Amtrak Picks New CEO, Gets Loan Grant

Amtrak has selected former Norfolk Southern CEO Charles Moorman to be its new president and CEO. Moorman will take the reigns from career bureaucrat Joseph Boardman this week.

Rail industry insiders were surprised when Boardman decided to step down in the middle of his contract. But, according to Trains magazine’s Don Philips (no link available), Boardman had alienated other officials in the organization with angry tirades and poor management.

Boardman leaves the organization with one victory: Amtrak has successfully negotiated a $2.45 billion loan from the Federal Railroad Administration. The funds will be used to buy new trains and upgrade the Northeast Corridor to operate at top speeds of 160 mph instead of the current 135 mph. Amtrak claims it will repay the loan out of revenues earned from the additional riders attracted to the new trains and higher speeds.

It is easy to be skeptical of this claim, however. Under Boardman, Amtrak shifted operating costs to maintenance and overhead in order to make Northeast Corridor trains appear profitable. While maintenance and overhead are essential for operations, Amtrak (along with the transit bureaucracy) counts maintenance as a capital cost. This shift allowed Amtrak to claim its trains were doing so well that it was seeking lower operating subsidies from Congress even as it sought much higher capital subsidies to do maintenance. Amtrak says it has a $7 billion maintenance backlog, and predictably, little or none of the $2.45 billion will be spent reducing that backlog.

If Amtrak doesn’t have enough money to maintain its tracks (most of which are in the Northeast Corridor), how will it find enough to also repay the loan? The answer is slight of hand: it will repay the loan with operating revenues that should be going into maintenance while it demands that Congress give it more money for maintenance. Under the terms of the loan, Amtrak doesn’t even have to start repaying it until 2022.

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Another lie is the claim that it will speed trains to 160 mph between Boston and Washington. The reality is some of the $2.45 billion will be spent improving a short stretch of track between Washington and Baltimore, but this is likely to shave no more than a few minutes off its train times. Between New York and Washington, the current average speed of Amtrak’s fastest “high-speed” Acela is 82 mph (though most are about 78 mph). This speed allows the Acela to attract less than 3 percent of travelers in the Northeast Corridor (all Amtrak trains together carry about 6 percent, less than half of which is on the Acela). Will the $2.45 billion loan allow Amtrak to boost that average speed to more than 85? Probably not.

As a former CEO of Norfolk Southern, Amtrak’s new president will bring an insider’s familiarity with the rail industry (which Boardman never really had) combined with an understanding of the political system. Headquartered in its namesake city in Virginia, Norfolk Southern was closer to Washington DC than any other major railway. Moorman’s selection brings back memories of Graham Claytor, who prior to being Amtrak president in the 1980s had been CEO of Norfolk Southern predecessor Southern Railway (and his brother was the first CEO of Norfolk Southern). Claytor was popular with Congress and was able to boost subsidies to Amtrak by claiming (falsely, as it turned out) that Amtrak would soon be profitable. Instead, he left behind a growing maintenance backlog.

Many rail advocates like to point out that there is no reason to expect Amtrak to be profitable but that we should subsidize it anyway because almost every other country in the world subsidizes their passenger trains. But the United States is not like every other country. Not only do we have a long history of demanding that transportation and other services stand on their own, most rail lines in the U.S. are privately owned.

The United States has, in fact, one of the most efficient rail industries in the world, because it is private. Private owners have dedicated their lines to freight, where rail really works best, whereas the publicly owned rail lines in other countries are dedicated to passengers, where rail is marginal. This is because politicians go for the glitz, not efficiency, and passenger trains are glitzier than freight.

Just as Amtrak’s ridership seems more dependent on gas prices than management, Amtrak’s future is more dependent on who gets elected to Congress. If Democrats take over both houses of Congress, then the floodgates are likely to open to expand service and maybe cover some of that maintenance backlog. Amtrak would also love to spend a few hundred billion dollars rebuilding the entire Northeast Corridor, although it will have to compete with Japan, which is spending $2 million to study a magnetic levitation train from Baltimore to Washington. No doubt this means it will spend $100,000 on the study and $1.9 million on lobbying for subsidies to the project. Maybe it should hire a former railroad executive to oversee it.