July 10, 2013
By Marc Bussanich
Washington, D.C.—A showdown over how to finance passenger rail in the United States is intensifying as a major piece of passenger rail legislation nears expiration in September. Watch Video
The Republican members of the House Subcommittee on Railroads, Pipelines and Hazardous Materials say they want dedicated funding to finance critical rail infrastructure projects but they want to open up the rail network to the private sector. The Democrat members mostly say they’re not opposed to private sector participation in passenger rail, but the private sector can’t supplant the federal government’s role.
The Republican subcommittee members like to tout their private sector credentials, and they argue that if passenger rail, especially on long distance routes, can’t turn a profit, then the government should let the private sector take over. The Democrats argue that the network of long-distance trains is a service provided for the public good, and that the private sector will not even consider operating and maintaining long distance routes because they will not make a return on their investments.
This debate played out at a hearing on how to finance intercity and passenger rail on Tuesday morning. Congressman John Mica (R-FL) has said there’s no bigger passenger rail fan than he but he’s also strongly opposed to Amtrak and the federal government operating the country’s passenger rail network. So much so that he told the Deputy Secretary of the U.S. Department of Transportation, John Porcari, that Amtrak is a relic of the Soviet era.
“I’m telling you. We have a Soviet style train operation. The private sector will invest if they’re given some kind of incentive. That incentive is a return on their investment. But you’re not prepared to do that,” said Mica.
Congressman Mica wants to open up Amtrak’s national network to private sector competition. When asked whether he’s concerned that the subcommittee is too overly focused on privatizing passenger rail rather than providing significant annual government funding as the government does for the interstate highway and aviation systems, Mr. Porcari said,
“Passenger rail is incredibly important to America’s economy and its future economy as well. Expanding the passenger service we have both in emerging markets and in established markets is a real important priority for the administration because we know that helps drive the economy.”
The Obama administration has proposed a five-year, $40 billion budget out of its overall FY 2014 budget just for the Federal Railroad Administration, but the subcommittee’s chair, Jeff Denham (R-CA) told the FRA’s administrator, Joseph Szabo, at a hearing two weeks ago that the FRA’s request is pie-in-the-sky.
With growing ridership pressing up against an aging passenger rail network that is almost at or near capacity on certain lines, such as the Northeast Corridor, and the House unwilling to commit to large government expenditures, the nation is at a crossroads over how to invest in its passenger rail infrastructure–forego to the private sector or commit to billions of dollars of investments.
Chairman Denham argues for squeezing out the profits that Amtrak earns on the Northeast Corridor, its most profitable route, and using them to pay for major infrastructure projects along that corridor, but that would undermine Amtrak’s long distance routes which are partly financed with NEC revenue. Congressman Mica argues that Amtrak should be realizing over $1 billion annually on its real estate assets rather than the $94 million it earned in Fiscal Year 2012.
One solution the subcommittee members and Mr. Porcari agreed has potential is a federal financing mechanism, the Railroad Rehabilitation and Improvement Financing (RRIF) Loans, which provides direct, low-interest federal loans to finance passenger railroad infrastructure. About $30 billion is currently available but the program has been underutilized until recently.
Still, Mr. Porcari argues that all available innovative funding mechanisms will not be a substitute for federal government investments.
“Passenger rail is a public good. It is truly a piece of infrastructure that serves the entire country. And while we welcome public-private partnerships, I don’t think anyone is suggesting that public-private partnerships alone can fulfill that need,” said Porcari.