[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE ROLE OF INNOVATIVE FINANCE IN INTERCITY PASSENGER RAIL
=======================================================================
(113-29)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS, PIPELINES, AND
HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 9, 2013
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
------ 7
Subcommittee on Railroads, Pipelines, and Hazardous Materials
JEFF DENHAM, California, Chairman
JOHN J. DUNCAN, Jr., Tennessee CORRINE BROWN, Florida
JOHN L. MICA, Florida DANIEL LIPINSKI, Illinois
GARY G. MILLER, California JERROLD NADLER, New York
SAM GRAVES, Missouri ELIJAH E. CUMMINGS, Maryland
SHELLEY MOORE CAPITO, West Virginia MICHAEL H. MICHAUD, Maine
CANDICE S. MILLER, Michigan GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana ALBIO SIRES, New Jersey
BOB GIBBS, Ohio ELIZABETH H. ESTY, Connecticut
PATRICK MEEHAN, Pennsylvania PETER A. DeFAZIO, Oregon
RICHARD L. HANNA, New York, Vice MICHAEL E. CAPUANO, Massachusetts
Chair STEVE COHEN, Tennessee
DANIEL WEBSTER, Florida DINA TITUS, Nevada
THOMAS MASSIE, Kentucky NICK J. RAHALL, II, West Virginia
ROGER WILLIAMS, Texas (Ex Officio)
TREY RADEL, Florida
SCOTT PERRY, Pennsylvania
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Panel 1
Hon. John Porcari, Deputy Secretary, United States Department of
Transportation................................................. 5
Panel 2
Beverley K. Swaim-Staley, President and Chief Executive Officer,
Union Station Redevelopment Corporation........................ 29
Frank Chechile, Chief Executive Officer, Parallel Infrastructure. 29
John Robert Smith, Cochair, Transportation for America; President
and Chief Executive Officer, Reconnecting America; and Former
Mayor of Meridian, Mississippi................................. 29
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Hon. John Porcari:
Prepared statement........................................... 41
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 55
Hon. Corrine Brown, of Florida........................... 56
Hon. Richard L. Hanna, of New York....................... 58
Hon. John L. Mica, of Florida............................ 61
Beverley K. Swaim-Staley:
Prepared statement........................................... 62
Answers to questions from Hon. Jeff Denham, of California.... 68
Frank Chechile:
Prepared statement........................................... 69
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 79
Hon. Corrine Brown, of Florida........................... 81
John Robert Smith:
Prepared statement........................................... 82
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 95
Hon. Corrine Brown, of Florida, including supplementary
information............................................ 98
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
THE ROLE OF INNOVATIVE FINANCE IN INTERCITY PASSENGER RAIL
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TUESDAY, JULY 9, 2013
House of Representatives,
Subcommittee on Railroads, Pipelines,
and Hazardous Materials,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
Room 2167, Rayburn House Office Building, Hon. Jeff Denham
(Chairman of the subcommittee) presiding.
Mr. Denham. The committee will come to order. First let me
welcome our distinguished witnesses and thank them for their
testimony today. As I have said during every hearing we have
held, I am committed to rail reauthorization this year. One
area the next rail bill will likely need to address is the role
innovative financing tools can play to advance intercity
passenger rail projects. We all need to be creative in ways to
stretch the Federal dollars and work with our partners in the
States, with communities, and the private sector.
I have consistently advocated for the need to leverage
private-sector financing in my home State for the construction
of high-speed rail. Without private-sector engagement in
financing, the California project is doomed to repeat the
mistakes of the past, and will require endless subsidies from
Federal taxpayers.
Innovative finance has been increasingly used in the United
States for highway mass transit projects. And one of my goals
for the upcoming reauthorization is to extend that trend to
passenger rail. The Railroad Rehabilitation and Improvement
Financing loan program is an example of a program I would like
to leverage even more. Currently, RRIF is authorized to lend up
to $35 billion in loans and loan guarantees for the development
of railroad infrastructure.
The program was created principally for short line and
Class I freight railroads, though recently commuter and
intercity passenger rail operators have expressed interest in
the program. RRIF and other Federal credit programs can
accelerate large infrastructure projects if stakeholders come
together to identify repayment sources. For example, Denver is
utilizing RRIF and TIFIA to complete a major expansion of
Denver Union Station, which will improve intercity rail,
commuter rail, and bus connections. The loans are being repaid
with a combination of local revenue sources. This is an
excellent example of States, the private sector, and the
Federal Government partnering to build more infrastructure in
new and creative ways. We need to encourage more of this type
of innovative thinking at the State and local levels so
entities like the Altamont Commuter Express, ACE, in my area,
can make the infrastructure upgrades they need for the future.
Station development is another tool that can be leveraged
to support expanded and improved passenger rail services. Rail
stations are often located in desirable downtown locations and
can become the focus around which significant residential,
commercial, and retail development can occur. Value capture
methods, such as the tax increment financing, can be a means to
leverage that private-sector development to spur transportation
improvements.
Finally, railroads themselves can proactively use their own
property to create additional funding sources. For instance,
railroad right-of-way can be used to place telecommunication
and other nontransportation infrastructure. In 2012, Amtrak
generated $94 million in real estate-related revenue. And I
would like to work to see them grow that number even further.
Again, I thank the witnesses for being here today.
I would now like to recognize Mr. Nadler for 5 minutes to
make any opening statement he may have.
Mr. Nadler. Thank you, Mr. Chairman.
I want to begin by thanking Chairman Denham for holding
today's hearing on the role of innovative financing in
intercity passenger rail.
Unfortunately, Congresswoman Brown has an unavoidable
conflict this morning, but I will do my best to fill in for her
today as ranking member.
In 2009, Congress passed the Passenger Rail Investment and
Improvement Act, PRIIA, which expires at the end of this fiscal
year. As the committee prepares to reauthorize PRIIA, it is
important that we take time to explore the role that innovative
finance can play in the development of intercity passenger
rail. But we must also not lose sight of the bigger picture.
Under PRIIA, we authorized a total of $9.8 billion for Amtrak
for fiscal year years 2009 through 2013. However, actual annual
appropriations for Amtrak over this period were significantly
lower, only $7.3 billion, or $2.5 billion lower than the
authorized amount. Funding for Amtrak pales in comparison to
those investments we make as a Nation in our highways and
airports.
Today, Federal spending on highway construction exceeds $42
billion annually. We have not spent that kind of money on
passenger rail service over the entire course of Amtrak's 43-
year existence. Looking back, the figures are no different.
From 1947 to 1970, when Amtrak was created, the Federal
Government spent $11.3 billion in aviation, and $52.4 billion
on the development of the Interstate Highway System and
obviously nothing on Amtrak. There is no question we need to
invest more in our railroads. A working group for the National
Surface Transportation Policy and Revenue Study Commission
reported that the total capital cost estimate of establishing a
national intercity passenger rail network between now and 2050
is about $357 billion, or $8.1 billion annually. We are nowhere
near that. And the House is currently moving in the wrong
direction. The Federal budget is being cut to unsustainable
levels under the Budget Control Act and sequestration.
The transportation appropriations bill for fiscal year 2014
that was just reported out of committee slashes Amtrak's
capital program by $352 million, or 37 percent below the fiscal
year 2013 enacted level. And it slashes Amtrak operations by
$119 million, 25 percent below the fiscal year 2013 enacted
level. Many of us will continue to fight these cuts. But given
the current fiscal climate, I can understand why many would
turn to the private sector. We should explore innovative
financing options, but they should supplement Federal
investments in Amtrak. We should reject any illusion that
private financing tools alone can fill the gap. They cannot
replace them. We need to ensure that there is a strong Federal
role to help guide and support the railroads to grow and
succeed.
In fact, only with a strong Federal role will we be able to
properly leverage the private sector. Despite this lack of
investment at the Federal level, the demand for intercity
passenger rail service is growing. Amtrak continues to set new
ridership and revenue records each year. And it is doing all of
this while facing budget cuts and uncertainty. We should build
upon Amtrak's success and give Amtrak the tools it needs to
truly implement a national strategic vision for intercity rail.
There are several existing programs and options that could
be part of the solution. The FRA's Railroad Rehabilitation and
Improvement Financing, RRIF loans program, is one tool that has
the potential to help railroads, shippers, and States meet
these rail infrastructure investment needs. Unfortunately, we
are not taking full advantage of this program. We often hear
that the application process is difficult, time consuming,
expensive, and cumbersome. There has been bipartisan support
for reforming the RRIF loan program, so I am hopeful that we
will agree on improvements. As we draft the PRIIA
reauthorization bill, it is the perfect time to look at the
current RRIF program and other financing tools that we can
create or improve to see what we can do to help this Nation's
intercity passenger rail system succeed.
Given the difficult economic climate, more and more States
and localities are turning to Federal credit programs and
public-private partnerships. We have an opportunity, as we
write the reauthorization bill, to find new creative ways to
help incentivize continued investment in intercity passenger
rail from both public and private partners.
But again, these innovative private financing options must
be incentivized, they should be utilized better, we should
reform them, but they cannot replace budget cuts or lack of
adequate Federal investment. They are a supplement, they are
not a replacement. Most of us here want to invest in and
develop safe, efficient, convenient, and affordable
transportation options like high-speed intercity passenger
rail. But if we want to see actual results and improvements in
the Nation's passenger rail system, we need a permanent
solution. We need to show the public and the private sector
that we support passenger rail, and give our States,
communities, and the private sector the confidence they need to
plan and invest. To do that, we must increase the use of
innovative financing, but we must increase substantially
increase the Federal investment of direct Federal
appropriations in intercity passenger rail.
Thank you, and I look forward to hearing our panelists'
thoughts and ideas this morning. I yield back.
Mr. Denham. Thank you. I now call on Chairman Shuster for
any opening statement he may have.
Mr. Shuster. I thank the gentleman. And I appreciate you
holding this hearing today. As I have said previously, I think
we have got to figure out ways to make sure the investments are
made in intercity passenger rail. And I think that it is not
only money, but it is reforming how we go about it.
Mr. Secretary, I would like to welcome you here today. I
should have started off with that. Thank you for being here. We
need passenger rail in this country. We have got to take a hard
look at it and figure out where we are going in the future. The
number I constantly remind myself of is that this Nation is
going to go from 300 million to 400 million people. The
projection in 2005 was it was going to take 32 years. We are
already 8 years into it, we are headed towards 400 million, and
we are going to have to figure out how to get people between
our major cities. You take the I-95 corridor. It is impossible
to build another lane of highway there. So we have got to
figure out how to improve moving people without moving them on
the highways.
I also believe that the partner out there is the private
sector. There is countries around the world that have shown
that private-sector involvement can be successful, and it is a
way to get those additional funds and investments made.
Programs like the RRIF program and TIFIA have shown us that we
can leverage those scarce Federal resources to make sure we are
making those investments that we need to. And we also need to,
and we are talking about reform, is leverage the railroad
assets, like stations and right-of-ways to make sure that we
are developing and being able to capture that investment that
is there. And again, we look around the world, there are places
that have done that successfully.
So again, I appreciate the chairman holding this hearing
and for the chairman's hard work traveling the country. I know
he has been around talking to stakeholders and making sure they
are heard. So, again, Chairman Denham, appreciate all your hard
work, and thanks for the hearing today.
Mr. Denham. Thank you.
I would now like to welcome Mr. Porcari as our first
witness today, our first panel. Then we will go into a second
panel. We will most likely have time for two rounds of
questioning. We know that this is a very important topic. And
we look forward to working with you on improving America's
railroad.
Amtrak, I agree with Mr. Nadler, has been improving. But we
obviously have some safety concerns. We have got some
infrastructure concerns. We have got some opportunities to
really invest in continuing those improvements. And we look
forward to working with you on that. I would ask unanimous
consent that our witnesses' full statements be included in the
record.
Without objection, so ordered.
Since your written testimony has been made part of the
record, the subcommittee would request that your oral testimony
be limited to 5 minutes.
Mr. Porcari, welcome.
TESTIMONY OF HON. JOHN PORCARI, DEPUTY SECRETARY, UNITED STATES
DEPARTMENT OF TRANSPORTATION
Mr. Porcari. Thank you.
Chairman Shuster, Chairman Denham, Mr. Nadler, members of
the committee, thanks for this opportunity.
When President Obama took office, he laid out his vision
for the 21st-century American rail, a vision that aims to
connect 80 percent of the Nation's population to a high-
performance rail network within the next 25 years. Since 2009,
the U.S. Department of Transportation has made unprecedented
investments in America's rail infrastructure to help make this
vision a reality. And every step of the way, we have put people
to work and generated economic growth in communities across
America.
Today, 6,000 corridor miles are being improved, 40 stations
are being upgraded, 260 next-generation passenger rail cars,
and 105 locomotives are being procured. Our High-Speed and
Intercity Passenger Rail Program is investing more than $10
billion in strategic market-based projects in 32 States. Our
successful TIGER grant program has awarded over $750 million to
more than 45 rail projects, from station upgrades to large-
scale freight initiatives. Our Railroad Rehabilitation and
Improvement Financing program, better known as RRIF, continues
to support major rail projects. And it is a great example of
how our investments are able to attract private capital.
One loan we issued through RRIF allowed Amtrak to buy 70
new locomotives to modernize its fleet in the Northeast
Corridor. These locomotives are being manufactured as we speak
at a Siemens plant in California that employs about 750 people,
with suppliers in 23 States building component parts. We have
also issued 29 RRIF loans to freight railroads, helping to
upgrade our rail infrastructure and improve the movement of
goods across America.
Our innovative TIFIA program is another tool we are using
to stretch our rail dollars further. TIFIA, that is the
Transportation Infrastructure Finance and Innovation Act,
provides direct loans, loan guarantees, and standby letters of
credit for major infrastructure projects throughout the Nation.
It is a powerful resource on its own, but when TIFIA is
combined with RRIF the benefits are truly inspiring.
For example, as you mentioned, Mr. Chairman, in Denver at
Union Station Denver, both a RRIF loan and a TIFIA loan are
being used together to leverage more than half of the total
project funding for the redevelopment of Denver Union Station.
More than 2 million square feet of mixed-use space development
is now being built around the station, spurred by the
revitalization of the station itself. And it is estimated that
public sector investments will create 7,000 jobs during the
construction of that project. As you can see, in cities and
towns across the country, rail investments lead to more jobs,
increase private-sector buy-in, and better infrastructure for
everyone. It is a true win-win-win situation.
To fully realize the potential for rail in America, we have
to continue investing Federal resources and leveraging them
with our public and private-sector partners. The President's
2014 budget request proposes a 5-year, $40 billion rail
reauthorization. And we are proposing to fund this
reauthorization by creating a new rail account as part of our
broader transportation trust fund, providing much needed
funding predictability and consistency for both our public and
private-sector partners.
Our current authorizations, passed in 2008 in true
bipartisan fashion, were game changing. Since they were passed,
Amtrak's ridership, its on time performance, and its revenues
have reached all time highs. The freight rail industry has
invested in its infrastructure at a pace not seen since the
19th century. And last year was the safest in railroading
history.
Now, imagine what we could do together if we treated rail
like our highways and other forms of transportation and
provided it with a sustained source of funding. Our highways
and airports are already stretched to their limits and facing
congestion that will only get worse with time. By 2050, we will
need to move up to--we will have an additional up to 100
million people in America, and 8 billion tons more freight per
year.
The demand for rail is at an all time high. In the last 10
years, Amtrak's ridership has increased by 40 percent. This is
the time to put rail funding on par with our other modes of
transportation. Making large-scale investments on a year-to-
year basis we realize is both difficult and inefficient. No
rail system in the world has ever been successfully planned and
developed on that basis. Predictability in Federal funding is a
necessity. It is what States, local governments, and private-
sector investors are looking for. It is what will move America
forward. And it is what will ultimately support the public-
private rail partnerships that are needed to realize the
President's vision for a national passenger rail network that
is the envy of the world.
Thank you, Mr. Chairman, for the opportunity to testify. I
look forward to taking your questions.
Mr. Denham. Thank you, Mr. Porcari.
Let me first start by clarifying something that you said in
your statement. I agree that there should be dedicated funding.
I think if you are going to improve passenger rail across the
Nation, there needs to be that dedicated funding stream. So
what are your ideas? Is it an infrastructure bank? Is it some
type of new tax? What does that dedicated revenue stream look
like?
Mr. Porcari. There are a number of ways this can be done.
And if you look at the ways in the past that Congress and the
executive branch have worked together in a true bipartisan way
to identify revenue sources, the entire spectrum of potential
revenues would be out there.
What is true, Mr. Chairman, is that any major
infrastructure investments, whether it is our highway system or
aviation, has required core public funding on a multiyear basis
to be effective. So we look forward to working with you and
members of the committee and Congress on identifying those
revenue sources.
Mr. Denham. Thank you.
And I would agree we need a 5- or 10-year plan to be able
to plan any long-term project. There is no plan that the
administration has out there in print today that I haven't
seen, is there?
Mr. Porcari. The President's fiscal year 2014 budget does
identify pay-fors for the rail portion of the plan from the
Overseas Contingency Operations Accounts. And we think of it as
some Nation building right here at home.
Mr. Denham. OK. I think we have scored the downsizing of
the war in many different funding scenarios. But we
nevertheless, we look forward to working with you on that
because we do agree that a long-term funding source, like the
Highway Trust Fund--only a Highway Trust Fund that actually is
fully funded, as well. We have some big infrastructure
challenges that I think we can work on, on a bipartisan level.
But let me start with a question about the RRIF loan. In
2011, the Department of Transportation approved to Amtrak a
$563 million RRIF loan for the procurement of 70 electric
locomotives. The loan will be repaid with revenue generated
from Amtrak's Northeast Corridor services. In your view, are
there further opportunities to leverage Amtrak's Northeast
Corridor profits to accelerate the state of good repairs along
the whole Northeast Corridor both on safety as well as creating
better efficiencies? I have taken that train a few times now to
see how many challenges there are and the number of projects
that are in dire need of funding.
Mr. Porcari. Yes, Mr. Chairman. The short answer is yes, we
believe there are further opportunities, whether it is through
the RRIF loan program, through, as you point out, station
development opportunities, and other value capture
opportunities, and baseline funding to restore some of the
Northeast infrastructure. Despite the historic disinvestment in
the Northeast Corridor, as you know, ridership growth has been
steady and very impressive. The rolling stock, in particular,
these new locomotives, will be very helpful. But I think it is
worth noting that the Acela trains, the newest rolling stock in
the Northeast Corridor, are now 20 years old.
Mr. Denham. And would it be helpful, as we are putting
together the PRIIA reauthorization, to separate Amtrak's lines
of business to make sure we are making loans to Amtrak that are
not being paid for with a Federal subsidy so that we have
directed funding just on infrastructure improvements?
Mr. Porcari. Yes, Mr. Chairman. We have been supportive of
having transparency into Amtrak's lines of businesses to better
support investment decisions, but also from a national
perspective, especially when it--because it is important to
serve rural areas throughout America on cross-country service
as well, to understand what it will take to support that
service in the long term.
Mr. Denham. And the RRIF, the whole overall RRIF program
has not been fully utilized. There is obviously a great deal of
money that is sitting out there that could be loaned out. And
recently the RRIF loan program has garnered interest for
advancing new intercity passenger rail projects. Does DOT
believe that the RRIF program can be used successfully to
support passenger rail projects as well?
Mr. Porcari. Yes, we do believe the RRIF program has a part
in both freight and passenger rail. There are some very
interesting both applications and potential proposals out
there. As you know, the RRIF program is our one underutilized
financial resource for both freight and passenger rail. We look
forward to working with the committee and the users to find
more effective ways to implement the RRIF program.
Mr. Denham. And I know that there are high-speed rail
opportunities to loan RRIF dollars. What role, if any, do you
think RRIF can play in the California high-speed rail project,
which, as you know, will require billions of dollars in grant
funding that is unlikely to materialize without a dedicated
source?
Mr. Porcari. The RRIF program is a potential source of a
portion of the financing for the California program. That will
have to stand on its own legs financially. Like every other
RRIF application, it would have to make financial sense in its
own terms. But it is a potential tool, as are other State and
Federal revenue sources.
Mr. Denham. Thank you.
We certainly agree on that. I think that they will have to
prove their business plan to be worthy before they could apply
for a loan. But we are certainly looking at other
opportunities.
Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chairman.
I just want to, before you answer my questions, I want to
follow up on that. Do you believe that a high-speed rail system
or any transportation system has to stand on its own in terms
of turning a profit or at least breaking even, as opposed to
being subsidized from the outside?
Mr. Porcari. Mr. Nadler, we don't have any portion of the
transportation system that stands totally on its own legs
financially.
Mr. Nadler. Exactly.
Mr. Porcari. What I was referring to is a specific RRIF
loan proposal, if we get one from the California High-Speed
Rail Authority, would have to make financial sense.
Mr. Nadler. Yeah, obviously. But we have to understand, I
assume, that loan programs, and any other innovative financing
systems that I haven't heard talked about--I have heard PRIIA
and RRIF--are loan programs. They have to be paid back. They
have to be paid back out of revenues. And you are not going to
build or maintain major systems out of their own revenues, even
if you use part of that--especially if you use a larger and
larger part of that for debt service. You have to have an
outside subsidy from somewhere, correct?
Mr. Porcari. That is correct. Mr. Nadler, we wouldn't have
an Interstate Highway System, we wouldn't have the aviation
system that is the envy of the world if we didn't have trust
funds with dedicated revenue sources that year after year
provided the baseline funding.
Mr. Nadler. So we have to find some revenue source from
outside in addition to creative use of PRIIA and RRIF and
anything else we can come up with and PPP, we have to find some
source which we don't have now of large-scale annualized public
funding for passenger rail?
Mr. Porcari. We do.
Mr. Nadler. And there is no proposal on the table at the
moment.
Mr. Porcari. Apart from the President's proposal in the
fiscal year 2014 budget. We look forward to working with the
committee and Congress on a multiyear proposal.
Mr. Nadler. Thank you. The President proposed in the fiscal
year 2014 budget, and I think this may have been what you were
just referring to, $300 million. Why is that necessary? I am
sorry, for State corridors, $300 million for State corridors.
Mr. Porcari. We have historically as a Nation underinvested
in these corridors. There is great demand for--grade ridership
demand that individual State corridors, and regionally and
nationally, we have not been able to fulfill. The idea is to
jump-start the infrastructure investment process with some
critically needed investments. Overall, the fiscal year 2014
proposal has a number of different categories which we are
proposing to fund both passenger and freight rail needs. And I
mention those in the same sentence because, with limited
exceptions of true high-speed rail, we will have a mixed system
in the United States.
Mr. Nadler. And these are grants, not loans, correct?
Mr. Porcari. Primarily they would be grants.
Mr. Nadler. Good. Thank you. Now, you mentioned that the
administration proposes to fund Amtrak--or actually you were
talking with the chairman, and you mentioned that the
administration proposes to fund Amtrak through business lines
rather than the traditional operating and capital debt service
grants. Last week, the FRA, the Federal Railroad Administrator,
testified that financing along business lines would not make
sense with the low appropriations levels proposed by the
Appropriations Committee in the House for Amtrak. Why is this
so? And what do you believe would occur in the short term and
long term with such low Federal financing levels? And do you
think the private sector would come in to take up the slack?
Mr. Porcari. Basically, providing transparency along the
lines of business will highlight, as the Administrator pointed
out, the underfunding and the problem. It will show very
specifically by line of business where more investment is
needed. There is certainly a role for public-private
partnerships, and we want to encourage those and maximize those
to the extent possible. There is a large part of the system
that is simply a public good that is not going to fit the
profile of what the private sector would co-invest in. So the
bottom line is a better, more consistent, and higher baseline
level of public funding is needed, along with better and more
public-private partnerships.
Mr. Nadler. That makes sense. But the Federal Railroad
Administrator testified that financing along business lines
would not make sense with the low appropriations levels. Now,
did he mean or would you say that what doesn't make sense are
the low appropriations levels? And with those low
appropriations levels that don't make sense, if you had
financing along business lines that would make it more
transparent and show more--how much it doesn't make sense? Or
instituting such a system doesn't make sense with inadequate
financing levels?
Mr. Porcari. What the President's budget is proposing is
transparency by lines of business and higher levels of funding.
If you look at the current funding and the House proposal for
funding, there would be some very difficult choices that the
House would need to make on actually cutting back service.
Mr. Nadler. But if you had a very inadequate level of
funding, would it still make sense to fund through business
lines to make it more transparent, or is there some reason that
wouldn't make sense if you were having senseless inadequate
levels of funding?
Mr. Porcari. We have been promoting transparency across the
transportation network, along with performance measures, as a
way to restore public confidence and show the transportation
investments on a business case basis make sense. So we would
propose to do that.
Mr. Nadler. Even if you had inadequate levels of financing?
Mr. Porcari. That is right.
Mr. Nadler. My time has expired. I yield back. Thank you.
Mr. Denham. Mr. Shuster.
Mr. Shuster. To follow along the line of questioning that
the gentleman of New York, senseless underfunding, putting into
a system that is not operating well or inefficiently, the whole
system is senseless. And so that is why I believe we have got
to start with reforming it how we move forward and then try to
figure out how to get those funds.
I think everybody agrees that there has to be some level of
investment from Federal to State, from the Government. As the
Secretary said, none of our transportation modes goes along by
themselves without some assistance. But again, going back to
the investments that are made and not being properly invested,
not being done in a way that we can maximize the return I think
is wrong.
But I look at Amtrak, and the ridership has gone up
significantly. We use all the time the Keystone corridor from
Harrisburg to Pittsburgh, which has gone up I think now about
70 percent in the last 5 years. Pennsylvania and Amtrak made
that investment. I think that is senseless sitting in traffic.
Every time I get on there and I do the back of the envelope,
and I did one right here to make the calculation, there is
three prices basically, $19, $29 and $39. That might have gone
up a little bit. But when you take that $29 or $39, which is
what the typical business traveler is going to pay, $58 or $78
round trip, if you take the tax, the gasoline you used, the
parking you are going to have to take into consideration and
the toll, it is $62 to $72. So as I tell the Governor of the
State of Pennsylvania--who is in control over the price in that
line--the price needs to be higher. Nobody wants to pay more,
but as a business traveler, as somebody that values my time,
the calculation needs to be made how much more productive can I
be? Because I think that that is a problem. That goes to the
point of the management of it is not like a private-sector
company would look at it, look at price elasticity, and they
would say, hey, we can get $100 or $110 round trip and increase
our revenues. We are not doing that.
My son traveled from Harrisburg to New York City round
trip. Good for me it was $108. I couldn't believe it was $108.
I probably would have paid $208 easily to make sure that he
didn't have to take his car into New York City and deal with
all the headaches and hassles.
So that is the core to the problem I think is we have got
to figure out how to reform Amtrak, to manage it the way a
private-sector company does. And when we are talking about
separating business lines, it makes a lot of sense to me. Now,
as I said, below the rail, that is where the investment is
going to have to be coming from help from the Federal
Government. But above the rail, by putting private-sector
practices, or by bringing the private sector into the process,
I think we can look at these things, these different lines as
standalone businesses.
And that long, lengthy statement brings me to my question
to you, Mr. Secretary. The President has talked a lot about it,
but I don't think his actions have put the focus where they
need to be. Dribs and drabs everywhere. I am not a fan of the
California high-speed investments being made there because I
don't think they can afford it. But do you agree we need to
really focus on the corridors that make the most sense? For
instance, the Northeast Corridor, or a heavily traveled
corridor, Chicago to St. Louis, those places like that. Do you
think we need to focus on those corridors and not try to spread
our money so thin we are not going to have any kind of impact?
Mr. Porcari. Mr. Chairman, much the same way that the
interstate system was built, the passenger rail corridors are
starting off as city pairs. You mentioned St. Louis-Chicago as
a great example, where that investment of Federal public
dollars has now resulted in 110-mile-an-hour service for a
portion of it. Likewise, Detroit to Chicago, most of that will
be 110-mile-an-hour service in the next few years. As the city
pairs start connecting with each other, you are building a
network from the ground up.
This is not a Federal Government master plan map of the
country imposed from the top down. It is really demand starting
with city pairs and emerging corridors building up. And again,
I would point out that that is the way, whether it is highway
or aviation or any other part of the transportation system,
that is the way most of our system has been built, from the
ground up.
Mr. Shuster. Except when you look at the New Orleans to Los
Angeles, the Sunset Limited, that is the biggest loser I
believe we have. What are your thoughts on that?
Mr. Porcari. Some of the cross-country service is very
important for the rural areas that it serves. Part of the
conversation should be those communities along the way and
connected to a nationwide network through Amtrak. As we are
losing intercity passenger bus service, for example, Amtrak is
becoming more and more important for those rural areas that
simply don't have transportation options otherwise.
Mr. Shuster. We are losing those intercity bus travel?
Mr. Porcari. Yeah, well, the bus industry is changing
rapidly, and a number of towns and areas that had been served
with scheduled service don't have that anymore.
Mr. Shuster. Right. Right. If the chairman will indulge me
for another 20 seconds, just a statement. I agree with you, we
need to figure out how to improve RRIF loans, get them out
there. Thirty-five billion dollars that is available, and we
are not even close to that. We tried, Chairman Mica and myself
tried to in MAP-21, tried to reform that but we were unable to.
So I look forward to working with him improving RRIF.
Thank you, Mr. Chairman.
Mr. Denham. Thank you.
Mr. Michaud.
Mr. Michaud. Thank you very much, Mr. Chairman.
And thank you for being here this morning. I want to follow
up, you mentioned that there is some collaboration between
freight and passenger rail, particularly in rural areas that
make sense to do that. How many areas, number one, is that
collaboration going on? And do you envision, do you have any
plans to increase that collaboration to include more passenger
and freight rail?
My second question is, as you look at trying to hold down
the costs, have you, the department, thought of utilizing the
National Guard to use that as a training project so when they
can use the man-hours and equipment to actually build passenger
rail, help hold down the costs?
And my third question is since the United States is
negotiating with the EU for a trade deal, and if you look at
the shipping lanes for that trade deal, it makes a lot of sense
to actually have it shipped on the east coast. And once it gets
on the east coast, I will just use Maine for an example,
Eastport is the deepest water port on the east coast, doesn't
have to be dredged. How would you get that product from say
Maine to California using rail? Have you looked at that as
well?
Mr. Porcari. Let me try to take those questions in turn.
First, in terms of shared tracks, it is important to state that
we have the best freight rail system in the world. It is the
envy of the world. And one of the reasons that our economy is
strong is because over the last 25 or 30 years, the freight
rail system has come back very strongly. And in the vast
majority of cases where we have passenger rail service, it is
on shared tracks where it is serving both freight and passenger
rail needs. That will continue to be true under almost any
scenario.
So we focus on the safety of the interaction between
passenger and freight, but we are very mindful from an economic
development point of view that we want to promote the freight
side of it as much as passenger. And we try to make sure we
have that balance there. As far as the National Guard, to my
knowledge, we have not looked at that as an option. We have
focused very much on the safety of the system. And that in part
has been from the rigorous training requirements and safety
management systems and other safety cultural issues that we
have worked on together with the various railroads for a steady
increase in safety.
On the shipping lanes and the ports, it is a great point,
because what we have not been able to do much in the past is
focus on the seams in the transportation system. We may have
great ports that have a 50-foot channel and a 50-foot berth,
but if we don't have great rail and highway access to that port
we haven't done anything. By category, one of the single
biggest winners in our TIGER grants over the various rounds has
actually been freight rail and ports. And it is because we have
been able to take very specific, relatively small targeted
investments and eliminate bottlenecks. And there is great
examples all over the country where taking a systems approach,
we have been able to eliminate some of those bottlenecks.
Through the RRIF program, through a continued TIGER program,
and through base funding at an adequate level for a passenger
rail system, we believe that we can actually keep working on
those bottlenecks and build a system that serves both the
freight and passenger rail needs. Mindful also that there are
other development opportunities and value capture opportunities
for that right-of-way and the stations as well.
Mr. Michaud. Thank you.
I think it is very important that when you look at
passenger, freight, and what is being negotiated like with the
EU, that you also look outside the box. My biggest concern,
without getting the wrath of my friends from New York, is my
understanding that they are going to have to spend about a
billion dollars raising a bridge. They are going to have to
spend a ton of money dredging, which is costly, so here is to
me anyway, is a waste of taxpayers' dollars when there are more
economical ways of probably looking at ways how things go. And
I would be willing to talk to Ranking Member Nadler about that
as well.
But my next question is, and I heard Chairman Shuster
mention it, about how businesses can afford more as far as the
costs. Have you done an analysis, maybe businesses can, but on
your ridership? Where is that return rates going to be? So if
you do raise the rate, are you going to be losing customers
because they can no longer afford the higher rate.
Mr. Porcari. As a general principle, Amtrak, commuter
railroads, other operators are looking at that the elasticity.
They do it on different schedules and in different ways. On the
Keystone service, I am not certain of where that point is. But
I think the chairman's point is a good one, when the service
started, the point was to build ridership. Now that ridership
has been built and the base ridership is there and it is still
growing, there may be pricing opportunities. I am not sure.
Mr. Michaud. Thank you very much.
Thank you, Mr. Chairman.
Mr. Denham. Thank you. Mr. Williams.
Mr. Williams. Yes. Mr. Secretary, thanks for being here. I
appreciate it. I am a business guy. I am from Texas. So I am a
big private-sector guy, believe in the private sector.
My experience has been that big government and regulations
and processes choke the heck out of opportunities for the
private sector to get engaged. I guess my first part of my
question would be, what do you propose? I mean, we haven't
talked too much about regulations and how hard it is for the
private sector to get involved with the Federal Government on a
private partner relationship. What do you propose do about some
of these regulations that seem to go on and on and on?
Mr. Porcari. Yeah. First, sir, on the public and private
investment, there is great example I wanted to mention in Texas
of Tower 55, which is a truly a national bottleneck.
Mr. Williams. Right in my backyard.
Mr. Porcari. Absolutely. And a joint investment from the
Class I railroads and the Federal Government is eliminating one
of the worst bottlenecks in America. And I think that is a
great illustration of the approach we are trying to take to
eliminate regional and national bottlenecks through joint
public-private investments. On the regulation side, we are
working very closely with industry on the implementation of,
for example, positive train control, as mandated by Congress.
We have made modifications to that program that we think make
sense. And we have done that working closely with the industry.
That is one example.
I would say that there is a strong shared sense of safety
and building a safety culture that, with or without
regulations, cuts across the railroad industry. And it is one
that we share with both our freight and passenger railroads.
Mr. Williams. Sometimes the process is pretty cumbersome,
and there are ways, hopefully you will find ways to make it
easier to be a partner.
Mr. Porcari. And I believe positive train control is an
example of that, where the regulations that were mandated by
Congress have actually been modified in response to legitimate
points brought up by industry.
Mr. Williams. The other thing is of course we all talk
about where the cash flow is, don't we? And the public sector
has got their cash flow, the Government has got their cash
flow. You know, as mentioned earlier, where is the--where do
you propose the Government's money comes from? Are you talking
about more taxes? Are you talking about tax increases? I heard
you say earlier we are talking about also money that the
President is planning on from the withdrawal from the wars. It
seems everybody has got their hand in that. Where is the money
going to come from? Are we going to tax? Are we going to have
higher taxes? More taxes?
Mr. Porcari. Well, first, the specific discussion about the
fiscal year 2014 President's budget does have that pay-for, the
Overseas Contingency Operations Account. And again, we think of
it as Nation building right here at home and investments that
will pay off for generations. We look forward to working with
Congress on a larger discussion on a bipartisan basis of the
levels of funding that will actually rebuild our infrastructure
and turn over to the next generation what we inherited, which
was a transportation system that drives the Nation's economy
and builds a better standard of living.
Mr. Williams. But you are not ready to commit for tax
increases right now.
Mr. Porcari. I am not proposing anything.
Mr. Williams. I yield back, Mr. Chairman.
Mr. Shuster [presiding]. Thank the gentleman.
And with that, Mrs. Napolitano is recognized for 5 minutes.
Mrs. Napolitano. Thank you, Mr. Chairman.
And I am glad that we have an opportunity to go over some
of the issues that are very important to my district and for
California.
Secretary Porcari, there have been very some potential
successful RRIF applicants in the program that raised some
questions to me and to some of my colleagues because of the
length of time of the review, the inefficiencies in the
process, the lack of staff authority, the lack of
communications, and other processes. In 2012, $83,710,000 were
loaned to the Alameda Corridor Transportation Authority, ACTA,
in California. It took them 33 months to get that loan. When
they applied, it was during the recession, and there were
problems with being able to pay the loan because the ridership
was down, and apparently, they were requesting some relief to
be able to refi their loan.
Do you believe there have been problems with the program?
What are you doing to fix them? The statute gives DOT 90 days,
but it doesn't begin to count until the application is deemed
complete. Thereby, it took 6 months for their application to be
deemed complete, even though there were no additional
information requests to the ACTA. Are we working on being able
to expedite, cut the timeframes? Do we have enough trained and
experienced personnel to do it in your staff? And what should
be the time limitation between the submission of an application
and then of course the deemed complete portion of it? Because
one barrier for some applicants may be the costs also for the
transaction. And if you would explain also, if you can, in the
short frame time what they are, what those costs are, and why
they may change during the RRIF approval and negotiation
process.
Mr. Porcari. Thank you, Ms. Napolitano. I will try to
unpack that series of questions.
First, as you know, the Alameda County Transportation
Authority refinancing was, as you point out, through a very
difficult economic time. Every one of our RRIF loans, as I
mentioned, has to stand on its own legs financially. It is an
incredibly important corridor for national trade. But it is one
where the refinancing as first proposed did not make sense and
from my perspective was not approvable because of some of the
financial issues. It took some time to work through that given
the size and scope of the project, and again, the national
importance of that corridor to domestic and international
trade.
We clearly understand that there are process improvements
that make sense and that we can do. Thirty-three months is not
the norm. But that is a project that, as originally submitted,
needed substantial work together to get to an approvable state.
Now, there are specific steps within the RRIF loan application
process. I will be happy to go through those. But maybe the
most important one is the independent financial adviser, who on
an independent basis is evaluating the creditworthiness of that
specific application. And that creditworthiness review often
takes a number of back and forth rounds and modifications to
the proposal before we can get to a point where it is approved.
We have been--tried to be very good stewards of the public
trust in only approving RRIF loans that make sense. We have a
lot more capacity to approve RRIF loans. We do think that we
can front load the process better than it has been done in the
past, where we can get to a complete application faster. And I
think that is really the key to having a better process.
Mrs. Napolitano. Should there be a time limitation between
the submission of the app and the deem of complete?
Mr. Porcari. Well, before the application is deemed
complete, I can think of several examples of RRIF loans that
simply didn't have enough information to act on. And if we were
required to deem them complete before the applicant
supplemented that information, those loans would have been
denied. So I think that there is a balancing act there in how
quickly we can get to deemed complete. It is in our interest to
do that, too.
Mrs. Napolitano. Can you quickly address the barrier for
some applicants for the costs issue?
Mr. Porcari. Sure. Especially for the smaller RRIF
applicants, I believe the smallest RRIF loan we did was on the
order of about $85,000. So the transaction costs are very
important, but especially important in the smallest ones. There
is an investigation fee, which is one-half of 1 percent. That
is what pays for the independent financial adviser. There is
the credit risk premium, which is required by the enabling
legislation. We don't have appropriated funds for RRIF. So the
applicants have to pay that in the RRIF program. And basically,
the less creditworthy the higher the premium. So that can be a
substantial barrier.
Mrs. Napolitano. Is there any way to be able to help the
smaller entities? Because this could be one of the problems for
the small entity being able to be successful.
Mr. Porcari. Well, we do recognize, the RRIF program was
originally set up, as you know, to help the short line
railroads. And it is an incredibly powerful economic
development tool for a railroad siding, a little bit of rolling
stock for smaller businesses in particular.
We can focus on ways to minimize the transaction costs. But
the things like payment for the independent financial adviser,
payment of the credit risk premium, really aren't negotiable.
And then of course the interest rate itself doesn't vary
widely, but it does float based on I believe the Treasury bill.
Mrs. Napolitano. Mr. Secretary, I would love to have--and
Mr. Chair--any information to this committee on how we can help
reduce those costs for smaller entities.
Mr. Shuster. Certainly. Thank you.
Mr. Webster from Florida is recognized for 5 minutes.
Mr. Webster. Thank you, Mr. Chairman.
Thank you for this meeting. And I had a question about
something local to Florida. There is an innovative,
groundbreaking private-sector project underway called All
Aboard Florida. And it will bring not only modern passenger
travel rail from Miami to my hometown of Orlando, but also be
great for economic development and also just great employment
opportunities as well. Are you aware of that project?
Mr. Porcari. Yes, I am.
Mr. Webster. I think it is probably the only green filled
passenger rail project that will be completed here in the next
few years. Is there anything that you believe DOT could do in
order to help that project along and move it forward quickly
and also without unnecessary delays?
Mr. Porcari. Well, it is one of the RRIF loan applications
that we are looking at right now. I would say it comes in with
some natural advantages in the sense that for the most part it
is existing right-of-way, and has, for at least a portion of
the line, the environmental clearances that are required. So
those are big pluses. I know, and you will hear more about it I
suspect on the second panel--but there are more--there are some
right-of-way and other issues to be worked out. But overall,
there is a real need. This is a great example of, for the most
part, what would be continue to be a shared use corridor, where
both freight and passenger activity can co-exist very well. I
don't know of any show stoppers for the proposal. But I don't
know enough of the details at this point to know that there
might be some. But in general, we welcome the proposal. We know
the need is great. And for a system that could serve in phases
or all at once, Miami to Orlando would be a big boon to the
State.
Mr. Webster. Just as a side note, I am familiar with TIFIA.
I am not as familiar with RRIF as I am with TIFIA. But people
seem to like TIFIA. People don't like RRIF. Is there a way to
come up with a hybrid program that would be more modeled after
the TIFIA program?
Mr. Porcari. One of the reasons that people like TIFIA is
because they are not paying the credit risk premium. In RRIF
they are. And again----
Mr. Webster. This is more also there is just some
objections to the--it is kind of cumbersome in the way it is
set up.
Mr. Porcari. I think the point is well taken. And we know
that in terms of re-engineering the process that we can make it
both an appropriately scrutinized process that includes the
independent financial review, but we can also make it a better
process. And as I mentioned, front loading--everything else
being equal, doing more work together with the applicant
upfront rather than having a consecutive process where you are
asking them questions or sending them requests for information
and then providing it----
Mr. Webster. That is what I heard, there is like this back
and forth that seems unending.
Mr. Porcari. We are not interested in turning this into the
consultants full employment act. What we would like to do is
make it both a responsive and responsible process.
Mr. Webster. Thank you. Yield back.
Mr. Shuster. Thank the gentleman.
And the gentleman from Minnesota is recognized for 5
minutes, Mr. Walz.
Mr. Walz. Thank you, Mr. Chairman.
And thank you, Mr. Porcari, for being here.
I represent a small city of about 110,000 people in
southern Minnesota. It also happens to be the world's premier
medical destination, Rochester, Minnesota, and the Mayo Clinic.
They have 2.75 million visitors a year, generating $10 billion
of economic activity. They employ 40,000 people, which is more
than Chrysler's entire workforce in the United States. They are
fed by two highways that are at one point within 20 miles of
the city two lanes that are on there. That is the situation.
There has been a concerted effort of local, State, private
partners to build intercity rail to obviously the destination
of the Twin Cities and the airport, where the bulk of those
2.75 million people fly into. My question as we go forward on
this, and I often hear it appears like when we talk about these
things that some of my colleagues believe our best days are
behind us. We have economic engines that are outpacing anything
in the world. We have innovation that is out-innovating anybody
else in the world. What is holding us back is an outdated,
outmoded transportation system that is going to take creative
thinking. My question to you is, and I hear it, is, how does a
city of 110,000 compete with a Miami, a Los Angeles, a Denver,
the Eastern corridor here? How do we make those investments
there, where I can guarantee you your return on the dollar is
going to be higher than any place else you get? How do the
programs, and I am glad to see the budget sets aside money, but
how do regional planning authorities compete with the
metropolitan planning authorities? And how are you envisioning
that to make sure that multimodal intercity rail transport is
available to the people in southern Minnesota?
Mr. Porcari. Excellent question, Mr. Walz. First of all,
the clinic is a great example of an anchor institution that is
a major employment node that our transportation system, whether
you are talking about highway or rail or aviation for that
matter, really hasn't kept up with. And transportation is
economic development. At the end of the day, this country was
built on tough investment decisions in transportation
infrastructure that our parents and grandparents and great
grandparents made. And I think what you are pointing out is, as
new employment nodes emerge, we have an obligation to serve
them as well. I am familiar with the discussion about passenger
rail service to the facility. It is a great example of what may
be an emerging node that would later be part of a larger
regional and national connection. And I mentioned city pairs is
one way that it works. Major employment nodes is another. We
don't see this as a zero sum game in the sense that with
adequate baseline funding, there are emerging rail markets all
over America that really can be served and can be served very
well. And for families, for patients, for others that want
transportation choices and don't want to have to drive, it
would give them those choices. So we see that as a great
example of how an intercity passenger rail program that
operates on various levels, regional, local, and true high-
speed----
Mr. Walz. How do we get away from the chicken and the egg
scenario that our local private partners are waiting for the
commitment and the investment, and then we keep hearing we need
to see that local commitment going? How do we get started and
break this logjam? Because the Chamber is all in. Labor is all
in. I mean people are all in on this thing. But we are caught
in this dilemma that, well, how do we know the Federal
Government is going to be there to do it? This is the case of
you can take your ideology and throw it out the window on this
one. This is going to be a public-private partnership. Without
the Federal Government and the State government, it won't
happen. Without the private sector, it won't happen. How do we
get there? What is the catalyst?
Mr. Porcari. Well, we will be happy to be the convening
group for that. But as you point out, that is a very likely
candidate for a public-private partnership, where there are
private investment opportunities, private redevelopment value
capture opportunities. It will take some substantial level of
public investment, most likely at both the State and Federal
level, to make that happen. So if you think about three
parties, private sector, State, and Federal, it will likely
take all three of those parties for that service.
Mr. Walz. I look forward to working with you. I think it is
an incredible opportunity to make it happen. Thank you.
Mr. Shuster. Thank the gentleman.
Mr. Hanna is it recognized for 5 minutes.
Mr. Hanna. Thank you, Mr. Chairman.
You said that you believe in RRIF loans. You think it is a
good process for the most part, problematic in many ways. And
you have identified ways that you think it should be changed.
Things go concurrently, not consecutively. But yet in your 2014
budget, you have made no changes in the process. Perhaps that
is not a relevant way to go about it. But specifically, what
would you do differently than you are doing? Because there is
no indication that there are any changes being made.
Mr. Porcari. Some of the same principles and practices that
we have applied to the President's dashboard process--if you
are familiar with that, we have taken Projects of National and
Regional Significance and greatly reduced the timeframe, in
some cases from a 5-year environmental document to 14 months,
for example.
The principles are things like concurrency. You don't need
to do everything consecutively. If you can chart it out and do
the processes concurrently----
Mr. Hanna. Right. But you have not made any changes in the
program, but you intend to make changes in the program, or you
just think that it is something you can do with the process?
Mr. Porcari. The program is a work in process. And I would
point out one other part, that I don't think we have done the
job we need to do with the RRIF program, and that is reaching
out to potential users of it. You know, we talk to the railroad
industry, and we talk to railroad users. That is fine. But
State and local economic development officials are actually the
ones that could probably best use it. It has been a little bit
of an eye opener to see that, for the most part, they don't
even know about the program.
Mr. Hanna. Let me ask you about another point that Chairman
Shuster brought up, and that is the elasticity of demand for
the product that you provide through, for example, Amtrak. And
you indicated you weren't aware of when they go back and check
demand versus pricing and how that is all done. But--and I
think there is wide agreement here that the public has a large
role to play in financing these things that are generally a
public good and couldn't survive without public money.
Everybody gets that.
But how, on the other hand, can you justify additional
public money without constantly looking at the demand-supply
equation that exists out there? And clearly, there is--demand
and supply are mismatched here, since we know that ridership is
increasing, and yet it would seem as though that we are not
getting the advantage of the elasticity of demand, which allows
the individual using the service to pay more and I would argue
a fairer share of the benefit.
Mr. Porcari. Mr. Hanna, I would be happy to get the
committee specific information on how and how frequently and by
what process Amtrak evaluates their fares. I can tell you as a
frequent Amtrak user, it seems to me that they are taking
advantage of pricing opportunities wherever possible.
Mr. Hanna. But yet you don't know when they do it or----
Mr. Porcari. I don't offhand, but we would be happy to get
that information for you.
Mr. Hanna. Thank you very much. I yield back.
Mr. Denham [presiding]. Thank you. Mr. Sires.
Mr. Sires. Thank you, Mr. Chairman.
You know I ride the Northeast Corridor just about every
week. And the other day we had a bunch--a group of Members ride
the corridor. And they pointed out to us some of the areas that
we could work on to make it faster. But one of the things that
I thought of as we were speaking is we are going to be making
hundreds of millions of dollars of investment to save 4 minutes
or 5 minutes on some of these turns. It just seems to me that
it is very difficult to make a decision to spend that kind of
money to save 4 or 5 minutes. Yet, you know we keep growing.
I know I have been involved with light rail and so forth in
many areas for many years. People don't want an increase in
trains going by in their tracks, because people have moved in.
Some of the old track, you cannot activate the abandoned
tracks. So I don't know what you are going to do by the year
2050 to move all of these people, the 100 million people and
the freight and everything else, because it seems the
communities are part of the problem. And obviously, in our
area, as being so congested, the investment to save 3 or 4
minutes is very hard because I can see some of the other
Members saying, why should they spend $300 million to save 4
minutes? And I understand it.
And my friend from Maine he wants to take away the bridge
in New Jersey, which has 260,000 people work because of those
ports that come through there because of the ships.
So I don't know how you are going to do this. And we are
not making an investment. The President makes--he creates the
transportation trust fund, and it seems like it is a one-shot
deal. There is no real long-term vision for this. So, you know,
I don't want to be in your shoes in 2050.
Mr. Porcari. A couple of things, if I may. One, time
savings is important. And you generally shave off a couple of
minutes at a time. It is not a quantum leap.
But what you get with that is even more important, which is
first of all reliability and on-time performance, which in turn
drives more ridership. And you also tend to get new capacity as
part of that, too. So while the attention may be on the time
savings, it is at reliability in terms of on-time performance
and the capacity that is the big payoff.
I would also point out in your Northeast Corridor example,
the Northeast Corridor commission, which is the State DOTs and
the other stakeholders, there is a long-term master plan
process going on right now looking at that very issue of
greatly increased capacity, how you get down to the specifics
of providing that capacity, and it is a very collaborative
effort of all the participating States.
So while we have one eye on today and on-time performance
and maintaining the system that we have, we are also paying
attention to the future knowing that these major investment
decisions sometimes take decades to do, and we need to tee
those up and make sure they are appropriately scrutinized.
Mr. Sires. Do you look at abandoned lines in terms of maybe
it is easier to go activate the abandoned lines of trains,
tracks?
Mr. Porcari. Using the Northeast Corridor as an example,
there are no abandoned lines that I am aware of that would have
adequate capacity, that don't have at-grade crossings, that
wouldn't be going through established residential neighborhoods
or some kind of fatal flaw.
There are opportunities for both passenger and freight rail
and abandoned crossings. Many of them that have been converted
to trails, for example, can support both rails-to-trails and
rail service. But for the kind of capacity you are talking
about for mainline service, I am not aware of any right-of-way
that is magically out there.
Mr. Sires. OK. Thank you very much.
Mr. Denham. Mr. Duncan.
Mr. Duncan. Thank you, Mr. Chairman.
And Mr. Secretary, thank you for being here with us and the
job that you do. Let me just ask you this. There seems to be
pretty widespread agreement that the RRIF loan process is too
cumbersome, too bureaucratic. And I wasn't here for most of
your testimony, but I think I heard you say that you agree that
it needs to be improved, speed it up, whatever.
I notice that there are only seven RRIF loans that have
been made since 2010, and how many applications are pending?
Maybe you testified to that already.
Mr. Porcari. I have not; it is a good question, Mr. Duncan.
There are eight applications pending, ranging from the high end
of about $3 billion to about $4.5 million. So kind of running
the spectrum of different projects.
Beyond that, we know that there is interest in additional
projects as well, ranging from very small ones like a potential
port project to much larger ones. So while there are these
eight under review right now, there are other potential ones as
well.
We do agree that this is the one program where we have more
official capacity than applications and it is a little bit
frustrating for all of us that we know that we could be out
there building more infrastructure.
Mr. Duncan. Let me ask you this. I noticed that of those
seven loans since 2010, they totaled a little over $800 million
and that two-thirds of it, $563 million I think went to Amtrak.
And I am told that the current Amtrak subsidy this year is
about $1.4 billion and that that is a little less than half of
the total operation. Is that roughly accurate?
Mr. Porcari. I would have to go back and check that.
Mr. Duncan. And I also am told that Amtrak does get some
subsidies, although much smaller, but some from various State
governments. Would you happen to know how much they get from
the various States?
Mr. Porcari. The States for rail service provided in the
States are paying Amtrak. There are standalone separate deals
for those. One of the provisions of the PRIIA legislation was
actually to rationalize those and have the States pay a
proportionate share. Under that, some States will be paying
more than they are now; some States will remain relatively the
same.
But, yes, there are multiple examples where States are
paying for service, and that service would not be there without
the State support.
Mr. Duncan. Apparently, there is a private-sector group,
the Florida East Coast Rail Group, that sees some real
opportunities or possibilities for the route from Orlando to
Miami. And many years ago, when Graham Claytor headed Amtrak,
he told me that they had a study at that point that if they
were able to add another route, that the next their most
preferred route that they thought would be the most used would
be from Harrisburg, Pennsylvania, down through Washington,
Baltimore, Roanoke and all down through my hometown of
Knoxville into Atlanta.
Have there been any studies or any updates or have you
just--in recent years as to what lines might show some
potential if Amtrak could get some assistance from the various
State governments and so forth?
Mr. Porcari. Yes, one of the things that high-speed rail
funding over the last few years has funded has actually been
corridor studies and corridor environmental work. So extensions
of existing corridors, for example Richmond to Charlotte being
one example, but other corridors as well. Using Atlanta as kind
of a hub, there is a lot of interest and activity and some
level of planning taking place on larger connecting corridors
in and through Atlanta.
Mr. Duncan. Before my time runs out, you said there is no
segment of the transportation world that operates on its own,
yet the story--the difference between Amtrak and the story of
freight rail is dramatically different. And freight rail, for
instance, they have told us that they have spent $25.5 billion
just last year alone updating their own--privately updating
their own infrastructure. What subsidies do you consider that
freight rail is receiving at this time?
Mr. Porcari. First, freight rail has been a great success
and great example of private investment. And as I mentioned, I
think that our private freight rail system is the envy of the
world. Some of the public investments in it, recently through
TIGER grants for example, have been co-funding the National
Gateway Project with CSX that cuts through--goes through five
or six States. I mentioned Tower 55 as an example in Texas.
Colton Crossing in California. Those are just a couple of
public investments where national bottlenecks would not have
been eliminated without both private and public funding.
Mr. Duncan. All right. Thank you very much.
Mr. Denham. Thank you.
Ms. Esty.
Ms. Esty. Thank you, Mr. Chairman.
Thank you for holding this very important hearing.
Thank you, Deputy Secretary Porcari. I appreciate your
testimony. Before I get to my questions, I want to just flag
for subcommittee members something that is happening in
Connecticut where these issues are tremendously important. And
the State of Connecticut has launched a Web site called
Transform Connecticut, and it is accessible to all users. I
have gone on it. We are getting wonderful suggestions from all
sorts of members of the public, stakeholders, and it is an easy
access portal and something that we might want to look at more
broadly in our--as we do this planning and innovation for
improved passenger rail service.
Last week I had the opportunity to meet with the
Connecticut Metro-North Commuter Council, which has been very
useful in doing surveys of users and giving us input which I
will certainly send along to you.
We all know that there is crying need and demand for this
service. The question is, how are we going to pay for it? And I
support the concept of innovative financing. I am a fan of and
cosponsor of the infrastructure bank, but we need to figure out
how to make this actually happen.
In Connecticut, as we know, we had quite recently a
derailment that shut down the entire system. And I would like
to point out that over the last 10 years, Connecticut has
invested $3.2 billion in this line, because Connecticut owns
this portion of the line, not Amtrak. But our Transportation
Commissioner Jim Redeker, who is also the current chair of the
Northeast Corridor Commission, estimates an additional $4.5
billion is needed to improve just our State's portion of that
line to bring it to a good state of repair.
I want to thank you, Commissioner--Deputy Secretary, for
announcing last fall the $120 million high-speed rail portion.
But, unfortunately, our chairman was stranded on that portion
and saw how much that is in need of still being upgraded as he
was stranded about a month ago on that line. I have to tell
you, however, that our are State folks from DOT say they still
do not have approval to spend those funds. It is my
understanding that they are trying to coordinate and take three
different grants and combine them into a single project. When
can we anticipate receiving approval?
Mr. Porcari. First, Governor Malloy and Commissioner
Redeker have been great partners in this, and we appreciate the
vision that Connecticut has as part of a larger system.
We cannot simply take three grants and combine them. If you
are familiar with grant procedures and the audit requirements,
while projects can dovetail with each other, we need, from an
accounting point of view, to separate the grants and keep them
separate. We have been very scrupulous and careful in doing
that.
We do think--Connecticut is probably a good example of a
State where a higher level of interaction and perhaps some
training and maybe even shared services or loaned personnel
would probably benefit that process.
Ms. Esty. Well, that leads to my next question. Our State
folks are pointing out that the Northeast is the only region
with FRA does not have a PMO overseeing these projects, and our
State staff is worried about their capacity to do this
oversight. And I think you just flagged that as part of the
issue. What sort of support might be available for States like
mine for project management and oversight to help us in this
process?
Mr. Porcari. To be honest about it, the project management
oversight capacity of the Federal Railroad Administration is
strained right now. It is a program that we take very
seriously. We have tried to work closely with Connecticut on
the implementation of these grants. But given the financial
pressures, including sequester, on our FRA staff, we need to
husband those resources pretty carefully.
I don't want to make a promise that we may not be able to
fulfill. What I will commit to is, I will talk to Commissioner
Redeker and explore ways that we can make this work faster. I
know the will is there is both sides, and these are not will
always easy projects. But we need to get them done and on time
and on budget.
Ms. Esty. I appreciate that. Given the large amount of
upfront capital that is needed for these rail and
infrastructure projects, can you project for us what a
percentage of the financing that we should expect from the
private sector if we are going to have a successful innovative
project, what would that look like in your mind?
Mr. Porcari. I can't give you a set percentage. It
certainly varies from project to project. For example, projects
that have good station development and redevelopment
possibilities would typically have a much higher percentage of
private investment. If there are other uses of the right-of-way
along the route, that too would tend to drive more private
investment.
So it is so project specific that I really can't give you a
percentage. But I will tell you we are highly incentivized to
maximize the private interest and investment in projects. First
of all, it is a good sign that it is a healthy project. But
beyond that, it helps us deliver a better project that serves
the public better.
Ms. Esty. Thank you very much.
Mr. Denham. Thank you, Mr. Porcari.
That wraps up our first panel.
Mr. Porcari. Thank you, Mr. Chairman.
Mr. Denham. Mr. Mica I think has one final question.
Mr. Mica. Good try. Good try. So many questions; so little
time.
Welcome back, Mr. Secretary. And I enjoyed our working
relationship. We have had some great successes. I would have
actually spoken for you to be Secretary, but I thought it would
have hurt your chances. I guess it didn't work out either way.
Maybe I should have spoken against you. I will have to
reconsider. But we look forward to having a new Secretary and
new leadership.
First of all, the productivity of the RRIF process, I heard
Ms. Napolitano talk about 33 months. You said you had eight--
let's see, you have eight pending applications?
Mr. Porcari. Yes.
Mr. Mica. How many people work there at RRIF? Five, I am
told? Five, six? Half a dozen?
Mr. Porcari. Approximately that.
Mr. Mica. Three quarters of a million dollars a year
expenditure in processing? In 2012, they did two loans; in
2011, three loans; 2010, two loans; 2009, three loans. It
doesn't sound like a very productive shop. And eight pending?
Mr. Porcari. In addition to the pending loans, I would
point out that an important part of the workload is the
previously approved RRIF loans, where in some cases, we have
had to rework and refinance.
Mr. Mica. If this was the private sector, you would be out
of a job in an hour. You ought to look at the private sector
maybe processing some of these. This is unbelievable. When she
told me 33 months on that loan, it is just not very productive.
And then Mr. Duncan pointed out--what did you say at the
beginning? You had 29 loans, 29 RRIF loans you spoke to in your
opening statement?
Mr. Porcari. Yes, I believe.
Mr. Mica. In what period? Well, I have got back a decade
about 30. So it doesn't sound, again, like a very productive
shop. It took 60 loans just to get to the amount of the one
Amtrak loan, the $562 million. And I am not sure that I would
have loaned them any money. Was that for equipment?
Mr. Porcari. It was for equipment----
Mr. Mica. Did you check their past history of buying
equipment? Their Acela trains? That they misdesigned them? And
then they had their tilt trains to go faster.
Mr. Porcari. I am very familiar with that.
Mr. Mica. They improperly designed them. I am sure you
corrected that. Because if they went too fast, they would hit
the other trains, so they put metal wedges in. So we now have
trains that now work. Is this, I hope, a better purchase?
Mr. Porcari. Mr. Mica, I am sure you would be pleased to
know that the operating profit on the Northeast Corridor made
for actually a very solid RRIF loan for the locomotives.
Mr. Mica. Just for the record, too, I want to put in the
list of FRA Administrators that doesn't quite equal the number
of RRIF loans, but they did for about two RRIF loans per FRA
Administrator. A question was asked of a witness of a previous
panel for that.
So, Mr. Chairman, I would like that made part of the
record. And also the record of not processing loans and the
inactivity of the RRIF process.
Mr. Nadler. Would the gentleman yield for a question?
Mr. Mica. Not right now, but if he gives me time at the
end, I will go into that.
The other thing, too, we are talking about financing. When
is the administration--when are we prepared to open up the
Amtrak monopoly on passenger rail service and let the private
sector compete in some of these routes? Are you ready?
Mr. Porcari. We have not, to my knowledge, seen any
specific proposals for that corridor.
Mr. Mica. Well, first of all, folks came in at the high-
speed rail time. They wanted to do the Northeast Corridor. They
were summarily rejected with their proposals, and I would be
glad to give you folks--the Northeast Corridor, this Member
here from Connecticut--it is an embarrassment; 68 miles an hour
from New York to Boston. The chairman who just left--he didn't
want any mud splattered on him today--he just told me he was
stuck an hour and a half going up to Connecticut to visit John
Larson. Here is one I got: 261 passengers Sunday were delayed
14 hours. This is 14 hours trying to get from New York to
Richmond. It took them almost a half a day to get there.
I mean, this just the other day. I am telling you, we have
a Soviet style train operation. The private sector will invest
if they are given some incentive. That incentive is a return on
their investment, and you are not prepared to do that. The
long-distance services are a joke. Here is the long-distance
services. These are the money losers. This is what Amtrak is
involved in; right?
Mr. Porcari. Are there specific cross-country routes that
you would propose to eliminate?
Mr. Mica. Pardon?
Mr. Porcari. Are there specific cross-country routes that
you would propose to eliminate?
Mr. Mica. First of all to get the private sector to compete
for them, and I would look at redoing the schedules. They don't
have to fly like planes every day. Airlines adjust their
schedule. Amtrak can't. They bring in a conclave of chefs to
cook up a more expensive menu to lose more money on their food
service, which is mostly on the long-distance services.
The top three all increased their losses in the last year,
including in addition to that, autotrain to Florida, which
serves my district. But they are all big money losers. When the
private sector comes in, they can make money. If you work with
them and give their some incentives and they have an
opportunity to return. But the Soviet style thinking and
operation of Amtrak prohibits us from moving forward into the
21st century.
Some of the others went over. Can I get a minute of grace?
Just one more question. We worked very carefully together, and
he did a great job--I will give him a compliment--the biggest
carrier of people in the United States is not airlines and
certainly not passenger rails. It is private passenger bus
service, intercity, mostly. They run about 750 million people a
year.
After much work Secretary Porcari did, the private carriers
located at Union Station over there on the second floor all co-
located. So the Greyhound riders and other people didn't have
to meet in Chinatown or some place else. They could have an
intermodal connection to the facilities. They were not second-
class citizens. We need to get people to use public transport
if it connects.
I heard from folks from Birmingham that they are building
an intermodal facility there. I would like you to check and see
it if there are Federal funds going into that, because they are
excluding the private carriers. The private carriers are our
biggest carrier. They make money. They pay taxes, and they move
more people than any other mode. They are good citizens, and
they shouldn't be denied access to a Federal facility, whether
it is in Orlando--we have an issue there--Birmingham or any
other city; right? Right? My question was: Right?
Mr. Porcari. I missed the question--the lead up to the
question. I will being happy to answer any specific question.
Mr. Mica. I thought it was fairly simple. You have an
intermodal facility. Private carriers should be able to
access----
Mr. Porcari. I will be happy to look at the Birmingham
facility. I am not familiar----
Mr. Mica. Shouldn't that be a Federal policy?
Mr. Porcari. I don't know. I would be happy----
Mr. Mica. You don't know? They are paying taxes. They are
making money. They are providing the biggest connection of
transportation for passengers in the United States, and you
don't know whether we should let them in a Federal facility?
Mr. Porcari. What I am saying is I am not familiar with the
Birmingham facility, and I would like to actually know the
circumstances before I answer. I just don't know.
Mr. Denham. We look forward to getting that information.
Mr. Nadler.
Mr. Nadler. Thank you. I just had a follow up to some of
the comments by our distinguished former chairman. Number one,
on the private sector taking over the long-range routes, isn't
it a fact that Amtrak has those routes because the private
railroads all gave them up because they were losing money on
them hand over fist?
Mr. Porcari. Yes.
Mr. Nadler. And I am not aware of any company that thinks
they could make money running those long-range routes. Maybe on
the Northeast Corridor, but certainly on some of these long-
range routes there is much smaller ridership.
The second thing I wanted to ask you is, we talked about on
the Northeast Corridor the average speed between Boston and New
York is 68 miles an hour, which is a lot less than between New
York and Washington. But isn't one the reasons for that that in
a large portion of the route from New York to Boston, the track
is owned by Metro-North, that is a commuter railroad, and the
Amtrak train has to chug along behind a slower commuter rail
because of the ownership priorities?
Mr. Porcari. That is true.
Mr. Nadler. So, aside from building a new line or maybe
expropriating it from the commuter railroad, is there anything
we can do about it that?
Mr. Porcari. The basic answer is no. What we can do is make
infrastructure instruments to maximize the capacity that is out
there.
Mr. Nadler. Adding an additional line in effect. Thank you.
Mr. Mica. Will the gentleman yield?
Mr. Nadler. Sure.
Mr. Mica. Well, again, I think when we took over passenger
rail service in 1971, there was a need for it. We have also
taken over freight, and they have done fairly well with the
private sector. I think some of these routes do need to be
opened, if the administration was willing or Congress was
willing, to give some private opportunity for private-sector
competition. And you have to look at the schedule of service.
You know, you don't want them just to cherry pick. We would
have to look at the subsidization, look at what it is costing
us now. I think that would be a fair route. I would be willing
to work with the gentleman on something like that.
But the Northeast Corridor, and I never did get to this,
has incredible potential. In a report that was handed out to
the committee--did you see this, Jerry? They give back about
$94 million. Well, that is overall in revenue from real estate.
I am told--I had some private-sector folks look at this and the
value of your real estate, you should be getting about a
billion dollars a year return, a billion dollars. That is what
they are leaving on the table. That could finance a lot of
improvements in the Northeast Corridor. That is one of the most
incredibly valuable assets in the United States of America. I
would be willing to work with the gentleman----
Mr. Nadler. That we ought to look at. And I would be
interested to know where that revenue would come from.
Mr. Mica. From the utilization of the right-of-way. They
get $24 million from the utilization of the right-of-way. That
is peanuts. If I had a trillion-dollar asset and I was getting
$24 million return, I should be put in the nuthouse.
Mr. Nadler. Mr. Mica, we should certainly look at that in
the Northeast Corridor and anywhere else where it is doable.
But I was just expressing my doubt that on most of these long-
range routes, you have a potential or that any private company
could make a go of it. The Northeast Corridor is quite
different. And there may be some other corridors.
Mr. Mica. The Northeast Corridor, too--if the gentleman
would yield--you could take an operation like the route in
England that Branson picked up. It went from $300 million a
year Federal UK subsidy to a $100 million profit plus paying
dividends to investors. The ridership went from 14 million to
28 million on that one north-south route. That is almost equal
to the entire ridership of Amtrak last year, which it is about
31 million. Are you aware of that?
Mr. Nadler. Yes.
Mr. Mica. Thank you.
Mr. Denham. Seeing all debate has ceased, Mr. Porcari, I
just wanted to clarify one final point before we go to the
second panel. It is true that Amtrak has above the rail on the
Northeast Corridor profitability of around above $300 million.
Mr. Porcari. Right.
Mr. Denham. Isn't it also true that over 95 percent of the
Northeast Corridor or Amtrak-owned infrastructure 95 percent is
on the Northeast Corridor.
Mr. Porcari. That is about right.
Mr. Denham. It is also possible, we could use that above
the rail profit as a dedicated funding source for the Northeast
Corridor?
Mr. Porcari. Yes, Mr. Chairman, it would cover a portion of
the needs.
Mr. Denham. And as we look across the Nation, other
opportunities, we would be looking at intercity rail, we would
be looking at passenger rail, and in some areas, even high-
speed rail, where you have significant profits that would
guarantee a return for the investor to be able to pay back
those loans.
Mr. Porcari. Over the long term, there is a likelihood that
other corridors would have the kind of ridership that would
generate that operating profit. You would be building up that
ridership over a substantial period of time.
Mr. Denham. In an area where you have--I will use my area,
for example--proven ridership, where we have above-the-rail
profitability on the ACE train in the Altamont corridor, if
they were going to expand and have dedicated track, they could
actually apply for a RRIF loan utilizing that above-the-rail
profit as security for----
Mr. Porcari. That is right. And if the independent
financial advisor believed it made business sense, that would
be a good RRIF loan.
Mr. Denham. Thank you. Well, we appreciate your testimony.
Mr. Mica. Mr. Chairman, just one thing on that. That is
above the rail, but the record should reflect also I believe
that most of the $1.4 billion does go to the Northeast
Corridor. The $562 million RRIF loan also went to the Northeast
Corridor equipment. So there has to be some calculation of the
math and what is in the rail in addition to what is above the
rail.
Mr. Denham. Thank you. We thank you for your testimony here
today.
Mr. Porcari. Thank you, Mr. Chairman.
Mr. Denham. At this time, we will go to our second panel. I
would like to welcome our second panel, Ms. Beverley Swaim-
Staley, president and chief executive officer of the Union
Station Redevelopment Corporation; Mr. Frank Chechile, CEO,
Parallel Infrastructure; and Mr. John Robert Smith, former
mayor of Meridian, Mississippi, and president and CEO of
Reconnecting America.
I ask unanimous consent that our witnesses' full statements
be included in the record.
Without objection, so ordered.
Since your written testimony has been made a part of the
record, the subcommittee would request that you limit your oral
testimony to 5 minutes.
Ms. Swaim-Staley, you may proceed.
TESTIMONY OF BEVERLEY K. SWAIM-STALEY, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, UNION STATION REDEVELOPMENT CORPORATION;
FRANK CHECHILE, CHIEF EXECUTIVE OFFICER, PARALLEL
INFRASTRUCTURE; AND JOHN ROBERT SMITH, COCHAIR, TRANSPORTATION
FOR AMERICA; PRESIDENT AND CHIEF EXECUTIVE OFFICER,
RECONNECTING AMERICA; AND FORMER MAYOR OF MERIDIAN, MISSISSIPPI
Ms. Swaim-Staley. Mr. Chairman, I appreciate the
opportunity to be here this morning. My name is Beverley Swaim-
Staley, and I am the new president and CEO of Union Station
Redevelopment Corporation, or USRC. Union Station, of course,
was its own public-private partnership when it was redeveloped
back in the 1980s. Congress passed a law and requested that the
Secretary of Transportation in 1983 establish USRC to manage
Washington's Union Station through the redevelopment in such a
manner that would protect the historic character of the
building, maintain it as an intermodal transportation facility,
and permit it to operate as a commercial entity without subsidy
from the Federal Government.
So I have had the privilege of being the president and CEO
for just 10 months, but I have been asked to be here talk about
my experience in Maryland where I served as the CFO and deputy
secretary and secretary of transportation for the past 3 years.
I had the pleasure there of doing some innovative financing
projects, and I will share a few of my observations with you
here today.
One of our projects you may be familiar with. It is a
highway built very close to here, the Intercounty Connector in
Montgomery County. It was one of the most expensive and largest
highway projects built in the last 5 years, and it was an
innovative financing project. We used seven different sources
of funding for that project. Three financial tools that were
available to us from the Federal Government and four different
State tools that were available to us at the time. That project
has been completed and is underway.
We had two other very large projects that we needed to
fund. One was at the Port of Baltimore. The port, obviously, is
a major economic engine in the State of Maryland. We needed to
rehabilitate our container terminal in order to be able to
handle the larger ships that would be available as a result of
the Panama Canal expansion. We did not have the money to do
that. So we entered into a public-private partnership 3 years
ago with Highstar Capital and Ports America. We leased the port
for 50 years. They not only came in and within about 2\1/2\
years were able to rehabilitate the port, bring in the
additional cranes. They are now open and operating 2 years
ahead of the schedule.
A second innovative financing project that I had the
privilege of executing was with regard to travel facilities
that were on I-95 in the northern part of Maryland. Those
facilities also were a major economic generator to the State of
Maryland, but they were over 40 to 50 years old and in bad need
of repair. What we were able to do was lease those to a private
entity for 35 years, and they came in and were willing to
invest and are currently investing over $200 million to
rehabilitate those facilities. So, with those two projects
together, we were able to bring in almost $2.5 billion of
private investment, long-term investment into the State of
Maryland.
So those were some of the examples that I am familiar with
in terms of what we can do through innovative financing. The
observations that I learned as a result of that that I would
like to share with the committee today. First, every project is
different. There is no one-size-fits-all approach. Each project
must be custom fit based upon the financing components of the
projects and the benefits to the users.
Second, all the financing, public or private, must have a
creditworthy repayment stream. There is no free money. The
money must be paid back. The private investor, as it has been
mentioned several times here today, also expects a return on
their investment.
Third, funding is the final solution. Before the financial
equation can be solved, you have really have to know what the
parameters are of the project. The first two questions to be
answered are: Is the project viable from an engineering and
constructability standpoint, and is there someone that wants
the project badly enough to pay for the benefits?
Fourth, define the elements of the project for which there
is a direct connection between benefits and cost. For example,
in private, in many transit-oriented elements, you start with
the parking garage as the first vehicle for financing.
And fifth, can the revenues and benefits from single assets
such as a parking garage be leveraged to finance all or other
portions of the project?
I guess I will have the opportunity to learn from these
experiences hopefully in my new position as the president and
CEO of Union Station. As I am sure you are aware, we are about
to embark on another redevelopment of the station. That station
has functioned very successfully through the past 30 years, but
we are currently at capacity. We service not only Amtrak but
commuter rail and also the largest subway in the system.
So we are undertaking right now the latest in the master
plan redevelopment. And as I just said, the first thing we need
to do before looking at financing there will be looking at
exactly what the project is. But we will be looking at all the
tools in the toolbox, many of which have been mentioned here
today. Not only the Federal and State funding. We have many
partners, but obviously value capture, tax increment financing,
and whatever vehicles are available to us at that time.
I thank you for the opportunity to testify, and I invite
you to visit Union Station and hear more about our plans.
Mr. Denham. Thank you.
Mr. Chechile.
Mr. Chechile. Good afternoon and thank you for this
opportunity.
Chairman Denham, Mr. Nadler, and members of the
subcommittee, I appreciate the opportunity to participate in
this hearing, and I am pleased to share with you a private
industry perspective on innovative financing approaches that
can benefit the passenger rail industry.
My name is Frank Chechile, I am the chief executive officer
of Parallel Infrastructure, which is an asset development and
right-of-way management firm based in Jacksonville, Florida,
and I am pleased to note the home city of our distinguished
ranking member, Congresswoman Brown, who I understand can't be
here this afternoon.
Parallel Infrastructure is a wholly owned subsidiary of
Florida East Coast Industries and together with our sister
company, Florida East Coast Railway, our heritage was
established more than 100 years ago by Mr. Henry Flagler.
Although operated independently from one another, our
companies are all focused on creating value from transportation
opportunities, including associated real estate and right-of-
ways. Together, we want to maximize the value of our own 351-
mile rail corridor, which traverses through areas whose total
population is just under 9 million people and stretches from
Jacksonville to Miami and connects to three major seaports.
I believe that the lessons we have learned can be employed
to provide a new source of financing for intercity passenger
rail systems in our country. Parallel Infrastructure was
established just 2 years ago and has quickly become a national
player. By entering into innovative revenue-share agreements
with right-of-way property owners, we help to monetize their
underutilized real estate without interrupting their core
operations. The result is increased revenue for a right-of-way
property owner with little to no risk. In collaboration with
our clients, and using our own capital, we take the lead in
proactively leasing right-of-way land, deploying communications
facilities, creating energy distribution systems, such as
pipelines, and building advertising, parking, and storage
structures.
In our short history, we have established asset development
agreements with 28 freight railroads managing more than 5,000
leasing contracts over roughly 1,800 miles of railway.
Our business model is straightforward. We provide both the
capital and resources to develop revenue-generating assets on a
right-of-way property and share returns with the property
owner. This frees the property owner to use their capital and
the new revenue streams that we generate to improve their
infrastructure. With more than 1 million miles of
transportation corridors in the United States, the opportunity
to earn revenues from this right-of-way real estate is
significant. For example, assuming earnings of just $1,000 per
mile from the activities I have described, a million miles of
corridor would generate a billion dollars. While that number
may sound ambitious, I will tell you that our own 351-mile
corridor is generating about $50,000 per mile.
Proactive and aggressive right-of-way management, whether
in the public or private sector, maximizes the value earned
from real estate assets, provides additional recurring revenues
for the owner, and allows an owner to access new capital by
collateralizing predictable revenue streams.
For example, if a transit agency generates $10 million of
annual revenue from their right-of-way, it can easily use that
as collateral to secure $100 million in capital through
financing transactions. So by unlocking the value of
underutilized real estate and using a third party's capital, an
agency is in position to leverage annuities to take on new
projects.
Another benefit of these types of arrangements is for
landowners to obtain access to these new assets to fill their
own operating needs. For instance, Parallel Infrastructure
recently leased space in our corridor to a leading
telecommunications company who is building an advanced network
for its own customers. Through our arrangement, our All Aboard
Florida and Florida East Coast Railway sister companies can
also access these assets for their own needs, such as
deployment of positive train control and offering uninterrupted
WiFi service to the passengers of our All Aboard Florida
intercity rail service.
These examples--using existing assets to generate new
sources of revenue--are one innovative way to finance passenger
rail in the United States. When you look at intercity passenger
rail systems, even in the well-utilized Northeast Corridor,
Amtrak's passenger revenue and congressional subsidies combined
do not adequately meet operating and capital expenditure
requirements within the corridor. Amtrak's own estimates state
that it will take up to 15 years to bring the Northeast
Corridor to a state of good repair even if they received all
their requested annual funding from Congress.
I believe that innovative private-sector partnerships can
close the funding gap and help shorten this timeframe. The 2008
PRIIA Act sought to enhance the relationship between the States
and Amtrak. PRIIA's successor should seek to strengthen those
provisions and provide incentives that take advantage of
private-sector expertise, where appropriate, particularly if
they generate dependable revenue streams.
By aggressively monetizing ancillary assets through
proactive right-of-way management and asset development,
intercity passenger systems will be financially stronger, more
viable, and better positioned to leverage steady revenue
streams, revive dormant assets, and ultimately thrive in ways
that have not been accomplished in the last 50 years.
I want to thank you for the opportunity to speak with you
today, and I will be delighted to answer any questions or
address any comments you may have.
Mr. Denham. Thank you.
Mr. Smith.
Mr. Smith. Chairman Denham, Congressman Nadler and
especially the two young folks that have joined us here at the
podium, I served as the Republican mayor of my home town of
Meridian, Mississippi, for 16 years and served as chairman of
the board of Amtrak. I want to thank you for giving me the
opportunity to share our thoughts about a subject that has
occupied a good bit of my adult life, and that is how we take
transportation systems--passenger rail in particular--and
leverage the economic impact to our hometowns, whether they are
large metropolitan areas or small urban places in rural
America.
I think that conversations should be framed by three
guiding principles. The first of those is that a national
passenger rail system provides significant economic value. When
we talk about a National Highway System or a National Aviation
System, we speak in terms of the economic development impact
that comes to the cities and regions that they serve. We should
use the same lens when we look at a national passenger rail
system.
More and more, people are using passenger rail to be
connected to jobs, to health care, to education, and to
tourism, which is the second or third largest industry in most
States. Passenger rail connects senior citizens and college
students alike. I have a letter from the president of Grinnell
College in Iowa. He states that lacking the passenger rail
connection to Chicago greatly hampers the growth and
recruitment of that college and indeed the entire region.
I have a letter from the mayors from New Orleans to
Tallahassee, Florida, seeking restoration of the passenger rail
service they lost due to Katrina. They believe that the right
passenger rail service along that corridor promises great
economic impact to that growing, developing, thriving linear
region along the southern gulf.
They recognize that the value is being part of a national
system. That is why you see exciting projects like Union
Station here in DC. It is not just Northeast Corridor trains
that stop there. It is long-distance trains. It is corridor and
State-supported trains as well. And when you cut service, you
undermine the value of the entire system. When you expand
service, you grow the value of the entire system. That value is
sustained by investments in service and infrastructure to
achieve a state of good repair. When infrastructure of
passenger rail is not in a state of good repair, private-sector
dollars remain on the sidelines.
That brings me to my second point. If you want a national
passenger rail system in a state of good repair, you must have
dedicated stable Federal funding. Rail is part of an intermodal
network of roads, bridges, transit, aviation and rail. None of
those modes cover their costs, and at full allocation, they all
lose money. But all of those modes receive dedicated stable
Federal support except for passenger rail. And that makes it
nigh to impossible for the operator, in this case Amtrak, to
make the long-term investment decisions it needs when it
doesn't know it will be funded from one year to the next at any
level. That level of future funding uncertainty means that the
private sector will not be there at the table. So the dedicated
stable Federal funding of passenger rail is a first step
towards the innovative funding that you seek.
The third point is that investment in passenger rail
stations and the property around them is ripe for innovative
financing, and brings value to the entire rail system. I see it
all over the country. Mayors who are Republican and Democrat
are working with the private sector to invest in those rail
stations and the surrounding property.
We did that in my hometown of Meridian, Mississippi, 20
years ago, when we built the South's first multimodal
transportation center. The city invested $1 million, which
leveraged an additional $5 million in Federal, State and
private-sector investment. That project has leveraged today
$135 million of additional public/private-sector investment
within 3 blocks of that facility.
And it is not just happening in Meridian, Mississippi. It
is happening in Normal, Illinois. It is happening in Lincoln,
Nebraska, and in San Bernardino, California, and in Memphis,
Tennessee.
I agree with members of this committee that the cumbersome
RRIF loan program--from which the Florida East Coast Railway
has submitted a request for a loan--must be retooled. If only 5
percent of the $35 billion of RRIF loan funds available has
been accessed, it tells me it is entirely too complicated for
the private sector to use.
TIFIA can be altered as well to bring in more private-
sector dollars. So innovative financing is an important piece,
but it supplements, it does not supplant dedicated, stable
Federal funding. That is why I will provide a letter signed by
mayors from all over the United States to this committee
seeking a commitment to dedicated Federal funding to support a
national passenger rail system. They understand the economic
development that commitment of this committee and Congress
would bring. And with your commitment, the private-sector
dollars will follow your lead. Thank you.
Mr. Denham. Thank you. We look forward to seeing that
letter.
First, Mr. Chechile, in 2012, Amtrak generated about $30
million in revenue from right-of-way-related activities. In
your view, how does that compare to your experience in right-
of-way management around the entire country? And additionally,
what additional revenue potential do you see, if any, for
Amtrak?
Mr. Chechile. That is a great question. Thank you. I think
the best data point I could offer is that in our own corridor
in Florida, we are generating approximately $50,000 per mile,
which is very likely the best metric to use for evaluating how
effective an organization is in its returns from real estate.
That corridor goes through a population that totals roughly 9
million people. If we took that $50,000 number and applied it
against Amtrak's more than 500 miles of corridor and made some
adjustment for population--the population through which the
Amtrak corridor traverses is four to five times the size of the
population that our corridor traverses in Florida--you arrive
at a value, just using a two to three times multiple instead of
a four to five times multiple for the population, of roughly
$50 million to $100 million as opposed to the $20 million or
$30 million they are currently generating.
Mr. Denham. And what type of right-of-way-related
activities would you foresee?
Mr. Chechile. Well, the activities that typically take
place in a right-of-way are somewhat standard. And in fact,
they oftentimes are already occurring. And indeed, the fact
that Amtrak generates the revenues that it does is certainly
admirable and a demonstration of the fact that the
opportunities are already there. The opportunities are varied.
And sometimes they are just using the real estate and leasing
that space to adjacent landowners. But where the value really
exists, and where the benefit of the private sector I think is
greatest, is if there is the actual creation of assets, which
in turn generate even greater returns.
So, for instance, the installation of telecommunications
facilities, be they fiber optic conduits or cellular towers, or
be they storage structures, car parking facilities, things that
oftentimes are already present along the corridor but are not
proactively pursued. Crossings in the corridor. Again, very
likely do exist in the Amtrak corridor, are not likely
proactively pursued. Pipelines are another popular
infrastructure asset that you find deployed in a right-of-way
corridor. And these are examples that we have in our own
corridor in Florida. These are examples of opportunities we are
working with other right-of-way clients around the country, and
I think examples that all railroads already have in place.
And again, the distinction really is about effectiveness
and whether the organization itself sees the real estate as
that asset and proactively works to seek a return from it or
instead is just reactive to any inquiry they receive and defers
to--defers its use to the rail operations exclusively.
Mr. Denham. Thank you.
And Ms. Swaim-Staley, you know, these rail stations often
become the focal point of a community. Great opportunities for
private real estate development. How can Union Station and
other stations around the country utilize private investment in
expanding, redeveloping?
Ms. Swaim-Staley. Well, as I said, with regard to Union
Station, we have not yet gotten to the stage, but certainly the
first thing that you look at are the elements within the
station development. So, for example, parking garages, whether
it is at airports or any other facilities. And many transit-
oriented development around the country, it is the first thing
you look at because it is a great opportunity to not only pay
for the parking garage, but to flex those dollars to use for
greater, larger portions of the development. So you look at
each and every activity that you have within a station. So, as
I mentioned, at Union Station in particular, we have, as has
already been referenced, we are the intermodal bus facility. We
are the largest subway station. We also have the commuter rail.
We have actually more commuter rail passengers than we have
Amtrak passengers coming into the station. We have partnerships
with Maryland, Virginia, and the District. We have two private
developers that are involved, one which purchased the air
rights and a second one running the current station. So we will
be working with all of our partners, both public and private,
to determine what both financing tools are out there that are
available, what opportunities, as I said, we have to leverage
from the additional economic benefit that we are going to
generate. I am sure we are going to be looking at value
capture, tax increment financing with our partners, really the
broad spectrum of the tools. And depending upon what is really
available at the time, whether TIFIA, you know, is still out
there, if RRIF is still out there, we would probably be looking
into whether those worked for our purposes or not as well.
So it is really about figuring out what elements you have
within the project, what opportunities you can leverage, what
elements would the private sector be interested in investing?
Typically, in parking garages, things where there is going to
be an immediate return, they will be very interested. In other
places, you may have to rely more on public financing because
you are not generating a benefit that is as attractive to the
private sector.
Mr. Denham. Thank you. And specifically for Union Station,
Amtrak is looking at $8 billion. Do you have specific financing
that you are looking at for Union Station?
Ms. Swaim-Staley. Well, Amtrak announced their plan. That
was for their portion of the plan. But as I said, the Union
Station redevelopment would also then include development
around the station; the air rights developer is also looking at
financing. And at this point, we are trying to take the vision
that was articulated that you are familiar with and really
determine exactly what a revitalized Union Station would look
like, what the components would be, where they would be within
the air rights development and the other new development and
the Amtrak redevelopment that is taking place. So we are not
yet looking at the financing piece.
Mr. Denham. Thank you.
Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chairman.
Mr. Chechile, in your testimony, you mentioned you were
selected by Allegheny County to build facilities on county
property, which you will lease and then share revenue earned
from the facilities with the county. This will create a long-
term revenue stream for the county and for your company. Is
this relationship typical when you work with the public sector
to leverage railroad right-of-way?
Mr. Chechile. It is. In fact, some of the arrangements that
we have with railroads are actually with public authority
right-of-way owners. So that arrangement, although with
Allegheny County, it relates specifically to real estate
parcels; there are similar arrangements that we have with
authorities.
Mr. Nadler. OK. Let me ask you the following question. So a
railroad owns right-of-way. Let's assume that it decides that a
good use of that right-of-way for ancillary revenue would be a
telecommunications line, fiber optic. Why would it contract
with a company like yours? Why would it not go directly to
Verizon or AT&T or Sprint or whoever and have them make a deal
with them? In other words, how does a company like yours fit
into it?
Mr. Chechile. Understood. A very good question. And in fact
very likely much of the revenue, if not all of the revenue----
Mr. Nadler. I can't hear you, sir.
Mr. Chechile. I would say that in fact all--much, if not
all of the revenue Amtrak derives today are very likely from
the arrangement that your example cites, where it is between
Amtrak and potentially an infrastructure provider. I think
where our arrangement is different is that firms like that are
typically looking for a way of deploying their assets in a
right-of-way that allow them to serve their customers. And
oftentimes they find that right-of-way owners are difficult to
do business with. Our heritage with respect to working with
railroads means that we have an understanding of how to, A,
make those connections, and then B, willing to invest our own
capital.
Mr. Nadler. So you would be hired initially by AT&T and not
by the railroad?
Mr. Chechile. If we are the ones building an asset, then we
in turn would be the one leasing the asset.
Mr. Nadler. No, no, no. But I am saying it wouldn't be the
railroad that would go to you; it would be the guy who wants to
use--the company who wants to use the right-of-way?
Mr. Chechile. The people--the way the commercial
arrangement would work and has worked, for instance, with
Allegheny County and others, is we sign an agreement to build
the assets, the communications facilities in particular, and
then it is our responsibility to go out and to identify tenants
for those facilities. And we share the revenue.
Mr. Nadler. You sign the original agreement with the
railroad, not with AT&T.
Mr. Chechile. Our agreement is with the railroad to share
the revenues that we earn.
Mr. Nadler. OK. Now, you said $50,000 a mile, or maybe $50
million to $100 million. For what length of track did you say?
Mr. Chechile. We are earning $50,000 per mile along our
350-mile corridor. Amtrak has approximately 525 miles of
corridor.
Mr. Nadler. OK. So it would be $50 million to a $100
million dollars over that.
Mr. Chechile. That itself is $25 million. And then making
some adjustment for four to five times the population count,
which should imply----
Mr. Nadler. OK. I thought I heard a few minutes ago someone
estimate that that right-of-way in the Northeast Corridor could
be worth a billion dollars.
Mr. Mica. A trillion.
Mr. Nadler. A trillion dollars. Is that realistic?
Mr. Chechile. I am speaking specifically to the right-of-
way. And I think the Amtrak system includes many more real
estate assets than just the right-of-way. So with respect to--
--
Mr. Nadler. OK. So we are talking about apples and oranges.
Mr. Chechile. I am talking about specifically the dirt the
track runs along as opposed to maybe the stations and other
opportunities.
Mr. Nadler. OK. Let me ask you a different question. Thank
you. In your testimony, you state that the time is now for the
public sector to take the step towards actively managing rights
of way by leveraging the private sector's experience and
capital. Is there any way that the public sector can leverage
railroad right-of-way to generate revenue without hiring an
intermediary firm? And I suppose your answer would be, from
what you said before, if it is dealing with a very large vendor
like AT&T or somebody, but not otherwise.
Mr. Chechile. I think there is a difference in terms of
effectiveness. So theoretically what can be achieved by a
right-of-way owner on its own would be the same. In practice,
our experience has shown that that is not the case.
Mr. Nadler. OK. Thank you.
Ms. Swaim-Staley, in order to attract private support for
the public-private partnerships that you talked about, how
important is it to have strong political and financial backing
for the project at the Federal and State level?
Ms. Swaim-Staley. Well, it is obviously very important to
have support from not only Federal and State, but your local,
and in station redevelopment the neighborhoods as well, and the
political support from all.
Mr. Nadler. Thank you.
My last question. Mr. Smith, you mentioned that a national
passenger rail system has significant economic value, and that
if any set of connections is eliminated, that is through
reductions in service, the value to the entire network is
diminished. That was your statement. Can you talk about why
long-distance service is important and what it contributes to
the economy? And what do you think will happen to the service
if States are forced to pick up the tab for them? And do it in
the context, please, of my understanding, or if I am wrong,
please, tell me so in your opinion, that it is very rare for
someone to take a long-distance route from let's say Chicago to
L.A. by rail, but that the intermediate steps are what is
really important, to go from Chicago to this place or from this
place to that place is why you need those routes.
Mr. Smith. You are exactly right, Congressman.
Mr. Denham. Mr. Smith, I will give you 30 seconds.
Mr. Smith. If you were to fly from one point to the other,
you would not have those mid-point connections. When I take the
Crescent home from DC to Meridian, there are segments that are
joined together that make one continuous route. People can be
on and off, and access it from State to State or city to city.
So that is what you are talking about, linking those pairs of
cities through a corridor that serves a region of the country
that wouldn't be served otherwise.
Mr. Nadler. That is economically important because?
Mr. Smith. That is economically important because where
that train stops in those cities is the opportunity for
investment and leveraging that station and the property around
it. You can see it up and down long-distance train routes and
other passenger rail service all over this country.
Mr. Nadler. Thank you. My time has expired.
Mr. Denham. Mr. Mica.
Mr. Mica. Thank you, Mr. Chairman.
Mr. Smith, are you aware of what the Federal debt is
approaching, what figure?
Mr. Smith. I couldn't give you a specific number.
Mr. Mica. More than $16 trillion, heading towards $17
trillion. Would you say that is about right?
Mr. Smith. If you say so, sir.
Mr. Mica. I say so, and that is the fact. And right now,
with deficit spending under this administration, we have been
borrowing about 40 cents on every dollar that we are spending.
That is the way we are financing things right now. Are you
aware of that?
Mr. Smith. Yes, sir, we are financing lots of choices with
that.
Mr. Mica. For example, I had a mother contact me, and they
are cutting out hot meals, I guess warm breakfasts for our
troops that are serving overseas. Were you aware of that
cutback?
Mr. Smith. No, sir. My focus is transportation.
Mr. Mica. Yeah. And have you heard about the chef conclave
to cook up new exotic dishes on the Amtrak money losing routes?
Mr. Smith. I actually ride those trains, and the dishes are
not exotic aboard that service. And I think that ignores the
larger issue.
Mr. Mica. Are you aware the Crescent, we lost $48 million,
which we had to borrow?
Mr. Smith. Yes, sir. But ridership is up on all of those
long-distance routes.
Mr. Mica. All the top three, it is actually down, and the
losses have actually increased. So $40 million. And I have to
make choices here, is it hot meals for my service or a gourmet
meal?
Now particularly--now let me ask you about your little memo
that you sent to my mayor and other folks as a former mayor.
You sent this to my mayor: House of Representatives is slashing
Amtrak's funding, putting the future of national rail system in
jeopardy. I think we went from $1.4 billion to $950 million.
And that is going to put us in jeopardy? This is your----
Mr. Smith. Yes, sir, it is. That is my statement.
Mr. Mica. Did you coordinate this with anybody at Amtrak?
Mr. Smith. No, sir.
Mr. Mica. No one? You didn't talk to anyone?
Mr. Smith. No, sir. That is our letter. I lived it and
breathed it.
Mr. Mica. That is your letter as former chairman. And you
basically said that our passenger rail is under threat. Don't
you think the United States is under threat when you are in
debt up to your eyeballs, when you are borrowing 40 cents on a
dollar to underwrite your service? You are aware that every
ticket on Amtrak last year was underwritten more than $40 per
passenger ticket. You are aware of that?
Mr. Smith. I am aware that Amtrak is recovering 88 cents on
every dollar.
Mr. Mica. But you are aware that we subsidized every ticket
on Amtrak over $40. And including these long-distance tickets,
some of them more than $400? And we can't cut back, sir?
Mr. Smith. We subsidize, or invest, depending on the verb
you want to choose, in every transportation system--if I may
answer.
Mr. Mica. Go ahead.
Mr. Smith. Every transportation system in this country,
whether that is highway, aviation, transit, or rail. That is a
fact. There is no passenger rail system in the world that pays
for itself out of the fare box.
Mr. Mica. That is not true. That is not true.
Mr. Smith. No, sir, that is true.
Mr. Mica. That is not true. Again, I beg to differ with
you, and I can cite you examples. I just cited one line that
has more passengers with a bigger return than Amtrak has. It
has doubled the passenger ridership in the last 10 years, and
actually gone from a deficit, one line, of $300 million to $100
million in profit.
Mr. Smith. That example ignores the capital costs.
Mr. Mica. That is not true. Don't tell me that. Please,
don't tell me that, because I have been there, looked at it,
met with the people. They put 5 billion pounds--$10 billion in
private money into the route. They will put money into a route,
the Northeast Corridor, if they get a return and a piece of the
action. If Amtrak continues its Soviet-style operations,
whether it is to Meridian, Mississippi, or to New York, Boston,
and Washington, you will continue to lose money. Are you aware
how much Amtrak loses in food service?
Mr. Smith. Not at the current moment.
Mr. Mica. Well, you know, it is going to approach, the last
12 years, a billion dollars. Did you know, a billion dollars in
losses on food service? Last year, according to testimony, we
had the guy sitting in the chair next to you a few weeks ago,
it was $72 million lost last year. And I think they cooked the
books on that. So you don't think we should cut back, that I
should make the choices and have my--go back and tell that
mother, you know, we need to put this money into Amtrak. We
can't take any cuts out of Amtrak. Can you name any positions
they have eliminated or anything they have done to cut back in
Amtrak?
Mr. Smith. That is a false choice, Congressman.
Mr. Mica. Oh, it is not a false choice. These are choices I
have to make. And I am not happy about Amtrak's performance.
And I am not happy about your communication to my mayor. Thank
you.
I yield back.
Mr. Smith. Thankfully, as a former mayor, I still have the
ability to contact my colleagues across the Nation, and most
respond and respond favorably because they live in the same
environment that I lived in for 16 years.
And I would just say on the subject of the long-distance
trains, when my Senator, Trent Lott, got to see the
Mississippians who use that system and saw it as vitally
important to them, the retired couples who use that system to
visit their dispersed families across the country, the single
mothers with children, for whom the only way they could get to
visit their grandparents affordably was through the use of that
train, the disabled vets that were onboard that train, when he
got to see the Mississippians impacted and affected he
understood the importance of that train and that service.
Mr. Denham. Thank you, Mr. Smith.
And let me thank each of you for your testimony today.
If there are no further questions, I ask unanimous consent
that the record of today's hearing remain open until such time
as our witnesses have provided answers to any questions that
have been submitted to them in writing, and unanimous consent
that the record remain open for 15 days for any additional
comments and information submitted by Members or witnesses to
be included in the record of today's hearing.
Without objection, so ordered.
I would like to thank our witnesses again for their
testimony today. If no Members have anything to add, the
subcommittee stands adjourned.
[Whereupon, at 12:15 p.m., the subcommittee was adjourned.]