Private Sector Participation in Intercity Rail Service

» A House Committee holds a hearing on privatizing passenger rail, but recommendations are likely to be difficult to implement.

Three weeks after Florida Governor Rick Scott (R) cancelled the Tampa-Orlando intercity rail project — a decision that seems increasingly foolish considering newly released projections of profitability on the route — members of the House Subcommittee on Railroads, Pipelines, and Hazardous Materials held a hearing today on the potential for increased private sector involvement in the funding and operations of intercity passenger rail service. The stated goal is to consider how to make intercity rail less expensive to run, at least in terms of government subsidies.

For Republican supporters of passenger rail, as few and far between as they are nowadays, getting non-governmental actors into the business is a major priority. Yet the ability to do so has been previously handicapped by other members of the GOP, most recently by Mr. Scott, whose decision to reject federal funds for his state’s project came before companies had the chance to respond to an offer to operate the line that would have required them to absorb construction and operating risks. And the whole goal of encouraging private investment may be troubled by the fundamental deficits in American rail infrastructure.

Nonetheless, the goal of increasing private participation in what for now is a government monopoly in the United States has long been a favorite of House Infrastructure and Transportation Committee Chairman John Mica (R-FL). In December 2008, Mr. Mica announced that the government would solicit private companies for their ideas for how to improve the nation’s rail system, and by February 2009, the government had received more than 100 responses. Notably, French national rail company SNCF produced a stunning report revealing plans for corridors in the Midwest, Texas, Florida, and California. These plans have gone nowhere so far.

There is quite a bit of precedent for private involvement in rail services: The United States’ passenger rail system, which was once impressive, was largely built by companies. More recently, European Union liberalization rules have encouraged the growth of huge multi-national transportation companies that are increasingly playing a role in moving people on commuter and intercity rail lines.

And the American freight rail system, which transports a large percentage of the nation’s goods, is self-supporting. In fact, its operators plan to collectively spend $12 billion on improvements this year alone.

Whether or not it is a good idea to replace monopolistic public sector ownership with private companies and competition is worth evaluating in the passenger rail sector. As Edward Wytkind of the AFL-CIO stated today accurately, privatization in the U.K. has resulted in numerous difficulties and arguably an increase in public subsidies. But an even more serious question is just how realistic privatization is at all in the American context.

Mr. Mica, who referred to Amtrak as a “Soviet-style” passenger rail service because of its reliance on subsidies and lack of competition, argued today that routes be put up for competition, implying that private companies would be able to provide similar services at a less expensive rate for the government.

But there will continue to be very limited interest in “attracting private sector capital,” as Mr. Mica put it, unless there is a significant increase in public investment in intercity rail. The problem is that outside of the Northeast, most rail corridors are owned by the freight railroads, and they offer only limited capacity for increases in passenger operations. These freight companies have been largely uninterested in investing in passenger rail (their ancestors, after all, abandoned such services decades ago), and the Congress cannot simply expect other companies to be able to operate trains on those tracks. The law allows Amtrak, as a public company, to run along freight tracks, but it would be very problematic to extend similar rights to private companies, as Stephen Gardner, Vice President at Amtrak, said today. Would it be fair to force private freight companies to allow other private companies to run on their tracks?

States that subsidize their in-state passenger rail services, including California and North Carolina, among others, have the right to contract intercity rail services out to companies other than Amtrak, but they have not done so so far — part of the problem, apparently, is that few or no companies have expressed their interest in doing so.

Moreover, because the existing infrastructure is so decrepit — too few double-track corridors and poor stations are only the start of the problem — it is hard to see why many private companies would want to become involved in this process, because there are very limited margins for increased profitability.

On the routes where Amtrak currently is not operationally profitable — those outside of the Northeast Corridor — private companies would almost definitely require subsidies. This is not an exception to the rule: In the U.K. and in other countries, private operators often compete for subsidized contracts. Joseph Szabo, head of the Federal Railroad Administration, said today that his agency would move forward with competitive bidding for services along two current Amtrak corridors, but why any company would want to bid out for the three-times-a-week Sunset Limited, for instance, is unclear.

Indeed, the whole discussion about increasing private investment in intercity rail implies that Amtrak has been unreasonable and inefficient in its use of funds. But the fact that Amtrak loses money does not mean that private companies would, or that they would require fewer subsidies. Indeed, Amtrak’s losses are mostly a result of the fact that its routes run along corridors that have suffered from public disinvestment: With capital expenditures along its lines, it would likely do far better. That is what the Administration’s $53 billion intercity rail program is supposed to do, but the Republican Party majority in the House has been largely opposed to any such investments.

The Northeast Corridor, which is the only rail route in the United States that has received significant investment, may be the only good candidate for private involvement because of its high capacity, high ridership, and even higher ridership potential with improvements. The problem with that idea is that Amtrak owns the line and is making money on its operations there. Would competition there be reasonable? Wouldn’t that simply reduce Amtrak’s ability to cross-subsidize its other operations into the future?

Advancing the cause of privatization and competition in America’s passenger railroads paradoxically requires an increase in public investment in infrastructure. That spending could be coordinated with private partnerships, but no company is likely pay for the entire cost of a new line. The European decision to allow liberalization only came after decades of upgrades along intercity corridors and parallel increasing ridership. Only after the government has opened up new lines for service — Florida’s high-speed rail line was an excellent example — will there be significant interest from companies.

Image above: A train in the Netherlands operated by private contractor Veolia, from Flickr user Reinout van Rees (cc)

65 Comments | Leave a Reply »
  • Avi

    The law allows Amtrak, as a public company, to run along freight tracks, but it would be very problematic to extend similar rights to private companies, as Stephen Gardner, Vice President at Amtrak, said today. Would it be fair to force private freight companies to allow other private companies to run on their tracks?

    Don’t we already do this for power and telephony? Most places allow you to chose who your power producer is, even if the power line to your house is owned by a different company. Similarly, I believe you can chose from multiple DSL providers, even if Verizon/AT&T owns the last mile.

    • Adirondacker12800

      Companies run their trains over other company’s track all the time. It’s one of the reasons North American freight operations are so sucessful. Train leaves California and never gets broken up until it arrives in New Jersey or leaves Washington State and never gets broken up until it gets to New York or California-Virginia etc.

      • I think the point is that freight companies are only obliged to distribute slots to Amtrak, not to private railroads.

        • Adirondacker12800

          So there can be a pro forma transaction where Amtrak sub leases their track rights to the private operator. Why we would be paying the vigorish to have a private operator to run the train is different question.

          • Nathanael

            That’s the first big question — why cut an extra profiteer in?

            The second big question is, what competition? Transportation, like distribution of power or telephone lines or Internet cabling, is largely a natural monopoly. Whenever it’s been privatized, it’s ended up as a private monopoly. How is that better in any way than a public monopoly? It seems strictly worse.

            If you want competition, you must be very careful about how you structure the market in order to encourage it.

            And even then, you get suboptimal results — competition produced the mare’s nest of non-connecting stations in London, the rail nightmare in Chicago, the redundant parallel lines which both went bankrupt in pretty much any part of the US or the UK you can think of, etc. Railroads, like roads, benefit in many ways from centralization, and an effective competition scheme is going to cost you more than centralization. Will you really get greater benefits from it?

            • Max Wyss

              We’d have to establish the relevance, but we may see soon the effects of competition by private companies in European countries (NTV doing high-speed services in Italy, Westbahn doing intercity services in Austria).

              This is a direct “real” competition on the same network.

      • Danny

        This isn’t true. There are plenty of exchange yards for cars, but the Class I railroads only run their own engines with their own engineers and their own crews on their own tracks.

    • Dexter

      I not sure this applies to railroads. When one railroad wants to use another railroad’s tracks there are trackage rights involved. I don’t think that another operator can use a particular railroad’s tracks without those rights.

  • So, this is a law that is only trying to make an opening for one company to operate on these tracks?

    • Max Wyss

      I may be wrong, but I think that the legislation guarantees Amtrak (keep in mind, a national organization built after the railroads shut down passenger organization) trackage rights. The terms are negotiable, but the railroad can not ban Amtrak. It could also have been one of the conditions to grant permission to shut down passenger service.

      Please correct me if I am wrong.

      • Hopefully nobody will correct you, since you are right: provision of passenger services was one of the conditions of operation, and while at one time provision of passenger services played an important political role in getting towns to compete for railway access, hence granting easements and other concessions which would have been much more expensive to obtain otherwise … but the 1960’s, railroads were looking to cut back on the maintenance cost of their existing track, rather than looking to expand …

        … and the granting of trackage rights to Amtrak was the quid pro quo for removing the provision of passenger service requirement.

  • Correct me if I’m wrong …

    High Speed Rail PPPs only seem to work when 80-85% construction funding comes from public sources, with private sources contributing 20-15% for things like building hotel/retail in large stations. Then it gets fuzzy for me.

    I’ve heard of a private company bidding to operate a HSRe line after its built. But why should the public permit them, if said private company doesn’t underwrite more of the construction cost?

    • The PPP for the extension of the LGV Atlantique to Bordeaux is 50/50. I have no idea how workable it is.

      The reason publicly-built railroads should permit private companies to bid on operations is that they can and should use track access fees to pay off construction bonds.

      • Drewski

        I would VERY much like to see the details on that. SNCF is running in the red now, and rail freight is a longstanding weak point in all western European rail operations.

        I can understand a model where private transport operators contribute to improve or maximize capacity, but neither road, rail, air nor water markets in the US have seen any significant display of this. I can’t say it’s innately evil, but I’m still left with this impression: if the toll-road model, open to all comers who can be accommodated in capacity (schedule), gives maximum predictability to private sector AND max benefit/minimum cost to taxpayers, why is this model so hard for Americans to accept?

        I’ll add a nice nugget of nuance to this. Every major airport in the US still has general-aviation traffic–the equivalent of a courier in a subcompact versus a double semi rig. (Actually, the volume comparison is far worse against the subcompact.) But US airports do this every day. On the rails, the Federal Rail Administration is busy endorsing the almost-phallic fetish of coal haulers like NS and CSX. Those trains are often 2 miles long, they hammer the trackbed to pieces, and those companies use their influence to keep ANY passenger trains off the tracks–unless, of course, those passenger trains are magically capable of surviving a head-on collision with a 2-mile-long coal train. That’s commercially insane, and all parties are aware of it.

        In Germany, it’s not at all uncommon to see passenger rail service which ranges from articulated single-unit DMU or EMU, up to multi-car double-deck RB, RE, or S-Bahn service, and then six-car or longer IC/EC/ICE services. In the US, the FRA shows no real interest in passenger services. For example, why should every line carrying freight be assumed to carry a train fully capable of crushing an articulated single-unit DMU? Lighter freight load ratings may make the reach of rail greater for freight; in some cases, passenger traffic may help open the market for limited freight traffic. But we don’t get to consider this in the US, because we’re still told that “trains” mean immense 2-mile-long coal or piggyback trains. We in the US are also all but prohibited from considering all of our rails as a true network–it’s more important for NS and CSX to retain separate lines, than it is to use total corridor traffic as a tool for upgrading to standards beyond any single party’s capabilities. That’s why we in the US don’t have a network, and why we can’t use existing technology, and why our own government spends money dutifully squaring the pointless circle of single DMUs capable of surviving a direct frontal impact from a coal train. We strive to destroy our own market options.

        • Adirondacker12800

          The coal is going to be moved whether or not it’s in one two mile long train, two one mile long trains or four half mile long trains. There’s going to be the same amount of wear on the tracks. Marginally less if you move one two mile long coal train with five locomotives – the locomotives are going to be the heaviest thing in the consist – or with quarter mile long trains that can be hauled with one locomotive. The railroad is going to have marginally more money for track maintenance with a two mile long train, with one crew, than with eight quarter mile long trains with eight crews.

    • Danny

      A lot of the cost involved comes with owning the right-of-way…and the proportion of right-of-way cost to construction cost increases exponentially as you move closer to HSR worthy corridors. If the public decides that it is in the public interest to maintain those rights of way as government property, then they should cover that cost.

    • Max Wyss

      There is a serious difference between infrastructure and operation. Infrastructure is something long- and very long-term. Whereas operation is short term, and replaceable.

      The only body who can ensure the long-term publich interest for infrastructure is government (the freight railroad’s interest is private, not for the public).

      So, the (private) operator has to pay for the usage of the infrastructure. The price tag must be appropriate.

      As we see, infrstructure and operation (suitable to the infrastructure) are completely independent. So, there is no need for any operator to “underwrite for the infrastructure”.

      Getting to the Florida example, no operator with no “bigger” agenda would have agreed to the terms mentioned. I think all the potential bidders considered the risks to be “acquisition cost”.

  • Tijl

    That’s my home town in the picture!

    The difference is indeed that infrastructure is run by the governments in Europe. The government infrastructure manager sells “paths” to the different companies operating, which can be any freight company (full open access) or passenger companies (concession based, with the major concessions usually operated by the state railways, but eg in the UK all private operators).

    When too many paths are requested, there’s an automatic trigger in which track is declared overloaded and the infrastructure manager will investigate how to increase capacity for the track.

    In principle the infrastructure managers could be commercial companies (as for a brief not to successful period it was, in the UK), but for that to work, the companies currently owning the track would have to be split in track owning and rolling stock owning companies.

    However to offer paths in a commercial fashion you’d need an at least minimally reliable system.

    • Nathanael

      That actually sounds like a sane way to create “competition”. You need massive regulation over the services provided, however, in order to maintain scheduling and avoid overcrowding lines. Still, having operating companies bid for paths is at least plausible.

  • please see our fresh new approach to HSR in the United

    States!-see… nychicagorr.org That is our new HSR advocacy group

    web site that is still a bit under construction but has most

    information necessary… Regards, Mike

    • John W

      “web site that is still a bit under construction” – Please tell me you’re not planning to cram even more animated gifs on there. Though I suppose they do provide fair warning of how serious a project this is: A virgin 500-mile line that includes running straight through central Penn (including bridges and long tunnels) for just $10,000,000,000.00? I’m not sure if even the Chinese are getting HSR for under $20 million a mile, and the now cancelled Florida line was $28 million per mile using a straight ROW already set aside when they built the interstate.

      • Adirondacker12800

        The tunnel from Penn Station to Grand Central would cost 10B…. they are routing it over the former Pennsylvania but touting service to Grand Central, the terminal for the former New York Central. They don’t connect.

        http://www.nychicagorr.org/RouteMap.html

        • Buckeyeman

          This route appears to follow the route of the Pennsylvanian and west of Pittsburgh follow the route of ther Capitol Limited mostly, if not totally.

          • Adirondacker12800

            Sorta kinda the route of the Broadway Limited. . . which goes to Penn Station. No connection to Grand Central. If you want to get to Grand Central from Chicago you’d probably follow the route of the 20th Century Limited which doesn’t go through heart of Pennsylvania, just the little bit between Cleveland and Buffalo.

      • Spain builds HSR for less than $20 million per mile. But the numbers exclude new track through urban areas, and Spain generally has unusually low construction costs. France and Belgium build lines for about $20-30 million per mile, but they keep tunnels and viadcuts to a minimum.

        • John W

          Being charitable and assuming that the Hudson crossing would be costed as part of the NEC, what would be a realistic ballpark figure for what they are suggesting?

          • I have no idea. In Spain, it probably would cost more, but not a lot more. Anywhere else, it’s a pipedream.

            I’d suggest to forget about NY-Chicago, not including combined NY-Pittsburgh and Chicago-Pittsburgh runs, until train speeds are high enough to make it worthwhile for dedicated tracks through northern Pennsylvania. And even that may be never – the higher the speed is, the less important cutting 150 km is.

            • Adirondacker12800

              Pittsburgh is in southern Pennsylvania…
              Northern Pennsylvania is filled with lots of….. nothing….interspersed with lots of mountains which means lots of long tall viaducts connecting long deep tunnels.

              • Thank you. I’m well-aware. My point is that NY-Chicago alone, i.e. through northern Pennsylvania, isn’t worth it. Combining separate lines, i.e. NE, Keystone, and the Chicago Hub, and then running trains all the way, would make sense for the small number of people who’d rather take a 5-hour train ride than fly 2.5 hours.

              • Nathanael

                The number of people who’d rather take a 5 hour train ride than fly 2.5 hours (plus 1 hour security, 1 hour to airport at NY, 1 hour to airport at Chicago) is actually probably everyone.

                Did you mean the number who’d rather take an 7 hour train ride, or something like that?

              • No, I actually meant 5, which is the limit of conventional HSR technology. Based on the experience of SNCF and JR Central/West, such service should expect to get some end-to-end ridership, but most people would still fly, and the greatest use of such a line would be for intermediate markets.

                I’m pretty sure everyone in this forum would prefer a 5-hour train ride, but we’re a minority, albeit a significant one. I rode Amtrak to Buffalo for 8 hours instead of flying for 1; I’m not a representative sample of anything, and I suspect neither is anyone else here.

              • But, Nathanial, most Chicago/NYC traffic is not for trips actually originating in downtown Chicago and terminating in downtown New York ~ one or the other, sure, but not both. So some of the additional time to one or the other airport is offset by time to whichever is the closest train station.

                Supposed that Pittsburgh/Cleveland, the 3C corridor and Columbus/Toledo/Detroit were full fledged Regional HSR corridors capable of allowing Express HSR trains to run through.

                Then 220mph through Northern PA through to Northern Ohio through to Fort Wayne and then 160mph~220mph to Chicago would give:
                New York / Cleveland via Pitt/CLV, New York / Columbus / Cincinnati via HSR & 3C, New York / Toledo / Detroit via HSR & Columbus/Detroit line, Chicago / Detroit via HSR and Columbus/Detroit line, Chicago / Columbus via HSR and Columbus/Detroit line, Chicago / Cleveland via HSR and 3C, and Chicago / Pittsburgh via HSR and Pitt/CLV.

                But all of those network affects would first start by building the 110mph Rapid Rail systems, then upgrading to Regional HSR, and only then would that common corridor pool all of those routes.

  • Rick Patoski

    To see how private sector funds are being used successfully to fund transit expansion and operations TODAY look at the MTR Corp, Ltd “Rail plus Property” busineess model being used in a common sense symbiontic manner where the profits from real estate development at,over and intergraded with transit stations generates income that not only is now paying for the expansion of the rail system in the Hong Kong region but is being used to lower fares. Also, as a publicaly traded stock company it used the proceeds from a IPO (not funds from the public sector) to start the real estate deveopment portion of its business plan ( it’s now involved in 18.3 mil sq ft of retail space and 75,000 residentail units)and pays dividends to it stockholders, the largest of which is the govenment of Hong Kong rather than the government paying for rail expansion and operating subsidies. It also is now operating the commeter rail system in Londan, Melbourne, and Stockholm and I am guessing it will soon start applying their “Rail Plus Property” business model in these cities as well.

    The big problem is the US that prevents local rail operators from replicating this business model is that I do not know of any local or regional transit authorities that are permitted to acquire any real estate that is not for transit purposes and therefore can not fully recapture the income benefits to other properties from their transit improvement and service. But I do not know of why the MTR corporation can not enter into a contract to operate a major commuter rail system (i.e. like Metro North, LIRR, MBTA, SEPTA etc..and follow their rail pluss property business model. MTR is very good at what it does with 93% on time performance for its trains and the first to offer 3G wifi on all railway premisses. One can only hope that they get involved in the US soon becasue neither the federal and local governments nor the priate sector in the US seem to get it.. even when the model for generating and using private sector funds to fund rail transit expansions and operations is out there for all to see !

    • John W

      The MTR certainly won’t be doing that in London – they’re partners in a joint venture that has the operating contract for the Overground (which is only a fraction of London’s commuter rail network), and it’s only a 7-9 year contract. Don’t know about Melbourne or Stockholm, but I can’t see either city giving swathes of property to a foreign operator in that manner.

  • b

    There are a couple of pretty serious impediments to private sector passenger rail that haven’t been addressed completely here.

    First of all, as stated above, the freight rail companies don’t want to be forced to let other private railroads use their tracks. Those tracks are private property, after all. To quote a statement on this issue from the American Association of Railroads, “Freight railroads would consider conveying mandatory access to non-Amtrak passenger operators a taking of private property which requires just and reasonable compensation under the Constitution.” (That’s legal talk for “it’s gonna be real real expensive.”)

    Additionally, as mentioned in Amtrak’s written testimony, legal liability issues have to be worked out before any other companies get involved in passenger rail. Amtrak is required to carry $200 million in liability coverage. If an entity receives a federal grant under the Amtrak authorization (PRIIA) they also have to have insurance coverage. However, there are no insurance requirements for other passenger rail operators.

    These issues pose significant barriers to private passenger rail operations and to fix them will dramatically drive up costs.

  • I don’t really like the idea of a public-private partnership where a private operator takes over and sucks away most of the profit after the public sector has paid most of the cost. I think a true partnership would allow a private company to run their own independent operation on a shared line. A double-track TGV line (er, LGV) has a huge capacity. If you only run a dozen trains a day on it, that’s just wasting a good chunk of the investment. However, two organizations could combine their resources to pay for it, and both could get 100% of the capacity they need.

    The best complement I can think of for high-speed passenger service is high-speed mail/parcel service. UPS and FedEx already use intermodal trains, so they’d probably benefit from using high-speed trains slotted in between passenger runs or during the quiet overnight hours. Online purchasing has made parcel delivery a huge market, and this could allow them to expand overnight and 2nd-day delivery while limiting expansion of their aircraft fleets.

    Well, that’s a long shot.

    Anyway, I really wish that $53 billion the Obama administration is talking about could just get approved so we could stop fussing about it. Amtrak has required $36 billion in funding from the federal government over the 40 years of its existence. I they’d gotten most of that money in a lump back in the ’70s or ’80s and started up a core HSR network, they probably could have become profitable in short order and started building new lines with those profits.

    So going forward, I figure we can either kill off Amtrak entirely, keep funding it at the status quo and still have the same network 40 years from now as we did 40 years ago (losing tens of billions in the process), or just spend that $53 billion now to make it profitable and allow the network to expand as those profits get reinvested.

  • Before the Midwestern corporatists and Rick Scott scuttled their states’ rail plans, I said that if Republicans wanted to bring a fresher approach to rail travel that they would force rail commissions at the state level to consult with and eventually select private operators to run their trains. Eight years ago, Missouri likely would have selected Herzog to run the St. Louis-K.C. trains had it not been for last-minute moves made by Amtrak. After all, the monopoly in place has only been a DE FACTO one since 1997, so if the federal government really wants passenger rail service to once again prosper, it would let other companies that really want to operate trains do so.

    Notably, French national rail company SNCF produced a stunning report revealing plans for corridors in the Midwest, Texas, Florida, and California. These plans have gone nowhere so far

    It’s very hard for anyone to get a decent plan going given the following:
    1) The very same government monopoly grabbing 97% of the stimulus grants even as the Obama Administration practically forbade it from submitting the NEC
    2) More practical HSR plans like Express routes to St Louis and Cleveland/Detroit were never submitted or funded last year (I know they weren’t submitted, but either was a better testing ground than FL)
    3) Ideologically charged groups like the Tea Party who make compromises next to impossible

    There are several ways to end the monopoly and promote a revival of passenger rail:
    1) Open competition where all routes are opened up to competitive bidding regardless of distance
    2) Partial competition
    3) End the 40-year experiment and return every single route to the host railroads

    There are other options, but these are the primary ones to keep an eye on. The first two methods would require the FRA to set reasonable liability guidelines rather than ones that punish the Class Is unfairly and keep potential operators away. The third one is the worst case-scenario and doesn’t need further discussion.

    The fact of the matter is that what we have today simply does not work! As a result, there is little or no innovation. Amtrak had to be pushed to produce a plan to replace its aging equipment and still didn’t offer much in the way for overnight travelers. With just a few competitors buying from the likes of US Railcar or Siemens, Amtrak will be forced to buy more equipment just so it can keep up. SNCF and JR Central drafted rail plans or pledged to DBOM an entire HSR route while other companies expressed interest to the feds. Boardman was forced to produce an HSR division within Amtrak. The bottom line being: Amtrak will be pushed out of its comfort zone and forced to provide a better quality of service once other companies pop up.

    As for Mica and Shuster, the hearing was a step in the right direction and a recognition that intercity rail is badly broken and needs a new direction even though both men are too Northeast-centric to my liking.

    Joseph Szabo, head of the Federal Railroad Administration, said today that his agency would move forward with competitive bidding for services along two current Amtrak corridors, but why any company would want to bid out for the three-times-a-week Sunset Limited, for instance, is unclear.

    I could think of one possible reason why someone would bid on the Sunset Limited: It could provide a path on how to promote an overnight train route by someone other than Amtrak. The company could not only upgrade the equipment, but it would also be able to update the route to daily status. A public-private partnership with the government, the three hosts, and the independent operator would result in the hosts being paid handsomely by the feds.

    • “I could think of one possible reason why someone would bid on the Sunset Limited: It could provide a path on how to promote an overnight train route by someone other than Amtrak. The company could not only upgrade the equipment, but it would also be able to update the route to daily status. A public-private partnership with the government, the three hosts, and the independent operator would result in the hosts being paid handsomely by the feds.”

      I agree with about everything you said, but Amtrak DOES have a plan to make the Sunset Limited run daily, however shoddy, at least its a start. The only thing blocking that plan is the UPRR, and wants Amtrak to pay $750 million just for track upgrades; upgrades they were planning to do anyway. Me thinks no private company would want to come up with that much money upfront either, much less Amtrak.

      And that therein lies the problem with private companies bidding for the current conventional routes. Amtrak has a sweetheart of a deal with cheap insurance and liabilities. If private companies want to run passenger rail, they’ll have to have their own right-of-way.

      • Passenger rail owning track would be a bit like greyhound owning a highway – they couldn’t afford it, except for very high passenger routes. I think a public infrastructure company allowing open access, and then having states/fed have bidding processes for the subsidies of unprofitable routes that are in the public interest may be the way to go.

        • I agree with you. Any passenger rail entity shouldn’t own the rails. The potential debts could make it unsustainable for that company in the future, requiring federal intervention. Either your proposal or letting the FRA or USDOT own passenger-oriented infrastructure is the most practical way of going about things.

    • Drewski

      And I can give you a very clear example of a market where the private-sector fetish has all but destroyed opportunities for ANY passenger rail. Ohio.

      In northern Ohio, especially Northeast Ohio, the collapse of railroads which became Conrail also became a way to combine multiple routes into the best unified options. If you have four roughly parallel routes, and you use pieces of them to create a better-engineered unified corridor, then that’s analogous to building an expressway out of pieces of an existing road system. However, when Congress took on the needless task of selling off Conrail–in pieces–this also had the impact of re-fragmenting corridors in a weakened rail market, basically parallel to I-90 from Boston to Chicago, with a spur from Cleveland to Pittsburgh.

      In the Cleveland area, we have separate CSX and NS rights of way along the Erie shore, through Lake County on the way to Buffalo. It would be easy to use those existing rights of way to tease out mixed lines, high-speed freight, and high-speed passenger. Existing rail freight volume, plus freight and passenger diverted from road and air, plus traffic generated by the corridor’s unique capabilities, would easily be enough to justify market involvement IF the Feds restricted their subsidies for other means of transport.

      This isn’t going to happen at the Federal level, because CSX and NS want to keep the FRA as their pet, and they don’t want to relent on their worldview. In the corridor I described, you’re talking about two parallel corridors, sometimes in one right of way, with a total of four to six tracks, and electrified the whole way. In Cleveland’s Lake East corridor, none of this can happen at this time, which means that no private investors have any incentive to step forward and proffer their cash. Similarly, the Cleveland-Columbus corridor is very direct if you’re talking about proposed 3C, but freight diverts west via Marion. Again, two rights of way, but neither one gets the cash it needs, because the political focus remains on the self-interests of two private companies, not the best interests of the transportation market, or the Ohio or Federal tax money spent for creating or maintaining any type of transport infrastructure.

      So you will please excuse me if I take a dim view of this status-quo concept of “public-private partnership.” P3 didn’t work in London Underground, it has been a disaster for many NHS Trusts in the UK, and it also inflated costs by 30% for Brampton Civic Hospital in Brampton Ontario. I could add Network Rail to this list, except no major operator like Virgin, Arriva or First has engaged in serious discussion to even put up the cash to make major capacity (therefore service) improvements. When I see NS and CSX jointly offering to rebuild Cleveland’s Belt Line in exchange for getting rid of two lift bridges, then I might pay some attention to the noise about “private sector.”

      • A core question with public-private partnerships is who owns the infrastructure?

        Its quite bass-ackwards to set out PPP that end up with the private conmpany providing finance for the infrastructure, with the public providing a guaranteed revenue source to ensure that the private investment is a financial success … the cost of finance to a private company is higher than it is to the public, so guaranteed revenue to recoup private financing costs, plus a positive return to the private party, almost always means a higher net cost to the public.

        Turning that the right way around, its possible (although of course not certain) to have public infrastructure franchising out rights to operate private services, and actually have an outcome as good or better than a purely publicly run operation.

        • Adirondacker12800

          We have PPP models to look at in other transportation markets. Buses use public infrastructure to make private profit. Airlines do the same. The public owns the infrastructure, builds it with lower cost government loans and the private operators pay fees to use it. …. not that their fees cover the cost of their use but it’s a model…

  • Chris

    Before Amtrak was formed, the federal government considered just paying the private railroads to continue to run the passenger trains that they’d otherwise discontinue. Democrats objected, not wanting to subsidize private companies.

    Why hasn’t this idea resurfaced? Allow private freight railroads to run their own passenger trains, and offer them direct payments or tax credits in an amount below what Amtrak loses on the routes. If the freight railroads can find ways to run the trains more efficiently- for less than the payments or tax credits- then it’s a win-win situation. The government spends less on passenger trains, saving money for taxpayers, and freight railroads could make a profit on operating passenger trains.

    Plus the standard criticism of Amtrak- that it’s an inefficient, government-run entity, would no longer be valid.

    This couldn’t work in the Northeast Corridor and some other corridors, but it much of the country, it could.

    • Nathanael

      The private companies had in many cases been deliberately offering low-quality service in order to drive passengers away and justify discontinuation of service. (This is well documented.) I can see why sane politicians wouldn’t want to subsidize them.

      The fact is that most of the railroads existing today have the same attitude; they really really do NOT want to run passenger service.

    • jim

      What Nathanael said. Plus, the freights couldn’t actually run individual passenger services as cheaply as Amtrak does. They lack the economies of scale that Amtrak has. Amtrak has passenger rolling stock maintenance facilities, the overhead costs of which get amortized over all their passenger services. A company setting up to run a single passenger service would have to incur the cost of running a maintenance facility just for it. Amtrak gets away with an inadequate quantity of rolling stock by being able to shuffle it around. It has just enough passenger cars on the auto train. When a bunch of them got damaged a few years ago, Amtrak stole cars from the Cardinal to replace them and backfilled the Cardinal with single level cars. A privatized auto train wouldn’t be able to do that, so would be forced into a more expensive sparing strategy.

      • Adirondacker12800

        The private entity could contract out the maintenance to Amtrak. They could lease cars from Amtrak. They’d have to get accountants with very sharp pencils to see if that made economic sense but there’s no reason why they have to maintain their own shops, their own fleet or even their own staff.

        • jim

          Boeing tried that on the 787.

        • jim

          There’s also no reason to suppose that Amtrak would cooperate. They have a history of playing hardball against private competitors. The VRE Ops Contract, they were outbid by Keolis, who obviously expected to hire the Amtrak route-qualified engineers that it assumed that Amtrak would let go after losing the contract. Amtrak made extraordinary efforts to retain these people, thus denying them to Keolis who found themselves unable to perform on the start date of the contract. Amtrak consented to a short term contract extension on very favorable (to Amtrak) terms while Keolis scrounged around for people.

          I’m reasonably sure that were, say, the auto train to be privatized, Amtrak would reallocate the passenger cars to other routes (the Heartland Flyer is perennially sold out but loses money because its consists are too short, for example). They might sell the automobile carriers to the new operator, but the new operator would have to find its own passenger cars. If the new operator wished to contract with Amtrak for ticket selling and reservations or for rolling stock maintenance, I very much doubt Amtrak would quote at cost.

          • Adirondacker12800

            They could contract it all out to company like TTX. Form a new company – PTX for passenger train exchange instead of trailer train exchange. Or TTX-Passenger services…. The model doesn’t have to be every railroad recreating the vertical integration of the past.
            …. I know! they could call it the Pullman Company! Have another company provide hotel services! Call it the Harvey Company….

  • Scott Mercer

    I agree. Force the private rail carriers to operate SOME minimal amount of passenger rail service, but have the government subsidize things if need be (that is, they can’t make money).

    I understand this is the usual right-wing hogwash, that is, privatizing profits and subsidizing losses, but, and this is a very big but, if it can increase passenger rail service, then I would accede to it for the public ammenity it creates.

    • The problem is that if the private freight railroads get to run trains, they’ll run them using the same operating practices they use today – i.e. slow, FRA-compliant trains, ticket-punching conductors, long turnarounds. If the goal is to modernize passenger rail, it’s important to make sure the initial operators are familiar with modern passenger rail.

      • Max Wyss

        … and, most important, only when full.

        Or show me an US freight railroad running according to a timetable.

        • Nathanael

          CN is timetabled, though I guess it’s basically a Canadian railroad.

          • Drewski

            Have you ever read how hostile CN and CP have been to either GO or VIA? GO has paid to add (read: rebuild) a third track east of downtown Toronto, to somewhere around Scarboro Junction, and west-northwest (Georgetown corridor) out toward the airport. You can’t catch an hourly (or more frequent) train from the Niagara Frontier into Toronto because it always results in a fight with CN or CP (or both) at some point.

  • Chris and Scott nailed it right on the head. One of the best ways to handle competition is to have the right kind of a public-private balance, which is sorely missing today.

    The hosts and AAR may want to preserve the monopoly by rejecting other eager carriers like Arriva, but that is no better than Amtrak using the onerous liability requirements to keep private operators from running trains in America.

    My own opinion is that the government needs to be involved in planning new corridors, improving the long-distance network, and exploring unconventional rail travel (e.g. Auto Train expansion; trains that transport passengers to ports for cruises). Once the feds do those three things (in addition to infrastructure improvements and setting rules and regulations), they should then GET OUT OF THE WAY and let the rail companies can run the trains!

    I agree. Force the private rail carriers to operate SOME minimal amount of passenger rail service, but have the government subsidize things if need be (that is, they can’t make money).

    Bingo! The hosts could run the long-distance trains and even add frequencies. A consortium could replace Amtrak as the go through for any routes that run on more than one host RR’s route. Meanwhile, non-NEC states could let other operators run trains. Amtrak would only run a couple of LD routes, but they’d be allowed to focus on the areas that it considers to be natural parts of their system (Wolverines, Empire Service) or extensions of the NEC (SEHSR’s northern half, Piedmont).

  • G-Man (type E)

    — “how to make intercity rail less expensive to run, at least in terms of government subsidies.”
    Simple answer: Make it fast enough to provide a significant value to the patrons riding it. Then the ticket price can be set at a level that produces an operating profit. Also, forego property taxes on ROW with passenger service priority. Remember, according to Republicans, tax reductions don’t count in our budgeting.

    Long answer: create add-on amenities, like the bar car, cafe car, media car, etc. that further drive profitability just like the snack counter at a movie theater or the convenience store part of a gas station. Even if Amtrak continued to operate the train, those add-on cars could be private operations. Don’t they already do that with some posh railfan tours in private cars hooked up to the end of the train? How about hotels built with stations to leverage the real estate. Maybe we can install massaging lounge chairs ($1/minute), video gaming couchs, a Blackjack/slots car operated by a tribe, a business center – meeting lounge w/ teleconference capability, kids play area/daycare, exercise car……. The public sector too often lacks Creativity and the ability to innovate, take risks and try things that may or may not succeed, because politicians are afraid any failure will become an albatross and lead to a loss of power. The private sector, on the other hand, continues to fail magnificently with little consequence and hence, is prone to continue risking everything to make a buck in some novel way.

    • Nathanael

      It is well-documented that train services turn from operating loss to profit as they get much higher volume. And how do they get higher volume? Mostly by running faster.

Leave a Reply

 

 

 

Comment preview below as you type. You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Prove you\'re not spam (required) Time limit is exhausted. Please reload CAPTCHA.

For help if you have trouble posting or your comment is marked as spam, please email:
info (at) thetransportpolitic.com | Comment Rules

The Site / The Fight

  • by Yonah Freemark
  • Twitter: @yfreemark
  • yfreemark (at) thetransportpolitic (dot) com
  • Le progrès ne vaut que s'il est partagé par tous.

Email newsletter

Network

rss feed
comments feed
twitter feed