Statement for House hearing on reducing regulatory burdens

Chairman Shuster, Ranking Member Brown, and Committee Members, Thank you for the opportunity to comment for the record in this hearing. 

Development of the Passenger Network:  We believe intercity passenger trains should be included in the surface transportation reauthorization law.  We of course also want to see a stable, multi-year source of funding.  This will allow the private sector to gear up and invest in passenger rail—both in the manufacturing industry and as operators.  The U.S DOT has a commitment from 30 foreign and domestic rail manufacturers to locate or expand operations in the U.S. if selected to do high-speed-rail work—meaning good-paying jobs for American workers.  The National Surface Transportation Revenue and Study Commission recommended annual investment in passenger rail of $9 billion.

Our 40-year vision for passenger trains in the U.S. calls for bringing passenger trains to over 100 metropolitan areas and many smaller communities that currently lack service.

We generally support the written testimony of Amtrak’s Joseph McHugh for this hearing.  However, we are concerned that efforts to change the liability law could, in AAR President Hamberger’s words, “end freight and passenger railroad cooperation in new passenger rail operations that involve freight-owned assets.” 

The cost of rail investment must be put in the context of the alternatives.  Population growth and improving standards of living will drive up the demand for transportation.  We must invest heavily to expand transportation capacity, as transportation is the “oxygen” that supports our way of life.  Without it, commerce dwindles and quality of life deteriorates.  The consequences of not expanding transportation capacity are unthinkable.  The issue is not whether we will spend large sums but how we will spend them. Investment to accommodate more fast trains for moving people and goods is not expensive when compared to the alternatives of building similar capacity by expanding roads and airports.

We strongly support development of the Northeast Corridor (NEC), but not to the exclusion of the rest of the nation.  Only 18% of the US population lives within 25 miles of an NEC Amtrak station.  The other 82% of Americans also need and want the choice of fast, frequent, safe and affordable train service. 

The solution to limited capacity and resulting high fares is new funding dedicated to accelerate the acquisition of new passenger train cars and locomotives.  These would be not just for the NEC but for service nationwide – including current and new corridor services as well as for the longer runs that link regional services and make trains a choice for more city pair trips.  By adding cars to existing trains, new frequencies to existing routes and new routes to fill critical missing links, new equipment will attract new revenue, reduce operating costs and increase fare box recovery.

Buy America:  We strongly support rebuilding of the industrial capacity in the U.S. that will support the growing intercity and commuter passenger train network we believe the country needs.  In that regard, and in a ‘deregulatory’ spirit, we ask consideration of a ‘sliding scale’ approach to Buy America compliance.  That is, rather than simply forbid a product which falls below a particular percent of U.S. content (e.g. 100%, 90%, etc.), impose an import fee that rises as the U.S. content falls.  The goal would be to keep the pressure on manufacturers to develop U.S. capabilities while minimizing the extent to which proscriptive rules drive up costs for U.S. carriers.

Obviously, in the spirit of flexibility, we would maintain the three exceptions.  That is, the provision may be waived if
• the domestic product is—by a certain percentage—more expensive than an identical foreign-sourced product,
• the product is not available domestically in sufficient quantity or quality, or
• waiver is in the public interest.

Build America Bonds:  We support restoring this program and making it more rail-friendly.  As originally authorized in the Recovery Act, it subsidized 35% of a state or local government’s interest payment on the issuance of debt, either through direct cash payment from the Treasury to the issuer, or through a tax credit from Treasury to the bondholder.  While BABs could generally be used to finance surface transportation infrastructure, its structure limited the program’s ability to help states finance High Speed & Intercity Passenger Rail grants.  This was due to the unique public/private nature of most U.S. passenger train operations, coupled with the expectation that any surplus revenue generated from a high-speed/intercity passenger rail facility should be used to pay off construction debt.

As structured, passenger investments from BABs could only happen if the infrastructure financed was 90% owned and operated by a governmental entity, or if 90% of the debt was paid back with public revenue.  A state would essentially be required to operate its own railroad in order to qualify as a government use.  A service operated by Amtrak is considered a private business use.  Given the likelihood of private business use, a state would then have to assume at least 90% of the debt obligation and could not use more than 10% of any revenue generated from the facility to pay-off or secure the debt.

The Internal Revenue Code includes a class of “qualified” private activity bonds, including one for high-speed intercity rail facilities, but the Recovery Act excluded all private activity bonds from receiving BAB assistance.  The best way to ensure that high-speed/intercity passenger rail projects are eligible under a future BAB program is to establish the high-speed intercity rail facilities bond as an eligible obligation under the Build America Bonds program. 

We also recommend:

• Modifying the definition of high-speed intercity rail facilities in the Internal Revenue Code by lowering the speed requirement from 150 to 110 mph to encompass a broader range of projects and ensure consistency with the definition of ‘high-speed rail’ in PRIIA; and by including rolling stock (the current definition specifically excludes rolling stock).
• Considering whether other modifications to benefit freight rail projects would be appropriate.

Support for Railroad Industry Recommendations:  As a charter member of the OneRail Coalition, we have been supportive of many positions taken by the Association of American Railroads and by the American Short Line and Regional Railroad Association, both of whose presidents testified at this hearing.  Some positions that we share include: 

• Support for extending the short line rehabilitation tax credit (45G);
• Support for “SHIPA” legislation extending the current freeze on longer and heavier trucks to the entire National Highway System;
• Opposition to H.R. 763, which would raise the federal weight limit to 97,000 pounds for combination trucks that add a sixth axle;
• Support for improving the RRIF program so that it will not remain, in Mr. Timmons’ words, “stuck where it has been for 10 years,” that is, badly underutilized;
• Support for some form of liability relief for railroads regarding their obligation to carry toxic inhalation materials.  In this regard, note that the FAA Aviation Insurance Program offers below-market rates for airlines’ war risk, hull loss and passenger, crew, and third-party liability insurance.  The program appears to be permanent, that is, its sunset date is routinely postponed; the current expiration date is September 30, 2011;
• Opposition to retroactive provisions in any new passenger-related liability law; and
• Support for retention of the Section 130 grade crossing “set aside” program.

Thank you very much for this opportunity to present our views.


National Association of Railroad Passengers http://www.narprail.org
505 Capitol Court NE, Suite 300
Washington DC, 20002-7706