For Immediate Release: August 13, 2003
Contact: Humberto Sanchez
States' Rail Rejection, Group Favors Senate Route Over Bush Plan
State rail officials yesterday criticized the recently unveiled White House plan that would force states to take over a substantial share of the operating and capital costs of intercity passenger rail, while praising proposals in the Senate to allow the issuance of taxable tax credit bonds to finance the development of the nation's rail infrastructure.
"The Bush plan is flawed in that it looks to states to form multistate compacts to preserve what is a national service," said David D. King, North Carolina's deputy transportation secretary and chairman of the States for Passenger Rail Coalition. "It is cumbersome and, on its face, unworkable."
King's comments follow the release of a statement from the American Association of State Highway and Transportation Officials, which also expressed concerns about provisions of the proposal, including the level and certainty of funding, and the federal-state matching shares.
Under the plan, states would be required to pay an operating subsidy -- the cost of operation not covered by fare box revenue -- for routes within its borders and half of any capital improvements and infrastructure maintenance. For routes that go through more than one state, rail officials would have to arrange to split costs among the states served by the route. The Bush plan would ultimately reorganize Amtrak into three separate entities and no longer provide direct funding to the railroad.
"In a world where folks are always micromanaging costs and cost allocations, to expect the states to come together, form a compact, decide on a fair and equitable way of distributing costs and service -- a seventh grader could tell you that that is not going to work," King said. "Trying to get a number of states to agree on what their fare and equitable share is would be a very difficult thing and it would change overtime."
While the group -- made up of rail officials from 24 state transportation departments -- was pleased the capital component was included in the proposal, members were critical of the funding split, compared with the 80% federal and 20% state funding model used for highway and transit projects.
"From a public policy prospective, we have always sought modal equity because you don't want to distort funding decisions," said Randall Wade, the Wisconsin Department of Transportation's passenger rail implementation manager and secretary-treasurer of the rail group. "When you go to the state legislature and ask them for a balanced program, there is going to be a tendency to go where the grant share is the highest and distort funding toward that mode, simply because the states are in such dire financial circumstances."
No official estimates were provided for how much the Bush proposal would cost states when it was unveiled at the end of last month. But for fiscal 2004, Amtrak requested that the federal government provide the railroad with $1.8 billion for operating and capital costs -- an amount that Amtrak officials maintain is necessary to prevent scaling back service and to put the system in a state of good repair.
Of the $1.8 billion, $768 million would be used for operating subsidies and $1.04 billion for capital costs, according to Amtrak. Under the plan, states would be required to cover all of the cost of the operating subsidy plus up to half of the capital cost -- a total of nearly $1.3 billion in fiscal 2004.
The U.S. Department of Transportation contends the rail proposal would allow states or groups of states to build rail routes more easily within their borders, based on regional demand, and thereby would provide more regional control over rail service.
"As with highways, transit, and aviation, local and regional priorities should govern rail transportation planning and investment," Transportation Secretary Norman Y. Mineta said in a statement when the plan was released.
The rail officials group also believes that not only would it be difficult to split the cost of service fairly, but the logistics of running the trains would also prove burdensome. For example, it would be difficult to change the departure time of the Silver Star, a train that provides service from New York to Miami.
"Every time you wanted to change the departure time out of New York for the Silver Star you'd have to have a debate about it," King said. "That's the central flaw of the plan . The determination to dump the cost of a national intercity rail system on the states was so overpoweringly unworkable that the rest of the good work that the administration did in trying to think this problem through was wasted."
The group also sounded its support for pending legislation that would authorize the use of tax credit bonds -- which pay interest in the form of federal income tax credits -- for the development and maintenance of rail infrastructure.
The rail officials said they are backing a recently introduced bill, sponsored by Sen. Kay Bailey Hutchison, R-Tex., authorizing the creation of a nonprofit entity that would issue $48 billion of tax credit bonds over six years to finance the repair and improvement of the nation's rail infrastructure. The bill, known as the American Rail Equity Act, would also authorize $12 billion for Amtrak.
"We are very positive on what Hutchison's got," Wade said.
But Democrats have not supported the bill, which is cosponsored by Republican Senators Conrad Burns of Montana, Olympia Snowe of Maine, and Trent Lott of Mississippi, because they oppose a provision that would turn over routes that fail to meet an 80% on-time requirement to private rail operators. They are concerned that these private operators would not have to uphold Amtrak's labor agreements.
Sen. Thomas R. Carper, D-Del., is currently drafting a bill, which is expected to have a tax credit bond component, that would address the Democrats' labor concerns. The proposal could be introduced as soon as next month, according to a spokesman for Carper.
"We are very supportive of the tax credit bond approach and understand that there is work underway to draft a bipartisan bill," Wisconsin's Wade said.
The rail officials group also reiterated its support for the Railroad Infrastructure Development and Expansion Act for the 21st Century, or RIDE 21, introduced in June by Rep. Don Young, R-Alaska, chairman of the House Transportation and Infrastructure Committee, and James L. Oberstar, D-Minn., the committee's ranking member. The bill, which was approved last month by the committee's rail subcommittee, would authorize states to issue up to $12 billion of tax credit bonds and $12 billion in tax-exempt private-activity bonds over 10 years for high-speed rail projects.
"There are active and good proposals that are being worked on, floated, and at various stages in the legislative process that seem to have a lot of merit, and the administration's proposal does not seem to be one that will survive the legislative process," King said.
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