Change Relationship between States, Amtrak and Railroads

Unlike Europe and Asia, most of the rail infrastructure in the U.S. is privately owned. Amtrak and other publicly-owned passenger railroads must negotiate with privately-owned railroads for use of their lines.

New arrangements between governments and railroads are needed to create incentives for railroads to add passenger-grade trackage and be proactive with service improvements to increase passenger market share. The new bargain should persuade railroads to become advocates for increased government funding, just as highway contractors lobby hard for public investment in roads.

THE INCREMENTAL COST PROBLEM

The core problem is that Amtrak pays too little for the use of freight tracks. They are paying rates substantially below that of freight customers and yet command premium service. This situation was created by the incremental cost formula contained in Amtrak’s enabling legislation.

Railroads provide substantial public benefit. As such, they were given special powers to assemble and manage rights-of-way that are not available to most corporations. In many cases, the railroads were given land as an incentive to construct new lines through sparsely populated areas. In exchange, railroads have special responsibilities, including (in most cases) being chartered as common carriers. Common carriers are required to haul any commodity offered to them, within reason. That included passengers until 1971.

Amtrak was created in 1971 to relieve the railroads of their obligation to carry passengers. For cultural and regulatory reasons, the railroads were unable to adapt to new market realities created by massive public investments in highways and airports in the 1950s and 1960s. Removing passenger carriage was the first step towards new regulatory structures needed to keep the railroads viable.

There was substantial surplus track capacity when Amtrak was created. Therefore, it was reasonable that Amtrak pay the railroads just the costs incurred by operating its trains. In essence, the deal was that the railroads would switch from losing money on passenger trains to not losing money without really making a profit either.

Since the original deal was made, various government policies have encouraged railroads to focus on very long, heavy trains while removing and downgrading trackage. As a result, the network now is not optimized for short (compared to long freight trains), fast passenger trains.

New government policies are needed that make operating passenger trains profitable for the railroads so that they will invest in the infrastructure needed to run them.

Several strategies can help get us there, most of these have been used with success on routes in several states. A more comprehensive approach is needed.

Increase the rate per train mile

The most effective incentive would be to pay the railroads a market rate for use of the track. The railroad would then be directly responsible for planning, financing, constructing and maintaining high-quality trackage needed to operate passenger trains.

In general, Amtrak pays about $5.00 per train mile to host freight railroads, and it already pays incentives above the statutory rate for delivering on-time performance. Our initial research suggests that the per-train-mile charge should be increased substantially to make passenger trains an appealing customer for freight railroads. Revenues will increase as more passengers ride and pay higher fares for the faster and more dependable service. Operating costs will be reduced by better use of rolling stock and crews. Therefore, it won’t be necessary for government sponsors to increase their payments by the same amount.

It is likely that the new deal would result in better freight service as the railroads are encouraged to think more holistically about their infrastructure and dispatching.It will be difficult to achieve these higher rates due to a cultural bias in government against sponsoring operations — often denigrated as “subsidies.” Funding capital projects are more politically popular, likely because they result in tangible infrastructure and photo opportunities at ground-breaking ceremonies.

Give the host railroad a large share of the revenue increase

Faster and more frequent trains draw more passengers, and more riders produce more farebox revenue. A simple incentive to encourage host freight railroads to prioritize passenger trains is to cut them in on the revenue. How much? A significant share.

Separate the track incentive payments

An immediate improvement could be achieved by making incentive payments on a route-by-route basis as opposed to a system-wide basis. Today, Amtrak makes incentive payments based on the performance of all trains on the host railroad. One late train reduces the payment, even if all of the others are on time. As a result, challenges on one route can effectively make it impossible to earn the incentives on the other routes, removing the motivation to achieve higher performance system-wide.

Reduce property taxes on rail lines hosting passenger service

Highways and airports do not pay real estate taxes. In fact, expanding a highway or an airport has a negative impact on local communities by removing property from the tax rolls.

Even though they perform the same basic function as highways and airports, railroads are taxed because they are owned by private entities, and the tax rates increase as the quality of the track improves. This creates a strong incentive to remove tracks and a disincentive to adding capacity needed for passenger trains.

Railroads that host passenger trains should be on a level playing field with other transportation infrastructure entities and not be taxed.

Provide direct capital support for track work

Highway and airport capital projects are funded largely with public resources. There should be a comparable public commitment to railroads hosting passenger trains.

This is not a new concept. $1.2 billion in American Recovery and Reinvestment Act (ARRA) funds financed improvements to most of the Union Pacific Railroad line between Chicago and St. Louis beginning in September 2010.

While this approach has been utilized the most, it is ineffective without increased incentives to run faster trains.

Provide direct support for highway grade crossing separations

Building bridges puts people to work: construction crews, steel companies, structural engineers. Highway builders love building bridges, and highways get the biggest share of the federal transportation budget by far. Putting more highway dollars into rail grade separations results in many benefits — jobs, reduced road congestion, and better train service.

Employ a dedicated track-maintenance gang

A freight train needs less precise track geometry than a passenger train. A delay has less impact on a freight train than a passenger train. If the passenger sponsor (e.g., Amtrak or another passenger train operator) provides a track gang dedicated to a section of track, the railroad can be maintained to a higher standard, and crews can reach the area more quickly to resolve issues in case of a problem. The Capitol Corridor in California has successfully adopted this approach.

Operate the right rolling stock

Freight trains and passenger trains operate at different speeds and with different stopping patterns. Passenger trains operate at higher top speeds, but also make more frequent stops. Lightweight trains that can stop and accelerate more quickly can minimize interruptions at stations and duck into sidings to minimize the impact on freight operations. New trainsets are more reliable, minimizing the disruptions from on-the-road breakdowns.

Keep station dwell times short

In addition to accelerating quickly out of station stops, keeping the time in the station to a minimum is needed to keep the railroad fluid. Level boarding is a great way to minimize dwell times as more doors can open and fewer people will need assistance. Class 1 railroads have long opposed level boarding due to the close clearances required at platforms. Automatic gap fillers being installed on Brightline trains in Florida may be the solution.

Limit speeds to 90 mph

Most intercity passenger rail planning has focused on 110 mph, the fastest trains can go without the expense of separating highway crossings. But the railroads are steadfastly opposed to mixing 110- mph passenger trains with long and heavy freight trains. It would be more productive to design for higher frequencies on shared freight tracks at 90 mph and focus on linking those shared tracks to segments of high-speed line to achieve competitive trip times.