House Amtrak Hearing Criticizes Cost-Cutting Measures and New Arbitration Clause

House Amtrak Hearing Criticizes Cost-Cutting Measures and New Arbitration Clause

November 15, 2019  | Jeff Davis

The House Railroads Subcommittee examined present and future Amtrak policy in a wide-ranging hearing on November 13 featuring the President and CEO of Amtrak as well as stakeholder groups.

Witnesses included (click on their name for their written testimony):

  • Richard Anderson, President and CEO, Amtrak
  • Nancy Nathanson, Representative, Oregon State Legislature
  • Greg Regan, Secretary-Treasurer, Transportation Trades Department, AFL-CIO
  • Stacey Mortensen, Executive Director, San Joaquin Joint Powers Authority
  • Jack Dinsdale, National Vice President, Transportation Communications Union
  • Jim Mathews, President and CEO, Rail Passengers Association
  • Bob Guy, Illinois State Director, Sheet Metal Air Rail Transportation – Transportation Division

The hearing had been planned for weeks, but one of the main topics of discussion was a late addition – POLITICO first reported on November 9 that Amtrak had changed its boilerplate contract of carriage on its tickets to prevent passengers injured in Amtrak accidents (or the families of passengers killed in Amtrak accidents) from suing Amtrak in court. Instead, those passengers will be forced into binding arbitration.

Federal regulations (14 CFR 253.10) prohibit airlines from imposing contract-of-carriage provisions that precludes passengers from suing airlines in “any court of competent jurisdiction,” but those regulations don’t apply to railroads. Full Transportation and Infrastructure Committee Peter DeFazio (D-OR) and Railroads Subcommittee chairman Dan Lipinski (D-IL) both indicated that his committee would examine legislation to apply a ban on forced arbitration clauses for Amtrak that is similar to the existing ban on forced arbitration clauses for airlines.

Anderson defended arbitration, saying it was much faster than the court system and that all of the same remedies are available arbitration as in the courts. Federal law (section 11415 of the FAST Act) limits aggregate Amtrak liability for accidents at $295 million per incident (adjusted for inflation), a liability cap which does not exist for airlines.

Much of the perennial debate involving Amtrak revolves around funding – each year, Congress approves enough federal subsidies for Amtrak to keep the railroad operating, but it is never enough to make much of a dent in the railroad’s capital backlog (particularly in the Northeast Corridor). There was general agreement between the panelists (and the Democrats on the committee) that Amtrak needs more federal funding – and not just more dollars, but reliable and guaranteed dollars that can be predicted in advance.

Anderson stated “Intercity passenger rail is the only major surface transportation mode that does not receive dedicated, predicable funding through a trust fund and contract authority at levels set by Congressional authorizations. If a state wants to add lanes to an interstate highway, the federal government will pay 80 to 90 percent of the cost out of the Highway Trust Fund. Yet throughout nearly all of Amtrak’s history there has been no significant federal funding to develop and improve intercity passenger rail corridors. While there have been a few small grants from matching grant programs such as CRISI and BUILD, the total amount such programs have provide for intercity passenger rail projects from appropriations since 2010 is less than the federal government gives highways each week. That makes no sense.”

Mathews, on behalf of the rail passengers, proposed increasing federal funding for Amtrak and those matching grant programs that Anderson mentioned from the $2.6 billion provided in fiscal 2019 to $5.5 billion in 2021, rising to $8.0 billion in 2025.

However, some of the decisions that Anderson has made to reduce the need for federal subsidies drew criticism from panelists and legislators.

Amtrak lost $37 million in FY 2018 selling food and beverages to a completely captive audience, and as part of Anderson’s business-like reforms, he is phasing out the full dining car service on some long-distance trains, which drew criticism from some legislators at the hearing. Steve Cohen (D-TN) reminisced about how great Amtrak dining car French toast used to be, and Mathews’ testimony reminisced about the shared communal dining experience. However, if Amtrak’s food and beverage prices were increased enough to break even (by an aggregate $37 million, system-wide, Mathews would also be getting complaint letters from his members, just of a different sort.

Anderson did appear to have the upper hand in responding to complaints about Amtrak’s reduction in its number of ticket sales call centers, namely that people are buying more Amtrak tickets online instead of over the phone. (Seriously. Who buys tickets for anything over the phone these days?)

There was broad agreement between the panelists that action is needed to mitigate Amtrak delays that are caused by the freight railroads that host Amtrak service outside the Northeast Corridor. Chairman DeFazio cited recent testimony from Federal Railroad Administrator Ronald Batory about the growing length of freight trains (some up to three miles long) whose length exceed any existing sidings and thus clog up networks. Anderson said that 80 percent of Amtrak’s failures to meet its on-time performance standards are due to actions by host railroads, and called host-related delays the single greatest threat to Amtrak’s long-term viability.

When asked for specific suggestions on how to reduce host railroad delays, Anderson had two suggestions:

  1. He said that the Federal Railroad Administration needs to finish the metrics and dispute resolution standards authorized by the 2008 PRIIA law but which have been delayed by lawsuits filed by the Association of American Railroads, who objected to the Obama Administration’s original regulatory proposal. That lawsuit wound up going all the way to the U.S. Supreme Court not once, but twice, with an appeals court finally (hopefully) settling the issue in July 2018 and with the Supreme Court refusing to hear AAR’s third appeal in June 2019. The old metrics are invalid but the court decisions finally clear the way for new metrics to be developed.
  2. He added that Amtrak needs a “private right of action” to enforce its legal right of preference over host railroad freight traffic (now codified in 49 U.S.C. §24308(c)). A 2008 USDOT Inspector General report noted that “the current mechanism for enforcing Amtrak’s preference rights is ineffective because Amtrak has no right to either sue the host railroads in court or appeal to the Secretary when it believes its preference is violated. While the freight railroads can appeal to the Secretary for a waiver of their preference obligations, they have no incentive to use it.” Anderson said that only once in Amtrak’s almost 50-year history has the Justice Department ever taken a host railroad to court to enforce Amtrak’s rights, so he asked the committee to change the law to allow Amtrak itself to take host railroads to court directly to enforce those rights. Lipinski asked the panel if they all agreed with that recommendation, and they all did.
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