Statement of Ross B. Capon, Executive Director
National Association of Railroad Passengers
Submitted for the record to the
Committee on Environment and Public Works
Committee on Finance
TEA-21 Reauthorization: Innovative Financing—Beyond the Highway Trust Fund
September 25, 2002
Thank you for the opportunity to present this information. Our non-partisan organization has worked since 1967 in support of more and better passenger trains of all types in the U.S.
Our vision of the future includes an intercity rail passenger network that connects all regions and metropolitan areas of the country and serves all important transportation routes. Such a vision would be similar to the one adopted with the authorization of the Eisenhower Interstate Highway system in 1956.
It is critical that TEA-3 Reauthorization finally resolve the chronic under-funding of passenger and freight rail transportation by establishing a federal program that encourages states to invest in both passenger and freight rail development.
At a time of unprecedented highway congestion, the freight railroads are reducing infrastructure improvement projects due to decreasing rates of return on capital investments. Meanwhile, for 31 years, we have subjected Amtrak to unpredictable funding levels that have left our national passenger rail system with a $5 billion backlog in needed capital investments. In California alone, over $100 million in intercity passenger rail investment plans that also would benefit freight operations have been shelved until more federal funding becomes available. A strong rail system serving both passengers and freight is a national necessity.
Individual states will never fulfill rail funding needs on their own, nor will they sustain the national vision for an efficient freight and intercity passenger rail network beyond their own borders. To realize the national vision, the federal government must lead. The traveling public wants intercity passenger rail. The rules for success are simple: Give people half decent service, and they will ride; give them great service, and they will come in droves. Very modest investments in service have brought substantial returns in patronage. To name just a few:
· Downeaster (Portland, Maine to Boston): Inaugurated in December 2001, this new route exceeded all revenue projections for the entire year in only six months. Through the summer, the trains often had standees even though third and fourth coaches were added to the original consists (which had one combined café/coach/Coastal Club Service car and two coaches). Although driving is an hour faster (without traffic), New Englanders are choosing the train for its convenience and comfort. August ridership was 30,700. With four daily round-trips, that is an average of about 124 passengers per trip.
· Long Distance Sleepers: In the January-March, 2002, quarter, sleeping-car revenues increased 18% and travel (measured in passenger-miles) 11% above year-earlier levels. Airline revenues were still down about 20%.
· Amtrak carries more passengers between New York and Washington than all airlines, and Acela Express/Metroliner service is a big factor in that. When all city-pair combinations between New York and Washington are included, Amtrak’s market share of the air-rail segment surpasses 70%. Premium Acela Express and Metroliner service has experienced a ridership surge of 35% since 2001.
· Amtrak’s share of the Boston-Philadelphia air-rail market was 8% before Acela and Boston-New Haven electrification, but that rose to 26% in the January-March, 2002, quarter (most recent available). This means that, in spite of Amtrak running-times of almost five or six hours (Acela Express and Acela Regional, respectively), there is more than one Amtrak customer for every three airline passengers.
· In the Pacific Northwest, new Talgo trains helped boost ridership from 226,000 in 1993 to 658,000 in 2001. (Passenger-miles rose 2% during the first 11 months of fiscal 2002 in spite of the travel recession.) The overall growth from 1993 was based on marginal increases in frequency and speed (with the best Seattle-Portland schedules now taking 3½ hours, a 53 mph average).
· Capitol Corridor: Since 1998, ridership on this bustling Sacramento-San Jose route has climbed 132%, surpassing one million annual passengers.
On the freight side, the Alameda Corridor in the Los Angeles area has improved over 200 grade crossings, reduced truck traffic, and tremendously enhanced the flow of freight trains between Los Angeles and Long Beach. Not long before, freight–passenger interference was reduced with construction of a rail-over-rail flyover in Los Angeles.
To make similar success stories possible elsewhere in California and the rest of the nation, the federal government must create a partnership with states that supports and encourages investment in passenger and freight rail. Several bills in the House and Senate, such as RIDE-21 and S.1991, laudably set the framework for a Federal rail infrastructure program, where money should be spent, and how tax-exempt bonds, tax-credit bonds, and expanding the Rail Rehabilitation and Infrastructure (RRIF) program will provide the needed capital. However, none of these bills outline where the cash needed to support these federal programs will come from.
Thus, the National Association of Railroad Passengers strongly supports the creation of a Rail Trust Fund, similar to those used so effectively for the highway and aviation modes.
While the Rail Trust Fund might eventually derive significant revenue from user fees, user-based revenue sources would not generate much revenue initially. In order for a rail trust fund to reach critical mass, the Federal Government must first “prime the pump” by earmarking revenue from other sources. Highways and aviation systems were already relatively mature before creation of their trust funds.
Some possible Rail Trust Fund sources already exist in the form of taxes levied on the railroads, which, unlike highway and aviation taxes, do not benefit further investment in their respective mode.
This counter-productive precedent has hindered development of both passenger and freight rail for decades. Between 1941 and 1962, the Railroad Ticket Tax raised billions in revenue, none of which went toward enhancing development of the freight or passenger rail service; some revenues actually went toward highway development. Today, through taxes levied on railroads on infrastructure and fuel, we continue to discourage investments in rail by funneling these revenues into the general treasury.
We believe rail should receive a portion of any future increase in gasoline or aviation taxes. We support many state DOTs in the view that they should be allowed to spend flexible gasoline-tax dollars on intercity passenger rail. We do not believe the nation or the cause of balanced transportation benefits from an ‘ironclad’ mode-specific approach to trust funds, but in the present context we certainly agree that taxes levied on railroads (including Amtrak) should benefit railroads – passenger and freight.
We know that freight railroads are very sensitive to the possibility that creation of a trust fund would alter the competitive balance among the railroads, or result in rail tax payments cross-subsidizing passenger projects. We believe these challenges can be addressed. General guidelines about overall project balance between competing freight railroads and how improvements must benefit both freight and passenger service could establish a fair process of disbursement for all parties. Other stipulations about the share of allowable projects whose benefits are judged to be "passenger only" could be negotiated.
If Congress does not repeal the 4.3 cent diesel tax which Amtrak and the freight railroads currently pay towards general deficit reduction, then the $170 million raised annually from this tax should be directed into a Rail Trust Fund, and no longer be set aside for deficit reduction. This precedent has already been set, as similar airline and highway taxes were redirected into their respective trust funds in 1997. Since 1997, the railroads have paid approximately $1 billion in diesel taxes to general revenue; this money should be retroactively rebated at its present value to the Rail Trust Fund and set aside for rail infrastructure development.
Other revenue sources being considered for the Rail Trust Fund include taxes on equipment sales, and passenger ticket taxes on commuter and Amtrak trains. Any new taxes levied on the freight railroad industry and passengers must not be viewed as a panacea, and be implemented with restraint. Raising taxes on equipment will increase startup costs for new services as well as decrease an already diminished rate of return for capital investments. An equipment tax will be pointless if railroads simply reduce their capital investments further because they are now paying a tax on new equipment. A net gain for capital investments infrastructure must accompany any tax levied on new equipment purchases.
With respect to passenger tickets, again, NARP believes these taxes must not be seen as a panacea, and be implemented cautiously (perhaps not at all, or only after the results of meaningful capital projects have become apparent in service improvements). Unfortunately, the vast reservoir of patronage that made the railroad ticket tax so successful (at raising general revenues!) between 1941 and 1962, is much smaller, and cannot generate nearly as much revenue as before. A passenger ticket tax must not try to make up this difference by imposing a much higher tax rate; taxing passengers too much would stifle ridership to the point that nobody rides the train. Amtrak already tries to set fares to maximize revenues, and many fares already are very expensive. Also, Amtrak, as noted above, already pays the 4.3 cent fuel tax.
Polls over the years have consistently shown public support for faster, more frequent, and reliable passenger trains, including two national polls this summer. A poll conducted by CNN/Gallup/USA Today near the height of Amtrak’s June cash crisis (June 21-23) found that 70% of the public support continued Federal funding for Amtrak. Similarly, The Washington Post found that 71% of Americans support continued or increased federal funding for Amtrak (August 5 article reporting on July 26-30 poll).
If we provide quality service, the public will ride the trains. If the federal government provides states a meaningful match, the states will drive the needed investments. At the same time, the public also will realize a tremendous benefit from an improved freight rail network. Again, the key to realizing these benefits will be a long term federal partnership with states, and an adequately supported Rail Trust Fund that would bring balance into national transportation policy, and ultimately benefit the users of every mode of transportation.
The web site of the National Association of Railroad Passengers is <www.narprail.org>.