SPEAKERS CONTENTS INSERTS
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AMTRAK AND HIGH SPEED RAIL
TRANSPORTATION AND INFRASTRUCTURE
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HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
JULY 25, 2001
Printed for the use of the
Committee on Transportation and Infrastructure
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DON YOUNG, Alaska, Chairman
THOMAS E. PETRI, Wisconsin, Vice-Chair
SHERWOOD L. BOEHLERT, New York
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
WAYNE T. GILCHREST, Maryland
STEPHEN HORN, California
Page 3 PREV PAGE TOP OF DOCJOHN L. MICA, Florida
JACK QUINN, New York
VERNON J. EHLERS, Michigan
SPENCER BACHUS, Alabama
STEVEN C. LaTOURETTE, Ohio
SUE W. KELLY, New York
RICHARD H. BAKER, Louisiana
ROBERT W. NEY, Ohio
JOHN COOKSEY, Louisiana
JOHN R. THUNE, South Dakota
FRANK A. LoBIONDO, New Jersey
JERRY MORAN, Kansas
RICHARD W. POMBO, California
JIM DeMINT, South Carolina
DOUG BEREUTER, Nebraska
MICHAEL K. SIMPSON, Idaho
JOHNNY ISAKSON, Georgia
ROBIN HAYES, North Carolina
ROB SIMMONS, Connecticut
MIKE ROGERS, Michigan
SHELLEY MOORE CAPITO, West Virginia
MARK STEVEN KIRK, Illinois
HENRY E. BROWN, Jr., South Carolina
TIMOTHY V. JOHNSON, Illinois
BRIAN D. KERNS, Indiana
Page 4 PREV PAGE TOP OF DOCDENNIS R. REHBERG, Montana
TODD RUSSELL PLATTS, Pennsylvania
MIKE FERGUSON, New Jersey
SAM GRAVES, Missouri
C.L. (BUTCH) OTTER, Idaho
MARK R. KENNEDY, Minnesota
JOHN ABNEY CULBERSON, Texas
BILL SHUSTER, Pennsylvania
JOHN BOOZMAN, Arkansas
JAMES L. OBERSTAR, Minnesota
NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
WILLIAM O. LIPINSKI, Illinois
PETER A. DeFAZIO, Oregon
BOB CLEMENT, Tennessee
JERRY F. COSTELLO, Illinois
ELEANOR HOLMES NORTON, District of Columbia
JERROLD NADLER, New York
ROBERT MENENDEZ, New Jersey
CORRINE BROWN, Florida
JAMES A. BARCIA, Michigan
BOB FILNER, California
EDDIE BERNICE JOHNSON, Texas
FRANK MASCARA, Pennsylvania
Page 5 PREV PAGE TOP OF DOCGENE TAYLOR, Mississippi
JUANITA MILLENDER-MCDONALD, California
ELIJAH E. CUMMINGS, Maryland
EARL BLUMENAUER, Oregon
MAX SANDLIN, Texas
ELLEN O. TAUSCHER, California
BILL PASCRELL, Jr., New Jersey
LEONARD L. BOSWELL, Iowa
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania
NICK LAMPSON, Texas
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
BRIAN BAIRD, Washington
SHELLEY BERKLEY, Nevada
BRAD CARSON, Oklahoma
JIM MATHESON, Utah
MICHAEL M. HONDA, California
RICK LARSEN, Washington
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Subcommittee on Railroads
JACK QUINN, New York, Chairman
THOMAS E. PETRI, Wisconsin
SHERWOOD L. BOEHLERT, New York
HOWARD COBLE, North Carolina
JOHN L. MICA, Florida
SPENCER BACHUS, Alabama
JERRY MORAN, Kansas
JIM DeMINT, South Carolina
ROB SIMMONS, Connecticut
SHELLEY MOORE CAPITO, West Virginia
TODD RUSSELL PLATTS, Pennsylvania
MIKE FERGUSON, New Jersey, Vice-Chair
DON YOUNG, Alaska
BOB CLEMENT, Tennessee
JERROLD NADLER, New York
NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
BOB FILNER, California
ELIJAH E. CUMMINGS, Maryland
Page 7 PREV PAGE TOP OF DOCEARL BLUMENAUER, Oregon
JOHN ELIAS BALDACCI, Maine
RICK LARSEN, Washington
WILLIAM O. LIPINSKI, Illinois
JAMES L. OBERSTAR, Minnesota
Capon, Ross B., Executive Director, National Association of Railroad Passengers
Carmichael, Gilbert E., Chairman, Amtrak Reform Council, accompanied by Thomas A. Till, Executive Director
Hart, Clyde, Jr., Vice President of Government Affairs, American Bus Association
Hecker, Jayetta Z., Director, Physical Infrastructure Issues, U.S. General Accounting Office
King, David D., Deputy Secretary for Transportation, North Carolina Department of Transportation
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Mead, Hon. Kenneth M., Inspector General, U.S. Department of Transportation
Warrington, George D., President and CEO, Amtrak
Williams, Sam A., Representative, Southeastern Economic Alliance, and President, Metropolitan Atlanta Chamber of Commerce
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Clement, Hon. Bob, of Tennessee
Coble, Hon. Howard, of North Carolina
Cummings, Hon. Elijah E., of Maryland
Graves, Hon. Samuel B., of Missouri
Larsen, Hon. Rick, of Washington
Nadler, Hon. Jerrold, of New York
Oberstar, Hon. James L., of Minnesota
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Carmichael, Gilbert E
Hart, Clyde, Jr
Page 9 PREV PAGE TOP OF DOC Hecker, Jayetta Z
King, David D
Mead, Hon. Kenneth M
Warrington, George D
Williams, Sam A
SUBMISSIONS FOR THE RECORD
Carmichael, Gilbert E., Chairman, Amtrak Reform Council, Executive Director, responses to questions and memorandum
Graves, Hon. Samuel B., a Representative from Missouri, statement, Scott Brace, Chairman, National Railroad Construction and Maintenance Association
Hart, Clyde, Jr., Vice President of Government Affairs, American Bus Association, response to a question from Rep. Clement
Warrington, George D., President and CEO, Amtrak, responses to questions
ADDITIONS TO THE RECORD
State of New York, Department of Transportation, Joseph H. Boardman, Commissioner, statement
State Transportation Board of Georgia, Emory C. McClinton, Chairman, State Transportation Board of Georgia, and J. Tom Coleman, Jr., Commissioner, Georgia Department of Transportation, letter, July 24, 2001
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THE CURRENT STATUS AND FUTURE PROSPECTS OF AMTRAK AND HIGH SPEED RAIL
Wednesday, July 25, 2001
House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Railroads, Washington, D.C.
The committee met, pursuant to notice, at 10:00 a.m. in room 2167, Rayburn House Office Building, Hon. Jack Quinn [chairman of the subcommittee] presiding.
Mr. QUINN. Good morning, everyone, and welcome to the hearing.
The primary purpose of our hearing today, as I think everyone is aware, is to explore the current status and future prospects for Amtrak. Passenger rail is a critical element of our American infrastructure. Personally, I cannot envision this country without a national rail passenger service. Since its formation in 1971, the National Rail Passenger Corporation, known as Amtrak, has provided that passenger rail service for millions of Americans all across the country.
As the authorizing committee responsible for crafting the Amtrak Reform and Accountability Act in 1997, we are here to examine the current financial situation of Amtrak and discuss ways to improve passenger rail service. With Amtrak's mandated operational self-sufficient date of December 2, 2002 approaching rapidly, Mr. Clement and I both agree that today is an appropriate time to have this hearing and begin these discussions.
By inspecting the condition of Amtrak now, we allow ourselves the opportunity to debate the many questions about Amtrak and its future, most notably, what role we in Congress want Amtrak to play in our increasingly congested transportation network. This Subcommittee has conducted several hearings already this year that have focused on ways to help alleviate that congestion on our roads and at our airports. I firmly believe that an efficient, reliable inner city rail passenger system is one such option.
Page 11 PREV PAGE TOP OF DOC Some of our witnesses today will discuss why they think we need to allocate more resources to our passenger rail system, and in particular, some high speed rail. I'm a co-sponsor of H.R. 2329, the High Speed Rail Investment Act, a bill that's sponsored by my colleague from Western New York, Congressman Amo Houghton, and our transportation full committee Ranking Member, Jim Oberstar.
I look forward to a detailed discussion of H.R. 2329 so that the Subcommittee can develop the best legislative proposal to make a high speed rail network in the United States a reality.
A couple of procedural matters before we begin, if I may, and before I yield to Bob Clement, Congressman Graves has joined us today. We're happy that he's with us. He's not a member of the Subcommittee, but a member of the Committee. I ask unanimous consent that he be allowed to participate in the hearing, and without objection, it is so ordered.
I also want to ask unanimous consent to hold the record of this hearing open for 30 days for members to submit additional questions to the witnesses, and also for witnesses to respond to us. Without objection, it is so ordered.
I yield to Bob Clement for any opening statement he may have.
Mr. CLEMENT. Thank you, Mr. Chairman. As all of you know, this Committee's been very active this year, and we're going to continue to be so. Mr. Chairman, I want to welcome the witnesses that will testify today. We've gathered here to discuss the future of rail passenger transportation and of our national carrier, Amtrak. It is my sincere hope that these proceedings will signal the start of a new era in our Federal transportation policy, an era where we have a clearly defined goal for our national rail passenger service.
For too long, Amtrak has languished as a result of a conflicted and unfair Federal policy. Having only been given the minimum amount of capital and operating investments necessary to exist, Amtrak has never had the resources to succeed. We must break the cycle of insufficient investment that begets unrealized potential and truly develop one of our greatest transportation assets.
Page 12 PREV PAGE TOP OF DOC It is time for America to join the rest of the world and commit to a well-funded, high speed passenger rail network throughout our Nation. In order to do this, we must challenge a series of conflicting ideas, erroneous assumptions, and ambiguous policies that have plagued Amtrak during its history. Perhaps the most important of these questions will be raised by Mr. Warrington today: can Amtrak continue to pursue its dual mission of behaving as a private business and as a public service simultaneously?
We must decide whether we truly expect Amtrak to turn a profit or at least break even, or do we recognize that even routes that don't generate profits contribute to the good of our country in a variety of ways which don't show up in the profit and loss statements of the carrier. Perhaps what we desire most is for a national public rail service that is managed with the efficiency of the private sector, but with the recognition that true operating profits are not realistic.
The paramount concern must be the creation of a system that continues and expands appropriate levels of rail service where it can benefit the American public. If we're to do this by requiring Amtrak to operate as a self-sufficient business, then we must give Amtrak access to the types of infrastructure investment we make available to its competition. All other modes receive tremendous indirect subsidies which allow them to maintain profitability. Why should passenger rail be treated any differently?
The legislation, H.R. 2329, recently introduced by Mr. Oberstar and Mr. Houghton, and co-signed by myself and over 150 of our colleagues, including our Chairman, begins to address this issue by providing $12 billion over 10 years for high speed rail projects. But this sum represents approximately one-third of what this Congress will spend this year alone on highways. If we're serious about creating a self-sufficient passenger rail system, we must provide high speed, high quality service across the country, not just the Northeast Corridor.
As our Nation's airports and highways reach the breaking point, high speed rail service must be employed to add capacity to our transportation network, while reducing our energy use and bettering the environment. Rail service also helps to focus development and density, build social cohesion and fights sprawl in urban and suburban regions, while also benefiting regional commuter and transit services with improved infrastructure.
Page 13 PREV PAGE TOP OF DOC In fact, there's not a truly profitable passenger railway system in the world. Yet we see that almost every other nation has determined that a well funded, large scale passenger network is necessary. Looking at China, Australia, and even cash poor Russia, large nations with the densities of western Europe, we see continued commitments to railways and service expansion. We must follow suit.
Our transportation system is facing imminent failure if we do not modify our priorities, take bold steps and invest in a truly integrated transportation system which combines high speed passenger rail, highway, air and transit. The tremendous growth of our Nation has been riding on our transportation network. We can either watch that growth stall and falter as our system reaches gridlock, or we can make the choice to invest now and ensure our continued prominence and success as a Nation.
Today we are certain to hear about Amtrak's struggles. But let us focus toward the future and make the commitment to creating a world class national passenger rail network. The public, businesses, and State and local governments demand this of us, and with persistence, patience and will, we will not let them down.
Thank you, Mr. Chairman.
Mr. QUINN. Thank you, Bob. Thank you very much.
I'd also like to ask unanimous consent that we allow Mr. Isakson, a member of the T&I Committee, but not this Subcommittee, to participate in today's hearing. Without objection, so ordered. I'd also ask unanimous consent that a statement from the Chairman of the full Committee, Mr. Young, be inserted in the record. We may hear from Mr. Young later, but that statement will be entered into the record. Without objection, it is so ordered.
I'd like to yield at this time to the Ranking Member of the full Committee, Mr. Oberstar, for any opening remarks. Mr. Oberstar.
Mr. OBERSTAR. Thank you very much, Mr. Chairman, for scheduling the hearing, and my appreciation also goes to Chairman Young for his commitment, expressed to me quite some time ago, that if we shaped a bill for high speed rail so that our Committee would have concurrent jurisdiction or primary jurisdiction, preferably, that we'd move ahead with hearings. We've been able to do that and have shaped the legislation in the fashion we have today allowing concurrent jurisdiction. So I'm very appreciative of the opportunity to move ahead.
Page 14 PREV PAGE TOP OF DOC Thirty years ago, when Amtrak took over from the freight railroads, the system of rail passenger service had deteriorated so badly that it looked like it was going the way of the dinosaurs. When we created Amtrak, there were skeptics in abundance. Few thought that Amtrak could succeed where the freight rails had failed. Not many people thought that we could induce our fellow citizens to give up the convenience of the automobile and get out of their cars and onto trains. Yet Amtrak succeeded.
It has accomplished much against the odds. Unlike the French TGV which has a brand new railroad and they just charted a course across the French countryside, cutting through fields and riding over mountains with electric power, our system has to operate on the ancient, decrepit in many cases, freight rail. That's where Amtrak started out. Freight railroads have improved their track a good deal, but it's still not passenger high speed rail quality track.
Amtrak has made a lot of progress. In fact, when you look at where it is today, adjusting for inflation, the operating deficit for 2000 including depreciation and the retirement payments, is less than two-thirds of what it was in 1980.
There has been constant pressure on Amtrak to reduce its losses, and that pressure grew in 1997, when this Committee required Amtrak to reach break-even in its operating budget by the end of 2002. That was, and is, a goal that no other passenger rail system in the world accomplishes except perhaps the TGV, which not only is profitable, paying back the interest in national government investments, but also helps sustain the rest of the passenger rail system in France.
But our transportation landscape is very different from that of Europe and Japan, Mr. Chairman. Prices for gasoline in Europe and Japan are in the range of $3 to $4 a gallon. Their highways, those that compare with our interstate, charge tolls of as much as 10 cents a mile. Their airports are limited in capacity and that scarce capacity is reserved for international travel, which is far more valuable in terms of revenue than domestic travel.
Page 15 PREV PAGE TOP OF DOC People are expected to take the train for short haul domestic trips. In fact, the national policy of France is to favor investment in surface travel on trips of 750 kilometers or less. For travel of 1,000 kilometers or more, the French national policy is to invest in air travel.
Similar policies exist in Germany and Japan. Because those countries recognize the benefit to the public from passenger rail service is greater than simply the revenues derived from that service. So they have invested heavily in improving the quality of the track, the quality of the ride, and the speed of service between communities.
In fact, the TGV is now so successful that our domestic airlines code share with the TGV. When you schedule a flight on a U.S. carrier to Paris and then from Paris, say, to Strasbourg, it's an airline ticket, but from Paris to Strasbourg, you're riding on the TGV which comes directly into Charles DeGaulle Airport.
So we've got a ways to go to catch up with the Europeans. We don't have to emulate the long haul service in Europe, but we do have to provide high speed, dependable service for distances of 500 miles or less. That is what we directed in TEA-21 that the Department of Transportation evaluate up to 12 routes for potential high speed rail service. Ten of these have been identified. Now we have to move ahead.
Congressman Houghton and I worked in the last Congress and again in this Congress to craft the High Speed Rail Investment Act, on which we are holding this hearing today. Our bill, and a similar bill in the U.S. Senate, will provide $12 billion in bonding authority over a 10 year period for high speed rail investments. Holders of the bonds will be able to take income tax credits instead of receiving interest payments. We believe that this is a more attractive financial inducement.
It's interesting to note that the $12 billion we arrived at is the cost of the French government's investment in TGV over the last 25 years.
Page 16 PREV PAGE TOP OF DOC Now, there are differences between our bill and the Senate's. The first is that in our bill, the Secretary of Transportation, not Amtrak, decides which projects will be eligible. Secondly, we provide for entities other than Amtrak to participate in the loan program. The legislation does have broad support. As the gentleman from Tennessee already noted, we already have 153 co-sponsors in the House.
We have to resolve the conflicting directions we've given Amtrak. We expect them to offer a public service and at the same time, operate as a profitable commercial enterprise. That may be internally contradictory. But we have to, and I think with this high speed rail initiative we'll help provide the means to attract people from the Nation's highways, get them out of their cars, use high speed rail for short distance trips corridors, relieve congestion in our valuable air space, and provide an extraordinarily safe means of efficient travel.
Thank you, Mr. Chairman.
Mr. QUINN. Thank you, Mr. Oberstar. Mr. Coble?
Mr. COBLE. Mr. Chairman, I thank you.
In the interest of time, I will not give a complete statement, but I will ask that it be entered into the record. I would like to make a couple of preliminary remarks if I may, Mr. Chairman.
Mr. QUINN. Without objection, so ordered.
Mr. COBLE. Mr. Chairman, I realize it's easy to sit on the sidelines and hurl stones. And that may be what I'm going to do. But I must say, folks, I am pleased that Amtrak is not managing what few limited personal resources I have. Now, maybe there's a good reason for it. There may be justification. There may be a good, solid defense.
But it is my belief that Amtrak will not be awarded the blue ribbon for sound fiscal management. And that bothers me.
Page 17 PREV PAGE TOP OF DOC I have some concerns, Mr. Chairman, as well, about the bonds. The GAO indicates that this has the potential of costing taxpayers a tremendous amount of money. That door is ajar, I'm afraid. So I look forward to hearing what will be forthcoming today, Mr. Chairman, and colleagues. Hopefully it will assuage some of my frustration.
In conclusion, Mr. Chairman, let me mention that David King, the Deputy Secretary of North Carolina's Department of Transportation, will be testifying on behalf of the States for Passenger Rail Coalition subsequently. And pardon my immodesty, Mr. Chairman, but we in North Carolina I think are blessed with a very efficient and effective department of transportation. Maybe it will be good to have you with us as well.
Mr. Chairman, I thank you and Mr. Clement for staging this hearing today, and I look forward to hearing the testimony.
Mr. QUINN. Thank you, Mr. Coble. The gentleman from North Carolina reminds me, as I remind all the members, that their full statement will be entered into the record. We will ask them to be as brief as possible in opening remarks, so that we may get to our first panel.
The gentleman from New York, Mr. Nadler.
Mr. NADLER. Thank you, Mr. Chairman.
Let me begin by thanking Chairman Quinn and Ranking Member Clement for holding this hearing today regarding the future prospects of Amtrak and high speed rail. This is an issue of particular concern to me, given that my district is in New York City, the center of the Northeast Corridor, and that Penn Station, the largest Amtrak station in the country, is in the district.
Amtrak owns the tracks in the Northeast Corridor which carry commuter trains operated by numerous local transit authorities. These commuter trains bring millions of people into and out of New York City every day. Without adequate funding for capital improvements, the daily operation and safety of these tracks has already come into question. So it is safe to say, and I think Chairman Quinn will agree, that the economic health of Amtrak has a significant impact on the economic growth throughout the State of New York.
Page 18 PREV PAGE TOP OF DOC I understand the motivations behind the Amtrak reform legislation passed in 1997, but I do not agree with all of the bills mandates. I do not believe Amtrak can operate a national inter-city passenger rail system and become economically self-sufficient under the constraints currently placed upon it. What I am sure of is that Congress cannot sit idly by and expect it to happen on its own, at least not by 2003 and not without drastic cuts to route services and jobs.
Indeed, Amtrak announced two weeks ago that it is seriously considering elimination of 15 percent of management employees and 10 percent of unionized employees. Congress must step up to the plate and provide the resources necessary if Amtrak is to develop competitive and profitable rail service across the country.
The High Speed Rail Investment Act of 2001, introduced by Ranking Member Oberstar, Congressman Houghton and many others on this Committee, is a major step in the right direction. Providing $12 million in bonding authority for high speed rail capital investments would make it easier for Amtrak to use other funds for operating costs and possibly even address fire, life and safety issues in the East River tunnels in New York, which are estimated to cost approximately $800 million to address.
I would also like to note that we have heard a lot about the cost of this legislation, but the development of high speed rail produces many savings. High speed inter-city rail can undoubtedly be part of the needed solution to increase capacity within the Nation's transportation system, reducing congestion and providing relatively inexpensive and environmentally friendly alternatives to building more highways and airport runways.
I would point out that in today's Washington Post, I presume not in contemplation of this hearing, appears an op-ed article by Bob Cotton, who makes a number of interesting points on this very subject. If Amtrak got the New York-Boston run down to two and a half hours, it would put basically, he says, put the air shuttle out of business.
Page 19 PREV PAGE TOP OF DOC In Chicago, where a major political battle is underway over a third airport, 40 percent of the flights are of distances less than 300 miles. In San Francisco, half the flights are 300 miles. If Amtrak replaced shuttle flights between Washington, New York and Boston, it would free about 60 takeoff and landing slots every hour. Bostonians would no longer be fighting about whether to expand Logan Airport, LaGuardia would no longer be the point of greatest congestion in the aviation system in the United States.
For we are now spending $14 billion in Federal funds for airports every year, and $33 billion for highways. Amtrak gets $361 million. If we just diverted $2 billion of the airport money annually to rail service, we would free more than enough airport capacity to cover the diversion. Too often, I think, we do not think holistically. We think about the air system, we think about the freight system, we think about the passenger rail system, we think about the highway system, and we don't think about them together.
There is a great demand for high speed rail. Thirteen of the 15 most congested metropolitan areas are located on or close to proposed high speed rail lines. The Northeast Corridor rail line between New York and Philadelphia relieves highway congestion by removing over 18,000 cars off the highway every day. Eighteen of the 20 most congested airports are located on or close to proposed high speed rail lines. For air routes less than 500 miles in length, high speed rail can provide competitive trip times and fares, freeing up the space in our airports.
The environmental benefits should also not be underestimated. Trains produce far less pollutants per passenger than automobiles and airplanes, especially where rail lines are electrified, as they are in the Northeast Corridor, and as they would have to be, I think, in any high speed corridor. The study by the Coalition of Northeast Governors estimated that shuttle express service between New York and Boston would remove almost 3,000 tons of pollutants annually from the atmosphere.
Page 20 PREV PAGE TOP OF DOC The benefits of high speed rail are clear. But building high speed rail lines, even in corridors that have already been designate for such purposes, will take a significant investment. But such investments make sense. Where Amtrak has invested significant funds in conjunction with the States, there have been major improvements in both trip times and passenger loads.
Again, in my home State of New York, where significant investments were made on the Empire Corridor line, more than 1.3 million passengers ride the line between New York City and Buffalo, a 25 percent increase since 1994. Passage of the High Speed Rail Investment Act of 2001 is a critical first step to ensure that our Nation's transportation system, of which Amtrak is an integral part, remains functional and efficient.
I look forward to hearing from all the witnesses, so that we can more closely examine the future prospects for Amtrak and find ways to increase high speed rail across the country and again, I thank the Chairman.
Mr. QUINN. Thank you, Mr. Nadler.
The gentleman from Florida, Mr. Mica.
Mr. MICA. Thank you, Mr. Chairman.
This is an extremely important hearing on the future of Amtrak. But by any realistic or bottom line evaluation, I believe the future of Amtrak is dismal, at best. Rather than react by pumping massive capital subsidies into a horribly flawed operation, I believe it's time for us to seriously consider what course of action Congress should pursue.
While I participated and supported in the 1997 reforms instituted by Congress, unfortunately the medicine prescribed four years ago was ignored by the patient and now has left the patient on life support and near death. Red ink in Amtrak's operations continues to extend as far as the eye can see, or as far as accounting projection sheets can honestly calculate. This sick patient pleads for more capital and cash infusions, but if past experience and revenue shortfalls are any judge, operational costs overruns will explode after numerous new money-losing routes are initiated.
Page 21 PREV PAGE TOP OF DOC Let's face it. It's time to be honest. Let's look at Amtrak's realistic options. In the private sector, Amtrak's only real choices would be to declare bankruptcy or to terminate business. Under the 1997 Amtrak Reform Act, two actions will soon be triggered. The Amtrak Reform Council must submit a restructuring plan and GAO must develop a liquidation plan. Those are both in the law that we passed.
Congress cannot continue to put good money after bad. I believe we should begin restructuring and liquidation now. I strongly support development of our high speed rail corridors. The problem with expanding Amtrak's high speed rail operation is that $12 billion bonding authority will at best build possibly two new corridors, but leave Amtrak with minimal capital improvements. The GAO report confirms that, page 22, $12 billion will not meet capital needs in high-speed rail corridors.
From Washington to Boston, for example, at least $3 billion is required for track improvements and tunnels and an additional half a billion dollars for catenary. Several billion dollars have already been expended since 1997 on rail upgrades in this corridor. However, we are years away from making the Northeast Corridor a true high-speed rail corridor. Acela was designed, it's a train to run at 180 miles an hour, it has that capacity. But it now runs, I was on it last week, at 135 miles an hour, nearly the same speed as Metroliner.
Instead of using Acela equipment from New York to Boston, where higher speeds can be achieved, most of the train sets now operate in the slower New York to Washington corridor. Amtrak failed to even provide a basic evaluation of the Catenary's inability to accommodate Acela's high-speed inflexible wire structure in the corridor from Washington to New York. So we basically have a high-speed, expensive, slow train.
If Amtrak operates new routes at the same loss ratios, we can expect a future $2 billion to $3 billion annual subsidy. United States taxpayers must already pick up the current $700 million to $900 million annual loss. It's time to sober up and look at serious options to dismantle Amtrak. Potentially profitable routes and high-speed rail operations need to be separated and run independently in the northeast, Chicago and any other new corridors.
Page 22 PREV PAGE TOP OF DOC Private sector competition to construct, manage and operate high-speed rail lines must be required. Auto trains should also be separated out and operated and managed after competitive tender. Coast to coast and north-south service should be offered to tour or cruise operators on a competitive basis. The balance of Amtrak's operations should be offered to state, local and private sector operators. If Congress and local and state governments want to continue paying expensive subsidies on huge, money losing routes, the true cost must be transparent and equally shared.
Our current approach to high-speed rail is half baked at best. With a little imagination and private sector involvement and backing, a real high speed rail or a Maglev system could and should be constructed in the Northeast Corridor. This should be a project, of course, of national priority. It would relieve eight of our Nation's most congested airports. It would help free up airspace for a long range transport, and it would provide an alternate to congested highways.
Unfortunately, politics, rather than a vision of the future, is driving our high-speed transit goals. I remain a strong supporter of mass transit alternatives, but I'm concerned that Amtrak's future has reached the meltdown stage. The future of Amtrak, even if we put the very best face on it, is grim. I believe that rather than expanding public financial exposure, we must begin looking at cutting the taxpayers' losses.
I have additional comments I'll submit for the record. Thank you, Mr. Chairman.
Mr. QUINN. Thank you, Mr. Mica.
The gentleman from Pennsylvania, Mr. Borski.
Mr. BORSKI. Thank you, Mr. Chairman. Let me congratulate you and our distinguished Ranking Member, Mr. Clement, for having this extremely important issue before us, one that obviously has some matters of differences from one side to the other. I have to admit, I'm a user, Mr. Chairman. I take Amtrak. I think the management and the workers do a pretty good job with the hand they are dealt.
Page 23 PREV PAGE TOP OF DOC I'm happy to see Mr. Warrington here, the President and CEO. I live in a big city. I always thought that being a mayor of a big city was about the toughest job in America. But I'm not so sure being the President of CEO of Amtrak isn't as tough.
We are asking the impossible. We don't invest enough in high speed rail. We don't invest anywhere near what Europeans do. We had an occasion not too long ago to go to Europe with Chairman Young to take a ride on the TGV. They do an incredible job. It goes fast, it is smooth, it is a nice ride, and they put a lot of money into their system, and we just don't.
We had a hearing on our highway and transit committee not too long ago, Mr. Chairman, and Mr. Anthony Downs, a senior fellow at the Brookings Institute, this was about congestion and what we could do about it, and his answer was, there was nothing we could do, that we all just had to get used to congestion, it was a way of life.
Well, I don't think that's so. I think we need to make major investments in our country in rail, that that is the answer to congestion. The airspace that Mr. Oberstar referred to, the obvious traffic daily through our major cities, there is only one answer, and that is, we need to get serious and invest in rail.
Now, I've also been on the Acela, as Mr. Mica. I find it to be a very pleasant way to travel, and I believe we can do better. We could go as fast as the French if we invested the money in the rail bed and the Catenary that the French do.
So again, Mr. Chairman, let me thank you for holding this important hearing. I really look forward to hearing from all our panelists today. This is a crucial question for the future of America. Thank you.
Mr. QUINN. Thank you, Mr. Borski. And the gentleman is absolutely correct, the interest shown at the turnout here of the Subcommittee is indicative, I think, of the interest and the input from everybody. The gentleman from Alabama, Mr. Bachus.
Mr. BACHUS. Thank you, Mr. Chairman.
Page 24 PREV PAGE TOP OF DOC Mr. Chairman, last week, my mother, who's 84, gave me a newspaper article about my grandfather. He was a railroad engineer for the Southern, he was 90 years old, he was the oldest engineer attending their reunion. As I read that article, he was relating some of his experiences on the railroad. What caught my eye is, he described coming out of Atlanta, Georgia, as the engineer on the Southern Railroad, and he said he was on 85 mile an hour track, and he had to slow for a 60 mile an hour curve.
Today, that is 55 miles an hour track on the straightaway, and it's 45 miles an hour on the curve. That was 1917, and today's 2001. That's pretty much the story of rail in America.
Now, there used to be two passenger lines between Birmingham and Atlanta. That one used to be 70, 80 mile an hour track. Today it's 40, 50, 60 mile an hour track. The other one is no longer in existence. It's been pulled up. So the other route is even in worse shape, it's gone.
To give you another example, I'm just sharing two experiences, real life experiences, which I think tells us about our railroad. My son went to Europe last month, just got back this weekend. He bought a EuroPass for $600 and he traveled to nine countries in Europe. He did nothing but ride the railroads, and he went everywhere he wanted to go for $600.
If you want good rail passenger transportation now, you got to Europe, you go to Japan. It's non-existent here. In 1960 and 1950, we led the world in rail transportation. We basically have two ways of getting around now, and that's the automobile or the airplane. I do, although I disagree with some of what John Mica says, I agree with him that there's a larger issue here, and that's, do we just want to walk away from rail passenger transportation or high speed rail, do we walk away from it, or do we fund it?
The middle ground is purgatory. I mean, we either have to fund it or we have to walk away from it.
Page 25 PREV PAGE TOP OF DOC I also agree with the gentleman from Illinois who said that being the President of Amtrak had to be the hardest job in Americafrom Pennsylvania. From Philadelphia.
Mr. BACHUS. We basically need to make that decision of where we're going to fund it. We will fund a mile, we will add a lane to an interstate highway, one or two mile interstate highway, spend $3 billion or $4 billion and not give it a thought. We'll build a $2 billion bridge on a highway and not give it a thought. But when it comes to spending $200,000 or $300,000 on rail, we debate it and argue it and kill it.
So the other thing that I have said to this Committee and that I'll say again is, I think the future of high speed rail, we've got to, like we did with the interstates, we can't have grade crossings. Automobiles and high speed trains don't mix. If you're going to have a successful high speed rail, or even 80 mile an hour rail, which isn't considered high speed rail, you can't have grade crossings every two or three blocks. You've got to separate them. They do that in Europe. We can do that here.
We wouldn't think of laying a public highway across an airport runway and putting a traffic light up there.
Mr. BACHUS. We don't have stop signs on roads that cross over our interstates. We know better. But we're still 50 or 60 years back when we talk about grade crossings. We wonder why our trains run late, when they have to cross about two or three grade crossings every mile and they have to depend on people not to get out in front of the train.
Thank you, Mr. Chairman.
Mr. QUINN. Thanks very much.
The gentleman from California, Mr. Filner.
Page 26 PREV PAGE TOP OF DOC Mr. FILNER. Thank you, Mr. Chairman.
I add my thanks to you for holding this hearing. The future prospects for Amtrak high speed rail service in the United States are issues, obviously, of extreme importance to all of us. We need to make sure that every effort is made to ensure our national rail passenger service is provided the opportunity to become a real long-term success story for our Nation.
The first order of business must be for Congress and the Administration to provide the proper funding to give Amtrak the opportunity to truly be a viable option for our Nation's travelers. Only a real, sustained Federal financial commitment to Amtrak, Mr. Chairman, and I say to Mr. Mica and others, will allow the U.S. to have a world class rail passenger system in the future.
I represent San Diego, California. Improvements to our region's transportation infrastructure have ushered in tremendous growth for the past several decades. Now we find much of Southern California facing the onerous burden of overcrowding to the point of transportation stagnation. We can no longer, as others have said before me, afford to be shortsighted in our transportation planning and goals.
My town of San Diego and the surrounding areas have little room to simply expand existing corridors of roadways. But rail technology has quietly advanced to offer possible long term solutions to many of our region's needs and potentially those of the entire Nation. A viable high speed rail system criss-crossing this country would clearly produce enormous benefits to the American public. Passengers would be able to cut travel times in half, businesses would be able to double their productivity. This would create a boon for our Nation's economy, provide new conveniences for travelers, and far more options for United States transportation policy in the future.
Like other members of this Committee, I traveled with the Chairman to see the high speed rail systems that are already in use in European countries. They have developed, as we saw, an incredibly impressive service for the people of their nations, and are way ahead of us, of course, in understanding the importance and potential impact of this technology.
Page 27 PREV PAGE TOP OF DOC The reason for this European success in developing their rail systems is pretty simple. Rail capital spending in France and Germany is roughly 20 percent of both nation's total transportation capital spending. In the U.S., we put less than 1 percent of our total transportation capital spending into rail.
Amtrak has a tremendous history of providing on-time service, usually well above 90 percent, while also having an enviable safety record by any public transit standard. All this has occurred while Amtrak has had to deal with budget shortfalls and a seemingly always cloudy political future.
The challenge to this Committee and anyone that would like to see this Nation pursue a high speed rail system that would provide viable service nationwide is finding the commitment and funding to make the concept work.
I congratulate Mr. Oberstar and Mr. Houghton for their High Speed Rail Investment Act. It's a great start, and we have to provide long term support to Amtrak if we expect them to provide us long term solutions to the Nation's transportation needs. I thank the Chairman.
Mr. QUINN. I thank the gentleman from California.
The gentleman from New Jersey, vice chairman of the Subcommittee, Mr. Ferguson.
Mr. FERGUSON. Thank you, Mr. Chairman. I'd like to thank you and Ranking Member Mr. Clement for having this hearing here today. And I thank the witnesses for being with us as well.
Amtrak is an important issue in our country and one that I think requires our immediate attention. Our transportation infrastructure, from our roads to our airports, even our waterways are experiencing gridlock today. Imagine the level of gridlock if every railroad passenger were driving to work during rush hour.
Page 28 PREV PAGE TOP OF DOC While I recognize that my region of the country depends on passenger rail more than any other, we also need to realize that this is a national issue. California, the most populated State by far, is beginning to develop their passenger rail systems. Ridership is up 49 percent between the Bay Area and Sacramento, and up 7 percent between Los Angeles and San Diego. Across the Nation, people are beginning to understand the benefits of passenger rail. It's energy efficient, it's environmentally beneficial, and it relieves congestion.
Amtrak is at a critical juncture. By December 2, 2002, Amtrak is supposed to be free of any Federal operating subsidy. Many people have different opinions on the feasibility or the self-sufficiency of Amtrak, as we've heard this morning. But I think it's more important to look at the larger picture, at the issues facing the railroad. We need to build our Nation's passenger rail service and our rail infrastructure in general. Our country can't maintain a cohesive transportation network to reduce traffic congestion and to boost economic growth without high speed and passenger rail.
Again this year, Amtrak is losing money and I have real doubts about their ability to become self-sufficient by December of next year. So where does that leave us? We need to define or perhaps redefine Amtrak's role in our transportation network. Do we want Amtrak to be a national rail network, or do we want Amtrak to become self-sufficient at the risk of losing vital service to growing regions of the country?
As long as the Government does not assist passenger rail with infrastructure and maintenance, I find it hard to see how Amtrak can gain its speed and turn a profit. Over the past four years, Amtrak's ridership has grown and the revenues have increased over $2 billion last year. Yet Amtrak still lost $561 million.
In order to reach self-sufficiency, Amtrak recently proposed cutting 10 to 15 percent of the work force, labor and management. Mr. George Warrington has stated that in order to reach self-sufficiency, he's going to run Amtrak like a business. While I agree with the business-like approach, it can't come at the expense of losing service for commuters. While cutting service will help Amtrak to balance the books, I'm not sure that this is in the best interest of the country.
Page 29 PREV PAGE TOP OF DOC Finally, I realize that Amtrak must share some of the blame for its financial woes. The American taxpayer cannot simply write blank checks. And it's this Subcommittee's job to hold Amtrak accountable. However, it's also this Subcommittee's role to see how we can assist and enable Amtrak to provide rail service with the proper investment. And that's one of the reasons I look forward to hearing from our panelists today. Thank you, Mr. Chairman.
Mr. QUINN. Thank you, Mr. Ferguson.
The gentleman from Oregon, Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I certainly feel more optimistic about the future of America's rail situation given the leadership of you and Mr. Clement, Mr. Oberstar and Chairman Young.
I agree with my colleague from Florida about one point, that we have a system dealing with rail transportation in this country that's half baked at best. I have a slightly different take on the perspective. I think that this Committee can focus on the need for us to have a transportation system that looks at all of the modes and looks at the way that we use land use in a comprehensive fashion.
I didn't agree with the legislation in 1997. I thought they were unrealistic expectations in terms of self-sufficiency. And I would note by way of a footnote that Congress has not funded what we have authorized under that 1997 legislation. I think we have almost a billion dollars that was contemplated this year, and they're slated to get something like $550 million. We're not even keeping faith with that goofy bargain from 1997.
It is unrealistic to expect somehow that magically, railroad is going to operate in a system that is not subsidized. That did not happen with any of the other modes. It wasn't until 1934 that you could even have a passenger plane operate profitably. And up until that point, it was subsidized through air mail. We continue to pump billions of dollars into air transportation. We have billions of dollars into road transportation, direct and indirect. I think that we are fooling ourselves if we're going to pretend that somehow, our rail system is going to be different than shipping by water, barge, or roads. I think only bicycles are self-supporting, according to Mr. Oberstar.
Page 30 PREV PAGE TOP OF DOC [Laughter.]
Mr. BLUMENAUER. I would also note that we spent a huge sum of money to establish the rail network in this country. It was a unique public-private partnership driven by then-President Lincoln, for instance. We have spent billions of dollars to get us to where we are today. For us to turn our back on that rail infrastructure would be a tragedy.
I would note also that all other modes need Amtrak to be successful. I look at my part of the world in the Pacific Northwest. We've got two airports at capacity, absolutely at capacity. The quickest way to add capacity to SeaTac and the Portland Airport is to get reasonable service between Portland and Seattle.
We have a road segment that is one of the most critical components of moving freight up and down the west coast and Interstate 5 jammed. If we had decent rail passenger service, we would be able to relieve the congestion far more cost effectively than trying to add lane miles or trying to tax or drive people off the roadways.
I have heard people compare the United States' passenger railroad system to a third world system. And with all due respect to the people who have used that, I think that is an item of disrespect to the Thai railroads and other railroads that I've ridden in the developing world. I think I've ridden railroads in at least two dozen countries. I've not seen one that is as poor as the United States and unnecessarily so. And I couldn't agree more with the gentleman from Alabama, and reference the fact that we know we can do better, we did it within our life time.
This Committee can make a difference. I appreciate the Committee's leadership and look forward to working with them so that we have a railroad system that is worthy of our communities and gives them the reinforcement they need to make them more liveable.
Mr. QUINN. Thank you, Mr. Blumenauer.
The gentleman from Missouri, Mr. Graves.
Page 31 PREV PAGE TOP OF DOC Mr. GRAVES. Thank you, Mr. Chairman.
While I am a member of the T&I Committee, I'm not assigned to the Railroad Subcommittee and I very much appreciate your giving me the opportunity to sit for this hearing in consideration of H.R. 2329, the High Speed Rail Investment Act. This is a matter of great importance to me.
Mr. Chairman, I support the goals of the High Speed Rail Investment Act. I truly believe that we should devote more Federal resources to upgrading passenger rail service in the United States. I also believe that where possible, the private sector should be encouraged to participate in passenger service.
This bill works against that objective in two significant ways, and I do think there is a cure. If the Chairman and the leadership of the Committee and Ranking Member Oberstar would work with me to implement that cure, I will become a very enthusiastic supporter of H.R. 2329.
I have two specific problems. First of all, I believe the bill destroys any opportunity for private companies to provide alternative rail passenger operations that are funded by the bond program. The bill gives Amtrak a total monopoly over the funding and forces competitors to operate under Amtrak control or under contract with Amtrak.
The second issue that's been brought to my attention is, the bill works against the opportunity for private sector contractors to work on the rail construction projects that will be funded by this bond program. The bill does this by not requiring open bidding for projects funded with this money.
It is likely that Amtrak will use these funds to subsidize an expansion of its aggressive movement into seeking third party rail maintenance and construction contracts in competition with private contractors. Both problems, I do believe, can be resolved with amendments that require fair and open competition for projects and competitions. I believe in competition, I think it lowers costs and results in better service and I hope the Committee will work with me to perfect this bill.
Page 32 PREV PAGE TOP OF DOC Mr. Chairman, I have other statements I would like to read, but in the interest of time, I would ask to just be able to submit those.
Mr. QUINN. Without objection, so ordered.
The Chair appreciates the gentleman's cooperation. Welcome, too, we're glad to have you with us.
Mr. GRAVES. Thank you.
Mr. QUINN. The gentleman from Maine, Mr. Baldacci, opening statements.
Mr. BALDACCI. Thank you very much, Mr. Chairman. I'd also like to thank Ranking Member Clement for this hearing, very important matter, especially in the northeast. When Secretary Slater was here and we were discussing the problems with aviation and the lack of aviation service, in a lot of cases none, it was high speed rail that was going to offer the alternatives for people to be able to get to different places. And it was with that that we ventured down the development of the high speed rail corridor that was connecting Portland, Maine and Auburn, Maine to Boston and New York and to the Northeast Corridor.
That has been a long process and an awful lot of frustration by a lot of people. But it has always been with the hope that we would have alternative transportation. As part of our effort here in the Transportation Committee was to promote balanced transportation. It is very important that we also follow that up with a commitment on resources.
I agree with the statements that have been made in reference to the 1997 law, because it really was put forward with an unrealistic expectation. It was a hope that we could at one point privatize Amtrak and make it run self-sufficient. But as long as you're going to have a public mission mixed in with the mission to become self-sufficient, they are competing with each other. It probably makes it very difficult for Amtrak to function in that light.
I think it probably will be in the reauthorization of Amtrak that we'll want to clearly define what the mission will be in the 21st century and apply the appropriate level of capital resources to support that mission. I think it is very important for the issues that have been raised here in terms of alternative transportation, balanced transportation, in terms of recognizing the stress that's on our road system where 98 percent of the traffic is on the road system. And in terms of the overburdening of our transportation network and the under-resourcing of rails, I think we know why we're so far behind than Europe and other countries, because they get it. And we haven't yet applied the resources necessary.
Page 33 PREV PAGE TOP OF DOC Mr. Chairman, I would like to be able to put the further statement into the record, as you have already provided for, and yield time to other members on the Committee, so that we can hear from our panel.
Mr. QUINN. Thank you, Mr. Baldacci. Without objection, so ordered.
Mr. Larsen, from the State of Washington.
Mr. LARSEN. Thank you, Mr. Chairman, and thank you for holding this hearing. I first just want to associate with the remarks made by Mr. Blumenauer from Oregon about the Pacific Northwest and the challenges that we face in the Pacific Northwest with congestion, and offer just some numbers about Amtrak Cascades ridership in the Pacific Northwest. I'll do this within 15 minutes.
Mr. QUINN. You'd better do it in less than 15 minutes, Mr. Larsen.
Mr. LARSEN. In 2000, Amtrak Cascades ridership grew to just over 530,000 trips, diverting more than 40 million vehicles miles of traffic from congested regional highways. This record setting ridership was 17 percent more than 1999, and ridership is growing at a very rapid rate. From 1993 to 2000, Amtrak Cascades ridership grew more than 460 percent. In 1999, ridership in Bellingham alone grew more than 142 percent, and in Mount Vernon, 71 percent. And Amtrak Cascades customer satisfaction ranks consistently at the top of Amtrak's 42 routes nationwide.
The reason I bring these numbers to light is because as we read various headlines about Amtrak, I'd like the Committee to consider keeping its eyes on the prize, that is, consider not only the future potential of high speed rail, but the current value of Amtrak's services. With that, without objection, I'd like to enter the rest of my comments into the record.
Page 34 PREV PAGE TOP OF DOC Mr. QUINN. Without objection, so ordered.
And the good news is, we've had a huge turnout here of members. The bad news is they all wanted to say something this morning.
Mr. QUINN. But that's not bad news at all. I think the more we talk about this and discuss it, the better off we're all going to be. I just said to Mr. Clement, that's what we look forward to in this Subcommittee, when we started it back in January, and it's just terrific.
You heard the bells, panel, that means we're called to a vote. We're expecting two votes, a 15 minute vote and a 5 minute vote, and then we expect almost a couple of hours free without any interruption. So it would be my suggestion, Mr. Clement, that we release the members now, just recess for about 20 minutes or 25 minutes to get us over there for two votes and back, and then we'll hear from our distinguished panelists. We're going to adjourn for a bit.
Mr. QUINN. Good afternoon and thanks for your patience. We expect, the word from the Floor is that we'll have ourselves a couple of hours, and as long as we're finished speaking, there's a chance we might get through this in a couple of hours.
Mr. QUINN. Thank you, all of you, for your patience. We are going to begin, Mr. Clement is on his way here, and we're going to hear from our first panel, Mr. Kenneth Mead, the Inspector General at the Department of Transportation; Ms. JayEtta Hecker, the Director of Physical Infrastructure Team over at the GAO; and the Honorable Gil Carmichael, the Chairman of the Amtrak Reform Council, joined by Mr. Till for questions if necessary.
You already know, you've testified many times before, we would inform you and everyone that your full statement has been made part of the record. Many of us have had a chance to look at it. We'd like to suggest that you keep your oral testimony to about five minutes or so. Mr. Mead, we'll begin with you and then work our way across the panel, about five minutes each. And I would ask the Subcommittee members to hold all their questions until all three of you have made your statements, then we'll begin our first round of questioning.
Page 35 PREV PAGE TOP OF DOC Mr. Mead, please proceed.
TESTIMONY OF HON. KENNETH M. MEAD, INSPECTOR GENERAL, U.S. DEPARTMENT OF TRANSPORTATION; JAYETTA Z. HECKER, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. GENERAL ACCOUNTING OFFICE; AND GILBERT E. CARMICHAEL, CHAIRMAN, AMTRAK REFORM COUNCIL, ACCOMPANIED BY THOMAS A. TILL, EXECUTIVE DIRECTOR
Mr. MEAD. Thank you, Mr. Chairman.
I met with the Secretary before coming up this morning, and I think we really do have a very serious situation dealing with a very serious issue. And that's why the Secretary believes that the debate on the options for passenger rail in this country ought to occur sooner rather than later. You have about 14 months left in the authorization period. And I think it's wise that we begin this discussion well in advance of the expiration of the current authorization period.
Mr. Chairman, our office is required to conduct an assessment each year of Amtrak's financial condition and report to Congress and the Secretary. We're in the middle of our fourth such assessment, and I'm going to overview some of the key elements of that, beginning with Amtrak's financial performance.
There is some good news here. The good news is that the revenue and ridership continue to grow at a very respectable pace. The past year revenue is up about 10 percent, ridership up 6 percent, non-passenger revenue also grew significantly. It now accounts for over 40 percent of all Amtrak revenues. Notwithstanding that, Amtrak's cash losses of $560 million in 2000 were somewhat greater than they were in 1997, which was the year that Congress established that self-sufficiency mandate.
And the story so far this year is the same. So far, cash losses are about $17 million worse than last year at this time.
Page 36 PREV PAGE TOP OF DOC Now, it's important to recognize the results vary by business unit. Amtrak's broken into essentially three: Amtrak West, Intercity and the Northeast Corridor. Intercity, which has the most long distance trains, they're struggling the hardest. Intercity revenues grew by about $15 million thus far this year, but the cash expense growth was about $53 million more. That's about three times greater than the revenue growth.
The Northeast Corridor revenues, on the other hand, they've grown about 10 percent, and they exceed expenses by about $60 million. And that's just so far this year. Amtrak West revenues are ahead of projections, but expenses outpace the gain. It's important to note that in California, the State does some subsidizing of Amtrak operations.
It's fair to say, Mr. Chairman, that Amtrak's operating self-sufficiency mandate is in very serious jeopardy of not being met. To reach the goal, Amtrak has got to reduce its annual cash losses by over $300 million. Four years into its five year mandate, the cash losses are getting worse, not better. And a major driver of this problem is the growth in the railroad's expenses. And a driver of that is the acquisition of debt. Long term debt and capital lease obligations now are at about $3 billion. That's an increase of $1 billion just over 1999. Annual interest expense has grown from $74 million in the year of reauthorization to a projected nearly $200 million by 2002.
So one of the reasons we've repeatedly urged Amtrak to reduce its expenses is so we would have time to absorb and accommodate those changes, so we wouldn't have to do this all at once. The situation now, though, is that in addition to acquiring a large amount of debt, Amtrak has few options outside of severe actions like across the board service cuts or personnel reductions.
Frankly, there's no doubt that Amtrak could make the kinds of draconian cuts that are necessary to meet its mandate. But if these cuts are going to mean sacrificing the assets or human resources necessary to maintain a healthy railroad beyond 2003, such a victory would really be hollow.
Page 37 PREV PAGE TOP OF DOC I'd like to move to Acela delays. Acela is the high speed rail service. The original delivery date for the final train set was June 2000 . Now it won't occur until the end of this year. In the past, Amtrak tried to compensate for the losses associated with these delays, but this year, they ran out of options. So rather than default on its obligations, which would have triggered a number of events, Amtrak took a $300 million mortgage out on portions of Penn Station.
Now, with that transaction came another $25 million or $30 million a year in additional debt. How are the operating results? Well, it's still early. But ridership on Metroliner and Acela Express combined is 9 percent higher at this point this year than it was at this point last year. Since December 2000, the Acela monthly load factors, that's the percentage of seats that are filled, increased in the south end, that's between here and New York City, from about 30 percent to a high of around 40 percent. On the north end, from New York to Boston, the load factors have declined from an initial rate of about 48 percent to where they are currently at just under 40 percent.
I caution the Committee not to take these current load factors too far or extrapolate into the future. These types of fluctuations on load factors are not uncommon with the introduction of new service, especially given some of the problems Amtrak's had.
I'd like to close with just a discussion of capital funding. The level of funding Amtrak has received in recent years is not sufficient to meet its capital needs. In fact, one of the members in opening remarks I thought put it very well. He said, the real issue here is not operating self-sufficiency. The real issue is the capital, the foundation of the railroad. And I encourage the Committee not to just focus on whether they make ends meet from an operating self-sufficiency standpoint, but how are you going to fund the capital of the railroad?
Amtrak estimates that it needs about $1 billion a year just for its general capital investment needs. We don't see, frankly, any scenario in the foreseeable future where Amtrak's revenues will be sufficient to cover operating expenses and make the capital investments needed to keep the railroad operating in good condition. Even if the High Speed Rail bill, the bond bill, were to pass, Amtrak would need an additional $750 million a year to meet its general capital needs and the railroad retirement contributions.
Page 38 PREV PAGE TOP OF DOC Just a word on the bond bill to be careful of. There are 10 designated corridors in the country. That $12 billion isn't going to go very far. And one concern that I'd like to just share with the Committee and close on this, is that if everybody has an expectation that they're going to get a high speed rail corridor under this bill, we should think about where all the rest of the money is going to come from. You see, high speed rail productions are very, very costly.
And with that, I'll just close my statement, sir.
Mr. QUINN. Thank you. We'll get to some questions after we hear from the GAO. Ms. Hecker?
Ms. HECKER. Good morning, Mr. Chairman and members of the Committee. I'm very pleased to be here today.
There are three points that I'll cover. The first is the uncertain future of Amtrak and intercity rail, the second is the expected large Federal capital costs that are involved to develop and maintain intercity passenger rail, and finally, the need to assess the extent to which public benefits really justify the magnitude of investments that we're looking at.
I'll summarize the three points very briefly and then just have a few supplemental remarks on each of them. The uncertain future, I think, is pretty much conceded around the room that it is unlikely that Amtrak can operate a national passenger rail system as currently structured without substantial Federal support--not only operating support, but capital support as well.
The second point is about the cost, the very high cost to develop and maintain intercity passenger rail. While we're focusing today on the $12 billion bond bill, as Mr. Mead has just alluded to, the total cost to develop and maintain intercity passenger rail, looking at both the basic needs that Amtrak has outlined in its own capital plan as well as the estimates of the full costs of the 11 corridors, could well exceed $100 billion over the next 20 years. So that's really the order of magnitude of the complete requirements for supporting both the development and maintenance of the full national system and the new high speed corridors.
Page 39 PREV PAGE TOP OF DOC The third point is the importance of honing in on the public benefits from projected investments. While we recognize that there is clear congestion, if not gridlock, in many parts of the country, the estimates of public benefits from investments in rail have often been unclear and at times over-estimated. So we think that, as the Congress considers these major investments and requirements, the real focus on the actual benefits that will accrue from each project is a very important part of the analysis.
So overall, then, the critical issues here are, first, the actions by the Congress to define in a more complete way the role that rail can and is expected to play in the national transportation system; how second, to assure the stable, sustainable funding for that role to be fulfilled and third, defining the appropriate roles and cost sharing by all the partners.
I think the key is to recognize that it's important to end the unfunded liabilities that have been perpetuated throughout Amtrak's life. Intercity passenger rail has been under-funded, it is under-capitalized, and it is being dis-invested. It presents safety risks and it also prevents the system from being efficient and reliable for partners to really do the kind of investment that is justified and of interest to States, regional entities and local governments.
It's very unlikely in our view that Amtrak can reach operational self-sufficiency in the 17 months remaining. In the first six years since passage of the 1997 Act, Amtrak was able to move only $83 million toward closing the gap. In the 17 months that remain, they have to achieve improvements of over $281 million. So that's more than three times the savings that they were able to yield in six years. So it is highly unlikely.
I agree with Mr. Mead that that isn't the sole criterion that you really want to look at. However, it's the one in the Act that really triggers some very significant actions.
Page 40 PREV PAGE TOP OF DOC Regarding the issue of the cost, as I summarized, there is $30 billion included in the current capital and finance plan by Amtrak for capital support over the next 20 years. That is $10 billion more than Amtrak has received over the past 20 years.
Now, in addition, the cost to fully develop the 11 high speed rail corridors in a preliminary Amtrak estimate has been put at between $50 billion and $70 billion. While there may be some overlap between these two estimates, and we haven't had time to scrub the data and really get behind them and really speak authoritatively. It's clear that full funding for the capital costs for rail over the next 20 years both to maintain the basic national system as well as to fully develop the 11 high speed corridors is in the order of magnitude of about $100 billion. That is $5 billion annually, that is 10 times greater than the amount Amtrak has been historically receiving.
Our intent isn't to throw water, it's just the order of magnitude really ought to be on the table. Now, of course, the High Speed Rail Investment Act is seen as a first step. Clearly there is sorely needed capital infusion required for the development and maintenance of high speed rail, and the bond bill would provide some of that. What is important, though, is to recognize that it falls so far short of the full needs. A concern that we have is what would be done to ensure that projects would be completed, that they would either have useful, usable segments, or that you wouldn't have a bunch of holes in the ground in 10 areas of the country.
If the bond bill is a modest step forward to infusing some capital, it's important to focus on assuring you get useful segments and benefits from those investments.
Now, an interesting analogy is the requirement in transit funding and the FTA role in reviewing new starts. Basically, before a new start full funding agreement can be concluded, FTA requires the applicant to demonstrate that other resources can reasonably be assured to be available over the life of the project. That includes not only their share of capital costs, but operating costs, so that the system will in fact be put in place and sustained so that the benefits can accrue.
Page 41 PREV PAGE TOP OF DOC On benefits, the third point is that, again, while there's growing interest in rail investment by communities and there's no doubt that there is some real opportunity for investment and benefits to accrue from high speed rail, our concern is that all too often, the projected benefits have been unrealistic or general, and not particular to specific investments in a specific project.
So we think that the importance of the Congress ensuring that the benefits will be appropriate to the kind of costs invested is critical. And it's important, of course, to recognize that high speed rail can never be competitive on long distances with air travel, and realizing that the investments need to be targeted. Also the service that results have to be frequent enough, comfortable enough, safe enough, and reliable enough, so you can't just say, all right, we're going to provide one train or maybe even two trains a day. That may not be enough to take someone out of their car and out of the plane.
So the key open issues facing the Congress are to define the national goals in transportation, including the role that intercity passenger rail can play, and assure sustainable investments to bring about that vision. Thank you very much, Mr. Chairman.
Mr. QUINN. Thank you very much, Ms. Hecker.
Mr. CARMICHAEL. Mr. Chairman, I hope I can contribute something to this very important debate that's started. I congratulate you and Ranking Member Clement for serving that role today.
This Nation needs to worry very much about what it wants in the way of a rail passenger system and rail system in this country. So we appreciate being invited. My Executive Director, Tom Till, is sitting beside me here, for the Amtrak Reform Council. We have two of our council members behind me, Nancy Connery, appointed by Senator Lott, and Jim Coston, appointed by Senator Daschle.
Page 42 PREV PAGE TOP OF DOC So we have a very good working council, 11 members. They are bipartisan, of course, and we have done an awful lot of work in the last two and a half years studying this national rail passenger dilemma.
I have a statement that staff put together for me, it's called a summary statement. It restates some of the things that our two cohorts here have already done, so I won't dwell on repeating those figures. But this statement is better than the formal one that you've gotten, because it is corrected in a couple of places. So I ask anybody in the audience or the Committee to read this statement, because it talks about a new model for Amtrak.
I'm going to try to just speak off the top of my head, real quick. Amtrak has reached a point that is quite critical. In July of 2001, we've got to have a debate from Congress and the Administration and the public about what kind of rail passenger service we want in this country. I've been involved with the rail industry for a long time. I've been involved with Amtrak 13 years. I go back to former President Bush as his Federal Railroad Administrator.
I can't think of anything, other than my personal business, that I've spent more time trying to figure out what we need to do than to get a healthy, modern, national rail passenger system. So I believe this council has produced something. You created us, and we have really worked.
To both sides of the Committee, this council is pro-national rail passenger service. We would like to see Amtrak succeed and be healthy. All of our recommendations to this point have been to help Amtrak restructure itself or streamline itself or reorganize itself. Twenty months ago, we told Amtrak it needed to cut expenses. So we were very happy to see Amtrak in the last couple of days announce a restructuring and refinancing and redesigning of the company.
Fundamentally what this council is recommending is that Amtrak, the national rail passenger system, needs to be a standalone organization. We need to figure out how much funding it needs to produce the national system that we want. We also think, with the emerging corridors, that those corridors need a financing mechanism. And, speaking personally, I think the high speed Rail Investment Act bonds that we're talking about today are a step in the right direction. But I think there is a much better bond out there than the one we have right now. Because the Northeast Corridor is such an important part of this country's economy, it's a major toll road. It has $20 billion worth of life safety work that needs to be done on it, and technical work that needs to be done on it, to make it a first class corridor.
Page 43 PREV PAGE TOP OF DOC If we go through just the bond issues, the current bond plan, we'll be dribbling it along and moving it along into the next 10 years, and won't accomplish what I think we ought to have. So, quickly, the council recommends that Amtrak separate itself into two divisions, at least, and two separate accounting divisions: the national operating passenger mail and express and premium freight division.
We need to know, this council needs to know how many people that is and what kind of money they need, and what kind of money it's generating. The trains running on the Northeast Corridor all the way to Boston belong to the national system. And we also want from Amtrak what it takes to run the Northeast Corridor infrastructure, the real estate company, and how many people it takes. We don't mind Amtrak keeping ownership of it, but we think Amtrak ought to be bringing to the Congress every year a budget for the national rail passenger operation and a budget for the corridor development.
I'll try to bring it to this point. Our proposal in here on the bond issue is that we think that the freight railroads who own 20 something thousand miles of Amtrak right-of-ways out there are wanting to increase their capacity and increase their speed and wanting to double track their lines. One of the reasons why today's freight railroads are not doing real well is back in the 1980s, they single tracked it the main line rail network. They took up their double tracks.
And one of the problems with Amtrak today is it can't get through on those single tracks. So we've got a real dilemma.
Now, intermodal freight trains have come along now that require high speed. So the freight railroads are trying to go the market and borrow money, and the market is saying, your return on investment is not good enough and you're having a hard time.
So there's a happy partnership out here that is possible, where the freight railroads, working with the States and with the Federal Government, may come up with a new type bond that would be a railroad development bond in my mind, I'm speaking some of Carmichael, and my council is going to whip me for talking a little bit about it. But there is a bond out here that can help the Northeast Corridor accelerate its life safety work and get it done, and that bond can also serve as a vehicle for expanding these high speed rail corridors across the country that the freight railroads want to participate in and the States want to participate in.
Page 44 PREV PAGE TOP OF DOC I'll use one little quick summary. We may issue a bond that the freight boys put up 15 percent, the States put up 20 percent, and I've got a feeling the investment market may be happy to put up the other 65 percent, if there is some sort of guarantee or some sort of revenue stream on it. And we should not be talking about $12 billion worth of bonds for this new national high speed rail corridor system, we should be talking about $100 billion worth of bonds.
Now, our other worry is that we think Amtrak needs to concentrate on its core business of passenger trains carrying mail and express and premium freight and being modern trains. We think the Amtrak does not need to be worried about the infrastructure side of it. We believe that somebody like the FRA, who has experience in this area, or another separate Government agency, should be the bonding agency.
So with that, I've run over. But there is a new model that's very appropriate for right now of bonding for the corridor development and a new model of how to organize the national rail passenger system so that it is very efficient and will require less and less subsidies as time goes on. This is what the council is proposing. It's very pro-new Amtrak.
Mr. QUINN. Thank you, Chairman Carmichael.
I want to make a note now for the staff of the Subcommittee that we make certain that Chairman Carmichael's corrected version of his statement become part of the record, and we'll make certain of that. Thank you for pointing it out to us.
I also want to mention to other members who have joined us here at the Subcommittee who weren't here for opening statements that we would gladly accept their opening statements as part of the record. And we left the record open for 30 days, so we would welcome and encourage all that, and appreciate that.
Thank you, all of you on this first panel. I'm not certain I have a question just yet, but a couple of statements are in order for me, of course. I kept my opening statement when we began rather bland and sort of boring. My staff felt the same way, Chairman Carmichael, about preparing that.
Page 45 PREV PAGE TOP OF DOC But I have to tell you, as the Chairman, as a partner to Bob Clement here, that I am an unabashed supporter of Amtrak. I cannot imagine this country of ours without a passenger rail service. And I think we in the Congress have a responsibility, Ms. Hecker, as you point out, to define in a more complete way what that rail role is. Clearly, that's our responsibility.
And it doesn't take a rocket scientist to figure out that you get what you pay for. I don't care if we're dealing with aviation or other matters, roads in this Subcommittee, and the full Committee or any other issue in our line of work, you get what you pay for. We called all of you together today, Bob and I and the rest of the Subcommittee, to find solutions, not to get after anybody, not to go after anybody, not to point any fingers, necessarily, but in a real spirit of cooperation, with all the work that the Council has done and others, to get a solution in the next 14 to 15 months.
Sometimes the Inspector General, sometimes the GAO become at odds with other people in this institution. That's not my intention. We are only going to solve this problem if we really get it together ourselves and hear from anybody who's got anything to offer to solve this.
And frankly, after seeking the response in the first hour here this morning of other members, on and off this subcommittee, I'm going to suggest that we gather ourselves together again in a few short months, whether it's in this hearing mode or some kind of a mini-summit to talk about rail issues and to talk about Amtrak's future.
Because to have a hearing and to offer some good questions and receive some good input and to walk away from it for another four or five or six months because of our schedule is not accepting that responsibility that is ours, clearly ours. And we'll work at what that looks like in these next few weeks and few months. Generally, that's where I'm coming from.
Mr. Mead, I'm going to ask one question before I yield to Bob in just a second. It's my understanding that since the Act of 1997, authorizations for Amtrak have been about $1 billion a year, starting in 1998. I don't think we've ever gotten that far. Usually we've gotten it about half of that, give or take a few numbers here or there. Can you respond to me in a hypothetical, if Amtrak was to have received that full billion a year since 1998, and subsequent years, and even next year, regardless of what Presidents have put in their budgets, how much of a difference would we be looking at today? How much of a serious problem would we have if that wasn't true?
Page 46 PREV PAGE TOP OF DOC Mr. MEAD. I don't think there would be any quarrel about whether they were going to make operating self-sufficiency. I think clearly, with those understandings, I'm not privy to whatever arrangements Amtrak entered into with the Administration back then or whatever, but clearly, that amount of money would have made a difference.
I would add, though, that in the longer term on the capital side, that would not have been sufficient.
Mr. QUINN. I think you're right. I don't think it is sufficient. But I also think that if, again, our responsibility, if it's authorized, we need to get it to the people who use it the most. I also believe that not every problem is one that can be solved with money. This one is, at least to get us towards a solution.
Now, some members of this House, some members of the Committee, object to that. We'll have to take that as it comes. But this is one where we've got a responsibility to meet it.
I have some more questions but I'll yield to Mr. Clement at this time. Thank you all.
Mr. CLEMENT. Thank you, Mr. Chairman.
Mr. Mead, you said in your statement that Amtrak's situation is getting worse. Amtrak points to its progress toward achieving self-sufficiency over the past year. Can you reconcile these contrary assessments?
Mr. MEAD. Sure. I think Amtrak by almost any reasonable measure has done pretty well in increasing revenues, passenger revenues, as well as increasing ridership in I believe all of its business units. They've also done a good job in growth in their non-passenger revenues.
The problem has been on the expense side of the ledger. That growth has been about 7 to 8 percent, but since expenses have always been higher than revenues, they outpace the revenue gains. It keeps getting cumulative and cumulative and cumulative, it adds up and adds up.
Page 47 PREV PAGE TOP OF DOC In addition to that, you have at play the acquisition of fairly substantial levels of debt and an annual interest load that's gone from oh, $24 million in 1994 to about $200 million per year in 2002. I think it is possible for them to achieve self-sufficiency, but by doing things that I would characterize as very draconian. Penn Station, in my book, came close.
Mr. CLEMENT. Well, let's talk about the expense side, then. What is the most significant expense problem that limits Amtrak's ability to reduce its losses?
Mr. MEAD. Probably maintaining a national network and a work force of its current size. The current size of the Amtrak work force is about 24,000 to 25,000. It's been constant for I guess about 30 years. And plus, they're trying to maintain this national network, which is the glue, you might say, of what holds Amtrak together as a national railroad. But those are the two categories I'd look to, sir.
Mr. CLEMENT. So you're saying they have too much personnel?
Mr. MEAD. I'm saying that's a major expense item. When you're not achieving sufficient revenues to pay that work force, yes, it does fall short.
Mr. CLEMENT. Well, are you saying they have too much personnel, or they're paying their employees too much?
Mr. MEAD. I wouldn't characterize Amtrak as being fat in the number of employees it has for what it's trying to accomplish. Amtrak will speak later on the cuts that it's proposing and I'm assuming that their cuts won't cut too deep into the bone of their labor force.
Mr. CLEMENT. Ms. Hecker, are you aware of any intercity passenger rail system in the world that covers its operating costs and do you think it's reasonable to expect Amtrak to do so?
Ms. HECKER. My comments are based on readings I've done. We have not done an evaluation of other operating systems. But I think the general literature is clear that operating subsidies are the norm. Investments, however, are enormous in many countries, and also the geography is different. So the nature of the systems in different countries have to be looked at when extrapolated to the U.S.
Page 48 PREV PAGE TOP OF DOC But I think your basic point is that, yes, operating subsidies are the norm worldwide.
Mr. CLEMENT. Your testimony seems to suggest that high speed rail offers the most promise in replacing short haul air service and freeing up scarce airport capacity. Is that true, and have you examined where such benefits are most likely to be achieved?
Ms. HECKER. No, sir, we have not specifically examined it. In just looking at S. 250 and the House bill, our focus was on the kind of criteria that were included to assure the greatest likelihood of achieving major benefits, rather than language in the Senate bill that just talked about geographic dispersion, which may not have resulted in the investments where the impact could be greatest.
But there's no doubt we have a number of airports in this country that are beyond capacity and there is some hope that this really could make a difference. But this is just a beginning, a seed, and the assurance we're not sure is really there that it will be completed, and that it would yield the benefits that are projected.
Mr. CLEMENT. Mr. Carmichael, I know you've thrown out the proposal. Maybe there's some confusion. I thought you were first proposing separating ownership, and it seems like your proposal now is this so-called corridor development. I wish you'd explain that.
But also, I'd like to know what your response has been from Amtrak. But then I'd like to also know if this is good for Amtrak, what you're proposing. Are you saying that would be good for the freight railroads as well?
Mr. CARMICHAEL. Several questions, let me see if I can keep them in my head properly. The freight people, and I know them fairly well, now know that they cannot increase the speed and capacity of their railroad system because the right-of-ways out here have been single tracked in most cases. The tracks are in excellent shape, heavy duty welded rail, from city to city.
Page 49 PREV PAGE TOP OF DOC But their return on investment and their investment bankers won't let them have any more money. They probably need to spend another $50 billion or $75 billion in the next 10 years going back and double tracking and upgrading their system to take care of the new intermodal trains, the container trains and things that are coming through, and the UPS trains.
So I've been told face to face with several of them that if they could partner with the States and with the Feds in some sort of bonding program that they could move aggressively out to upgrading the tracks. Now, the high speed intercity rail passenger thing that we are talking about has got to have double tracks and good signal systems all across the country. When we first started looking at this Amtrak dilemma, we came up with two questions. Amtrak is two problems. One is the national rail passenger company and how to fund the corridors. Of course, Amtrak owns 400 miles of one of the corridors, operates on 22,000 miles, but it owns about 400 miles between here and Boston.
It needs to spend a lot of money on that corridor. That corridor is very valuable. So Amtrak has proposed and Congress has responded with a proposed bond program. So as we looked at this two problems of Amtrak, how to fund the national rail passenger system and how to create a national rail passenger system, we also looked at the Northeast Corridor funding needs, which is a double and triple and quadruple track system, great high speed corridor, potential high speed corridor. We also found that the freight boys needed it, too.
The freight people right now fuss at Amtrak because it interferes with movement of their freights on that single track system as I was saying. They made a serious mistake in the 1980s of doing the downsizing and doing the single track. Now, Mr. Gude at the Norfolk Southern said to the State of Virginia, we would appreciate your giving us or loaning us or participating with $900 million so we can double track our track out here that parallels I-81 and relieve the stress on the highway system.
So the council said, okay, let's separate Amtrak's operating company into a division, at least. Let's take the Northeast Corridor and separate and create a government agency out of it or a division of Amtrak. We didn't talk about privatizing anything. However, investment bankers told me that the Northeast Corridor is such a valuable asset that it's probably worth more than the $25 billion or $30 billion the taxpayers have invested in Amtrak.
Page 50 PREV PAGE TOP OF DOC So that corridor is an extremely valuable toll road out there. One investment banker told me, if that toll road, if we'd set it up as a separate agency, it could go ahead and sell the bonds and do the life safety stuff itself, it wouldn't have to wait. So we keep coming back that Amtrak has to be, its core business should be set up and funded properly.
Mr. CLEMENT. And what's Amtrak's response to your proposal of the council?
Mr. CARMICHAEL. The other day, when Amtrak hired McKinsey and Company to come on board, the signal to me was, they have finally decided they're going to look at that redesigning. The Amtrak organization we've got today is so structurally flawed. George is a great guy, but he is not a miracle worker. To run that corporation the way it's organized now is just difficult, impossible in a sense.
So by separating the company into those two divisions and coming to Congress for a budget for the passenger mail and express business, and then coming to Congress for a funding of the corridor development, now if Amtrak does that and these bonds are modified so that they fit this Northeast Corridor and the emerging corridors, then I think those bonds can be very attractive to the investment market, and we can be talking about instead of $12 billion, we can be talking about $100 billion for a new national corridor system all the way across the system.
Mr. CLEMENT. Thank you.
Mr. QUINN. Thank you, Mr. Clement. Mr. Coble.
Mr. COBLE. Thank you, Mr. Chairman.
Mr. Chairman, I know that you come from a railroad family, and I know you're proud of that. I'm proud of railroads. I think railroads are as American as hot dogs and apple pie and motherhood. I don't think anybody in here is anti-railroad.
Ms. Hecker, you indicated, I think you said that it is your belief that high speed rail could never be competitive with air traffic. Now, I can neither refute nor confirm that, but being the eternal optimist, I hope that high speed rail can compete with air traffic. I don't know whether it can or not, but I guess the ensuing months will perhaps answer that question.
Page 51 PREV PAGE TOP OF DOC Let me put this question to any of you on the panel. Under the bill before us, H.R. 2329, Amtrak is both the issuer of the Federal funds that result from the bonds of the development of high speed rail service and the recipient of these funds. Is there any other Federal transportation program that has one private entity as both the issuer and the recipient of Federal monies resulting from bonds?
Ms. HECKER. I'm not aware of that.
Mr. MEAD. Not that I know of, sir.
Mr. COBLE. Do any of you know of any? Okay, so I'll take that as no, then.
In GAO's report on S. 250, the Senate companion bill to H.R. 2329, the bill before us, the GAO report concluded that the Senate legislation could potentially cost the taxpayer between $400 million and $3 billion more than a direct appropriation. Do you all maintain that this assessment also applies to House Bill 2329, and if so, can you explain the method by which GAO arrived at that conclusion?
Ms. HECKER. Yes, sir, I believe that the same estimates would apply. Basically we looked at the cost of the tax credit to the Treasury, and then we added in what additional costs might accrue to the Treasury if States issue tax-exempt bonds for the matching contributions, and then we also added in additional costs if taxable earnings would be offset by accumulated losses that otherwise Amtrak wouldn't be in a position to deduct. So those would all be losses to the Treasury.
Then we calculated the data two ways, both in nominal costs and present value costs. Because the bonds have 20 year terms and could be issued over a 10 year period, the bonds would present costs to the Government over a 30 year period. So we looked at the whole period, and the nominal costs are between $17 billion and $19 billion for the $12 billion in bonds issued. The changes in the House bill from the Senate bill did not materially affect that at all.
Page 52 PREV PAGE TOP OF DOC On a present value basis, the cost to the Treasury would be between about $8 billion and $11 billion. We compared the cost with the costs of appropriations resulting in the same amount of money for rail projects and the same State share. That's how we got the additional costs for the bond bill compared to appropriations to range between $400 million and $3 billion, as you correctly outlined.
Mr. COBLE. I thank you for that. Either way, it would seem to me to be a more sound course to pursue to go the appropriations route, but I guess Amtrak's answer to that would probably be they probably would not be the beneficiary of that much money. Is that the problem?
Ms. HECKER. Well, this Committee knows better than I do the constraints of the budgetary process, and the limits of resources available.
Mr. COBLE. We're the authorizers, we're not the appropriators. But I just wondered, it seems to me that if that's the case, Mr. Chairman, it might be better to go the appropriations route. But as I say, that may be easier said than done. I don't have the answer to that.
Mr. MEAD. An interesting angle on this bond bill is not only what Ms. Hecker is pointing out, but if you did go through appropriations, then the payback will come from Amtrak. On the current construct of the bond bill, Amtrak, although it issues the bonds, does not pay back a dime on them. That's because the Treasury pays it back in the form of a tax credit, and the States pay back the 20 percent as a result of their deposit into an escrow account.
But under appropriations, it comes out of Amtrak's account. This way, Amtrak gets the benefit of it, but it doesn't pay for it.
Mr. COBLE. Mr. Chairman, I see the red light is illuminating in my eyes, so I will return to you.
Page 53 PREV PAGE TOP OF DOC Mr. QUINN. The Chair appreciates that illumination, Mr. Coble.
Mr. QUINN. Mr. Borski.
Mr. BORSKI. Thank you, Mr. Chairman.
Mr. Carmichael, I'm intrigued by your proposal. I have a couple of questions on it. Are you talking $100 billion for the Northeast Corridor only in the infrastructure, and what would be the results of that for passenger rail?
Mr. CARMICHAEL. The Northeast Corridor is, I'm pulling the numbers up in my head, needs to have $20 billion spent on it rapidly. If Amtrak should set it up as a separate division, infrastructure division, and it went into the marketplace and sold the bonds and accelerated the improvements, high speed rail, the Acela trains and everything like that, would be major benefactors of it.
I need you to ask your question again to see if I missed your point.
Mr. BORSKI. I want to know, yes, could the Acela hit that 185 mile an hour speed that we're talking about if that kind of investment were made?
Mr. CARMICHAEL. I have some answers, pieces of that in my head. As I understand the Catenary system in the south, the trains have a hard time from FRA safety standpoint running at that speed, because the Catenary is not adequate enough for it that speed.
The $20 billion would put it into what I would call a legitimate high speed corridor.
Mr. BORSKI. And my question is, is that $100 billion just for the Northeast Corridor?
Mr. CARMICHAEL. No. I'm talking about the whole United States.
Mr. BORSKI. So $20 billion would take care of the corridor.
Mr. CARMICHAEL. Right.
Page 54 PREV PAGE TOP OF DOC Mr. BORSKI. And the separate account that you're talking about, are you talking about one operating and one for capital investment?
Mr. CARMICHAEL. Your question again?
Mr. BORSKI. Are you talking about one division of Amtrak that would be solely for operating and one that would be solely for capital, with this $100 billion?
Mr. CARMICHAEL. Let me back up just a minute. Amtrak right now is going to be issuing these bonds. We worry about Amtrak issuing the bonds. We think Amtrak's management needs to concentrate on its core business, running trains, carrying passengers, mail and freight and express and things like that. We don't think the Amtrak management needs to have the burden of doing the bond business.
The Council at this point, if I'm interpreting my council correctly, they think that's something issuing bonds that belongs in the Government agency side. So if we're going to talk about the development of high speed corridors across the United States, and using bonds to build those high speed corridors, we think that bonding authority should be in an agency like the Federal Railroad Administration. We know that the freight people in the States across the country are all willing to be players in this thing right now.
So Amtrak needs to concentrate on the core business. They don't need to be into the corridor development business.
Mr. BORSKI. So is it your view, if we had this $100 billion bond, that Amtrak could be operating without Government assistance for operating?
Mr. CARMICHAEL. Amtrak would probably bein my mind, we're trying to put Amtrak in the same position that an airline's in. Delta Airlines doesn't have to build airports, doesn't have to carry it on its financial statement, doesn't have to pay for the control system or anything else like that. Delta buys planes and maintains counters and carries people. Poor Amtrak at this point is doing everything. They are responsible for the Northeast Corridor infrastructure and the total nationwide passenger train operation. And we're expecting them to be self-sufficient.
Page 55 PREV PAGE TOP OF DOC Amtrak, if it was running trains and concentrating on its core business and had these high speed corridors out here, probably would come pretty close to being profitable. The TGV, for example, in France, runs on very good, dedicated tracks. They generate enough revenue to buy more train sets. In a sense, I think that's what we're trying to get Amtrak to.
So the council's approach is, how do we get Amtrak in the same posture as an airline is, and how do we keep Amtrak from trying to do everything other than run its core business.
Mr. BORSKI. Mr. Mead, Ms. Hecker, I'm assuming you've seen this proposal. Could you share your views on it with us, please?
Mr. MEAD. Frankly, you're still going to have to pay for the infrastructure. Whichever shell you move around we're still talking a large piece of change, and somebody has to come up with the money. I think the financing issues, in my judgement anyhow, are the premier ones, that we have to make a judgment about the capital and how the capital is going to be funded.
Whether Amtrak is the one that's going to be maintaining the infrastructure or somebody else, seems to me a subordinate question.
Ms. HECKER. We do believe that looking at structural changes is an important part of this. We have had some familiarity with the ARC reports. We have not done our own analysis.
But I think what is important about structure is that structure does determine the extent to which it can act like a private entity and the extent to which it has public responsibilities that conflict with it. So structurally, that's a way to really examine how to maximize it functioning as a private entity and perhaps separating out or having a different structural treatment, perhaps, for the public good dimension.
Mr. BORSKI. Thank you, Mr. Chairman.
Page 56 PREV PAGE TOP OF DOC Mr. QUINN. Thank you.
Mr. MICA. Thank you, Mr. Chairman.
Let me carry this a little bit further. Mr. Mead, you've testified that $12 billion is only going to give them enough capital, literally, for 10 years. In fact, if you go back and look at somebody's report here, maybe it's GAO's, it says that $12 billion in bonding authority that's proposed by Congress actually is only equal to about $9 billion. Is that correct, Ms. Hecker, in your report?
Ms. HECKER. In present value terms, that was
Mr. MICA. Okay, it's worth $9 billion. And you testified that it's going to take, Mr. Mead, a billion dollars a year for the next decade in minimal capital expenditures, is that correct?
Mr. MEAD. Yes. Nobody should assume that the bond bill is to take care of
Mr. MICA. Yes, Amtrak's running around like the Pied Piper promising everybody a high speed rail. And let me prove another point that makes this even more ludicrous, what we're proposing here. Mr. Carmichael, how much did you say it's going to take to just improve the Northeast Corridor? Didn't you just testify $20 billion?
Mr. CARMICHAEL. That's right.
Mr. MICA. So this is another half baked approach, spending more money, not getting anything done that needs to be done. Mr. Carmichael, why didn't you all consider a plan that would take, first of all, the Northeast Corridor can make money, if it was privately operated. A lot of people in Congress couldn't understand that, because they don't have a clue as to how business operates for a profit and loss.
But the Northeast Corridor could make money, isn't that the case? If properly operated on a high speed basic, not 135 miles an hour or losing business with new Acela trains from New York to Boston, couldn't it make money?
Page 57 PREV PAGE TOP OF DOC Mr. CARMICHAEL. When I was administrator with Sam Skinner, and he was so sure that Amtrak was cooking the books in the Northeast Corridor that he took a lot of my money and went and did a study on it.
Mr. MICA. Well, I believe it can make money. I believe AutoTrain can make money. There again, another half baked approach. We put in an tremendous amount of money, since Susan Molinari chaired this Subcommittee, into AutoTrain, we put in new sleeper cars, new dining cars, refurbished the carriers, coaches, everything is new. We put in a $30 million station in Lorton and we dump them in Florida in heat. I'd like to take the Amtrak people right now outside and tie them to a tree for about an hour and see what it's like to be dumped in Florida at the half baked approach they've taken to finishing AutoTrain. It's the way they operate things.
Mr. Mead, maybe you could supply the Subcommittee, I read this somewhere or heard this, that only in, if you take all the railroads in the world, and only in Bulgaria and Romania do you get a production per passenger mile per employee less than in the United States. Could you check that and provide that to the Subcommittee?
Mr. MEAD. Yes.
Mr. MICA. See, that's the problem, is that we have operationally, and it's not Amtrak's fault, they inherited sort of the mess that they were given. But I think the only solution, Mr. Carmichael, is to take this out far beyond what you propose, take the operational parts out. The Northeast Corridor can make money, I believe. The AutoTrain can make money. There are other corridors.
But God forbid that we should give them high speed rail to operate on top of, new high speed rail routes on top of what they already have. Do you think they can operate new high speed rail corridors on top, given the constraints, financial and operational?
Mr. CARMICHAEL. There are about 25 States already in the process of developing high speed corridors and
Page 58 PREV PAGE TOP OF DOC Mr. MICA. But the question is
Mr. CARMICHAEL. Amtrak's job is just to bring the trains and run them on it.
Mr. MICA. I know. But the bill also provides this bonding authority. First of all, we've proven it's not going to provide bonding authority for any new corridors. It's not even going to meet half the capital requirements for just the Northeast Corridor, correct?
Mr. CARMICHAEL. I'm going to give you the privilege of letting Tom Till respond.
Mr. BORSKI. Tom?
Mr. TILL. Yes, I think an interesting approach, to see how States are evolving in trying to come to grips with these regional federally designated corridors, is what's going on in the Midwest. In the Midwest, nine States got together. They defined an operating plan, they determined that they would run an amount of train miles that's about half of what Amtrak runs today in the whole country.
Mr. MICA. But should Amtrak operate that?
Mr. TILL. I'm getting to that point, because it's very important. They decided among themselves that they did not want to just make it part of the Amtrak system, but they would negotiate with Amtrak on a sole source basis if they could reach an agreement on operating costs and the structure of the system. So that's what they're doing.
Within that framework, they're going to create what amounts to a separate subsidiary of Amtrak in order to run this thing so they can control the costs and they can make a contract with that subsidiary to run a certain amount of service at a certain cost.
Mr. MICA. Basically what I proposed is that we separate these things out and they will, they can operate at, what would be interesting is also, and I'd like it made part of the testimony, is Amtrak has competed for some commuter rail and other routes out there, I understand that almost double the price for operations that some of the private contractors have picked that up. Mr. Chairman, I'd like to have that be made part of the record, too, to prove a point that Amtrak necessarily cannot do it as cheaply and efficiently and economically and in good public service as the private sector.
Page 59 PREV PAGE TOP OF DOC Let me just say one final thing. Labor should not be afraid of what we're proposing. Because I think that tens of thousands of new jobs will be created if we would unleash this private sector potential and not just limit Amtrak to its current dismal future and status.
Thank you, Mr. Chairman. I yield back the balance of my time.
Mr. QUINN. The gentleman's time has expired. Thank you, Mr. Mica.
Let me go to Mr. Graves now, who's been with us almost all morning, and asked to sit with us especially for this occasion. Are you having fun, Mr. Graves?
Mr. GRAVES. Yes, I am.
Mr. GRAVES. Yes, I am, Mr. Chairman, and again, I appreciate it.
I don't think there's anyone isI'm an absolute fan of the railroads. You have no idea how big a fan I am, but I'm also a very big believer in fair competition and opening this thing up. There's an interesting statement that was made, and I think it was made by Mr. Mead, that whether, I think you said whether or not, whether Amtrak or someone else is the provider of the contract or the services is a subordinate question. I think it's absolutely a very important question. I don't think it's subordinate to anything.
Mr. Carmichael, you mentioned the FRA being the bonding authority, which I think makes a lot of sense. I think there is a huge conflict of interest if you have Amtrak both being the bonding authority and also the recipient of those bonds. The two things you said in your testimony which I do like, one, each project should be evaluated by an impartial Government body on its own merits and free from any requirements that Amtrak operate the services benefiting from the funding.
The second was, all funds, including both State contributions and bond proceeds, should be under the control of an independent trustee, and should not be permitted to be entangled in any manner with the internal finances of the issuer, which I think is a great point.
Page 60 PREV PAGE TOP OF DOC The one thing I do want to ask you, the original testimony which you asked not to be used, and which you submitted a second testimony, there are several things in there which included in your new testimony, and I'm just curious why, because I think they make a lot of sense, I'm going to read them, there's three of them.
A company in Amtrak's financial condition should not be issuing $12 billion in debt, particularly when $9 billion of the debt will be for rail corridors that Amtrak does not own. Second, if Amtrak issues the bonds it will have conflicts of interest. Amtrak may be tempted to use its control of funding to exert improper influence on corridors outside the Northeast to retain Amtrak as the operator of new services. And third, were Amtrak to apply such improper pressure, it would place other train operating companies at a distinct disadvantage in competing to provide service. This would amount to a restoration of Amtrak's monopoly, which was repealed by the Amtrak Reform and Accountability Act.
I was just curious why you left those out, because I think they ought to be submitted, if we could. Because I think it makes a lot of sense.
Mr. CARMICHAEL. Let's let Tom respond to that.
Mr. TILL. That's in the full statement, Mr. Graves, and it's part of the record.
Mr. GRAVES. I appreciate that very much. And I appreciate what you're saying, because that's kind of exactly what I'm looking at. I don't want to derail this thing, I just think that we should have fair competition. I appreciate your loyalty to the railroads.
Thank you, Mr. Chairman.
Mr. QUINN. Thank you.
Mr. DEMINT. Thank you, Mr. Chairman. I do appreciate your words in support of a national rail system.
Page 61 PREV PAGE TOP OF DOC To me, the development of a national passenger rail system, the infrastructure, the service, is as important a thing as we can do on this Transportation Committee; as important as development of an interstate highway system. So I firmly believe in it, and frankly am concerned that we don't have a big enough vision as a Committee, perhaps even as witnesses, to fill that bill of importance.
It seems that all we're trying to do is feed it enough crumbs to barely keep it alive. As we consider this bonding issue, it's clear from what you've told us today that this is not going to solve the problem. It's not going to give us long-term sustainability of the Amtrak system, and in that light, I would just like to ask anyone on the panel, is it unwise and maybe even irresponsible to move ahead with the issue of bonds, the issue of debt without a bigger plan to provide long term, predictable funding for Amtrak to operate at the level we need it to be, so that it can become what we want it to be? Just anyone.
Mr. MEAD. We discussed this over at the Department. In a lot of ways, deciding on the bond bill puts the cart before the horse; that there's a larger framework here and a larger issue about what Congress sees as the future of passenger rail in the United States and the construct of it.
In fact, one of the very basic questions here is who issues the bonds. Well, how are you going to decide who issues the bonds before you decide who is the national rail passenger system? So I think you have a good point there, sir.
Mr. DEMINT. Anyone else?
Mr. Chairman, I yield back.
Mr. QUINN. Thank you.
Mr. SIMMONS. Thank you, Mr. Chairman.
Like many of the members of the Committee, I have a lot of background and a lot of support for passenger rail. Representing eastern Connecticut, the first interstate railroad system in the United States was from Providence to Stonington, Connecticut, my home town. And it carried passengers as well as freight. And we've gone through, over the last decade the upgrade of the shoreline right-of-way.
Page 62 PREV PAGE TOP OF DOC But I will also have to say that in my experience, and prior to coming to this body I was ranking member of the transportation committee in Connecticut, that our experience with Amtrak on the so-called high speed rail project was an unfortunate experience. It was an experience where we felt that the scoping of the project and the implementation of the project was unnecessarily expensive and unnecessarily exclusive of State concerns for that project. I think what we see today is the fruits of that experience.
It's very hard to have high speed rail on the Connecticut shoreline when you have nine full circles of turns between Westerly and New Haven. It's hard to go fast when you're going in circles. And it's very hard to have high speed rail from New Haven to New York when the right-of-way is controlled by Metro North, which carries a far larger group of citizens that I have to respond to than what I see on the Acela.
So I think that our support for passenger service is conflicted by the unfortunate experience that we've had with Amtrak. I believe that Amtrak needs to be reorganized. And I believe that it is hard to go forward with a major bonding package if we don't know what that money is going to go to, and whether that expenditure is really going to help the current situation.
And that reflects my concerns here. I do believe that we can make money, as one of my colleagues from Florida indicated, with this intercity rail system. But the way it's currently structured, I don't see how Amtrak can be successful and I don't see how the Metro North system, which serves Connecticut, New Jersey and New York City, can step aside to allow them to be successful under current conditions.
So I will share those thoughts with the panel and ask the panel if any of them wish to respond to that.
Mr. MEAD. I think you're right. You know, I'm from Connecticut, from a shoreline town. So I know of what you speak. And I do think there are some fundamental issues here that the panel's laid out, and I think Mr. Warrington, in his statement, even lays out some very core policy issues about the direction that passenger rail is going to take, which need to be resolved before we go forward and start dispersing bonds under the bond bill.
Page 63 PREV PAGE TOP OF DOC That would be all I would have to add.
Ms. HECKER. In short, the bond bill perpetuates another unfunded commitment on top of the unfunded commitment that Amtrak represents. So the value of a consolidated Congressional agenda and action and vision on the future of intercity passenger rail for both a basic national system as well as high speed rail clearly has merit.
I think another point Mr. Carmichael brought up that's extremely important is the issue of the development of freight rail infrastructure and the long term concerns and needs there. An important consideration here is whether and how to integrate the freights' needs with the commuters that you represent. There's so much at stake here one wonders whether it might not be wiser to try to package that all together.
Mr. CARMICHAEL. Mr. Simmons, I'm also going to try to respond to Mr. DeMint and his questions. I'm sorry he didn't get to stay. These corridors that have been federally designed out there, these high speed corridors, in addition to the Northeast Corridor, are very similar to what happened to the toll roads back in the 1950s, when I was a youngster. Those toll roads ended up being an interstate system nationwide, the defense interstate highway system.
These corridors that have been designated right now are the beginning of a new interstate system, I call it Interstate II. The current interstate system is a slow asphalt and concrete, automobile and truck thing. We're beginning to start to fund with these bonds this Interstate II, this nationwide, high speed, intercity rail corridor system. And I think that's an extremely valuable asset for us to be planning for, and I think that the debate on Amtrak is going to focus on, how do we get this intercity, high speed, Interstate II rail system out there. The freight people are going to enjoy it very much, because they can move their freight on this double track system and triple track system out here at a lot higher speed. The nation will like it very much because it's environmentally benign in an awful lot of ways, and it can be electrified later on if we have to.
Page 64 PREV PAGE TOP OF DOC So these bonds are the forerunner of the development of a national intercity high speed rail system. And it will probably be far superior to the interstate highway system we produced before.
No I'm speaking for Gil now, and not the Council.
Amtrak's job is to bring the trains. The Federal Government, working with the States, and the private railroads that own the right-of-ways, can take these bonds and start building this new high speed, intercity, very safe, very environmentally benign new national passenger and mail and express system for this country.
This bond is not just Amtrak getting some money for the Northeast Corridor. This bond, if it's properly designed, will be the funding mechanism for this new high speed intercity passenger mail and express system. Your Committee is working with an extremely important issue in this bond. Our council is saying, structure that bond so that it attracts the freight boys and they become players and we get a good intercity system out of it.
Mr. QUINN. Thank you, Mr. Simmons. Mr. Carmichael, I did not mean to cut you off with Mr. DeMint's response. I did not know you were looking to be recognized.
Mr. CARMICHAEL. That's all right. He's talking about a national system, and so are we.
Mr. QUINN. Mr. Ferguson, questions for this panel? Mr. Clement, any final questions?
Mr. CLEMENT. No.
Mr. QUINN. Anybody else on the panel at this time?
Mr. CLEMENT. Wait just a moment, I think Mr. Oberstar wants to ask a question.
Mr. QUINN. Our plan here, while we're waiting, is after last minute questions for this panel, would be to move to our second panel. We're still expecting to have enough time to get that done and finish before we're interrupted by any new votes that come through, and if possible, we'll get to the third panel as well.
Page 65 PREV PAGE TOP OF DOC And in the meantime, I want to thank all of you for participating here this afternoon as we head toward our next panel.
Mr. Ferguson, would you assume the Chair while we're waiting?
Mr. OBERSTAR. Mr. Chairman, I apologize for having to step out. There's always other committee business that I have to address.
First of all, unfortunately my colleagues who spoke earlier are no longer in the room, I want to make it clear for the gentleman from North Carolina and the gentleman from Florida, and the gentleman from Missouri, H.R. 2329 is not an Amtrak bail-out bill. This legislation is targeted to high speed rail corridors. Mr. Houghton and I did not craft this legislation to solve Amtrak's problems.
Secondly, the gentleman from Missouri raised questions about opportunities for private companies. Our legislation specifically provides that avenue of opportunity. The bill in the other body, S. 250, does not. It resides all authority in Amtrak. We specifically corrected that defect.
The gentleman from Florida said, well, Amtrak is horribly mismanaged, and then said that we should construct Maglev in the Northeast Corridor. Well, that's internally contradictory. If you had all the money to provide Maglev in the Northeast Corridor, then with that kind of money you could put it in Amtrak and make it whole.
Mr. Carmichael's comment is right on target that we ought to double track and avoid the conflict between passenger and freight. And if the freights themselves double-tracked, they would vastly improve their own efficiency and reduce their maintenance costs.
Well, Ms. Hecker, I appreciate your concern about holes in the ground in 10 areas of the United States. We don't envision 10 high speed rail corridors. If we could do two, I'd be happy. If they could do one and make it work, and show Americans that high speed rail can work. I'd be happy.
Page 66 PREV PAGE TOP OF DOC I just recently in the last year or so initiated a new idea, which is already catching on, of safe routes to school, to turn around the health habits of a whole generation of Americans. Obesity kills 300,000 people a year in America. Twenty-five percent of kids 15 and under are clinically obese. We've got to get kids walking and biking to school.
I said, let's demonstrate that this can be done. And I got two areas from different parts of the United States, one from a suburban setting on the West Coast, and one in an urban setting on the East Coast. Not 10 projects, just 2. If we can make it work in two places, then the rest of America will catch on.
Well, the short story is, not only has it worked, it's been so successful that many other States are just clamoring to get in to use the template of these two projects. That's what I want to do with the high speed rail initiative. Yes, the bill falls far short of needs, if you talk about doing 10 or 12 projects. We're not talking about doing 10 or 12. I'm hopeful that if we get two or even one that would be enormously successful.
I specified in my opening remarks that the French did not follow existing freight rail lines. They built clean, new lines, relatively straight, with only very small percentage deflection in their curves, so that they could achieve 180 mile an hour speeds. They did it one segment at a time, they did the Paris-Lyon line, and then proceeded to the Atlantique route and then south, then north and now they connected Lyon and Marseilles. These are all enormously successful. Why should we be the last in the world with high speed rail service?
Yes, Mr. Carmichael, I agree, and Ms. Hecker, I agree that $100 billion would be wonderful. But we'd be laughed out of the House if we proposed a $100 billion investment for a new rail program. Let's start with something that's manageable.
It might be appropriate, Mr. Carmichael, to reside the authority in FRA. But I thought we already had an existing managing entity in Amtrak. And I didn't want to create a new bureaucracy. Mr. Houghton didn't want to create a new bureaucracy. So we're using Amtrak as a pass-through, as a vehicle, so that we aren't bringing in a whole new bunch of bureaucrats to run a new financing program. Let's keep it narrow, keep it slim, keep it manageable.
Page 67 PREV PAGE TOP OF DOC I would like to ask the IG and GAO, what you'veI hopeexamined in detail, the House legislation, and not confused it with the Senate bill, as many people have done so far today. What further oversight authorities would you want to see in this legislation to assure that there is careful management of the financial resources we have committed?
Mr. MEAD. I'll take a shot at that, Mr. Oberstar.
Speaking for the IG only, certainly not the Department, I don't know what their views are on this, a principal concern I have with the construct of the bond bill, and I appreciate the distinctions you articulated between the Senate and House versions, because those distinctions you drew are accurate ones.
You pointed out that you were interested in one or two corridors. In my travels, there's a lot of people in the Congress that have expectations the one or two corridors will be in their neighborhood. I'm wondering if we ought to have a common framework for what the expectations are.
Frankly, I think there's a lot of appeal in a bond bill if it's limited in scope, so it doesn't get out of hand, so the inexorable pressures that Amtrak is currently under, of running routes, all these routes doesn't increase. You know, whenever Amtrak tries to cut back a route, they have a lot of people come knocking on their door and protesting, even though the route by the wildest stretch isn't going to come close to making ends meet.
So that would address a lot, from my point of view, if it focused more narrowly, if we wouldn't unleash a tidal wave of requests.
Mr. OBERSTAR. And at the same time, we have to avoid the ever-present temptation to designate by legislative direction which those corridors should be. This should be a peer reviewed, merit-based process. And if more than one or more than two are meritorious, that's fine. But I want to see, as I said, I didn't want to limit this to a small number, but my expectation was that maybe two projects would be designated, and if they work, we'll find that $100 billion. The Congress will flood the place with funding.
Page 68 PREV PAGE TOP OF DOC Mr. MEAD. You asked about the oversight. I didn't respond to that directly, but I think the bill does have some good oversight provisions in it. I can see that if you're really open to having other entities bid for high speed rail, for doing work in the corridors, that Amtrak would have a conflict in doing that. But the bill also has the Secretary of Transportation in a very central role. I don't think anything goes anywhere unless the Secretary of Transportation says it does.
Mr. OBERSTAR. Right.
Mr. MEAD. And that seems like a check.
Maybe what you could do is, if Amtrak is bidding or wants to issue a bond, then for that purpose they can be involved. And if somebody else wants to, then they don't go through Amtrak. It seems like just a minor legislative drafting issue.
Mr. OBERSTAR. And that's the answer to the concern of the gentleman from Missouri. I just wanted to make it very clear to my colleague that his concern has been reflected in the changed language in the House bill, and I think we've responded to it.
Ms. Hecker, do you have a comment?
Ms. HECKER. First, I would say that there are some substantial improvements over S. 250 regarding some concerns that we have with that bill, such as more specific selection criteria, which would focus more on the real likely benefits. And perhaps the most important one is walling off the funds from Amtrak for regular use for either ongoing capital needs or operations.
There's also an important issue of authorizing funding for intermodal facilities. That's a huge gap in current infrastructure funding. Highways don't want to fund it and transit doesn't want to fund it, and ports don't want to fund intermodal facilities. So this is, I think, the first time I've ever seen a piece of legislation that says, yes, we'll take ownership and we'll fund those intermodal facilities, particularly into airports. So those are some important improvements.
Page 69 PREV PAGE TOP OF DOC The key, though, I think is this idea of it not being the bail-out, as you said, for Amtrak. They still have a significant role in the project selection, and we think you may want to reexamine that, and also there's still a reference to a continuing requirement for a financial contribution to Amtrak itself. Obviously if it's another operating company that would be developed or contracted with by one of the corridors, or even in a partnership with a freight, why would it have to have a financial benefit to Amtrak?
The other point I made note of in my statement is the concern about providing for cost growth and assuring that the funding is for useful projects. In terms of your reference of not expecting all 11 corridors to be developed, we've spoken with a lot of the folks and we think every one of them is expecting to be either the one or one of the 11. So the expectation out there right now is very high, and I think some kind of clarification that the target here is to get, I'm afraid to use the word demonstration project, that really does demonstrate, like the France Lyon
Mr. OBERSTAR. The word demonstration suggests a temporary operating quality.
Ms. HECKER. That's why I hesitated. But to really demonstrate that it can get people out of their cars, out of the planes and really provide some real relief for the substantial congestion that so many Americans face.
Mr. OBERSTAR. Well, if you would like to suggest some further ideas for walling off, as you called it, and limitations that would help with the oversight process, I would welcome those suggestions, as well as those from Mr. Mead.
There is another matter that has been raised quite frequently, and I regret that our full Committee Chairman is not here. But quoting from his statement in his news release he says, ''I'm disturbed about Amtrak bond legislation that could open the door for Amtrak to access TEA-21 funds that it currently is prohibited from tapping.''
Page 70 PREV PAGE TOP OF DOC We have very clear language in this bill on page 21, line 16, subsection g, special rule relating to the National Railroad Passenger Corporation. I won't go through and read it all, but it is derived from the language that the Ways and Means Committee, working together with Chairman Shuster and me in the crafting of TEA-21, wrote into TEA-21.
And the language is almost the same, except as provided in subparagraph (b), no amount may be appropriated from the highway trust fund on and after the date of any expenditure from the highway trust fund which is not permitted by this section, meaning, you can't use money unless you have a specific new act of Congress that goes through the Ways and Means Committee and this Committee to do it. We made it very clear. After all, I had a major hand in writing TEA-21, taking the trust fund off budget. Both Chairman Shuster and I made it very clear that we're not opening the door for Amtrak to use highway trust fund dollars, and we have written very clear language in TEA-21 and in this legislation that Amtrak can not get its hands on the highway trust fund.
Mr. Carmichael, do you have any comments?
Mr. CARMICHAEL. I believe your question is, why it shouldn't be domiciled in Amtrak to issue the bonds. And our report was, our recommendation was that an agency like FRA be the issuers of the bonds, and the Department of Transportation and the Secretary would have to approve it all.
Amtrak's job is to run passenger trains, carry mail and express. And the FRA, which I was administrator of, did an awful lot of work in the Northeast Corridor, FRA knows how to do EIS work. They know how to do corridor evaluation. They have the expertise. Amtrak doesn't have that expertise in its shop. So Amtrak in my mind, and most of the council's mind, Amtrak needs to concentrate on its core business. And the Government agency needs to have the responsibility of analyzing and selecting through the Secretary of Transportation.
So these bonds, you weren't here a few minutes ago, these bonds may be the vehicle for building a very nice new Interstate II system out here of high speed intercity rail passenger network. It could be very similar to Interstate I, with highways connecting cities. These bonds, if we design them properly, can fund and finance these emerging corridors all across the country.
Page 71 PREV PAGE TOP OF DOC So I think FRA, working with FHWA, could do a good job in evaluating corridors and passing out the bonds, controlling the bond funds like that. So I'd urge the Committee to really think about Amtrak in the operation company doesn't need to be in the corridor business.
Mr. OBERSTAR. I did give that consideration, Mr. Houghton and I did, and we'll come back and take another look at FRA. But there are some benefits other than financial considerations that relate to labor concerns, keeping Amtrak in the picture resolves some other concerns that we may run up against.
Thank you, Mr. Chairman. I appreciate the time to pursue this matter at length.
Mr. FERGUSON [ASSUMING CHAIR]. Certainly.
I understand Mr. Graves had one more question he wanted to ask.
Mr. GRAVES. If I could, just to try to clarify some stuff. The Secretary of Transportation makes the decision on what projects there are. I guess this is to Mr. Mead. Who makes recommendations to the Secretary of Transportation?
Mr. MEAD. Well, that would be Amtrak. I think the colloquy here was just, if it's desired by the Congress that other people can bid, offer bonds, then it seems to me that in those circumstances, Amtrak would be conflicted, if they're in competition, obviously, and that a provision could be put in the bill that would bypass Amtrak in those circumstances, and I think that was the essence of the exchange.
Mr. GRAVES. I was curious, because I don't want to get messed up here.
Mr. MEAD. It's a good issue, because under the bill, there are so many billions of dollars, I think it's $3 billion, that can go to the Northeast Corridor. And there, assuming Amtrak is reauthorized, Amtrak would be the likely one that would want to issue the bond for the Northeast Corridor.
Page 72 PREV PAGE TOP OF DOC But elsewhere in the country, that's not necessarily the case.
Mr. GRAVES. If another company gets a contract, they have to operate under a contract with Amtrak, is that not correct?
Mr. MEAD. Yes.
Mr. GRAVES. And they have to comply by the same rules and laws that Amtrak has to now, which creates a problem.
Mr. MEAD. Actually, my recollection is that the bill says that the high speed rail line would not necessarily have the same track access rights or preference rights that Amtrak currently has.
Mr. GRAVES. Yes, if a private got it, they would have to go nose to nose with the privates to get those rights. But as far as some of the laws and regulations concerning Amtrak, even a corporation wouldn't have to abide by the same as Amtrak?
Mr. MEAD. No, they wouldn't. Because Amtrak has certain statutory rights under the basic enabling legislation.
Mr. OBERSTAR. If the gentleman would yield, under the legislation, Amtrak has to waive its rights.
Mr. GRAVES. I can get with Mr. Oberstar, too, and we can figure out some more of these. I appreciate that.
Mr. OBERSTAR. I think the gentleman raised a valid concern, if the gentleman would further yield, and I wanted to address that concern, because that concern arises out of the Senate bill, but not our bill. I think we can further refine the language and address the matter with greater clarity, if that is necessary. And I'm happy to do that.
Mr. GRAVES. I appreciate that.
Mr. FERGUSON. With that, I want to thank this panel. We appreciate your time and energy on this issue. As you can see, there's a great deal of interest in this legislation and in Amtrak in general by this Subcommittee, and we appreciate your time.
Page 73 PREV PAGE TOP OF DOC With that, you're excused. Thank you very much.
I'd invite Mr. George Warrington to have a seat at the table.
George Warrington is the President and CEO of Amtrak. We appreciate your patience today. We understand it's been a long morning and now afternoon. We invite you to give your opening statement.
TESTIMONY OF GEORGE D. WARRINGTON, PRESIDENT AND CEO, AMTRAK
Mr. WARRINGTON. Thank you, Mr. Chairman.
I really do appreciate the invitation to appear before the Subcommittee this morning to discuss both our progress and our challenges. And we have many on both fronts. We talked about it at length this morning.
I appreciate your leadership and the leadership of the Ranking Member on this concept of an honest dialogue about our national transportation needs and the role that intercity passenger rail service should play in helping to meet those needs.
I would like to start by reprising a theme that I delivered on the occasion of Amtrak's 30th anniversary this past May. We referred to it, I referred to it as the tale of two Amtraks. One Amtrak is working very hard to transform itself into a more customer focused, market driven organization, partnering with Governors and mayors, business and community leaders, chambers of commerce and the like, and all about improving mobility for people and commerce in this Nation.
I will tell you the other story doesn't read well. It's a story of mission conflict, and we have had some discussion about this this morning. It is a 30 year history that suggests that running an intercity passenger rail system with a national public service mandate and running at a classic commercial profit are not compatible goals.
Page 74 PREV PAGE TOP OF DOC First, let's look at what we're doing to try to work smarter and better. We've improved our service, introduced high speed service in the northeast and new or expanded service, some of which was referenced here this morning, in other parts of the country. We have introduced a service guarantee, the first one offered by a national transportation carrier in this country, and we backed it up with a service standards program.
We're focusing on partnerships with other companies and we're leveraging our assets to generate new revenues from new lines of business. The combination of these factors has, as Ken mentioned earlier, increased our ridership and our revenues substantially over the last couple of years.
In the current fiscal year, despite the contractions seen in other parts of the transportation and tourism industries, we have sustained between a 9 and 10 percent growth in revenue. But despite this, we are not meeting our forecasts, set before the downturn, and prudence requires us to assume continuing flattening of the economy and the impacts it could have on our service and on our system. This means, I will tell you, and we've had some discussion about this this morning, intensifying our effort on expenses in this fiscal year and next fiscal year, and begin next fiscal year with a lower base when projecting our revenues and expenses.
As part of an ongoing five year business plan, Amtrak has already been working on scores of internal cost management and cost reduction efforts. Our goal is to save an annualized value of $270 million a year over the next four years. We have launched some initiatives in this fiscal year, some last year, and are in the midst of analyzing and have been over the past 8 to 12 months literally every single part of our company for additional savings in fiscal year 2002.
As we do so, we are mindful of the long term imperative to create a stronger company and not to weaken the company. So we're not just slashing services or quality, which could actually depress long term revenues. But instead, we are looking at significant streamlining and restructuring of the business across the entire operation and in specific areas like operations, procurement, fleet management, inventory, receivables and all of our administrative and overhead costs.
Page 75 PREV PAGE TOP OF DOC And this is not a recent phenomenon. This process has been underway for quite some time.
As a result of these efforts on both the income and the expense side of the ledger, which is the principal measuring stick here, we have reduced our Federal operating support for use of Federal money for operations from $318 million in fiscal year 1999 to $59 million this year, as part of a national system.
This is a glide path we have projected to achieve operational self-sufficiency. We have done this even as we have faced delays in the full implementation of our Acela high speed service, less than adequate amounts of Federal capital investment, literally for 30 years, but including over the past several years, and recent evidence of a weakening national economy.
I'd like to clarify the Amtrak Reform and Accountability Act mandates that five years after passage, Amtrak shall no longer use any of its appropriated funds to cover operating expenses. That is the test for self-sufficiency, and I will tell you, we are working very, very hard, and we are entirely focused on striving to meet that mandate.
But it is also important to understand that even if we achieve this, and I am confident that we have all of the tools at our disposal to do this, and we have accelerated them, even if we achieve this, and even if Congress passes the High Speed Rail Investment Act, there will still be a need for ongoing Federal capital investment for basic Amtrak system needs and excess mandatory railroad retirement payments.
While we've been working hard to meet our Federal mandates, we've also been working with Governors, mayors and business leaders across this country. As this Committee knows very well, State and local leaders are searching for solutions to America's growing crisis. They know that with a relatively modest investment, and everything's relative, rail can give travelers a real alternative, comfortable and convenient, while revitalizing local economies and reducing burdens on highways and airports. I know the panel which follows me consists of a number of business leaders from around this country and policy makers who will, I know, speak to that theme.
Page 76 PREV PAGE TOP OF DOC That's the first part of the tale of two Amtraks. Let me turn to the rest of the story and be as brief as I can be.
In 1971, Amtrak was created with a Congressional mandate that said in part, Amtrak shall completely develop the potential of modern rail transportation to meet the needs of the United States. It was explicitly a public service mission. At the time Secretary of Transportation John Volpe predicted that Amtrak would be profitable in three years. When that goal wasn't realized 26 years later, Congress enacted legislation requiring us to become operationally self-sufficient by 2003. That sounds like a commercial mission.
If you're a public service provider, you go where the community need is. If you're a business, you go where the money is. And if you're Amtrak, which way do you go? Believe it or not, quite frankly, we are managing to go in both directions at once. We're working hard to achieve operational self-sufficiency while still serving a national network.
But not surprisingly, this has some undesirable side effects. First, it will always leave Amtrak with P&L losses after accounting for depreciation. Second, it required internal, significant internal cross-subsidies from commercial revenues and profitable train services to offset losses from money losers. The bottom line, we are not able to meet a mandate to run a national network and turn a profit in a classic commercial sense.
There's another negative consequence associated with this unrealistic expectation. It clearly erodes confidence in our passenger rail system, which is arguably doing better and is more important to our future than any time in this Nation's history. Mr. Chairman, we need to forge a clear consensus about the Amtrak mission, we have sidestepped it for literally 30 years, and determine the appropriate modes and levels of capital investment to support that mission.
As things stand, intercity passenger rail suffers from a chronic investment gap. Total investment in intercity rail is about 1 percent of all Federal transportation spending, or about $500 million a year. After covering our excess railroad retirement obligations and a small portion of our operating expenses, very little of the Federal support is actually left for capital investment.
Page 77 PREV PAGE TOP OF DOC What do we do? Frankly, we need to get closure on three critical policy questions. First, what should the national intercity rail system be? Profitable routes? Routes through federally designated corridors? Long distance routes serving communities and under-served markets, or a combination of these? Amtrak can inform this discussion with much data and years of experience, but only policy makers can define that ultimate mission.
Second, should the system cover the costs of public services that don't pay for themselves, and if so, should that be through cross-subsidies internally as we do today, which always leaves on the edge at the end of every fiscal year, or through direct support or through other means?
And finally, as or most importantly, how much capital will be provided in the most capital intensive business in the western world? How much capital will be provided to support the system and where will it come from? Some of the financing could come from the High Speed Rail Act, which is supported, as you know, by more than 150 House members, including the majority of the T&I Committee.
Because this legislation provides real solutions to transportation problems and because it would cost relatively little compared to the benefits and compared to the capital leveraged from other sources, this bill enjoys broad bipartisan support from Governors, mayors and many other organizations you're going to hear from today. All of these leaders recognize the potential benefit for our economy and our communities from a national network of high speed corridors built out over time.
As Mr. Oberstar said, this is not an Amtrak bill. This is not an Amtrak bail-out. This is about economic development to communities, States and regions.
The High Speed Rail Investment Act would literally be just a first step in making investments to reduce trip time in key travel markets, relatively short to medium distance markets around the country. Current plans envision reducing travel time between Chicago and Detroit from today's nearly six hours to three hours and forty minutes, Seattle and Portland from three and a half hours to two and a half hours, Charlotte and Atlanta from six hours to about three and a half hours. And there are still more opportunities to significantly reduce trip time congested travel markets on both the south end and the north end of the Northeast Corridor.
Page 78 PREV PAGE TOP OF DOC The Act would cover some of the country's rail investment needs, but as many of your prior witnesses have indicated, not all of them. The scope of those needs, the best mix of funding sources and amounts, the relative priorities and the timing of investments is up to law makers like yourself, as well as all of our partners in States and Governors and local business leaders.
If I can leave you with one message today, it is my request that the mission of intercity passenger rail in the United States in the 21st century be clearly defined for the first time in our 30 year history, and that the appropriate levels of capital investment resources be supplied to support that mission.
Mr. Chairman, we appreciate the time and the interest you are devoting to this issue. We look forward to working very closely with you as you and we work through these challenges over the next 12 or 15 months, perhaps with an eye toward reauthorization. Working together, I do know, and I'm confident that we really can write a new book about intercity rail and Amtrak and its role in the future with respect to solving very serious congestion problems that are going to flow from travel demand forecasts over the next 15 or 20 years.
Thank you, Mr. Chairman.
Mr. QUINN [RESUMING CHAIR]. Thank you, Mr. Warrington, and I want to quickly thank Mr. Ferguson for sitting in there. The mayor of the City of Buffalo, where I represent, is here for another meeting in the building, and when he heard you were up here, he may come up for some testimony. As long as he doesn't take Mr. Mica's seat, I told him that would be fine.
Mr. QUINN. You're aware of Chairman Carmichael's discussion this morning of the Reform Council's recommendation. Have you had a chance to see it?
Mr. WARRINGTON. Yes.
Page 79 PREV PAGE TOP OF DOC Mr. QUINN. Can I ask you, in a couple of minutes, your quick reaction?
Mr. WARRINGTON. A couple of reactions. The general concept of separating internally within the Amtrak structure, organizing, structuring the management of the assets and the operation separately, I think is a good objective. I also believe, and Gil has recommended and Tom Till has recommended, and we are doing this, we're in the process of doing this, that the accounting around both maintenance and operations and capital needs to be segregated also, so we have a very clear picture.
Leaping beyond that, though, I would be concerned about a balkanization of a precious asset. That is, high density and very complex and complicated, like the Northeast Corridor, and a balkanized ownership or a balkanized management of both the asset and the operation, particularly when you need to craft a careful maintenance, construction and scheduling and operations plan, not only for Amtrak service, but collegially with multiple commuter operators, 24 hours a day, 7 days a week, and lay on top of that freight operations.
I think there's extraordinary value and utility, cost efficiency, as well as safety considerations around the concept of singular and focused accountability around those critical integration issues on the Northeast Corridor.
I would also say that the Northeast Corridor itself has extraordinary potential with the right level of capital investment to get the kind of trip times with the Acela train set at 150 miles an hour, and if we invest smartly and wisely, particularly on the south end, there's no reason that with this bill that we're talking about here today, we can't further chip away and get that trip time down to the 2:10 to 2:15, 2 hours and 15 minute mark or so between Washington and New York.
The other aspect of the Northeast Corridor that's very important is the fact that it is a major revenue generator for Amtrak, which we use to significantly cross-subsidize our operation across this country. In fact, when challenged with the operational self-sufficiency mission, we have worked very hard to develop commercial revenue streams around real estate development and telecommunications, and ultimately other opportunities to generate cash and to generate income to help us deal with money losing trains across this system which are a fragile network that we have received as a mission by this Congress to operate.
Page 80 PREV PAGE TOP OF DOC Mr. QUINN. Thank you, Mr. Warrington. The catch-22 there is that while the Reform Council says you should be in the railroad business, running cars and that's all, you find yourself in some other businesses, to help out with the cash shortage.
Let me ask you this. I mentioned it earlier in our discussion, too. Since 1998, the authorization has been about a billion dollars for Amtrak, and yet in Presidents' messages or budgets they've come up with about half that. Why hasn't or, enlighten me why Amtrak hasn't pushed to get more, hasn't requested more, hasn't said that if we're authorized for a billion, let's get the folks on T&I, let's get our supporters around the country, let's talk to the White House or whoever we have to talk to to get some of that money?
Mr. WARRINGTON. I think frankly, Mr. Chairman, because we've been pragmatists, and we have a long history of failure to ever effectively appropriate authorized levels through this process and through a discretionary process.
The irony here, frankly, is we're having a discussion over three hours this morning about the mechanics and the like around a bill, and whether Amtrak should have access to that money or not have access to that money. Is it the right thing to do, or is it not the right thing to do? What are the mechanics around it? We can go around the axle forever around those basic questions.
In the end, it is simply a vehicle that enables us to get access, and not just us, this is about States and freight railroads, access to money to invest capital to start making a difference, because the discretionary process in this town and in this body, over 30 years, has not effectively dealt with the fundamental, underlying question here about money, and it has never effectively dealt with the conflicting mission also.
Mr. QUINN. Well, I think you've heard from other members who were here earlier today about just that. The inertia, the ability of this body to get you the money it needs to do the job quickly, you've heard from Mr. Borski and others, and you'll hear from more, Mr. Coble made a suggestion that we look at the appropriations side of these things. I don't know that it would ever make anything any easier. And your pragmatism on what a President puts in his budget is what you're going to get maybe didn't do you as well as it should have, but arms you with some information. Thank you.
Page 81 PREV PAGE TOP OF DOC Mr. Clement.
Mr. CLEMENT. Thank you, Mr. Chairman.
Mr. Warrington, I think you know I'm a supporter for Amtrak. I'm also a believer in the national passenger service. I know we spent a lot of time today talking about high speed rail and all, and particularly the Northeast Corridor. And I support the entire country having rail passenger service, but you also know, places like Tennessee, Tennessee, we border more States than any State in the United States. And we're still waiting for Amtrak. So you talk about high speed rail, we'll take a slow train, you know. We don't have to have a so-called high speed train at this point in time.
But I think if we're really going to be serious about supporting Amtrak and supporting national passenger service, you know, Amtrak has to look at the whole country and not just part of the country.
You state in your testimony that Federal operating support has been reduced to $59 million for this fiscal year. But the GAO says you need to achieve another $281 million in financial improvements to meet the goal of operating self-sufficiency. The Department of Transportation Inspector General says you must reduce losses by over $300 million. Can you please reconcile these different estimates of the gap you must close between now and the end of 2002?
Mr. WARRINGTON. Yes. My challenge is to stay on the glide path. And over the past three years, we have reduced the amount of money which we devote to train operations and operating support for the company from $318 million to where we will end up this year of $59 million.
So when it's all said and done, out of the appropriation that we get, we will under the definition established by this Congress be devoting in what is a $3 billion operation about $59 million to operations. In addition, we will be devoting, out of our appropriation, about close to $200 million toward excess railroad retirement, which was never part of the self-sufficiency test, which we need to understand, which will have to continue to be a responsibility of this body for the future.
Page 82 PREV PAGE TOP OF DOC Next year, in 2002, that number, $59 million, needs to be reduced to $40 million, and by 2003, to zero. Although that excludes roughly $200 million for excess railroad retirement outside of that test. And we have had underway over the past year and are deeply in the middle of a process to review all of the economics of our operation, our entire cost structure, our entire management structure, and we are in the process of making decisions about very significant streamlining to our management and the operation of this company.
We've also had underway literally scores and scores of cost management, both task forces and programs inside the company, that touch every aspect of the company. I will tell you, considering the conflicting mandate of the national system, I've got two missions that I am required to adhere to. We are doing everything possible to adhere to that mission by 2003. It is, continue to run a national system which includes money losing trains and reach operating self-sufficiency, that definition. And we have a lot of work going on, and will be making decisions over the next couple of months about any subsequent or further actions we need to take to make sure that we are there.
I can't control everything and I can't guarantee everything. And we have encountered some adversity over the past year or two that has made that challenge more difficult. But I will tell you, it is within reach or we will be very, very close.
I will tell you also, though, at the end, when we get there, we will still have, and we will get abused for having about $900 million in losses in a classic commercial sense. Because we'll have about $600 million to $700 million of depreciation that I will never be able to fund through the fare box or through some other source. I will still have $200 million of excess railroad retirement obligations above and beyond the self-sufficiency test. And that's real.
And from a P&L sense, I will continue to show losses, and we will continue to be criticized for running a losing operation and being in the red. But we will have met the basic test that this Congress put before us around the amount of Federal money that we do get that we devote to operations. We will get there or we will get very close. But we're going to also be doing some things inside the company to significantly streamline or continue what we've already set in motion around streamlining the way we do business.
Page 83 PREV PAGE TOP OF DOC Mr. CLEMENT. Some of Amtrak's critics have stated that the growth in your costs have been the result of your agreements with labor. What is your response to that?
Mr. WARRINGTON. My response to that is, our costs arelet me back up for a minute. First of all, when Amtrak did its last round of collective bargaining, the outcome produced about $57 million of work rule savings and wage rates that were about 10 percent less or 90 percent of what were then the freight rates that were being negotiated by the carriers and organized labor, number one.
Number two, our wage rates are either competitive or below market for many of our crafts. So I am not going to pin labor with a tag that Amtrak's problem is associated with what in the end is fair and reasonable wage rates for a fair day's work, and my obligation is to make sure that we are fully executing and making sure that the work rules that we negotiated are being fully utilized, to get the most efficiency out of the work force, basically.
So I would say that our wage rates are fair, and they are reasonable, they are competitive and in many instances, they are below market. I have dispatchers that sit in Penn Station, New York, that are earning $10 an hour less, literally, sitting next to Long Island Railroad dispatchers that are making $10 an hour more than our guys are. So I'm not going to be apologetic about the wage rates we pay, they are fair and they are reasonable.
My challenge and labor's challenge is to continue to press on work rules around productivity in a fair and efficient way. We did that the last time around and we're going to do that this time around as well.
Mr. CLEMENT. All right, thank you.
Mr. QUINN. Thank you, Mr. Clement.
Mr. COBLE. Thank you, Mr. Chairman. Mr. Warrington, good to have you with us, as well as the first panel, good to have the first panelists with us as well.
Page 84 PREV PAGE TOP OF DOC Mr. Warrington, Amtrak has the authority, unlike any other Government agency, or unlike most Government agencies, to challenge the Administration's budget allocation for Amtrak, and ask Congress directly for its full general fund appropriation as authorized by the reform law. Yet Amtrak, I don't think, has done this since the reform law, even though the President's budget has provided little more than half the amount that Amtrak was authorized to receive.
Now, I'm not normally one who encourages the spending of money. But this is troubling in light of Amtrak's repeated assertions that the Federal Government has underfunded the passenger rail capital improvements over the years. If what I have said is accurate, has the Amtrak board of directors violated its fiduciary duties under the District of Columbia Corporation Act by not seeking full funding, by not pursuing that alternate course?
Mr. WARRINGTON. No, I believe in fact, we have always officially requested the authorized amount, that's my recollection. I'll have to reconstruct that over the past couple of years. But my recollection is, we've always officially requested the authorized amount and usually, it was not provided in the President's budget. That was just the reality. We had to work within that practical constraint.
Mr. COBLE. And you think you all did in fact challenge the Administration's amount during those years?
Mr. WARRINGTON. We made requests and we got out the other end whatever we got out the other end. You know, I think we had no interest in getting into a major fight with any Administration around the budget.
Mr. COBLE. Mr. Warrington, if you could give us, just for the record, in more detail.
Mr. WARRINGTON. More history, yes.
Mr. COBLE. Now, I don't mean to imply anything's wrong about this next question. I am told that Amtrak's computer reservation system is programmed to flag the travel of members of Congress. Now, for example, heads up folks, Congress Quinn and Congressman Clement are going to be on that 3:00 o'clock departure to New York.
Page 85 PREV PAGE TOP OF DOC I'm not suggesting anything wrong about this, but if this is done and Mr. Clement and Mr. Quinn, I don't think there's anything wrong with using you as illustrations, but we'll use Borski as an example
Mr. QUINN. Why don't we use Coble as an example?
Mr. COBLE. I'll use Coble as an example.
Mr. QUINN. All right, that's better.
Mr. COBLE. But Mr. Warrington, my question leads to this. If this is done, again, repeating, nothing improper about that, but I can see how members of Congress, and I used Jack and Bob as examples, because they're the ranking and chairman of the Committee, the members of Congress would obviously get a better response than Joe Q. Public. Is this flagging situation a commonplace practice?
Mr. WARRINGTON. No. I would be veryI am completely unaware that we have a computer reservation system that flags members of Congress or anybody else. I will tell you this, I do get calls very frequently from members of Congress who tell us that they're going to be riding the train.
Mr. COBLE. And if that is done, and I reiterate, nothing wrong with that, but I can see how if that's done, then the members of Congress would have the best foot forward in their presence, would leave probably with a better taste maybe than a passenger who didn't see the best foot forward.
Let me ask you this, Mr. Warrington. Amtrak, I am told, has accepted the fiscal year 2002 funding request of $521 million. If the bond proposals are not enacted, will Amtrak be able to survive financially on its general fund appropriations during the coming fiscal year?
Mr. WARRINGTON. Yes. Actually, we had a conversation earlier about the President's budget historically. And we worked closely with OMB and the Department of Transportation on a 521 number that was scored at 100 percent. That was what was included within the President's budget. While it's not the fully authorized level, it comes closer to the authorized level, because it is scored at 100 percent.
Page 86 PREV PAGE TOP OF DOC And that's good. And that enables us to keep a reasonably sized capital program going through next year.
Mr. COBLE. Thank you, Mr. Warrington.
Mr. Chairman, I direct your attention to the fact that the red light is not yet on and I yield back.
Mr. QUINN. I guess the trains do run on time, Mr. Coble.
Mr. BORSKI. Thank you, Mr. Chairman.
Mr. Warrington, as I said earlier, I think you have a tough job. I believe I heard a member say earlier Amtrak should run as a business, and I think I heard in the next breath but don't reduce any passenger service. How do you do them both?
Mr. WARRINGTON. We do have a mission conflict in this place. The way we do them both is by cross-subsidizing. We have put a lot of effort into service quality, into the high speed program in the northeast, which is not ideal and not optimum yet, but capital will clearly get us there, and developing other revenue streams. We've gotten into the mail and express business on the tail end of our long distance trains.
And it's all about finding ways to generate revenue, to offset or cross-subsidize internally trains that will always lose money because of their nature. But on the other hand, the Congress has determined that a national network is important, and that it serves many under-served communities. And we've worked hard to move in both directions at once. But I will tell you, it's difficult. As I said earlier, in the end, what it does is, it works us toward a point where, at the end of each fiscal year, we're at zero, and we have no working capital.
Now, you pick up the Wall Street Journal this morning or yesterday, or any other newspaper out there, but I concentrate on the Journal, and you've got all the earnings reports coming in from the last quarter. You'll find that United Airlines lost $660 million last quarter, and Delta Airlines lost $550 million. I heard this morning that Lucent lost $3.2 billion last quarter.
Page 87 PREV PAGE TOP OF DOC The way they deal with that is because they have working capital, they have reserves, they don't work to zero to meet a political construct over a short period of time, which is what my challenge is. I've got a mission to run a national system and meet a self-sufficiency deadline by 2003, and to get there successfully, I can't have any reserve at all. I need every dollar applied to satisfying both of those objectives.
It is no way to run a railroad or any other business, and it gives you no flexibility at all to deal with any kind of uncontrollables, because you never control everything in life, and all forces never align perfectly. That's what I've got to deal with all day long, because nothing is ever perfect. Without any kind of working capital or ability to deal with those kinds of uncertainties, we tend to live from day to day and month to month and year to year and we are always on a treadmill trying to satisfy everybody's competing needs. And as I said, it is no way to run a railroad.
Mr. BORSKI. Paint a picture for us. What would it look like, what would the passenger rail service in this country look like if you were only running for-profit service?
Mr. WARRINGTON. I will tell you this, we areI can't tell you that precise picture today, because the system works like a system, so you have to segment all the pieces of the system. Actually, we're doing that. We're looking at every piece of the business and every piece of the system and ultimately understanding what the winners are today, what the winners are downstream, and you've got to make a lot of assumptions about that.
Part of the assumption is how much capital do you have to be able to invest to make a loser a winner or a loser less of a loser or a winner a much bigger winner, like in the case of Acela. I can't tell you exactly what that picture is, but I will tell you, there is a piece of today's system that will always, forever lose money by its nature. And you know, I think as part of the reauthorization discussion, fundamental to this question is, what is the national network, should the network include, and I believe, my personal feelings are, I think it's important, a national connected system.
Page 88 PREV PAGE TOP OF DOC Frankly, today, it's a skeleton, a skeleton of what it was 30 years ago. When Amtrak was formed, the size of the system and the route miles were cut by 50 percent. And today is what you have left, you have a bare framework, a skeleton of transcontinental long distance trains.
I could make an argument, and I would urge this kind of discussion, frankly, over the next 12 or 15 months, Mr. Chairman, if that is a public service mission, and it's driven by connecting communities and economic development, serving under-served markets in regions of this country, I could make an argument that that is not unlike the concept of essential air service in this country that the Government does pay for to serve under-served communities on a contract basis with air carriers.
I don't see any reason why certainly a piece of this system, we shouldn't be honest about, will always lose money. But its purpose is not to be commercially successful. Now, we've got a responsibility to run it as efficiently as possible. But in the end, as efficient as some of these services will be run, they will still lose money. I think the critical question is, what role does the Government want us to play in providing those kinds of services to communities and States across this country.
Mr. BORSKI. Run it like a business, Mr. Chairman, and don't take away any of our service. Good luck, Mr. Warrington.
Mr. QUINN. Thank you, Mr. Borski.
Mr. MICA. Thank you.
Mr. Warrington, I'm really here to help you.
Mr. MICA. I wanted you to know that. I appreciate the job you're trying to do. Also understand some of the constraints you're working under, having been on Transportation Committee since 1993.
Page 89 PREV PAGE TOP OF DOC As you can tell, I'm a bit frustrated, because even the proposal to authorize bonds really doesn't get you where you need to be. If you go across the country, people are crying out for high speed rail service, for commuter service, because every major and even smaller towns are in absolute traffic gridlock.
But I'd hate to see us put a band-aid on this, or bailing wire, when we really need a bigger fix. I propose today, let's face it, the Reform Act requires two things. It requires either liquidation or a restructuring plan. So I think we need to go further than what Mr. Carmichael and his group have proposed. We need to take those parts.
Now, you just spoke about Lucent or the private sector and how they generate money to operate. Mr. Carmichael also said there's some pretty valuable territory, you've got 400 miles of line in the Northeast Corridor, and assets. Isn't it possible, well, first I want to know, do you have any authority to go out into the private market and seek capital? Is that something you're lacking, is that correct? Or do you have that?
Mr. WARRINGTON. As a matter of fact, what's interesting, Ken talked earlier about our interest payments, which are up to around $160 million a year.
Mr. MICA. Now your indebtedness is three and five, isn't it?
Mr. WARRINGTON. Two point eight, three billion, yes. But that's our overall long term debt service. Which interestingly, from a capitalization ratio rate is about the amount of debt service you've got against all your equity in the country. The cap rate there is about 33 percent. And I was reading the other day, Mobil's rate of debt service to equity is about 45 percent.
Mr. MICA. But see, the thing is, you aren't operating like them, and I want to know if there's a constraint. I would rather give you the clear blanket authority to go out and do that, separate that entity off, make it work, make it, get the capital. You heard you need $20 billion. Well, put $20 billion into it. It's just like AutoTrain. For six, seven years, we've been trying to put that together, and for lack of $30 million, we've got a half baked AutoTrain system.
Page 90 PREV PAGE TOP OF DOC So let's not do this half baked. All these members who sign on these bond bills think that, my God, they're going to have high speed rail running through their city and commuter rail and everything else being financed through this, and that's not the case. So if it takes $100 billion, that's the investment that the Congress should stand behind. But I think that you have enough equity to do in the Northeast Corridor, if we broke that off into a separate operating route, I think there are other profitable ventures, as I said.
Now, let me just get a couple questions while I've got you here. I rode last week, or went up, took 14 members to New York City. We visited the Newark Airport. There's a new $420 million, what do you call it, monorail. I was going to say Maglev. It's almost done. It's supposed to be operational in September. They built a station over your high speed corridor along the New Jersey transit, or underneath runs the New Jersey transit lines.
And they told me, as of the beginning of this hearing, they still haven't been able to communicate with Amtrak on service to this vital connector, which is part of a multi-billion dollar project in that area. Can we get you all to talk to them? It will provide you more passengers, and I know it requires some change in schedule.
Mr. WARRINGTON. Let me give you a very direct reaction to that. That is patently untrue. I have personally had discussions with the Port Authority of New York and New Jersey, and all of the interests associated with this service. And I will guarantee you that they have been told that we are stopping as many trains there as possible. In fact, my problem internally is, I'm trying to get more peak period trains stopped there.
Mr. MICA. Their representative was here and just before the hearing said they haven't been able to get anything out of Amtrak on a commitment. So I'm just telling you, you know, I just do this on a part-time basis.
Mr. WARRINGTON. Can I say one other thing about that? That stop is incremental revenue for me, estimated at about $5 million a year. So you know, it is inconceivable to me that anyone would be throwing away $5 million by not stopping a train that is already going by the station there.
Page 91 PREV PAGE TOP OF DOC Mr. MICA. Absolutely. That's what I thought.
The other thing, too is, we've got to get, we've spent billions so far on some infrastructure improvements, granted we need more. We spent tens of millions on train sets, the Acela, can't we get them running where they can run the fastest?
Mr. WARRINGTON. It's back to money. The top speed is not 180 or 185 miles an hour, it's 150 miles an hour. Our biggest constraint is infrastructure that dates in age from 1875 to 1932, built by the Pennsylvania Railroad and its predecessors.
Mr. MICA. But I'm told that you could even get better speed by moving more of those up until the New York to Boston corridor, as opposed to putting them down in the other corridor. Plus, I asked one of the folks on the train last week what they're doing with the old Metroliners, and he says, nobody knows. Is that correct?
Mr. WARRINGTON. Well, I know. The Metroliners are being phased out and the equipment is being deployed to Acela regional service, and it's being overhauled, the interiors are being overhauled, and the Metroliner equipment fleet, which totals about 56 cars, 12 train sets, is being redeployed to the Acela regional fleet that infills the Acela express trains.
So we have a combination of, for example, an hourly express train and an hourly regional train that makes local stops and doesn't go quite as fast.
Mr. MICA. One last thing, and you know, Congress has to be honest with itself. You said a piece of the system will always lose money. You're correct, if people want service where it's more cost effective to take folks in a limo, but they want to run a train, you're going to have to pay for it.
The last part of my proposal was that we separate out these profitable parts into operating companies that stand alone, and then we take that other part and we partner with State, local and other governments, and then we have some transparency in that, so people can see what the cost is. They're paying for local subsidies for their buses or whatever they're running, light rails. And I think we should be able to do the same there. That's my final question. Do you agree with that?
Page 92 PREV PAGE TOP OF DOC Mr. WARRINGTON. On that latter point, I think that concept has some merit. I am all for transparency about what the winners and losers are in order to help us inform what's the right level of Federal and/or State and local support for each piece of the system that may not be making money.
Mr. MICA. Finally, Mr. Chairman, I have several questions I want to submit for the record about reducing frequency of unprofitable and lightly traveled trains, and some other questions I'd like to submit for the record.
Mr. QUINN. Without objection, that's ordered.
Do you expect Amtrak to give you some answers to those questions?
Mr. MICA. Absolutely positively, and I'll be unrelenting if they don't.
Mr. QUINN. Absolutely. Mr. Graves.
Mr. GRAVES. Thank you, Mr. Chairman.
You mentioned about cross-subsidies, and I think you mentioned real estate and telecommunications. The one that I have a concern with is entering into competition, third party contracts, at least, for maintenance and operation, which concerns me quite a bit. I don't think you mentioned that one.
But the question I have, at least, with the GAO documented problems in keeping track of your accounts and then going out and competing with private companies for third party contracts and all, can you assure me that at least you're not subsidizing any of those third party bids against private companies? Because I don't have a lot of confidence there.
Mr. WARRINGTON. I'm required under the law to make sure that our inspector general certifies the costing methodology and the actuals associated with all of our bids. And we have a pretty rigorous process inside to make sure that we conform to that. And it's in my interest also, because this is about making money on a profitable basis.
Page 93 PREV PAGE TOP OF DOC Mr. GRAVES. I appreciate your comments. I don't have a lot of confidence, and I appreciate what you said.
Mr. QUINN. Thank you, Mr. Graves.
Mr. Clement, any questions at this point?
Mr. CLEMENT. I think I've covered it, but thank you, Mr. Chairman. I believe Mr. Oberstar has a few more questions he would like to ask. But I'llgo right ahead, Mr. Borski, I'll yield to you.
Mr. BORSKI. Thank you, Mr. Clement.
Mr. Warrington, I wanted to ask you a little bit about the Acela and how it's doing. Obviously there were some delays, but it is up and running. Are you going to be making profit on that soon? Tell me a little bit about the Acela.
Mr. WARRINGTON. It's actually doing very well. It's doing better on the south end than the north end in terms of OTP. The south end OTP, New York to Washington, Washington and New York is up around, I think it's 92 to 93 percent on time. There are many days when the train actually gets in early, ahead of schedule.
On the north end, between New York and Boston, we have had some constraints over the past, since March, because what we were finding was that that railroad is built through rock in Connecticut, in a deep cut, and the old New Haven Railroad had anchored it with bolts. What we found with the freeze and thaw this past winter, they had intense swings in temperature, many of those rocks started to chip away. We found that we had to put in place speed restrictions over the past three months or so that causes us to lose some time on those trains, unfortunately, an average of 8 to 12 minutes on some trains.
So that's cost us some on-time performance and probably a little bit of revenue also. We will be done with getting all of the rocks either anchored or out of there very shortly and business should pick up there as well.
Page 94 PREV PAGE TOP OF DOC Mr. QUINN. Thank you, Mr. Borski.
Mr. OBERSTAR. Thank you, Mr. Chairman.
Again, this hearing has been very enlightening. It's been very important to explore the issues in this legislation. There are some legitimate concerns that have been raised that I think we can address, and I look forward to working with GAO and with the IG to resolve these matters and take up some of the suggestions of Mr. Carmichael and fold those into our legislation if at all possible.
But again, Mr. Warrington, I appreciate your reaffirming my statement that this legislation is not intended to bail out Amtrak. But you did say, and I think I wrote it down verbatim, we do need a clear conception of the Amtrak mission. That has been fudged over time. The question is, what should Amtrak be, should its mission be a purely commercial mission, live or die on it, or is Amtrak a public service, like a public utility.
I don't think that the Congress, in formulating policy on Amtrak, has clearly and concisely answered that question. It's sort of a foot in one camp and a foot in another camp. That's why the Amtrak Reform Council, the so-called oversight council, was created, to look over the commercial side, but also sort of wink at the public service side. I don't think a wink is good enough. I think we need to view Amtrak as a public service.
In Paris, the Metro is heavily subsidized by the Paris city government. You can buy, for $40, a monthly pass on Metro. You can go anywhere, you can go to Palace Versaillesyou can go to Versailles on the above-ground, you can go all over for $40 a month, get on and off as many times as you want.
That would cost you about $120 on Metro in Washington. But if you didn't have Metro in Paris, well just try to move around that city when they occasionally have a strike, when the Paris Metro workers were tired of working, they call a strike and the whole city shuts down. They can't afford it.
Page 95 PREV PAGE TOP OF DOC We can't afford not to have a national passenger rail system. And it is public service, and we need to acknowledge that. And I was going to ask you, which do you believe is the appropriate role for Amtrak to pursue. I think it's a hybrid. I think it is a public service with a commercial responsibility.
Mr. WARRINGTON. Is that a question?
Mr. OBERSTAR. It's a statement for you to respond to.
Mr. WARRINGTON. Yes, I agree.
Mr. WARRINGTON. I think there's extraordinary opportunity about really successful commercial enterprise around pieces of this business, like the Northeast Corridor. But I disagree with Mr. Mica about the prospects for private investment to take it and run with it. Because there is such a historical state of good repair backlog, there is no return on that investment. Until this basic infrastructure is built as a public responsibility, it's going to be very difficult to attract private investment with a significant return.
I think with a baseline public investment, there is opportunity to attract additional private capital, clearly, around the incremental gains associated with high speed service.
As I said earlier, I think there are pieces of this business and large pieces of this system, if we invest capital wisely, can be in a classic commercial sense perhaps even cover depreciation. I'm not sure about being entirely profitable. There are subset businesses around real estate and telecommunications and the like that are clearly very profitable businesses. There are commuter businesses that we run that are clearly profitable businesses that cover all costs.
There are also train services out there, public service train services, serving communities that will never be profitable. I think we need to stand up to the question of whether or not we want, this town wants, to literally pay for the operation of those services on an ongoing basis. So we're not cross subsidizing just to get to zero all the time.
Page 96 PREV PAGE TOP OF DOC Mr. OBERSTAR. Thank you very much, those are good responses. I keep saying, not just in committee, but in other venues, that Amtrak was sent on a mission impossible, to run a passenger rail system on a dilapidated freight rail structure. And as the freight rails have made money, they've made improvements in their track, in their rolling stock, but still, Amtrak has to run over the freight rail system. And where you are obligated to run on single track, you can't achieve the speeds, you can't achieve the efficiency, and you can't achieve the frequency that is needed for passenger rail service to be effective.
The French avoided that. They built new track through the French countryside. Damn the cost, full track ahead. And it worked.
Now, we don't have the billions of dollars to do that in the United States. Answer this question if you can. How many miles of double tracking would it take to allow Amtrak to achieve its full potential?
Mr. WARRINGTON. I don't have that number off the top of my head, but it's thousands. And I can get that number back to you.
Mr. OBERSTAR. That's the issue.
Mr. WARRINGTON. Yes.
Mr. OBERSTAR. Secondly, should Congress repeal the requirement on Amtrak to achieve self-sufficiency, if we take the view that, or endorse the view that passenger rail service is a public service?
Mr. WARRINGTON. I think that the discipline that the self-sufficiency test has imposed on the company is good, frankly. It's a good tool for me running the company as we alter and change the culture of the company.
At the same time, I think if we're there or close, and the chaos that the possibility of failure could promote, I think is a very risky course. I think it is something we would regret for many, many years. We're working hard to get there, and I believe we will be very close, even in a downturned economy. And it is affecting us as well.
Page 97 PREV PAGE TOP OF DOC But whether we get there or not, it is a convenient, short term, we can debate that forever. And we'll get there, and either we will be there or we'll be close or we'll be a little bit ahead. I would argue that what we have done is establish relevance.
The real policy question here isn't whether we're up $50 million or down $50 million against an artificial political test. The real question is whether we're relevant in the American economy and have a role to play looking forward. We need to make a decision about what our mission is then we need to capitalize it the right way.
If we're going to run money losing trains because we want to do it as a public service, then the Congress ought to say, we're going to pay you to do it, and we're not going to require you to take all this revenue that you're breaking your behind over here to generate, because you're behaving commercially to subsidize it, so that you can just barely get to zero, just get to zero so you can live for another day, it is wacky and it is irrational, and it is incredibly frustrating, I've got to tell you, for the men and women of Amtrak and for our customers as well who depend on us.
Mr. OBERSTAR. I think that I obviously touched a raw nerve, and I'm glad I did, because it brought forth a very deep seated and heart-felt response. We might well continue this dialogue further, but I think we've covered the essence of it.
Mr. Chairman, you're very much an advocate for rail. I'm delighted that we had the opportunity to advance the cause of rail in all of its manifestations. Let us continue to work together.
I think the last comment, if Congress is going to say no, you can't shut down that line in order to achieve the efficiencies we've told you to gain, then we ought to provide the money to keep it rolling. Thereby hangs the tale.
Mr. QUINN. Thank you, Mr. Oberstar. Earlier this afternoon, when the Subcommittee had more members here, we talked about that, that whole responsibility of ours, and the real possibility of trying to get together some of the players who were here today, a new person over at FRA and very possibly Bob and I putting together a morning session in September, a little summit kind of meeting here, to further this discussion.
Page 98 PREV PAGE TOP OF DOC Mr. OBERSTAR. If you'd yield, I welcomed your suggestion, and I failed to do that, but I do now, to encourage you to pursue that, and I'd be glad to join in any such discussion.
Mr. QUINN. I'd be happy to have your help. Thanks very much.
If there are no further questions for this witness, Mr. Warrington, thanks for your candor, thanks for your preparedness today. I know that we had to cancel this once or twice, but you and your staff did a great job in being ready for us today and having some good answers.
We're going to move to our third panel now, and we'll excuse this witness. Thank you.
Mr. WARRINGTON. Thank you, Mr. Chairman.
Mr. QUINN. Good afternoon, gentlemen. Thanks for your patience with us and the rest of the Subcommittee members, and members from off the Subcommittee, for that matter. We deeply appreciate your being here today. Your prepared statements will prove immensely helpful to the Subcommittee and then as we report to the full Committee.
Just to remind this panel, as you've heard already today, all of your written statement has become part of the record. We would ask you, Mr. King, we'll begin with you and work our way across the panel, to give us about five minutes or so of a summary of your statement. We'll hear from all four of you first, and then Bob and I and Mr. Borski and any others will also ask our questions at that time.
Just so we have a sense of the time here, the cloakrooms are telling us we expect a vote around 3:00 o'clock. There will be a series of votes at 3:00 o'clock, so if it's at all possible, it might be in all of our best interests if we can hear from you and then rotate the panel through a series of questions and maybe get done by 3:00. My sense is, if we get called for some votes, we're going to be gone at the votes for more than about 45 minutes or so.
Page 99 PREV PAGE TOP OF DOC The Chair would like to yield to the gentleman from Georgia, Mr. Isakson, for the purpose of an introduction.
Mr. ISAKSON. Thank you very much, Mr. Chairman. And in particular, thank you for allowing this witness and for me to participate today, I appreciate it very much.
It's a privilege for me to introduce Mr. Sam Williams, who is the President of the Atlanta Chamber of Commerce, but is here today in his capacity as member of the Southeast Economic Alliance. I'm very pleased that Sam can be here today for the benefit of the Committee. Sam's career is long and storied one in Atlanta, not just in trade association or chamber work, but as a significant player in the development community in Atlanta, Georgia, for many, many years.
As the Committee is aware from testimony in any number of transportation issues, Atlanta has been the poster child for transportation issues in this country for the better part of four or five years. Under Sam's leadership, the Atlanta chamber of commerce has partnered in many ways with the public and private sector for innovative problem solutions in terms of transportation. Our State's entering into a plan for commuter rail program. We have of course, the Metropolitan Atlanta Rapid Transit Authority, and they're very interested, too, in passenger rail and high speed passenger rail.
I'm also pleased that today in attendance, in addition to Mr. Williams' testimony, Mr. Emory McClinton, who's the Chairman of the Board of the Georgia Board of Transportation and a critical player in our State.
I thank Sam for being here. I know his input will be of tremendous help to the community, and once again, I thank the Chairman for the opportunity of Sam testifying today.
Mr. QUINN. Thank you, Mr. Isakson. The only caveat is, once we allow you to introduce him, we need you for the votes on this when it comes time.
Page 100 PREV PAGE TOP OF DOC The Chair will now yield to the gentleman from North Carolina.
Mr. COBLE. Thank you, Mr. Chairman.
Mr. Chairman, you will recall previously in my testimony I alluded to David King. But I thank you for letting me formally introduce him to you and to the Subcommittee. David King serves as the Deputy Secretary of the North Carolina Department of Transportation. He is here today, among other reasons, representing States for Passenger Rail Coalition. Good to have you, David, and the other panelists, and Mr. Chairman, I thank you.
Mr. QUINN. Thank you, Mr. Coble.
Mr. King, you may proceed. Thanks very much.
TESTIMONY OF DAVID D. KING, DEPUTY SECRETARY FOR TRANSPORTATION, NORTH CAROLINA DEPARTMENT OF TRANSPORTATION; SAM A. WILLIAMS, REPRESENTATIVE, SOUTHEASTERN ECONOMIC ALLIANCE, AND PRESIDENT, METROPOLITAN ATLANTA CHAMBER OF COMMERCE; ROSS B. CAPON, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF RAILROAD PASSENGERS; AND CLYDE HART, JR., VICE PRESIDENT OF GOVERNMENT AFFAIRS, AMERICAN BUS ASSOCIATION
Mr. KING. Thank you, Mr. Chairman, Mr. Coble, members of the Committee.
I will ask that my written testimony be part of the record.
Mr. QUINN. Without objection, so ordered.
Mr. KING. I will try to go through three main points here in rapid fashion in order to make the time deadline.
I am here representing the 21 State coalition, as Mr. Coble said. That coalition is chaired by Secretary Terry Mulcahy of the State of Wisconsin. There are three points that I'd like to make on behalf of the coalition.
Page 101 PREV PAGE TOP OF DOC Point number one, and really this picks up on a comment that Mr. Oberstar and Mr. Warrington made within the last hour, we as a group believe that this bill has been widely misunderstood and mischaracterized as an Amtrak bill, an Amtrak bond bill. If you look at where the money comes from to support the financing, the match to create an escrow to retire the principal comes from the States. It comes from non-Federal sources, by definition. We understand that clearly.
Given that fact, it's incumbent upon the States or multi-State coalitions or compacts to assure ourselves that the project to be undertaken with that money is a project that meets our criteria. I've got to go back to my appropriators and my board of transportation and justify that investment.
So I do believe that there are some large national issues that surround how Amtrak is organized and what is expected of it, and as George Warrington said, it's schizophrenic. I think that those are very real issues. I think that those issues can be separated from the issue of how to begin to upgrade at least 11 high speed rail potential corridors, incrementally, one project at a time, 10 minutes here and 15 minutes there, in order to begin to achieve a much more vibrant and service oriented intercity rail passenger service in this country.
As we look at criteria that the State of North Carolina would use, we'd obviously look at safety, speed, which is what the customer is looking for, reliability is a huge issue, and certainly all the customer satisfaction issues. The States consider Amtrak a partner in this venture, an important partners, but by no means a dominant partner, and certainly not the only available partner.
The State of California has initiated a modus operandi that I'm very interested in, the Capitol Corridor in northern California. The State has created a political subdivision called the Joint Powers Authority that contracts with Amtrak, but it also contracts with a food service vendor and with a marketing vendor and with communities that operate train stations and with Burlington Northern Santa Fe on an equal basis to run service that is growing faster than any corridor in the country.
Page 102 PREV PAGE TOP OF DOC I think the lesson there is that there's an arms length relationship. Amtrak has got to perform and some entity other than Amtrak has control. I think Mr. Till mentioned that sort of construct was also being considered in the greater Chicago area.
I think the point there though is that this is a program that the States and multi-State compacts have an interest in, and Amtrak is a partner, not the dominant player necessarily.
Point number two, I'm happy to be sitting immediately to the right of Mr. Williams. Because he represents the southeastern chambers, and you will hear from him, I shall not steal his thunder. But to me, it's a huge message, and it certainly has been very instrumental in moving forward in North Carolina, that chambers of commerce, for reasons that have a great deal to do with economic development, are finding this to be something that is worthy. It is one thing for a transportation official such as me to make the case for high speed rail. It's quite another for a group of chambers to make that same case based on economic development, on jobs, on making a cohesive regional economic unit out of the southeast or any other region of the country.
So I think that is the point that many States are coming to and my group of 21 states felt was important for me to make to you today. It's not just transportation officials who are making these points.
Third, the States are ready to go. We feel a sense of urgency here. While the debate rages about what exactly Amtrak's mission is, and hopefully trying to cure some of the structural problems that have been discussed I think, very well today, we would still like to begin to make those investments in infrastructure that are going to be necessary no matter what the organizational outcome of those debates turns out to be.
We've done our environmental work, and our planning work, State DOTs know how to do that. We do it all the time, we built the interstate system. We built it over 40 years, I'll remind you, we did not build it over 10 years with one $12 billion bond program.
Page 103 PREV PAGE TOP OF DOC So we know how to do that, we've already identified the projects that we would undertake. We've identified the State non-Federal money that we would use as a way of retiring the principal for matching. We've developed partnerships with our Class 1 railroads, and that's a hugely important point. I think Class 1 railroads in this country have only recently begun to realize that States can be partners and that passenger service does have corollary freight improvement benefits associated with it. Both of the Class 1's that serve North Carolina, CSX and Norfolk Southern, are prepared to work with us, looking forward to working with us, and I hope you will hear from them as this debate goes on about House Bill 2329.
We've also developed some multi-State alliances. I think you heard earlier about the greater Chicago program, the Pacific Northwest, obviously the States of Washington and Oregon work very well together. The general assemblies of the States of North Carolina and Virginia have recently, just this spring, passed a multi-State compact that allows us to go forward together and we expect, through time, to be able to extend that to South Carolina and Georgia.
In summary, we commend you, Mr. Chairman, for the hearing. I think it's quite clear the debate's been robust and healthy and there's a lot of work yet to do. But as a group of States, we'd like to say that we're here to implement, to make you proud that you take this action, because we will be able to deliver results in I think a relatively short amount of time.
I look forward to any questions and thank you very much for the opportunity.
Mr. QUINN. Thank you, Mr. King. And thanks for reminding us, when Mr. Clement and I decided to call for this hearing, we knew that it could be viewed a lot of different ways. But our intent is certainly to be helpful. That is what we're hearing over and over again today, and we thank you for being here. Your input will be important when we follow up as well.
Page 104 PREV PAGE TOP OF DOC Mr. Williams.
Mr. WILLIAMS. Thank you, Mr. Chairman, members of the Subcommittee, for inviting us here to testify and for me to talk about southeastern high speed particularly.
As my member of Congress indicated, I'm with the Atlanta Chamber of Commerce, but I'm also uniquely here today to represent 13 cities in the southeast that have come together to form a coalition in support of high speed rail. I'm also accompanied today by Emory McClinton, who is the Chairman of the Georgia Department of Transportation, and he has asked me to submit a letter to the Committee on behalf of the Georgia DOT in support of this as well.
Mr. QUINN. Without objection, that becomes part of today's record. Thank you.
Mr. WILLIAMS. I understand that the principal theme today, at least part of it, has been Amtrak, and I certainly commendwell, George is gone now, but he's done a wonderful job. I don't pretend to understand the finances of Amtrak, but I'm here to talk about economic development, and the fact that in our view as business executives, gridlock and winglock are hurting our effectiveness as a regional economy. We must develop high speed rail as what we call the third leg of the transportation stool.
Certainly we have a very effective interstate highway system. We have an air transportation system that's effective. But we lack woefully for passenger rail, particularly compared to other economies.
Traffic congestion is a major driver of concern to businesses whom I represent, and the studies show us that we expect a 400 percent increase of congestion on urban freeways and a 200 percent increase on other roads over the next 20 years. One out of every four flights in the United States was delayed last year. That's a 90 percent increase over a five year period. In the southeast, we live these stats every day. Our region has grown considerably faster than other parts of the Nation, and of course, Hartsfield Airport is the busiest in the world.
Page 105 PREV PAGE TOP OF DOC The Southeastern Economic Alliance that I'm representing today is 13 chambers of commerce very uniquely put together: Richmond, Hampton Roads, Raleigh, Winston-Salem, Charlotte, Spartanburg, Greenville, Columbia, Atlanta, Chattanooga, Birmingham, Macon and Savannah. These cities have never come together on any issue before. Today they have.
Also we see as business leaders in the southeast that our larger metropolitan areas, and even clusters of smaller cities in their proximity of 100 or 200 miles, have formed what we consider as mega cities. On a global basis, the American mega cities are competing with their counterparts in what I would really call global economic warfare.
To compete on a global basis, we have to ask you as Congress to enable us to have the economic infrastructure that our competitors have. Asia and Europe are ahead of us. We have to balance all three legs of this stool if our work force is effectively going to compete in this global economy.
This alliance that we put together recently had a meeting in Charlotte, for the first time, chambers in this region, many of whom viewed each other as aggressive competitors over the last 50 years. The speaker at this, the keynote speaker at this conference was retiring Bank of America chairman and CEO Hugh McColl, proving that we are not a group of rail buffs, but rather business executives looking at the bottom line of how our urban economies can compete better.
The alliance is right now in the process of asking someone from each State, a CEO, to represent that State in this discussion. Milton Jones, President of Bank of America Mid South, will represent Georgia, Charles McCrary, President of Alabama Power, will represent the State of Alabama, and former Governor Jim Hunt will represent North Carolina. These are no nonsense business executives.
We're also organizing to come to Washington this fall with a group of business leaders from 13 cities and hold a reception at Union Station and call on our members of Congress to urge them to support the High Speed Rail Act.
Page 106 PREV PAGE TOP OF DOC We talk about a lot about money today, and $12 billion is a lot of money. But I think if you measure it in contrast with other investments of transportation, the Big Dig in Boston of eight miles is more than this bill calls for. Hartsfield's fifth runway is almost $6 billion. That's enough money to build a high speed rail from Washington, D.C. to Atlanta.
The Federal Aviation Administration is going to spend $11.5 billion over three years just to reduce flight delays. Our Government clearly supports Federal spending on transportation infrastructure, as it should. But we say, we have to consider high speed passenger rail in the same context that we do others.
The Texas Transportation Institute recently released a study on congestion and concluded that the annual congestion costs or bill for 68 urban areas was $78 billion. How can we compete in a global economy with this kind of inefficiency? Time is money to business executives.
Our southeastern area has become a web or urban cities that are virtually touching each other at our edges. We think that we need more than any region this effective transportation mode to quickly get from one urban center to another. We think this proximity of high population densities will assure ridership, will avoid unpredictable delays and save business the time and money so we can compete.
We thank you very much for your time today, Mr. Chairman, and look forward to encouraging more participation from the business community in this debate.
Mr. QUINN. Thank you very much, Mr. Williams. When you make your arrangements for the visit from the alliance later this year, please inform the Subcommittee. If we can get some of our members over there, we'd be happy to attend.
Mr. WILLIAMS. Thank you.
Mr. QUINN. Let us hear from the National Association of Rail Passengers now. Ross?
Page 107 PREV PAGE TOP OF DOC
Mr. CAPON. Thank you very much, Mr. Chairman, for the opportunity to appear.
The bulk of my printed statement is devoted to the proposition that where people have been given even half decent service, they are riding in droves. Just to take one example out of the blue, from New York to Buffalo, the ridership on Amtrak's Empire corridor, which was 1 million in 1994, 1.3 million last year.
Mr. QUINN. Just out of the blue?
Mr. CAPON. That was just out of the blue.
Mr. QUINN. Just like Coble's got me getting reservations on Amtrak.
Mr. CLEMENT. If the gentleman will suspend, Mr. Chairman, you also brought me into that loop, too.
Mr. CAPON. In the face of some fairly aggressive fare increases. Indeed, our members in New York State and elsewhere are concerned that Amtrak fares are beginning to price, or already have priced, family and leisure travel out of the business.
So the evidence from our point of view is very strong in support of something like the High Speed Rail Investment Act. We strongly support that bill. We think that the House, that your Committee has done a good job of addressing many of the issues that people had raised with the Senate bill. We think that people could probably go on forever with something of this level of complexity, finding ways to perfect it a little more. But we're concerned about what Mr. King said, ''the States are ready to go,'' and we think, we are very much concerned that this bill get enacted this year, so that we can start seeing the kinds of results that David talked about.
Page 108 PREV PAGE TOP OF DOC We understand there is a possibility, I would like to rate it less than 10 percent, but there is a possibility that the Amtrak structure will be changed next year as a result of the reauthorization process. We don't see that as a reason for waiting another year for this bill. If dramatic changes are made to Amtrak and the whole structure next year, part of that exercise would presumably be making whatever changes would be needed in the High Speed Rail Investment Act at that time to make them consistent. But as Mr. King said, the need is now for making these improvements and laying the foundation for getting them to go forward.
We certainly agree with Mr. Warrington's characterization of the long distance network as being skeletal. Any one of my board members could give you examples of routes that don't exist that we would like to see, like for example, Chicago-Atlanta-Florida.
One concern that we have is all the discussion about your profitable routes and your unprofitable routes may give some people the feeling that if you peeled off the unprofitable routes tomorrow, you would have something significant remaining. As we understand Amtrak's figures, the Acela Express/Metroliner is the only ''profitable'' route that there is, and that route wouldn't exist if it was not part of the overall Northeast Corridor structure, which includes unprofitable routes.
So in the narrow use of that term, there really isn't anything profitable. We just get nervous when we hear statements that imply some people think that there's all kinds of profitable routes out there today.
Certainly with the work of the High Speed Rail Investment Act, at some point in the future, we may well see a number of profitable routes. But that is at some point in the future.
It's been a long day, so I think I'll leave it at that and thank you again for the opportunity.
Mr. QUINN. Thank you. I do have a question for you, though, when we're finished here.
Page 109 PREV PAGE TOP OF DOC Mr. Hart.
Mr. HART. Good afternoon, Mr. Chairman and members of the Committee. I'm Clyde Hart, Vice President of Government Affairs for the American Bus Association.
The ABA is a national trade association for the intercity motor coach industry. It is comprised of approximately 3,400 member companies that operate buses and provide related services to the motor coach industry. In total, ABA members provide all manner of bus service to 774 million U.S. passengers annually. Our roster of members includes nationally known intercity passenger carriers like Greyhound, family owned businesses such as Burlington Trailways in Iowa, and Jesse Hill Tours in North Carolina, and regional carriers such as Adirondack Trailways.
I am here today to make you aware of our concerns about H.R. 2329, the High Speed Rail Investment Act of 20001. First, a few words about the passenger carrier industry. The industry serves more than 4,000 communities directly with scheduled service. The industry is a small business success story, comprising almost 4,000 companies, 90 percent of which operate fewer than 25 buses. The industry serves leisure and business travelers, rural residents and others seeking access to education, health care and the rest of America's transportation network.
I want it understood that the ABA does not oppose funding for Amtrak. Indeed, ABA members work with Amtrak every day in our common goal to provide transportation service, alternatives and connections to the traveling public. We do believe, however, that H.R. 2329 in its present form is deeply flawed and has the potential to cause more harm than good.
We have several concerns. H.R. 2329 authorizes Amtrak to issue $12 billion in federally subsidized bonds for intercity rail purposes with minimal Federal oversight and with no protection for existing intercity bus service. The last time Amtrak was given access to subsidies of this magnitude, the traveling public was negatively impacted, particularly those in rural communities. In the Northeast Corridor in the late 1970s and early 1980s, Amtrak used those funds to reduce its fares to match intercity bus levels, even though its costs were three times that of intercity bus.
Page 110 PREV PAGE TOP OF DOC As outlined in the 1979 GAO report, the results were devastating. Intercity bus companies lost millions of dollars and were forced to reduce fares below compensatory levels and to cut back service both in the corridor and most importantly on rural routes feeding into the corridor.
We believe it is not good public policy to subsidize one mode of transportation to the detriment of another. The goal of H.R. 2329 should be to ensure the development of high speed rail and intermodal cooperation, not to damage the intercity bus industry. Specifically, we believe that the bill should preclude the issuance of Amtrak bonds if Amtrak is found to have engaged in pricing practices that damage existing intercity bus service.
Our second objection to the bill as currently written is that the bill does not promote what every transportation analyst, policy maker, operator, and by my count, five members of this Committee, mentioned just today, a systems approach to transportation. A systems approach to the Nation's transportation ills means a transportation system, including intermodal connectors, that works together, each mode complementing the others.
In order to achieve this result, any major transportation funding bill should contain provisions for intermodal planning and systems development by local, State and Federal officials. H.R. 2329 contains no such provisions.
The idea of multi-modal facilities is beginning to take root. Cities such as Buffalo, New York and Minneapolis, Minnesota, have taken the lead in creating intermodal facilities. Public-private partnerships are developing other such facilities. One example is in Maine, where Maine DOT is working with Concord Coach Lines and Amtrak on a plan that will allow Amtrak to deliver passengers to Concord's terminal in Portland.
The Midwest Regional Rail Initiative mentioned by Mr. Till earlier is a good ongoing example of intermodal planning. The initiative States have been receptive to the concept of working with existing bus operators on a multi-modal transportation network where bus and rail service is integrated to offer the customer a wider range of transportation choices in conjunction with high speed rail.
Page 111 PREV PAGE TOP OF DOC But such working partnerships should not be left to chance or to the good graces of whomever is at the helm of Amtrak or in public office at any particular time.
One final suggestion along this line is to use H.R. 2329 to begin the process of building a national public transportation information network. The network would have information on rates, routes and service options on all public transportation modes, and would allow any person to build a trip from and to points in the United States, regardless of the mode used. H.R. 2329 properly structured could be the first important step toward creating such a system.
In closing, let me thank the Committee for the opportunity to appear before you today, and I will answer any questions for the Committee.
Mr. QUINN. Thank you, Mr. Hart.
Let me thank all four of you. Let me just point out that Mr. Oberstar stated when he left, one of the purposes of this kind of a hearing is to get input on the bill. You correctly state, Mr. Hart, as the bill is currently drafted. So I think there's opportunity to make some changes here and your comments are, I don't want to speak for Mr. Oberstar, of course, but I know for all of us, that input is important to us, so thanks.
Mr. Williams, thanks for listing the citiesthat was going to be my first questionthat you represent in the Southeast Economic Alliance. Would you anticipate, if you're going to go forward with some projects, that the projects would be submitted from the Alliance or from individual communities?
Mr. WILLIAMS. I think that they would be submitted by each State government. We're there as business executives, speaking up for the private interests of economic development, but we would be working through the State governments in each case.
Mr. QUINN. Just as Mr. King pointed out, yes. Good. Let me also ask you, again, we're not here to tear apart any of these bills, H.R. 2329 is what it is, and we're looking for some input. But it appears like Amtrak is the clearinghouse for taking a project to the DOT. The only right the State has, it looks like, is to contribute about a minimum 25 percent of the project. Any concerns about the States involvement there, going through Amtrak? Do you anticipate any problems there?
Page 112 PREV PAGE TOP OF DOC Mr. WILLIAMS. I don't anticipate any. I think that our States are going to have to work with each other to make sure that if we as a region receive a grant that there is a State match in each case, and that each State government is prepared to meet its obligations. I think that that's a safe assumption at this point.
Mr. QUINN. Let me ask both of you, as long as I have my time now. Are you concerned about sort of the limited role here in terms of, I don't anticipate any problems, either, but I also know that my State transportation commissioner, Mr. Joe Boardman, likes to pay attention to what happens in his State, and doesn't like to turn over decision making to anybody. For instance, Amtrak. But you're satisfied with your reading of the bill that your State would be okay? I'll ask Mr. King.
Mr. KING. I'm confident there are some changes that could be made that if you asked the States to be the bill drafter that we would certainly make. Having said that, I think there are some theoretical problems. States are used to being in control, as I mentioned our role with the highway program. But the real control we feel we have is the money. If we're putting the money up from which the principal is going to be repaid, then the deal's got to be right or the money won't be on the table.
Mr. QUINN. Okay, good. Thank you both.
Mr. CLEMENT. Thank you, Mr. Chairman.
Mr. King, you called for an equitable distribution of funds among the States. Explain to me how that would work.
Mr. KING. Well, I was interested in the earlier colloquy between Mr. Oberstar and Mr. Warrington about whether or not we would have one high speed rail project, or perhaps making good advances in 11 corridors and perhaps some other corridors. Clearly, the point I tried to make about interstate system is that it was not built in five years. It was built over 40 years. These high speed rail corridors will be built incrementally. We will have our State funding match incrementally. The bonding authority will come incrementally.
Page 113 PREV PAGE TOP OF DOC And I hope that every high speed corridor that is ready to go, having done its planning, having gotten its match together, having gotten its relationships right with the Class 1 railroads and with Amtrak, can all move forward as they are ready.
I do agree that $12 billion, while it's an awfully good first step, particularly compared to zero, is a small down payment towards true high speed in 11 corridors across the country.
Mr. CLEMENT. Rather than the Federal Government putting all their eggs in one basket, you're saying, spread that money out. If the State and local government or the private sector has money available, ready to move forward, don't let the Federal Government hold the project up.
Mr. KING. We can make, in North Carolina and the southeast, that is from Atlanta to Washington, the Southeast Corridor, we can make strong incremental improvements that will generate increases in ridership and revenues without getting to the high speed stage. I think the gentleman from Alabama whose grandfather was the engineer said it well. We used to run 100 mile an hour service in eastern North Carolina. Our top speed now is 79 miles an hour, 80 years later.
So we've got an awful lot of progress to make without even approaching the 100 miles an hour mark in North Carolina. Eventually, we want to be every bit as fast as the Northeast Corridor. We want to connect people in Atlanta with Washington via the Piedmont over the southeastern States. But that will take time, and we're patient, and we'll take it one investment at a time.
Mr. CLEMENT. Mr. Williams, your appreciation of the potential regional development impacts of a high speed rail network is insightful. What is your assessment of the type of service in terms of speeds, frequency that is needed to have a meaningful impact on the airport and highway congestion conditions you've described?
Page 114 PREV PAGE TOP OF DOC Mr. WILLIAMS. Well, I think you have to look at the transportation patterns of the interstate highways as well as air travel between cities that are within 200 to 300 miles of each other. The peak loading patterns that we have at Hartsfield Airport, for example, are tremendous in the early morning and in the evening hours. So that if people were commuting between Atlanta and Charlotte or Atlanta-Birmingham or Savannah and Columbia, you would have to put those trains on the routes that the passengers want when they want them.
I think you would have to have several times in those peak hours in the morning and in the evening to be effective. And I think there's a lot we can learn from our competitors in Europe and Asia of their peak. Serve the peaks, serve the commuting times in the morning and the evening, so that it truly is an alternative to the interstate highway and the airports at their peak congestion times.
Mr. CLEMENT. Mr. Capon, some have suggested that Amtrak be reconfigured to offer only service in a number of corridors around the Nation and to abandon the long distance trains as relics of the past. Could you comment?
Mr. CAPON. Well, we obviously disagree with that. I think that the long distance trains have been crucial in generating enthusiasm and support for Amtrak as a whole around the country. I think that anyone who proposes to get rid of them should try walking, especially through the coaches, at night. They will find the lowest income travelers on the rails on the continent.
And in fact, the statistic is in my testimony, I believe it's 86 percent of the riders on long distance trains are coach travelers. These are not rich people. They are people in many cases that cannot fly for medical reasons, that are afraid to fly, that are trying to get to communities that do not have affordable public transportation options. And frankly, there's a lot of beauty in the lower 48 that can be seen best from the trains.
Page 115 PREV PAGE TOP OF DOC We think that Amtrak has a long way to go on the so-called express initiative, which was conceived as a way to improve the economics of the trains. We were very encouraged by the appointment last year of Lee Sargrad as their new president of mail and express. It seems pretty clear that they've been making a profit, a genuine profit, on their mail, their Postal Service business, for a long time, but that their express operation not only has been very disruptive to on-time performance and lengthening schedules, but has not yet turned a profit. We are concerned about that.
We have confidence in Mr. Sargrad in that he is making progress in turning that around, and that when he is successful in doing that, the bottom line of the long distance trains will significantly improve, as will the bottom line for the system as a whole.
I have a board member, actually a vice president, who studied a lot of route by route statistics that are now in the public record, including some that were attached to a statement that Senator McCain submitted recently. He has calculated that the total Federal subsidy on a per passenger mile basis is actually lower on the long distance trains. The total subsidy is 18 cents a passenger mile versus 30 cents on the West Coast Corridor trains, and 31 cents on the Midwest. The Midwest is probably not fair, because very little development has happened there.
So that the economics of long distance trains by these measures are well within the realm of the other trains that Amtrak operates outside the Northeast.
Mr. CLEMENT. Thank you.
Mr. Hart, in your statement, you mentioned the need for an intermodal approach. Doesn't H.R. 2329 mention the development of intermodal facilities as a specific purpose of the legislation?
Mr. HART. It does, Mr. Clement. The problem is, if you look at both places in the bill where intermodal is mentioned, on page 14 and 26, with regard to the project criteria and the additional selection criteria, both of them say, ''intermodal facilities'' insofar, and I'm paraphrasing, insofar as those intermodal facilities help the development of high speed rail. That leaves out an awful lot of projects that will help the development of transportation.
Page 116 PREV PAGE TOP OF DOC And that may be a different, that is a different animal, and that is the larger animal, I suggest, and I hope my testimony suggested, that we look toward. Just let me give you one example, from a former life. Somebody once tried to come up with the idea of a high speed ferry from Woodbridge to Washington. I don't know if it's a good idea or not. The problem is that under this bill, it would not even begin to get on a selection criteria to be accepted by the Secretary. And I think that's the problem.
And that's what also can be fixed. It doesn't have, the intermodal facilities should not just be related to high speed rail. There are an awful lot of things that can be and are being done. Buffalo, in the Midwest initiative, that includes, just to take an example out of thin air, buses, that would help congestion and help get people out of their cars and also would feed into Amtrak. Part of my organization's problem is what happened in the Northeast Corridor was that when the NECIP funds were used, basically to take down Amtrak fares, what dried up was not only service in the corridor, but the feeder service from Maine, from New England, from rural New York, rural Pennsylvania and West Virginia. That dried up, and that was a shame for everybody.
Mr. CLEMENT. So you want to go much further than the high speed rail bill pending, when you refer to the intermodal?
Mr. HART. I would like to go further, Mr. Clement. I'm not sure how much further I'm going. Because sooner or later, we're going to have to stop this zero sum game, where if my mode wins, your mode must lose. It's all transportation, as somebody once told me, and that's right. It all should be viewed as, and the term was used by one of the members of the Committee here today, as a holistic system. That's the only way we're going to get something done.
Mr. CLEMENT. Thank you very much.
Mr. QUINN. Thank you, Bob. Mr. Coble.
Page 117 PREV PAGE TOP OF DOC Mr. COBLE. Thank you, Mr. Chairman.
Mr. King, you responded in a general way to Chairman Quinn's question regarding possible changes to the bill before us. Let me ask you specifically, if you could, what changes would you make to the bill?
Mr. KING. The States, I think in general, and it goes to that question about fear of the filtering process through Amtrak, I think the States in general would respond to that by saying that the more the States can be assured that they will have a large voice, I won't go as far as saying control, but a substantial voice in project selection, in project management, and the questions that have been raised about the integrity of the bonds, the more control we have over those three areas, I think the happier we will be.
I'm an optimist by nature, and I'm ready to get on with it. So I'm willing to hope that all the players treat the bill as it is, as I would expect them to, and we can move forward and make progress.
But perfecting language is always available, and if we got the chance, I think we would make some suggestions along those three lines.
Mr. COBLE. Assuming a Federal partnership, Mr. King, with respect to funding for passenger rail, given the opportunity, do you believe that States could efficiently and effectively conduct and operate regional rail systems without Amtrak?
Mr. KING. I alluded to the California experience in my oral presentation. I like the stability that Amtrak brings. Perhaps that's not an appropriate term, but they are a national carrier. They can operate and we can turn to them and say, we'd like to provide this service, and we can negotiate a price, and they can negotiate an agreement with a Class 1 railroad.
I like the fact that we should be able to have that sort of relationship with other carriers. So you asked the question without Amtrak, my preference would be that operating entities other than Amtrak be available to us under this bill, and that we would be able to use the competitive pressures that are inherent in that relationship in order to make sure that whoever is the operator, Amtrak or somebody else, we're getting the best possible deal for our customers.
Page 118 PREV PAGE TOP OF DOC Mr. COBLE. Mr. Hart, the bill authorizes Amtrak to issue bonds to develop high speed rail projects. As we all know, high speed rail projects are limited in that all points can't be served. What benefits, Mr. Hart, if any, are there in this bill for rural communities or communities not able to be served by high speed rail?
Mr. HART. Thank you, Mr. Coble, that's the problem as we see it with the bill. There are no benefits for rural America that aren't exactly and directly served by Amtrak or any of the other high speed rail operators that would do it. That is the problem.
And that's where service is most needed. Rural America is getting cut out of transportation service and we need to reverse that. This could be a step in doing that.
Mr. COBLE. Mr. Chairman, if you will pardon my immodesty, I again beat the five minute red light rule and I yield back.
Mr. QUINN. I believe that's the only reason you came here today.
Mr. QUINN. Thank you very much, Mr. Coble and Mr. Clement. We've come to the end of our questioning for this panel, our third panel. Both of us want to thank you for your patience. We've been at it now just about five hours, and I have to tell you, I've been here a few terms, this is probably one of the most enlightening hearings, helpful hearings I've been at through all my committee assignments. I want to thank you all for helping do that.
We're going to take it from here and hopefully be in touch with all of you again. Bob, any closing remarks?
Mr. CLEMENT. I think I agree with what you said, this has been very helpful as we move forward and try to push intermodalism, but also understand that our transportation system is really being strained right now. There's a lot of anxiety on behalf of Americans about moving around the country and we need to face up to those pressures, and we need to solve these problems.
Page 119 PREV PAGE TOP OF DOC Mr. QUINN. Thank you, Bob. Remember, you get what you pay for.
[Whereupon, at 2:05 p.m., the subcommittee was adjourned.]