Amtrak Subsidy Gone, States Must Pay the Freight to Keep Rail Routes
By Ron Nixon, May 2, 2013
Children waited in March for a rally in support of keeping Amtrak service to Lewistown, Pa., and other towns in central and western Pennsylvania. The state ultimately agreed to pay for the service.
HUNTINGDON, Pa. — The unmistakable wail of a locomotive horn and screeching steel wheels signal the arrival of the evening Amtrak
train in this central Pennsylvania town just over an hour west of
Harrisburg, the state capital. The train is one of two that stop here
daily, a vital link to Harrisburg, Pittsburgh, Philadelphia and the
entire Northeast Corridor.
“There is no bus service or airports nearby,” said Dee Dee Brown, the mayor of this town of 7,000, who often rides the train to Philadelphia. “It’s just the train, and, quite frankly, we would be a ghost town without it.”
But after years of financial losses on the route for Amtrak, Pennsylvania was faced with either picking up the tab or losing it altogether by Oct. 1. Under pressure from Congress to reduce its dependence on federal subsidies, Amtrak is looking at either closing 28 short-haul routes or getting 19 states to cover the costs. Most of the states have already agreed to pick up the costs.
The railroad has traditionally subsidized some local routes, while leaving others up to the states to support, but now state governments will have to pay for all local routes of less than 750 miles in a state. The Northeast line, Amtrak’s moneymaker, is not included.
If all the states chip in, Amtrak officials expect revenue to increase by about $85 million a year, which would shrink its chronic deficit.
Pennsylvania and Virginia are among the states that have already agreed to pay for service, citing the need to ease road congestion, spur economic development and remain connected to the Northeast line. But other states, like Indiana, are still debating what to do. In most cases, the routes run at a loss, say state officials, who view them more as an infrastructure investment like a highway.
The cost-sharing arrangement between Amtrak and the states, mandated by a 2008 law, is designed to reduce federal support for Amtrak, which has received nearly $40 billion in taxpayer subsidies since its founding in 1971, and has never made a profit. Last year, the railroad got about $1.4 billion in federal money for its operations, rail maintenance and equipment purchases.
Last year, Amtrak — which says ticket prices and fees cover about 88 percent of its operating costs — lost more than $450 million, mostly a result of constant maintenance of tracks and bridges that are decades old. Its long-distance routes also contribute to the losses, but they are not included in the cost-sharing program because they cross so many states.
Joseph H. Boardman, Amtrak’s president, said sharing costs with states would reduce the need to ask Congress to cover operating expenses and make financing for rail service more uniform. He said the federal operating subsidy last year of $466 million was down from a peak of $755 million in 2004, a result of cost sharing with some states, as well as record ridership and revenues.
“It’s what Congress has been doing for years, that is to push costs down to the state and local level,” Mr. Boardman said. “It’s not going to be a windfall for Amtrak, but it will help reduce our costs.”
The Brookings Institution, the Washington policy research group, attributed some of the improvement in the railroad’s finances to its partnership with 15 states that pay at least part of the expenses on 21 train routes. Last year, states paid Amtrak about $180 million to operate trains.
Virginia, which began contracting with Amtrak for a train between Lynchburg and Washington in 2009, recently added a route to Norfolk from Richmond and passed legislation to finance it.
“We see good rail service as part of our overall transportation plans to reduce congestion on the highways, and the routes add to the economic vitality of our communities,” said Kevin B. Page, the chief operating officer of the Virginia Department of Rail and Public Transportation.
Virginia officials said Amtrak spent over $100 million on goods and services in the state last year. The railroad also employed 864 residents, adding $73 million in wages.
Pennsylvania, which spends about $9 million a year for Amtrak service connecting Harrisburg and Philadelphia, recently agreed to pay an additional $3.8 million a year for the Pittsburgh-to-Harrisburg service. State officials worried about picking up the cost for the line, which averages about 400 riders a day. But they agreed to pay the cost after local officials like Huntingdon’s mayor staged rallies to support the route and Amtrak lowered its cost estimates.
“We always saw the line as important to the communities along the route and an integral cog in the regional transportation system. It was just a matter of cost, " said Erin Waters-Trasatt, a spokeswoman for the Pennsylvania Department of Transportation. “We feel comfortable with the agreement we’ve reached with Amtrak.”
In Indiana, state officials are studying whether to kick in $4 million to $5 million a year to continue the Hoosier State train between Indianapolis and Chicago.
Will Wingfield, a spokesman for the Indiana Department of Transportation, said the state was in the process of hiring a consultant to evaluate the service.
In California, officials are weighing whether to pay an additional $20 million to $25 million a year to keep service between San Diego and San Luis Obispo.
Transportation experts like Robert Puentes, a senior fellow at the Brookings Institution who was a co-author of its Amtrak study, said he expected all the states to eventually agree to the cost-sharing arrangement, which will provide more money to upgrade tracks and improve stations.
“The larger implication is that it will have a positive impact on Amtrak’s budget and improve passenger rail service,” Mr. Puentes said.
He said Congress, Amtrak and the states should consider developing a cost-sharing plan for the money-losing long-distance routes, on which the railroad loses about $614 million a year. Cost sharing on longer routes could reduce Amtrak’s dependence on federal subsidies by $800 million a year, Mr. Puentes said.
Amtrak officials disagree.
“It’s not something we would endorse,” said Mr. Boardman, the Amtrak president. “Some states might pay, while others might not. That would leave gaps in the network and impact overall service.”