Streetsblog Capitol Hill

The nonpartisan Congressional Research Service has examined the question of whether the GOP plan to privatize Amtrak’s most valuable corridor is constitutional – and it’s determined that it is not.

Warning: this is about to get a little wonky. But I figure if Streetsblog readers can get all nerdy on transit, you can probably geek out on legalese every once in a while too.

CRS looked at two constitutional provisions and found that the GOP plan violates them both.

First: the Takings Clause [PDF]. The government is allowed to take private property for public use, as long as the owner is justly compensated. The bill proposes to transfer the corridor and rolling stock from Amtrak to the USDOT.

According to CRS, this poses three constitutional questions:

• Is Amtrak an entity outside the government? (It’s not a “taking” if property is transferred to different agencies within the government.) On this question, CRS says that the federal statute creating Amtrak unequivocally stated that it “is not a department, agency, or instrumentality of the United States Government.” The courts have upheld this definition.
• Do the assets to be transferred constitute “property” under the Takings Clause? CRS says they are “classic, well-established forms of Taking Clause property.”
• Is the transfer of assets from Amtrak to USDOT a taking? Indeed, it’s a “paradigmatic” taking, according to CRS. The only way for the term not to apply is if the transfer were somehow deemed non-coercive, since the draft bill contains no mechanism for enforcement. Still, CRS concludes that the “not-truly-coercive argument seems unlikely to succeed.”

OK, so it’s a taking. That’s fine – as we said, the constitution allows takings – as long as they’re justly compensated and for the public use. Whatever you think of the plan to privatize Amtrak, apparently just about anything Congress decides to do satisfies the “public use” clause. But the question of compensation is thornier.

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The Economist’s blog on business travel, Gulliver, has a short post this morning about Rep. John Mica’s proposal to privatize the Northeast Corridor. Blogger “N.B.” has a healthy dose of skepticism for arguments on either side but does significantly more damage to Mica’s argument that that of his opponents. Gulliver strikes a blow at the very idea that private companies can accomplish what Mica hopes they will:

Photo: The Economist

Surely the congressman is aware that most high-speed systems elsewhere in the first world were built with enormous investments of government money (not to mention exercises of government power, including eminent domain seizures to find land for new routes).

Major infrastructure projects, be they airports, highways, or railroads, are more often than not undertaken with significant government support. Privatisation of established rail lines has been successful before and can be again. But Americans shouldn’t trick themselves into thinking that private investors will willingly foot the bill for massively upgrading the nation’s high-speed rail infrastructure.

The post also questions the anti-privatization argument that the proposal would leave less profitable routes without an important source of funding. “Economics, not nostalgia or politics, should determine where Amtrak operates,” N.B. writes. “Right now, it’s often the opposite. Is it really necessary that Amtrak service Dodge City, Kansas (pop. 27,340)?”

Of course, the blog also says the obvious: this proposal isn’t going anywhere. House members can argue about it all they want, but the Senate isn’t having it, and neither is the president. It was wise of Mica to introduce the bill separately from the rest of the reauthorization, to avoid the risk of letting this controversial idea sink the rest of the bill.

Rep. Corrine Brown (D-FL), the top Democrat on the Railroads Subcommittee, began her remarks at yesterday’s Transportation Committee hearing like this:

My notes say that I’m supposed to say, ‘Thank you Mr. Mica for holding today’s hearing.’ I don’t think so. Because I think legislation that affects the entire passenger and freight rail system in the United States deserves hearing, examination and debate. There are numerous legal, financial and operational questions that need to be answered before we auction off Amtrak to Wall Street investors.

Rep. Corinne Brown (D-FL) wasn't quite ready to thank Mica, as is customary, for holding the hearing.

The hearing was called at the last minute as a result of Brown’s and others’ demands for a full airing of Democrats’ concerns before taking quick action on the Republican plan to privatize Amtrak’s Northeast Corridor.

Committee Chair John Mica (R-FL) started off blustery and aggressive, saying, “We’ll have a hearing every week if we have to until we get this done” and dismissing his critics’ concerns with visible frustration. Once he got that out of his system, though, he adopted a more conciliatory tone as he talked about Amtrak.

He introduced Amtrak CEO Joseph Boardman with some self-effacing humility: “[Boardman] takes a beating from time to time, sometimes from me, unwarranted, and I apologize publicly for that, but he does as good a job he can with the cards he’s dealt,” Mica said.

That was just the beginning of Mica’s overtures to the embattled rail chief and his allies. He prodded Democrats and witnesses for suggestions for improving the plan, looking to incorporate their suggestions to build consensus for the bill. Significantly, Mica even allowed that the plan to privatize the Northeast Corridor could end up leaving Amtrak more or less intact, especially since Amtrak is already looking for private-sector partners to team up with.

“I’m not trying to limit any service they provide, or privatize all of Amtrak,” Mica said. “I don’t mind giving authority to Amtrak to do what we’re trying to achieve. I don’t know that we need to create a second entity to do this.”

He said he’d been told by Amtrak leaders in the past that they didn’t have the authority to team up with the private sector to operate and maintain the corridor. “The key is to attract private capital, so we have got to have the ability, for whatever entity, whether it’s Amtrak or another entity, to attract that private capital.”

Boardman indirectly chided Mica for his previous attacks on Amtrak, saying, “The stability of Amtrak and its future are critical to have any confidence in us as a centerpiece. And this legislation, and the way that we’re characterized on a regular basis, doesn’t sustain that in the investment public. And it’s not accurate. Sir.”

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Privatization of Amtrak service could disrupt commuter rail lines that run on its tracks. Source: GAO

House Transportation Committee Chair John Mica (R-FL) is moving forward with his plan to hand over the Northeast Corridor to private companies, despite (or because of) the fact that such a move could write Amtrak’s obituary.

Is privatizing the corridor a good move? Mica and Rep. Bill Shuster (R-PA) say that with the participation of private companies, they can build “real high-speed rail on NEC – less than two hours between WDC and NYC” and they can “double total intercity rail traffic on NEC.” They claim they can do all that for far less than Amtrak’s proposed price tag of $117 billion.

Commuter Rail

But some say that’s “not a rational plan.” One Hill staffer working on transportation issues said that Mica’s idea “just doesn’t work.” After all, she says, as long as commuter rail shares the track with intercity rail, there’s no way to double intercity service and run it at 120-mph speeds while still accommodating local train service. She says unless their plan is to raise fares exponentially to gather funds to build a whole new parallel track, it’s impossible to meet Mica’s goals under the terms he’s setting.

A 2006 GAO report [PDF], foreseeing the GOP attack on Amtrak, found that an “abrupt Amtrak cessation” would be severely disruptive to transit agencies up and down the corridor. “Seven of the nine commuter rail agencies in the Northeast operate over Amtrak-owned portions of the Northeast Corridor,” the GAO found. “According to officials from these agencies, access to Amtrak’s infrastructure is essential to their services.”

Even if services kept running but the management switched to a private company, the GAO warned that the transition “would take months, not weeks” and would involve complex labor and liability issues. “So we’re just putting everyone through all this upheaval to essentially put in the exact same thing, just under a different name,” said the staffer.

All We Are Saying is Give Amtrak a Chance

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Rural Amtrak service could be a sticking point as Mica tries to win over members of his own party to his privatization plan. Photo: TrainWeb

John Mica has blinked.

Rather than go full steam ahead with his fast-track plan to introduce his bill to privatize the Northeast Corridor today and to have the committee discuss it and vote on it tomorrow, Transportation Committee Chair John Mica (R-FL) has agreed to delay action to allow time for a full legislative hearing. Democrats on the committee had asked Mica for the chance to get a full look at the proposal and voice their concerns.

The hearing is scheduled for tomorrow. The committee has not yet announced who will be appearing as witnesses. We’ll bring you a report after the hearing.

Rahall is pleased with the change in timing. “I would like to thank Chairman Mica for agreeing to Democrats’ request to hold a hearing on this bill before marking it up so that all Members could have an opportunity to better understand its sweeping ramifications,” he said in a statement.

But other Amtrak advocates on the Hill say it’s just delaying the inevitable. And it’s not just Democrats that are critical of the plan to take the Northeast Corridor away from Amtrak and let private companies run and operate the line. There are rumors that Mica’s gotten some grief from members of his own party over the plan.

After all, no one questions that the underlying motive of the privatization plan is to dismantle Amtrak, a company Mica has long derided as a “Soviet-style” money pit.And many rural areas – often represented by Republican lawmakers – depend on Amtrak service as an essential transportation connection and a focal point of their towns. It’s no wonder the representatives of those towns are nervous about the proposal.

The top Democrats with jurisdiction over rail in the House are asking for a little old-time bipartisan cooperation in the Transportation Committee. They’re complaining that Republicans have shut them out of the process on one of the most important, game-changing proposals to come down the pike in a while: taking the Northeast Corridor away from Amtrak and putting it in private hands.

Not so fast, Republicans. Rahall wants some bipartisan input on rail privatization. Photo: Red Dog Report

Rep. Nick Rahall (D-WV), ranking member on the House Transportation Committee, and Rep. Corinne Brown (D-FL), ranking member on the Subcommittee on Railroads, sent a letter [PDF] requesting that the committee hold a full legislative hearing on the bill. Rahall yesterday called the proposal a “death knell for passenger rail.”

The letter says:

This legislation, which you state makes sweeping changes to the national passenger rail system, has not been shared with Democratic Members or staff; we have not been briefed on the proposal; and it is not yet available for public review. We believe there should be an opportunity to have a formal discussion on this legislation that would allow all interested and affected parties to participate before moving it through the Committee process.

The text of the draft bill has since been made available on the T&I committee website [PDF], as well as a section-by-section analysis [PDF], although there is no guarantee that the language in the draft is the language that will be in the final bill. The committee held a briefing yesterday for the public, but there was no chance for other lawmakers to comment, ask questions, or invite witnesses, as they would in a hearing. The next time the committee is scheduled to consider the legislation is next Wednesday – the day after the final bill is introduced – when the committee will vote on it.

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In an email statement to Streetsblog, Transportation Secretary Ray LaHood expressed concerns about the GOP plan to privatize the Northeast Corridor:

LaHood isn't happy with the GOP plan to privatize Amtrak's Northeast Corridor. Photo: Christian Science Monitor

Chairman Mica and I share a strong interest in high speed rail, particularly in the Northeast Corridor.  He should be commended for giving this topic the attention it deserves.

However, based upon our preliminary review, we have many questions about the Mica proposal’s feasibility.  At present, we believe Amtrak is the entity most capable of taking the next steps to modernize rail service in the Northeast Corridor, which is why the administration has serious concerns about any proposal to privatize Amtrak’s Northeast Corridor. The administration also has the responsibility to ensure that taxpayer investments are protected and well-managed.

With 50 million people in the corridor and another 20 million coming over the next generation, the Northeast Corridor can and should be one of the top high speed rail corridors in the world.  I look forward to working with Chairman Mica to make that happen.

Under the House Republicans’ proposal to bring more private competition to the nation’s most valuable transportation asset, the Northeast Corridor would remain in public hands. Transportation Committee Chair John Mica (R-FL) made clear that under his and Rail Subcommittee Chair Bill Shuster’s plan, “the public maintains ownership of the corridor; we’re not giving it to any private firm.”

Could the Northeast Corridor be taken away from Amtrak? Photo: Amtrak

Mica and Shuster also affirmed their support for a national passenger rail system, but both wanted to find a way to reduce the amount of public subsidy that supports that program. “We will have to subsidize a number of the routes,” Mica said, “because almost every form of transportation is subsidized.” That’s a significantly more moderate stance from a man who accuses Amtrak of “Soviet-style” inefficiencies.

At a briefing on the plan this morning, Mica and Shuster suggested two possible scenarios: in the first, they’d separate the Northeast Corridor’s infrastructure from the operations. Amtrak would become an operating unit under USDOT and it could participate in an open bidding process to become the operator of the rail service. Meanwhile, USDOT could enter into contracts with private firms to build and maintain the 456 miles of track and right-of-way.

Advocates say the ability to turn its full attention to operating trains might not be a bad situation for Amtrak. As Mica said, “It’s very difficult to develop, finance, construct and operate a high speed system.”

Still, that’s the essence of scenario #2: Mica calls it a “turnkey” project, which would provide private companies with an opportunity to “develop, control, maintain, run, and operate” the rail system.

Mica proposes that USDOT narrow down the applicants to two or three bidders, allowing a regional executive committee the final decision about who runs the service.

“Amtrak has made some progress,” Mica admitted. “They finally identified and designated the Northeast Corridor a high-speed rail corridor.” Still, he said the Amtrak plan to do it in 30 years with $117 billion is a failure. Mica says that with private participation, it can be done in 10 years – sort of an L.A.-style 30/10 program for the Northeast – and with far less money. He said he thinks the NEC will be a “cash cow.”

Meanwhile, Mica and Shuster both took great pains to assure organized labor that their interests will be preserved under the new plan. Reaching out to “union brothers and sisters,” they said union wages and benefits would be maintained and employment would be expanded as the service grew.

Democrats reacted to the plan with a fire usually reserved for birthers and death panelists. “This plan is a death knell for passenger rail service from coast to coast,” said the committee’s ranking Democrat, Nick Rahall (D-WV). “Privatizing this profitable corridor will not merely affect train service in that region; it will have a devastating domino effect from coast to coast, leaving trains stuck at the station across the nation.”

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House Republicans, led by Transportation Committee leaders John Mica (R-FL) and Bill Schuster (R-PA), have a plan to take the Northeast Corridor out of Amtrak’s control and privatize it. They’ve long called Amtrak a “Soviet-style operation” that loses money.

Could a private company take over Amtrak's Northeast Corridor? Photo: Trains

Mica said that ridership of the NEC hasn’t changed since 1977, the year after Amtrak took over the corridor: a record he calls “one of the most dismal on earth.” [PDF] Amtrak advocates contend that chronic underfunding has starved the system, creating a situation that would make world-class service impossible. They also point to record ridership system-wide in seven of the past eight years, mostly due to the increase in state-supported service. (Representatives from Amtrak would have spoken on behalf of the railroad but were not invited to testify.)

The Mica/Shuster plan would separate the Northeast Corridor from Amtrak and transfer it to USDOT initially, then spin it off as a separate business unit. A competitive bidding process would determine who takes over the title. That entity would have to establish high-speed service from Washington to New York that takes under two hours (doing it in 15 years, not 30, as Amtrak proposed) while reducing or eliminating federal subsidies. They plan to include this proposal as part of the surface transportation reauthorization bill.

Mica and Schuster stress that organized labor would keep all its protections and that the plan would boost employment, but unions are having none of it. Edward Wytkind, president of the AFL-CIO’s Transportation Trades Department, said Amtrak’s 30-year plan for high-speed rail includes all the private sector participation it needs. “There is no high-speed passenger rail system in the world that operates without significant government assistance,” he said. “Private sector companies simply cannot make a profit without federal support.”

He said private entities taking over the most profitable part of Amtrak’s system would “let the rest of the system wither” and he simply didn’t see what the country would be getting in return for this valuable transportation asset.

Wytkind reminded members of Congress that when Amtrak took over the NEC in 1976, it was because the private company that had been running it had gone bankrupt and no one else wanted it.

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Senators in Appropriations have to ask, Who rides the train cross-country anymore? Photo: Pignouf

The idyllic cross-country train trips that many Americans still take could get derailed by today’s “slash and burn” federal budget policies. Meanwhile, fears for the safety of rail passengers in the post-bin Laden era are drumming up political support for costly security measures and raising, once again, questions about why the federal government funds rail routes without any promise of profitability.

At this morning’s Senate Appropriations hearing on budget requests for the Federal Railroad Administration (FRA) and Amtrak, the three senators in attendance were unified in their support for funding rail transportation. They’re working on the funding request for the FRA for 2012, not the rail piece of the overall transportation reauthorization. Still, with huge disagreements over spending levels in Congress still raging and a showdown looming over cuts as a quid-pro-quo for raising the debt ceiling, next year’s funding is a significant question.

So the three senators present wanted to know how they could be expected to defend rail funding without more transparency in the budget allocation process. They also asked pointed questions about what the administrators of the FRA and Amtrak were doing to keep riders safe from the terrorist attacks threatened by Al-Qaeda.

The FRA has taken on a greater role in the allocation of funding for rail projects over the last several years and senators appeared frustrated over a lack of clear information as to where the funding would come from. Indeed, some security projects appear in the FY2012 budget request but the FRA is also requesting a USDOT loan to for the same thing.

Transportation Appropriations Subcommittee Chair Patty Murray (D-WA) was quick to commend FRA Administrator Joseph Szabo for his efforts, but called him out for not improving transparency about how, when, where and why projects are funded.  “I support investments,” she made clear. “Now is the time to address critics head on. We must communicate with the people.”

Murray and Sen. Frank Lautenberg (D-NJ) presented a grim future for surface transportation if funding does not keep up pace with booming population growth. The only other senator to speak, ranking Republican Susan Collins of Maine, agreed and reminded her colleagues that the ambitious national rail plan proposed by the FRA, including high-speed rail, has yet to be followed up with any cost estimates, for construction or operations.

Szabo, for his part, could only promise that studies to be released within “the next couple of months” would present the “broader business case” for funding both high-speed rail and individual projects across the country. Szabo, the first union railman to hold his position, was proud of what his agency was doing to keep hazardous freight secure – but admitted that there are still unimplemented security measures that date back to 9/11.  He pointed out that for every $50 spent on aviation security, only $1 went to surface transportation.

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