This Week at Amtrak; June 8, 2009

This Week at Amtrak; June 8, 2009

A weekly digest of events, opinions, and forecasts from

United Rail Passenger Alliance, Inc.
America’s foremost passenger rail policy institute

1526 University Boulevard, West, PMB 203 • Jacksonville, Florida 32217-2006 USA
Telephone 904-636-7739, Electronic Mail info@unitedrail.org • http://www.unitedrail.org


Volume 6, Number 16

Founded over three decades ago in 1976, URPA is a nationally known policy institute which focuses on solutions and plans for passenger rail systems in North America. Headquartered in Jacksonville, Florida, URPA has professional associates in Minnesota, California, Arizona, New Mexico, the District of Columbia, Texas, New York, and other cities. For more detailed information, along with a variety of position papers and other documents, visit the URPA web site at http://www.unitedrail.org.

URPA is not a membership organization, and does not accept funding from any outside sources.

1) For those of us who keep track of segments of the news using key words for Internet searches, the term “Amtrak” has been popping up on a frequent basis in stories referring to the bankruptcy and government restructuring of General Motors. Most of the time, Amtrak is being cited as an example of what happens when formerly private industry suddenly comes under public ownership, with all of the resulting ills and pains in that process. Most writers and thinkers are bemoaning the fate of GM, and hoping against hope GM will not one day be a close cousin to Amtrak as we know it today with all of the associated problems.

Optimists, however, don’t point to Amtrak as a comparison for GM and Chrysler, but rather point to Conrail, the product of a similar crisis takeover that was allowed to work under market forces and eventually go back into the private sector and eventually become so attractive, it was fought over by two titans of modern railroading, CSX and Norfolk Southern.

One can only wish GM and Chrysler the fate of Conrail, and not that of Amtrak.

2) Another fun exercise with the news has been the tracking of Vice President Joe Biden’s and United Stated Secretary of Transportation Ray LaHood’s ongoing dog and pony shows around the country exploring the future of high speed rail.

There have been nearly identical headlines in almost every newspaper and media outlet around the country, wherever the Veep and Secretary have gone: “(Insert city name here) is likely on the fast track to high speed rail.”

Since there is only $8 billion to go around to get things started, it looks like there are going to be a lot of disappointed folks who were hoping and dreaming to be in the first wave of high speed rail free federal monies. After all, $8 billion isn’t that much money when you’re looking at an entire continent, but it’s a start.

3) Speaking of high speed rail, this word has come from Gil Carmichael. As always, whatever Mr. Carmichael has to say is important.

[Begin quote]

PRESS RELEASE
For Immediate Release

ITI's Gil Carmichael says "ethical" 21st century High-speed rail transportation system 2.0 is needed now

- Ambitious High-speed Freight and Passenger Rail-based Transportation Infrastructure Program Required -

DENVER, CO, June 3, 2009 – Gil Carmichael, Founding Chairman of the Board of Directors of the Intermodal Transportation Institute (ITI) at the University of Denver, told a group of transportation industry, academics, and government leaders at the National Transportation Infrastructure & Regulatory Policy Forum, held at the University of Denver, in Denver, Colorado, that an "ethical" high-speed rail-based intermodal transportation system must be implemented – and soon.

"Like President Obama, a growing number of American people have a vision of a high-speed rail, intercity passenger transportation infrastructure system in the U.S.," said Carmichael. "It is a logical and necessary next step forward from President Eisenhower's Interstate Highway System of the 1950s; but proponents have long had a hard time being heard until recently."

To illustrate where we have been coming from as a nation, Carmichael pointed to several critical events that occurred during the past four decades. "Many of us remember October 1973, when the Arab oil embargo took place and created our fist energy crisis," he said. "Long waiting lines at service stations formed and many stations turned off their lights on the Interstate. They were out of gas! Americans woke up and realized that we had built a mobility system on a finite fossil fuel. By 1974, I remember people abandoning their 4,000-pound, eight-cylinder, six-MPG Buicks and lining up to buy a VW Rabbit diesel. We started to ‘think small’ and solar and wind energies were being discussed. But by the late 1970s we were seemingly discovering oil under every polar bear in the Arctic. The price of a barrel of oil then went from $35 back down to $9-$12 a gallon, and by the middle 1980s we were once again well on our way to preferring gas-guzzling muscle cars, SUV’s, 400HP V8’s, and $70,000 trucks! Fat City was the way to go until last year. Furthermore, research shows the U.S. had an unwritten transportation policy that declared we wanted ‘cheap fossil fuel.’ Virtually any political figure who even talked about raising the gas tax was doomed to failure."

So, Carmichael posited, where are we today with our 21st century global economy? The truly big energy crisis has occurred. Oil rose to $140.00 plus per barrel. Gasoline/diesel went to $5.00 per gallon. Oil is down now to about $60.00 per barrel, as are gas-per-gallon prices; but our airlines are clobbered by high fuel prices; our Big Three car manufactures are shattered; and our economy is on some sort of life support. It is quite possible that gas, diesel, and jet fuel prices will go back up in the near future as long as we are held hostage by our dependence on foreign oil and unpredictable supplies, consumer demand, and fluctuating prices. Congress cannot keep prices reduced by legislation. Global economic chaos would result if just one major oil producing nation has some sort of calamity.

"We can no longer afford the lavishness of the past. As soon as possible, this nation has got to radically change the way people and freight move in order to avoid long-term economic decline," said Carmichael. "One need only look at our demographics and our growing population density. When I was 30, there were 130 million people in the U.S. By 2040, there will be 400 million. North America will have a population of well over a one-half billion people! We are finishing the first decade of this new century and the old order of ‘doing business as usual’ is not working. It will not be able to correct itself. Like China, we must think more wisely."

Carmichael looked at where we are headed with our transportation infrastructure. "What is the biggest public-works project this century that can ensure U.S. prosperity?" he asked. "Last century it was building Interstate I – 43,000 miles of grade-separated, four-lane highways. It served millions of cars and trucks and thousands of busy, small airports and commuter airplanes, feeding into huge hub airports with large passenger planes going long distances to big cities. The airlines in the 1970s and 1980s expanded, in part, with jet fuel prices at about 40-60 cents per gallon, with no tax. Western man built a huge transportation system on this cheap oil; it employed millions of people and we all prospered. But that is all over in 2009!”

"So what do we do now?" asked Carmichael. "What major public-works project can we implement this century that will help keep our 400 million people working, will produce a prosperous economy, and will build a long-lasting, sustainable transportation system? My answer is we build ‘Interstate 2.0’. I initially said it should be 20,000 miles of high-speed rail. It really should be 30,000 miles and use the huge, wide, existing – and paid for – rail Rights of Way in partnership with the private freight railroads and the states. We should give the private railroads their 25% investment tax credit to encourage them to upgrade and double- and triple-track their main lines to increase speeds and double freight capacity. States should build or lease high-speed track on their ROWs to run new, modern, intermodal freight and passenger trains. These high-speed tracks should be grade separated just as were the Interstate Highways. Our objective is to enable Amtrak and its partners to run frequent and safe 110-125 MPH passenger trains. We have the technology with GPS/PTC to do this with a high degree of safety. It will cut highway fatalities at least 50% and drastically reduce the wear and tear and cost of maintaining the highways.”

"So intermodal and high-speed passenger rail visionaries have finally been heard by a young, new President who produced $14.3 billion to be spent on high-speed rail corridors in the next five years to begin Phase I of this century’s most important infrastructure program. This huge work program puts America on the way to creating an ‘ethical’ intermodal freight and passenger transportation network. We can electrify it by mid-century. It will then truly be an ‘ethical, sustainable’ system. President Obama will be the 21st century’s ‘Eisenhower’ because he will have created ‘Interstate 2.0,’ a high-speed rail network reconnecting our center cities, major airports, and ports – recapturing the vital role of the intercity bus and transit industries."

In explanation, Carmichael defined an ethical transportation system as one that 1) does not injure or kill 2) does not pollute and is environmentally benign 3) does not waste fuel and 4) does not cost too much. It uses the strengths of each mode. “We must build a 21st century intermodal transportation system using the ‘steel wheel and steel rail’ as the fundamental element of this system. Early in this century we can electrify all of North American rail, providing a new source of energy for our transportation system,” he said.

"We have started," summarized Carmichael. "This is Phase I – $14.3 billion of funding and 13 federally designated, high-speed rail corridors. Amtrak has crossed the Rubicon. It now needs to put out an RFP for 150 new trains sets. It will show the American people that a truly interconnected intermodal transportation system is coming. By using our existing freight rail ROWs and not destroying more green fields, we can actually have a much better transportation system than Europe. It is an exciting new era that we are entering."

About ITI

The Intermodal Transportation Institute at the University of Denver offers an Executive Masters Program that awards a Master of Science in Intermodal Transportation Management from the University of Denver. This graduate degree program prepares transportation industry managers for the increasingly complex, global business environment where knowledge of finance, quantitative processes, supply chain, law, and public policy issues as well as freight, passenger, and intermodal transportation operational strategies are critical management tools for success. For more information on the ITI Executive Masters Program call: 303-871-4702 or visit: www.du.edu/transportation.

[End quote]

Two things Mr. Carmichael said are of profound importance. The first is naming an “ethical transportation system,” a phrase that is seldom used when referring to major industry. His definition is superb.

The second is his call for Amtrak to immediately order 150 new trainsets. While that is just a round number, the meaning is all too important. Amtrak can either get with the new program in this country, or it can be left behind.

As demonstrated in the last issue of This Week at Amtrak, it’s tough to imagine Amtrak having any type of current, relevant plan for expanding the all-too-important national long distance system instead of just raiding state treasuries for the operation of often statistically irrelevant short corridor routes. We need some sort of statement right now from Amtrak about a new equipment plan, even if it’s to say a plan is in the works with perhaps a broad, general outline.

We hope GM one day will have the success of Conrail; is it impossible to hope that one day (hopefully, soon) Amtrak, too, will have the success of Conrail?

4) The following commentary appears in the Spring issue of the Minnesota Association of Railroad Passengers newsletter.

[Begin quote]

By Andrew C. Selden

Is Amtrak secretly planning to exit the long distance business?

It may be. Despite billions of new federal grants this year, signs are building that Amtrak may be on its way to dropping the commercially strongest part of its business, or alternatively, perhaps, setting up another "hostage" situation, where Amtrak pulls its old stunt of threatening to shut down this service or that, or everything, if Congress doesn't give it billions of new dollars (almost all of which are always lavished on the NEC).

By any objective analysis of Amtrak's actions, one is forced to conclude that Amtrak wants out of the LD train business. They are not repairing locomotives in Chicago, they are not fixing wreck damaged Superliners at Beech Grove, they have no plans to order more equipment for LD trains. Cliff Black, Amtrak's P.R. chief, referring to the LD trains, said "The moment of truth is coming." Before Alex Kummant was run out of town, he said, "The future is in the corridors." The last Amtrak CEO who cared about the LD trains was Graham Claytor, who said at a NARP Board meeting in Washington that "the LD trains are operating in the black." Eyewitnesses sitting right in front of Claytor confirm that this is exactly what he said.

Profit-making businesses have customers, and those customers are vital to the success of the business; not enough customers and the business dies. Businesses do everything they can to get more customers, and the value their most important customers by "courting" them constantly. All this is blindingly obvious.

So, who are Amtrak's valued customers? Passengers? Not really, at least not directly. Amtrak's most important customers are Congress and the States that hand Amtrak all that free cash to pay for service. Thanks to years of myth-making by Amtrak, Congress believes that the LD trains are huge money losers, that nobody rides them, and they go places nobody wants to visit. This is all nonsense, but it is what Congress (and the media) believe, so it might as well be fact.

Since Congress is Amtrak's most important "customer," and since Congress believes that the LD trains are the cause of Amtrak's financial mess, what is Amtrak to do? Admit that they have been cooking the books and lying to Congress for years? Admit that Warrington's promise that Acela would make a PROFIT (and bring in enough cash to support the rest of the system) was a big fat lie? Admit that they have been making spending decisions to garner political support (which translates into free money), rather than to develop a better, bigger national railroad which carries more passengers, more miles? No way, no chance. Amtrak is a company that focuses its attention on doing things that get more of that free money – rather than getting it the old fashioned way, by earning it.

It seems increasingly likely that Amtrak is going to let the LD trains die by simply not ever ordering more LD equipment, and/or not repairing anything at Beech Grove. As equipment wears out or is damaged, trains will come off, and because Congress believes the LD train myth, this action will be viewed by many as an example of Amtrak actually being fiscally responsible.

Once the LD trains are gone, it will be interesting to see how Amtrak and the politicians along the NEC explain the continued need for that huge subsidy.

Consider, too, that Amtrak's new interim CEO, New Yorker Joe Boardman, has been mouthing support for the (skeletal) national network as it exists now, but doing almost nothing to invest in it. Certainly, no new cars are being ordered, and no new route connections implemented (although, plans are well along to run a daily train Chicago – Dallas – San Antonio – Los Angeles over the Texas Eagle/Sunset route). In the six months or so that Mr. Boardman has led Amtrak, there has been much talk about another wave of improvements, including new Viewliner and Acela cars, for east coast services, including the NEC, of course, but nothing at all about new Superliners or western routes."

A business that doesn't believe in itself, that doesn't reinvest in itself, that is consumed with political game-playing rather than a relentless entrepreneurial drive to play to win in the marketplace, is a business that really is in a slow liquidation. This isn't about "fairness," or "regional balance," or "social service to fly-over states." It's about smart business and winning strategies. And based on all the evidence, Amtrak is failing at that.

[End quote]

5) Here in Florida, a game of “Chicken” is being played by the State of Florida and Tri-Rail in Southeast Florida.

Readers of this space know the just completed legislative session in Florida earlier this month was not kind to commuter rail; completely killing (they think) SunRail in Central Florida, and leaving Tri-Rail in Southeast Florida somewhat hobbled without a permanent funding source.

Part of the failed SunRail deal was for Tri-Rail to receive permission for the three counties it serves – Palm Beach, Broward (Ft. Lauderdale), and Miami-Dade – to levy a $2 per day surcharge tax on rental cars in those three counties, only. It was estimated this surcharge would provide adequate funding, in addition to farebox revenues and some monies kicked in from the three counties, for Tri-Rail to be a fully functioning system.

Whoops! SunRail went down in flames (for the moment), and the Tri-Rail’s permanent funding along with it.

Now, Tri-Rail says its host counties are not going to fund it fully, and it will have to cut back on service, slashing its daily service and completely eliminating all weekend and holiday service.

Whoops! again. The feds, who provided a lot of the funding for the recent upgrades to Tri-Rail infrastructure, say they have a written agreement with Tri-Rail which states Tri-Rail will at least run all of the trains it does today (less two frequencies), or Tri-Rail will have to pay hundreds of millions back to the feds because the federal money was intended to help Tri-Rail provide a full schedule of trains.

But, wails Tri-Rail, it has no money, and it’s going to receive even less money next year from the three counties it serves. So, supplication to the State of Florida has occurred, but the state says it has no money, either, in this tight budget year. (When it comes to government, somehow isn’t EVERY year a tight budget year?)

Which leaves Tri-Rail in a pickle.

What about raising fares? That is going on right now, with a 25% increase, but it won’t be enough.

More riders? Already happening, courtesy of last year’s high gas prices, and the riders decided to stay, even with today’s lower gas prices.

Tri-Rail is a relatively new system, just 20 years old. It has never had an opportunity to create any type of financial cushion, and has always been dependent on the financial kindness of others to survive. It kept fares artificially low for decades, declaring it was all riders could afford to pay. No one even took inflation into account; just unrealistically low fares hoping today’s day of reckoning would never occur.

Tri-Rail is not alone. News accounts from across the country tell sob story after sob story about insolvent transit systems. What started as sleek steel wheels on shiny steel rails have become lumpy, worn wheels on two streaks of parallel rust.

Who is to blame? Everyone. Commuter rail managements who thought they were in the welfare business instead of the transportation business made unsustainable business plans that never tested to find the high end of commuter fares.

Local governments which saw the benefits of commuter rail systems, but couldn’t bring themselves to understand the fiscal needs of commuter rail as much as the fiscal needs of concrete and highways.

State governments which for the most part have ignored commuter rail, never bothering to look at its benefits or flaws, especially the benefits of higher tax bases and greater job creators.

And, the federal government, which has never really had a defined surface transportation policy which blended all types of surface transportation into a cohesive system.

The one group NOT to blame is the public. When given the chance, the public has embraced commuter and light rail time and time again when it was built intelligently and to meet public demand. Skyrocketing ridership in places like Dallas-Fort Worth, Phoenix, Minneapolis, various places in California, and elsewhere prove the point.

When the public is presented with intelligent commuter rail, the public will sample it, and a certain portion of the public will choose commuter rail for a variety of personal reasons.

So much public policy today is made for annoying “green” reasons, or reasons various nanny state government busybodies think we should do for our own good (After all, we know best, they say, no matter what.), often public planners forget that if a good plan is put into place, the public will willingly flock to it, without having to inflict pangs of environmental guilt. Good commuter rail systems – especially ones like found in the Dallas-Fort Worth system – are able to stand on their own as attractive alternatives without overt government coercion.

Where should these commuter rail systems be going? Straight into the future, but with better planning, better financing, and better management.

At the moment there seems to be two types of politicians controlling the fate of commuter rail. Here in Florida, we have the type which are uninformed, and ideologically opposed to any new taxes on anyone for any reason. These same folks, while having an admirable goal, seem to think somehow infrastructure and public utilities spring from the ground after a good soaking rain. It never occurs to them the prudent investment in commuter rail brings huge results from higher tax revenues because commuter rail helps make cities livable, desirable for new businesses to relocate to the area, and commuter rail is an economic generator in its own right.

The other type of politician looking at commuter rail seems to think money grows on trees or is easily produced by printing presses, any type of commuter rail is good (No matter how ill-conceived.) because it creates jobs (Even though they are not quite sure how jobs are created.) to build, and then voters can ride for nearly free because Big Brother will be happy to foot the bill for perpetual commuter rail by raising taxes on all of those mean, evil rich people.

Neither type of politician is very good for commuter rail.

All types of politicians need to be educated about commuter rail and learn the discrete benefits of commuter rail as applied to any local system.

Why do we care about commuter rail? Because it is an infrastructure incubator for Amtrak and intercity passenger rail.

6) As long as everyone understands the huge worlds of difference between commuter rail and intercity passenger rail (And, the individual management philosophies which apply to each distinct, separate type of rail.) then an understanding can be reached how one is good for the other.

Commuter and regional rail done correctly provides a superb feeder system for Amtrak’s (or, anyone else’s) long distance trains. Commuter and regional rail stations and infrastructure also serve nicely as stations and infrastructure for long distance trains, without long distance trains being burdened solely with all of the costs of those stations and infrastructure.

Long distance trains, when part of a robust system (a far cry from today’s skeletal Amtrak system), reverse feed commuter and regional trains, disgorging passengers from long distance trains to complete their journey by local rail.

One hand washes the other, neatly and cleanly.

What we now need is a comprehensive government surface transportation policy which understands the interconnectivity of all of these systems, and the strengths and weaknesses of each.

Some will say we used to have that, in the heyday of railroads. But, really, we didn’t. Because, while we had a fully mature passenger railroad system, it was a highly regulated system constantly fighting with government interference and resulting high costs to operate often unnecessary trains and services. Also, at the time, there was no mature highway system, but, rather, a skeletal system of two lane roads around the nation which ironically resembled today’s Amtrak national system.

And, too, there wasn’t a mature air travel system, but, rather, a system of DC-3 Gooney Birds and later ill-starred Constellations with plenty of holes in the route system, and no effective transcontinental service as we know it today.

The bottom line is, we never have had as a nation a real passenger transportation policy which addresses surface, air, and water transportation. We have either had predominantly water transportation (Erie Canal), predominantly passenger rail transportation, or predominantly highway and air transportation. Never have we had a policy which takes into account the full benefits of all of these modes of transportation.

The wise gray heads like Gil Carmichael are making a clarion call for a workable transportation policy. Amtrak can be an important part of that policy, but only after it has had a major restructuring from what it is today.

7) The Wall Street Journal last week reported United Airlines has requested dueling bids from Boeing and Airbus for 150 new aircraft – all paid for with private capital, and all for passenger service. Someone obviously thinks the passenger business is on the upswing.



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J. Bruce Richardson
President
United Rail Passenger Alliance, Inc.
1526 University Boulevard, West, PMB 203
Jacksonville, Florida 32217-2006 USA
Telephone 904-636-7739
brucerichardson@unitedrail.org
http://www.unitedrail.org