September 25, 2002 Letter To House Appropriations Chairman Bill Young

To House Appropriations Chairman Bill Young

September 25, 2002

The Honorable C. W. “Bill” Young, Chairman
Committee on Appropriations
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman:

As you prepare to mark up the Fiscal 2003 appropriations bill, we wish to underline three key points:

  * As indicated in our August 22 letter to members of your transportation subcommittee, we strongly support Amtrak’s request for $1.2 billion for Amtrak in Fiscal 2003. Amtrak President Gunn, who inherited this budget request, has said it is too low. It is clear to us that Amtrak is having a difficult time arriving at a Fiscal 2003 budget based on a $1.2 billion federal grant, thus we think anything even lower will raise serious questions about the organization’s ability to survive.

  *  With regard to report language calling for an end to certain routes on July 1, 2003, we emphasize that the existing system is so skeletal that elimination of any major route means total cessation of service to entire states and major metropolitan areas, and threatens to start a “falling-domino” process. We strongly oppose such eliminations, particularly on the eve of what we presume will be next year’s reauthorization. Discontinuance of the Sunset Limited, for example, would shift some New Orleans terminal costs to the two other trains that serve New Orleans—City of New Orleans to Chicago and Crescent to Atlanta/Washington/New York. Those trains would be hit with higher costs and loss of connecting revenues from Sunset Limited connecting passengers. Finally, route eliminations do not create near-term net cost savings and thus would not help close any budget gap in FY03 or even FY04.

  *  Even if a threshold were to be established, “subsidy per passenger” is a measure with no economic basis. “Operating ratio” (costs divided by revenues) would make more sense, or possibly “subsidy per passenger-mile”—both are standard measures in intercity transportation. “Subsidy per passenger” has certain uses in the local transit industry where trip length variations are small, but even for commuter railroads subsidy per passenger-mile (and operating ratio) are standard since these trips tend to be longer, and the financial performance is clearly distance related.

The best illustration of the third point is the Chicago-Los Angeles Southwest Chief. It has the fifth best operating ratio among long-distance routes, but the fifth worst subsidy per passenger. The disconnect between these two metrics results from the fact that this train carries a relatively small number of passengers relatively long distances. To some extent, subsidy per passenger is a measure of average trip length of the passengers on a route, but certainly not a measure of economic efficiency.

Both the Southwest Chief and Three Rivers are linchpins in Amtrak’s mail carriage business, which Mr. Gunn has confirmed is profitable and which he wants to continue.

The Sunset Limited and Texas Eagle have been victims of dismal Union Pacific on-time performance. In fact, Union Pacific is distinguished by having earned no Amtrak on-time performance incentives over the past two years. This has an impact on ridership and we strongly believe the correct next step is to correct the performance problems rather than to excuse Union Pacific from its legal obligations.

Finally, all the numbers include allocations of corporate overhead, an extremely inexact science at Amtrak and another indication that many costs assigned to individual routes will not disappear if routes are dropped, but simply be shifted to surviving routes, “fattening them up” for the next “kill.”

David M. Laney, President Bush’s nominee to the Amtrak Board, said at his September 5 confirmation hearing what many of us believe: The appointment of David Gunn was “a very positive statement by the board” and “so far, there has been a significant step-up in [Amtrak’s] credibility” as a result of Gunn’s appointment. We believe Mr. Gunn should be given time to show what he can do to improve productivity and reduce costs, and should not be forced to immediately switch to dealing with the possibly fatal ramifications of eliminating all service to Texas, Oklahoma, Arizona, Arkansas and New Mexico. (Technically, the Oklahoma City-Fort Worth Heartland Flyer is not on the committee’s “hit list” but a substantial part of its revenue comes from Texas Eagle connecting passengers and no one believes the Flyer could survive in isolation.)

Thank you for your past helpfulness to the intercity passenger rail business, and for whatever you can do to ameliorate the problems raised by the Committee’s report.

Sincerely,

Ross B. Capon
Executive Director

cc:  The Honorable David Obey
    The Honroable Harold Rogers
    The Honorable Martin Olav Sabo