May 2011 - The case for passenger rail service, both high speed rail and conventional intercity passenger service is now self evident. Existing modes of transportation currently consume more than two thirds of our nation’s oil supply and are responsible for nearly a third of our carbon dioxide emissions. Despite echoes to the contrary from the decedents of the flat earth society, global warming threatens the future of the earth and there is a limit to the amount of oil and carbon based fuel that can be extracted from the ground. The congestion on our nation’s highways and air corridors are already major problems and will only increase as we add an estimated 80 million people to our country in the next 25 years. Adding another six lanes to I-95 or I-80 is not the answer. It is a fact that the costs of building and operating passenger rail service uses tax dollars far more efficiently than similar investments in highways and airports. Passenger rail uses less than 20% of the energy to operate and produces less than 20% of the earth killing greenhouse gases when compared to airplane and automobile transportation. Current total trip times between population centers 300 miles or less apart are less on passenger rail when highway congestion, airport security and traveling to and from the airport are all factored into the trip. As passenger train investment becomes greater permitting for faster trains this number will easily grow from 300 miles to 500 miles.

It is in America’s national interests in general and the individual passenger’s interest in particular to develop and build passenger rail. Passenger rail also provides the backbone for regional economic growth. The construction and operation of the service provides good jobs and a good tax base for further economic growth. Passenger rail is a critical component to getting America back on its’ economic feet. The public understands and supports this solution. While concern about rising government deficits and the depression of 2008 is driving all elections and political decisions the public supported 43 out of 56 transportation ballot initiatives in 2010 even though it meant additional taxes. This is a 77 per cent success ratio for public financing of public transportation and most of the measures passed by very wide margins.

Amtrak is America’s only nationwide passenger rail system. In his first State of the Union address in 1982 Ronald Reagan called for the elimination of all public subsidies to Amtrak. His administration was dominated by oil, military, automobile and highway interests. His call for the destruction of publicly financed passenger rail served a narrow constituency at the expense of America’s national interests. Subsequent Republican leadership on this question, with some exceptions, also opposed developing reliable passenger rail service for America. Fortunately the political process allowed Amtrak to continue but not without a cost. Amtrak was funded just enough to keep its nose above the water line and was never permitted to provide the service that the country needs. Amtrak is in fact by legislation a private corporation with a public Board of Directors appointed by the politicians. Despite the coordinated attacks on its’ existence by politicians who have greater allegiance to the oil and gas lobbies than to America’s interests, Amtrak has proven itself to be a remarkable success story. When its’ capital construction crews are compared to their private sector counterparts the installation of ties, rail, bridges and catenary systems is performed equally or better. When compared to other passenger rail services anywhere in the world Amtrak is number one. On an operational level it returns 78% of its’ costs from ticket revenues as opposed to a national average of 47% for commuter railroads and 58% for heavy rail transit systems. Our European friends and competitors took a different path and invested heavily in passenger rail. Today they have developed modern, high speed systems that serve as the economic backbone for their economies. It isn’t competition and trickle down economics that have made European standards of living higher than those in the United States but a more wise investment of public tax dollars into transportation, health care, and education.

Just saying no to the future with Amtrak or to public rail financing is longer an option for the enemies of publicly funded transit. The evidence is overwhelming that investment and development of passenger rail is in the national interests and vital to our future. So what is the solution being proposed by Chairman Mica of the House Infrastructure Committee and the Republican majority in the House? Since January 2011 when they became the House majority they have been holding regional hearings to establish “public-private” partnerships or rather, to privatize existing passenger rail networks like Amtrak and to establish private sector operation of future passenger rail corridors. The problem is that these schemes do not work and eventually leave the public holding the liability while the private sector walks away with our tax dollars. To make the argument, the Republican leadership must also ignore our own relatively recent history. Ignoring reality is not a problem for Chairman Mica who has stated that the House has the power to legislate it away. At a recent public roundtable meeting in January 2011 held in Grand Central Station New York he said that Congress makes the laws and thus could make the reality. Chairman Mica said that if it was 3 o’clock in the afternoon and Congress wanted to pass a law making it 1 o’clock in the afternoon that they could do that and then everyone would have to call 3 pm 1 pm. With respect to their schemes to turn the public assets over to the private sector he and his committee are doing their best to recreate reality. Instead of calling the scheme the looting of taxpayer dollars and theft of public assets for the private sector they are now calling it a “public-private partnership.

Politicians like Chairman Mica make the argument that turning over passenger rail service to the private, for profit companies would make it run more efficiently at a lower cost. They argue that the public can pay less tax dollars and are therefore better served. Unfortunately feel good rhetoric and slogans or recreating reality does not run a railroad and the facts and history do not support these contentions. Privatization or public-private partnerships does not guarantee government savings, does not mean lower fares, does reduce service and is bad for democracy. Privatization of public transit introduces a new cost - a profit margin. There is no evidence anywhere that privatizing public transit has led to lower fares for passengers. In fact, the evidence is all on the other side and that fares actually increase with privatization. Privatization does not improve overall service as only the most profitable service would be retained. It is undemocratic because private operators would be making decisions to slash service that is needed but not immediately profitable. These decisions should be made by the public’s representatives and not the profit maker.

However, even with Amtrak and our own recent history we know that House Republican schemes to create “public private partnerships” sdo not work if promoting the public interest is the desired goal. The American financial system was shocked when the Penn Central Railroad declared bankruptcy in June 1970.    This was the world’s largest corporate bankruptcy at the time and it sent shock waves through the financial system. Six other railroads in the Northeast were also in serious financial shape or also declaring bankruptcy. These railroads provided essential commuter service, passenger service, railway express freight service, bulk freight service in box and hopper cars, and perishable consumer goods such as fruit and dairy products. There were many reasons for the collapse of this industry but a main reason was the inability to operate commuter and passenger rail at a profit. The Northeast sector relied upon these services and Congress moved quickly to nationalize these railroads. The American Association of Railroads, representing the private sector freight railroad industry, objected to this plan and with President Nixon threatening a veto of total government control a series of laws were enacted between 1971 and 1983 that eventually created Conrail, Amtrak and the commuter railroads (NJT, SEPTA, MARC, Metro-North and MBTA). This was the largest public bailout at the time. It resulted in the reorganization of freight service in the Northeast under a public entity Conrail with its eventual sale back to the private sector in the then largest initial public offering 1987.

However, with respect to passenger service, the private sector, state and federal governments and the unions agreed that passenger and commuter service should remain under government ownership and control because it is a vital public service, necessary to the economies of the regions it serves and can not be profitable and as shown by its history, can not be successfully operated by the private sector. Other countries have privatized their passenger rail service with drastic consequences for the workers, passengers and taxpayers. While there are many examples, on example is the privatization of British rail in England. In the 1990s a conservative Tory government privatized its passenger service and the result was a four fold increase in track worker fatalities (from 1998 to 2004, 39 track maintenance workers were killed due to lax safety under the new scheme) and a similar increase in passenger fatalities most notably the 1996 Stafford rail crash where 31 passengers died because of problems with privatization. After the tremendous waste of tax dollars and worker and passenger life the British government had to revert back to a plan that is very much resembles Amtrak where a private company is governed by a public board for the public good and not for the profit margin of the investor.

Private investors want to make one thing - money and that is the problem with privatization of public services in general and rail transportation in general. When a private equity firm takes over a distressed company they lay off a large percentage of the work force, sell assets and degrade the physical plant to keep the profit margin wide, make no investment in the future and keep only the most profitable operations until new investment requires that they also be sold in a fire sale. This is how private equity firms make money. They do not make money by creating value and service but by liquidating what is left. Like vultures flying around dead meat they have all attended the hearings of Chairman Mica and his Transportation and Infrastructure Committee. At the hearings representatives from Fortress Investments, Goldman Sachs and Morgan Stanley were all in attendance and invited to sit at the public table. Do you think they are there to ensure that Americans are served with a vital public service necessary to our national well being or do you think they are there to scoop up as much of the taxpayer dollars that Chairman Mica will attempt to send into their accounts? And finally, since we know that history shows us the private sector is not going to provide us with reliable passenger train service, what then are they providing for Chairman Mica and the House Republicans who are inviting them to dinner?

We need to educate members of Congress to the dangers of these schemes. Our lives and our country depends upon it.

This article is in the May 2011 issue of the BMWED Journal and is authored by Jed Dodd, General Chairman of the Pennsylvania Federation and Assistant to the President for Passenger Rail.


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