Think Privatizing Amtrak Services is a Good Idea? Think Again.

Privatization of Amtrak service could disrupt commuter rail lines that run on its tracks. Source: GAO

House Transportation Committee Chair John Mica (R-FL) is moving forward with his plan to hand over the Northeast Corridor to private companies, despite (or because of) the fact that such a move could write Amtrak’s obituary.

Is privatizing the corridor a good move? Mica and Rep. Bill Shuster (R-PA) say that with the participation of private companies, they can build “real high-speed rail on NEC – less than two hours between WDC and NYC” and they can “double total intercity rail traffic on NEC.” They claim they can do all that for far less than Amtrak’s proposed price tag of $117 billion.

Commuter Rail

But some say that’s “not a rational plan.” One Hill staffer working on transportation issues said that Mica’s idea “just doesn’t work.” After all, she says, as long as commuter rail shares the track with intercity rail, there’s no way to double intercity service and run it at 120-mph speeds while still accommodating local train service. She says unless their plan is to raise fares exponentially to gather funds to build a whole new parallel track, it’s impossible to meet Mica’s goals under the terms he’s setting.

A 2006 GAO report [PDF], foreseeing the GOP attack on Amtrak, found that an “abrupt Amtrak cessation” would be severely disruptive to transit agencies up and down the corridor. “Seven of the nine commuter rail agencies in the Northeast operate over Amtrak-owned portions of the Northeast Corridor,” the GAO found. “According to officials from these agencies, access to Amtrak’s infrastructure is essential to their services.”

Even if services kept running but the management switched to a private company, the GAO warned that the transition “would take months, not weeks” and would involve complex labor and liability issues. “So we’re just putting everyone through all this upheaval to essentially put in the exact same thing, just under a different name,” said the staffer.

All We Are Saying is Give Amtrak a Chance

Meanwhile, PRIIA, the law that reauthorized Amtrak in 2008 [PDF], is still in its infancy. It re-invested in the state of good repair of Amtrak’s infrastructure and sought to resolve its debts. Some say it’s too early in that process to bury Amtrak now. Besides, Amtrak itself is inviting the private sector to collaborate with them on upgrading the NEC. Proposals were just due two weeks ago. Again, to many, it’s premature to interrupt this process.

Federal Assets

More reasons to oppose the privatization scheme are coming out of the woodwork each day. Sen. Dick Durbin (D-IL) just introduced a bill, the Protecting Taxpayers in Transportation Asset Transfers Act, which draws attention to another problem with the plan: that privatization squanders federal investments in public infrastructure.

Durbin’s bill would help ameliorate that issue by requiring repayment to the federal government, as well as mandating the consideration of factors such as the environment, public health, commerce and national security. It also introduces new accountability measures to ensure sound maintenance and the disclosure of anticipated effects on wages and employment.

“The last transportation bill alone provided states with an average of $48 billion per year for upgrades to roads, bridges and mass transit systems,” said Durbin. “Any deal to sell or lease these assets should be closely examined and include a return on the federal taxpayer investment.”

Bailouts

If that weren’t enough reason for liberals and conservatives alike to flee, screaming, from any plan to sell off our most valuable transportation asset, consider this: Reconnecting America says, “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,” Reconnecting America continues. “This approach will require an unknown amount of taxpayer funds in an effort to attract private investors to upgrade, maintain and operate the NEC.”

British Government support to the rail system, 1985-present. Source: Reconnecting America/Office of the Rail Regulator, UK DIT

Republicans constantly point to Virgin Rail in the UK as a great privatization success story, but in fact, the company that took over the rail infrastructure went bankrupt just five years after assuming ownership and the government had to take over the company, with the net effect that the taxpayer portion of passenger rail funding increased after privatization. Virgin, the operator, stayed afloat – but according to Darnell Grisby of Reconnecting America, “If Virgin had to cover its own maintenance and capital needs, its balance sheet would be bleeding as well.” This is the model Mica and Shuster are looking to for guidance on the NEC.

Add to all of these pitfalls the fact that by taking the profitable NEC off Amtrak’s books, the lucrative Acela line can no longer help pay for long-distance rail service in the rest of the country. If the GOP thinks per-passenger federal subsidies on those money-losing lines are high now, just wait until Amtrak has no ability of its own to help cover those services.