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When Congress consolidated passenger rail into a single carrier in 1970, it is unclear if it knew the passenger service would operate at a loss. The not-quite-public yet not-quite-private nature of Amtrak has caused many problems over the years, but recent expansion plans highlight a different public-versus-private problem that may only get worse if the new Gulf Coast route is added.
At issue are the long-standing rules that Amtrak can receive preference over freight on the infrastructure owned and maintained by freight rail companies. These rules are not at risk of being altered, but repeated use of this standard where it is not economically feasible will create significant financial losses for the public.
The first of three primary problems that arise with the Amtrak expansion are financial losses for the freight railroads, which will internalize costs they do not create. The second is that the general population will see the cost of goods affected by supply chain disruptions. Finally, taxpayers, who have long funded Amtrak operations, will be on the hook for sustaining this new route despite it operating at a loss. The net effect of these, even when considering the purported benefits from ridership and connectivity, is economic loss.
The first of these issues has landed Amtrak and multiple freight rail carriers before the Surface Transportation Board this year. Despite requests to use the freight-owned track, Amtrak appealed to the STB under its statutory right to bypass stalled negotiations. The freight rail companies contend that the impact of twice-daily passenger service added on their tracks has high, if yet unknown, costs. The parties all agreed to a Rail Traffic Controller study, the industry standard process, to identify these costs and impacts, but Amtrak withdrew in order to appeal to the STB before completing the study.
Freight carriers argue that millions of dollars of investment would be needed before a new passenger service could be added safely and without affecting the quality of service to customers in the region. If Amtrak does not make those investments but is granted access, in addition to potential disruptions in the regional supply chain by granting passenger service preference, the freight carriers would foot the bill for maintenance, upgrades, and other operating costs.
Amtrak contends that these investments are not necessary, but the outcome of the STB decision may shed the final light. These costs will accrue, however, even if only in the maintenance of regular wear and tear, which the freight carriers will internalize, given that they own the track. What is more, the twice-daily service of passenger trains would occupy the track and may cause the freight movement to be rescheduled. That could delay raw materials or finished goods from arriving as soon as they otherwise would, which may increase costs for businesses and consumers.
Finally, Amtrak provides a service but requires support from tax dollars to maintain its operation. This is a long-standing practice. But the Gulf Cost route, in particular, is estimated to be one of the costliest short routes in Amtrak’s portfolio — operating at a $27 million loss even five years after regular service has been implemented. What is more, the projected ridership by 2027 is fewer than 200 daily passengers, or under 50 riders per daily train. For each passenger, Amtrak would lose nearly $400. While the passenger carrier has millions of dollars in maintenance backlogs and other routes with considerably greater proven ridership, expanding to serve relatively few people at such a loss is not sustainable.
By contrast, the drive from Mobile, Alabama, to New Orleans, Louisiana, is about two hours by car, and for less than $30, a bus can make the trip in less time than the proposed Amtrak service. With multiple bus options, there does not appear to be a demand or need for passenger rail on this route. Most of the proposed economic development projected to occur from passenger rail service can be realized through vehicle transport in cars and buses. If there are gains only accessible from passenger rail, they do not exceed the costs likely to result from this expansion.
If Amtrak can gain sufficient ridership, generate improved revenue, and shed costs, then it should absolutely merit the use of tracks in many instances. Yet the Gulf Coast service currently raises serious concerns that it is not one of those instances. Structural reforms may be needed for Amtrak, but in this particular instance, the prudent policy is not to expand until the full impact is known and accounted for economically.
Benjamin Dierker is the director of public policy at the Alliance for Innovation and Infrastructure.
