Elon Musk’s call to privatize Amtrak should surprise no one. He owns a car company, has recommended that tourists from abroad not ride passenger rail in the U.S., and according to his biographer “the idea (for the Hyperloop) originated out of his hatred for California’s proposed high-speed rail system,” which he viewed as too costly and too slow.
But supporters of passenger rail in the U.S. should not dismiss the notion of redefining Amtrak’s role in running our nation’s intercity rail network, including privatizing some of its operational responsibilities. Rather, they should use this moment as an opportunity to debate the best way to leverage private investment in passenger rail.
Born out of necessity, Amtrak was never intended to be the long-term solution to providing passenger rail in the U.S. The collapse of privately owned and operated passenger rail in the 1960s led to the government corporation’s creation in 1971. Amtrak’s operations greatly expanded in the mid-1970s when it took over the Northeast Corridor, which accounts for over a third of its passengers and is operationally a money maker. Since then, Congress has been fairly divided about Amtrak’s vision. Many Democrats support more government funding of Amtrak while large swaths of Republicans have called for the public corporation’s dismantling and the sale of the NEC to private interests. Partly as a result of this partisan divide, Amtrak has been unable to access a stable source of funding to invest in its rail infrastructure, leaving it with billions in deferred maintenance and little money for investments in high-speed rail.
The Downsides Of Privatizing Amtrak
But would the sale of Amtrak to private investors result in a world class intercity passenger rail system? Not likely. No country in the world has a first-class passenger rail system that is completely private. And history has shown (including that of the United States), that most private passenger rails systems (as well as many privately owned airlines), are eventually bailed out by taxpayers. Why? Because transportation systems require a massive amount of capital investment, maintenance costs rise significantly over time, and profit margins are tight.
For this reason, transportation infrastructure is usually owned and its maintenance subsidized by the public sector. In the U.S. for example, construction of the Interstate Highway System was financed by the federal government, and most commercial airports are publicly owned by state and local governments (or public authorities), and receive support at the federal level from grants and tax-exempt bonds.
However, unlike countries in Europe and Asia, most railway tracks and train stations are typically owned by freight railroads, not the government. The major exception is the Northeast Corridor, along with some of the rail network around Chicago and parts of California. Interestingly, these rail corridors are by far the most popular in Amtrak’s network.
Private-Public Partnerships Would Jump-Start Passenger Rail In The U.S.
Although total privatization of Amtrak should be off the table, partnerships with the private sector should not. This could include allowing private passenger train operators to run trains on publicly owned track and allowing Amtrak to invest in privately built and operated high-speed rail corridors. Working with the private sector could dramatically improve service, infrastructure, and the ridership experience when combined with government investment (more on that later).
For example, several European countries have begun to privatize some of their rail operations in order to create more competition, meet growing demand, and reduce greenhouse gas emissions. Partly in response to the European Union’s 2016 Fourth Rail Package, private operators are now competing with state-owned rail operators in Spain (the world’s second largest high-speed rail system), France, and Germany. And several companies are looking to compete with Eurostar by beginning to offer cross-channel service in the near future.
In the U.S., Brightline — a private rail operator that made its start as All Aboard Florida — now offers fast rail service from Miami to Orlando. Brightline ridership has grown to over 2 million passengers a year, and it is expanding its 125 mile-per-hour service to Tampa. The company has also begun construction of a true high-speed rail corridor (200 mph) from Las Vegas to the outskirts of Los Angeles. The construction of the line will take place along interstate 15 and is jointly funded by the federal government ($3 billion) and private investors ($2.5 billion). Its Las Vegas to Los Angeles corridor will be completed before California’s HSR project, and at a much cheaper rate per mile.
But the key to a successful, vibrant passenger rail partnership will require public investment. Since the early 2000s, China’s government has invested $1.5 trillion to create the largest high speed rail system in the world. While it is unlikely that the U.S. will match that figure anytime soon, establishing a steady source of funding for passenger rail would allow Amtrak to invest in other privately led ventures, such as the Texas Central rail initiative.
One source of funds is already in place — the $35 billion Railroad Rehabilitation and Improvement Financing Fund. This program is already paid for, so it isn’t new spending. But these funds are rarely used for passenger rail. Congress should make the loan program explicitly available for high-speed rail projects. Another source of funding for rail infrastructure could come from the leasing of operating rights to the Northeast Corridor and other popular routes.
Ultimately however, Congress will need to provide a steady source of money for projects, much as it does for highways and airlines. Hopefully the involvement of the private sector in partnership with Amtrak will find support from enough Democrats and Republicans to make this happen. And who knows, maybe Musk and Tesla will decide to build electric trains.