Testimony from Chairman Fred Craig on the Transportation and Infrastructure Committee Hearing on April 17th, 2024.
TESTIMONY OF FRED CRAIG – Chair of AIPRO
Submitted to the Railroad, Pipelines and Hazardous Materials Subcommittee
House Transportation and Infrastructure Committee
Hearing on Commuter and Passenger Rail Challenges
April 17, 2024
I am Fred Craig, Chair of the Association for Innovative Passenger Rail Operations or AIPRO. (See Addendum #1-About AIPRO) I also serve as Chief Operating Officer of Transdev Rail in North America. On behalf of AIPRO, we appreciate this opportunity to present testimony to this Subcommittee on the potential future of passenger rail in the United States.
The Case for the Competition Model on Commuter and Intercity Corridors.
The prior witnesses at this hearing have made a compelling case that competitive selection of operators and service providers is a valuable option when selecting partners for their services. These commuter agencies are the primary customers for our AIPRO operating members, which are Herzog, Keolis, Transdev, and RATPDev. It should also be noted that two Rail Labor Organizations the Brotherhood of Railway Signalman and the Brotherhood of Maintenance of Way Employees are active AIPRO members.1 Developing strong partnerships between these agencies and our service providers and rail labor has been the key to efficient and successful operations.
While this hearing is not focused on the intercity corridors, the witnesses from SFRTA and RTD presented a compelling case that having qualified firms bid for their services is the model that works best. In this written testimony, we argue that the ways commuter agencies select operators through competitive processes provide excellent models for expanding the current and future intercity rail market. The substantial number of FRA Corridor Identification and Development (CID) projects now in process make the competitive model completely feasible.
Our primary AIPRO objective is to maintain the forward progress on competition in the commuter arena while at the same time building a similar framework for the implementation of FRA CID intercity corridors across America. Today, states/authorities sponsoring intercity projects have two clear options. One- they may select from the Competitive Models currently used by commuter agencies which have been so well articulated in this hearing. Two- they may stay within the Traditional Amtrak Model which has been the dominant method of contract partnering between the states and operators for the last half-century. We encourage the Competitive Model to be applied to both the commuter market and state-supported intercity CID corridors where appropriate. In fact, there is a minor difference in the basics of commuter rail operations, under FTA authority for financial support, and state-supported intercity operations, largely under the authority of FRA. Both rail services are regulated for safety under the FRA regime. As Chairman Nehls said, at the opening of this hearing, “Private sector providers help lower costs, improve services, and increase ridership.” In this regard, the extensive expertise of the established commuter agencies and their private sector partners could be of immense value in the emerging world expanding intercity rail corridors. The question is how to make it all work together.
The issue of creating a better future for passenger rail falls squarely within the jurisdiction of this Subcommittee. Since the 2008 PRIIA Act, Congress has laid the foundation for a competition model on intercity corridors. (See Addendum #2 -Congress Encourages the Competitive Model on Intercity Corridors.) With the opportunity created by the Bipartisan Infrastructure Law it is time to accelerate this pro-competition trend.
As the re-authorization time approaches, we propose your committee pursue a targeted re-arrangement of railroad passenger law to effectively build a robust and cost-effective rail passenger network that better maximizes the benefits of commuter operations and the expanding CID intercity corridors. The legislation should encourage competition for operations and services in both arenas. In this testimony, we will identify specific issues we believe should be addressed.
The Competitive Direct Access Model for FRA CID Projects.
Compared to many regions around the world, America’s intercity passenger network is lacking in many ways. While our country has neglected its national rail passenger system, the developed world has created an amazing web of High-speed and High-performance rail passenger service. Now, we are at an inflection point in America. The Bipartisan Infrastructure Law or BIL has appropriated significant funding and created a process that gives us new hope. Can we bring home the dream in the next round? We suggest that BIL’s FRA Corridor Identification and Development Program (CID) is the pathway to constructing a High-performance intercity passenger network. While advancing High-speed rail and long-distance corridors are important, we suggest a primary early objective should be a massive commitment to city-pair corridors under 750 miles. A strong framework is already in place. States and localities must commit to managing the projects and subsidize the operations. For the first time, states have significant federal-state partnership grants available for capital-related projects. As the CID pipeline progresses, FRA can become an integral partner and guide the implementation of the national program. Currently, there are thirty state-supported routes with sixty-nine new projects being studied through FRA funding. This model is roughly akin to the Federal Highway Program with federal oversight and significant funding. This is appropriate.
The Competitive Direct Access Model. Federal law clearly permits alternative passenger operators and service providers to become partners with states/authorities in developing intercity corridors under 750 miles. However, since Amtrak has been the only game in town for a half-century, it takes a new platform to introduce the competitive model. AIPRO is collaborating hard with stakeholders and is developing a model based on commercial principles and permitting competitive options for selecting passenger rail operators and service providers. We call this the Competitive Direct Access Model. This provides the states with both the Traditional Amtrak Model and the alternative Competitive Direct Access Model for expanding and managing their intercity corridors under FRA guidance.
Our Direct Access Model eliminates statutory operator preferences over track owners. Access, metrics, and standards, including on-time performance, are negotiated legal contracts. The Model will encourage competition for services and require early expressions of interest from potential operators and service providers on any given project. It will also incorporate fair labor practices designed to produce good jobs. The goal is a streamlined process.
We do not underestimate the difficulty of the task ahead. The Traditional Amtrak Model has pretty much been the sole method for contracts between the states and an operator on an intercity corridor. It excludes the competitive option. The Competitive Direct Access Model opens the market to alternative operators and service providers. For the last year, AIPRO and its allies have been developing a pragmatic template for this innovative approach. It is based largely on previous work by a Class 1 railroad and has been used effectively in the commuter arena. It has been adopted by the Chippewa Rail Commission which proposes a new Corridor ID service.
The Competitive Direct Access Model is designed under current law and needs no statutory change (See Addendum #3-Moving to the Competition Model)
On-Time-Performance Metrics and Standards. It positions projects through commercially negotiated access as well as metrics and standards including on-time performance.
Competition Test. States/authorities will be encouraged to adopt a formal two-step procedure to evaluate the market for a competitive option. The Step 1 planning stage will include a simple solicitation of expressions of interest to determine the viability of a competition. Assuming there is interest, Step 2 in the project development stage will include more formal Expressions of Interest and then later in the process Requests for Proposal. The entire Direct Access Model needs to be streamlined to ensure the delivery of equipment at the appropriate time in the implementation cycle.
Fair Labor Practices. Achievement of fair labor practices that will produce good paying jobs while creating flexibility to achieve success in new vulnerable corridor
operations.
Streamlining. This process will be designed to not add any additional time to make a project operational. The competitive option will run concurrently with other project
activities such as construction and equipment delivery.
Again—we are advancing the Direct Access Model framework under current law.
Looking Toward a new Authorization—What should Congress do?
With a new BIL authorization on the horizon, we suggest a restructuring of the passenger rail law is in order. Here are a few areas that we believe would create a good result.
Promotion of a pro-competitive policy – Legislative provisions should proactively promote passenger rail innovation and competition.
The statute should require a competitive method for selecting rail service operators as a condition of grants where practicable.
Specific rail programs should require competitive criteria for applicant states and local agencies.
The process should include a requirement for simple Expressions of Interest in the planning stage to evaluate the competition option.
PRIIA Section 301 grant competitive requirement should be referenced in the criteria. States can select Amtrak or an Operator without a competitive process if they meet the following PRIIA 301 test-- If the State/Authority does not select the operator competitively it must “provide written justification to the secretary showing why the proposed operator is best, taking into account price and other factors and that the proposed operator will not unnecessarily increase the cost of the project.”
Infrastructure and Equipment Funding. There should be a sustainable funding source available to major providers of rail service on a fair basis including commuter agencies and states/authorities sponsoring passenger rail.
Commuter agencies should have access to the CRISI.
o Federal grants should have set-asides to build state capacity to manage state-supported routes.
The federal state-partnership program should be available exclusively to the states and authorities sponsoring corridor development.
Grants available to states/authorities should not be available directly to competing operators including Amtrak or Private Operators such as Brightline, Herzog, TransDev, RATPdev, or other operators or service providers.
Equipment and Liability – The legislation should address the insurance shortfall and create an adequate equipment pool available directly to states and commuter authorities.
Amtrak Reforms – The political reality is such, it will undoubtedly be necessary to maintain Amtrak’s statutory privileges including access metrics and standards. These should increasingly become a fallback last resort. Wherever possible the tilt should be to the competitive model.
Amtrak should not have statutory privileges that increase its power over commuters or other publicly funded agencies. They should deal on a commercial basis as equals. STB should be given clear authority to mediate and resolve disputes between Amtrak and commuter agencies. 2
Amtrak Operations should be separated from other functions and made an independent entity with transparent accounting and accountability. The planning functions should be separated as an independent office or transferred to FRA. A level playing field should be created between Amtrak operations and alternative operators and service providers with whom Amtrak will compete.
Insurance and Liability: There should be a complete review of liability and options for coverage of both commuter and state-supported rail operations. (See Addendum 4- Insurance and Liability)
The Commuter Rail Coalition's proposal for an additional year to secure insurance when the federal cap is increased should be adopted.
Options for reform including pooling arrangements should be pursued.
Equipment - How can the many needs of the emerging state-supported corridors be met? Amtrak cannot efficiently meet the growing requirements of the states and/or authorities for the 69 CID corridor projects. Assorted options, including an FRA equipment pool available to states/authorities, should be reviewed in the coming months.
Finally, AIPRO would ask this Sub-Committee to consider a future hearing on the legislative ideas we have put forward as well as those from other stakeholders. Our immediate goal is a package of reforms that will streamline relations between the FTA-oriented commuter world and FRA CID intercity corridors to produce the most cost-effective alternative to produce a High-performance rail passenger network across America.
Thank you!
ADDENDUM #1 - AIPRO AND ITS MISSION
About AIPRO. We are an alliance of independent operators, labor organizations, and associates dedicated to advancing innovative passenger rail operations in the United States. The organization is made up of passenger rail professionals including operators, labor, rail construction contractors, consultants, and other stakeholders. We share the goal of a transparent and competitive marketplace. The Board is composed of Transdev; Keolis; Herzog; RATPDev; BRS-BMWE (rail labor) and McGrath Rail (rail construction). Our Associates include Direx Solutions and MaxAccel. For more than a decade AIPRO has pressed its goals in a low-key fashion. We believe we are now poised to make a significant contribution to the creation of an American High-performance passenger rail network.
Today the AIPRO companies play a significant role in the American passenger rail space. In 2019 Amtrak carried about thirty million passengers while the AIPRO companies carried eighty million passengers. Certainly, all passenger rail took a terrible hit in the pandemic. In 2020 Amtrak carried 16.8 million passengers, a 47.4% decrease and the commuter world saw a similar decline. However, ridership is coming back. In 2023 Amtrak carried twenty-eight million passengers. Commuter operations are seeing a similar rebound. In 2023 AIPRO companies carried about 65.5 million passengers by rail in the US (Transdev 2.1 million; Herzog 17 million; Keolis 30 million; RATPDev 15.4 million).
Globally and in America our members compete fiercely against each other. They run everything on the rails from streetcars to High-speed trains. Internationally my company Transdev carries over 608 million passengers a year. Keolis carries about 470 million 7 passengers. RATPDev passenger count totals a whopping 1.5 billion annually. Together our members transport about 2.6 billion passengers by rail each year. This is the equivalent of carrying every American citizen 7.8 times a year. AIPRO members have incredible experience and a great deal to offer. We are anxious to contribute to the creation of an American High-performance passenger rail network in the coming decade.
Addendum #2 Congress Encourages the Competitive Model on Intercity Corridors.
In the late 1950s and 1960s passenger service operated by freight railroads collapsed. Amtrak was organized in 1971 as a federally controlled entity that would be managed as a “for-profit” corporation that would receive taxpayer subsidies. It was given a monopoly over intercity passenger train operations as well as special privileges including forced access to freight rights of way at incremental cost and a metrics and standards priority to be enforced at the Surface Transportation Board. At that time no viable passenger operators were on the horizon.
Over the last half-century, times have changed. There is now a robust group of independent passenger rail operators that run tens of thousands of trains in the United States and carry 2.6 billion rail passengers internationally. How did this happen? Toward the end of the 20th century new commuter agencies moved to the model of competition for operations and the current AIPRO members became principal players.
By the end of the last century, Congress began to nudge intercity passenger rail in the direction of a competitive model. It began to recognize the growing diverse marketplace for expanding passenger rail operations and services. By 1997, Amtrak had received more than $20 billion in federal funding and there was no end in sight. Recognizing the growing number of passenger rail operators in the commuter field, Congress repealed the prohibition against alternative passenger service providers operating over intercity corridors without Amtrak’s consent.
In the PRIIA Act of 2008, Congress strengthened the role of the states to manage all intercity corridors under 750 miles. PRIIA, Section 301 added a new requirement that compelled state grant applicants to use a competitive process in the selection of an operating partner. Further, a predecessor Coalition to AIPRO (Herzog-Transdev-NRC) negotiated a provision, also included in PRIIA Section 301, to protect rail labor rights on these intercity corridors in the event there was an operator change from Amtrak to an 8 independent operator. Thus, the rail unions became agnostic as to the operator, and in some cases, are now in active support of the Competition Model being developed by AIPRO.
PRIIA 2008 encourages intercity passenger service.
Section 209 – States, not Amtrak, were made fully responsible for operating losses on the state-supported routes under 750 miles.
Section 301 – Established a grant program for the states. Unfortunately, for assorted reasons, the 301 grants were smothered in the bureaucracy cradle. 3 However, these grants available to states were revived in a big way in the Bipartisan Infrastructure Law (BIL) and other FRA grant programs.
Section 301 – Requires that as a condition of grants, states are to select operators competitively. If a state does not, “it shall provide written justification to the secretary showing why the proposed operator is best, taking into account price and other factors and that the proposed operator will not unnecessarily increase the cost of the project.” AIPRO believes this to be a critical provision that should be strengthened in the next authorization and fully applied by FRA.
Section 217 – Provides that states selecting alternative operators shall have access to Amtrak facilities, equipment & services with STB binding arbitration. This provision has never been assessed but could become important. 4
Section 305 – Provides states with responsibility for and access to Next Generation passenger cars.
Section 205 – Created an Alternative Passenger Rail Service Pilot Program. Again, this program failed in its implementation and should be revisited.
The FAST Act of 2015 strengthened the PRIIA provisions promoting competition and enhancing the role of states. Then came the Bipartisan Infrastructure Law (BIL) signed into law in November 2021. In total it appropriates about $1.2 trillion over 5 years for transportation and other infrastructure. It appropriated about $39 billion to improve transit and $66 billion primarily for intercity passenger rail. Much of this intercity funding is available through the Federal State Partnership for Intercity Passenger Rail Program. Here both the states and Amtrak are eligible for these grants. This includes $36 billion in advance appropriations. Throughout the BIL the option to pick alternative operators for intercity corridors is fully protected.
ADDENDUM #3 Moving to Competition Model
Progress to Date. In the pre-pandemic world, Amtrak pressed for a $75 billion trust fund giving Amtrak all the money and the authority to manage all intercity passenger rail development. This would have provided complete control over intercity passenger operations. The infrastructure law, drafted by a bipartisan group in the Senate, rejected that approach. It placed FRA in charge of the design and funding of the intercity passenger rail network outside the Northeast Corridor. It provided states with substantial funding for the first time ever, primarily through the Federal-State Partnership Program. It is specifically agnostic on the choice by sponsoring states/authorities of contract operators and service providers. Thus, either Amtrak, an alternative service operator or a combination can become the contract partners who operate the passenger service in the intercity corridors.
Specifically, the BIL:
Puts the Federal Railroad Administration in complete charge of developing the intercity passenger network outside the NEC through the new Corridor Identification and Development program (CID). This creates a system of partnering between states, contract operators and service providers (which may or may not include Amtrak), and FRA. These operating partnerships then enter the CID funding pipeline. AIPRO is convinced that vigorous competition for the partnering role will bring a High-performance rail network to America.
Provides significant grant funding to the states for the first time. Through the Federal-State partnership and other grant programs states now have access to more than $66 billion over the next five years. The USDOT Build America Bureau (BAB) currently has about $110 billion in soft money to lend.
Provides two clear options for the state/authority CID grant applicants to choose operators and service providers in these emerging corridors. First, of course, states can deploy the Traditional Amtrak Model and keep Amtrak as the exclusive partner. Or states have the alternative option to choose to partner corridor service providers competitively. In many cases, given its long history, Amtrak will be the logical partner. They clearly have an essential role in the future of intercity passenger development. But- there will be circumstances, particularly on new routes identified under the CID program where the competitive model will make the most sense. That will be the sweet spot for AIPRO. We are working to refine that competitive mechanism which we are calling the Competitive Direct Access Model.
ADDENDUM # 4 Insurance and Liability
This is a complicated and critical arena. An insurance solution must be built into the Direct Access Model so that the cost of claims does not sink into the benefits of competition. AIPRO is looking at a range of options for the emerging intercity corridors. This includes everything from property-by-property insurance coverage on the Commuter model to pooling arrangements, likely through the USDOT, and “nuclear type” coverage. We believe the liability issue needs to be addressed legislatively in reauthorization.
The liability regime in 49 U.S.C. § 28103, with the ever-increasing federal cap, makes it extremely difficult for commuter authorities or states to obtain adequate coverage. The per-incident liability cap is expected to reach $397 million in 2026. Increased exposure and a shrinking rail insurance market threaten the future of passenger rail.
Amtrak has tools to address these liability concerns across intercity passenger routes. Given its direct federal subsidy and special statutory protections for self-insurance, Amtrak gets a “head start” on the cost of claims. Some states/authorities with their private operators in the commuter arena have found ways to “skin the cat” on liability—but none are as simple or cost-effective as Amtrak’s federal support and captive off-shore insurer. On intercity operations, this has already been accomplished on the Hartford Line as well as the Brightline operation in Florida. We believe similar arrangements can be crafted on the FRA Corridor ID expansions. We are optimistic that liability coverage can be arranged for the emerging intercity corridors as it was on the Hartford Line and Brightline.
To that end, Congress should work to re-level the field. Here are some options:
(1) Requiring Amtrak to offer coverage to any intercity operator or state sponsor through its Passenger Rail Insurance Plan with fair and reasonable terms and conditions. Disputes could be resolved by the Federal Railroad Administration or the Surface Transportation Board.
(2) Enacting a statute that would permit states to extend their sovereign immunity to intercity passenger rail operators by contract.
(3) A USDOT solution. The Build America Bureau programs (RRIF) could be used as a backstop. In another alternative, FRA could provide a federal “match” (akin to the federal appropriation to Amtrak) to a risk liability pool for intercity commuter rail operators or state participants that would also contribute and obtain coverage through that pool; or (4) Eliminate Amtrak’s “head start” by requiring Amtrak to obtain a bona fide third-party policy—without “self-insurance” and Passenger Rail Insurance Ltd.
Notes:
In addition to AIPRO passenger rail contract operators, the Railroad Cooperation and Education Trust (RAILCET), representing unionized rail construction contractors, is also a proponent of the competition model for expanding commuter and intercity passenger rail service. RAILCET is comprised of two building trade unions, LIUNA and IUOE, and thirty rail contract companies with whom they have a national agreement.
Indeed, the new STB Passenger Rail Advisory Committee (PRAC) may prove instrumental in making recommendations to the Board and Congress on how best to use the STB capacity and experience in developing a pragmatic competition platform for the expansion of intercity corridors.
The Obama High-Speed Rail appropriation pumped nearly $11 billion into rail projects outside the PRIIA 301 framework. The PRIIA grants then died for lack of an appropriation.
Again, this should be an appropriate issue to be reviewed by the STB’s new Passenger Rail Advisory Committee.