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25–911 PDF 2006

AMTRAK REFORM PROPOSALS

(109–31)

HEARING

BEFORE THE

SUBCOMMITTEE ON

RAILROADS

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 21, 2005

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

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON RAILROADS

STEVEN C. LATOURETTE, Ohio, Chairman

THOMAS E. PETRI, Wisconsin

SHERWOOD L. BOEHLERT, New York

JOHN L. MICA, Florida

SPENCER BACHUS, Alabama

JERRY MORAN, Kansas

GARY G. MILLER, California

ROB SIMMONS, Connecticut

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

JON PORTER, Nevada

TOM OSBORNE, Nebraska

MICHAEL E. SODREL, Indiana

LYNN A. WESTMORELND, Georgia, ViceChair

DON YOUNG, Alaska

(ex officio)

CORRINE BROWN, Florida

NICK J. RAHALL II, West Virginia

JERROLD NADLER, New York

BOB FILNER, California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

LEONARD L. BOSWELL, Iowa

JULIA CARSON, Indiana

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

JOHN BARROW, Georgia

JAMES L. OBERSTAR, Minnesota

(ex officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Chambers, Ray B., Preseident National Railroad Construction and Maintenance Association, Inc. ......................................................................................... 44

Liberatore, Dominic J., Executive Director, All Aboard Ohio .............................. 44

Laney, Hon. David M., Chairman, Amtrak Board of Directors ........................... 12

Mead, Hon. Kenneth M., Inspector General, Department of Transportation ..... 12

Reistrup, Paul, Chairman-Elect, Railway Service Corporation ........................... 44

Rosen, Hon. Jeffrey, General Counsel, U.S. Department of Transportation ...... 12

Scardelletti, Robert A., International President, Transportation Communications International Union .................................................................................... 44

Serlin, Robert, President, Rail Infrastructure Management, LLC ...................... 44

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Brown, Hon. Corrine, of Florida ............................................................................. 64

Costello, Hon. Jerry F., of Illinois .......................................................................... 89

Cummings, Hon. Elijah, of Maryland .................................................................... 91

Menendez, Hon. Robert, of New Jersey ................................................................. 136

Mica, Hon. John, of Florida .................................................................................... 138

Nadler, Hon. Jerrold, of New York ........................................................................ 139

Oberstar, James L. of Minnesota ........................................................................... 143

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Chambers, Ray B ..................................................................................................... 78

Laney, Hon. David M .............................................................................................. 97

Liberatore, Dominic J .............................................................................................. 120

Mead, Hon. Kenneth M ........................................................................................... 124

Reistrup, Paul .......................................................................................................... 151

Rosen, Hon. Jeffrey .................................................................................................. 168

Scardelletti, Robert A .............................................................................................. 186

Serlin, Robert ........................................................................................................... 201

SUBMISSIONS FOR THE RECORD

Brown, Hon. Corrine, a Representative in Congress from Florida, letter from

George Francisco, Chair, Transportation Trades Department, AFL-CIO,

Rail Labor Division, October 8, 2004 .................................................................. 58

Laney, Hon. David M., Chairman, Amtrak Board of Directors:

Responses to questions from Rep. Brown .......................................................... 102

Response to a question from Rep. LaTourette ................................................... 114

Reistrup, Paul, Chairman-Elect, Railway Service Corporation, responses to

questions from Rep. Brown ................................................................................. 165

Rosen, Hon. Jeffrey, General Counsel, U.S. Department of Transportation,

responses to questions ......................................................................................... 38

Scardelletti, Robert A., International President, Transportation Communications International Union, responses to questions from Rep. Brown .............. 197

Serlin, Robert, President, Rail Infrastructure Management, LLC, responses

to questions from Rep. Brown ............................................................................. 212

ADDITIONS TO THE RECORD

Houlihan, Lokey, Howard & Zukin, Louis A. Paone, Managing Director, letter, September 8, 2005 ......................................................................................... 220
Page

VI

International Brotherhood of Teamsters, John F. Murphy, International Vice

President Eastern Region, statement ................................................................. 222

National Association of Railroad Passengers, Ross B. Capon, Executive Director, statement ....................................................................................................... 228
(1)

AMTRAK REFORM PROPOSALS

Wednesday, September 21, 2005

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON RAILROADS, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, WASHINGTON, D.C.

The subcommittee met, pursuant to call, at 10:30 a.m., in Room

2167, Rayburn House Office Building, Hon. Steven LaTourette

[chairman of the subcommittee] Presiding.

Mr. LATOURETTE. The subcommittee will come to order this

morning. Good morning to everyone. I apologize for being a little

tardy. I was at the White House attempting to convince the administration that the suspension of Davis-Bacon on the gulf coast was

a bad idea.

This subcommittee hearing will come to order. I want to welcome

all of the members today and also the witnesses on today’s hearing

concerning Amtrak reform proposals.

Back on April 27 of this year, the full committee approved H.R.

1630, the Amtrak Reauthorization Act of 2005. This legislation

would provide Amtrak with $2 billion of authorization per year for

3 years beginning in fiscal year 2006. The bill would also impose

certain reforms, such as the requirement that Amtrak provide a

separate accounting for each of its lines of business. It would also

require that the Federal Railroad Administration oversee all Amtrak expenditures.

Since our passage of H.R. 1630, a number of other Amtrak reform proposals have begun to gain attention. Some of these proposals involve spinning off Amtrak routes to some financially strapped

States. Other proposals have taken a more positive approach and

seek to establish a new public funding mechanism or promote private financial investment in Amtrak lines. I find the latter proposals particularly intriguing, as they dovetail with the rail provisions

that we tucked into the new highway bill.

In case you haven’t read all of the fine print in TEA-LU, the bill

contains about $35 billion in low interest loans for passenger and

freight rail, as well as a $100 million annual authorization for

high-speed rail corridor development. I want to commend Chairman Young and Ranking Member Oberstar for all of their hard

work on this issue, and wish to thank the members of this committee on both sides, particularly my ranking member, Corrine Brown,

for their support of passenger rail.

Today the subcommittee will hear testimony from a range of parties, including the Transportation Communication Union, which

represents the largest share of Amtrak employees. I look forward
2

to hearing their recommendations regarding the future of passenger rail.

From a personal standpoint, I just want to say it is my 11th year

in the Congress, and it seems when we deal with Amtrak, every

year we do this kabuki dance and have to fight and scrap. This

year the budget that was sent up was zero, then it went to $550

million, thanks to some great work by Ranking Member Oberstar

and Ms. Brown, up to a decent level. But it seems that we always

give Amtrak just enough money to fail, and I would hope that we

listen to anybody that has a good idea, a bright idea as to how we

can do it better with the goal of having a good, viable, well-financed, well-structured, good infrastructure passenger rail system

in this county. That is why we gathered today.

Before yielding, I have one brief housekeeping matter. I want to

ask unanimous consent to allow 30 days for members to revise and

extend their remarks and to permit submission of additional statements and materials by the witnesses. Without objection, so ordered.

It is now my pleasure to yield to Corrine Brown, our ranking

member, for any opening statements she might have.

Ms. BROWN. Thank you, Mr. Chairman, for holding this hearing.

I would like to commend you for your strong and consistent advocacy for Amtrak. If it wasn’t for your efforts and for the hard work

of Ranking Member Jim Oberstar, thank you, Mr. Oberstar, and

other members of this committee, Amtrak would have been forced

to cease operations this fall. I want to thank you for the people.

At a recent poll, it showed that I guess 70 percent of the people

thought that Congress did not share their values, and that was

truly an example of not sharing the American people’s values.

Last year, Amtrak achieved record ridership of 25 million passengers nationwide, the equivalent of 125 fully loaded 757 airplanes. This is a substantial increase in ridership, which shows me

that support for Amtrak is growing. This is a real credit to Amtrak

management and David Gunn. I want to publicly thank Mr. Gunn.

Recent polls show that 66 percent of the American people support Amtrak. Not 66 percent from the red States or the blue States,

but 66 percent of the people of America.

Congress also supports Amtrak. Now more than ever. The

LaTourette-Oberstar amendment to the fiscal year 2006 transportation appropriations bill increased funding for Amtrak by over

$1.176 billion. That is $1.176 billion more than the administration

requested for Amtrak, and $626 million more than the House Appropriations Committee provided. That amendment passed the

House by a voice vote. On the same day, my amendment to preserve long distance routes passed the House by 269 to 152. Now

it looks like the Senate is going to pass a $1.45 billion bill, and I

understand the Senate will soon pass a reasonable, sensible Amtrak reauthorization bill.

The fact is that support for Amtrak has never been greater. Amtrak works and the American people depend on it. When our commercial aviation system shut down on 9/11, stranded passengers,

including Members of Congress, turned to Amtrak to reunite themselves with their families.
3

Most recently, Amtrak helped evacuate families in Louisiana displaced by the hurricane. Amtrak fed them and gave them water,

more than the Federal Government did. Just think what would

have happened if Amtrak was broken up into different companies

and if the States had to run the railroads themselves.

But a small minority in this Congress, and I want you to know

small, and you know who you are, and one person is not here

today, but I want you to let him know I called his name, Mr. Mica,

thinks that Amtrak should be eliminated and that we should

starve it to death and then privatize the system.

Don’t you realize that Amtrak was created because the private

railroads could not handle passenger service and didn’t want it?

They lost money on it. They came to Congress and asked us to take

it up. They told us to take their equipment, take whatever we

needed and begged us to allow them to abandon the passenger rail

business.

Amtrak opponents claim that the private sector can do something

cheaper and more efficient. All we have to do is remember this

summer when the Acela crisis happened, to realize it is not going

to happen. Here we had a private corporation, the Northeast Corridor Maintenance Company, which failed to fulfill meaningful

maintenance and inspection responsibility.

Just look at the British experience with privatization and separation of operations from infrastructure and maintenance to understand the devastation such practices can cause.

In March, the chairman and I traveled to Europe to look at the

rail network. We learned that former British rail infrastructure

management had outsourced all of its maintenance and engineering work. As a result, the conditions of the track deteriorated rapidly. Two fatal accidents in 1999 and 2000 revealed the extent of

the deterioration and the company’s poor understanding.

Thankfully, the British government learned from their mistakes.

The government took back control of the rail network and is now

investing billions of dollars in infrastructure, maintenance and

other improvements to get the trains back on track.

We should be doing the same thing. We should be investing in

our railroad system, just like we invest in other modes of transportation. We spend trillions of dollars to subsidize every form of

transportation, highways, aviation, transit, maritime, and Amtrak

gets the short end of the stick, and just over $1 billion a year from

the Federal Government.

We spent $18 billion on aviation security since 9/11, but nothing

to secure Amtrak passengers. I read recently that the airlines are

looking for another handout from Congress because of fuel prices,

about $600 million in tax relief. I don’t see any relief for Amtrak.

We spend $4 billion a month in Iraq, that is $1 billion a week,

but we can’t find $3 billion to get the Northeast Corridor to a state

of good repair.

Halliburton wastes $7.2 billion of Federal funds at inflated costs

billed to the Federal government for nothing but things like sodas,

movie rentals, tailor services and equipment. But they just get

swept under the rug.
4

Halliburton billed the Federal Government for 37,000 cases of

soda every month at $45 per case. And we complain about $3 beverages for Amtrak? Halliburton spent $10,000 a day of hard-earned taxpayer dollars

to house their employees in Kuwait at a 5-star hotel, instead of

moving them to air conditioned tent facilities like the ones used by

our troops for under $600 per day, and we complain about the costs

of Amtrak sleeper service. Halliburton leases SUVs and trucks for as much as $7,500 a

month per vehicle, and then turn around and bill the Federal Government for it. Yet some in Congress complain about the cost of

Amtrak workers, most of which will never be able to afford a vehicle that costs $7,500 per month. Then there is the TSA, which spends $1,200 for 20 gallons of Starbucks coffee, $1,500 for 14 extension cords, $500,000 to rent

tents that flooded in a rain storm, $250,000 for artwork for TSA’s

new Crisis Management Center in Virginia, $30,000 for silk plants

and flowers, $13,000 for lamps, and $29,000 for art consultants,

just to name a few things. And we complain about $1 billion for

a service that millions of Americans rely upon.

We should be ashamed of ourselves. Let us stop nickeling and

diming Amtrak to death. Let us stop looking for ways to get rid of

our passenger rail. Let’s start giving Amtrak the support it needs,

and let’s get back to solving the real problem this country is facing.

Thank you, Mr. Chairman, for having this hearing, and I am

looking forward to the presentations and to asking questions.

Mr. LATOURETTE. I thank the gentlelady. It is now my pleasure

your to yield to the ranking member of the full committee, Mr.

Oberstar.

Mr. OBERSTAR. Thank you, Mr. Chairman. Maybe after that recitation of the ills of Halliburton, I had best submit my statement

for the record.

I think you stated the case very well at the outset, Mr. Chairman, when you said over the years, the Congress has given Amtrak

just enough to fail. That is a very apt description of it.

I am grateful for your continued support and advocacy for passenger rail transportation, your chairmanship of the subcommittee

has certainly demonstrated your commitment to improving rail

passenger service and keeping it part of our national transportation landscape, and I really appreciate the ranking member, Ms.

Brown, who has led what I can only describe as a crusade in support of Amtrak and demonstrating the effectiveness, the potential

and the continued need for rail passenger inter-city service.

I hope your mission this morning was successful, Mr. Chairman.

I am sure it was heralded with great applause and love and brotherly affection downtown. I sent the President a letter saying that

this was the wrong thing to do.

The prevailing wage in Louisiana, my wife is from New Orleans,

we spend a lot of time there over the years, and the prevailing

wage is just under $9 an hour. That is not going to break the bank

for anybody. That is not a good prevailing wage in northern Minnesota or Chicago or Cleveland or a lot of other places in this country. Why you would want to take it out of the pockets of the working people, I don’t understand.
5

I said if you don’t roll back your decision and reinstate the prevailing wage, at least do what we did during World War II and impose a ceiling on the amount of profit the corporations can take out

of those contracts. Put a 25 percent limitation, if that is the

amount you are going to reduce the prevailing wage by.

We are not going to fight that battle in this committee, but we

have done it and we have done it very well, with your support, in

favor of decent wages for construction trades work, working people.

As we will hear the proposals today, we are going to hear a good

deal of the magic of privatization. I just want to remind the apostles of privatization that the private sector did run passenger rail,

and they ran it into the ground, and they and U.S. Postal Service

are principally responsible for the deterioration of passenger rail

service in the United States.

By the time Amtrak was created and the last of the railroads

had shed their passenger service, the inter-city market was down

to just under one-half of one percent of passenger travel. Daily

inter-city passenger trains were down to 300 from a high of 11,000.

I remember in our State of Minnesota how the railroads, one

after another, petitioned the Interstate Commerce Commission for

discontinuance with the help of the U.S. Postal Service, if the Postal Service would take the mail off the Railway Post Office, the

RPO, that was worked overnight from city to city, then the railroad

could declare that segment unprofitable and discontinue the operations.

So the Postal Service had this great idea of regional distribution

centers and the mail from Chisholm, 5 miles away to Buhl, would

instead travel 90 miles to Duluth, be worked in Duluth and then

go 85 miles back to Buhl the next day, instead of on the RPO being

dropped off that night.

Everybody thought that was a heck of an idea. I didn’t understand it. I didn’t know why you wanted to travel 170-some miles

to make a 5-mile journey for a letter. But that is what they did.

And those cities also lost LTL, less than carload service. So small

towns shriveled up. Passenger service died. Eventually it was all

turned over to the Federal Government. That is the history of Amtrak.

When it was turned over, the terminals were rundown, the stations were in bad shape, the passenger cars were in terrible shape,

the amenities were minimal, the equipment was prone to failure,

and that is what the Congress, in its wisdom before you and I, Mr.

Chairman, and Ms. Brown, were elected to Congress, although I

was here as an administrative assistant for my predecessor.

So the Federal Government took all the poor and lonely and dispossessed of rail passenger service and put them all into Amtrak,

and then expected it to run and be successful. And over the years,

again, I come back to your image, just enough money to fail, just

to hang on by their fingernails.

In contrast, there is Europe, there is Japan. When I was a graduate student at the College of Europe in Brugge, Belgium, in 1956-

57, as part of our study programs, we would go to different parts

of Europe and see different economic models. Traveling from Paris

to Leon, 288 miles, 4-1/2 hours. As a poor university student, I
6

could only buy a seat in the last car of the train, so all the soot

dumped on us in the last car of the train.

I came back in 1989 as chair of the Aviation Subcommittee, traveled that same linkage, from 4 hours and a half to 2 hours and 1

minute. 184 miles an hour. They did it in Europe. They made the

investment.

It was $12.5 billion the French government invested to build the

TGV, and then Germany came with the ICE and Spain with the

Talgo and Italy with their high speed train service.

Now, how in this country can you insist on Amtrak being profitable, when the freight rails themselves, year after year after year,

have said, and the Surface Transportation Board affirms in every

one of its decisions, that they have not achieved revenue adequacy?

Well, if they are hauling goods that don’t need to be fed and watered and pampered and arrive in the space of a few minutes, then

how do you expect the passenger service to do that?

Well, the Brits thought that their system was in such bad shape

that it would be a good idea to privatize it. Privatization. Chairman

Shuster and I and others on the committee did an infrastructure

tour of Europe. We saw the ICE, the TGB, we had briefings on the

Spanish Talgo folks. And then we took the TGV through the

Chunnel at 186 miles an hour, got into England and went down to

79 miles an hour, and there we chugged along until we got to London.

There we met with the British Parliament Transport Committee

and the Transport Minister, who briefed us on their decision in

parliament just a few days earlier to appropriate600 million

pounds for the private sector operators of their privatized rail system to bail them out, and the money went to the shareholders. And

we asked them, why is it going to the shareholders? Because if you

don’t pay them off, they will lose faith and pull their money out,

and then the whole system will collapse.

Since then, the British government has taken back their intercity passenger rail and created a government not-for-profit-operation called Network Rail, and are putting billions of dollars in to

restore the rolling stock and the rail beds and try to revive their

system.

We can learn the lessons. There has been a successful privatization in Japan. The Shinkansen, after years of government investment and government shouldering of the burden, spun off this now

highly successful rail passenger system to three or four private

companies.

But remember, these are high density passenger corridors. You

ride the Shinkansen from Tokyo to Osaka, and you are the distance

from here to the witness table from homes, from tea bushes, from

residences. Every one of those trains is packed, because they don’t

have a highway system as we have. Their air travel is limited because of the topography. So they have been very successful.

But we can be successful in this country with very different geography, with the vast territory that we have, if we would just simply

make the capital investment and not just enough to whet the appetite and let Amtrak limp along.

So I look forward to the hearing today. I am grateful for Chairman Young’s strong support of our bill that we moved earlier this
7

year, the $2 billion that we have approved for Amtrak is $2 billion

a year, I think is a very important start. The Senate now has legislation they are about to move from committee, and I am very hopeful that we can do something good and lasting and beneficial.

Thank you, Mr. Chairman.

Mr. LATOURETTE. I thank the gentleman. I would just remark

that in the charts that I delivered in my earlier meeting, the labor

in Alabama, the wage rate is $5.15 an hour.

The gentleman from Florida, Mr. Mica.

Mr. MICA. Thank you so much, Mr. Chairman, and thank you for

holding this hearing and the hearings that you have held on reviewing some of the performance of Amtrak and also raising the

question today about operation of the Northeast Corridor.

Mr. Chairman, I have a bill that I will be introducing this afternoon, and I hope every member of this subcommittee will join me.

This is a very simple piece of legislation. It requires in 90 days that

the Secretary of Transportation conduct a competitive tender, a bid

offer, to privatize the Northeast Corridor within. Within 2 years, it

also would transfer any and all assets to a board.

Hopefully, we could have a Northeast Corridor Compact operating and overseeing the operation of a truly high speed service in

the Northeast Corridor. It is long overdue in the United States, and

I think this could be a model for high speed service in a dozen corridors across the United States. I think that we will be able to pass

this.

First of all, there is a lot of misinformation about operations and

privatizations around the world. I want to use a specific model. I

spent part of the recess visiting with representatives of Virgin Rail

in England.

You have heard a lot of gobbledegook today about what is going

on. I have the facts of what is going on and let me compare what

we can do in the Northeast Corridor and the lessons we can learn

from England.

First of all, the biggest lesson to learn from England if you are

privatizing, is not having too many franchises or individual operations. I think they started out with more than 28. They are down

to nine or ten, and that was one of the errors that they made. This

is a perfect example, what I am going to tell you here, of what we

can do and what has been done.

Virgin, some of you know, I guess, Richard Branson. He has, of

course, operated air service very successfully and has become very

wealthy in the process. He took over two franchises 8 years ago,

1997. So far he has expended more than2 billion pounds, that is

nearly $4 billion if you look at when the pound was even higher,

$4 billion in two fleets of rolling stock. He acquired the two main

routes. The two main routes have 34 million passengers a year. I

believe Amtrak has 28 million. These two high speed routes have

34 million.

Virgin’s trains have made a profit every year since 1999. From

1999 to 2003, Virgin trains reinvested its profits and in further improvements. In the last 2 years, Virgin’s trains have made enough

profit to pay a dividend. This is the fact. These are the financial

sheets.
8

In addition, each year they paid an additional 400 to 450 million

pounds in infrastructure access charges to network rail. Network

rail is the one that actually operates the infrastructure. That did

at one point go bankrupt some years ago and it did require a government subsidization. However, they have paid close to $1 billion

almost every year as opposed to the $1.2 billion or whatever on average we have been giving Amtrak. In addition, they have paid $50 million to $100 million to rail

network for infrastructure improvements, and some of that—wait

a second, I take that back. There is a subsidization of50 to 100 million pounds from the Federal Government in U.K. towards that operation. They do bid out all of the services, and the one who provides the service with the best frequency and record of service and

performance and the lowest subsidization is paid. So there is a

small subsidization, nothing like we have.

So we have a model. The on-time performance was 84 percent

last year.

You have heard the ranking member criticize also some of the

performance and the time it has taken over the past few years.

That is because massive amounts of private capital have been put

into the infrastructure, massive amounts, not just from Virgin Express, but also in the system.

So, we can continue to run a half-baked railroad and high speed

service.

Now, why am I interested in this? I chair Aviation, and aviation,

we are approaching back in LaGuardia, Newark, JFK, maximum

capacity. At National Airport, we are approaching again maximum

capacity. I visited last year Philadelphia Airport. They are at or exceeding maximum capacity.

So this is an excellent model which we can adopt. Yes, mistakes

were made, but the dollars and cents, the facts are here, and it is

a sin to abuse taxpayers in the way we are doing.

I don’t want to get into the litany of things that we found in

these hearings, the loss of hundreds of millions of dollars in food

service, the bungling of the Northeast Corridor acquisition, which

all of this is now infamous and sets a standard for poor operations.

We also have had, and I think we are going to hear from the

folks from Wall Street who are willing to take this corridor over,

willing to invest the money and can operate high speed service. It

may even make a profit like these folks have made a profit with

an absolute minimum of subsidization.

So I ask you to join me, members of this panel, in cosponsoring

this legislation. We won’t mess around. We will direct the Secretary to do this and we will get it done by legislative mandate

sooner rather than later. I thank you for the time and yield back

any balance of the time.

Mr. LATOURETTE. I thank the gentleman.

Mr. Oberstar.

Mr. OBERSTAR. I would just inquire of the gentleman from Florida which of my statements he wants to characterize as

gobbledegook.

Mr. MICA. Gobbledegook—

Mr. OBERSTAR. What did I say that is gobbledegook?

Mr. MICA. No, I didn’t hear you. I didn’t hear anyone.
9

Mr. OBERSTAR. I resent that characterization, since you didn’t

hear it. You also recited a fact that I cited, so how can that be

gobbledegook? If you want to engage in a dialogue, let’s have a dialogue, but let’s not mischaracterize.

Mr. MICA. I do have notes that were given to me that, again, that

no one makes money on passenger rail service. However, I did hear

you at the end, and that wasn’t gobbledegook, that the Japanese

had converted their system. So I would definitely say for the record

that that part was not gobbledegook. I have notes from what Ms. Brown said, that $3 billion, for example, to Amtrak would get it in a state of good repair. That is

gobbledegook.

Mr. LATOURETTE. I think we are going to get back to regular

order. I would just ask members to engage in court easy to each

other. We also note that Mr. Branson had a very good reality television program.

Mr. Nadler.

Mr. NADLER. Thank you, Mr. Chairman. I will not call the legislation we have been talking about simple-minded, because I will

observe the proprieties.

Mr. Chairman, I have a statement here which I will submit for

the record because of the passage of time. I want to just make a

couple of observations.

Number one, it is clear, that it is clear we have been starving

Amtrak and most of the problems Amtrak is having is because they

haven’t had an adequate budget, that we have been starving them.

Someone, I think Corrine said, Congresswoman Brown said we

have given them just enough money to fail, or just enough money

to limp along.

Most of the problems is they didn’t do prototype testing, trying

to save money, and you have the Acela problem. You have to fund

a railroad adequately. We haven’t done so, number one.

Number two, nobody in the environment of the United States has

been able to figure out in the last 50 years how to make passenger

rail profitable. Now, maybe if the administration’s policies succeed,

as they seem to be doing, and we get $6 or $7 a gallon gasoline,

maybe then we will be able to have profitable private passenger

railroads.

I co-chaired hearings in the New York State assembly back in

1989 on the feasibility of Maglef. At that time it looked like it

would cost about $50 million, in 1989 dollars, $50 million a mile

for capital investments for Maglef.

Our conclusion was that there was no transportation in corridor

in the United States where the density of traffic was such that it

would with justice that kind of investment. Maybe in Europe or

Japan, because they then had $5 a gallon gasoline. And if we want

to follow the policy that would give us $5 a gallon gasoline in 1989

dollars, then you could have lots of profitable, private railroad,

Maglef investment and so forth.

But to cite the marginal success in England, where they are

charging, I think currently, about $6 a gallon for gasoline as a

precedent for the United States is, shall we say, fallacious.

My district has, or had, the World Trade Center in it until September 11, and I very distinctly remember that when I had to get
10

home from here after the attack that morning, there was no way

into New York except by Amtrak. They shut the bridges, they shut

the tunnels, the airports were down, everything was down. The

only thing that was running was Amtrak. Thank God for Amtrak.

You must have redundant systems of transportation.

Again, as Mr. Oberstar has pointed out, the reason Amtrak was

formed in the first place is that every single one of the private railroads petitioned the ICC to abandon the passenger services because they couldn’t make money on it.

To go with some fanciful, speculative reform plan, so-called reform plan, that would eliminate what is a very successful service

now, 25 million passengers last year, for an experiment, an experiment that probably will not work until we have $6 or 7 a gallon

gasoline, which I hope is not the administration’s secret goal, would

be to put the safety as well as the economy this country at risk.

I hope we will not indulge in such a fantasy. What we ought to

do is adequately fund Amtrak and let it work properly.

I thank you. I yield back, and ask that this be submitted for the

record.

Mr. LATOURETTE. Without objection.

Mr. Simmons.

Mr. SIMMONS. Thank you, Mr. Chairman, and I thank the panel

for their presentation. I have long been an advocate of Amtrak, but

I have also long been an advocate of reforming Amtrak to try to

rationalize the program in how it operates in certain parts of the

country, to invest in those areas where it seems to be successful

and to consider divesting ourselves of some of those routes that

seem to be unsuccessful, to provide our constituency with safe, reliable and reasonably priced service.

I am somebody who used Amtrak service for a decade when I

taught in New Haven and lived in Stonington, Connecticut, and I

rode it every other day, every week, for the academic year. What

I looked for was safe, reliable, modestly priced service.

In the State of Connecticut, we also participate in Metro north,

which is a tri-state consortium which provides also safe, reliable

and somewhat cheaper service, although over a shorter haul.

I look at the investment that we need to make in our movable

bridges in New England. Three of the five bridges slated for investment are in my district, the two non-moveables are also in my district, and the failure of any of those bridges, the newest of which

dates back to 1918, could disrupt the service.

So as we look at this issue and we look at these problems, I

would be interested is to know what proposals can be made for the

future.

I thank the Chair, and I yield back.

Mr. LATOURETTE. I thank the gentleman. Mr. Blumenauer.

Mr. BLUMENAUER. Thank you, Mr. Chairman. You set us off on

the right tone, both by being brief and to the point, and identifying,

as you characterized it, the kabuki dance in Congress: giving just

enough money for it to fail. I will reserve my debate with my colleagues for another day.

There are enough flaws in how Amtrak was set up and its history. We can go through all that. There is enough responsibility, I

think, left over for problems that we have, including Congress and
11

congressional oversight. We can all accept some of that. I am interested in actually hearing from our witnesses.

The two things that are on my mind are the notion of a system,

because we need a passenger rail system. And if there are proposals to change the system, how these provide a nationwide system

is critical, because the sum of the parts actually adds up to something that is greater and that people rely upon. At the end of the

day, we don’t want something that cannot function as an integrated system.

Second, I am perfectly willing to subsidize rail passengers as we

subsidize every other transportation mode. This is important. I

want to understand that we will get the most out of the subsidy

with which we are involved.

But the final point that Mr. Nadler touched on that I think ought

to be overarching when we are looking at the long run is that there

is no investment that we can make that will be more energy efficient. I don’t know if it is going to be $3-a-gallon gasoline, $6-a-gallon gasoline, but the point is they are not creating more dinosaurs

and petrochemical resources. It is not going to be cheaper over

time, and rail passenger service is the most energy efficient mode

of inter-city transport that we can come up with. This fact is going

to loom larger and larger, and I think will inform what these gentleman and the others will be presenting to us today.

Thank you, Mr. Chairman. I look forward to actually hearing

from our witnesses.

Mr. LATOURETTE. Thank you, Mr. Blumenauer. Mr. Osborne.

Mr. OSBORNE. Mr. Chairman, I have no comments at this time.

I am anxious to hear the witnesses. I think we have had plenty of

commentary. So I will pass at this time.

Mr. LATOURETTE. Thank you very much. Ms. Carson.

Ms. CARSON. I will pass.

Mr. LATOURETTE. Mr. Sodrel.

Mr. SODREL. Thank you, Mr. Chairman. I guess first I would like

to take exception to the statement that highway transportation is

subsidized. A trucker pays over $7,500 until Federal excise tax for

the privilege of buying a new power unit. They pay $550 a year in

Federal heavy vehicle use taxes for the privilege of owning a heavy

truck. In Indiana, they pay over $1,300 a year to buy a license

plates for the privilege of putting that truck on public highways.

In addition, they pay the State and Federal motor vehicle tax for

the purpose of building and maintaining the Nation’s highways.

Very often they pay a toll in addition to all of the above.

If you never buy a motorized vehicle, if you ride a bike or city

transit vehicle never pay to build or maintain our Nation’s highway

system. But if you earn income in the United States, you are paying for Amtrak, whether you use it or not.

The second point, the USPS responded to passenger rail service

curtailments. They were not responsible for them. You will notice

from the chart that passenger rail service began a serious decline

in schedules at the end of World War II. The USPS could not meet

service standards on the few remaining passenger schedules, so as

schedules were curtailed, the USPS shifted to alternate modes.

I am confident the Nation’s private railroads would heavily provide passenger service if it could be provided at a profit. I am not
12

against so much passenger rail service as I am enormous subsidies

for that purpose. If memory serves me right, the first 10 years of

Amtrak, from about 1970 to 1980, it averaged about $365 million

a year in subsidies. We are now looking at some really enormous

sums

Another issue I would like to respond to is Indian Trail, a private

bus company, was operating somewhere between eight and ten

schedules a day from Detroit to Chicago pre-Amtrak. When the tax

using entity Amtrak began service between Detroit and Chicago,

Indian Trail dropped their schedules to one over a relatively short

period of time. I don’t know if that one is still operating. But it is

not in the Nation’s best instance to have tax users running taxpayers out of business.

Lastly, the last deal last DOE report that I saw said in terms

of British thermal units, an inter-city motor coach was the most

fuel efficient form of transportation between cities, not passenger

rail.

I thank you.

Mr. LATOURETTE. I thank the gentleman.

To our panel, thank you very much for coming. As you can see,

we are of one mind on the subcommittee as to what should be done,

so we look forward to hearing from you.

On the first panel we have the Honorable Jeffrey Rosen, who is

the General Counsel for the United States Department of Transportation; the Honorable Kenneth Mead, who is the Inspector General for the Department of Transportation; and the Honorable

David Laney, who is the Chairman of the Amtrak Board of Directors.

I want to thank you all for coming. We have received your written testimony and it will be made part of the record. We look forward to hearing from you.

TESTIMONY OF HON. JEFFREY ROSEN, GENERAL COUNSEL,

U.S. DEPARTMENT OF TRANSPORTATION; HON. KENNETH M.

MEAD, INSPECTOR GENERAL, DEPARTMENT OF TRANSPORTATION; AND HON. DAVID M. LANEY, CHAIRMAN, AMTRAK

BOARD OF DIRECTORS

Mr. LATOURETTE. Mr. Rosen, you are first.

Mr. ROSEN. Thank you, Mr. Chairman and ranking member

Brown and members of the subcommittee. I appreciate the opportunity to share some thoughts at this hearing and also to be here

on behalf of Secretary Mineta and the Department of Transportation.

What I would like to do in my oral remarks here is focus on

three propositions about which I think there is either consensus, or

at least the possibility of developing a consensus.

Let me say, first, the objectives of inter-city passenger rail. I

think in having discussions with a wide group of people about this,

there is really a consensus that we would all like the same thing.

We would all like a system of inter-city passenger rail that was

really outstanding in terms of the service that was available and

that was provided, was comfortable and convenient, reliable and on

time, and perhaps most importantly, took people to the destina-
13

tions to which they wanted to go in a reliable and timely way. The

administration is supportive of the role of inter-city passenger rail

in our overall transportation system.

So the choice is not one as sometimes framed of having Amtrak

or nothing. I think there is wide consensus that there is an important and useful role for inter-city passenger trains. The question is

how do we get to that situation of having an outstanding inter-city

passenger rail system that I think, as I say, if there could be consensus, we would all like to have.

The second proposition, we are not there. Amtrak, if we are candid, is not currently a system that we would say is an outstanding,

word-class kind of system. I have never heard anybody say that

Amtrak is the model that other countries and their people would

want to emulate. I have heard members here today point to the

Virgin Express in England or to the Japan Central Railroad or

some other railroads. But I don’t hear people say it the other way,

′′why aren’t those systems more like Amtrak?′′ When we look at our other modes of transportation in this country, our highway system, our airport and aviation system, our

freight rail system, I think that people do look at those as being

outstanding models, not immune from criticism, but in the aggregate outstanding systems that others would emulate and praise

and want to be more like.

If you think about inter-city passenger rail and where we are

now, would anybody, if they were starting with a blank slate or a

green field, design inter-city passenger rail to look like what we

have in the United States today? I think not. But we have spent,

because sometimes I hear the only problem is money and the administration doesn’t agree with that, but the taxpayers of the

United States have spent in excess of $30 billion on Amtrak over

the last three decades, and at this point it seems to us that it is

fair and appropriate for the taxpayers to expect a better system.

That takes me to the third proposition about which I think there

is consensus, or at least the possibility of consensus, at least for

those who agree with the first proposition that we would like to

have an outstanding system of inter-city passenger rail.

The third proposition about which I would suggest we have or

ought to have consensus is that reform is urgently needed; that

whether you characterize yourself as an Amtrak supporter or an

Amtrak critic or somewhere in between, it seems to me that we all

ought to be able to agree that reform and improvement of the system is urgently needed.

So, part of why I think this hearing is a very welcome event is

if we can agree that reform is needed, then we turn to the discussion of what are the reforms? What are the changes that would be

desirable to get us to a better system?

The administration had provided our proposals in the bill that is

now designated H.R. 1713. I will not take the time this morning

to try to walk through all of its provisions. But I will note that the

key principles of that legislation are set out in my written testimony at pages 14 and 15, and there are five key principles.

Since I see my time running down, I will not enunciate them, but

I will look forward to referencing them perhaps if there are questions. I welcome, and of course invite, any questions you may have.
14

Thank you.

Mr. LATOURETTE. Thank you very much, not only for your testimony, but for your observance of the subcommittee’s time limits.

Mr. Mead, thank you for being here. We would like to hear from

you.

Mr. MEAD. Thank you, Mr. Chairman. I would like to focus today

on solutions. On the problems with the current model, they can’t

be solved by simply giving more dollars to Amtrak. There are a

number of reasons for that. I don’t think controls are adequate in

a sense to ensure cost-effective or reliable service, there is not even

a threat of competition, critical repair needs are not being adequately addressed and States don’t have enough say in the matter.

Our prepared statement details those results. There is no point

in belaboring them here. Now is the time to focus on solutions.

I know there are numerous proposals in the Congress. I think

that is a real step forward. They are not, to understate things, all

of the same mind, but they do seem to have a common goal of improving passenger rail service.

To reach a consensus on balance, I think reauthorization ought

to focus on improving mobility in short distance corridors, not just

the Northeast Corridor, and in restructuring long distance services

to compliment those corridor services.

Based on our work over the years, we see three central themes

that will draw out successful reform. First, there must be some incentives for cost-effectiveness. Amtrak doesn’t have any right now,

other than the annual threat of budget cuts and the dance the

chairman went through that we go through annually.

Here is a quick case in point: We did a recent analysis of Amtrak’s long distance services to determine whether cost savings

could be had without eliminating any routes, any station stops, and

not eliminating or reducing any frequencies.

Eliminating large subsidies for long distance first class services,

dining cars and other amenities could reduce net operating losses

by $75 million to $158 million per year and avoid an additional $79

million per year in planned capital expenditures.

We found, Mr. Chairman, on one route, we found the first class

subsidy exceeded $600 per passenger. The subsidy for first class

was often more than double the subsidies for coach. We are still

waiting to hear what action Amtrak will take. The Inspector General did this study, not Amtrak. It should have been done years

ago.

Second, there should be a larger voice for States in making decisions. They are in the best position to decide what the transportation needs ought to be between their population centers; they

would not be the sole decision-makers, but they need a stronger

voice than they have now.

The third issue of course, is the funding. The funding has been

woefully inadequate. You need adequate and stable funding. Now,

because we don’t have that, you are in a continuing state of decline

on every front except in some situations where the States are providing their own funds.

Earlier this year, we offered some options to the Congress, not

reauthorization proposals, but a proposal that contains six core elements. I would like to quickly overview those.
15

First, formula grants to States for capital and operating costs

without a State matching requirement. We think this is important,

especially for the 16 states in this country that only have long distance service at the present time. That is all they have. You can

forget these states talking about the potential for corridor development, because there aren’t dense population centers. That is 16

states.

Second, a program to restore the current system to a state of

good repair, to provide Federal funds to do this without the requirement for a match. For the Northeast Corridor, you are probably talking a price tag of $4 to 5 billion. I don’t see why anybody

would want to buy this corridor, unless the requisite investment is

made in it.

Third, a program for capital grants to States for the development

of corridor services. We would say a reasonable match requirement

is 15 to 30 percent. This is the way you are going to get corridors

developed in this country, to invest in them. We are now talking

principally outside the Northeast Corridor.

Fourth, the Secretary would have authority to evaluate Amtrak’s debt, which has grown from $1.7 billion in 1997, to over $4.5 billion

in 2004, and, if necessary, to take action economically advantageous to the U.S. and inter-city passenger rail to resolve the

issue of this debt, that we, incidentally, pay for every year.

Fifth, the Federal funding of these programs would stay at adequate levels. We can go into in the Q&A period what those funding

levels might be, but I see you looking at something in the neighborhood of $1.7 billion to $2 billion by the year 2010. All of that assumes additional state contributions and some implementation of

the cost saving initiatives, such as those I mentioned earlier.

Six, ownership of the Northeast Corridor ought to be resolved. If

the Federal Government is going to invest in that corridor and

bring it to a state of good repair, I think at the end of that period,

the Northeast Corridor States should be expected to make some

contribution to keep it in a state of good repair, along with the Federal Government.

I think the quid pro quo on that would be that the Federal Government ought to be taking title from Amtrak. Amtrak may very

well be the operator of it, but if we are going to make that kind

of investment, there ought to be a quid pro quo.

That concludes my statement. Thank you.

Mr. LATOURETTE. Thank you, Mr. Mead.

Mr. Laney, we welcome you. We look forward to hearing from

your testimony, and if you could, as part of your testimony, give

us an update on the Acela train service. I would obviously be interested in that.

We look forward to hearing from you.

Mr. LANEY. Thank you, Mr. Chairman. I will be glad to.

Mr. Chairman, members of the committee, I appreciate the opportunity to speak and to be able to go into more detail during the

Q&A afterwards, but let me gloss over the surface of current operating activities and results, as well as our strategic planning; and

I will mention the Acela operations.

For current operating results, we have made solid progress both

in rebuilding plant and equipment and maintaining the financial
16

and organizational stability of the organization. During this fiscal

year, Amtrak continued to show positive results in a number of important areas. Amtrak will finish fiscal year 2005 under budget,

and will set a new ridership record. This is remarkable in light of

the unforeseen Acela service interruption which stopped all Acela

train service earlier this spring. Amtrak responded to that event

very effectively, in my judgment, integrating other equipment very

quickly into the timetable so that there was no measurable impact

on our Northeast corridor ridership.

We are now back to full Acela service, and we are operating, so

far this month, at a 92 percent on-time performance level, which

is the highest on-time performance in Acela history.

More recently, we have confronted an indefinite truncation of

three of our long distance trains resulting from the impacts of Hurricane Katrina, the Sunset Limited, the City of New Orleans and

the Crescent. On that note, I should also add that we made trains

and were able to make trains available to FEMA to ferry evacuees,

relief workers and supplies from New Orleans to Houston in the

days immediately following the tragedy. They were not used, but

they were certainly available and waiting for a number of days and

ready to go.

This year we continue to chip away at the mountain of deferred

maintenance that we have inherited of both plant and equipment.

In fiscal year 2006, we expect to continue this type of capital investment—renewal of track, signals, wire, equipment switches and

interlockings. But we will also begin major multiyear projects to rebuild structures critical to the Northeast Corridor operations.

These include replacement of the failure-prone movable bridge

spans referred to by Congressman Simmons, I believe, your

′′favorite bridges′′, those on the Thames and Niantic Rivers in Connecticut; also, replacement of the 1930s-era cables in the Baltimore

tunnels and major track work on the Harrisburg-Philadelphia line.

In fact, at this time next year we expect to have that corridor updated and operating at higher speeds and with additional frequencies.

Completion of the bridge and tunnel work is essential; without

them, we risk the type of fundamental failure that could impact the

entire Northeast Corridor service.

The fiscal year 2006 operating request is lower than in previous

years and reflects Amtrak’s ability to hold operating costs flat, despite inflation, rising insurance costs, and the high cost of fuel.

Adequate capital investment, of course, will help us keep operating

expenses under control.

I support the fiscal year 2006 Senate Appropriations Committee

proposed at 1.45 billion. With an operating budget lower than last

year, every additional dollar, in my judgment, goes into capital,

whether equipment or infrastructure, and adds lasting value for

whoever operates on Northeast Corridor tracks. In the Northeast

Corridor, of course, it is freight operators, commuters, as well as

Amtrak.

During the past 3 years, we have not borrowed any additional

funds nor have we assumed any new debt, except for the DOT loan

during the summer of 2002, which is being paid back in annual installments. Our workforce has been reduced in size from 25,000 in
17

fiscal year 2001 to 19,500, its current level, a reduction of about 20

percent. With that reduction, our payroll and benefits costs are

down dramatically. Our deficit per train-mile has decreased from

$22 in fiscal year 2000 to $13 in fiscal year 2004.

As I mentioned earlier, ridership has continued to increase. In

fact, during the period of 2000-2004 ridership grew from 22.5 million to 25.1 million, or 11.6 percent, insignificant relative to aviation and highways, of course, but remarkable considering the challenges presented by years of unfortunate decisions that we have inherited and Amtrak’s prolonged financial starvation diet—remarkable, but in the judgment of the board, still unsatisfactory. We

have very ambitious reform goals.

A few words about our reform initiative package:

The reform plan outlines a detailed set of initiatives, some of

which Amtrak will accomplish on its own and others of which will

require government action. We have begun and will accelerate the

implementation of those that we can institute on our own.

Our plan advances four essential objectives: first, development of

passenger rail corridors based on an 80/20 Federal/State capital

match program, with States becoming purchasers of a variety of

competitively bid corridor services. And let me reiterate, States become the purchasers at that point.

Second, return the Northeast Corridor infrastructure to a state

of good repair and operational reliability with all users gradually

assuming increased financial responsibility for their share of corridor operating and capital needs. And frankly, in my judgment,

state of good repair is not ambitious enough, considering the number of transportation challenges converging on the Northeast Corridor over the next decades.

Third, preservation of our national long distance system. We

have long distance routes that over time will have to meet minimum financial performance requirements and, in some cases, will

require state assistance.

And finally, the opening of the intercity passenger rail industry

to competition and private commercial participation.

Rather than going into detail, let me simply refer you to that

plan. I had hoped that the Lott/Lautenberg bill would provide the

platform for moving Amtrak and, indirectly, passenger rail much

more dramatically into the 21st century along the lines of our

plan—I presume it is a work in progress—and I hope we have the

opportunity to work with the Senate staff as it is reworked, or with

you in connection with any counterpart legislation.

One critical issue central to the future of intercity passenger rail

competition is, in my judgment, not adequately addressed. The

Lott/Lautenberg bill in some ways still leaves Amtrak too much in

control and does not, in its current form, provide adequate access

to private operators and, more importantly, private capital, but it

is a very constructive start. You will hear from a number of possible interested competitors this afternoon, and I don’t think any

of them will disagree.

In any case, the end result of any reform is a genuine opportunity for the revitalization of the intercity passenger rail system,

and we are not there yet.
18

In closing, let me just say that we hope to work with all of you

in connection with any legislation. In the meantime, we can’t wait

and we are pursuing our reforms on our own, and I think we are

making considerable progress. In the meantime, I can’t overemphasize that adequate funding for Amtrak in 2006 will be a critical

first step in advancing the objectives of our Strategic Reform Initiatives plan.

I appreciate your time and attention and look forward to answering any questions. Thank you, Mr. Chairman.

Mr. LATOURETTE. Thank you very much, and I thank all of you

for your testimony this morning.

Mr. Rosen, I want to start with you because in your testimony

you talk about the inherent flaws of what you call the 1970 model

of rail passenger service, but I think that I would fast-forward to

1997, when the Congress passed the reform legislation. And I

would just ask your—and rather than looking at the structure that

was created in that 1997 bill—I mean, I think horrendously bad

judgment has been exercised by the board of Amtrak in some situations post-1997, and an example is not dissenting on mere halffunding requests, quadrupling the company’s debt load and making

no attempt to modernize or modify the route network.

And so, I mean, would you agree or disagree with me that the

structure, the intention of the 1997 act was to stop micromanaging,

in Congress, of the Amtrak system? And I, at least from where I

sit, I think some bad decisions were made post-1997. Can you

share with me what your thoughts are?

Mr. ROSEN. Well, I think, in the big picture, I would agree with

you that the basic method of the 1997 act was to empower Amtrak

to fix itself, to remove some of the legal impediments that had previously existed and some of the obligations the company had to enable it to contract out and do other—do joint ventures with bus

companies, and to have more authority to try to fix itself; but unfortunately, the company didn’t do that. And I would agree with

you that then piling on the debt to the point where it is at 3.8 billion of nondefeased debt now, which is an annual payment this

year of something like $273 million of just debt service, was not the

appropriate course of action. And it hamstrung Amtrak in different

ways because—Mr. Laney alluded to the fact that they haven’t

done any additional borrowing in the last couple of years, but of

course it is hard to imagine that there is anybody out there that

would be willing to lend them any more because the amount of

debt is so high already.

So I would agree with you that the decisions that were made

turned out not to be in the best interest of intercity passenger rail

and that on this next go-round it would be desirable to have some

more prescriptive requirements and desirable to have greater oversight mechanisms. And let me be specific about what I mean by

that.

In the 1997 act, the primary consequence of Amtrak not achieving self-sufficiency and, in a sense, reforming itself was going to be

a so-called ′′sunset trigger,′′ by which, in a sense, in the end everything blew up. Well, that provision wasn’t adhered to, in part because it is so drastic, and so the accountability mechanisms along

the way were not really there.
19

As we go through a reform process at this point, I would say it

would be desirable to have more oversight mechanisms, including,

through the Department of Transportation, the Federal Railroad

administration, and more opportunity for corrective actions to be

called for along the way. And that was the intention of the 1997

act, that I think was quite commendable, and many of the things

in it were good things, but in the end it didn’t succeed.

Mr. LATOURETTE. Let me—I think you mentioned that no legislation to date has incorporated all of the administration’s principles.

Has the administration taken a position on the Lautenberg bill, S.

1516?

Mr. ROSEN. No. We are having discussions with the committee

and the committee staff and hoping to work further with them on

ways of developing a bill that eventually might be successful, but

we have not yet taken a position on it in the aggregate.

Mr. LATOURETTE. The administration position for the most part,

I think, was encapsulated as a courtesy in H.R. 1713. I have been

hearing rumblings recently that perhaps the Department isn’t as

crazy about those proposals as they were at the time they were

first sent up to the Hill. Is that an accurate observation?

Mr. ROSEN. I think that would be an overstatement. I think we

continue to support the reforms that were in H.R. 1713. I think

what we have indicated is that in some instances we are more interested in the objective--and in the principle than in the exact

mechanism.

As an example of that, H.R. 1713 calls for the Northeast Corridor

to be separated away from Amtrak so that there is separation of

infrastructure management and operation of the trains. And then

with regard to the infrastructure, after a transition period in which

the Federal Government owned it and brought it to a good state

of repair, they would have given it to a compact of, if I remember,

eight or nine of the Northeast States.

Well, the compact is not the only mechanism by which you can

get to that result. And so I think we have indicated that we have

some flexibility about the exact mechanisms by which goals are

achieved.

But the underlying principle I think we adhere to, in particular,

is that the role of the Federal Government should be the support

of infrastructure development, maintenance, improvement, and not

the subsidization of operating companies; in the same way that the

Federal Government supports airports, but not subsidies to airlines, and supports highway infrastructure, but not direct subsidies

to trucking companies, and that kind of principle.

And so what I would say is the administration continues to support H.R. 1713, but the underlying principles of the reform that it

embodies are more important than any particular, exact term or

mechanism.

Mr. LATOURETTE. Thank you very much.

The last question I have is for you, Mr. Laney, before I yield to

Ms. Brown. In Amtrak’s Strategic Reform Initiative that was published last May there was an indication that the company was

going to establish route performance metrics beginning in 2005,

and that routes not meeting established metrics would be termi-
20

nated beginning in 2008 unless the States affected provided an additional subsidy. It’s a multipart question.

The first one, if you could share with us what the status of these

metrics is and which lines might be facing termination.

And then the second one is, in that recommendation, does Amtrak ever consider alternatives other than complete termination,

such as reduced service or seasonal service?

My dad, for instance, lives in Meadville, Pennsylvania, and he

called me up and he said, If you ran a train from Cleveland to

Pittsburgh for the Browns-Steelers game, you would be making

money hand over fist. So is it all or nothing based upon these

metrics, or do you also consider seasonal or reduced service?

Mr. LANEY. Well, let me first respond by saying we have not finished the analysis, but I expect at this week’s board meeting to

have presented by staff to the board, in effect, a template for the

metrics and basically the measures for performance of various

routes. But—we have not begun the process, but it will begin over

the next 30, 60, 90 days. And I would be able to give you a better

sense if you were to ask that question a month from now or 2

months from now. But we have been waiting for the response from

the staff.

And with respect to the various alternatives as to any particular

route, let me assure you we will consider every conceivable workable solution to make it work. We are committed to try to hold the

system together, but at a reasonable cost. And we are not going to

be able to make them profitable, but we do, I think, have the ability to make them much more efficient, much more attractive to the

users of that service, and much less expensive than they currently

are.

Mr. LATOURETTE. I thank you very much.

Ms. Brown.

Ms. BROWN. Mr. Rosen, where is Mr. Minetta? Has he been on

the Hill, to the House or the Senate, to testify any time this year

about Amtrak? I know he hasn’t been to the House.

Mr. ROSEN. With respect, Congresswoman, actually he has, to

the Budget Committees, the Appropriations Committees. He testified in both the Senate and the House Appropriations Committees,

about the Department’s overall budget, but he specifically addressed Amtrak in both of those hearings.

Ms. BROWN. I know that we requested him to come today; I am

sure we did. I guess you are his designee.

Mr. ROSEN. I am his designee. I am also his designee as the Department’s representative on the Amtrak board of directors, and so

the Secretary asked me.

Ms. BROWN. That is very good, because I have a question then.

The board came forward and recommended 1.8 billion, the administration came up with zero. I mean, I guess—can you explain

to us how you voted and what did you do to shake the package?

What was your vote on that committee? The board had something

different from the administration.

Mr. ROSEN. Well, I will tell you that neither I nor the adminis- tration supported a $1.8 billion request for Amtrak. And I will tell

you that with regard to the administration’s proposals on the budget, or appropriation, side of this, we have consistently said, and the
21

Secretary said publicly on a number of occasions, that the administration’s budget was intended to, and I would suggest has had the

effect of, calling attention to the need for action and reform, because the existing system, the existing model, does not work well,

and that it does not make sense to put good money after bad, it

makes sense to put good money after good.

So if you reform and improve the system, then the

administration—

Ms. BROWN. Mr. Rosen, I don’t have much time. Did you hear me

talk about Halliburton?

Mr. ROSEN. Yes, I did.

Ms. BROWN. Okay. So we need to know that this administration

doesn’t have all of the wisdom in Washington, D.C., and certainly

they don’t—you don’t have all the answers as far as Amtrak is concerned, and you don’t have—I mean, this is the people’s House;

maybe I am the only one who thinks so, but the people should have

some input. And all of the wisdom is not up there, wherever you

all preside, to sit down, the bean counters, and make the decisions

about Amtrak, but I need to go on.

The chairman of—let me ask you a question. First of all, let me

just thank you for all of the people, because what you all did. When

FEMA was a complete disaster, you all were able to pull yourselves

together. In fact, that is, the only people that worked were in the

private sector, and Amtrak, along with the other railroads, was

able to pull together and create equipment from Baltimore to New

Orleans to help evacuate the people. And I want to thank you because the rest of America saw how inept this government operated

and how inept FEMA operated, and I thank you.

My question is that it appears that Amtrak is on the right track,

and you have undertaken new capital equipment and you are closing the maintenance gap. Why is it that you think these people

continue to talk about, you know, privatizing or just really destroying Amtrak? I mean, do they not read the polls, or do they think

the people are stupid? What is it?

Mr. LANEY. Congresswoman, I appreciate your question. I think

everyone involved and interested in Amtrak, from the riders to people in the position like mine or yours or DOT, believes that there

is considerable room for improvement, everybody has their own

ideas. I think the board has its own ideas, and unfortunately, I

think we are in a position to begin to move on those ideas and to

see the impacts of those. So while the debate rages, we are going

to work, and I think we are making progress.

But I don’t think anybody wants to destroy Amtrak—I know

some people do, but I don’t think any right-thinking person does;

nor do I think they want to do away totally with intercity passenger rail because there is a vital role, at least in some parts of

the country more than others, for intercity passenger rail.

Ms. BROWN. Well, you know, the proof is in the pudding, and

when I zero-fund you, I am not trying to get your attention, I am

trying to—I am destroying you. I mean, we throw money here, we

passed $62 billion for the hurricane victims that I support; however, we put it in an agency, FEMA, that is inept, that is not operational, so I don’t know. But I do know that zero funding means

no support.
22

I yield back the balance—wait, no, I have a question for someone

else.

Mr. Mead, do you think it is wise to separate Amtrak operation

from infrastructure like they did, I guess, over in England where

they had to reverse themselves?

Mr. MEAD. No, not until you have a corridor that is in a state

of good repair. I think you have to get the corridors in a state of

good repair before you can even talk about that. At that point, you

may have different decision-tree paths, but you don’t want to close

the door on that.

What they did in Great Britain was, they didn’t get the infrastructure right and they had a safety problem.

Ms. BROWN. The question about food service, can you elaborate

on that? Because some people recommend that Amtrak should do

away with food service because it is this, it is that; but when people take the Amtrak train, many are diabetics or older people, they

need to be able to purchase foods for these routes.

Can you—

Mr. MEAD. Yes, they do. Our point is that the taxpayers should

not be subsidizing first-class meals, there is no justification for

that, at least that I see. I think Amtrak—obviously people when

they are going on a train trip for a thousand miles, you have got

to give them food, but there are alternatives that can be explored—

Ms. BROWN. Sir, I talked about meals earlier, and clearly—I just

took the train from here, it wasn’t no first-class meal that I had,

and I purchased it.

Mr. MEAD. You must not have been on a long distance train.

Ms. BROWN. Well, no, I went from here to Baltimore.

Mr. MEAD. These are the long distance routes with the sleepers

on them, that the subsidy that the taxpayers are paying for the

meals is very substantial. Obviously, you have got to provide alternatives, you can outsource, you can stop at train stations.

I wouldn’t recommend going as far as the airlines do where you

get nothing.

Ms. BROWN. That is right.

Mr. MEAD. Or pretzels.

Ms. BROWN. Let’s don’t go there.

Did you also evaluate what this would do to the Amtrak revenue.

Mr. MEAD. No, we haven’t done that, and I will tell you why. The

revenues that are coming in for the long distance, the sleeper car

service, were so far below the cost of providing that service that we

thought that could wait until another hour. That needs to be in arrears. The recommendation for making relative to sleepers and food

is not a one-size-fits-all. Our point is that Amtrak ought to be evaluating those. They committed to do so. They should have done it

10 years ago; it should not have to be something that waits for an

inspector general report.

And I noticed that in Amtrak’s statement—or in their summary,

I haven’t read their prepared statement—I don’t see this, the recommendations that we made in that report, addressed; and I think

that it is incumbent upon Amtrak to move forthwith on that, expeditiously.
23

Ms. BROWN. Well, I am sure that they will take a look at your

recommendations. I make a lot of recommendations and nobody

takes a look at it, so—

Mr. MEAD. I do.

Ms. BROWN. I yield back the balance of my time.

Mr. LATOURETTE. I thank the gentlelady.

And Mr. Mica.

Mr. MICA. Thank you. And I want to thank, first of all, the new

chairman of the Amtrak board of directors, Mr. Laney, for taking

on the challenge, and also for your initial efforts. I can’t think of—

I can think of few people who have taken on such a challenge.

I have been on this panel for 13 years, and I have been through

the Amtrak Reform Council, and through countless hearings, unfortunately, nothing gets done; and I am pleased that you have begun

to make some progress.

We had a discussion, Mr. Laney, about privatization, and I think

you had told me that Mr. Gunn was not willing in the past to meet

with those that had brought forth private proposals; is that correct?

Mr. LANEY. No, sir, I don’t believe I did, and I know he has.

Mr. MICA. No, I thought you told me in the past—in fact, I

thought your words were, he threw them out of the office, or something when you sat with me. But in any event, in the past, he

wasn’t willing to meet with them.

He has met with them?

And you told me you were going to meet with the Wall Street

folks after—or investors, on the Northeast Corridor; is that correct?

Mr. LANEY. I think I have met with anybody who wants to meet

and throw an idea or concept over the transom, figuratively speaking.

Mr. MICA. Did you meet with—

Mr. LANEY. I know I have met with everybody you and I spoke

about.

Mr. MICA. I did present here the Branson model, which does—

I mean, this is certifiable, they have made money. It is a minimal

subsidization. They have also paid for the infrastructure, and the

privatization has attracted billions of dollars in capital.

Are you looking at one of these as a model to take over the

Northeast Corridor?

Mr. LANEY. I think the board will consider anything that could

reduce the subsidy and improve the quality of the service we provide.

Mr. MICA. I think you have most of the authority to actually do

this; this directs it. But you could put this out for tender with very

specific requirements, could you not?

Mr. LANEY. Yes, I think we could.

Mr. MICA. And you could also have performance requirements, et

cetera.

Now, we have to deal with the debt, we are going to—we are

really going to have to deal with the debt, and that is $4 to $6 billion, I am not sure exactly. Do you know? In that range?

Mr. Mead.

Mr. MEAD. Yeah, it is about—the part that has to be paid back

that doesn’t already have the separate accounts is about 2.7, I

think.
24

Mr. MICA. Okay. In any of event, I think that is something we

should assume, especially if they are willing to put this money in.

And I have met with folks that are willing to put in anywhere between $8 and $12 billion.

I was told by two previous studies—Mr. Mead, you are not paying attention, I am going to direct this to you.

I was told by at least two previous studies that it is going to take $15 to $20 billion to really get the Northeast Corridor—in order to

perform high speed services; is that correct? I mean, you have seen

some of the previous studies.

Mr. MEAD. I have seen those numbers, and—

Mr. MICA. That is with Amtrak doing it or the government doing

it. I think the private sector could probably do it for a little less.

It is still going to be pretty hefty.

Have you seen anything, Mr. Rosen.

Mr. ROSEN. Not as to the Northeast Corridor, in particular. I

think I have seen some information on—

Mr. MICA. Well, if you haven’t seen it, you need to look at it. Can

we get staff to pull those up? And we have had testimony before

this committee before—I am telling you it is $18 to $20 billion,

which brings me to, the point is—and I have given this speech

many times because we can give Amtrak 1.4 billion, we can give

them 1.2 billion this year with a $6 billion maintenance backlog.

With a requirement to put the Northeast Corridor in truly high

speed operating condition, it is going to take $18 to $20 billion.

The private sector is willing to put up, from what I am told, any- where from $10 to $12 billion, and that would require a minimal

subsidy and we would have truly high speed service.

Do you think that is possible, Mr. Mead?

And, Mr. Mead, you also need to get the latest information on

these operations. In fact, I will write you a letter, and I want you

to come back to the committee and verify the figures that I have

given today.

Mr. MEAD. Okay.

Mr. MICA. Do you think it is possible?

Mr. MEAD. I think it is possible. But those proposals, you stipulated, if I understood you right, that they were ready to do this.

I am not aware of a proposal where they are ready to do this without the Federal Government coming up with $17 or $18 billion.

Mr. MICA. Well, I am. And we can try to put this proposal out

there. We have nothing to lose; I mean, the worst we can do is not

get an offer.

Would you be willing to try that, Mr. Laney?

Mr. LANEY. As I said, there is nothing off the table as far as I

am concerned, whether it is the Northeast Corridor or anywhere

else in the country.

Mr. MICA. That is great, and I think we need to try this.

Once you do that—now, one of the problems with Amtrak—I am

not an Amtrak opponent. I am the strongest advocate of transit alternatives in the United States Congress; I strongly support investing in that. It is a great, cost-effective alternative. It is good for the

environment. No matter how you do it, we can move people around.

Once you do that, one of the problems we have had is, we can’t

get a handle—and I have been here 13 years; we cannot get a han-
25

dle on Amtrak finances. Mr. Laney and Mr. Gunn probably began

that process, and as we get a handle on them, it is scary, we found.

Mr. Young and I did the food service, a couple hundred million

dollars. Every dollar for food service paid, it cost us two dollars.

We are going to see a legal—I have asked for a legal review—

GAO is doing that study—that is going to make your eyeballs pop

out.

You, Mr. Mead, have said and testified Amtrak’s own numbers

show about 175 million in annual unallocated overhead costs; is

that correct?

Mr. MEAD. Yes.

Mr. MICA. So we still do not have a figure. If we take out the

Northeast Corridor, we have an independent operation, we get private investment coupled with Federal investment, then we have

Amtrak long distance service left over. I love your 80/20 or 90/10,

100 percent, whatever we do, but we can also conduct that.

And, Mr. Mead, wouldn’t that make it possible to tell what Amtrak finances truly are, if we separate that out—

Mr. MEAD. Oh, it would—you have to look at it separately. It

does have to be—that does have to be done from an accounting

standpoint.

Mr. MICA. —where the potential is for getting high speed service

in our most important corridor to relieve congestion in that corridor, stop and think, in less than 2 hours? Nobody would ever get

on another plane; we would be able to deal with congestion, actually put more planes going longer distances bringing people in. We

won’t lose any air traffic because they will always need that capacity. So this proposal has a great deal of potential.

Now, I have tried the Amtrak reform proposals, and I have got

an 82-page one here, and I have tried a 62-page one.

This is a simple thing: We put the Northeast Corridor up for bid

for the private sector. That gets them out of—Mr. Rosen, you said

this is all sort of a structural problem.

Mr. Rosen, if you are losing hundreds of millions of dollars in

food service, that is not a structural problem. Mr. Rosen, if you are

bungling a multibillion dollar high speed acquisition and operation

of a high speed service in the Northeast Corridor, that is not an

operational problem. If you can’t account for $175 million in

unallocated overhead costs, that is not an operational—a structural

problem.

Mr. ROSEN. Congressman, let me just clarify; I think I agree with

you. I wasn’t saying that structural was the entire problem; it is

multiple problems.

Mr. MICA. No. Again, structural is a big problem, but that is in

the Northeast Corridor.

Mr. Laney, the only asset that you own, real, hard asset that you

own, is the land, really, in the Northeast Corridor; and I think—

Mr. LATOURETTE. Mr. Mica, could I ask you to ask the question,

and it be your last question so we can move on?

Mr. MICA. Yes.

How much do you really own of track? And am I correct in that

it is the Northeast Corridor plus that little Michigan piece?

Mr. LANEY. Yes, that is pretty much it.
26

Mr. MICA. So we take that out of the equation, we put that up—

and I met with Sweeney from AFL-CIO years ago and I said, we

can guarantee every labor position, every benefit, and still operate

and there will be twice as many people involved in high speed service because if we make that a success, we will have operations

across the United States which will be providing high speed service.

So I look forward to all three of you gentlemen lobbying—

Mr. LATOURETTE. I thank the gentleman and his time has expired.

Mr. Oberstar.

Mr. DeFazio.

Ms. Carson.

Ms. CARSON. Yes, I will be very brief. Thank you all for your

input into this conversation.

I want to contrast what we, the Federal Government, gave, 15

billion, to the airlines right after 9/11; and the airlines were in

deep financial trouble before 9/11, as we all know. We didn’t put

in any restrictions or requirements, and CEOs bailed out with a

substantial—quote, unquote—′′bonus.′′ Mr. Wolf at USAir got

around 8 million and left like a bandit, and I guess that is what

it was, banditry.

With regards to Amtrak—and I was very impressed by how Amtrak is addressing the cost of running Amtrak, the fact that you

have reduced some of the cost of doing business with Amtrak. And

I am sure all three of you gentlemen know that when we did have

the catastrophe of 9/11, the ridership of Amtrak went up, you can

almost say that it skyrocketed.

What difference do you anticipate with a private enterprise coming in and doing Amtrak better than what Amtrak is doing on its

own? Because it continues to improve.

And the last part of that question is whether or not you believe

Mr. Gunn is doing a good job.

Mr. LANEY. Let me start with the last question first. Mr. Gunn

has done, as far as I am concerned, a splendid job. He took Amtrak

from the day he landed on the platform, in effect—in 2002, I believe it was—and has righted a ship that was listing and about to

spill over, as far as I am concerned. And David Gunn is a terrific

operator, and at least a career-long railroad man understands it.

We have shifted gears in a way and moved from an operating

focus—which will remain a principal focus, operating efficiencies

and so forth—to sort of recasting the future. And the board has assumed a little bit more initiative than it has in the past.

And so we are working carefully with David, and his principal

focus seems to be more and more focus on the day-to-day operations, and the board is focused more on the future. So there is a

balance to be struck there, and we are attempting to through that.

And the other question I believe you asked was with respect to

what a private entity might be able to do; I don’t know. And a

number of proposals that I have seen for assuming responsibility

for operation of an entire set of routes or an entire self-contained

system like the Northeast Corridor—and I think the chairman alluded, or someone earlier alluded, to the risk of an experiment.
27

We, at the board level, have to look at everything, but ultimately

we are responsible for the future of Amtrak; and Amtrak is the

only housing for intercity passenger rail in the country, so in effect,

we are responsible for the future of intercity passenger rail.

So we have to be very careful in analyzing and understanding

any moves we might make like that, and their ramifications. And

a lot of the actions I think you might see in that regard over the

next few months or years will likely be pilot programs, kicking the

tire so to speak to make sure it works, and if it works, there is no

reason why it can’t be expanded.

But I think there is enormous potential value in the competencies, skills and financial strengths, as well as the operating

capabilities that private operators can bring to intercity passenger

rail in this country, and they need to be given a shot.

And I think there is potential for Amtrak to improve as well, because if Amtrak ultimately competes for its future against these

kinds of performers, then Amtrak is going to have to compete at

the levels of those performers. And competition can, at its best—

there are some downsides to it—improve the performance of anybody.

But we have to be very careful, and ultimately, I think the board

feels very responsible in terms of the steps that it might take, and

it cannot put an entire system at risk.

Mr. MEAD. I would like to make a comment on this competition

issue.

First, I am not prepared to say that there is or will be a good

deal of competition out there.

And I think that the playing field has to be open to allow for

competition.

And third, I don’t think Amtrak should be in the decision-maker

seat as to whether or not there should be competition. I think that

is a decision that Congress has to make in the reauthorization.

Mr. LATOURETTE. Does the gentlelady yield back?

Ms. CARSON. Yes.

Mr. LATOURETTE. Mr. Simmons.

Mr. MICA. Mr. Chairman, just a unanimous consent request.

I would ask that in the record we include at this point the fact

that there was $5 million given to airlines that could show damage

from the events of September 11th. We did create a $10 billion loan

guarantee program, not a loan program, which expired—

Mr. LATOURETTE. Excuse me. Mr. Mica, I would ask you—

Mr. MICA. I would just like—

Mr. LATOURETTE. I would ask you to respect the Chair for just

a second, if you would.

Do you have a document that you would like to submit?

Mr. MICA. Yes, with that information.

Mr. LATOURETTE. Without objection.

Mr. Simmons.

Ms. BROWN. Mr. Chairman, I want to show an objection.

Mr. LATOURETTE. Objection is heard.

The gentleman from Connecticut.

Mr. SIMMONS. Thank you, Mr. Chairman. A couple of quick

thoughts and then a question.
28

Mr. Mica raised the issue of getting true high speed on the

Northeast Corridor and what the cost would be. My recollection is

that before Amtrak invested in the Acela service there was an

analysis of the Northeast Corridor from New York City to Westerly, Rhode Island, which is a shoreline portion of the track. And

it was determined that between Boston and New York you have 12

full circles of turns, nine of those 12 full circles or turns are from

Westerly, Rhode Island, to New York City, which means that you

add up the degrees of turns and you get complete circles.

With nine full circles of turns between Westerly, Rhode Island

and New York City, you could not ever have truly high speed service—there is only a 4-mile stretch, I believe, where you are authorized to go 125 miles an hour—and therefore, an inland route was

considered, which would be a modern, straight route which could

achieve high speed service. The costs for that were very substantial, in the range of $15 to $16 million, so I think that is perhaps

where those numbers come from.

But when I talk about a safe, reliable service at a reasonable

price, it is with the idea that as long as you are running Acela on

the shoreline, you are never going to straighten out those circles.

You just can’t do it, because the Connecticut coast was settled in

the 1640s, and there is where a substantial portion of our infrastructure is, and you simply can’t do it unless you go underground.

Point two: Over the last several years Amtrak has repeatedly

threatened access fees for other users as well as threatening higher

fees for riders. Metro North owns the track from New Haven to

New York City. Metro North carries a very substantial number of

Connecticut citizens in and out of New York City every day. So the

politics of all of that, of those user fees, is that probably 10 to 15

times as many people will be beating on my door should the user

fees affect Metro North as would be if the reverse was true.

So I think it is important for people to understand the local politics, or the regional politics, of rail transit in trying to make some

of these decisions. That being said, I do have a question.

One of the testimonies, Mr. Laney’s, says that one of the four essential objectives is to preserve our national long distance system.

The other testimony, by Mr. Rosen, says that when it comes to long

distance services, Amtrak has had little or no success in responding

to competition with bus and air, and Amtrak’s presence in this segment of the intercity transportation market has dwindled.

I mean, I think that is an accurate statement. And when I think

about it, and when I think of the four transcontinental services and

some of the overnight services, I think, and I would be interested

to know, if people in this room had to be in San Francisco or Los

Angeles or Seattle Monday morning, how many people would call

up Amtrak? Please raise your hands.

Okay, if people in this room had to be in New York City tomorrow afternoon, how many people would consider calling Amtrak?

Raise your hands.

I mean, that is really where we are at. I mean, that is reality.

Who in the heck is calling the trains for transcontinental trip other

than for tourism purposes or to give the kids an experience or,

yeah, 30 years ago I took the train to L.A., and now my wife and

I are retired, let’s try it again.
29

But the feedback that I get from people who are making many

of these trips is that it is not successful, it is a disaster.

And I guess my question is, when one of our witnesses says preservation of the long distance systems is an essential objective, essential objective, and another says that Amtrak has little or no success responding to competition in long distance services, what is

the story? What is the deal? What are we, as Members of Congress,

members of the subcommittee, supposed to gather from this apparently conflicting testimony?

Mr. MEAD. I have a suggestion. I think that—let me just quote

you some numbers quickly.

Of the total 25 million riders on Amtrak, 11.5 million, about,

rode on the Northeast Corridor; 9.8 million rode on what are called

′′quarter routes,′′ these are between the population centers; about

4 million rode on these long distance trains. All that number, who

knows, 500,000, end to end, you know, the transcontinental, the average distance traveled on these long distance routes is about 700

miles. So therein lies a tension.

There are several million people riding these things. They are

not—it is not necessary, air travel between those locations, and

some of these States; it really is an essential mobility requirement.

So there is this tension.

We are trying—what we were trying to do in the, study we did,

was look at long distance travel and say, all right, is there a balance that can be drawn where you keep the trains and you save

some money?

And we found that there is, but Amtrak hasn’t taken advantage of it; and it amounted to, you know, almost $250 million a year.

Mr. ROSEN. Another way to look at that, Congressman, is that

4 million passengers are on the long distance trains compared to

the airlines carry—oh, I think it is in excess of 700 million passengers annually, and yet for Amtrak the cost of the long distance

routes is disproportionate. And as the inspector general studies

showed, the cost of providing first-class service—that is, the sleeper

cars, the dining cars—is even greater. And I don’t see how anyone

can justify the Federal taxpayers’ subsidizing somebody in excess

of $600 per passenger per ride to take a long distance first-class

trip.

So the harder question is, well, is there long distance service that

makes sense? And part of the challenge for all of us is to identify

whether, in essence, as I said in my initial statement, is the way

Amtrak does it the only way to do it? Because the way Amtrak

does it is wildly costly for relatively little benefit.

But might there be other ways to structure this where some of

these, as Mr. Mead said, 700-mile distances might be preserved

and made more cost effective? Might there be some of these vacation or tourism routes, say, through the Northwest, where there

would actually be demand if the service was structured differently?

So there is a need to look at that, it may not be a one-size-fits-all

answer, but it is clear that the status quo doesn’t work.

Mr. SIMMONS. Mr. Chairman, my time is up. But my response

would be that just as the taxpayer should not subsidize first-class

meals, taxpayers should not subsidize essentially vacations and

tourism. And it seems to me the cruise lines and others have man-
30

aged amenity train travel for people who are on vacation, and if

they don’t make money, at least they break even.

And again, I thank the Chair and the ranking member for this

hearing. This is a critically important issue for America, and we

have got to come to some resolution on this problem. And I yield

back.

Mr. LATOURETTE. I thank the gentleman.

Mr. DeFazio.

Mr. DEFAZIO. Thank you, Mr. Chairman. I have a couple of questions about the debt.

The debt is substantially privately held, as I understand it. Is

there some which is attributable to the Federal Government?

Mr. ROSEN. Yes, there is Federal debt; it is not in the numbers.

The 3.8 billion is the privately held debt.

Mr. DEFAZIO. What is the average interest rate on that? Because

the interest costs are awfully high. It is either short-term debt or

it is very high interest rates.

Mr. LANEY. Most of the debt that carries the highest interest

rates is equipment financing.

Mr. DEFAZIO. Okay. So that is shorter term?

Mr. LANEY. No, it is long term.

Mr. DEFAZIO. So what are the interests? What is the average?

Mr. LANEY. I don’t have it.

Mr. DEFAZIO. It looks like, I don’t know, I just did a rough—it

must be at least over 7, closer to 8.

Mr. MEAD. It is about 7, it is about 7. It goes up. I think one

of the worst is Penn Station; that is a little over 9 percent.

Mr. DEFAZIO. Okay. So what is today’s 30-year T-bill, 3-point

what? Anybody know? 3-point something, whatever. Okay.

So if the Federal Government—does anybody believe that the

debt is not guaranteed by the Federal Government, it is only by

Amtrak; and if Amtrak were somehow to become insolvent that the

private bondholders would get zero? Does anybody believe that?

Mr. ROSEN. Well, we believe that is certainly the case.

Mr. DEFAZIO. Do you think that would happen? Do you recommend that?

Mr. ROSEN. Well, I would say a couple of things about that, Congressman. One is, in the early 1980s, Congress previously did wipe

out the Amtrak debt and had the taxpayers take responsibility for

it; and a lot of good that did. Here we are—

Mr. DEFAZIO. Right, but they didn’t have a plan.

But let’s just say I am just asking you a question: Do you think

the private bondholders are at risk under the current scenario with

the recommendation, the administration proposing zero funding for

Amtrak?

Would that then cause a default, since I don’t know how are you

going to pay the interest? Would the private bondholders just eat

it, or do you think the Federal Government would bail them out?

Would you recommend the Federal Government bail them out?

Would you recommend the Federal Government not bail them out?

Mr. LANEY. I can’t speak for the Federal Government, but let me

speak for Amtrak.

I don’t think those bondholders either believe or should believe

that the government stands behind Amtrak; and I think it is re-
31

flected to some extent in credit rating, it is reflected to some extent

in our credit ratings. Bondholders see those ratings, and it makes

them very, very nervous.

Mr. DEFAZIO. But if we are going to continue to have an Amtrak,

it seems that you could cut that interest obligation in half just by

substituting Federal bonds. But, okay, that is a discussion for another time. And then if you linked that to the reductions in firstclass service and food, I mean, we would be talking somewhere in

the vicinity of $300 million a year, which would be a nice piece of

change toward getting the obligations of Amtrak down.

Mr. MEAD. Well, i can’t let this go unsaid. I mean, the fact of the

matter is that, as a practical matter—apart from the legalisms,

apart from the morality, the practical matter is that Amtrak’s

budget has an item in it where they are asking you for the money

to pay their debt. So year after year after year—

Mr. DEFAZIO. So the taxpayer—if Amtrak continues, the taxpayers are going to continue to subsidize debt at 8 or 9 percent, or

7 or 8 percent in the private sector, as opposed to the taxpayers

assuming more obligation for debt at a lower interest rate as a

Federal obligation. But that is—

Mr. ROSEN. Can I just make an observation on that?

It is true that the taxpayers subsidize Amtrak’s debt; it is not

true that they totally pay it, because Amtrak gets revenue from

multiple sources—right now, about 40 percent from the taxpayers.

So you could say 40 percent of the debt is—

Mr. DEFAZIO. Right. Well, it depends on how fungible the money

is. But in any case, it seems to me if we are going to continue to

have an Amtrak, lowering the debt obligation costs, in addition to

first-class service and other cost-saving measures, and maintaining

a national network—I mean, we had the gentleman from Connecticut and others from Florida who have pretty much discounted any

need for a national system.

I guess I would look at today’s prices of gasoline, I would look

at the fragility of the airline industry, I would look at what happened post-9/11 when my regional power marketing administrator

had to get back to Oregon, couldn’t find a rental car; he took Amtrak, planes didn’t fly.

And Mr. Mica would agree with me on this point: What is going

to happen the day after we have multiple planes fall out of the sky

because we are not doing an adequate job of keeping explosives off

airplanes? I think Amtrak will be pretty heavily subscribed.

So to become the only major nation in the world without a national rail service seems to me to be folly in light of higher energy

costs and an industry which is—the airline industry which is mostly bankrupt and has—is a proven target of terrorism, although obviously rail isn’t exempt.

That is an observation, not a question.

I would ask a question about the rail debt. I don’t understand,

Mr. Mead, how one of the biggest problems in my region is--we do

have a very nice growth path, which I believe Amtrak would recognize, on our rail service, particularly in the northwestern United

States, which was one of the earliest designated high speed corridors.
32

But we have made precious little progress toward delivering on

the promise of high speed, although we have some very nice train

sets running on it which weren’t custom made, unlike Acela, and

they are very dependable. But that is another issue.

But the big problem is the freight. And I don’t understand the—

how are we going to—and I have tried to talk to the freight people

and said, maybe we could have some sort of coordinated approach

here; you need some double tracking, we need double tracking,

can’t we get into this on a unified basis with some cost-sharing between the two entities, et cetera?

Can you address that question? How would we ever realize, even

in short corridors where we don’t own the track—everyone is focused on the Northeast. I don’t live in the East, a lot of us live in

the West, so how would that work?

Mr. MEAD. Well, I don’t want to be the only voice on the panel

on this, but when I was just giving my testimony, I think it was

before you came in, I mentioned six points that I thought were key

to any reauthorization proposal. One of them was a capital program to the States.

In some of these situations, such as probably the one you are describing, you are going to have to invest in your rail bed. You are

going to need money to invest in your rail bed, probably run another track, maybe around an existing track, so you can deal with

the congestion between the freights and the passengers. That is

why you need a capital program that is oriented toward clearer development, so you can do that and you can make those types of investments.

Now, the State is going to have to contribute, but what we would

recommend is a match somewhere between 15 and 30 percent. And

I would think it would be—you need a pretty robust program.

Mr. DEFAZIO. Either of the other panelists want to respond to

that?

Mr. LANEY. Congressman, if I could respond, it is already happening to some extent, but to a very minor extent relative to the

potential, without a match program.

California has contributed, I think, over the last decade probably

approaching $2 billion. Washington State, as you know, if you add

it all up, I think it is close to a billion dollars; that is with no

match, and the improvements—the impact of the improvements is

very measurable and the need is there. So there is an appetite from

a transportation standpoint. With a match program, the state contributions would have been greater in amount and more accelerated I think.

There is a healthy interaction between the freights and a number

of States regarding passenger rail, principally California and

Washington that we don’t see yet in the rest of the country.

Mr. DEFAZIO. Well, we have done a little bit in Oregon. We happen to be more poor than either of those States; and we didn’t have

the dedicated revenue source that Washington State used to have,

which is now gone, so they are probably going to be in the same

boat we were are—but a match program would be distinctly preferable to my governors scrambling around, trying to find small

amounts of money.
33

Mr. ROSEN. Congressman, can I just mention, in the administration proposal embodied in H.R. 1713, we did include a matching

grants program as well, more a 50/50 kind of match, more like the

New Starts transit-type program. And the key to that again is to

move a system to one where the Federal Government is supporting

infrastructure, not operations of actual operating companies.

Mr. DEFAZIO. And if I could, just one last question, Mr. Chairman; I realize my time is—I would like to ask about the Acela.

I think that the Federal Railroad Administration safety standards are antiquated at best—absurd, perhaps. You know, Europe

successfully operates a lot of high speed trains. They call the Acela

′′the pig,′′ ′′the fat pig,′′ and obviously it has failed because of that.

In the Northwest, we operate a Spanish train set, the Talgo,

which happens to work really well. The problem is that it has to

have a waiver from the FRA standards because the FRA has a

1900 mentality that weight is the thing for safety, not dealing with

couplings and other safety issues.

I would like to—has the administration or Amtrak taken any

sort of an active role in trying to update those things so we can

move to proven technology? I am not saying we have to buy the

trains overseas, but we can license the technology and manufacture

proven, functioning, lighter, more efficient high speed trains here

in the United States of America as opposed to buying and continuing to build things that don’t work, that are more expensive.

Anybody got an observation on that?

Mr. ROSEN. Well, I am not sure that we would agree with the

premise that FRA safety rules are all just—

Mr. DEFAZIO. Well, I am talking about the one that goes to

weight as the biggest safety factor and the fact that you have to

get a waiver to operate something that is safely operated in Europe

carrying tens or hundreds of millions of people a year.

Mr. ROSEN. The test from the FRA standard is not weight, but

strength and how they will perform in accidents; and I don’t think

any of us would want to move to a system that was less safe.

Mr. DEFAZIO. Well, I am not talking about less safe, I am talking

about the European system, which I think is arguably as safe or

more safe with proven technology, because it can actually operate

as opposed to having failed brakes because the damn thing is so

heavy that it can’t even support its own brakes.

Mr. ROSEN. Okay, there are two different things there.

Mr. DEFAZIO. No, they aren’t. I mean, we designed this gigantic

fat pig, and the thing is very inefficient, it had substantial operating problems, and it is under the theory that it is safer because it

is big and fat and heavy and carries bigger, fatter and heavier cars,

whereas the Europeans get the same performance with a whole different system of couplings.

I would urge you to study this and not dismiss it and not say,

I am trying to recommend something less safe. I ride on the Talgo,

it is not less safe, it just gets to safety through a more efficient way

than the Acela.

Mr. ROSEN. I have ridden a train in Spain myself. It is not an

issue of whether we agree that Acela or Talgo is better;that is not

the issue. The issue is, is Acela like it is because of FRA? I can’t

agree with you on that.
34

Mr. DEFAZIO. Well, then someone else should take a hit other

than FRA on the issue because it is really kind of an embarrassment.

Thank you, Mr. Chairman.

Mr. LATOURETTE. I thank the gentleman.

Mr. MICA. Mr. Chairman, I have a unanimous consent request.

Mr. LATOURETTE. Go ahead.

Mr. MICA. I request that I put this written statement into the

record that says, ′′I am a strong advocate and supporter of the National Passenger Rail System and Service, always have been, always will be.′′ Mr. LATOURETTE. Without objection. At the ′′be,′′ without objection.

Ms. BROWN. Mr. Chairman, there is an objection.

Mr. LATOURETTE. The objection is heard.

Mr. Oberstar.

Mr. OBERSTAR. Thank you, Mr. Chairman.

I listened with interest and watched with fascination the slide

presentation by the gentleman from Florida on Virgin Rail Group.

And I subsequently have then gone back to my staff to call up on

the Web the report of the British Strategic Rail Authority’s 2004-

2005 annual report. British Strategic Rail Authority is now Network Rail, but its last report is by that name. And found that Virgin’s cross-country and West Coast franchises, according to this report, the official agency, received a total of over 200 million pounds,

which in that year’s evaluation is $360 million in subsidy from the

British Government.

The Virgin Rail Group, under British law, is authorized to book

the subsidy as revenue, which then makes its operations appear to

turn a profit.

Would the gentleman from Florida disagree with that.

Mr. MICA. No, that is exactly what I quoted. It is subsidized, and

they have 34 million passengers as opposed to Amtrak’s 25 million

passengers.

Mr. OBERSTAR. They receive a significant subsidy, and it should

not be trivialized; it runs roughly 11 cents a passenger mile—

Mr. MICA. Can I just add—

Mr. OBERSTAR. Just a moment; I will yield to the gentleman in

due course.

-- and operates high speed service in very high population density corridors. That is very significant, and it is considerably different from the Amtrak situation.

And I yield to the gentleman.

Mr. MICA. Thank you.

And that is what I pointed out, that if we take out the Northeast

Corridor and we give it the same opportunity, the subsidization—

again, they have 34 million passengers in those two north-south

lines. We have one line, and we are running—what did you say,

Mr. Mead, how many million of the 20—

Mr. MEAD. Eleven million in the Northeast Corridor.

Mr. MICA. And if you will look further in the report, you see how

many billions of pounds reporting in an infrastructure investment,

not just—well, not just private money; I also know there is federal—British federal money in it.
35

But, with that combination, I think we can take that out, operate

it at high speed service and create a model; and then you have the

balance—and I always have supported long distance service—and

will have a good financial picture and State public-private partnerships. Florida has had millions of dollars ready to go to increase

ridership as a partner.

Mr. OBERSTAR. I thank the gentleman for those observations and

just want to clarify the record. It was somewhat oversimplified and

glossed over in the earlier presentation, and I would note that in

the Boston-to-Richmond corridor there are probably 35 million people. We could have substantially greater ridership on Amtrak if in

that corridor we had the quality ride, if the catenaries were upgraded, if the switches were improved, if the Connecticut gap were

closed, if the rail were upgraded and the track upgraded and the

locomotives also upgraded. All of that also requires capital investment and you will have the ridership.

I noted the situation in Japan where you have high population

density corridors with substantial government investment to bring

the whole infrastructure up to a level needed to attract ridership.

That is what we are talking about. It is not very complicated. It

is a matter of political will, and we seem to lack the political will

to make the decision.

Again, I compliment the chairman of the subcommittee for so

succinctly summarizing the issue: giving Amtrak just enough to

fail. We have to give them substantially more to succeed.

I yield back the balance of my time.

Mr. LATOURETTE. I thank the gentleman.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

I just want to go back to this whole issue of safety. How do we—

you know, under your proposals, how do we guarantee safety? Certainly it is a concern. I think when the British system went

through its changes, we had a situation where there was a crash;

and I want to know that our passengers are guaranteed safety. Do

you have concerns about that, and how do we make sure we guarantee that?

Mr. ROSEN. Two thoughts about that, Congressman. One is, Amtrak is subject to the Federal safety regulations and so would any

competitor or other passenger rail operator. We would start there.

Second thing, I would observe about a year ago the World Bank

issued a study of the British rail system; and, among other things,

they specifically looked at the question of what the safety record

had been, because there had been a crash that got a lot of publicity. And their conclusion was that the British rail system was, in

fact, at least as safe as the United States system and perhaps more

so.

It is an unfortunate fact of life that from time to time there are

train accidents, and there have been in the United States. So we

want to minimize and avoid and prevent those. But that is the purpose of our Federal rail standards.

Mr. CUMMINGS. Anybody else?

Ms. BROWN. Mr. Chairman, I would like to speak to that point.

Mr. CUMMINGS. I yield to the gentlewoman.
36

Ms. BROWN. I would like to speak to that point. That is not totally correct. We met with the British officials and legislators—they

do not call themselves legislators but our counterparts—and they

were very, very clear that there was a serious deterioration of the

rail system when they turned it over to the private entity; and it

was not—and that is why they had to go in and take it over. Then

they are spending billions more additional dollars to bring the system up to snuff. And, in addition, it wasn’t one accident; it was

two, but several lives. It was not a minor thing, and they realized

that they had to take recontrol of the system.

Mr. CUMMINGS. Reclaiming my time, did you have something,

Mr. Mead?

Mr. MEAD. Thank you.

The description of the British infrastructure is essentially correct, and one of the ways railroads deal with infrastructure problems is they slap on what they call go-slow orders. You can’t do

that in aviation. At 35,000 feet, you can’t say, well, let’s deal with

this problem by going slower. But the railroads do. What you really

need for this Northeast Corridor is a multiyear, probably 5, maybe

8-year plan for bringing it into a state of good repair; and you need

to watch the go-slow orders that get put on because that not only—

they may create a safe situation, but it also results in your trains

not going more than at a snail’s pace.

Mr. CUMMINGS. Going back—I will come to you in a moment.

Thank you.

But going back to what Ms. Brown was just saying and going

back to what you said, Mr. Rosen. You said, ′′as safe as the United

States,′′ is that what you said?

Mr. ROSEN. That is right.

Mr. CUMMINGS. Is that the gold standard?

Mr. ROSEN. Is the United States the gold standard?

Mr. CUMMINGS. Yes.

Mr. ROSEN. In terms of safety regulation, I believe it is.

Mr. CUMMINGS. Not safety regulation. Safety, period. The President said after Katrina the efforts were okay, but he did not like

the results. They were unacceptable. So I want to draw a line

there.

Mr. ROSEN. I am not sure I understand.

Mr. CUMMINGS. It is simple. What I am asking you is it is one

thing to say the gold standard is the United States. It is another

thing to say the results of the efforts are the gold standard. When

you sit there and you compare something to the United States, I

am assuming that we have the very best results, too, not just effort.

Mr. ROSEN. Well—

Mr. CUMMINGS. Let me take a step further. You seem to be—I

may be confusing you. It is my understanding that in one of these

crashes it was like 31 deaths. So I am trying to figure out, you go

to privatization you have 31 deaths, and so what does that mean?

I am just concerned that when we start talking about privatization,

I know we have Federal regulations, but I want to be very careful

that we do not slip.

I can’t help but have the backdrop of FEMA on my mind, I have

to tell you. I just want to make sure that government is going to
37

continue to do what government is supposed to do, because people

rely on us to do that.

Mr. ROSEN. Let me offer maybe two disconnected thoughts on

that. One would be in terms of the administration’s proposal, as

embodied in H.R. 1733, specifically, would require that the Federal

Rail Administration do a safety review of the qualifications of any

new company that would operate trains and compete with Amtrak.

So I think we would be attuned to what I think is your concern,

which is somebody unqualified or unsafe going to run these trains.

We would specifically want to address that.

But the other thing I would say is sometimes the issue of privatization gets a little confusing because, of course, Amtrak is itself

a private company. It is federally subsidized, but it is a private

company that operates the trains and is itself regulated through

the Federal standards. So a new competitor would have to likewise

meet the standards but at least under the administration proposal

would have to undergo a specific FRA safety review of its qualifications and capabilities.

Mr. CUMMINGS. Did you have something to say?

All right, thank you.

Mr. LATOURETTE. I thank you, Mr. Cummings.

The Chair would advise that we have been told that our first series of votes on the floor is going to be about 1:50. I have a couple

of requests to make to the panel, and I will yield to Ms. Brown for

one question, and then what I would like to do is try to get the testimony of the second panel in before we have to go vote. I know

that is a rosy—I and will yield to Mr. Mica for one question as well.

My request is, Mr. Rosen, we had a hearing with the new FRA

Administrator, Mr. Boardman; and Mr. Bachus, who is not with us

today, made a request during that hearing. There was some confusion about the date when the implementation of the new whistle

rule went into effect. There was a vigorous discussion between how

an interim rule could really be a final rule for the tolling of the

statute, and we were promised an opinion by the Department of

Transportation.

The second question goes to you, Mr. Rosen, and also you, Mr.

Laney. There have been doubts raised in the public domain about

the notion of, one, whether or not the Amtrak Board has a quorum;

and, two, if it does not have a quorum, if it can operate without

a quorum. We have received a number of references to legal opinions, but never have I seen one in writing that explains that position as to whether the Board as currently constituted even has the

authority to enter into contracts which would be of great concern

to a lot of people.

I would ask DOT and Amtrak if you are relying on some legal

opinion that you presently have a quorum or that you do not need

a quorum. If somebody could get the subcommittee that in writing,

we would appreciate that very much as well.

Ms. Brown, your one question.

Ms. BROWN. I would like to ask unanimous consent for members

to submit additional questions to the witnesses for the record.

Mr. LATOURETTE. Without objection.

[The information received follows:]
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39
40
41
42
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Ms. BROWN. My additional question is for all three, because I

want to get this on the record. Do you know of any developing

country where they have private operators come in and run the

railroads successfully, do it within budget, provide good-quality

service and earn a profit without any assistance from public funds?

And the other question for the chairman of the Board, I have

some written questions pertaining to labor organizations. Are they

operating under an expired contract? When did the contract expire

and how have the negotiations been going on? I would like that in

writing.

Would you three please answer my question?

Mr. MEAD. No, I am not aware of any.

Mr. ROSEN. As to your first question, I would point to the picture

on the wall and note that the Alaska railroad is a profitable operation. The Japan central railroad, I am told, is such, the Hong

Kong railroad.

Ms. BROWN. Sir, are you sitting there telling us that the Alaska

railroad does not receive any Federal money? Now, the chairman

would be shocked to hear you say that, and he is not here.

Mr. ROSEN. For operations, as opposed to infrastructure.

Ms. BROWN. Sir, the capital costs is the problem, we all know

that, and the infrastructure. And we also know that the administration has not done a durned thing since 9/11 as far as securing

the safety of the railroads, the tracks, and security. So, as you go

back wherever you are going, I would like for you to discuss that

area.

Mr. ROSEN. Maybe we could have some definitional things as to

what counts, and you could clarify the question, but I will be happy

to respond.

Ms. BROWN. I do know that the Alaskan receives Federal dollars.

Mr. ROSEN. Well, again, Congresswoman, we will be happy to respond to the question with some clarification.

Ms. BROWN. And I am sure the chairman has a lot to do with

it. He is doing his job.

Mr. LANEY. The answer to the question, is no, I do not know of

any.

Mr. LATOURETTE. Mr. Mica, your one question?

Mr. MICA. My one question maybe will be towards Mr. Mead.

Again, I think it is important that we look at the models that we

have for privatization. The British model, again, I think there has

been some incorrect information. They did have problems at the beginning, I understand, Mr. Mead. They let, as I said in my opening

remarks, some 28 franchises; and that is now down to either eight

or ten. And, also, they did have an accident. They had accidents before, but they also inherited an entire nationwide network of rail

passenger and commuter service which was in total disrepair.

And isn’t it correct, Mr. Mead, that they had private investment

I believe somewhere between 15 and $20 billion U.S.? Because it

is over 10 billion pounds in the infrastructure.

And isn’t it further correct—and I think Mr. Laney and Mr.

Rosen also agreed with this—Amtrak only owns two pieces of rail

infrastructure, one the Northeast Corridor and a little bit of Michigan?
44

The rest you pay track access charges to freight companies. Most

folks on this panel do not even understand how Amtrak operates.

Are those points correct?

And, finally, isn’t it correct that Amtrak’s last report booked its

Federal appropriations as revenue?

That is my one question.

Mr. MEAD. Actually, it was two. But I think the answer to the

series of questions that were the first question is yes. And the point

I was making during the testimony is that—the state of repair of

the Northeast Corridor, and it is probably about 5 billion, and it

is a definite plus-up way above that to make it high speed. And

that is a true investment.

The second question, whether they book it as revenue or not, I

would have to get back to you. Maybe Mr. Laney knows that.

Mr. LANEY. Well, it is not debt.

Mr. MICA. That is what I am told by my staff.

Mr. LATOURETTE. We thank you all for being here. We thank you

for your testimony and your answers to our questions and you go

with our thanks.

Mr. ROSEN. Thank you, Mr. Chairman, for having us here today.

We look forward to working with you and the entire subcommittee

as the process of new authorization goes ahead.

Mr. LATOURETTE. We do, too; and please give our regards to the

Secretary.

Mr. ROSEN. I will be happy to do that, from the ranking member

as well.

Mr. LATOURETTE. The second panel will be comprised of Ray B.

Chambers, National Railroad Construction and Maintenance Association, Inc.; Robert Serlin, President of Rail Infrastructure Management LLC; Paul Reistrup, Chairman-Elect of the Railway Service Corporation; Dominic Liberatore, Executive Director, All Aboard

Ohio; and Robert Scardelletti, International President, Transportation Communication International Union.

Mr. MICA. Mr. Chairman, I have a unanimous consent request.

I have an IG, GAO and Amtrak Reform Council Report—at least

we would like to include portions of them—that detail it would take

18 to $20 billion to make the Northeast Corridor a truly high-speed

corridor, and I would like reference to that in the record.

Mr. LATOURETTE. Without objection.

Well, hopefully, Mr. Reistrup will come back. In the meantime,

gentlemen, we want to thank you very much for coming today, and

you come with our thanks.

TESTIMONY OF RAY B. CHAMBERS, PRESIDENT, NATIONAL

RAILROAD CONSTRUCTION AND MAINTENANCE ASSOCIATION, INC.; ROBERT SERLIN, PRESIDENT, RAIL INFRASTRUCTURE MANAGEMENT, LLC; PAUL REISTRUP, CHAIRMANELECT, RAILWAY SERVICE CORPORATION; DOMINIC J.

LIBERATORE, EXECUTIVE DIRECTOR, ALL ABOARD OHIO;

AND ROBERT A. SCARDELLETTI, INTERNATIONAL PRESIDENT, TRANSPORTATION COMMUNICATIONS INTERNATIONAL UNION

Mr. LATOURETTE. Mr. Chambers, you are first.

Mr. CHAMBERS. Thank you.
45

I am Ray Chambers, President of the National Railroad Construction Association, the NRC. I appreciate the opportunity to testify.

We believe strongly, strongly in the future of intercity passenger

service in this country. We build the tracks, and we maintain the

tracks. We have obviously a vested interest in this. As a result of

that, I was instructed in January to review all of the proposals on

the table and come up with an analysis and try to make recommendations to the Board of Directors to see if they wanted to

take a position in this battle.

I was given a little budget, so we hired an outside expert, Lou

Thompson, formerly with the World Bank and the Federal Railroad

Administration. The NRC Board met in Geneva, Ohio, on the 20th

of July, 2005, in a meeting hosted by our Vice Chairman, Larry

Laurello, in his vineyard. We did not sample his other products

until after we made our decisions. We endorsed a reform agenda

and a program which is covered in my written statement.

I want to comment on just a couple of things. We have heard

today a very interesting and lively debate between Ms. Brown, Mr.

Mica, Mr. Oberstar and others. Mr. LaTourette said something I

think that was very, very important at the beginning of this debate. He said that we have been going through a kabuki dance for

20 years, and we have. It is time to move to real reform. I believe

that this debate and discussion, as lively as it was, is real. We are

starting to come to grips with issues.

In terms of the specific proposal that we are putting forward, as

we reviewed and analyzed everything, Lou and I came to the conclusion, and our Board agreed, that the initiatives put forward by

David Gunn and Mr. Laney, the strategic reform initiatives, were

very well thought through and very well analyzed and should be

the core of the process going forward.

We also decided it is time to make a start. So we have proposed

what we are calling Advanced Reform 2006, which is done through

the existing statutes. What we are calling for, Mr. Laney has pretty

much said he is going to do. Under existing statutory authority, the

Board can do a great deal.

Secondly, we have some objectives for a long-term reform process

for 2006 to 2010. These proposals are based on a number of bills

that are on the table. We are also looking at a final system plan

process which successfully reorganized the bankrupt Northeast

railroads in the 1970s and 1980s as a way to move this thing forward. We think it can be done.

In terms of our Advanced Reform 2006, we support—there has

got to be adequate appropriation. We support the $2 billion request

coming through this committee, but it should be as high as possible.

Secondly, we believe the Amtrak Board of Directors should take

it to the max in terms of beginning a real test of reform. We support breaking the business lines down to the five lines of business

which was in the Gunn-Laney Strategic Reform Initiatives. We

would go a little bit further. We think that the NRC infrastructure

should be separated but within the Amtrak family, so you can focus

on infrastructure and you can focus on making Amtrak a more private-like company as it moves along.
46

We would like to see the appropriation by the Secretary not go

just to one pot to Amtrak but be divided by those five lines of business to create additional accountability. A subsidy should go to

NEC infrastructure. The long distance system should receive a subsidy. We support it and believe Amtrak should continue to run it,

and it should be subsidized 100 percent.

Our major proposal, which protects our own vested interest, is

the State corridor operations. I was delighted with Chairman

Laney’s comments today. We think it is time to launch pilot

projects. We would propose that money be set aside in the appropriation for the State-subsidized operations.

Gunn-Laney took 15 lines, and they said that should be the national system. We agree. They took 25 lines and said they should

be State subsidized. We would like to see appropriations go directly

to the States. The States could begin to launch demonstrations in

alternative operations or could continue with Amtrak under the existing arrangement. We think that would be a good start. We would

find out whether competition for operators work or do not work.

I would like a side comment. I just returned from a week in Europe where most of the private operators made presentations to the

Eastern Europeans. The private operations in Europe that have replaced state operations have almost uniformly grown passengers,

they have uniformly improved safety and are renewing equipment,

including in Britain. I know it is a controversial issue.

My colleague, Lou Thompson, was responsible for the World

Bank report on Great Britain; and I would like to take an executive

summary of that and submit it to the subcommittee to get at some

of these issues that were discussed. I will share it in advance to

get to the questions that Mrs. Brown and others might have.

Finally, we need to get to the long-term restructuring framework.

There are a lot of great ideas on the table and a lot of stakeholders.

We need time. We believe H.R. 1630 should pass—it is a good bill

and gives us a start—and then we can begin a real process and an

honest dialogue between all the parties to get to real reform.

Thank you very much.

Mr. LATOURETTE. I thank you, Mr. Chambers.

There were two things that I particularly liked about your testimony. One is that you left tourist dollars in Geneva, Ohio, and the

second was that I said something smart once. So I appreciate that.

Mr. Serlin. Thank you for being here. We would like to hear from

you.

Mr. SERLIN. My name is Robert Serlin, President of Rail Infrastructure Management, an entity that develops innovative rail passenger solutions.

One such solution is the infrastructure management organization

plan, or IMO plan. Today I would like to talk with you about the

elements of the IMO plan, the statutorily provided IMO plan stakeholder protections, and the IMO plan benefits.

The plan’s origins lie in Chairman Bud Shuster’s 1997 Blue Ribbon Panel. It found that Amtrak has two distinct businesses, a

transportation service provider and infrastructure manager. Under

the IMO plan, Amtrak is separated to two federally owned entities.

The first Federal entity, Amtrak, remains exactly as it is today,

continues to operate in the current intercity Northeast Corridor
47

and contract commuter trains and to own its reservation service,

rolling stock, et cetera.

The second federally owned entity would own the 600 route miles

of Amtrak’s own infrastructure, the passenger stations on that infrastructure and catenary. This infrastructure would be managed

by an infrastructure management organization, an IMO, which is

responsible for managing the infrastructure for a period of 50

years. The right to be that IMO, the infrastructure management

organization, is awarded on a competitive basis by the STB.

While some have expressed concern about this separation, it is

worth noting that, though Amtrak operates passenger trains over

roughly 23,000 route miles, it owns and manages only about 2 percent of those route miles. Moreover, Amtrak did not own any infrastructure during its first 5 years. It was solely a transportation

service provider.

With respect to the protections, we have reached out and met

with the key stakeholders and have gone to great lengths to address their concerns by embodying in our statutory proposal that

we have prepared here the following protections:

Firstly, labor is protected because the IMO is automatically subject to FELA, the Railroad Labor Act, Railroad Retirement and the

Railway Safety Acts.

Secondly, Amtrak’s infrastructure employees are protected because the IMO must offer to employees all current infrastructure

employees an honor representation and seniority.

Thirdly, passengers are protected, because the IMO is deemed a

railroad, making it automatically subject to the jurisdiction of the

FRA’s Office of Safety.

Fourthly, commuter carriers are protected, because the IMO is

obligated to continue offering commuter carriers subsidized access

fees.

Beyond these protections, the IMO plan promises tremendous

benefits. It retains Amtrak’s national system with a subsidy level

of about $500 million annually, a level which we believe Congress

can and should support.

Secondly, the IMO plan delivers a vastly upgraded Northeast

Corridor infrastructure. To realize our vision of expanded passenger rail traffic, the IMO increases corridor expenditures from an

average of $200 million annually to a statutory minimum of $600

million annually. Our business plan contemplates spending at least

a billion dollars annually on the corridor.

The IMO plan eliminates the Federal Government’s obligation to

fund the looming deferred maintenance liability currently estimated between 5 and $8 billion. The IMO plan also increases highquality rail construction and maintenance jobs.

Congress would benefit from this plan in two important ways: It

improves the transparency of Amtrak’s train operating costs by removing the allocated Northeast Corridor infrastructure costs; and,

secondly, it reduces Amtrak’s required appropriation by close to a

billion dollars a year.

This ongoing approach to creation and saving is achieved by

using private-sector funding of Amtrak’s Northeast Corridor. The

IMO, using private-sector funds, pays for all rail infrastructure op-
48

erations and improvements. All improvements become the property

of the Federal Government as they are made.

Funding is achieved through a $17.5 billion zero scoring RRIF

loan. Prior to receiving the RRIF loan, the infrastructure management organization, or IMO, must furnish the Federal Treasury a

third-party investment grade repayment guarantee in the full

amount of $17.5 billion. In this way, taxpayers get the benefit of

this private-sector investment with absolutely no financial risk to

the Treasury.

Amtrak itself benefits. The IMO would be mandated to transfer

$2 billion in cash to Amtrak and assume automatic two-quarters of

a billion dollars of debt from Amtrak. And, ultimately, the biggest

beneficiary of this plan is the traveling public. The IMO must increase the number of passengers in order to generate new revenue.

Revenue increases come from new train services that pay trackage

fees to the IMO and from which the IMO pays for infrastructure

improvements.

In closing, the IMO plan is a comprehensive, workable proposal

that protects the stakeholders and, unlike any proposal under consideration, provides a funding solution. It meets the needs of the

traveling public and will stimulate a new age of rail travel with

new stations, expanded service patterns, faster trip times, greater

reliability and new trains.

We urge Congress to implement the IMO plan so that all America can realize this positive vision of passenger rail service in the

United States. Thank you.

Mr. LATOURETTE. Thank you, Mr. Serlin, for your testimony.

Mr. Reistrup, welcome. We look forward to hearing from you.

Mr. REISTRUP. Thank you, Mr. Chairman.

I am Paul Reistrup, Chairman-Elect as of this Monday, the 19th,

of Railway Service Corporation, Wilmington, Delaware.

You may remember I was the second president of Amtrak during

the period we acquired the Northeast Corridor under the direction

of Congress. On that watch, most of the equipment that still is out

there running today, the Amfleet and Superliners, were ordered

and introduced into service.

We have today, RSC, several things we would like to propose to

you. The first is that there be a pilot project. That has been discussed today. We have specifics. Also very important is the beginning of an Infrastructure Trust Fund for railroads, passengers in

particular, and then the private sector initiatives, which would be

responsive to many of the concerns of the members that I have

heard today.

The capital costs of new equipment would be covered by the

group that I am involved with. The pilot project would be on an existing Amtrak route using existing Amtrak equipment that would

be upgraded for a quick start-up, hopefully in year 2006. It would

not require Federal funds. The other routes would roll out, should

this be successful, and that lowers the risk, of course, because this

would just be one pilot route. The Infrastructure Trust Fund is a

definite must before any subsequent pilot projects would be rolled

out because the infrastructure is capacity constrained throughout

the United States.
49

We are committed, RSC, to a union operation. We want Amtrak

to operate this, and I will go into specifics on this. We also have

a commitment of $20 million for start-up money and $100 million

for financing the equipment, and that is debt financing.

This obviously is to, on this route, double the ridership. That is

the goal in this decade.

The very important bottom line is to reduce the operating costs

per seat mile, similar to what Southwest Airlines has done in competition with the other airlines. Got to have faster door-to-door

service than driving. And we want also to point out, I have exhibits.

Exhibit 1 establishes the organizational structure with Amtrak

with a new company called Amtrak Railroad Operations, ARO; and

you can see it for yourself, RSC basically is the business development, not the operator in this case.

Also, I have the details of the infrastructure, which is Exhibit 3;

and Exhibit 2 is the specifics of the pilot project.

Mr. Chairman, I would like permission to introduce a letter from

Louis—we call him Lou—Paone of Houlihan Lokey Howard &

Zukin, a restructuring firm that has worked with Conrail, also in

the airline restructuring ports, has worked many times with labor

unions and basically outlines the specifics of financing this pilot

project with private funds without Federal support.

Mr. LATOURETTE. Without objection.

Mr. REISTRUP. Thank you.

Mr. LATOURETTE. Thank you very much.

Our next witness is a good friend from the State of Ohio, does

a great job on behalf of the rail passengers not only in Ohio but

around the country, Dominic Liberatore.

Dominic, thank you for being here. We are looking forward to

hearing from you.

Mr. LIBERATORE. Thank you, Mr. Chairman.

Good afternoon. I am Dominic Liberatore, Executive Director of

All Aboard Ohio. We are a not-for-profit citizen-based group that

advocates for improved passenger rail service and increased freight

capacity within Ohio and the region. I want to thank you Mr.

LaTourette, Ranking Member Brown and the other members of the

subcommittee for having me here today.

I thank you, Mr. LaTourette, for your efforts in advancing H.R.

1630 and 31, as well as the appropriations that Amtrak is currently under.

All Aboard Ohio also strongly supports Senate bill 1516, the Passenger Rail Investment and Improvement Act introduced by Senators Lott and Lautenberg and trusts that this committee will continue to work with its Senate counterparts. And I would like to

mention that Senator DeWine from Ohio has also cosponsored this

bill.

I am here on behalf of all Ohioans who wish to ride passenger

trains and to speak in support of these pieces of legislation.

Ohio and the Nation needs a stable, cohesive and innovative national passenger rail system under Amtrak, but they have been unable to provide such service due to the lack of stable, long-term

Federal funding and the lack of a mandate to provide the kinds of

service that meet the needs of Ohioans.
50

As the graphic on the monitor illustrates, Columbus, Ohio, is the

second largest metropolitan statistical area in the United States

with no passenger rail service. However, since Phoenix is served indirectly by service 35 miles away Columbus, Ohio, is actually first.

Within the United States, within the State of Ohio, our State

capital is the largest city in the country with no passenger rail

service. It is not an honor that our organization is proud of, nor are

the citizens of Ohio.

Even more ironic is the fact that the Cleveland, Columbus and

Cincinnati corridor has a higher population corridor compared to

France; and the French have much better passenger rail service.

I would like to discuss privatization a little bit. Some believe that

privatization is a magical idea to improving passenger rail. I am

greatly concerned about these statements, especially in light of the

service failures and incredible government waste expense incurred

in Great Britain. Rather than privatize, I believe House Resolution

1630 will provide stability, improved accountability, encourage better and more service, allow Amtrak to develop new routes, purchase more modern equipment, and make badly needed repairs to

both existing equipment and infrastructure.

Ohio is one of the 24 States that are developing or implementing

planning for regional passenger rail service with fast, frequent and

timely trains and designated short haul corridors. The Ohio Help

plan calls for six to eight trains a day running at speeds of up to

110 miles an hour serving virtually every major city in Ohio and

connecting them with major international airports and business

hubs like Chicago, Detroit, Pittsburgh, Toronto, New York, Philadelphia, and even Washington, D.C. It would also greatly expand

capacity and eliminate bottlenecks for movement of freight rail.

Within the State of Ohio we have a serious capacity crisis with

the lack of track to move the increasing amount freight coming

from the coast. Preliminary economic impact studies indicate that

the Ohio hub system, if built, will be a strong tool for developing

new businesses, expanding existing businesses, creating more and

prevailing wage jobs which cannot be outsourced, and putting more

dollars into local economies. Just building the Ohio hub will create

over 6,000 jobs within Ohio and the region.

But as the hub plan advances through the planning process at

the State level, it is impeded by the lack of a Federal funding

mechanism that would allow States and the Federal Government

to partner in the funding of this plan and other plans.

Please direct your attention to the monitors. When discussing

transportation funding disparities, the former chairman of this

committee, Representative Jack Quinn, said: You get what you pay

for. He could not be more correct. All of this discussion about a little dollars here and a little dollars here is taking away from a large

discussion and the reality of the situation.

That is the reality. The reality is we invest in our highways, we

invest in our airports, we have world-class airports, and we have

a world-class highway system. And we have a third-rate passenger

rail network due to the lack of Federal funding. Do not be confused

by anything else. That is the truth.

House Resolution 1631 I believe begins to answer this critical

problem. It establishes the same 80/20 Federal-to-State funding
51

match that other modes like highways and airports enjoy. This is

absolutely necessary if we are to bring balance to our transportation system.

I don’t think I am exaggerating when I say this need is critical

even now, as gasoline prices rise, highways become more crowded

and our Nation’s airlines face financial uncertainty and current

bankruptcy in many cases. Ohioans and other Americans are looking for an option to driving and flying, but that option too often is

either not there or too inconvenient in terms of time or location. If

you want to get on a train, Amtrak, within the State of Ohio, you

have to do it in the middle of the night due to lack of frequency

and Federal investment.

The illustration shows just how our national transportation system is fundamentally unbalanced and a handicap to the mobility

of all Americans. Ironically, in spite of these limitations, Amtrak

has seen a steady increase in ridership on all of these trains both

short and long distance. State-supported train service in California,

the State of Washington, Illinois, and Maine have seen ridership

increases to the point where funding to buy or lease more passenger cars is desperately needed.

Members of the committee, House resolution 1630, 1631 and Senate bill 1516 will help Ohio and the rest of America get on track.

Thank you for having me at your subcommittee hearing today

and for your work to improve and invest in Amtrak. If there was

ever a time to bring passenger rail to the forefront now is that

time. Thank you.

Mr. LATOURETTE. I thank you very much, Mr. Liberatore, for not

only coming but for your fine testimony.

Our final witness today is Robert Scardelletti, who is the International President of the Transportation Communications International Union.

Mr. Scardelletti, thank you for being with us; and we look forward to your testimony.

Mr. SCARDELLETTI. Thank you, Mr. Chairman, Ranking Member

Brown.

I am the International President of Transportation Communications Union. We represent about 47,000 of America’s working men

and women, and we are now proudly affiliated with the 700,000

member International Association of Machinists. On Amtrak, TCU

represents more than 8,500 employees who work as clerks, carmen,

supervisors and onboard service workers.

I start from the premise that Americans want, need and deserve

a truly national rail passenger service, not one that just serves a

few corridors on each coast. I believe that most of the reform proposals being circulated will result in just that, a handful of subsidized corridors and the rest of the country being deprived of any

train service at all. Those who suggest that breaking Amtrak into

various components somehow would reduce its public subsidy ignore its own history.

Amtrak was created in the first place because the Nation’s private freight railroads sought to eliminate passenger trains because

they simply could not make a profit from them. Recognizing that

rail passenger service was an important piece of the Nation’s trans-
52

portation network, Congress created the National Rail Passenger

Service.

There is no question that, since its inception, Amtrak has required continual Federal support, just like every single other mode

of transportation in this country. But I submit that those who suggest that somehow privatization would be a magic bullet that

would cure passenger rail service of the need for public subsidy are

far off the mark. If anyone could have made a profit, it is the

freight railroads who operated passenger service more than 100

years. They did not and they cannot. They do not advocate it today.

They haven’t expressed a smidgen of interest of going back to the

future of private passenger rail service, even with Government subsidies.

Today, we have heard from entities who say they are interested

in running passenger trains. With all due respect, I believe the

profit they foresee would be from the public trough, not from passenger operations themselves. And we need only look at Great Britain’s failed experiment. Passengers were saddled with increased

fares, shoddy maintenance practices, excessive job reductions, resulting in an unprecedented slew of train derailments, drastic deterioration of service and a coordination problem with a maze of

poorly managed providers. The private contractors walked away

with billions of public dollars, and the British taxpayers were left

paying the tab.

The various privatization proposals that are circulating share another feature of the failed British experiment. They would break

Amtrak up into a crazy quilt of uncoordinated regions and entities.

This is one of the reasons that these proposals are opposed by the

Nation’s freight railroads. Nor is there any reason to expect that

breaking up what is now a coordinated, fully integrated system

would somehow result in cost savings.

Another misconception is that partial privatization or contracting

out somehow would result in savings to Amtrak. My own union has

direct experience with this approach. We were involved with Amtrak’s biggest venture in contracting out in recent years.

We lost approximately 300 jobs when, in 1999, Amtrak contracted out commissary operations. We were told that Amtrak

would realize tremendous savings by being able to close their commissary facilities since the contractor would have its own more

modern facilities offsite. However, the contractor quickly discovered

that offsite commissaries did not logistically work. Amtrak ended

up having to maintain most of its facilities, and we have good reason to believe that the venture has been a financial and managerial

disaster for Amtrak. Amtrak lost a significant amount of control

over inventory and food selection and suffers from the vendor overstocking trains and not receiving full credit for unsold items.

Contracting out is not a panacea but is symptomatic of a common

theme in many of the proposed reforms and that is to blame Amtrak workers. The Amtrak Board of Directors, for example, in its

fiscal year 2006 grant request launched an outright assault on employee pensions, working conditions and job security. The Board

went so far as to propose that Congress take new employees out

of the railroad retirement system that is healthy and well funded.

They also asked Congress to allow the Amtrak labor contracts to
53

expire so that the company could impose work rule changes on its

employees with no regard to the collective bargaining process.

The Board argued that this radical departure from long-standing

labor law is necessary to ensure an equitable legal and regulatory

framework for labor among Amtrak and its competitors. This rationale is completely without merit, and every rail carrier is subject

to the same rules that Amtrak is seeking to exempt itself. Other

modes, such as aviation and intercity bus, are subject to fair labor

laws and do not allow the company to unilaterally impose new

terms and conditions.

In short, Amtrak’s Board is not looking for an even playing field.

They want an advantage over their workers that is not enjoyed by

others in the industry and would represent a clear rejection of fair

and balanced collective bargaining.

Amtrak workers have sacrificed for more than 30 years to keep

Amtrak alive in the form of lower wages and a host of work rule

and other concessions. Furthermore, Amtrak employees, through

their representatives, their unions, have always been able to reach

agreements with Amtrak, even though it has been extremely difficult to negotiate with a company that is chronically short of

funds.

An Amtrak liquidation which would be the result of the administration’s plans if enacted would have a devastating impact on the

rail retirement system. Thousands of rail workers on the freight

and commuter side would have their retirement and unemployment

benefits threatened, and rail employers would see railroad taxes

soar.

Is Amtrak perfectly run today? Of course not. There are areas of

improvement, and we want to work with the carrier and this committee on that effort. But how is dividing the franchise into various

parts inherently better than the current framework?

Amtrak is drowning under a deficit, struggling to turn around a

significant deferred maintenance cost, paying less than standard

rail industry wages and subject to unpredictable and highly volatile

funding sources. These are the real problems that need the immediate attention of this committee.

In the face of these incredible obstacles, Amtrak nevertheless

does improve both in terms of ridership and operations; and towards this end, TCU salutes the Chairman, Don Young, Ranking

Member Jim Oberstar, Subcommittee Chairman LaTourette, Ranking Member Brown and other members of the committee for their

support of H.R. 1630 and 1631 which would provide Amtrak with

the resources it needs to evolve into an efficient, modern national

intercity passenger system.

True reform of Amtrak would be, for the first time ever, to provide it with substantial funding levels necessary to provide quality

service that Americans deserve and need. Soaring gas prices only

highlight the benefits that Amtrak could provide if properly funded, as does national security issues such as transportation during

September 11th and our recent national disaster under Katrina.

In conclusion, I would emphasize that Amtrak was created precisely because a private system did not work. The private carriers

who operated passenger trains wanted out because they simply

could not make a profit. If they could not make a profit, there is
54

absolutely no reason to believe that the privatization today would

be any more successful; and when we speak of the national freight

railroads we are dealing with some of the most efficient and profitable companies in this country.

Mr. Chairman, thank you for allowing TCU to present our views

on the future of Amtrak and intercity passenger rail service.

Mr. LATOURETTE. Mr. Scardelletti, I thank you very much.

A housekeeping matter that I should have mentioned before, we

have a lot of important people in our audience, but we are honored

to have Jolene Molitoris, the Administrator for the Federal Rail

Administration under the Clinton administration, with us. Glad to

see you, Administrator.

Mr. Scardelletti, I am glad you talked about the food service and

that decision. I know that you and your representatives were

present at the hearing that we had on that; and I think it is as

a result of your observations and other folks’ observations—Mr.

Crosby, who was here on behalf of Amtrak, and when I talked with

Mr. Laney the other day in my office, they admit that they made

a bad contract—not they, but a bad contract was made. I think

some of the observations you have made have sunk in on that administration, and I think that they are going to do—I trust that

they are going to do what they have to do to fix and make it right.

I just have a few questions, Mr. Serlin, of you. You heard Mr.

Scardelletti, and I assume those observations are not new, and I

assume your IMO proposal would involve a new franchise or manager of the corridor and that you would somehow assume all of Amtrak’s existing labor contracts and obligations and sort of hold

harmless relative to labor. Am I correct on that?

Mr. SERLIN. Yes, you are.

Mr. LATOURETTE. So anybody who works on the Northeast Corridor today would work on the Northeast Corridor tomorrow if you

were successful in achieving this IMO status?

Mr. SERLIN. We would be offering them a job. We can’t obligate

them to accept it. But, yes, you are right.

Mr. LATOURETTE. When folks from your group visited me earlier,

is it the contemplation that this IMO would become a second national railroad?

Mr. SERLIN. No, sir. The IMO would simply manage on behalf of

the Federal Government Amtrak’s owned infrastructure, which is

the 500 route miles roughly in the Northeast, 100 miles in Michigan and Chicago’s Union Station.

Mr. LATOURETTE. And the $2.75 billion that you mentioned, the

$2 billion in cash and the assumption of about $750 million of obligations, I assume that that would be guaranteed or mandated by

statute or guaranteed by contracts?

Mr. SERLIN. That would be by statute or we would be obligated

to make those payments.

Mr. LATOURETTE. The last question is the RRIF loan that you

were talking about sounds a little bit better than the regular RRIF

loan, which is a guarantee that the government—but I thought you

were describing something that was more concrete than the regular

RRIF loan. Am I right about that?

Mr. SERLIN. You are, sir.
55

One the issues in the standard RRIF loans is the nature of the

collateral. Here, prior to the RRIF loan being granted, collateral

equal to 100 percent of the RRIF loan, a third-party investment

grade instrument would have to be provided to the U.S. Treasury.

Mr. LATOURETTE. I did have one more question before I move on

to somebody else.

There have been a lot of proposals—not only those presented

today but others—dealing with the spin-off of the Northeast Corridor. One of the things—and when I get to Mr. Reistrup I want

to talk to him about it—is that when there was a perpetual freight

easement given to Conrail, which has now been assumed by their

successors in interest, CSX and Norfolk Southern Railroads, does

your plan envision altering that relationship, that easement? Or,

with or without those railroads, does it envision an expansion of

freight travel as well on the Northeast Corridor?

Mr. SERLIN. It is a two-part question. Let me answer individually.

Firstly, all the existing statutes, all the existing contracts would

continue forth post separation of the infrastructure so that IMO

would have to assume all of the agreements with the freight railroads whereas as is.

Secondly, we fully acknowledge that the corridor is, first and

foremost, a passenger corridor, but within the rubric, if working

with the freight railroads, the freight railroads can increase their

business. We would look forward to working with them to achieve

that.

Mr. LATOURETTE. Appreciate that

If it is all right with Ms. Brown, I have a few more questions.

We have a series of votes. I would like to recess now and come back

and ask a few more questions. Is that all right with you? We have

three votes, so we will stand in recess and try get back together

at 2:15, if we could. Maybe you could get a bite to eat, and we will

see you at 2:15.

The subcommittee stands in recess.

[Recess.]

Mr. LATOURETTE. If the witnesses will return to the table, we

will try to move through this so that we can get you on your way.

I have a few more questions before I yield to Ms. Brown.

Mr. Reistrup, I think I was listening to your testimony, but—and

when you were talking about a pilot project, but I don’t think I

heard you identify whether or not you and those that are working

with you have identified what area of the country or what line you

would be interested in running this pilot project on.

I ask you that question because I find the idea of a pilot project

to be an interesting proposal, but there will be those who say if you

cherry pick a certain line—so I would like to know if you have

identified where you would like to make this pitch and if you can

tell us a little bit about how you came to choose that site.

Mr. REISTRUP. I would be happy to, Mr. Chairman, if you put

Plexiglass between me and my new friend from Ohio. And we lived

in Ohio, Cuyahoga Falls and also Painsville, early in my career.

I really, a couple of years ago when I began advising RSC, suggested that they could not roll out the entire Amtrak operation,

particularly all over the country, so I suggested a rollout plan. And
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we, from the beginning, talked about something that had relatively

light freight traffic, two or three trains a day, so that the freight

capacity is not a big issue, that the line is in relatively good condition and at least one friendly freight railroad. So we picked, and

at my suggestion, Milwaukee through Chicago to St. Louis; and we

would run as many as five round trips, five frequencies there.

The line—as you may know, Federal funds have gone into positive train control to St. Louis. About half of that line is set up now

for 110 miles an hour. It rides like a dreamboat. I have ridden the

whole thing on a UP inspection train.

The other is the former Milwaukee—a high-speed line that used

to run 120 miles an hour with steam when I was a kid. That line

today is limited to 79 miles an hour. But it is Canadian Pacific,

and they also work with the passenger carriers and have light

freight traffic. That is why we did it. We wanted to have a hub

where there is maintenance for the locomotives and cars and right

downtown Chicago is where that is.

Mr. LATOURETTE. Do you need legislation to make this pilot

project a reality? Or do you believe that the current statutory

framework under which Amtrak is operating could give them the

ability to move forward on what you have suggested to us today?

Mr. REISTRUP. I am not an attorney, but we do have one that is

with Metro North in our group, Walter Zelig, and we do not feel

that legislation is necessary. Amtrak, being a corporation in the

District of Columbia, could do it with us because they would be

running this.

Mr. LATOURETTE. Have you talked to the powers that be at Amtrak about your proposal?

Mr. REISTRUP. Yes, sir, we have.

Mr. LATOURETTE. Two other—and I thought you heard you say—

or maybe in a previous meeting that I had where folks outlined

your proposal—that you think you could have this pilot line up and

operational by spring of 2006?

Mr. REISTRUP. Yes, sir.

Mr. LATOURETTE. You mentioned a trust fund dedicated for rail.

I know that one of my other postings is the Water Resources Subcommittee, and a lot of people are now thinking about a trust fund,

because we have a huge deficit in our sewer and water line capacities in this country. And the question, the $64,000 question, is

where do the funds come from that goes into the trust fund?

I know that people in the bottled water industry, for instance,

are all up in arms because they think the easiest thing for us to

do is put a nickel on these bottles of water. Where do you envision

the funds coming from for a trust fund?

Mr. REISTRUP. Part of the funding would come from the passenger ticket revenues along the lines, which would be the Amtrak

ARO operation, but also any commuter operators, users. And where

the improvements included freight, double-tracking, for instance,

freight capacity, freight would be part of that.

Mr. LATOURETTE. And the last, Mr. Scardelletti had to catch an

airplane, but you also heard a number of his concerns and the concerns that I share and I know the ranking member does as well.

How would the issue of existing labor contracts be dealt with on

this line that you envision running as a pilot program?
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Mr. REISTRUP. In brief, the existing labor agreements would be

in place, Amtrak contracts, because Amtrak would be the operator;

and if there had to be a slight change in crewing, it is not really

a union consideration, but a local agreement, running through Chicago being an example of that.

But we would live within the existing rules. For example, 6

hours for a lonesome engineer without an assistant, and that would

be the limit. Or there would be two.

Mr. LATOURETTE. Okay. And, last, it is a pleasure to have you

here as a former President of Amtrak and maybe you can help me

with something that has troubled me. I think about the time you

were at Amtrak. I recall the 4R act authorized Amtrak to enter

into agreements, and one of the agreements that Amtrak entered

into was the granting of this perpetual easement of freight to Conrail, now defunct and inherited by CSX and Norfolk Southern. So

whether the corridor in the future is operated by Amtrak or anyone

else, no freight can operate without the consent of those two freight

railroads unless the easement that was negotiated is bought out.

Can you share with us what motivated Amtrak at that time to give

away forever a freight monopoly? Now it is a duopoly on the railway on the Northeast Corridor.

Mr. REISTRUP. At that time—from my standpoint at that time,

Mr. Chairman, I felt that having Conrail, who was interested in

survival, did not like passenger trains. Much of its management,

they inherited that attitude. We could not have them running

metroliners and have Amtrak survive very long. So we basically accommodated them with this easement.

Now, there are three operators, Norfolk Southern, CSX, but I call

it Little Conrail up in New Jersey as well. That easement does

exist, and it is exclusive, as I read it. I am not an attorney.

Mr. LATOURETTE. It is, too. And it is not a question but my district office in Painsville, Ohio. So, like Mr. Liberatore, you are well

represented.

Ms. Brown.

Ms. BROWN. Thank you, Mr. Chairman.

First of all, I have a letter here from the Transportation Trade

Department, AFL-CIO, which states their opposition to the IMO

plan. Mr. Chairman, with your permission, I would like to insert

that into the record.

Mr. LATOURETTE. Without objection.

[The information received follows:]
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Ms. BROWN. My question is for Mr. Serlin. Do you have a detailed business plan and a detailed capital plan which states how

much will be invested, where and when it will be invested, and on

what specific projects and the costs of the projects? If so, can you

provide that to the committee for the record?

Mr. SERLIN. We do have such a plan, and we would be very

happy to share it with the committee. It is proprietary, so we are

restricted from entering it into the record, but we would be very

happy to meet with you and share it with you and your staffs.

Ms. BROWN. Okay. Your proposal asks for $17.5 billion of RRIF

loans with no clear mechanism for repayment. How can you justify

such a request, given your limited experience in the railroad industry? How you would repay the loan?

Mr. SERLIN. It is a multipart question, so let me address each

part individually.

Firstly, the way the RRIF loan—there are two ways in which the

loan can be repaid. Most critically, the U.S. Government holds a

third-party investment grade instrument in the value of $17.5 billion, which means in the event that the IMO—in our case, RIM—

would default or be unable to pay the full amount, you have the

full amount or Treasury has the full amount in its hand. That

guarantee instrument is the full amount of the RRIF loan.

Ms. BROWN. Just another follow-up question. What fees would

you impose on users or passengers that are above and beyond the

fares as paid already? Would it be imposed on States and local governments? In other words, what are your revenue streams?

Mr. SERLIN. There are a multitude of revenue streams. You have

from the freight railroads—we do not foresee any increases on—

there are three freight railroads: CSX, Norfolk Southern, PNW. We

do not see any increases, and we would look forward to working

with them on additional business at agreed-upon rates.

You have the commuter carriers that are currently protected

under title 45. They would have exactly the same title 45 protections. None of that is being modified. So there would be no increases unless it was agreed to between them and the IMO. But

there is no basis for that unless they ask for it. They are protected

under title 45.

So—and there is no imposition of charges on the States. The

States are the beneficiary of the improved infrastructure network

and of the increased—of the new stations we would be building as

part of this and of the additional trains and the additional throughput.

Ms. BROWN. Thank you.

In closing, Mr. Chairman, let me just say that there is no mode

of transportation that pays for itself, irregardless of what any

member of this committee says or any Member of Congress says.

I have been on the Transportation Committee for 13 years, but I

had 10 years of experience before I came here on the Transportation Committee in the Florida house, and I know someone here

says Florida is ready to come up with millions of dollars. I hope you

are not waiting for the check.

So I know we have our challenges before us as far as Amtrak is

concerned. But it has been the stepchild of this administration and

the Congress as far as that is concerned. But, clearly, the American
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people support Amtrak and they would like for us to work to make

the system a world-class system.

I thank you, Mr. Chairman, for holding this hearing.

Mr. LATOURETTE. I thank the gentlelady.

Mr. Mica.

Mr. MICA. Mr. Chairman, just for the record, the State of Flor- ida—you can snicker and laugh, but the State of Florida had $70

million prepared to put into one of the corridors, and I see people

shaking their head in the affirmative.

I will also put that in the record with permission and document

it, Mr. Chairman.

To fully implement—to continue the discussion on the $17.5 billion, what kind of a timetable would you need to get into that kind

of a arrangement, to actually provide service?

Mr. SERLIN. I am sorry. Would you mind—I am not quite sure

I follow the question. What service?

Mr. MICA. You are talking about putting $17 billion investment

through a loan. How long would it take to actually put that investment in and see it realized?

Mr. SERLIN. Thank you for restating the question.

The $17 billion—again, if RIM is selected for the IMO by the

Surface Transportation Board, because this is not being sole

sourced by our business plan we would start investing that literally

on day one. Now, obviously, it is a slow and steady process. You

cannot do this too quickly. You do not want to disrupt train service,

operations of Amtrak or the commuter carriers or the freight carriers, so this has to be done in a slow systematic fashion. The word

slow means safe. It does not mean—does not mean lackadaisical.

Safety is clearly the first thing that goes here, and everything is

done to address the safety issues.

Congressman Simmons, bridges in Connecticut. The State bringing—continuing the work of Amtrak on the Susquehanna River

bridge on the southern tier where there has been little—relatively

little investments spent to date. We would anticipate being able to

complete bringing not only just to a state of good repair but beyond

a state of good repair in parts starting within just several years.

We look at this of having a turnaround starting about 15 years

now. Starting year 16, our projections are to be cash positive.

Mr. MICA. Okay. Also, for the record, there is transportation that

does make money. Of course, they cited the cruise ship industry

and some of the pleasure rail passenger services. Some run by the

cruise industry does make money.

I just met with representatives of Greyhound. They provide our

national bus network, and they do make money. They are listed on

the stock exchange if anyone wants to see them.

Not that we have to make money on this. I am just trying to—

I have always said we would have to subsidize some essential service, and we do that in airlines and other areas. What we want to

do is minimize the subsidization and also maximize the service.

One the problems I have with any of the privatization proposals

is that we have to have some accounting; and I think, Mr. Chambers, your association suggests a line of business basis. We can’t

take a proposal and do a small demo project and not know what

Amtrak’s true costs are, and we have had testimony again today
61

that confirms that they have $175 million in unaccounted-for expenses. So to try to find out what it is costing Amtrak and compare

that service with some private sector demo will never work until

we get the finances straightened out. That is part of your plan,

isn’t it, Mr. Chambers?

Mr. CHAMBERS. Yes, that is correct. In fact, we have a another

element in it. And I haven’t studied your Mica plan carefully.

Mr. MICA. The biggest problem I see, too, is the only rail infrastructure that they really maintain is that Northeast Corridor and

that 100 miles we talked about in Michigan. That is why I say if

we could take that out and also have a private operator from the

operations standpoint you can see exactly what your dollar costs

are in the balance.

Now, Amtrak should be out of the commuter business. There are

plenty of vendors that do commuter business and do it very well.

We have them in Florida, and they do make money. Part of it is

subsidized by the government, but they do make money and provide service; is that correct?

Mr. CHAMBERS. Yes. I would like—

Mr. MICA. Like Herzog, for example?

Mr. CHAMBERS. Herzog operates in Florida. In fact, several of the

commuter agencies are going to the model that we are recommending of going to competition with private vendors to run the commuter operation.

Mr. MICA. But a private operator that provides—and we know

that Amtrak gets into the commuter business—cannot compete

with Amtrak when they bid against a government entity that is

grossly subsidized, where we can’t figure out even the bottom line

their finances, can we?

Mr. CHAMBERS. That is the position—that is correct. That is the

position of NRC. Amtrak is working on it. But until they are operating on the same kind of a private basis as the other carriers with

their inherent subsidies and inherent political relationships and so

on, they provide competition that you can’t compete against in a

transit environment.

Mr. MICA. If necessary, if it takes me 13 additional years, I will

get audits or GAO reports on every aspect of their operation until

we figure out what the costs are; and the next one is going to be

a doozy coming up.

Mr. CHAMBERS. I would like to go to your first question, because

it is an important one.

You are right. What we are proposing is the Gunn-Laney proposal to break Amtrak grat subsidies down to lines business. We

also have a proposal that a study should take place on the Northeast Corridor on financing mechanisms including the RIM proposal,

commuter fees, efficiencies, and so on should be part of that study.

Our key proposal—goes back to your dialogue with Ms. Brown.

A key part of our proposal is that there should be subsidy available

for the Secretary to be able to make direct grants to the States to

launch demonstration projects using alternative operators.

Florida, since there has been debate about that, is a good example of exactly what we are proposing here. We are proposing that

you take the amount that Amtrak would be subsidized for operating subsidy and for capital and make that available to the State
62

Department of Transportation. The Florida State Department of

Transportation then could select Amtrak or they could go into a

competition. And Florida is a good example. Florida does not have

one of those State-subsidized routes today so this would be a new

operation.

You are correct that Florida has made some commitment of

funds, which I understand is still there. Amtrak backed away from

it because they were losing money and did not want to launch new

service. The last time that I talked to the Florida East Coast they

were still interested in launching that service. Under this proposal

then, the Secretary of Transportation from the State of Florida

could make a proposal to the Secretary to provide—a grant; and

then the State of Florida could select Amtrak if they chose or they

could put it out to bid or ask Trirail to run the service. Which

would be good for me because my client, Herzog, operates the

Trirail trains. So that could work out well. They would have these

kinds of options, and then we would get some testing of the private

market and how it really works.

Ms. Brown is absolutely right. There are very few rail passenger

operations anywhere that are not subsidized. The question is how

the subsidy is going to come. We feel—and this is the key to this

proposal. We feel that the subsidy should not be considered a subsidy but should be a public service obligation contract that goes

from the USDOT to the operator to provide a service. Amtrak can

compete for that, other operators can compete for that, and that is

the model that is working now, starting to work around the world.

In terms of Amtrak and privatization specifically, will we ever

get there? I don’t know. But I do believe if you deal with the legacy

debt that several of you talked about, you go to the idea of public

service contracts, that Amtrak itself could become a private operation over time, and I think we need to get on with it and try some

of these demonstrations.

Mr. LATOURETTE. Thank you, Mr. Mica.

I thank all of the members who participated today. It was a robust hearing of ideas attempted.

I want to thank our panel for your testimony. I want to thank

you for your organizations, for taking the time to take an interest

in the passenger rail in this country.

I think that everybody agrees—I did not hear anybody disagree

anyway—that we need to make sure that we have a good, viable,

competitive passenger rail system in this country; and, hopefully,

some of the ideas that came forth on this panel and the first panel

will assist us in doing that.

I would just make an observation. It was mentioned a couple of

times about the Lautenberg bill, and I think it has good provisions

and bad provisions. One of the provisions that troubled me is that

it relies heavily on bonding, which I don’t think has much chance

of success in the Ways and Means Committee here, and I know it

exceeds the current President’s observations relevant to the Federal Government’s bonding authority.

So we hope to work with Ms. Brown and take some of the ideas

that we have talked about today and fashion a House piece of legislation in the true bipartisan tradition of this committee and see if
63

we can convince our Senate counterparts that we maybe have some

ideas that they had not thought about.

But, again, I thank you very much for being here, and you go

with our thanks.

This hearing is adjourned.

[Whereupon, at 2:47 p.m., the subcommittee was adjourned.]
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