Reform Amtrak to get the biggest value

No corporation will benefit more from the $1.2 trillion Infrastructure Investment and Jobs Act passed by Congress in November than Amtrak. The bill’s pledge to spend $66 billion on the federal-supported firm represents a 480 percent year-over-year increase, making it the largest expenditure on passenger rail since Amtrak’s creation in 1971. 

Taxpayers have a right to expect the most from each of the billions of dollars spent via the infrastructure bill. They also have a right to expect operational improvements in Amtrak. Although some of the funds will go to upgrade old, Amtrak-owned rail infrastructure — such as the much-needed replacement for the 148-year-old Baltimore & Potomac Tunnel on the Northeast Corridor at a cost of $4 billion and the Hudson River Gateway project at an estimated $12.3 billion — injecting competition on Amtrak’s Northeast Corridor is the policy reform with the single greatest benefits to taxpayers. 

From a commercial perspective, the corridor is appropriate for high-speed rail. It includes stops in major population centers such as Baltimore, Philadelphia, Newark, N.J., New York and Boston. It is profitable, with the tight population densities, moderate distances and concentrated central business districts critical for successful passenger rail. It should be a showcase for how the United States can deliver self-sustaining, reliable, safe and affordable high-speed passenger rail.

Instead, Amtrak’s service is often plagued by uncertainty, delays, and even occasional derailments. Those problems cannot be blamed exclusively on old infrastructure, since Amtrak even loses money on food service.

Aspects of Northeast Corridor infrastructure, such as tracks, stations and overhead gantries, have so-called “natural monopoly” characteristics, meaning they are best operated by one large firm with a legally protected monopoly. However, many other aspects of corridor operations are potentially quite competitive; firms could compete for that business, and do in many countries around the world. Competitive operations include the operations of trains, ticketing and food service, among many others.

The salutary effects of competition can be introduced either in real time, with multiple carriers serving various routes, or via fixed-term concessions. Operational rights could be bid out at regular intervals of, say, 10 to 15 years. Concessions would specify key aspects of service, such as rates, service frequency and safety standards. Bidding could be based on the largest up-front concession payment an operator is willing to make, or based on various aspects of service quality. In addition to expert international operators, Amtrak itself could be among the bidders. Unlike the U.S. Postal Service, for example, Amtrak is a privately owned company that should be subject to the forces of competition whenever possible.

This idea is not new. Indeed, competition in passenger rail is rapidly becoming the international norm. The World Bank lists examples of passenger rail concession agreements from countries as diverse as Argentina, Armenia, Brazil, France, Peru, Russia and the United Kingdom.

From a legal perspective, competition-injecting reform is straightforward. Despite its current de facto operational monopoly, Amtrak does not have an exclusive right to intercity passenger service. However, any new passenger rail company must contract with the owner of the tracks for “trackage rights.” Although Amtrak owns those rights on the Northeast Corridor, it easily could be required to grant track usage rights to a competing operator.

The benefits of introducing competition on the Northeast Corridor are legion. The inefficiencies stemming from Amtrak’s de facto monopoly and decades of government subsidies need to be phased out. The prodigious innovations in passenger rail occurring globally would be brought to America. Customer service would improve.

The potential benefits of reforming the way U.S. infrastructure is delivered are nowhere greater than in passenger rail. The Northeast Corridor should be a showcase for how the United States can have a self-sustaining, reliable, safe and affordable high-speed passenger rail. The barrier today is not geography or insufficient taxpayer spending but improper, outdated federal rail policy.

Congress has done its job. Although its focus is on transportation, the Infrastructure Investment and Jobs Act is a much-needed bipartisan, generational bill making massive investments across a range of infrastructure sectors. Separate from regular surface transportation spending, it includes $65 billion for broadband infrastructure, $55 billion for clear water, $65 billion for power and grid improvements, and $25 billion for airports. The framework the bill provides should be used to implement policy reforms ensuring that taxpayers get the most value for every dollar of that spending. Reforming Amtrak is a much needed first and obvious step.

Rick Geddes is a nonresident scholar at the American Enterprise Institute and founding director of the Cornell Program in Infrastructure Policy, a professor of economics, and a professor at the Jeb E. Brooks School of Public Policy at Cornell University.