By Noel T. Braymer

The Federal Railroad Administration recently announced the format for companies and local governments to bid to operate up to 3 of the 15 Long Distance Amtrak routes. The process of selecting operators will take well over a year. Winners of the franchises will have a contract to operate service for 4 years. It would then be open to renewal or new bidders. These operators will be eligible for a subsidy up to 90% of what Amtrak claims it needs for these trains. These privatized services will have access to Amtrak reservations, stations and maintenance facilities. The hope is private operators will be able to offer better service more economically than Amtrak does presently.

Who might bid to operate these long distance trains? There are several companies in this country and around the world that operate passenger trains under contract with government agencies. For example operation of Caltrain, ACE and Coaster trains are all operated under contract by private, for profit companies. Metrolink’s trains are also operated under contract with Amtrak. The freight railroads can also bid to operate these long distance passenger trains. In the case of the BNSF, it has never been out of the rail passenger business. The BNSF continues to operate a very efficient commuter rail service under contract with Metra in Chicago on the old BN 3 track mainline.

One of the challenges for private operators is that they will have to negotiate for trackage access with the freight railroads to operate trains on their tracks. Amtrak under the Amtrak law gets a major discount from the freight railroads to operated their trains on the freight railroad tracks. This has long been an issue with the freight railroads which say they can’t make money with these low rates. Another issue the freight railroads have is Amtrak trains are often late and have mechanical breakdowns on their tracks. Most freight railroad mainlines today are single tracked, with few sidings which are designed for a few but very long heavy freight trains. A late Amtrak train can disrupt schedules for many trains on the freight railroad mainlines. No doubt the freight railroads will demand in any negotiation with private operators more for per mile usage of their tracks than they can ask from Amtrak and stipulate fines for late passenger trains which disrupt their freight traffic.

A good thing in this process is that the private operators will be able to use Amtrak’s reservation system for ticketing, as well as stations and facilities. It is likely at least in the beginning for start up service that Amtrak train equipment under lease will also be needed. This reduces the need for redundant infrastructure and will mean income for Amtrak. This will also make it easier for passengers to transfer between the entire national rail passenger system. Privatization will mean that these operators will get subsidy at least for the first 4 years. The problem with all passenger rail services is making enough money to pay for the full cost of  a railroad’s infrastructure. The advantage of passenger trains sharing a railroad with freight, is the freight is paying most of the cost of the infrastructure of the railroad. Just like being a roommate, its cheaper than renting an apartment by yourself.

For these new private operators to make an operating profit, or just to increase their income even with the subsidy available for these 3 lines, they will have to increase their revenues. This will mean buying more and new equipment which will have lower operating costs than continuing to use 30 plus year old aging equipment. As it stands now most of Amtrak’s long distance trains are often sold out, particularly the sleeping cars. With more equipment, it will be possible to run longer trains (most Amtrak trains are no more than 10 cars long, while in the past trains up to 18 cars were common) which means increased ridership and revenues.

Much of the assumption behind this experiment is that private operators will be able to operate rail passenger service more economically and provide greater customer satisfaction. Amtrak has been fighting privatization while at the same time claiming they are losing millions of dollars running the long distance trains. Amtrak claims they run long distance trains because they are a necessary if expensive public service. This however hasn’t stopped Amtrak from cutting several long distance train routes in the past. Amtrak will have some say in which of the 3 current Amtrak routes will be tested for privatization. This brings up the possibility that privatization could expose problems with Amtrak’s accounting. Amtrak critics have pointed out for years that its accounting system doesn’t meet Generally Accepted Accounting Principles (GAAP) which is standard for most accounting systems. Without standard measurements it is like comparing apples with oranges when compared to other accounting systems.

Amtrak’s accounting is largely based on allocated costs. This means costs for a route are assigned, usually on a train mile basis, not by adding up all the receipts for expenses from the different routes. The long distance and state supported local trains costs are accounted differently than for trains on Amtrak’s Northeast corridor. A long held criticism of Amtrak’s accounting is through allocating costs it doesn’t charge their NEC trains for the full cost of  the NEC infrastructure, while assigning much of this cost to the Long Distance and State supported local trains. This would inflate the costs of these non-NEC trains while making the economic performance of the NEC trains look better. If this criticism is correct, Amtrak could have a problem if the trains that are privatized perform much better with much lower operating costs than Amtrak’s accounting would predict.

If these privatized routes succeed and operate at a profit while attracting more ridership and buying more equipment to handle the extra ridership; we could see the start of  a major expansion of long distance rail passenger service. There are plenty of towns around America which would love to have rail passenger service and expanded existing service.This could mean expanded new services and new routes. With at most modest subsidy for such service we could have the incentive for the freight railroads to welcome additional passenger trains if they are profitable for the railroads and come with capital improvements which benefits the freight railroad’s business. Private capital could be available for new and more locomotives and passenger cars to handle the traffic demand. At the same time new and improved stations have and can be built by local communities which would function as regional transportation centers as well as stimulating local economies. This might create the first major expansion of rail passenger service in this county in over a 100 years.