Today, Congressman Jerrold Nadler (D-NY), the senior Northeastern Member on the House Transportation and Infrastructure Committee, delivered the following statement at a Committee hearing on the Competition for Intercity Passenger Rail in America Act of 2011:

“Thank you, Chairman Mica and Ranking Member Rahall, for holding this hearing on the Chairman’s bill to privatize the Northeast Corridor (NEC).  I’m glad we’re holding a hearing instead of a markup as I think was originally intended.  This is a pretty drastic proposal that makes sweeping changes to the intercity passenger rail system.  It requires careful thought and deliberation, and I appreciate the Chairman’s willingness to slow this process down so we can address the many questions and concerns raised by this legislation.

“The bill requires Amtrak to redeem common stock and transfer its assets to DOT.  At the same time, it directs the Secretary to solicit ‘expressions of interest’ from private entities to build or operate high speed rail service, and then it gives $2 million to the top contenders to prepare a more detailed proposal.  (Why does an entity that supposedly has enough funding to build and operate a high speed rail line need taxpayer support just to write a proposal?)  Then the Executive Committee established in the bill would evaluate these proposals, select the best one and notify Congress of its decision.  Congress has no role in the decision.  It’s just told what will happen.  And the Secretary is directed to implement the Executive Committee’s selected plan and grant a 99 year lease to the Executive Committee to carry it out.

“One of the biggest problems with this bill is that it sets in motion the elimination of Amtrak before any proposals are reviewed or recommended.  We have no idea if there are any viable private financing schemes that adequately meet the desired criteria.  We have already requested proposals in PRIIA and none were submitted for the NEC.  I understand the Chairman has indicated that he thinks DOT didn’t really act in good faith in search of proposals, but his bill setting up a new RFP is also in the hands of the DOT.  Regardless, the logic doesn’t follow that, therefore, we should first eliminate Amtrak, and then hope that a solution will magically appear.

“As the Chairman knows, I have supported his quest to research and review privatization proposals, but why should we take the drastic actions laid out in this bill until a detailed plan has been presented and evaluated?  Why should we disrupt or eliminate current service, and potentially lose good-paying jobs, until we know what will replace it?  And why shouldn’t we keep investing in Amtrak in the interim, and allow it to compete as well?

“Another major problem is that this bill grants broad authority, including eminent domain authority and preemption of several state and local laws, to this Executive Committee (which is eventually staffed by the private entity) with a lot of unanswered questions.  There might be legitimate reasons to have such authority, and generally speaking, I support it when furthering interstate transportation and commerce that is clearly in the public interest.  But, under this bill, we don’t know exactly who we’re giving this authority to, or when or how it will be used.  This is a monumental states’ rights issue and a very broad grant of authority to an unknown, unaccountable entity over our districts.  There are simply too many unanswered questions to allow such broad federal preemption, and to place it in the hands of a private entity.

“I also question the provision of the bill requiring Amtrak to redeem all common stock at the book value.  DOT performed a valuation and determined the stock is worthless, which the courts have upheld.  Under this bill, Congress is stepping in and providing a direct windfall to at least one of the shareholders.  I have concerns about the takings issue in this bill, but beyond that, this could create a real problem of unjust enrichment.  I’m frankly surprised that, as my friends on the other side of the aisle are pushing drastic cuts across the federal budget, that they would agree to just handing someone a windfall of hundreds of millions of dollars.

“These are just a couple of the big picture concerns.  There are many other troubling aspects of this bill, such as inadequate labor protections, the potential impact to the railroad retirement system and increased costs for the freight railroads, the probable loss of state-supported and long-distance routes, and the shifting financial burden to states and local governments.  If one main goal of privatization is, presumably, to reduce federal funding, it seems odd to leave the federal government with such significant costs and liabilities.  I would rather take that money and invest it directly in Amtrak’s plan to eliminate the $9 billion backlog created by federal underinvestment and to implement Amtrak’s plan to upgrade its high speed rail service.

“My biggest problem with this bill is that it throws the entire passenger rail system off a cliff, and hopes a safety net suddenly appears.  At least it hopes the NEC is saved. It doesn’t deal effectively with other routes, except to remove the cross-subsidy from the Northeast Corridor that supports them. These are risks I am not willing to take. I must oppose this bill.”

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