I just saw this on the misc.transport.rail.america newsgroup. Don't know of the validity. The poster did not give any source so take it for what its worth. Or, perhaps someone has seen this and posted it earlier and I missed it. Thought it was worthy to at least mention on this forum.
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BUSH ADMINISTRATION PLAN TO REFORM AMTRAK
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The administration’s proposal, if enacted, would mean a radical departure from the procedures and policies currently in place for America’s intercity passenger rail service Among other things, it would create three new rail companies, require states assume costs of any trains they want to retain which do not meet the standards established in the bill, create a new methodology for calculating long distance train performance, enlarge the board, and give greater control to the Department of Transportation. Funding for rail corridor development would be modeled on transit projects but with differences; the Federal share would decline over a five-year period from 100% to 50%, and there would be nothing comparable for access to the Transit Sub-Account of the Highway Trust Fund to pay for rail projects. The Administration’s proposal has been introduced in the Senate by Sen. John McCain as S.1501.
FUNDING:
No specific dollar amounts of authorizations are proposed, and all of the funds necessary to implement the transition process would be subject to annual enactment by Congress of discretionary appropriations.
BOARD:
The Board of Directors would be expanded from seven members to eleven. The quorum for Amtrak’s Board of Directors would be reduced from one half of the current seats to a majority of the current members. This means that if there is a delay in the appointment of new members to the expanded Board, the three current members could make board decisions. Even after new members are appointed to the Board, its key decisions would be subject to the approval of a new Transition Committee consisting of the Secretary and one or two other members which would ensure that the public interest is served in Board decisions. Under that standard, Amtrak would essentially lose its independence of the DOT.
NORTHEAST CORRIDOR:
The NEC would be transferred to DOT for lease to an entity to be formed under a compact among the eight concerned States and the District of Columbia If the compact is not formed in two years, then the Federal commitment to fund 100% of the NEC capital backlog is withdrawn, and the continuation of intercity passenger service in the NEC would be subject to the adoption of new legislation following recommendations from the Secretary. This raises serious questions about the continuation of passenger rail service in the Northeast Corridor.
The NEC commuter authorities would lose their statutory right to use the NEC at incremental cost. Although the new NEC compact authority, if formed, would have the power to continue such favored treatment for the commuters, that seems unlikely, because the Federal Government would be providing no operating assistance to make up the difference between fully allocated costs of NEC commuter operations and incremental costs?" which is what they pay today.
The British experience is especially valid for high-speed operations like the Northeast Corridor. It has been consistently reported through many reputable sources that the British system has been an enormous and costly failure. Not only has the British system put passenger safety and reliability at risk, it has resulted in far higher public expenditures, not the savings that were promised by its sponsors. For 25 years the NEC states and Amtrak have worked to improve capacity, reliability and utility for rail passengers. One of the key reasons for its success is that Amtrak largely controls the infrastructure and operations on the NEC.
The Administration’s plan much more closely parallels the privatization of British Rail and the separation of its operations and infrastructure.
LONG AND SHORT DISTANCE TRAINS:
All of Amtrak’s seventeen long distance routes would be subject to new loss per passenger-mile limitation on the Federal share of operating expenses. The glide path to self-sufficiency would be reduced over time. Any passenger-mile loss in excess of $0.40 in 2005 would have to be paid for by the state or eliminated. Any passenger-mile loss in excess of $0.20 would have to be paid for by the state or eliminated in 2006. Any
passenger-mile loss in excess of $0.10 in 2007 would be paid for by the state or eliminated by 2008; there would be $0.00 subsidy for passenger trains after that. The proposed legislation is ambiguous on whether this calculation is to be based on avoidable or fully allocated costs. However, it probably means that long distance trains would begin to disappear with increasing rapidity in the 2005 to 2007 time frame. Unless Congress appropriates funds to pay the labor protection resulting from route
discontinuances, Amtrak would be in a financial crisis long before the end of this period, which would mean the long distance trains could disappear even faster than the new statutory formula would require.
Any Amtrak routes (long distance or short distance) outside of the NEC that are still in operation after three years would be subject to privatization.
A new operator selected by a State, local authority or a compact entity formed to support the route would be assigned Amtrak’s statutory access right to freight rail lines at an incremental cost. However, merely to retain all current routes, a State cold be required to form multiple compacts with several States. Should a new operator want to add a new route, it would be subject to negotiations with the freight railroads
without recourse to incremental costs that are statutorily established for Amtrak.
AMTRAK EMPLOYEES:
Although Amtrak employees (who do not accept a DOT buyout of up to $50,000)
continue under current terms of employment with Amtrak successor entities
(the Amtrak Infrastructure and Operating Companies), that protection could be short-lived. The NEC compact entity could select someone other than the new Amtrak Infrastructure Corporation, and States could select new operators to replace the Amtrak Operating Corporation. Who these parties might be is now anybody’s guess, and there is no guarantee that they will not offer substantially less compensation and benefits than Amtrak currently does.
(FOR REFERENCE ONLY)
There are also noteworthy changes with respect to Amtrak secured creditors, vendors, and common stockholders.
1) The debt secured by rolling stock will be assumed by the new Amtrak operating company, and the secured creditors are likely to view its credit-worthiness as substantially less than Amtrak and threaten repossession of rolling-stock.
2) The NEC would be transferred to the Secretary, who would then be responsible for payment of principal and interest on debt secured by the NEC, but only to the extent Congress appropriates funds to do so. In any event, if the NEC compact entity is formed, it will then assume the NCE debt, but the credit-worthiness of such an entity is now only speculative.
3) Equity partners in Amtrak financing deals have the benefit of covenants against the loss of tax benefits that the deals provide them. A Transfer of the NEC to such a compact entity could, for example, trigger huge financial instabilities under such agreements if the NEC becomes a government-use property as the result of such transfer. There is no apparent source of funding anywhere to pay such liabilities.
4) Amtrak vendors will note that the current Amtrak Buy America requirement, which applies to all Amtrak purchases in excess of $1 million, would be narrowed in that the requirement would be limited to purchases made with Federal grant funds only, and State or privately financed acquisitions would not be subject to the current Buy-America requirement; and
5) the mandated redemption of Amtrak common stock would not satisfy Amtrak
common stockholders, and the new authority to redeem it through condemnation
is likely to be challenged on constitutional grounds because the prescribed
standard for just compensation is too narrow.
------------------------------------------------------------------------------------------------
BUSH ADMINISTRATION PLAN TO REFORM AMTRAK
------------------------------------------------------------------------------------------------
The administration’s proposal, if enacted, would mean a radical departure from the procedures and policies currently in place for America’s intercity passenger rail service Among other things, it would create three new rail companies, require states assume costs of any trains they want to retain which do not meet the standards established in the bill, create a new methodology for calculating long distance train performance, enlarge the board, and give greater control to the Department of Transportation. Funding for rail corridor development would be modeled on transit projects but with differences; the Federal share would decline over a five-year period from 100% to 50%, and there would be nothing comparable for access to the Transit Sub-Account of the Highway Trust Fund to pay for rail projects. The Administration’s proposal has been introduced in the Senate by Sen. John McCain as S.1501.
FUNDING:
No specific dollar amounts of authorizations are proposed, and all of the funds necessary to implement the transition process would be subject to annual enactment by Congress of discretionary appropriations.
BOARD:
The Board of Directors would be expanded from seven members to eleven. The quorum for Amtrak’s Board of Directors would be reduced from one half of the current seats to a majority of the current members. This means that if there is a delay in the appointment of new members to the expanded Board, the three current members could make board decisions. Even after new members are appointed to the Board, its key decisions would be subject to the approval of a new Transition Committee consisting of the Secretary and one or two other members which would ensure that the public interest is served in Board decisions. Under that standard, Amtrak would essentially lose its independence of the DOT.
NORTHEAST CORRIDOR:
The NEC would be transferred to DOT for lease to an entity to be formed under a compact among the eight concerned States and the District of Columbia If the compact is not formed in two years, then the Federal commitment to fund 100% of the NEC capital backlog is withdrawn, and the continuation of intercity passenger service in the NEC would be subject to the adoption of new legislation following recommendations from the Secretary. This raises serious questions about the continuation of passenger rail service in the Northeast Corridor.
The NEC commuter authorities would lose their statutory right to use the NEC at incremental cost. Although the new NEC compact authority, if formed, would have the power to continue such favored treatment for the commuters, that seems unlikely, because the Federal Government would be providing no operating assistance to make up the difference between fully allocated costs of NEC commuter operations and incremental costs?" which is what they pay today.
The British experience is especially valid for high-speed operations like the Northeast Corridor. It has been consistently reported through many reputable sources that the British system has been an enormous and costly failure. Not only has the British system put passenger safety and reliability at risk, it has resulted in far higher public expenditures, not the savings that were promised by its sponsors. For 25 years the NEC states and Amtrak have worked to improve capacity, reliability and utility for rail passengers. One of the key reasons for its success is that Amtrak largely controls the infrastructure and operations on the NEC.
The Administration’s plan much more closely parallels the privatization of British Rail and the separation of its operations and infrastructure.
LONG AND SHORT DISTANCE TRAINS:
All of Amtrak’s seventeen long distance routes would be subject to new loss per passenger-mile limitation on the Federal share of operating expenses. The glide path to self-sufficiency would be reduced over time. Any passenger-mile loss in excess of $0.40 in 2005 would have to be paid for by the state or eliminated. Any passenger-mile loss in excess of $0.20 would have to be paid for by the state or eliminated in 2006. Any
passenger-mile loss in excess of $0.10 in 2007 would be paid for by the state or eliminated by 2008; there would be $0.00 subsidy for passenger trains after that. The proposed legislation is ambiguous on whether this calculation is to be based on avoidable or fully allocated costs. However, it probably means that long distance trains would begin to disappear with increasing rapidity in the 2005 to 2007 time frame. Unless Congress appropriates funds to pay the labor protection resulting from route
discontinuances, Amtrak would be in a financial crisis long before the end of this period, which would mean the long distance trains could disappear even faster than the new statutory formula would require.
Any Amtrak routes (long distance or short distance) outside of the NEC that are still in operation after three years would be subject to privatization.
A new operator selected by a State, local authority or a compact entity formed to support the route would be assigned Amtrak’s statutory access right to freight rail lines at an incremental cost. However, merely to retain all current routes, a State cold be required to form multiple compacts with several States. Should a new operator want to add a new route, it would be subject to negotiations with the freight railroads
without recourse to incremental costs that are statutorily established for Amtrak.
AMTRAK EMPLOYEES:
Although Amtrak employees (who do not accept a DOT buyout of up to $50,000)
continue under current terms of employment with Amtrak successor entities
(the Amtrak Infrastructure and Operating Companies), that protection could be short-lived. The NEC compact entity could select someone other than the new Amtrak Infrastructure Corporation, and States could select new operators to replace the Amtrak Operating Corporation. Who these parties might be is now anybody’s guess, and there is no guarantee that they will not offer substantially less compensation and benefits than Amtrak currently does.
(FOR REFERENCE ONLY)
There are also noteworthy changes with respect to Amtrak secured creditors, vendors, and common stockholders.
1) The debt secured by rolling stock will be assumed by the new Amtrak operating company, and the secured creditors are likely to view its credit-worthiness as substantially less than Amtrak and threaten repossession of rolling-stock.
2) The NEC would be transferred to the Secretary, who would then be responsible for payment of principal and interest on debt secured by the NEC, but only to the extent Congress appropriates funds to do so. In any event, if the NEC compact entity is formed, it will then assume the NCE debt, but the credit-worthiness of such an entity is now only speculative.
3) Equity partners in Amtrak financing deals have the benefit of covenants against the loss of tax benefits that the deals provide them. A Transfer of the NEC to such a compact entity could, for example, trigger huge financial instabilities under such agreements if the NEC becomes a government-use property as the result of such transfer. There is no apparent source of funding anywhere to pay such liabilities.
4) Amtrak vendors will note that the current Amtrak Buy America requirement, which applies to all Amtrak purchases in excess of $1 million, would be narrowed in that the requirement would be limited to purchases made with Federal grant funds only, and State or privately financed acquisitions would not be subject to the current Buy-America requirement; and
5) the mandated redemption of Amtrak common stock would not satisfy Amtrak
common stockholders, and the new authority to redeem it through condemnation
is likely to be challenged on constitutional grounds because the prescribed
standard for just compensation is too narrow.
