Amtrak, the states, and the future of the short distance trains

MinnARP President’s Column; Commentary by Andrew Selden
NOTE: Mr. Selden has been a frequent speaker at RailPAC Conferences

The long, suffocating death-grip that Amtrak has had over America’s intercity passenger rail service for the last 40 years may be starting to come undone. The agent of change driving this potential revolution is frustration among the state governments with the steady decline in the quality and quantity of service provided by Amtrak coupled with the constant escalation of prices charged by Amtrak in its never-ending quest for cash to subsidize the NEC.

Many states and regional commuter agencies broke away from Amtrak as their contract operator over the last decade after discovering that Amtrak was always the high-cost provider. This trend accelerated after Amtrak, having lost out in an open competition for the Virginia Railway Express contract, then arrogantly tried to bully Keolis, the winning bidder, into not being able to perform on the contract.

Amtrak’s efforts to protect its position as the de facto monopoly provider of passenger train services were never better illustrated than in PRIIA, the last Amtrak re-authorization bill to pass Congress, in which Amtrak made a crude attempt to give itself control over car fleets owned and operated by the states, and the legal authority (in combination with a complicit FRA) to set performance standards to be imposed on host railroads. The former was taken out of the bill at the last second after California and other states discovered the power-grab, and the latter was ruled unconstitutional in a lawsuit brought by the AAR, now being appealed by Amtrak to the Supreme Court. (In an amusing, if somewhat pathetic, footnote, Amtrak’s appeal is being supported with a “friend of the court” brief filed by NARP.)

But all of that is a side show. The main act is the actual business of operating intercity passenger trains. Amtrak has made plain for years that it has no interest in “owning” any short distance trains outside the Northeast Corridor, where it owns much of the rail infrastructure and derives much of its political support. Thus, most if not all of the other regional corridors exist at all only because state governments have taken it upon themselves to sponsor rail services, and up till now, that has meant entering into contracts with Amtrak and vesting Amtrak with the power to set the price it requires the states to pay to run these trains. Its “costing” methodology has always been shrouded in mystery and never subjected to a rigorous independent audit. Because it is based on Amtrak’s internal cost accounting system, the “costs” it assigns to these trains and charges the states are more arbitrary and inflated allocations than accurately traced real costs of a given service.

A decade ago, Missouri discovered that an independent provider was willing to operate the “Missouri Mules” between St. Louis and Kansas City for far less than Amtrak was charging, but Amtrak exercised its monopoly power to bully Missouri into not pursuing that option. And recent winters in the Midwest have demonstrated to Missouri, Michigan and Indiana how unreliable and unaccountable Amtrak’s services can become in suboptimal operating conditions. In California, Amtrak had to be forced by intense local political pressure even to extend the “San Diegan” services to the huge markets north of Los Angeles to Santa Barbara and beyond. And the simple quality of service offered by Amtrak with Amfleet and Horizon cars in high-density all-coach seating configurations, and sometimes surly “service” employees, is legendary.

This has all come to a point where states have had enough. Amtrak in fact does not have a legal monopoly on intercity passenger services. It does have a statutory easement to use private railroad lines for its trains at sub-market rates, and free access to a billion and a half dollars of free public capital grants ever year. That is a valuable commercial asset, but Amtrak has squandered it by not exploiting it effectively outside the NEC. States accordingly have begun to explore other models for providing train services.

Indiana, oddly enough, is the first to jump ship. It is currently in advanced negotiations with a private company based in Chicago—Corridor Capital—to re-equip and operate the Chicago-Indianapolis Hoosier State service, using refurbished ex-ATSF El Capitan bilevels owned by Corridor Capital. The business model under consideration would have Corridor Capital be the sole contractor with the state, and in turn it would hire Amtrak to provide the engineers and conductors to operate the train over the CSX and CN tracks used to get to Chicago. But Corridor Capital would design, market, staff, cater and operate the services “inside” the train. We would hope that their vision for this service includes quickly expanding the service beyond the four day a week, once a day, service provided by Amtrak (the other three days a week, Amtrak operates, and would continue to operate, the overnight Cardinal service between Chicago, Indianapolis, Cincinnati, and the Northeast). A short corridor like IND-CHI cannot succeed by any measure with a meagre once a day train on a less-than-daily basis. It will take multiple, daily, trains to make a difference, or even be worth operating at all. Corridor Capital would offer different classes of service, and an attractive on-board food and beverage service. More info on Corridor Capital is available at www.ccrail.com .

Other states are close behind Indiana. To cite but one example (there are several others in various stages of development), on August 4, the states of Texas and Oklahoma put out a formal request for information from potentially interested parties to take on operation of the Heartland Flyer service between Oklahoma City and Ft. Worth. This solicitation was in response to an arbitrary increase in Amtrak’s fees of nearly 100% over the next two years to run this one local train. The takeover would occur January 1, 2015 if the states pursue the initiative. This movement should lead to a real breakthrough, as more states discover that they can either get the same level of service for less (to much less) cost than they have been paying Amtrak, or, at the same level of outlay, get more and much better train services.

Best, the introduction of fresh, entrepreneurial ownership of these regional corridor services will bring to America the same kind of exciting innovation and price reform that has revolutionized rail service in western Europe (point: aggregate ridership in the UK is nearly triple what it was just before the breakup of the suffocating British Rail monopoly).

It is not much of a leap to suggest that the western long distance routes can follow the same model. A given route could be taken over on the same basis by a large travel service provider like Carnival, Virgin or Marriott. It would contract with Amtrak to “drive the train” but the contractor would own the inside of the train, and could define its own services, price and market them, provide service staff, and take the financial risk on the business. (We wouldn’t be at all surprised to see this approach cut Amtrak out altogether if the sponsor were able to contract directly with the host railroad to provide trackage rights and operating crew at market—not freight rail—prices.)

What this writer saw in Alaska this summer on the passenger trains owned by Carnival’s Princess and Holland America brands, and operated under contract by the Alaska RR, show that this can be done successfully. After 40 years of steady decline in service and market share under Amtrak, and an utter absence of innovation (after Graham Claytor’s purchase of the Superliners), the Alaska experience and the growing opening of even long-distance and high speed services in Europe to private competitive operators, shows not only that this can be done successfully, but also that this is the ONLY way that we will ever see innovation and growth in American passenger rail service, and eventually get much of it off the federal dole.

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