(The following article by Alan Wirzbicki was posted on the Boston Globe website on February 22.)
WASHINGTON — The Bush administration’s effort to force passenger rail restructuring by driving Amtrak into bankruptcy probably would force the railroad to sell off its stations and trains to repay billions of dollars in debt, leaving the system in tatters, rail specialists said last week.
In its budget released this month, the administration requested no federal subsidies for Amtrak, with the goal of starving the company into insolvency. The White House proposal predicted that the move would lead to “restructuring and efficiencies” under a bankruptcy court. The administration expressed hope that states would take on responsibility for running a reformed rail system, which it says could deliver better service.
But the corporation is $3.8 billion in debt, and a bankruptcy court would have to act in the interests of the railroad’s creditors, not the public or Amtrak’s eventual successor, rail specialists said.
That could mean the court would decide to sell valuable property, such as Amtrak’s Penn Station in midtown New York and stations in Philadelphia and Baltimore, to pay debts. Amtrak runs on freight railroad property in most of the country, outside the reach of a bankruptcy court, but owns its track and stations in most of the heavily traveled Northeast Corridor.
Selling those assets would mean the state-sponsored system in the Northeast that the Bush administration envisions would start from scratch or assume those debts itself. Amtrak service accounts for about a third of the transportation market between New York and Boston.
“I don’t know that everybody really understands how complex the railroad climate is,” said Anne Canby, a former head of the New Jersey and Delaware departments of transportation and former treasurer of the MBTA. “It’s not like an ordinary company that you just shut down.”
Senator Patty Murray, Democrat of Washington and the ranking member of the Senate Transportation Appropriations Subcommittee, said, “Ceding control of the national railroad to a bankruptcy trustee is both reckless and irresponsible.”
Murray wrote to Transportation Secretary Norman Mineta on Wednesday asking how the administration planned to prevent the system’s assets from being auctioned off to the highest bidder in the event of a bankruptcy.
Murray also questioned the administration’s expectation that the states, most enduring financial crises of their own, could come up with millions each to take the place of federal funding.
“I take it as a complete nonstarter that the states would take over services that cross multiple state lines,” said Ross Capon, the head of the National Association of Railroad Passengers, a lobbying group, citing the expense and the difficulty that would arise in determining how to share costs between neighboring states. “I think it’s more likely they will find a way to keep Amtrak going than they will find a way to build things from the ashes.”
Amtrak carried 25 million passengers last year, up from 22.5 million in 2000. Several regional commuter railroads, including the MBTA, also use the Amtrak track and facilities that could be affected by a shutdown.
The proposal to push Amtrak into bankruptcy — which faces significant bipartisan opposition on Capitol Hill — reflects the administration’s frustration with stalled efforts to reform the railroad, which the Office of Management and Budget says has cost taxpayers $25 billion since its founding in 1970. The administration proposed transferring Amtrak to the states in 2003, but the bill went nowhere in Congress.
In remarks last week in Chicago, Mineta said Amtrak ran “trains that nobody rides between cities that nobody wants to travel between.”
In its budget proposal, the administration said it might support passenger rail funding in the future, but only “on the condition that real legislative reforms are enacted.”
Still, the new zero-appropriation proposal, which Mineta has championed, seems to ignore past warnings of his own agency.
In Congressional testimony in October 2003, Department of Transportation Inspector General Kenneth Mead warned against abruptly ending subsidies.
“Requiring a large, rapid increase in state operating subsidies for both long- and short-distance trains is more likely to lead to their elimination than restructuring and improvement,” Mead testified before Congress.
The Bush-appointed chairman of Amtrak’s board of directors, Texas lawyer David Laney, broke with the president in a gingerly worded letter to Congress released Thursday night. Laney said that although zero funding is the “right message,” it is not the “right number.”
“Although bankruptcy might prove a reform strategy of last resort, at this point in the reform process it is precipitous and counterproductive,” Laney wrote, citing progress in the past three years under Amtrak president David Gunn.
But Amtrak’s critics say turning over Amtrak’s infrastructure to the states would clear the way for private companies to run train service along those routes at lower costs, similar to the way a private company runs the MBTA commuter rail but does not own the tracks or stations.
Canby, now president of a mass transit advocacy group, suggested that the administration is trying to create the appearance of crisis to force changes.