Mica Introduces NEC Privatization Bill
Yesterday, House Transportation Committee Chairman John Mica and Railroads Subcommittee Chairman Bill Shuster proposed a bill to privatize Northeast Corridor operations. This will be done more like European rather than Japanese privatization: Amtrak will not be privatized directly, but instead the Amtrak-owned trackage and rolling stock in the Northeast will be transferred to a separate government-owned company, which will award a design-build-operate-maintain contract based on competitive bidding and lease the infrastructure to the winning bidder for 99 years.
Amtrak President Joseph Boardman replied, “This is broader than the northeast at this point. This is the Privatize Passenger Rail for America Act. The overall impact is this takes Amtrak apart, from an infrastructure standpoint, and replaces it with a government entity.”
The bill can be read here, with summary in plain English here. It does not include any regulatory component, and at this stage appears to leave the FRA in place. It also explicitly states that only the Amtrak-owned portions of the NEC will be transferred to the new government authority; if the private bidder wishes to use any infrastructure owned by Metro-North or the MBTA, the federal government will not help. With both of these hurdles still in place, the bill demands that private bidders meet the following requirements:
1. All current commuter rail services on NEC continued at current levels
2. All current freight rail services on NEC continued at current levels
3. 2 hours or less express high-speed rail service between Washington, DC and New York, and 2.5 hours or less between New York and Boston
4. Double the number of intercity trains on the NEC (both high-speed and Northeast Regional)
5. Complete the entire proposed project within 10 years
It is not clarified what the first two points mean. For example, one way to permit higher speeds in MBTA and Metro-North’s territories is to speed up the commuter trains, buying higher-performance trains and running them with more schedule discipline. Although by passenger standards this means the commuter rail service will have higher levels, from the perspective of the agencies this involves conceding turf and changing operating practices. In addition, increasing superelevation requires setting a minimum speed or running vehicles at cant excess (negative cant deficiency); while this is not a technical problem for commuter trains, traditional regulations are against it even outside the US, and it is a problem for freight trains. Speeding up freight trains is a solution, but could increase their operating costs, especially if they remain diesel-powered; this may or may not satisfy the second point in the bill.
In the absence of FRA reform, it would be difficult and expensive to achieve significant improvements; together with commuter rail agency turf, it bears some responsibility to the $117 billion cost of Amtrak’s Next-Generation High-Speed Rail plan, which has drawn criticism from many good transit activists.
In the presence of FRA reform and a rule requiring the commuter railroads to give access if required, the standards set in the bill are not very ambitious. The advertised timetable calls for an average speed of 180 km/h between New York and Washington, at the lower end of high-speed rail, and 145 km/h between New York and Boston, at the upper end of upgraded legacy rail. Existing high-acceleration or high-cant deficiency trains could achieve this on legacy tracks, with some upgrades. With small curve modifications (including an increase in superelevation, which could complicate matters for freight trains) an off-the-shelf Pendolino could run at 160-200 km/h even on the curvy Shore Line in Connecticut; south of New York, few curves would limit speeds to less than 200 km/h, and those are either relatively easy to fix or located near urban stations where speed would be low anyway.
Another issue with the bill is that it seems to want to maximize private spending in addition to minimizing public spending. It directs the Secretary of Transportation (who currently opposes privatization) to choose the expression of interest that,
(A) indicates that the project will successfully meet or exceed the performance standards.
(B) incorporates the greatest amount of private sector financing.
(C) incorporates the least amount of Federal support.
(D) is based on a public-private partnership structure that closely aligns with the structure selected by the Secretary.
In other words, there are no points awarded for exceeding the standards; however, there are points awarded for spending more money than necessary, as long as it’s all in the private sector. This despite the fact that at the speeds of the express trains running on the Sanyo Shinkansen (currently the fastest in Japan) and the TGV from Paris to Marseille, average speed would be about 220-230 km/h, for a total travel time of about 1:35-1:40 on both the New York-Boston and New York-Washington segments.
The glossy PDF that Mica and Shuster use to argue for the importance of privatization, noting increases in ridership in Britain and Japan, leaves out similar increases that came in Europe after the introduction of better regulations or more modern rolling stock. For example, the German rail reforms in the 1990s and the introduction of high-speed ICE trains helped raise ICE ridership from 6 million in 1991 to 36 million in 1999. France has seen large increases in TGV ridership and intercity ridership in general from the 1980s onward.
Despite this, good transit activists should not dismiss Mica’s effort the way they should dismiss openly dishonest anti-transit politicians, such as Governor Rick Scott. Achieving improvements in ten years is much better than Amtrak’s competing unambitious Master Plan. I believe the bill is reformable, and have already called Rep. Mica’s office and urge everyone else to do the same, demanding regulatory reform in addition to or instead of privatization.
Update: as Bruce McF notes in comments both here and on CAHSR Blog, 99 years is normal for a land concession but extraordinarily long for a transport concession. Under European-style privatization there’s a new auction once every few years, I think 10 at most.
Pedestrian Observations 
A private operator would not have the ability to condemn land for improvements, would they? This would make it very difficult to assemble any new land for a straighter right-of-way, precluding true high-speed rail >200 km/hr, especially between Boston and NY.
I imagine we would get faster and more profitable trains (the Acela already makes a significant profit), enough to pay for maintenance of the existing right-of-way, but there would be no money left over for further improvements or for subsidzing connecting intercity rail or regional rail. And what private group has the ability to get tens of billions in financing for true high-speed rail on this corridor?
While a private operator with international experience is needed for the NEC in the future, to implement HSR, we need to reform the outdated regulations first, and make a plan thru the political process. Even in California, where HSR had enough support to get $10 billion in local funding from voters, complaints from land owners along the route are a big problem, and mitigation is a big part of the cost. I don’t see how a private company could navigate the NIMBY minefields and the uncertainties of land use policies, to take on the billions of dollars in risk required for the NEC.
No, they would. The bill establishes that the government entity owning the tracks may “acquire, by condemnation or otherwise, any interest in real property that the Northeast Corridor Executive Committee considers necessary to carry out the goals of section 24902 [goals and requirements].”
I’m also not too worried about private funding. Japan offered California half the money for construction, which is about $22 billion – and the NEC can be done for cheaper, especially with the trip times the bill requires. In addition, JR Central is building the $90 billion Chuo Shinkansen out of its own pocket, since the national government decided funding the line was not cost-effective.
What I am worried about is that nobody would want to deal with Metro-North (75 mph speed limit, 3″ cant deficiency), the FRA, and the MBTA (South Station capacity phantoms). NIMBYs are a comparatively smaller problem – e.g. SNCF has decades of experience of mollifying French farmers (and French unions!). Honestly, if the FRA can be gotten around, then subsidizing regional rail might be necessary, just to get Metro-North and the MBTA off the HSR operator’s back; those subsidies are not large relative to potential HSR profits, and could be reduced or even turned into a net profit with some modernization.
I think Mica is right to move the NEC away from Amtrak and make a different entity reponsible for maintenance and upgrades (in this case DOT, contracted to a private company). However, the main problem is still FRA regulations, as discussed in your post, but just as importantly the actual funding required to make the improvements. As Joseph E. points out, what private company can put up that much funding? It’s highly unlikely that DOT will receive billions of new dollars in funding for rail investment. Without either of these, privatizing operations in the NEC and especially the other corridors really won’t solve many problems.
Because he did not address funding and regulations, and instead focused simply on privatiziation, this appears to be nothing more than a plan to kill Amtrak; at least that is how it looks to me.
What problem does this solve?
Or to put it another way, what would a private operator under this framework be able to do that Amtrak can’t do now?
(Secondary point: the bill sets targets for the first ten years, but grants a 99-year concession! That’s a mismatch.)
And it is silly to give a concession for longer than 30 years in any event ~ there’s negligible value to a private firm to the rights outside of the first 30 years, so there is no credible reason for a 99 year concession.
99 years is normal for real estate transactions – e.g. Hong Kong doesn’t sell land, but leases it for 99 years.
On the other hand, now that I’m thinking about it, contracts for private operation of railways are in the single digits. (ant6n, what’s normal in Germany?) So in that sense it’s not really like European privatization…
Rail franchises n the UK have been let with contracts for anythign from 18 months (!) to 25 years. The previous government favoured 5-10 years, the current one favours 10-15 years.
(Also, previous gov. generally included a performance-related extension option for the franchisee, which they didn’t always take, even if they could. The current gov. plans to include an extension option for the government to exercise.)
In Germany, the usual contract length seems to be 8-12 years. The Berlin S-Bahn contract is going from 2013 to 2017 (14 years). These are operators on existing or publicly upgraded infrastructure, though, paying track fees.
I think that if you ask the private operator to actually pay for the improvements of the tracks, they’d want a longer claim on the tracks, to get a better return on investment.
On the other hand, as you pointed out, the schedule requirements wouldn’t necessitate that many expensive upgrades, so maybe a 15-20 year concession would actually make sense? After which the infrastructure should become public again.
On an unrelated note, does the bill specify anything about fares? Is the selection process dependent on fares?
The bill says nothing about fares; the only legal selection criteria are the four posted.
Thanks for the info about the German contract length.
This is a great blog post! Keep up the good work …
I fear that a privatization may kill the line. Historically, with few exceptions, transportation systems have not been profitable (even in the most dense of urban settings). I don’t pretend to have the answers – but I’m positive that it is not this.
Historically, high speed rail has generated operating surpluses, so an operating profit on the back of public capital subsidies alone is quite plausible.
Tom, Kyle: you may be right – I don’t know. It could just be a ploy. I’m still cautiously optimistic, because the main additional law that needs to be passed to make this work is really deregulation (off-the-shelf imports with a track record of safety and success can be used in the US with only trivial modifications), so it could be popular with Republicans. And conversely it can also be looked at as better regulations and better government, so if the Republicans do nothing about it and the Democrats retake Congress in 2012 then the Democrats may be interested…
While it’s good that somebody in our government’s taking a page from Europe’s playbook (even if it’s EuroPrivatization), without addressing the fundamental failure of the FRA, this bill is a lot like putting lipstick on a pig. Until the FRA can be solved (probably by eliminating it altogether), the regulatory climate here will make it difficult almost to the point of outright impossibility to run passenger rail altogether–much less profitably run passenger rail!
The interesting question: What happens to the REST of Amtrak? This maneuver would convert the remainder of the system from one which overall loses money, but provides useful (and profitable) services in the NEC, to one which loses even more money and primarily operates slow long-haul rail that is not competitive with air travel, excluding a few rural parts of the country that happen to have train service but no (or expensive) passenger air service. I suspect that part 2 of this will be increasing calls to kill of the remainder of the Amtrak system.
Now, that might not be a bad thing, necessarily–given that much of Amtrak’s non-NEC operations are essentially a subsidy to rural America–which has proven quite adept at dining at the federal trough. And given that, Amtrak may be harder to kill off than people may think.
But spinning off the profitable parts of an enterprise and liquidating the rest, is a rather common tactic.
The corridor services would be state-supported, which most already are, so it’s not as big a deal. The long-haul services… we’ll see. Or, rather, we won’t, because this proposal has little chance of clearing the Senate.
I know you’ve mentioned the FRA buff strength requirements for locomotives and cars, with 900 in the U.S., 200 in Europe and 100 in Japan. Is lowering the requirements possible only on lines with systems such as or similar to PTC, ACSES, ITCS? Improved signalling systems? Or on lines with limited freight traffic and limited grade crossings?
Basically, can these lower requirements be implemented on any line? What are the legitimate arguments to keeping the strength requirement so high?
Caltrain’s simulations show that FRA compliance makes trains safer in crashes in a narrow range of relative speeds, I believe 15-25 mph. Above that range, they crumple; below that range, nothing crumples. But the FRA is more likely clinging to knee-jerk notions of safety by buff strength, like the SUV driver who would feel unsafe in a small car; European trains incorporate crumple zones instead and are safer in crashes. In addition, Caltrain found that European trains are safer in grade crossing accidents.
PTC is a good thing, but even on lines that do not have it, FRA compliance is not necessary for safety. However, based on things Amtrak occasionally says, it’s possible the FRA will waive the buff strength requirement on PTC-equipped lines, which would be the start of real reform.