We have a guest comment from Jack Lettiere, former New Jersey DOT Commissioner and former NJ Transit Board Chairman.

The title of your article truly represents an unsettling fact.... it is really the same old debate. Given its context and nature, it will yield the same result for our customers and commuters... not much! Where is the new thinking? Before we begin a discussion of whether the private sector can do a better job than Amtrak, we should first be asking what are we trying to achieve in the NEC and why.

I would suggest that our focus on Amtrak vs. privatization may be a premature discussion. The old debate concentrates on 'how" Amtrak should operate rather than on "what" it is we really want to accomplish.We need to consider ALL of the services provided by ALL rail transit providers (e.g. Amtrak, NJ TRANSIT, MARC, SEPTA, etc) and how do we best use these resources (equipment, stations, staff, rights of way) to meet the apparent needs of the NEC customers. This approach is Business 101.Without an understanding of what we want to achieve and the resources that are available to accomplish it, a well-reasoned decision on privatization is not possible.

Furthermore, during this "same old debate", we have forgotten the States who operate on the NEC and provide millions of riders with service each day. Given this extensive operating resource, let's put our efforts in addressing how the transit system can provide the customer with the best service at the lowest possible cost throughout the Northeast? Privatization can be part of that equation, but not the only other consideration. If we think that privatization alone will bring that result, we may be just having a theoretical argument without considering the entirety of the system. This is a difficult undertaking. primarily because discussions will get caught in the woolly underbrush of organizational self-interest and ideological pomp. What about our customers?

For example, about eight or nine years ago, NJ TRANSIT took over the operation of Amtrak's "Clocker Service" between Philadelphia and New York City. NJ TRANSIT operated it at a lower cost and with greater service reliability. Many more of these types of service/ equipment redundancies exist within the system that add tremendous costs to the operator and eventually to the customer. Unless the Northeast is willing to put all of its scarce resources on the table, discuss different management structures and ticketing options (need the transit equivalent of E-ZPass, common ticketing methods), we will continue with the same old debate.

We need to be less concerned about the agencies / organizations individual well-being and more concerned about the customer. I guess what I am suggesting is that the transit system need to be rationalized to meet the needs of the customer. We seem to be stuck in a 1940's transit paradigm. A business systems approach might lead us to a deliberate a consortium of operators (States, Amtrak, Private Contractors) with a board that deploys all owner resources to provide service across the system at the lowest possible cost. Think about it, how many operators do we need to provide service from Trenton to Philadelphia, New York to Philadelphia, etc?

How can we ask the federal government or our customers to pay more for a system when we do not operate it as efficiently and effectively as we can?

Let's change the debate to Lowest cost / Best service vs.Current Operations rather than Amtrak vs. privatization. Perhaps we can then move to a constructive conversation with better results for the public.This will be a very hard thing to accomplish, but that's why they call it work!

I surely do not claim to have all the answers. My objective is to move the debate in a more productive place.

To the question of whether or not this is the same old debate, the answer is yes.

The purpose of running a national passenger rail system isn’t to enrich Wall Street and wealthy investors by handing them one of the nation’s most prized and complex surface transportation corridors, the Northeast Corridor (NEC). This proposed privatization experiment does exactly that – and it will bankrupt Amtrak and put daily commuter rail service at risk on the East Coast and around the country.

The proposal offered by Reps. Mica and Shuster literally ends Amtrak’s operating rights on the NEC, essentially seizes Amtrak’s assets (a directive that has launched a robust “takings clause” debate) and puts Amtrak service at risk everywhere else. What do the 700,000 people who travel on the Northeast Corridor every day get from this scheme? Uncertainty and chaos. And what do American taxpayers get in return after decades of investment? Nothing except for wealthy investors looking to make a buck.

We support boosting the role of the private sector in our rail transportation system but we are opposed to privatizing and breaking up Amtrak, especially at a time that the company has launched a new strategic vision that embraces a partnership with the private sector in the hope of bringing 220 M.P.H. service to the NEC.

The Mica-Shuster proposal is a solution in search of a problem. Amtrak is doing better today than at any time in its history. Acela and all NEC services are booming, and overall demand for more train travel across America is off the charts, with ridership up 36 percent since 2000. The only thing missing is the will in Congress to fund a long-term vision.

Privatization is hardly a new idea. It has been discredited when attempted in other parts of the world, most notably in Great Britain where fares went up and service and safety deteriorated. In the end, the U.K. government doled out billions to untangle the mess.

The proponents of privatization repeatedly have pointed to a different U.K. privatization example: Virgin Trains. They present wonderful statistics about Virgin Trains but conveniently leave out a few key facts. The truth is that Richard Branson-owned Virgin Trains has received – and continues to receive – large public subsidies. The system as a whole became far less efficient after privatization with a recent study showing that the privatized UK system is now 35 percent more expensive to operate than the state-owned European railways. We’ve even heard that Virgin is repaying the government. Sure sounds great. But since 2002, Virgin has received 2.6 billion dollars in direct public subsidies. It’s true that in 2008-09 it paid back 81 million dollars. But a year later it was again receiving more than it repaid. Overall, between 1996 and 2009, revenues from the UK’s privatized system more than doubled but during the same period the public subsidy grew a whopping 500 percent. Virgin Trains is hardly an example of unleashing the power of the private sector – it’s an example of public spending enriching private investors.

Despite claims that the proposed legislation takes care of workers and holds harmless Amtrak’s employees, this plan guarantees the workers who lose their jobs nothing except a weak “hiring preference” that only gives them a chance to be considered for a job. Nothing else. They also lose their bargaining rights and thus the protections in their contracts. And coverage under the Railroad Retirement pension, unemployment and disability system is taken away. By removing thousands of workers from Railroad Retirement the Mica-Shuster proposal could place the entire pension system at risk and along the way impose enormous tax increases on the participating employers including the private freight railroads. Under the Mica-Shuster plan, by 2033, the tax rates for the Railroad Retirement program would rise to a staggering 27 percent.

Make no mistake, this is not a serious plan to modernize our high speed rail system – by design, it is a plan to destroy Amtrak.

Congress should reject this scheme. It should instead focus on completion of a long-term surface transportation bill that embraces the role of Amtrak as the centerpiece of high speed rail operations. It should put to rest the idea that the NEC and all its complexities should be privatized, and provide stable and long-term federal policy and funding for the future of our transportation system.

In many ways, this is the old Amtrak debate, complete with ideological axes to grind but still lacking answers to the tough, fundamental questions:

What will the ongoing role of the federal government be to support operations that are not profitable but provide net public benefits? As Emil points out, most Amtrak corridors and routes will not make even an operational profit and would be unattractive to private investors without federal subsidy guarantees. It is instructive in the U.K. that subsidies increased to private rail operators (such as Virgin) after privatization, in part to pay for infrastructure upgrades on long neglected corridors.

Will the House of Representatives commit to such a funding structure that would provide certainties for private companies and upgrade rail infrastructure? If so, how would they support ongoing operations and capital infrastructure needs? Upfront payments, credit enhancements, availability payments, annual subsidies? How will these work with the current budget process?

Other vexing issues include:

How will current equity holders in Amtrak be compensated?

How will existing labor contracts and railroad retirement benefits be managed?

Will Amtrak's current operational cross-subsidies be retained? If so, how? If not, what is the likely effect on those routes that generate "inadequate" revenues?

How would a multitude of private operators work with freight rail companies that own most of the nation's track infrastructure?

The history of Amtrak is one in which long-term capital planning has been very challenging with few funds available for new capital equipment and maintenance of existing lines. In addition, Amtrak has been challenged to maintain many routes to protect policymakers’ views of a national system.

Let’s have answers to these tough questions before we think about who will manage, operate and maintain the system. Their success, or Amtrak’s, will only come if we have more certainty in a national rail policy and this will happen when all sides talk with each other, not at each other.

Steve Van Beek

At TEN, we disagree with the idea that privatization is always cheaper or more efficient. However, we don't need to speculate about the potential impacts of passenger rail privatization. Transit systems across the world have experimented with privatization and the results are virtually always the same: the public ends up paying more for less and less service.

As an example, let's look at what happened in Britain. In the mid-1990s, the Conservative government in the UK set about breaking up the national British Railways and selling it off to a series of private investors. Since then, the financial realities of rail service have forced the government to subsidize many commercially unsuccessful services. Without the buying power of a single operator like the former British Railways, costs have increased dramatically and incentives to innovate and modernize have decreased leaving the infrastructure in Britain decades behind the publicly-run systems of nearby France and Germany. The British government now spends more (even after inflation is accounted for) subsidizing these unsuccessful commercial rail operators than it did simply running the publicly-owned British Railways. Is this really what we want to happen in the US? If privatization does become a reality, there has to be accountability. Just this week, Senator Durbin introduced a bill that would set common-sense rules for privatized roads, transit and other transportation infrastructure. The bill would require the disclosure of anticipated effects on wages, employment, and work rules. We at TEN applaud Sen. Durbin's focus on job impacts. Privatization is ultimately a dangerous gamble and one that we at TEN do not support.

Chairman Mica's proposal for change in intercity passenger rail services in the Northeast Corridor (NEC) can play a useful role, in stimulating a broader and more constructive discussion about how these services might be provided. Some have described (and criticized) his proposal, as a call for "privatization" of NEC. It more appropriately might be seen, as a proposal to open-up these services to greater competition and to market forces.

There appear to be some similarities between Chairman Mica's ideas and those contained in the Bush Administration's intercity passenger rail bill. The Bush proposal started from the idea that "Amtrak" was not necessarily synonymous with "intercity passenger rail" and that a "national passenger rail system" could be one that was constructed on the basis of viable regional networks, operating in corridors, in which there were markets for intercity passenger rail. Obviously, NEC is such a corridor.

Neither the Bush Administration bill nor, apparently, the Mica proposal recommended that the ownership of NEC should be transferred to the private sector (although there have been such proposals from others). President Bush and Secretary Mineta proposed, instead, that ownership of NEC ROW (except for those portions of ROW between Washington, DC, and Boston, MA, that are owned by the States of Massachusetts, New York, and Connecticut or their agencies) should rest with the federal government and that decisions over how and who would operate passenger trains in that ROW should rest with an entity, in which both the federal government and the states of NEC would play key roles. Private sector engagement in this process would occur through the opportunity for private companies and ventures to compete with Amtrak to operate intercity passenger rail services in NEC.

I believe now, as I did when I served at U.S. Department of Transportation under President Bush, that such competition would offer the hope, if not the promise, of enhanced service in NEC. The important thing to accomplish is to end Amtrak's monopoly over such services, not necessarily to dislodge Amtrak from providing it. The continued existence of Amtrak's statutory monopoly in NEC is not in the interest of intercity passenger rail customers and the public anymore than monopolies serve the interests of customers and the publc in other sectors of the American economy.

Another positive thing that could result from Chairman Mica's proposal is greater engagement of the states in NEC in the key decisions about operations of intercity passenger rail in this region.

A proposal to change the public entity or organization that owns NEC and to open-up operations to competition between public and private firms is not unique to the Mica proposal and was not new in the Bush Administration's bill. Such a proposal draws on elements of the reforms of British Rail, on the changes in the national rail systems in Japan and in several western European nations, and on the conclusions and recommendations of earlier "blue ribbon commissions" that have studied Amtrak and NEC.

Finally, whatever the institutional reforms that might occur for NEC, the ROW and other infrastructure in the Corridor must first be brought to a state of good repair. While this program of restoration should be a mixed federal and state responsibility, the greater part of this capital investment burden should be borne by the federal government. Similarly, we should consider carefully whether operations of train service by the entity or entities that win the concession to operate it should include maintenance of ROW or whether that continuing responsibility should remain in the public sector. In this regard, too, there are lessons from the experiences of other nations that have undertaken reform of their passenger rail systems and have introduced competition in the provision of these services.

Fawn –

Thank you for publishing the illuminating guest comment from John Robert Smith. I have three questions about it:

a) Where is the evidence that Amtrak’s Northeast Corridor operations are “profitable”?

b) On what basis does John Robert assume that the federal government — which has run out of money — will bail out private interests that choose to invest in rail privatization?

c) Would Reconnecting America support such bailouts?

I strongly support the recommendations in the Mica-Shuster Intercity Rail bill. The recommendations are right on and format innovative and impressive

As a transportation professional for many years I have long been advocating the importance of the Northeast Corridor and the need for real high speed (150MPH to 200MPH) service.Bringing private sector talent to bear on issue through rigorous competition with specified performance criteria, as the bill proposes, may yet bring effective and profitable high speed rail service to this unique corridor.I believe that the private sector, its engineers and designers, construction, maintenance and repair contractors, operators and financiers have the will and capacity to meet the challenge.

Here is a guest comment from John Robert Smith, President and CEO of Reconnecting America:

Representative John Mica (R-FL), Chairman of the House Transportation and Infrastructure Committee, announced a far-reaching plan to privatize the Northeast Corridor (NEC) as well as intercity passenger and commuter rail service.

I applaud the Chairman’s focus on creative approaches to improve the nation’s intercity rail system. We agree with the Chairman that America still needs a national rail system and that taxpayers need to be protected. But we have concerns that this approach may fall short on these goals.

These concerns include:

1.The fact that very few, if any of the long-distance lines will attract private sector funding. The focus on privatizing the Northeast Corridor will weaken the existing national system. Removing the profitable NEC from the current system of shared benefits deprives the rest of the nation’s rail system of critically needed operating assistance. This approach, as proposed, may weaken or terminate the intercity rail connections that are the lifelines in small towns from Montana to West Virginia, as well as big cities such as Chicago and Los Angeles.

2.Globally, rail privatization has led to costly government bailouts of private companies that have acquired too much risk. Investors have an implicit assumption that taxpayers will provide a backstop for companies that make risky choices to maximize profits.

3.This approach will require an unknown amount of taxpayer funds in an effort to attract private investors to upgrade, maintain and operate the NEC.

These questions of how to maintain and upgrade a national system, and how to protect the public interest if we privatize a taxpayer-funded asset are fundamentally important, but heretofore, unanswered questions. I look forward to hearing more on these specific topics from the Chairman when he formally introduces his proposal on Tuesday.

Chairman Mica’s welcome initiative offers a new twist to the debate about Amtrak. Contracting out rail passenger services is a good idea, and for the reason he gave: If private firms can do it better, or cheaper, why should they not be given the chance? Why not indeed? Some might even ask why Amtrak itself does not seek outside bids for all of its services.

Another advantage of contracting out services is that the bids would give us credible information about which of Amtrak’s services could be made financially viable.

Those of us who favor “integrated transport planning” might ask why

the "multi-modal" folks in the Department of Transportation do not go further, and devise bidding processes that would accept bids for high-quality passenger services being provided by other modes. For example, as demonstrated in the Washington to New York corridor: For many journeys, buses on uncongested roads can offer more frequent, cheaper and faster door-to-door seated services than can be provided by steel-wheeled trains on fixed tracks.