Hotline #776 -- September 14, 2012

Amtrak announced this week that it has experienced 11 consecutive monthly ridership records in the current fiscal year, setting its highest ever single month ridership record in the month of July.

Amtrak issued the release on September 10, highlighting the decade of unprecedented growth experienced by the railroad:

Through 11 months of FY 2012 (October 2011 - August 2012), total Amtrak ridership is up 3.4 percent as compared to the same period last year. When the current fiscal year ends on September 30, Amtrak expects a new annual ridership record will be set, surpassing the current record of 30.2 million passengers established in FY 2011.

From FY 2002 to FY 2011, Amtrak ridership increased 44 percent and set new annual records in 8 of those 9 years. This long-term growth is occurring across the Amtrak national network and on all Amtrak business lines, including the Northeast Corridor, state-supported and other short-distance routes, and long-distance services.

With the U.S. population expected to be well above 400 million by the year 2050, these ridership figures stress the importance of investment in passenger rail infrastructure and rolling stock to meet steadily rising demand.

The House Committee on Transportation & Infrastructure held a hearing titled “Amtrak Commuter Rail Service: The High Cost of Amtrak’s Operations” on September 11, featuring attacks on Amtrak’s participation in the commuter market by several members of the House Majority.

These attacks were led by Chairman John Mica (R-FL), who seemed unconcerned or unaware of the recently announced, record-breaking Amtrak ridership figures.

“Amtrak is a highly subsidized, Soviet-style rail system, but despite every ticket being underwritten nearly $50 by the taxpayers, Amtrak is an absolute failure in competing with the cost-effectiveness and level of service provided by the private sector,” Mica said.  The Chairman went on to say that “Amtrak needs to get out of the commuter rail business, the private sector should be given more opportunities to save taxpayers money in operating rail service, and federal funds should never be used by Amtrak to sue private entities for competition-related lawsuits.”

The hearing featured Amtrak’s President & CEO, Joseph Boardman, as well as representatives of independent rail operators and organized labor.  Boardman pushed back against the Chairman’s claim that Amtrak was operating monopolistically, pointing out that Amtrak only operates three commuter services out of the 26 commuter carriers in America listed by the American Public Transit Association—with Mica conceding that point.  Overall, Boardman seemed philosophical about the company’s place in the market:

From Amtrak’s point of view, the contract commuter business has both costs and benefits. It can generate net revenue, which allows us to reduce our dependence on Federal operating support. Because we do not use Federal funds to cross-subsidize these agencies, our bids can be more expensive than those of private companies that may underbid to enter the market or to build a market for other services such as capital replacement. Whatever the cause, profit margins have decreased significantly in recent years. 

Liability is also a major challenge. As you know, while Amtrak must maintain $200 million in liability insurance, other commuter operators are not subject to this requirement. When we take on a service, we must ensure that we don’t take on a liability obligation that could leave us vulnerable to a judgment or an award that could impact our financial viability. There are a lot of companies competing for the commuter business, and we are finding that agencies are increasingly asking them to take on much greater liability exposure in the event of an accident rather than having the agency purchase its own insurance to cover the risk. Amtrak cannot assume that risk. When responsibility for liability exposure is passed to a private commuter service operator that does not have adequate insurance, and can be constructed so that it can escape an unaffordable liability judgment through bankruptcy, the risk is in effect transferred to the riding public. If Amtrak assumes that liability, then the costs generated by a single commuter operation are transferred to the federal taxpayer, an option we do not believe is in our best interest.

[You can read more about the hearing on the NARP blog.]

In advance of the extension of Amtrak’s Downeaster to Freeport and Brunswick, Maine—which will begin revenue service on November 1, it was announced today—members of TrainRiders/Northeast gathered in Freeport yesterday to celebrate the successful advocacy work that paved the way.

NARP President Ross Capon was on hand to congratulate TrainRiders/NE Chairman Wayne Davis for achieving what many called an “impossible dream” of bringing Amtrak service back to northern New England, while outlining challenges at the federal level.

Patricia Quinn—executive director of the Northern New England Passenger Rail Authority, which manages the service—was also in attendance to speak about the Downeaster’ impressive ridership and operating figures.

"It's a huge milestone," Quinn told the Associated Press on September 12. "Really, the service expanding to Freeport and Brunswick was always part of the plan. When we inaugurated the service in 2001, it was supposed to happen in a couple of years. To make it finally happen is pretty exciting."

Senator Olypmia Snowe (R-ME), who played an integral role in securing funding for the Downeaster’s restoration in 2001, was also on hand to praise the benefits the passenger train service had brought to the region.

"This route will be an indispensable economic boon for Maine,” said the Senator.

The U.S. Department of Transportation awarded $71 million in rail funding for the Indiana Gateway Project, which will relieve current passenger and freight rail congestion, and support future development of high performance intercity passenger train service throughout the Midwest.

“The Indiana Gateway project will create jobs and grow our economy over the long-term by moving people and goods more efficiently than ever before,” said Secretary LaHood. “This project will help eliminate severe chokepoints in the region’s rail network while creating capacity to handle future rail demand as our population grows.”

Currently, more than 90 freight trains and 14 Amtrak intercity passenger trains travel between Porter, Indiana and the border between Indiana and Illinois everyday—a 29.3 mile stretch of track owned by Norfolk Southern Railway.  This project will improve reliability and reduce congestion through upgrades to the signaling system and track reconfiguration. 

In its announcement, the U.S. DOT also described the Indiana Gateway as a necessary step in developing and expanding high performance passenger rail throughout the Midwest:

The completion of this project will significantly strengthen the Midwest Regional Rail Network, which will connect more than 40 cities in the Midwest. More than 100 million people call the Midwest region home, with the vast majority of residents living within 500 miles of the Chicago rail hub. Using the Gross Domestic Product as a measure, the Great Lakes-Midwest economic region would be the fifth largest economy if it were its own country.

With more than $2.5 billion already invested in the Midwest since 2009, funding 39 projects in eight states, the Federal Railroad Administration and its state partners are making great progress on High-Speed and Intercity Passenger Rail projects across the Midwest. Nationwide, more than $12.0 billion has been invested in 153 projects in 32 states, laying the foundation for a 21st century passenger rail network.

Officials are also pointing to the jobs that this investment will generate, shoring up a construction sector that is still struggling to rebound from the recession.

“The Indiana Gateway project will create jobs in the short term, improve the transport of passengers and cargo in the midterm, and build a foundation for a thriving rail infrastructure and a sound regional economy in the long term,” US Representative Pete Visclosky (D-IN) told the Fort Wayne Journal Gazette.

The National Resource Defense Council released poll results showing that a majority of Americans would prefer to drive less, but almost 3/4ths feel that they have “no choice” but to drive as much as they do.

The poll also found that two out of three Americans say they want more government investment directed towards the expansion and improvement of public transit and rail.

Highlights from the poll include:

·         59 percent feel the transportation system is “outdated, unreliable and inefficient”

·         55 percent prefer to drive less, but 74 percent say they have no choice

·         58 percent would like to use public transportation more often, but it is not convenient or available from their home or work

·         59 percent would like more transportation options so they have the freedom to travel other than by driving

·         63 percent (more than three in five Americans) would rather address traffic by improving public transportation (42 percent) or developing communities where people do not have to drive as much (21 percent) – as opposed to building new roads, an approach preferred by only one in five Americans (20 percent)

·         64 percent say their community would benefit from an expanded and improved public transportation system, such as rail and buses

You can see the full results of the poll, along with the methodology employed, on the NRDC’s website.

The White House announced that it will nominate infrastructure investment specialist Christopher R. Beall to Amtrak’s Board of Directors.

The White House website provided a summary of Beall’s professional accomplishments:

“[Beall] is a Partner at Highstar Capital, L.P., an infrastructure investment firm specializing in the transportation, environmental services, and energy sectors. From 2003 to 2004, Mr. Beall served as the Chief Financial Officer for Aslan Group, where he directed capital and human resource optimization efforts and oversaw the company's entry into the environmental services business. Before joining Aslan, he served as an Associate in the Global Natural Resources division of Lehman Brothers Inc. from 2000 to 2003.  Mr. Beall received a B.S. in Mechanical Engineering from Oklahoma State University and an M.B.A. from Harvard.”

Given the railroad’s ambitious plans for the Northeast Corridor—both for track infrastructure modernization and station development—the nomination could be seen as an attempt to provide the Amtrak board with additional expertise in the investment industry.

USA Today is reporting that, for the 13^th time this year, the airline industry is attempting to raise airfare across the country.  If the attempt succeeds, it would lead to the sixth fare increase this year.

The fare increase was led by industry leader Southwest Airlines, which will implement a $5 fare hike (each way) on around 400 of its routes—that is equal to roughly 10 percent of the total routes operate by the company.  The fact that the fare hike is being led by Southwest suggests the increase will stick.

"I have never seen a hike with Southwest participating that didn't stick," Rick Seaney, founder of FareCompare.com, told USA Today.

Seaney identifies rising jet fuel prices as a leading culprit.