Amtrak Staying on Track?
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MARGARET WARNER: Amtrak trains are rolling today, but no one knows for how long. The nation’s passenger railroad is running a big deficit this year, as it always does.
And its new president, David Gunn, said last week the situation’s so dire that he’d have to start shutting down service if Amtrak didn’t get a $200 million infusion of federal aid this week.
DAVID GUNN, President, Amtrak: My checking account, in layman’s terms, will be overdrawn. And when I get my phone bill, I won’t be able to write a check.
MARGARET WARNER: A shutdown would mean turning away the 65,000 passengers who ride Amtrak-owned trains every day, particularly in the New York-to-Washington corridor.
RODERIC WILSON, passenger: The northeast corridor is essential to the business community. I use it often. I go to Philadelphia and New York regularly, and I always ride on the Amtrak.
MARGARET WARNER: Also affected would be some 600,000 commuters in the Northeast, Chicago and California, who ride trains that use Amtrak-owned facilities, like tracks, tunnels, and signals.
Amtrak hasn’t turned a profit in its 31 years.
Last year it lost $1.1 billion, the most ever.
CASHIER: Five, six, seven, eight is $40.
MARGARET WARNER: The reasons are many: High infrastructure costs, unprofitable long-distance routes mandated by Congress, poor management, and competition from highways and airlines, which both enjoy government subsidies.
The immediate issue on the table now is whether to get Amtrak the quick $200 million bailout it needs this year through either a congressional appropriation or federal loan guarantees. The longer-term issue is how to restructure the railroad to operate more profitably.
Last week, Transportation Secretary Norm Mineta laid out his principles for restructuring Amtrak. They include: Privatize some routes; take tracks and other infrastructure away from Amtrak, leaving it to run only trains; and make states pay more for intercity rail service.
Mineta took no position on the $200 million bailout, but said last night, after meeting with Gunn and the Amtrak board, that he was confident a shutdown would be averted.
NORMAN MINETA, Secretary of Transportation: First, Amtrak must continue to search for ways to cut expenses and to build on David Gunn’s initial efforts to get control of its finances. At the same time, the federal government will continue to identify the best mix of options available to stabilize Amtrak and its short-term finances.
MARGARET WARNER: This morning, Senate Democrats took issue with Mineta’s restructuring approach, and called on President Bush to move quickly on the short-term bailout.
SEN. ROBERT TORRICELLI, (D-NJ): It is genuinely an economic crisis. It is a loss of jobs and will severely impact an entire region of the country economically.
MARGARET WARNER: Later today, Mineta said a short-term fix is in sight.
NORMAN MINETA: No one wants to see Amtrak die. We’re coming along very well. We’re very, very close to coming to a solution to help Amtrak.
MARGARET WARNER: To explore Amtrak’s immediate crisis and longer-term future, I’m joined by two people involved in it.
Sylvia de Leon is a member of the Amtrak board of directors, chairwoman of its Corporate Affairs Committee, and a senior partner in a Washington law firm. Tom Till is executive director of the Amtrak Reform Council, an independent commission established by Congress to monitor Amtrak’s financial performance. Earlier this year, the council made its own recommendations to Congress on how to restructure the country’s passenger rail system.
Welcome to you both.
Ms. De Leon, is Amtrak going stop running this week?
SYLVIA DE LEON: No, I am confident that there won’t about a shut down.
I don’t think we’re out of the woods. We have uncertainty and that’s really what this problem is all about.
Amtrak every year borrows money and this year because of the uncertainty our banks have said we’re a risk. We need to know what the government is going to do. The other thing that is different this year is our auditors have said unless we’re certain the banks will loan money they won’t give us a clean opinion. It’s a chicken and egg situation and we need definition and decision from the government.
MARGARET WARNER: Do you agree, Tom Till, that the government is going to step in here and at least in the short-term crisis avert it?
TOM TILL: I think both — all parties involved — the Congress, the Administration, certainly Amtrak, will work together to make that happen. MARGARET WARNER: Does it matter whether it’s in the form of a direct appropriation or a loan guarantee?
TOM TILL: If it’s a loan guarantee, that will mean that Amtrak will have to pay it back when it gets it’s appropriation for fiscal year 2003, which will be later on this fall.
If it’s a direct grant, of course, they won’t.
MARGARET WARNER: And do you think this bailout should happen?
TOM TILL: I think the council in general would — although not all members perhaps — but in general would support the notion that Amtrak ought to keep running.
MARGARET WARNER: Ms. De Leon, five years ago Congress said Amtrak should be at least self supporting by the end of this year and Mr. Till’s own council this year said, ‘ain’t gonna happen.’
Why is that? And should that even be a goal to be able to operate Amtrak without a subsidy?
SYLVIA DE LEON: There isn’t a rail passenger system in this world that doesn’t rely on government investment.
There’s not even a domestic transportation system that doesn’t rely heavily on government investment. We have the air traffic control system paid for by the government. We have an aviation trust fund. We have an airport development program. Those are in effect subsidies to the aviation industry. We have a $30 billion plus highway trust fund. Those are subsidies to passengers in their cars.
We don’t have anything comparable like that. Federal investment is critical in public transportation.
MARGARET WARNER: What is your view about why it’s not going happen and whether it’s the right goal to have in the first place?
TOM TILL: Well, I think the important thing to know is that even if you don’t believe that trains can be profitable — perhaps some can but it’s unlikely that the whole system would — there are much more efficient ways to run rail operations than the way we have organized Amtrak.
It’s built on a model that was developed years and years ago and a model that is now obsolete.
Americans love European trains. And when they go to Europe, they’re riding on trains that are now going through an institutional evolution, very much like the recommendations that the council made and the kinds of recommendations the Bush administration has made.
Things have to change. People have to look at financing the infrastructure that Sylvia talks about, but they have to do it in a way that is going to put the money directly into the infrastructure.
And that’s why the European Union has declared that all their railroads have to keep separate books on their the infrastructure and a number of railroads are moving to separate that infrastructure so they can see the kind of investment that goes into the track and get the benefits they are after.
MARGARET WARNER: Is he right that even if you can’t get to a no-subsidy point that Amtrak is poorly run, poorly managed from a financial point of view?
SYLVIA DE LEON: Whichever way you cut it you need to deal with the financing first.
You can rearrange the deck chairs any way you want. If you don’t have capital investment in a highly capital intensive industry, it doesn’t matter how you structure it. You have got to take care of the fundamentals first.
MARGARET WARNER: And so how do you do that?
SYLVIA DE LEON: I think there are plenty of ways to come up with capital.
We do it in all kinds of industries. I mean we have an 18-cent gasoline tax. Give Amtrak a penny of that and previously we’ve asked for half a cent of that. There’s an excise tax on diesel fuel for trains. That doesn’t go back to the trains – that goes to the general revenue.
There’s bonding authority to have high-speed trains. We have a really strong high-speed train system on the northeast corridor. California, Chicago, Milwaukee, the Pacific Northwest are crying for that. We can fund through bonding.
The basic decision is the Congress has got to decide what does it want passenger rail to be? Right now they want a national route system, and that is the law, but they don’t give us the money.
So the reason Amtrak is in trouble year after year, and by about July has to go borrow money year after year, is because Amtrak itself is subsidizing the national route structure.
MARGARET WARNER: What do you think the answer is if you have to sum it up?
And I know it’s a very complicated issue, but in terms of restructuring Amtrak in a way that it operates at least as profitably as it can and as effectively as it can –
TOM TILL: Well, let’s talk about the model that we just talked about, all the things Sylvia was talking about, with regard to all the funding that goes into infrastructure for aviation and for highways.
We do that much differently than we do Amtrak. With Amtrak, any infrastructure it owns and needs to maintain, we put the money into an operating company. We don’t ask trucking companies and bus lines to build a highway and we don’t ask the airlines to build the airports and the air traffic control system.
So let’s get a solid federal-state partnership to put that infrastructure in place, and that includes on the Northeast Corridor.
MARGARET WARNER: So, in other words, let me just interrupt — are you talking about essentially split Amtrak?
Is there a consensus developing in which let Amtrak run the trains just as the airlines run their airplanes and let some other entity be responsible for the infrastructure?
TOM TILL: That’s correct. Absolutely. The states want to control their own infrastructure improvements for all these corridors that they’re looking to expand. In California, California is driving that; it’s not Amtrak. And they need a good, solid federal-state partnership that will provide them the funding they need to expand. In Washington State, in Oregon, and the Midwest — it’s happening all over the country — in Florida, in the Southeast, this kind of a program, which has already been proposed in Congress by — in the House of Representatives — will provide billions of dollars under bonding authority as Sylvia mentions to do that.
But Amtrak doesn’t need be in the middle of that, they need to be running the trains that will serve the people and eventually under our proposal there could be competition for the right to run those trains.
MARGARET WARNER: Is there a consensus developing on at least this idea?
SYLVIA DE LEON: The consensus that is clearly there is that the mayors of this country are really strongly behind Amtrak. The governors are really strongly by Amtrak.
There are lots of new ideas and some of them need to be studied very carefully. But Amtrak has been partnership with the states for several years now; 38 states have some kind of relationship with Amtrak now.
MARGARET WARNER: But as you yourself said, it’s not working financially.
I mean, does the board support essentially getting out of infrastructure business, getting out of the tunnel and track maintenance business and just running the trains?
SYLVIA DE LEON: My fiduciary duty as a board member is to be sure that there is passenger rail and that the corporation is strong.
I think, as you’ve seen in Washington, it takes a lot of time to change and to have big changes in legislation and elsewhere. I think right now we have a major problem on our hands. The public has spoken; they want passenger rail. Ridership is incredible. I want to take care of the financing problems first. I want the Congress to decide what it wants to be.
And if we want to change the organization, we can talk about that. But organization doesn’t fix economics, and this is a problem about economics.
MARGARET WARNER: Last quick question to you both: We keep reading and we understand that the Northeast Corridor, the heavily traveled corridor — Chicago, California, as you said — are profitable or close to, and it’s these big long haul passenger routes, a lot of them put in by Congress, that drag it all down, at least part of it.
Do you think that Amtrak should stop servicing the vast areas of the country where, in fact, there isn’t a huge, huge demand for it?
TOM TILL: The ’97 Act gave them some authority to negotiate with their labor force and determine whether or not they could get the right to discontinue some of those trains. They have not done any of that and they had initially the authority under the law.
I think there’s an element of political reality that says you’re going to have to deal with Congress on that but I disagree totally with Sylvia on the issue of whether or not you need to change the structure.
If the trucking companies and the bus lines own the highways, funding that would be a much different problem than simply having the states and the federal government have a gas tax to build those roads.
MARGARET WARNER: Quick final comment on the idea of just jettisoning the roots that that don’t pay?
SYLVIA DE LEON: There’s a lot of middle America that that has been jettisoned already. The airlines are not having an easy time. They’ve had to pull back on a lot of their routes. There’s a lot of transportation that has left middle America. I think they want rail but that is not an issue for me to decide; that’s for the Congress to decide.
MARGARET WARNER: All right. And more later. Thanks Sylvia de Leon and Tom Till.