Britain’s privatization plan was, for all intents and purposes, a disaster. So I am not going to advocate that Amtrak go that way. But I think privatization is possible, and I have a fairly distinct plan in my mind, which I will post later.
So lets assume that the Government decides Amtrak should be privatized. But in an unsual move for the US government, they decide to do this in an intelligent, logical, and reasonable way that is clearly aimed at success. They lay out a distinct plan for Amtrak to follow on its route to privatization.
Their first order of business is to elect you as President and CEO of Amtrak. They offer up a legislated plan consisting of the following:
Budget: Amtrak will recieve, in a lump sum, $30 billion for capital spending.
Funding: Amtrak will also recieive federal funds covering all losses in operations for 5 years.
Funding Options: You have the option of increasing that time, at the cost of $2 billion per year from that capital spending budget. So, for instance, if you want it for 10 years, you only get $20 billion.
Governance: Amtrak can operate as any business would. They can sell whatever they want of their assets, they can close any part of their business, they can expand any part of their business. They no longer have to adhere to the 180-day rule, instead they must carry out all booked fares for 90 days (so if no fares are booked, they don’t have to run the train) and offer refunds beyond that. The government can reccomend whatever options they want, but can not require their implementation.
Operational Limitations: None. Amtrak can start Amtrak Airlines in competition with the airline industry, they can start Amtrak Trailways to directly compete with Greyhound, they can start Amtrak Departments to compete with Macy’s. They can even start Amtrak Freight to compete with the freight roads, but there are some limitations on that that I’ll outline later. Amtrak can, for instance, sell the Northeast Corridor if they choose to do so.
Regulatory Aid: Amtrak is still intended primarily as the operator of rail passenger transport. As a result, several aides to them will be implemented, as outlined below.
That more or less sums up the plan the government offers you.
Firstly, that aid. Amtrak will continue to have the right to operate over any freight road they wish to. Amtrak will pay them half of the going rate for moving private freight cars (as opposed to passenger) per car. For example, take BNSF. They charge 1.10 per mile to move a private car, with a minimum charge fo $390. If Amtrak was going to move the California Zephyr with a consist of a baggage, TransSleeper, 2 Sleepers, Diner, Lounge, 3 Coaches then they would be moving 9 cars for a total of $4.95 per mile, a total of $11,622 each way. Thats an average of $2,324 per revenue car, or $36.55 per passenger, assuming capacity (48 people per sleeper, 74 per coach).
Amtrak can decide to use any route on the US rail system. The freight company must agree to a route within 90 days of Amtrak giving notice, or risk a federally-enforced fine of $300,000, payable to Amtrak.
Amtrak also must be given priority over freight traffic, or risk a federally enforced fine of $500 a minute for every minute over 10 minutes each route that a freight road holds up an Amtrak train due to improper track maintnence, prioritizing other trains, equipment failure, or dead-on-the-law trains. (So if Amtrak is 2 hours late at the fault of Union Pacific, then they have delayed them 1 hour, 50 minutes, or 110 minutes, more than legally acceptable and must pay Amtrak $55,000 in reparations.)
In addition, the freight road would be responsible for all of Amtrak’s financial costs resulting from this delay, such as bustitution, hotel stays, putting up crew, and refunds to passengers. These rules do not apply if the cause for the delay is an act of god, or something else the frieght road is truly not responsible for (such as the mudslide for the Coast Starlight). Further, there are no acceptable excuses for not tracking a passenger train on a route the FRA deems safe for operating passenger trains.
However, there is one other thing. Amtrak can compete with the freight roads if they so choose. However, if they do so with anything other than mail or a single express car, these rules do NOT apply to the trains running freight. A freight hauling Amtrak train is subject to the railroads choice to carry that train, and is subject to the rail company’s choice of priority. It would not be fair to force the freight roads to give priority to a train in direct competition with them. Amtrak CAN, if you so choose, attempt to build its own rail network.
At the end of the time period Amtrak elects for government funding, several things happen. First, the government turns in its stock, as do the railroads. A single class of stock is then issued in an IPO. The railroads have the option to either recieve stock based on 25% of their percentage of ownership of the original common stock, or an amount of money equal to the amount generated from selling that stock to the general public during the IPO.
Amtrak will then stop recieving public funding, although it can continue to opt to offer its services to anyone (including states) at a cost-plus basis. For example, Amtrak California will remain property of the state of California.
As with any other company, board members would now be elected by the shareholders.
I know this is not likely to happen. I’m not looking for people’s opinion of whether we could get the US government to agree to this scenario. I’m interested in what you, as Amtrak’s President and CEO, would do given these parameters. I’ll post my own solution later.
Lastly, I’d prefer a long, detailed solution, if you are willing to give one. If not, a shorter one would be interesting. And can I suggest we not debate each other’s ideas, and that for debating them, we create a different topic?
Edited by Green Maned Lion, 06 February 2008 - 11:17 AM.