NARP - National Association of Railroad Passengers

March 23, 1995 March 23, 1995

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Statement of

Ross B. Capon, Executive Director

National Association of Railroad Passengers

Before the Subcommittee on Transportation

Committee on Appropriations

U. S. House of Representatives

The Honorable Frank R. Wolf, Chairman

Fiscal Year 1996 DOT Appropriations

March 23, 1995

Thank you for this opportunity to present the views of our non-profit organization, which for 28 years has been promoting "balanced transportation."

I. THE BENEFITS OF AMTRAK

Amtrak continues to be an important part of our nation's transportation system.

It is energy efficient. Amtrak is 45% less energy-intensive than the domestic airlines (2,503 Btu's vs. 4,567; Transportation Energy Data Book: Edition 14, May 1994, prepared by Oak Ridge National Laboratory for the U.S. Department of Energy).
Amtrak uses land more efficiently than do other forms of transportation.
Amtrak is far safer than auto travel at all times and, during inclement weather, safer and usually more reliable than airplanes and buses.
Amtrak serves many communities where alternative trnasportation either does not exist, is not affordable, or only serves different destinations.
Amtrak is important to those who cannot fly for medical reasons, and to those for whom physical and financial considerations rule out driving long-distances.
Amtrak can play a key role in "anchoring" intermodal terminals and enhancing their visibility, and in putting people on intercity buses who would not otherwise have considered using them.
Amtrak helps mass transit and downtown areas by generally serving more transit-accessible locations, by increasing the economic vitality of those locations, and, in some cases, by sharing costs through jointly used terminals and tracks.
As demand for transportation continues to grow, so will the importance of the rail alternative. Highways and aviation cannot do the job alone.
Amtrak provides important transportation capacity, since Amtrak is infrastructure as well as carrier. Amtrak owns much of the Northeast Corridor tracks, about 80 miles of the Chicago-Detroit mainline and terminal trackage in some cities. Here, Amtrak is the rail equivalent of the air traffic control system, airport authorities, and airlines all rolled into one. Amtrak also represents people-moving capacity where it uses tracks of the freight railroads. Amtrak's demise -- unlike the demise of an individual airline or bus company -- likely would mean the permanent loss of passenger-carrying infrastructure capacity for both Amtrak-ownd and freight-owned tracks.
Amtrak's full costs -- again in contrast with the other modes -- are all "out in the open"; Amtrak gets no hidden subsidies. [Some airline and bus costs are borne by various levels of government.]

II. TRANSPORTATION USER TAXES, TRUST FUNDS AND SUBSIDIES

Today's transportation system results from years of mode-specific trust fund investments in road and aviation facilities. By offering generous federal matching funds for such facilities but virtually nothing for intercity rail passenger projects, federal policy discourages state rail investments. For meaningful movement towards balanced transportation, the federal government must provide a funding source for a healthy federal share of funding for such projects.

The Transportation Research Board has noted one argument for broadening the use of mode-specific trust funds: "Both air and highway facilities are financed in part through federal user taxes that are placed in modal trust funds. To the extent that high speed ground transportation (HSGT) reduces congestion of airports and highways financed with federal aid from these trust funds, it may be appropriate to use these funds to subsidize HSGT service" (page 131 of In Pursuit of Speed: New Options for Intercity Passenger Transport; Special Report 233; 1991).

Also, the U. S. spends more of its gas taxes on roads than do many other countries. The Netherlands and Great Britain spend about 25% -- most other European countries about 33% -- of road fees on roads (U.S. DOT, National Transportation Strategic Planning Study, March, 1990, pages 6-10).

Most of our members drive, but they do not want the government to interpret gasoline purchases as votes for more roads, even where rail could do the job better. Indeed, the biggest "subsidy" highways and aviation enjoy is the government's "channeling" function -- the directing of all air ticket taxes into aviation investment and of most highway taxes into roads. Instead, our members, and -- we believe -- countless other citizens, want a policy based on a transportation system, not on separate highway, aviation and rail systems.

We see the Clinton Administration's proposal to fund Amtrak from the Highway Trust Fund as consistent with our general views, but we are aware this is not a popular proposal on Capitol Hill. We urge that adequate funding for Amtrak not be held hostage to the trust fund debate.

Railroads: Railroad passengers paid $2.0 billion (nominal, not inflation-adjusted figures) in ticket taxes 1942-62, but this money simply went to the U.S. Treasury (general revenues). [Rail freight shippers paid $3.1 billion in federal freight waybill taxes 1942-58]. The Doyle Report to the Senate Commerce Committee (National Transportation Policy, June 26, 1961) cited this tax as "one of the factors under Federal control which favors the growth of private transportation and makes the preservation of public service more difficult."

Highways: Using a narrow definition of costs, highways enjoyed a subsidy in 1993 of $5.8 billion from all levels of government. [$20.5 billion in non-highway-user payments went to roads in 1993, up from $18.3 billion in 1990 and $16.9 billion in 1986. Going the other way, $5.0 billion in 1993 highway-user payments went to mass transit and $9.8 billion to other nonhighway purposes. The $20.5 billion includes $4.8 billion property taxes; $12.7 billion general appropriations; and $3.0 billion "other taxes and fees".]

These Federal Highway Administration figures exclude highway-related costs of police and fire departments, emergency medical service providers, city and county prosecutors and tax losses from land paved for automotive purposes. The gasoline tax would have to increase a few dollars to reflect such costs. In addition, since congestion fees do not exist in the U.S., those who use congested highways enjoy an additional subsidy -- as well as the knowledge that government's usual response is to provide even more road capacity, paid for by all highway users, not to assess those using the congested highways.

Aviation: Federal aviation subsidies through mid-1988 totaled $32.8 billion (15.8 plus 17 in the next paragraphs).

"Airport and airway development costs incurred prior to the assessment of user charges in 1971 have been treated as sunk costs, none of which have been or will be paid for by air carriers and other system users ... these sunk costs total $15.8 billion" (Study of Federal Aid to Rail Transportation, U.S. Department of Transportation under President Ford, January 1977).

This excludes spin-off benefits to airlines from: the military aerospace research program and from training pilots; the airports' tax-free bonds; and the costs of unnecessary damage to the environment and our trade deficit caused by overdependence on short-distance flights and neglect of high-speed rail.

Based on the FAA's estimate "that private-sector users are responsible for about 85% of FAA's spending for aviation programs," the Congressional Budget Office (CBO) concluded that private-sector air users "have received a general fund subsidy of $17 billion, which is equal to the difference between the private-sector share of FAA spending and aviation-related excise taxes since the start of the trust fund" (CBO special study, The Status of the Airport and Airway Trust Fund, December 1988).

III. PRIVATIZATION IS NOT AN OPTION

Due to the subsidies just discussed, some of the world's cheapest gasoline and air fares, and highway tolls that range from low to non-existent, a privatized intercity passenger rail system is not plausible in the U.S. It does not exist anywhere else in the world, even though competitive environments in some other countries are more favorable to rail. This does not mean railroads are inefficient; only that all their costs are easily captured on a single balance sheet (second and third bullets, page 2), while their significant benefits are harder to quantify.

Nor are freight railroads likely to accept an obligation to charge incremental costs to entities other than Amtrak. The railroad industry's only significant experience with this was bad: "at the time of its bankruptcy filing [in 1980], [Auto-Train Corporation] owed Seaboard [a CSX predecessor] more than $5 million in unpaid fees" (Regardie's, May/June 1981).

IV. SUBSTANTIAL OPPORTUNITIES TO IMPROVE AMTRAK'S ECONOMIC PERFORMANCE

The Intercity Passenger Marketplace: Clearly, the present management inherited a bad situation with cash reserves depleted and revenues hurt by: the 1992 rail strike and the results of the consent agreement with the Food and Drug Administration (including many trains originating hours late or without full consists), the 1993 Midwest floods that badly disrupted service and the 1994 safety public relations disaster and smoking ban impact.

There also have been service quality problems which Amtrak says the present service cuts will help it correct, especially by accelerating retirement of the oldest equipment. Finally, low air fares have cut into Amtrak's revenues in some markets, making clear the need for improved productivity at Amtrak, as discussed below. [The low air fares increasingly are made possible by reliance on elderly jets. ValuJet's fleet averages 25 years old; Northwest and USAir plan to fly some planes "to their 30th birthdays or longer," and, in this regard, American, United, Delta and TWA "may join the pack." "Jurassic Jets," The Wall Street Journal, November 3, 1994, front page story.]

As illustrated by a recent successful Auto-Train advertising campaign (ridership up 19% in the first quarter of FY95), Amtrak must advertise its services aggressively rather than cut its advertising budget. Also, any further downsizing should protect sales people who are producing revenue by working with travel agents both in person and on the telephone. In short, a big part of the solution to Amtrak's problems must be selling itself.

Capital Investment: Maintenance of the existing capital investment level is important, as is -- at least for the next few years -- the existing operating grant level. The actions discussed below and other efficiencies identified by Amtrak and in Battelle's Amtrak Review (October, 1991, for President Bush's Department of Transportation) could significantly improve the resulting "value for taxpayer dollars."

While last week's action by the House Budget Committee was encouraging, it is important to note that the long-distance trains will require a federal operating grant even after five years, albeit a modest one if the efficiencies noted below can be realized. I recognize that the required actions are not the primary responsiblity of this committee, but urge members of this committee to help make clear the importance of these issue to your colleagues.

Federal Employers' Liability Act: In the past, Amtrak has testified that it would rather live with no-fault state workers' compensation laws than with this railroad-specific, fault-based law. However, since Amtrak serves so many states, such a change might replace one set of costs with another -- the bureaucracy required to live with so many different state laws. An alternative approach might be to retain FELA and cap the awards.

Labor productivity: In the early 1980s, Amtrak and its labor unions made significant progress in improving productivity. The unions deserve considerable credit for this. In recent years, however, productivity improvements have slowed even as they have increased at the airlines. Productivity improvements are a less-remarked but vital part of the package Amtrak announced and are essential whether through negotiation or act of Congress.

We know there is little sympathy for labor protection provisions that provide up to six years' severance payments for those who lose their jobs due to Amtrak service reductions, but any change in these provisions must be part of a comprehensive program to improve Amtrak's productivity. Eliminating labor protection only facilitates the elimination of service, it does not address productivity of workers who continue to work.

To some extent, especially in the shops, productivity progress has been a victim of the sheer number of unions with which Amtrak must deal (13 unions, 26 bargaining units). The Canadian government recently required all railroad shopworkers to elect a single union. In the U.S., unlike in Canada, such an action would require new legislation. Congress should consider requiring all Amtrak union employees to elect a single union, or perhaps two (operating, non-operating).

Requirements that, for example, every Amtrak train with two revenue cars carry a conductor and an assistant conductor, and that every Amtrak train with more than six revenue cars carry a conductor and two assistant conductors, are anachronisms which must be changed. (Revenue cars include coaches, sleeping cars and "working" baggage cars, but do not include diners, lounges and closed mail and baggage cars.)

Particularly in light of the flexible job descriptions on Southwest, the nation's only consistently profitable passenger airline, consideration must be given to consolidating train crew and on-board services crew functions. By the same token, success of freight railroads in contracting out locomotive maintenance and other functions should force a review of the provision in Amtrak's law which bans most contracting out.

Railroad Retirement and Railroad Unemployment: Amtrakrelated payments to these non-experience-based systems are a function of federal law imposed on railroads but -- for reasons unrelated to technology -- not on airlines.

Contracts with Freight Raillroads: Survival of reasonable contracts between Amtrak and the freight railroads appears to depend on (a) retention as is of Section 24308 of Title 49 of the U.S. Code (formerly section 402 of the Rail Passenger Service Act); and (b) passage of a law that addresses freight railroad concerns about liability. Special provisions which currently apply to the Virginia Railway Express and to the recent extension of MBTA commuter rail service to Worcester, Massachusetts, may provide useful models. If the Interstate Commerce Commission is terminated, Section 24308 would of course need to be changed, with the ICC's Amtrak-related functions preserved and shifted to a properly insulated body in the Department of Transportation.

Northeast Corridor Track Use Payments: Freight railroads using Amtrak-owned Northeast Corridor tracks pay fully allocated costs, but commuter rail authorities pay avoidable costs only. The commuter rail payments should be reviewed for a possible increase, whether to the fully allocated level or some intermediate amount. This is not an easy issue, as federal transit operating grants are likely to decline as well, but -- even with increased commuter rail payments -- states along the Corridor easily would remain Amtrak's biggest net beneficiaries.

Federal fuel tax: Amtrak -- not the airlines -- began paying such a deficit-reduction tax in 1990. The public interest is not served by charging Amtrak this tax. This tax is particularly harmful because its goes directly to the bottom line of individual routes. The airline industry is lobbying to escape imposition of the 4.3-cent scheduled to take effect October 1 (but already paid by Amtrak). Certainly, any legislation that repeals this tax for the airlines should do the same for Amtrak.

V. SERVICE REDUCTIONS

This announcement involved the biggest train-mile reduction in Amtrak's history. By our calculations, Amtrak identified about five million annual train-miles, which compares with 4.6 million eliminated in 1979, the largest previous service reduction. Amtrak is expected in early April to announce additional reductions that would take effect June 1. We opposed these reductions. If Amtrak is forced to go any further on the service-reduction front, we are concerned that Congressional support for the system would evaporate.

VI. THE FUTURE

We do not see state operating grants saving long-distance trains. It is unlikely that every state along a given route would decide to fund the route, much less accept any plausible cost allocation or schedule (some states always must be served in the middle of the night). Running "closed door" through states that fail to pay is not a solution: it costs commercial revenues and makes the train less useful to states that do pay for the service. Furthermore, long-distance routes depend heavily on connecting traffic so just putting together for one such route would not produce adequate ridership to justify its existence.

As noted earlier, however, the size of the operating grant needed for these trains will be quite limited if the economies discussed above can be achieved.

Long-term, Amtrak needs to say more about the potential for service growth once the immediate problems are addressed. The various stakeholders -- including employees and passengers -- need to know more about the positive aspects of the overall vision that lies behind present painful actions.