House Republicans Propose Privatization of NEC
The 2012 election can’t come quickly enough. The House Transportation Committee, headed by Florida Republican John Mica, has proposed privatizing the Amtrak Northeast Corridor:
“We plan introduce legislation to separate the Northeast Corridor from Amtrak, transfer it to a separate entity, and begin a competitive bidding process that would allow for a public-private partnership to design, build, operate, maintain, and finance high-speed service. Our plan would do so in a dramatically shorter time, in closer to 10 rather than 30 years, and at a fraction of the $117 billion cost proposed by Amtrak, while creating new jobs,” Mica said.
Mica’s plan slams Amtrak ridership on the NEC, claiming it’s been stagnant since 1977. But what he doesn’t mention is that trains are at capacity, and the track capacity is itself being maxed out. Nor does he mention that the Acela is profitable. In other words, Amtrak is doing great on the NEC with what it has – but without further investments, it can’t improve on that and carry more passengers, which it ought to.
The House Republican concept is to have the private sector fund the expansion. How exactly they’re going to do that is another question entirely. Selling off the NEC tracks isn’t going to be cheap – assuming it is valued properly, and public infrastructure is usually sold off below market value in order to provide a sweetheart deal for corporate allies.
Nor will the construction costs come cheap. $117 billion would be an enormous lift for the private sector. The chances of it succeeding are slim. Not because HSR is a flawed concept – the Acela proved it can be profitable. But the construction costs aren’t recouped immediately, and nor should they be. When attempts to recover those costs are rushed, you get the Taiwan problem where the system displayed healthy ridership growth, generating an operating surplus in 2010 but having to be bailed out by the Taiwan government in 2008 because the construction debt could not be repaid quickly enough.
In April 2010, Yonah Freemark at the Transport Politic laid out some of the problems with too much private involvement.
John Mica will follow his ideological doctrines even if it’s not a smart financial move. While we need to invest in the NEC, this doesn’t seem like the right way to do it. Democrats and President Barack Obama would be better off waiting until 2013, when a Democratic House would be presumably more interested in finding long-term funding solutions.