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AMTRAK BOARD CREATING INFRASTRUCTURE SUBSIDIARY

A response from the National Association of Railroad Passengers

OCTOBER 12, 2005: It was revealed last night that the Amtrak Board of Directors, at its September 22, 2005, meeting, approved a resolution directing management "to take all appropriate action to create" a wholly-owned Northeast Corridor Subsidiary that would take title to Amtrak's Northeast Corridor infrastructure.

The resolution states, in part, that the action "is undertaken for purposes of facilitating and furthering future capital investment, financing, development, oversight and operation of the NEC Infrastructure with the intent to enhance the performance and capacity of the NEC Infrastructure for the benefit of the Corporation and all current and future users of NEC Infrastructure."

The board's action appears to reflect a sharp departure from the position it took in the April 2005 "Strategic Reform Initiatives and FY06 Grant Request," which included this:

• "the Board and management have extensively explored a number of recommendations calling for the NEC infrastructure to be moved into a separate entity. We have also reviewed models for such a structural split adopted and implemented in other countries with varying degrees of success. This step in the overall reform process remains an option for continued review. We have decided for now, however, that the costs, complexities and risks of such a split within Amtrak outweigh the benefits. Consequently, we have concluded that separation of NEC assets from NEC operations is not advisable at this time.
• "Without disrupting the current GAAP-compliant accounting and budgeting, Amtrak...will be organizing its strategic plan and providing financial reports around five business lines... Infrastructure Management (Amtrak-Owned) [includes 96 miles in Michigan and other non-Northeast segments]... Northeast Corridor Operations... State Corridor Operations... National Long Distance Operations... Ancillary Businesses. [NARP Observation: the resolution refers to Northeast Corridor infrastructure, not to infrastructure Amtrak owns elsewhere.]
• "The NEC is among the most complex rail corridors in the world, and presents a unique operational and management challenge. Where other countries have built dedicated infrastructure to support 150-plus mph services, the NEC mixes high-speed intercity services with freight rail services operated by seven different railroads and some of the densest commuter operations in North America provided by eight commuter authorities. Despite the growth in commuter services, Amtrak remains the dominant user of the NEC, representing nearly three-fifths of all train miles, and is the only user operating end-to-end and at high speeds.
• "Amtrak has begun the process of separating infrastructure management from operations for planning, accounting and financial reporting and analysis purposes. We believe that this approach will deliver much of the benefit of ownership segregation; moreover, it represents an essential step in ownership separation if such an action were to be undertaken at some subsequent date. Whether or not ownership of NEC infrastructure and operations is separated in the future, it is our position that control of rail operations and infrastructure management should remain unified for purposes of safety and efficiency."

The reasons for the Board's sudden change of position, and the reasons they kept their action secret for so long are unclear. The board currently has only four voting members rather than the seven the law envisions. Only one, Chairman David Laney, has been confirmed by the Senate. A second, Jeffrey Rosen, represents Secretary of Transportation Norman Y. Mineta who has made many negative (and frequently inaccurate) statements about Amtrak this year. The other two members, Floyd Hall and Enrique Sosa, are recess appointments whose terms will expire when Congress adjourns for the year. Some observers have speculated that the White House would reappoint Messrs. Hall and Sosa, but the legality of a 're-recess appointment' is unclear.

[Note: The quotations above are from Amtrak's 2006-2011 Strategic plan, available on their website. The above quotations are from printed page 13, except that the 'without disrupting' paragraph is from page 11. These pages are known electronically as pages 21 and 19, respectively.]

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