CRS: Northeast Corridor Privatization Plan Violates Constitution

The nonpartisan Congressional Research Service has examined the question of whether the GOP plan to privatize Amtrak’s most valuable corridor is constitutional – and it’s determined that it is not.

Warning: this is about to get a little wonky. But I figure if Streetsblog readers can get all nerdy on transit, you can probably geek out on legalese every once in a while too.

CRS looked at two constitutional provisions and found that the GOP plan violates them both.

First: the Takings Clause [PDF]. The government is allowed to take private property for public use, as long as the owner is justly compensated. The bill proposes to transfer the corridor and rolling stock from Amtrak to the USDOT.

According to CRS, this poses three constitutional questions:

  • Is Amtrak an entity outside the government? (It’s not a “taking” if property is transferred to different agencies within the government.) On this question, CRS says that the federal statute creating Amtrak unequivocally stated that it “is not a department, agency, or instrumentality of the United States Government.” The courts have upheld this definition.
  • Do the assets to be transferred constitute “property” under the Takings Clause? CRS says they are “classic, well-established forms of Taking Clause property.”
  • Is the transfer of assets from Amtrak to USDOT a taking? Indeed, it’s a “paradigmatic” taking, according to CRS. The only way for the term not to apply is if the transfer were somehow deemed non-coercive, since the draft bill contains no mechanism for enforcement. Still, CRS concludes that the “not-truly-coercive argument seems unlikely to succeed.”

OK, so it’s a taking. That’s fine – as we said, the constitution allows takings – as long as they’re justly compensated and for the public use. Whatever you think of the plan to privatize Amtrak, apparently just about anything Congress decides to do satisfies the “public use” clause. But the question of compensation is thornier.

Under the bill, the compensation Amtrak will be awarded consists of “all but one share of the preferred stock of Amtrak held by the Secretary” (USDOT holds all of Amtrak’s preferred stock) and relief of all debts to USDOT. CRS doesn’t make a determination on what the value of that compensation is, but Amtrak’s common stock, at least, is virtually worthless.

Either way, CRS says, it’s not so much the amount of the compensation as its form that is troubling. State courts have consistently found that “money is the only legally adequate compensation.”

Moving on now to the Appointments Clause [PDF]. Paradoxically, the reasoning behind CRS’s conclusion that the rail plan violates the Appointments Clause contradicts the reasoning behind its conclusion that it violates the Takings Clause.

The Appointments Clause protects the separation and balance of powers by vesting the president with the power to appoint high-level officials only with the advice and consent of the Senate. The rail privatization proposal would create a Northeast Corridor Committee that essentially takes over the powers of Amtrak, with broad authority over the acquisition and improvement of rail facilities. CRS finds that the powers given to the members of that committee are significant enough to warrant presidential appointment with Senate approval, under the Appointments Clause.

Here’s the rub: in order to determine this, CRS found that Amtrak is enough of a federal entity to warrant constitutional appointments, as to any other key federal post. In so doing, it cites a Supreme Court case that decided that Amtrak was enough of a federal entity that it had to abide by governmental free-speech mandates.

In discussing the Takings Clause, CRS found this case to be somewhat of an outlier in a case history that generally defined Amtrak as independent. But in discussing the Appointments Clause, CRS quotes the Justice Department as saying “we can conceive of no principled basis for distinguishing between the status of a federal entity vis-à-vis constitutional obligations relating to individual rights and vis-à-vis the structural obligations that the Constitution imposes on federal entities.” Which is to say, either Amtrak is a federal entity or it isn’t. And in this case, they found that it is.

The way that the House had proposed to appoint the five members of the executive committee was a little more haphazard than what the Appointments Clause mandates. The committee, under the plan, would consist of (A) The Secretary of Transportation,  (B) one member representing the states of the Northeast Corridor, appointed by the governors (and DC’s mayor), (C) one member appointed by the Speaker of the House of Representatives and one member appointed by the majority leader of the Senate, and (D) one member, selected by a majority of the voting members of the Northeast Corridor Infrastructure and Operations Advisory Commission.

The House Transportation Committee can try to argue with the contradictions behind the CRS results, but it most likely cannot escape the fact that the rail plan, as currently written, violates at least one constitutional amendment.

Top committee Democrat Nick Rahall of West Virginia couldn’t be more pleased. “The ideals enshrined in the Constitution by our Founding Fathers have guided our Nation for centuries and Republicans should not railroad these principles in their flawed rush to privatize Amtrak,” he said in a statement. “This ideological assault on Amtrak is nothing more than a Transcontinental Tragedy that will result in a Constitutional Catastrophe.”

  • Anonymous

    Here’s a kink: how would it even be a “taking” to begin with?

    The federal government buys property all the time without invoking the takings clause. Just like any other entity, it needs to purchase things sometimes, so it negotiates a price and pays for it … just like any company or person. The takings clause only applies to cases of eminent domain, in which the party whose property is being taken does not consent to the transaction. Since Amtrak is a government-owned corporation, the only consent the government would need to transfer property is … its own.

    Now, I’m not sure if the legislation establishing other government owned corporations like the Tennessee Valley Authority or the Federal Deposit Insurance Corporation were as clear as Amtrak’s that the corporation “is not a department, agency, or instrumentality of the United States Government.” But if you take the logic of this post and apply it to other government owned corporations, that would mean that the government essentially cannot repurpose or sell any property owned by government-owned corporations. The transfer of the Panama Canal, for example, would be unconstitutional.

    Or, more closely related to this issue, the dissolution of Conrail would have been unconstitutional.

  • Neroden

     Just wrong.  The government would need the consent of Amtrak’s board.  Amtrak is a private corporation established by government charter… but the rules under which it was established don’t allow the government to unilaterally fire the board and replace it with suck-ups.

    And the current board would not consent to having its price asset taken.

  • Neroden

     Conrail differs in that the board of Conrail was stacked with people who were willing to privatize it and sell it off *before* the privatization was done.  Yes, that *could* be done with Amtrak but it would take years.

  • I don’t know about now, but in 2005 Amtrak’s board was so pro-privatization it fired David Gunn for focusing on a state of good repair first and defending rail subsidies.

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