Is It Time to Franchise the Long Distance Passenger Trains? October 31st, 2013
By Noel T. Braymer
What’s the answer for America’s Long Distance Passenger Trains? Since W. Graham Claytor retired as Amtrak President in 1993 the Long Distance Trains have been slowly decaying. New and more equipment is needed now just for current demand. The equipment is now not being properly maintained which often causes problem on the road and delays. The railroads are increasingly unhappy with Amtrak because they don’t get paid enough to make money with Amtrak’s trains and often deal with its breakdowns. How can we turn things around to create a growing, vibrant and self-supporting Long Distance Passenger Rail service in this Country?
I don’t believe that all public service problems can be solved through privatization with the power of “private enterprise”. There are plenty of stories of privatization going badly. Years ago large corporations like Enron got into the business of privatizing local government services such as water departments. These companies bought city water departments from the cities for a fraction of what they were worth and promised that service would improve and water rates would go down. What happened instead was that many water department employees were laid off, the budget slashed for maintenance and the water rates were jacked up all to increase profits for the private companies.
You don’t have to be Adam Smith to see the problem with this. Giving a company a monopoly without oversight is asking for trouble. The best form of oversight by government is insuring companies are competing against each other and people have choices in what services they want.
In Britain private companies operate rail passenger services. There are several companies operating intercity rail passenger services without a subsidy and at a profit in Britain. These companies don’t own the route or the railroads. Each company has to bid to win a contract for the franchise to operate on a route. Unlike professional sports teams the railroads don’t own the franchise. These companies have their franchise for a fixed length of time. On a regular basis these companies have to rebid and compete with other bidders to keep or win the franchise from the existing franchisor. These companies pay for the right to make money operating trains in Britain.
Not only do these franchisors pay for their franchise, they also invest capital to buy new equipment and expand service. After paying for these and other improvements there is plenty of incentive to increase ridership and run full trains to pay for everything and earn a profit.
How could this work in this Country? We could start by asking for proposals from potential franchisors. Looking at their business plans for a franchise we can find out what they would do to make money on these routes or greatly reduce the subsidy the taxpayers would to pay. The incentive for the potential franchisor should be to increase their revenue and reduce or eliminate any need for an operating subsidy. The point is to promote growing services and reduce subsidies over time.
We still need the trains to connect with each other so passengers can go where they want to go. We shouldn’t hand over all of the routes to only one operator.This will likely be done in steps not the whole system all at once. Passenger transportation involves both cooperation and friendly competition.
Amtrak would likely control the NEC and many short distance corridors. It would save money not operating the Long Distance trains while gaining more connecting riders from them. Amtrak would be needed to provide a central ticketing and reservation service for the whole system. The different franchised trains will need to connect with each other and to Amtrak as well as need a National Timetable and Passes which could be handled by Amtrak. The trains might still say Amtrak on them. But each route would have its own unique service with a unique selection of food and amenities to promote innovation in service.
What companies would want to bid to run passenger trains? For starters the airlines could. Virgin not only owns airlines, but is a major operator of rail passenger service in Britain. Not only do their trains carry more passenger than their planes but Virgin uses their trains to connect with their flights. The company that owns Greyhound Bus in this country: FirstGroup is also a major bus and rail passenger operator in Britain. The same is true of Megabus which is owned by Stagecoach Group of Britain.
The railroads themselves might be interested in running passenger train service if there is money to be made. BNSF has never been totally out of the passenger business. They have continued to operate the commuter trains on their tracks under local government contract in the Chicago area. This services continues to be one of the most heavily used and most economical to operate commuter rail passenger services in the world. The BNSF also operates the Northstar, the commuter trains in the Minneapolis area. Private companies under contract operate many of commuter rail service already in this Country.
As part of the franchising process the companies should be encouraged to propose service extensions and additional frequencies. They should be involved in joint ventures with the local communities for station and route improvement. These companies would negotiate directly with the host railroads over the price of operating the passenger trains and for capital improvements needed for expanded service.
The point of creating long distance passenger train franchises isn’t to “save” the trains. The path to profitable long distance passenger service depends on growth with more, larger trains with more connections. Franchising will only work if it is a healthy, growing well run service to most of the Country. Government will still be needed for some funding of capital projects like track work, stations and so on. But much of the operation of long distance passenger trains can be self-financed including buying new equipment. Passenger Trains don’t have to pay the full costs of a railroad if it shares tracks with freight trains. But like any good roommate it needs and can pay its fair share for what it uses to the railroads.