Discussing Privatization of the Northeast Corridor, but for What Aims?

» House Republicans suggest putting Amtrak’s primary line up for bids, but faith in the private sector is not enough to promote this change.

House Representative John Mica, a conservative Republican from central Florida and the Chairman of the Committee on Transportation and Infrastructure, has been berating Amtrak for years, so his announcement last week that he would promote the privatization of the Northeast Corridor comes as no surprise.

With Democrats still in control of the Senate and a Republican Party history of bringing up the issue and then promptly giving up in the 1980s and 90s — even when the GOP has controlled the Presidency or both houses of the Congress — any such plan is unlikely to move forward. Yet the question of the privatization of intercity railway operations in the United States will play a role in future debates, especially if the federal government continues to invest in new and improved rail networks. This may be the opening salvo in a years-long argument.

Before stepping into that, though, we need an honest discussion about the goals of the railway system and that of the transportation network in general. Is it there to generate profit for a small number of private corporations, or to ensure alternative mobility options to the largest possible percentage of the population? Should its operations be ultimately determined by surface-level profitability, or by public and political consensus?

Mr. Mica’s recent denunciations of the national railroad have come across as downright dogmatic: So convinced of the failures of Amtrak, he has been referring to it as a “Soviet-style” railroad. The committee released a chart showing little growth in Amtrak ridership along the corridor over the past thirty years to back up this notion.* Thus the committee chair’s privatization argument, founded in the broader modern conservative logic that claims — whatever the evidence suggests — that anything that the public sector does, the private sector can do better. For Mr. Mica, who is an adamant supporter of high-speed rail between Boston and Washington, this means that Amtrak’s current ownership of the Northeast Corridor is a stumbling block in the way of progress.

Instead of Amtrak’s 30-year, $117 billion proposal to build a new true high-speed link along the East Coast, Mr. Mica would produce the same benefits “in half the time and at significantly less cost,” thanks to private sector participation, which would be involved in building, designing, and operating the new system. His committee has yet to release any information showing how this could work.**

Avoiding the complicated issue of construction and focusing on operations alone, the committee compared Amtrak’s performance with that of Virgin Trains, which has since 1997 held the contract to operate the United Kingdom’s West Coast Main Line, connecting London with Birmingham, Manchester, and other cities. Mr. Mica made the claim that Virgin had been operationally profitable and been able to pay the government usage fees, compared to Amtrak, which he noted was subsidized. The U.K., which began the privatization of its railroads in the early 1990s, is the model the Florida congressman seems to be interested in imitating: The general idea, like in Great Britain, is to pull the Northeast Corridor itself out of the hands of Amtrak and hand it over to a new track-owning entity under the auspices of the Department of Transportation (the fate of the track section not owned by Amtrak in New York and Connecticut is unclear). Then private operators, potentially including Amtrak, would be able to bid out for operations rights.

This was an odd comparison to make, not only because Amtrak is operationally profitable in the Northeast Corridor, but also because Virgin’s history of operating trains in the U.K. has not been scot-free. Though ridership has increased more than expected, on-time performance of Virgin trains have never reached levels above 90%. Instead of paying £1 billion to the government as originally planned in the contract, the company actually received what were effectively £590 million in operating subsidies between 2002 and 2006, according to the National Audit Office (much of which was due to the government’s own poor contract writing).

And then there’s the fact that the U.K. government paid for most of the costs of the £9 billion upgrade to the West Coast Main Line that was completed in 2008. Can we compare Amtrak effectively to this history? The U.S. government certainly did not commit to a $15 billion upgrade of the Northeast Corridor over the past 15 years — in fact, the Northeast Corridor Master Plan, the last serious effort to improve the system, lasted between 1977 and 1998 and distributed only $6 billion to the line.

This is not to say that Virgin is a particularly bad example. Its peer companies have a history of dropping their contracts in order to avoid paying the government for the use of the railroad tracks. During the recession, several private companies simply determined that they could not handle the agreements they had signed just a few years before, putting several lines into public hands (which now are making a profit). But these failures do not “prove” anything: There is no evidence that a public sector entity would have done the same job more effectively. A well-functioning government service provider would have passed any profits or shareholder dividends back to the user or the government, arguably the better outcome — but how can we be sure that it would be well-functioning?

The irony for Mr. Mica is that Amtrak, especially in the Northeast, has been acting much like a private, profit-motivated company would. The company has prioritized profitability in its operations over expanded ridership: The growth of intercity buses between the region’s largest cities has been met with little decrease in rail prices, and that’s because Amtrak knows it can fill its trains even at higher fares. The continued operational profitability of the corridor in the face of this competition is indicative of this fact.

Why, then, bring up the issue? Because the value of the nation’s rail system is established by the policymakers determining how to distribute grants or to whom to award service contracts, whether they be to public or private entities. Alon Levy wrote pointedly last week that the major handicap to improved performance in the Northeast is not Amtrak but rather the Federal Railroad Administration, which determines the regulations that govern the operations of the railways. Public or private, these rules would have to be followed.

If Mr. Mica’s ambition is to improve rail services, a reasonable path must evaluate the risks and benefits associated with different models of transport operations. This might mean transferring control of the infrastructure to an independent entity, or altering regulations, or even promoting some competitive bidding for the rights to operate in certain rail corridors.

But a goal of moving yet another service out of public hands and into private ones mostly for the sake of denouncing government as a concept is one that cannot be accepted. The surface-level comparison Mr. Mica made between Amtrak and Virgin Trains is indicative of the lack of serious thought that has been devoted to this conversation thus far. We need to evaluate and determine the national vision for our transportation system, and then move on from there.

* There was no mention of the fact that Amtrak’s capacity problems are mostly structural, stemming from track conflicts with commuter railroads and an inability to buy new railcars until recently. Update, 31 May: Ross Capon of the National Association of Railroad Passengers notes that the decline in ridership cited by the committee was not accurate; the initial figures included New York to Philadelphia Clockers (turned over to New Jersey Transit in 2005) and trains between Philadelphia and Harrisburg, neither of which were included in the 2010 numbers. Comparing the same train service, Amtrak ridership on the Corridor increased from 7.7 million in 1981 to 10.4 million in 2010.

** Amtrak has recently announced that it will pursue partnerships with private investors on future improvements for the Corridor.

Image above: Amtrak Acela train, from Flickr user Angelo Leung (cc)