railroad infrastructure. As tenants on a private railroad, we must be good partners able to make the improvements necessary to allow critical freight traffic to move efficiently. This is not a theoretical issue. In 2000, Union Pacific Railroad permitted a second train without Oregon making the needed capital improvements. The resulting train interference causes operating problems for both the passenger and freight trains on a daily basis. S. 1501 proposes a 50-50 match, equivalent to the match ratio now required for projects funded through the FTA. We have serious concerns about that proposal. States will always look to invest state dollars where the federal share is the greatest, particularly in hard economic times. If rail projects are forced to compete with 80-20 or 90-10 federal-state match ratios, as is typical with highway projects, we will have a difficult time competing when dollars are scarce. Privatization of Amtrak We strongly caution against a rush toward privatization. Oregon’s recent experience with contracting private passenger rail service as part of the Lewis and Clark Bicentennial Commemoration events has shown us there are risks in privatization. We were very lucky. We have a high quality and cooperative short line operator, who operated the trains very, very effectively. We contracted with a separate local food vendor, who could not have done a better job. We had outstanding ridership, ending the season with 88 percent of the seats for the season sold. We did not save money. It is wishful thinking to suggest that privatizing passenger rail service will cost less than Amtrak. Competition could have benefits, but third party operators also cause us concern. Yes, there are very good third party rail operators, but those of us in the railroad business know many dreamers and schemers who would likely bid on routes. Many states have legal requirements to accept the lowest bid. In the railroad business this could be disastrous. The Class I railroads’ concerns about this issue are legitimate. Railroading is not for amateurs. Governance and Multi-state Compacts The Pacific Northwest is touted because Oregon, Washington and British Columbia appear to exist as an operating entity. In fact, there is no formal compact. We exist only because Amtrak exists. Multi-state compacts are very difficult to develop. Even simple reciprocity agreements often take years, because, by law, these compacts must be approved by legislative bodies. The drafters of the US Constitution understood full well that interstate commerce should not be left to the states. Imagine, if you will, a similar requirement for the maintenance and operation of the Interstate Highway System. Is it possible? Perhaps, but it will take time and money to address the myriad of legal issues that such compacts necessarily raise. Furthermore, it would likely require a new bureaucracy, something like a multi-state port authority, to actually operate, or contract for operations of the trains. Long Distance Trains Two long distance routes, the Coast Starlight and the Empire Builder, serve Oregon. For reasons that sometimes elude even me, ridership continues to grow. It tells me that despite years of neglect these trains still serve a purpose. It is easy to talk about how much these trains lose, how much they are subsidized, but the reality is that the long distance system over-all recovers nearly half of the operating costs through passenger revenues. That is very good when compared to most other forms of public transportation. It is easy to target the long distance trains, but we fully agree with Mr. Gunn. Eliminating the long distance trains will not solve the “Amtrak problem,” and may actually make it worse. Transferring the responsibility to the states makes as much sense as transferring the responsibility of the interstate highways to the states. Having now had the experience of being involved with successful passenger rail service, I believe that the long distance trains could increase ridership and reduce the level of public subsidy, but it will take some investment. The long distance train equipment needs to be modernized. We need to make investments in the track system to improve on-time performance and ride quality. We need to look at certain corridors to increase frequencies, and in those cases look to the states for partnership. As we have learned from the regional trains, more frequencies mean more riders which over-all reduces the per passenger level of public support. We need to invest in stations, not only historical buildings but new stations, and in a way that will generate economic development in those communities. Rejuvenating the long distance train system provides a tremendous opportunity to reinvest in rural America and sustain what in many places is the only transportation link beyond roads. Amtrak As a state partner, I would be less than truthful if I said we and Amtrak had a perfect relationship, but I can also tell you that without Amtrak, the Cascades would never have happened. Amtrak has provided the legal, operating and institutional framework that is necessary to run a railroad. I have confidence that David Gunn has provided a new direction that is refocusing the railroad in the direction it needs to head. There are issues with Amtrak as it exists today. The Amtrak Board needs better geographic representation. Part of our success in the Pacific Northwest has been our ability to put our stamp on the service we pay for. We need to be able to select our own local food and beverages, develop our own marketing strategy and determine our own color schemes. While that may sound trivial, it is just the kind of thing that sustains the local constituencies needed to support local funding. But for all of Amtrak’s flaws, may I suggest that it would be far easier to fix what is wrong with Amtrak than to start from scratch. Why Intercity Passenger Rail? Our ten years in developing passenger rail has made some things very apparent. There is the obvious. Passenger rail offers a transportation alternative for those who cannot or choose not to drive or fly. The real dividends go far beyond that. · Passenger rail, and railroading generally, provides solid family wages jobs. · Rail infrastructure improvements are as valuable to the economy as any other construction job. For every million spent, 19 family wage jobs are created. · Passenger rail capital investment will reduce the cost of time delays for freight and reduce transportation costs for American producers. · Station improvements, beyond construction jobs, generate economic development and increase property values. · A commitment to passenger rail would likely encourage more rail equipment companies to locate in the US providing both jobs and competition. What States Need States need: · Federal funding for capital investment consistent with funding for other transportation projects. · Operating funding equity. · Control over capital projects. · Equity among rail passengers nationwide. · A stable, adequately funded rail service provider. Conclusion In closing, I want to emphasize that Oregon needs a federal partner now. Oregon is not alone. Many states began planning and development when the High Speed Rail Act was passed as part of ISTEA. It has been a promise not kept. What are we talking about it terms of funding? In Oregon, we could have a high quality passenger rail program, with five round trips a day matching eight roundtrips in Washington for a total investment of $350 million dollars. $100 million for track improvements, $100 million for train equipment, $100 million for highway-railroad grade crossing improvements, and $50 million for building or restoring train stations. These are investments with long term economic, environmental and social benefits that will last along time. Thank you for your consideration and the opportunity to testify before you today. Respectfully submitted by Claudia L. Howells Administrator ODOT Rail Division October 2, 2003