Bidding opens to outsource up to three Amtrak long distance trains

[cirdan]

I don't see the proposal up currently as having any bidders, though. From the sounds of it, they need both the trackage rights and the cars to make it happen. The Class I's don't have the cars to make it happen (nor do they want to deal with that) and any private railcar operator will likely have a difficult-to-impossible time working with the Class I's for trackage rights.

Maybe they don't need to bring in their own cars or equipment. Amtrak could lease them the cars already on those services, at least initially, with maybe a clause in the contrcat that the contractor must bring in their own equipment within a reasonable horizon.

I can't see anybody accepting such terms by the way, at least not in the present climate. I'm just trying tpo come up with hypothetical schemes.

 

[Green Maned Lion]

For Amtrak to change it needs money. Have you ever seen how much money it costs to save a private business that screwed up? Bankruptcy financing is a huge deal.

Amtrak can change a little here or a little there, but the changes people talk about are almost always outside Amtrak's financial reality.

 

[DSS&A]

For a short time in the 1990s, the Federal Government allocated transit agencies to do a lease-lease back financial arrangement to lease their long term new equipment (passenger cars) to there organizations who paid BIG money to utilize the depreciation tax write-off. The Feds stopped it because they started loosing too much tax revenue.

A new version of this lease-lease back law could be enacted to help finance around 50-65 percent of new passenger cars and still not have the Feds "loose too much tax revenue". Amtrak could then use other financing to pay for the remaining costs. Bridges also have a long enough lifespan and a large enough cost for a lease-lease back depreciation write-off.

This type of financial arrangement would probably be received well by the current administration because it would get private capital funds to pay for new infrastructure.

 

[sldispatcher]

1 or 2 percent of this could have transformed Amtrak's Long Distance service for the next 30 or 40 years.

http://money.cnn.com/2012/10/03/news/economy/green-stimulus/index.html

Trust me, I'd love to see AMTRAK get a dedicated 1/4 of 1 % of the gas tax for infrastructure and capital improvement projects.

DSS&A: Great idea that would still work, but again, that would be thinking too far outside of the box.

 

[neroden]

A dedicated funding source, and a concerted program to purchase the tracks or build new tracks... well, that's all Amtrak really needs. Everything else is minor.

This formula is, after all, what saved, expanded, and/or created every single urban rail system in the country. This is the story of every successful subway, light rail, streetcar, or commuter rail line in the US and Canada. Same formula should work for Amtrak.

 

[cirdan]

Curiously they're usually quite happy to sell their tracks to governments (state, local, or national). Take advantage of that.

They are also happy to sell tracks to shortlines.

But the tracks they like to sell are typicall branches with relatively insignificant traffic, marginal stuff, on which operations break even at best.

In the case of lines being sold to commuter rail authorities, it's actually quite attractive for them because somebody else assumes the maintenance and scheduling costs but the RR still gets to run trains.

One measure of a company's performance is how well capital i invested. If you put your money into a main line, you have a high return on that investment. However, a barnch may break even and may even make a loss. One way out of that would be to close the line, but if somebody else is stepping up to do the maintenence for you, that's an even better alternative. If somebody even steps and offers you cash for it, that's cash you can invest elsewhere where you can generate higher returns.

I don't think any RR, except maybe when in bankrupcy, would contamplate selling something like a transcon.

 

[cirdan]

Of course some of the freight operators understand this. They'd love to have the government maintaining the tracks the way it maintains the roads for the truckers. And I'm OK with that.

I don't thin the governemnt taking over all ROW would necessarily be good for the railroads.

In many cases, railroads enjoy relative monopolies. If the competion needs to take a longer and more circuitous route, then you are at a natural advnatage.

If the government were to own all the track, railroads would no longer compete on the basis of geographic advantages or speed but it would just be about price. A race to the bottom would ensue which would damage the industry as a whole.

 

[neroden]

The government owns all the track in practically every country in the world. The result is... they don't do the stupid stuff. It's possible for freight and passengers to take the most direct route rather than taking circuitous routes to "stay on the same company".

 

[Green Maned Lion]

Not that I think you are nuts or wrong, Nate, but two points:

Most government owned infrastructure in the US is poorly maintained, be it tracks or roads. I understand the idea you are proposing, but while badly maintained roads mostly mean an uncomfortable ride and more frequent trips to the alignment rack, tracks maintained to the level of my local streets would mean half the trains falling off the tracks, or crawling like a newborn baby.

Secondly, defining a successful public rail system is tricky. Most people around where I live consider the RiverLine successful- it has consistently beat ridership estimates. It also has a fair box recovery somewhere south of 25%. Is that success? (Open ended question with open ended answer.)

I refuse to consider it successful until I can eat dinner in Manhattan any day of the week at a reasonable hour and get home before the line shuts down.

 

[bretton88]

Not that I think you are nuts or wrong, Nate, but two points:

Most government owned infrastructure in the US is poorly maintained, be it tracks or roads. I understand the idea you are proposing, but while badly maintained roads mostly mean an uncomfortable ride and more frequent trips to the alignment rack, tracks maintained to the level of my local streets would mean half the trains falling off the tracks, or crawling like a newborn baby.

Secondly, defining a successful public rail system is tricky. Most people around where I live consider the RiverLine successful- it has consistently beat ridership estimates. It also has a fair box recovery somewhere south of 25%. Is that success? (Open ended question with open ended answer.)

I refuse to consider it successful until I can eat dinner in Manhattan any day of the week at a reasonable hour and get home before the line shuts down.

To tack onto that, France is seen as one of the great train systems in the world, completely owned by the government. The unseen underside of that is while the tgv is great, the regional train lines outside of Paris have been left to rot, leaving a lot of those lines having to be bustituted or super slow.
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[Anderson]

Not that I think you are nuts or wrong, Nate, but two points:

Most government owned infrastructure in the US is poorly maintained, be it tracks or roads. I understand the idea you are proposing, but while badly maintained roads mostly mean an uncomfortable ride and more frequent trips to the alignment rack, tracks maintained to the level of my local streets would mean half the trains falling off the tracks, or crawling like a newborn baby.

Secondly, defining a successful public rail system is tricky. Most people around where I live consider the RiverLine successful- it has consistently beat ridership estimates. It also has a fair box recovery somewhere south of 25%. Is that success? (Open ended question with open ended answer.)

I refuse to consider it successful until I can eat dinner in Manhattan any day of the week at a reasonable hour and get home before the line shuts down.

To tack onto that, France is seen as one of the great train systems in the world, completely owned by the government. The unseen underside of that is while the tgv is great, the regional train lines outside of Paris have been left to rot, leaving a lot of those lines having to be bustituted or super slow.
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This is always a concern of mine with HSR systems: You end up serving a subset of the market very, very well and a good chunk of it rather poorly unless you're willing to cross-subsidize.

 

[ehbowen]

The government owns all the track in practically every country in the world. The result is... they don't do the stupid stuff. It's possible for freight and passengers to take the most direct route rather than taking circuitous routes to "stay on the same company".

If you're comparing Jimmy Stewart's Mr. Smith Goes to Washington against DiCaprio's Wolf of Wall Street, I would have to agree with you. Unfortunately, honest and diligent men with a servant's heart are hard to find in either the business or political spheres these days. If we're talking the societal norm, I would have to say that there is no reason to believe that an indifferent, self-absorbed bureaucrat would be a better steward than an indifferent, self-absorbed plutocrat. And the plutocrat would be easier to oversee and motivate; all it takes is a little pelf.

Personal anecdote, yes, but it's an absolutely true story. I worked for a few years maintaining a major physical facility owned by the City of Houston. The facility manager told me, to my face, that his goal was to spend as little as possible for the next eight years so that he would get good evaluations until he retired. After that, and this is a direct quote, "I don't care if this whole place falls apart and they have to rebuild it from the ground up." Do you think rail passenger service would be doing better under the management of someone like him?

Edit To Add: We did experiment with nationalizing the railroads, during World War I. There was enough "stupid stuff" done during those years to fill several books. Your retraction will be accepted at any time.

 

[Ryan]

If we're talking the societal norm, I would have to say that there is no reason to believe that an indifferent, self-absorbed bureaucrat would be a better steward than an indifferent, self-absorbed plutocrat. And the plutocrat would be easier to oversee and motivate; all it takes is a little pelf.

You've got that backwards. The plutocrat answers to nobody. The bureaucrat answers to the people. That whole "government by the people, for the people bit", you know?

 

[ehbowen]

If we're talking the societal norm, I would have to say that there is no reason to believe that an indifferent, self-absorbed bureaucrat would be a better steward than an indifferent, self-absorbed plutocrat. And the plutocrat would be easier to oversee and motivate; all it takes is a little pelf.

You've got that backwards. The plutocrat answers to nobody.

Oh? Customers, stockholders, regulators, financiers...lots of leverage to make him pay attention to the basics of customer service. Just make sure that he is able to make a profit if he gets it right.

The bureaucrat answers to the people. That whole "government by the people, for the people bit", you know?

The problems we're having today can be directly traced to the fact that the bureaucrats do NOT answer to "the people". What, exactly, could I do about the personal example which I cited? Tell the local newspapers, and have him call me a liar and fire me while he pointed to his pristine record? Think again.

 

[cirdan]

Not that I think you are nuts or wrong, Nate, but two points:

Most government owned infrastructure in the US is poorly maintained, be it tracks or roads. I understand the idea you are proposing, but while badly maintained roads mostly mean an uncomfortable ride and more frequent trips to the alignment rack, tracks maintained to the level of my local streets would mean half the trains falling off the tracks, or crawling like a newborn baby.

Secondly, defining a successful public rail system is tricky. Most people around where I live consider the RiverLine successful- it has consistently beat ridership estimates. It also has a fair box recovery somewhere south of 25%. Is that success? (Open ended question with open ended answer.)

I refuse to consider it successful until I can eat dinner in Manhattan any day of the week at a reasonable hour and get home before the line shuts down.

To tack onto that, France is seen as one of the great train systems in the world, completely owned by the government. The unseen underside of that is while the tgv is great, the regional train lines outside of Paris have been left to rot, leaving a lot of those lines having to be bustituted or super slow.
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One of the problems in France is that the country is hyper centralized. Virtually everything is decided in Paris and by people with a very Paris-centric view.

So the rail system, as indeed much else, is built to make it easy to get to paris quickly. Cross country and regional routes get much less money, and in many cases they only survived because some local people or groups put up huge protests - in Paris, otherwise they wouldn't ahve been noticed.

Germany is a much more decentralized country. Berlin may be a nice city but it's rather peripheral. There are tattempts to artificially make it important, but if you've been there you can see this is mostly fake.. Government is much more federalistic and regional governemnts have much more power. This is why most high speed lines in Germany don't come anywhere near Berlin but connect the other major cities. And because governemnt is more local, cross country and regional lines are also much more visible and are thus in far better shape (on average) than those in France.

Move to Switzerland, a country that is even more decentralized. Berne doesn't feel one bit like a capital city. It's quaint and slow and special and most Swiss don't take anything that comes from there very seriously. The cantons are all powerful, and many of the cantons are small, with several having only about 20,000 inhabitants. And if you get decisons taken on that level, you get a lot of money being puit into local connections.

 

[dlagrua]

As I've said before I do not believe that private industry would bid to take over LD routes where they could not follow today's formula of employing cheap labor. Unfortunately, corporate America has evolved to the point where its only purpose is to make a profit at any cost.

IMO the best operation of the railroads, can be done by private industry but only with government oversight.

 

[ehbowen]

As I've said before I do not believe that private industry would bid to take over LD routes where they could not follow today's formula of employing cheap labor. Unfortunately, corporate America has evolved to the point where its only purpose is to make a profit at any cost.

IMO the best operation of the railroads, can be done by private industry but only with government oversight.

I wouldn't argue that one bit. I just think that we need to restructure the incentives so that it is possible (not guaranteed) for private business to make a worthwhile profit if they do everything right. That includes setting standards which need to be met to qualify for those incentives (quality, frequency, capacity, OTP) and enforcing restrictions (hours, wage rates, maintenance standards) which ensure that those who are inclined to "race for the bottom" can't undercut those who really do want to provide a decent service.

 

[jebr]

I guess I just don't see the appeal for any private company wanting to wholesale take over the train service from Amtrak. There's too many disparate elements and specialties needed to make it work that without a massive scale there's high risk and relatively low reward.

If we're truly serious about using privatization for aspects of intercity passenger rail, it needs to be broken up into specific elements, likely with a fee-for-service contract. I could see the potential for efficiencies in having companies that already specialize in certain elements of the experience, and if they were interested in it creating a better experience and/or saving some money without degrading the experience. Setting aside labor contract issues, etc. I could see the benefit of having a restaurant chain operating the dining car, contracting out the cafe car operations to a fast food or convenience store chain, contracting out the sleeper cars to a hotel chain, and contracting out the operational crew to freight railroads. There's a lot of synergies in operating the elements as simply moving extensions of landlocked chains, perhaps moreso than trying to operate it all under the "Amtrak" banner.

Now, we'd have to make sure the contracts were written in such a way to ensure that the differences between the two are accounted for, and there may not be chains interested in operating them even under a fee-for-service model. But I think that particular question is still open and one that hasn't been fully considered by Amtrak as a cost-savings and/or service-enhancement measure.

 

[cirdan]

I guess I just don't see the appeal for any private company wanting to wholesale take over the train service from Amtrak. There's too many disparate elements and specialties needed to make it work that without a massive scale there's high risk and relatively low reward.

If we're truly serious about using privatization for aspects of intercity passenger rail, it needs to be broken up into specific elements, likely with a fee-for-service contract. I could see the potential for efficiencies in having companies that already specialize in certain elements of the experience, and if they were interested in it creating a better experience and/or saving some money without degrading the experience. Setting aside labor contract issues, etc. I could see the benefit of having a restaurant chain operating the dining car, contracting out the cafe car operations to a fast food or convenience store chain, contracting out the sleeper cars to a hotel chain, and contracting out the operational crew to freight railroads. There's a lot of synergies in operating the elements as simply moving extensions of landlocked chains, perhaps moreso than trying to operate it all under the "Amtrak" banner.

Now, we'd have to make sure the contracts were written in such a way to ensure that the differences between the two are accounted for, and there may not be chains interested in operating them even under a fee-for-service model. But I think that particular question is still open and one that hasn't been fully considered by Amtrak as a cost-savings and/or service-enhancement measure.

MacDonald's once operated a small number of dining/cafeteria cars in Switzerland. It wasn't a success and the contract wasn't renewed. Some years later Starbucks tried the same and also failed.

Maybe the synergies aren't as big as they may at first appear.

On the other hand there are dedicated train service companies such as Wagons-Lits who have been running train catering and sleeping car services in different European countries for decades.

 

[railiner]

Wagon-Lits was the European version of The Pullman Company...

 

[Green Maned Lion]

As I've said before I do not believe that private industry would bid to take over LD routes where they could not follow today's formula of employing cheap labor. Unfortunately, corporate America has evolved to the point where its only purpose is to make a profit at any cost.

IMO the best operation of the railroads, can be done by private industry but only with government oversight.

Actually, that's the way business is always done. It's just that today's corporations are getting bad at it. They have started to neglect long term profitability in a search for quarterly returns.

I was in business. All I cared about was making a lot of money. In order to accomplish this, I was generous with refunds, friendly and helpful to my customers, and a finikin about my products quality. Because a good, we'll run, quality and customer focused business is the one that will, in time start generating a lot of money from loyal customers... and if you don't screw up, it will never stop.

 

[cirdan]

Wagon-Lits was the European version of The Pullman Company...

In later years they developed to a service company.

 

[ABQFloridian]

I don't thin the governemnt taking over all ROW would necessarily be good for the railroads.

In many cases, railroads enjoy relative monopolies. If the competion needs to take a longer and more circuitous route, then you are at a natural advantage.

If the government were to own all the track, railroads would no longer compete on the basis of geographic advantages or speed but it would just be about price. A race to the bottom would ensue which would damage the industry as a whole.

More likely, the fair and open competition would serve to sort the industry out. It is the state of monopoly which you praise that causes the degraded state of rhe tracks we encounter on the Amtrak trains we all ride and love. Think of how many of a railroad's customers are essentially captive.
Suppose you're a large dairy processor and for the sizes of shipments you get, it wouldn't be price-competitive to haul them by truck, so you have to use rail. Your plant is off BNSF track, so you call for the rate. It's higher than you hoped? Too bad, you can't call anyone else. Shipments start coming late because they're skimping on maintenance on your line? Too bad, you can't call anyone else. They arbitrarily raise their rates on you? You get the idea. In a monopoly, there is no incentive to improve service or reduce cost.

Anyone who's ever lived in a house with only one choice cable/internet/phone provider knows this all too well. I think it also explains some of the atrocious customer service on Amtrak.

The only way opening railroading up to real competition would "damage the industry as a whole" is if you consider industry to be only is current players, because some big names might indeed go under. Some might be so used to not having to fight for customers that they never adjust. If some operators race to the bottom, eventually one will hit it and die, leading the others to change course. The market will stabilize within a couple of years, and the companies that emerge as profitable will be those who can deliver freight and passengers with the best combination of speed, service, and efficiency, which by my measure means the industry will be drastically improved, not damaged.

 

[Anderson]

I don't thin the governemnt taking over all ROW would necessarily be good for the railroads.

In many cases, railroads enjoy relative monopolies. If the competion needs to take a longer and more circuitous route, then you are at a natural advantage.

If the government were to own all the track, railroads would no longer compete on the basis of geographic advantages or speed but it would just be about price. A race to the bottom would ensue which would damage the industry as a whole.

More likely, the fair and open competition would serve to sort the industry out. It is the state of monopoly which you praise that causes the degraded state of rhe tracks we encounter on the Amtrak trains we all ride and love. Think of how many of a railroad's customers are essentially captive.
Suppose you're a large dairy processor and for the sizes of shipments you get, it wouldn't be price-competitive to haul them by truck, so you have to use rail. Your plant is off BNSF track, so you call for the rate. It's higher than you hoped? Too bad, you can't call anyone else. Shipments start coming late because they're skimping on maintenance on your line? Too bad, you can't call anyone else. They arbitrarily raise their rates on you? You get the idea. In a monopoly, there is no incentive to improve service or reduce cost.

Anyone who's ever lived in a house with only one choice cable/internet/phone provider knows this all too well. I think it also explains some of the atrocious customer service on Amtrak.

The only way opening railroading up to real competition would "damage the industry as a whole" is if you consider industry to be only is current players, because some big names might indeed go under. Some might be so used to not having to fight for customers that they never adjust. If some operators race to the bottom, eventually one will hit it and die, leading the others to change course. The market will stabilize within a couple of years, and the companies that emerge as profitable will be those who can deliver freight and passengers with the best combination of speed, service, and efficiency, which by my measure means the industry will be drastically improved, not damaged.

I think the best question is whether there's a model to be had which doesn't lead to either direct government management of the tracks (which leads to a Beeching problem) or doing it one step removed (which has the potential to trigger a "Hunter Harrison" problem). Basically, how do you make sure you set the operation up so it doesn't turn into some sort of easily "raidable" piggy bank (coughMetroNorthcough)?

Of course, this has also brought to mind another aspect of this question: Whether states wouldn't just be better off pumping billions of dollars into a straight-out hostile takeover bid of some Class Is the next time the market has a bad run? CAHSR is an outlier, but for the present price of UP stock and what I think is the present value cost of the CAHSR project the state could probably buy out around 1/3 of UP's shares over a few years. On a 20% dip that amount starts getting rather close to 50%, and some action from other states (IL, WA, etc.) could make a dent there as well. VA and NC could probably take around 15% of CSX, maybe closer to 20% if the stock slumps more when Harrison leaves, for the "direct" cost of CAHSR. Those dividend checks would also go a decent way towards paying all of this off.

Ideologically I'm not thrilled at the idea of this, but I think it also has some real merit as an approach...especially since it would all be "willing buyer/willing seller" transactions. Moreover, you could probably leverage the money presently going into share buybacks into paying this back...I'm not familiar with how to set up a corporate raid or whether you'd need to take 100% of shares or just 51% or 60% or some other share...but the point does become that buying out large minority stakes in the railroads and using that to negotiate slot rights and priority handling with the executives might well make more sense than the ongoing direction of policy. Regrettably I see it as a non-starter.

 

[neroden]

Personal anecdote, yes, but it's an absolutely true story. I worked for a few years maintaining a major physical facility owned by the City of Houston. The facility manager told me, to my face, that his goal was to spend as little as possible for the next eight years so that he would get good evaluations until he retired. After that, and this is a direct quote, "I don't care if this whole place falls apart and they have to rebuild it from the ground up." Do you think rail passenger service would be doing better under the management of someone like him?

That -- deferred maintenancne -- was pretty much the official policy of almost all of the private railroads for several decades, from the 1930s through the 1990s. Your point?

Edit To Add: We did experiment with nationalizing the railroads, during World War I. There was enough "stupid stuff" done during those years to fill several books. Your retraction will be accepted at any time.

USRA established the Joint Line in Colorado, widely considered a great success. The railroads were nationalized because the pre-nationalization railroads were COMPLETELY INCOMPETENT and totally unable to move troops and materiel needed for the war. (The private owners were put on notice and managed to be less incompetent during WWII.)
I have never seen a single citation of even *one single specific case* where the USRA managed things worse than the previous private railroads. As far as I can tell, they were better managed. I have only seen vague, nonspecific, and scurrilous claims, almost uniformly coming from the private owners who were temporarily expropriated.

Feel free to provide citations to the contrary. Otherwise, your retraction will be accepted at any time.

Having researched the history extensively, the railroads were returned to the private owners basically due to political lobbying (and the clear desire of Congress to not actually pay fair value for the existing tracks), and not for technical reasons.

I realize that none of us were alive during World War I. The documentary evidence, however, is NOT on the side of the privatization supporters. Perhaps the only lesson is "remember to pay the private owners a reasonable amount for their assets", as Clement Atlee did and Woodrow Wilson didn't.