House Committee Examines Amtrak CapEx and Transparency

by Sean Jeans-Gail | VP of Gov't Affairs + Policy

The House Transportation & Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials held a hearing this week spotlighting the massive increase in construction and equipment procurement at Amtrak, with key members of Congress calling for greater transparency in how that money is being spent.

The hearing, titled “Amtrak and Intercity Passenger Rail Oversight: Promoting Performance, Safety, and Accountability”, featured testimony from Stephen Gardner, Chief Executive Officer at Amtrak; Anthony Coscia, Chairman of the Amtrak Board of Directors; and Julie White, Deputy Secretary for Multimodal Transportation at the North Carolina Department of Transportation.

One of the recurring themes of the hearing was the unique mix of opportunities of challenges faced by Amtrak as they reorganize to absorb the influx of funding from the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law. These grant dollars are going towards urgently needed upgrades to critical infrastructure assets and equipment, much of which has degraded from decades of deferred maintenance and replacement.

The transition to a healthy capital expenditure program has required Amtrak to transform itself into a different kind of railroad. And while Gardner said Amtrak is on target to set a new all-time ridership record this year, with strong year-over-year revenue growth, they’ve also seen an increase in operating costs. One driver is inflation, with increased costs for local goods and services (i.e., diesel fuel, higher wages to Amtrak employees). But much of it is directly related to the work being done to address the railroad’s massive state-of-good-repair backlog.

“Another driver of the increase in our operating costs is that the IIJA transformed Amtrak from being primarily a train operating company into a train operating company and a very large construction company,” explained Gardner. “Our capital expenditures have increased from $1.6 billion in Fiscal Year 2019 to nearly $5 billion this year, and a projected $8.3 billion next year. That enormous increase in capital spending has been accompanied by many additional costs in areas such as legal, financial management, training, human resources and information technology that we did not have before, and that are considered operating costs under the Generally Accepted Accounting Principles, or GAAP, that apply to corporations – rather than public agencies – like Amtrak.”

In his written testimony, Gardner provided a litany of the tangible projects that are being funded, including:

• Construction on the Hudson Tunnel Project, where Amtrak recently awarded the construction contract for the rehabilitation of the four tubes of the 114-year-old East River Tunnel, with work set to commence later this year;
• Construction of the Portal North Bridge, a key Gateway project led by NJ Transit in partnership with Amtrak, which is 58% complete;
• Replacement of the 117-year-old Connecticut River Bridge in Old Saybrook, Connecticut, with construction set to commence later this year;
• Replacement for the 118-year-old Susquehanna River Rail Bridge in Perryville, Maryland, with construction set to begin next year;
• A construction contract for the Frederick Douglass Tunnel in Baltimore, awarded in February, clearing the way for construction to begin later this year;
• Commencement of work on the Chicago Hub Improvement Project (CHIP) to enhance the passenger rail experience and rail infrastructure in and around Amtrak’s Chicago Union Station;
• Ongoing construction on the redevelopment of William H. Gray III Philadelphia 30th Street Station, Amtrak’s third busiest station;
• Completed construction of the first of two new high-level platforms at Baltimore Penn Station, providing additional capacity for Amtrak and MARC commuter rail service and enhance accessibility, with additional work to bring the station into a state-of-good repair and expand its footprint commencing later this year;
• Two major breakthroughs on the Washington Union Station redevelopment—the FRA’s clearance of the final environment impact statement and next month’s Amtrak takeover of the sublease for the station—which will allow Amtrak to move forward on a revitalization and expansion program;
• High-speed testing of the new Acela trainsets on the NEC, following Alstom’s advancement of the FRA-required computer modeling process, with initial revenue service projected to begin around the end of this year (Editor’s Note: these trains were originally scheduled to enter revenue service in 2021);
• Production of the Siemens-built Amtrak Airo trainsets for operation on Northeast Regional trains and state-supported services in the East and Pacific Northwest is underway, with projected initial service in 2026 on the state-supported Amtrak Cascades route;
• Continued deliveries of the Siemens-built state partner-owned Venture cars for operation on state-supported routes in the Midwest and California;
• Advancement of the Request for Proposals for reequipping much of the long-distance fleet, with a procurement contract scheduled for 2025;
• Continued deliveries and operation of the Siemens-built ALC-42 locomotives for the long-distance services;
• Continued restoration to service of damaged and mothballed railcars;
• Completed ADA accessibility work on 15 stations in FY23, with eight more so far this year, and nine more stations projected to be in full compliance by the end of the year;
• Upgrades to grade crossings along the route of the planned New Orleans to Mobile, Alabama;
• Planning work on the Mississippi-Louisiana Grade Crossing Improvement Project, to evaluate 15 potential improvements to highway-rail grade crossings on the CN-owned rail line used by the City of New Orleans service;
• A $28 million refresh of nearly 400 cars in Amtrak’s Superliner fleet, which operate primarily on Western long-distance trains.
• Upgrades of Amtrak’s onboard Wi-Fi to 5G on many routes to provide passengers with enhanced onboard connectivity;
• Work on four Amtrak routes selected as part of the Corridor ID: an extension of Northeast Corridor service from New York City to Ronkonkoma on Long Island; the Texas Central Dallas to Houston high-speed rail project; and increased service frequency on the Cardinal and the Sunset Limited, from tri-weekly to daily.

The length and breadth of this list will be a delight for U.S. passengers used to seeing America’s national rail operator limp along with a starvation budget. However, it’s also clear that a half-century of disinvestment in passenger rail in this country can’t be fully addressed in five years—particularly for states in the West and the South, where passenger rail service is inadequate or nonexistent. Congressional leaders pointed to the need to ensure that passenger rail investment continues, calling for predictable, dedicated funding in future surface transportation bills.

“Highways, transit, airports and harbors all have funding certainty, to some extent, enabling long-term major capital projects in these modes without fluctuations due to the annual appropriations process,” said House T&I Ranking Member Rick Larsen (D-WA). “It is time that intercity passenger rail had the same certainty.”

Congress Demands More Transparency

Of course, with more funding comes more responsibility. Not only to implement the upgrades in a timely fashion (a huge challenge in itself), but to be able to account for how taxpayer dollars are being spent. Two key Republican figures introduced legislation designed to introduce more transparency in Amtrak’ governance.

Rep. Troy Nehls (R-TX), chair for the House T&I Subcommittee on Rail, introduced the Amtrak Transparency and Accountability for Passengers and Taxpayer Act, which applies the requirements of the Sunshine Act to Amtrak, including requirements for meetings of Amtrak’s Board of Directors to be open to the public.

“We also remain concerned about the lack of improvements in transparency and accountability at Amtrak following the record levels of funding it has received in recent years,” said Chairman Nehls in his written statement. “The Amtrak Board of Directors does not make its meetings open to the public as other federally chartered entities do, and the Board has approved substantial ‘performance bonus’ payments to Amtrak executives despite significant financial losses.”

It is a shame that Rep. Nehls is introducing a confused idea about profitability into an important conversation about the need for public access to Amtrak's decision-making process. By statute, Amtrak takes public funds to provide a public good to the cities and towns it serves, not to make a profit. That's true of most federal transportation programs. For context, Congress has transferred $276 billion into the Highway Trust Fund (HTF) since 2008, and the IIJA provides almost $24 billion a year in general fund subsides to the HTF.

However, while Amtrak shouldn’t be expected to make a profit, it should be required to comply to the same good governance rules applied to other public agencies.

Rail Passengers is pleased to be able to share that Amtrak’s Board has been in touch with our Association, and has expressed a willingness to introduce some of these best practices. Furthermore, the Board has communicated that it won’t need to wait for Congressional action to ensure improved public access to the Board with increased transparency moving forward. Given the important near term decisions around the investment of IIJA funds, Rail Passengers applauds the willingness of Amtrak to take these steps of its own accord.

Our Association understands that Amtrak’s Board will, at times, need to discuss sensitive information requiring the Board to go into executive session. Recognizing that important caveat, and based on the best practices utilized by these entities, our Association would like to see some version of the following policies implemented:

• Published list of meeting dates, with reasonable advance notification provided via Amtrak’s website;
• Live streams of Amtrak’s Board meetings available to the public;
• Recordings of Amtrak’s Board meetings posted publicly;
• Opportunity for the public to comment on Board proceedings in writing;
• Publicly posted meeting agendas;
• Publicly posted meeting minutes; and
• Publicly posted board materials.

Rep. Marc Molinaro also introduced the Amtrak Executive Bonus Disclosure Act, which would require Amtrak “to notify and brief Congress 30 days before it awards any executive bonuses and to publicly disclose any executive bonuses that have been awarded through notice in the Federal Register, along with an explanation of the metrics and criteria used to determine the bonuses.”

Rep. Molinaro was a key Republican backer of Amtrak during last year’s budget fight, and was part of a crucial bloc of Northeastern Republicans who helped kill a House GOP proposal to slash Amtrak’s Fiscal Year funding by 76 percent. Rail Passengers applauds Rep. Molinaro’s desire for a public explanation of the metrics and criteria used to determine these bonuses.

However, we also understand that, to run a world class railroad, Amtrak will need to offer salaries that are competitive with the private sector. Like most things in life, you get what you pay for, and top transportation talent doesn’t come cheap. Following the hearing, Amtrak publicly posted pay data for its leadership, revealing that Gardner makes $1.1 million. That is both a significant amount to the average American, and well below what his industry counterparts make. Alaska Airlines’ CEO, which carries roughly the same number of passengers, received $10.2 million last year, and CSX’s CEO received around $14 million in total compensation.

Amtrak's Chairman correctly observed that when public agencies aren't able to attract talent in-house, it often ends up costing the public more in the long run.

"If Amtrak didn’t have the workforce required to manage and support multiple multi-billion dollar capital projects, it would have to rely on high-priced consultant practices to do that for us," said Coscia. "As someone with a lot of experience with mega projects – I chaired the Port Authority of New York and New Jersey while it was rebuilding Lower Manhattan after 9/11 – I can attest that relying on consultants would be much more costly to taxpayers and would greatly increase project risks, as the experience of rail and transit projects overly dependent on consultants has demonstrated."