PRIIA Re-authorization Suggestions

[V.Payne]

As to the competitively bid services (by passenger mile funding instead of lump sum) a bid bond would certainly take care of the fly by night operators as you have to satisfy the bonding company or the rates go up. A requirement of a minimum of 2 years operating under FRA rules would also go a long way.

The self liquidating large loss insurance pool language is actually meant to deflect liability which is the precondition of the investor held railroads.

Any comments on the A+B+C funding formula? It was created after looking into the cost categories that Amtrak is/was using to develop the 403b state funded train costs. The intent is to provide an alternative funding formula for Amtrak that is compatible with competitively bid services. It separates out the two large fixed cost drivers Shared large stations and Shared large Metro terminal trackage as well as basing Amtrak funding on a per passenger mile metric to encourage them to seek economies of scale on the LD network (at a rate below the historic interstate cross-subsidy).

[Overmod]

You have so far left out any mention of the most critical part of this scheme -- ensuring safe operation as a precondition for participating in the pool and licensing arrangements.

There need to be strict formal requirements to keep the usual fly-by-night and corner-cutting operations from coming in, causing the usual sorts of incompetent disaster and depleting the pool, and then conveniently 'going out of business', shucking the assets at pennies on the dollar to new shell corporations set up by relatives or cronies, and doing the dip again.

Underwriting requirements, too.  

The trick is going to be to ensure that the initial and ongoing requirements are fair and fact-based, not the usual political claptrap and barriers to entry masquerading as 'safety assurance' or whatever weasel words.  Developing the right balance here, and expressing it clearly and concisely, should be done NOW, as an integral part of the proposal.

[V.Payne]

Finally, a proposal to align the NRPC budget by the "A B C" formula proposed below.... This would allow for economies of scale in larger and more trains off the NEC to be properly accounted for without being overshadowed by the large NEC fixed costs.

(f) Alternate NRPC Funding Formula Report.— Within 1 year after the date of enactment of (this act), the Federal Railroad Administration shall complete a report on the suitability of shifting NRPC funding to a three part formula-

(1) NRPC Funding = A + B + C x Rail Passenger Miles Carried

(A) Component A- Shared Station Building capital and maintenance costs, cost to exclude incremental cost per passenger boarding;

(i) required due to the use in law and practice of large terminal buildings by many entities other than the NRPC, estimated at $200 million a year. Within this item NRPC is to include security costs at such stations; and

(B) Component B- Shared Infrastructure capital and base maintenance costs in the Northeast Corridor and other large metropolitan hub terminal areas with MSA populations over 1.5 Million, cost to exclude incremental cost per axle and train mile;

(i) required due to the financial impossibility of constructing highway facilities and parking garages to satisfy the demand within such areas and subsequent regional congestion if rail facilities are reduced, estimated at $600 million a year. Within this item NRPC is to include coordination of dispatching along such routes and justification for expanded capacity; and

(C) Component C- Shadow Toll per Rail Passenger Miles Carried, equivalent or less than the Interstate cross-subsidy per automobile user, to account for lack of government capital investment in rail network and lower accident financial cost to governments, estimated at $0.11/(1.2) per Rail Passenger Miles Carried in the initial year, except for trips of individual passengers over 500 miles for which the value shall linearly decline to zero at 900 miles and thereafter to encourage direct airline service;

(i) required to offset the nationwide marketplace average of the Dwight D. Eisenhower National System of Interstate and Defense Highways cross-subsidy from taxes on local roads supported by general funds, as defined in section 24711 of this title;

[V.Payne]

This is the Shadow Toll modification to the pilot in the 2008 PRIIA, based on my paper and the NPV of the user payments into the interstate highway program... Blue text is proposed revised language from the 2008 bill.

Proposed Modifications to TITLE 49 USC 24711

 Alternate passenger rail service pilot program

a) In General.— Within 1 year after the date of enactment of (this act), the Federal Railroad Administration shall complete a rulemaking proceeding to develop a pilot program that—

(1) permits a rail carrier or rail carriers that own infrastructure over which Amtrak operates a passenger rail service route described in subparagraph (B), (C), or (D) of section 24102 (5) or in section 24702 or other rail carriers that are acceptable to all the owners of infrastructure on the route, to petition the Administration to be considered as a passenger rail service provider over that route in lieu of Amtrak for a period not to exceed 5 years after the date of enactment of (this act)Passenger Rail Investment and Improvement Act of 2008;

(2) requires the Administration to notify Amtrak within 30 days after receiving a petition under paragraph (1) and establish a deadline by which both the petitioner and Amtrak would be required to submit a bid to provide passenger rail service over the route to which the petition relates;

(3) requires that each bid describe how the bidder would operate the route, what Amtrak passenger equipment would be needed, if any, what sources of non-Federal funding the bidder would use, including any State subsidy, among other things;

(4) requires the Administration to select winning bidders by evaluating the bids against the financial and performance metrics developed under section 207 of the Passenger Rail Investment and Improvement Act of 2008 and to give preference in awarding contracts to bidders seeking to operate routes that have been identified as one of the five worst performing Amtrak routes under section 24710;

(5) requires the Administration to execute a contract within a specified, limited time after the deadline established under paragraph (2) and award to the winning bidder—

(A) the right and obligation to provide passenger rail service over that route subject to such performance standards as the Administration may require, consistent with the standards developed under section 207 of the Passenger Rail Investment and Improvement Act of 2008; and

(B) an operating subsidy a Shadow Toll for the initial period per Rail Passenger Miles Carried —

(i) for the first year at a level not in excess of the level in effect during the fiscal year preceding the fiscal year in which the petition was received, adjusted for inflation and inclusive of estimated equivalent equipment lease payments;

(ii) for any subsequent years at such level, adjusted for inflation; and

(C) a Shadow Toll for the second and following periods per Rail Passenger Miles Carried —

(i) initially based upon the Dwight D. Eisenhower National System of Interstate and Defense Highways cross-subsidy from taxes on local roads supported by general funds, using an Automobile Vehicle Mile Equivalent (AVME) measurement;

(ii) the upper limit for such compensation during bidding will be 92% of the $0.12 AVME Dwight D. Eisenhower National System of Interstate and Defense Highways cross-subsidy, yielding an upper limit of $0.110 AVME, except for trips of individual passengers over 500 miles for which the value shall linearly decline to zero at 900 miles and thereafter to encourage direct airline service;

(iii) for calculation, provided rail passenger miles may be divided by (1.2) to determine the AVME service provided unless more justification is provided;

(iv) with no lower bid limit on AVME. It is expected for the bids to decline with additional capacity, though bidders will be responsible for determining the market potential for expanded service; and

(6) requires that each bid contain a staffing plan describing the number of employees needed to operate the service, the job assignments and requirements, and the terms of work for prospective and current employees of the bidder for the service outlined in the bid, and such staffing plan be made available by the winning bidder to the public after the bid award. In no way shall the existing duties of NRPC employees serve as a limit nor shall existing NRPC employees compensation be decreased per hour of work. Reasonable inflation escalation of wages and compensation increased where duties increase shall be assumed.  

(7) require that each bid contain a financing plan describing how all direct costs for the route are covered including –

(A) equipment capital or leases, and maintenance;

(B) train and Non-shared Station operation personnel and material;

(C) insurance or subscription to a risk pool;

(D) access fees for Shared Stations proportional on boarding passengers but exclusive of capital costs;

(E) construction, lease, and operating costs for non-shared stations and trackage;

(F) access fees for use of right of ways;

(i) Where right of ways are financed by state or federal grants, by incremental cost per axle and train mile unless other agreement govern; and

(ii) Where right of ways are not financed by state or federal grants, by full proportional cost, by axle and train mile measurements, not greater than existing NRPC agreements, adjusted for inflation, unless other agreements govern. On such routes all liability from railway-highway accidents shall be absorbed by the Large Loss Insurance Pool;

(8) require a base access fee be provided in the request for proposals or upon petition with a base service schedule, except when a service proposal is initiated by the rail carrier owning the infrastructure of the route.

(9) allow for Bidders to amend the schedule and fee structure in agreement with the infrastructure owner prior to the bid or at any point thereafter but that negotiated schedule shall be made known and available under the same terms to all bidders prior to the acceptance of bids.

(10) allow for instances where the rail carrier is not the infrastructure owner, for the particular segment, the operations of the train subject to regulation under this title -

(A) be performed by the National Railroad Passenger Corporation under contract unless an agreement is reached with the infrastructure owner;

(B) the National Railroad Passenger Corporation shall be considered the operator for the purposes of federal law and regulation, regardless of the financial control of the rest of the service;

(C) all rights of access and renewal currently enjoyed by the National Railroad Passenger Corporation shall continue regardless; and

(b) Route Limitations.— The Administration may not make the program available with respect to more than 2 Amtrak intercity passenger rail routes.

(c) Performance Standards; Access to Facilities; Employees.— If the Administration awards the right and obligation to provide passenger rail service over a route under the program to a rail carrier or rail carriers—

(1) it shall execute a contract with the rail carrier or rail carriers for rail passenger operations on that route that conditions the operating and subsidy rights upon—

(A) the service provider continuing to provide passenger rail service on the route that is no less frequent, nor over a shorter distance, than Amtrak provided on that route before the award; and

(B) the service provider’s compliance with the minimum standards established under section 207 of the Passenger Rail Investment and Improvement Act of 2008 and such additional performance standards as the Administration may establish;

(2) it shall, if the award is made to a rail carrier other than Amtrak, require Amtrak to provide access to its reservation system, stations, and facilities directly related to operations to any rail carrier or rail carriers awarded a contract under this section, in accordance with section 217 of that Act, necessary to carry out the purposes of this section -

(A) shared stations costs shall be billed based upon a proportional cost to operate the station per passenger boarding exclusive of capital grants; and

(B) equipment leased may only be that which was regularly assigned and used for spares on the route in the prior two years of operation unless by agreement with NRPC; and

(C) if existing equipment is used, the lease will be at the depreciation rate, inclusive of any proportional share of future maintenance scheduled to be performed by NRPC, which shall be proportionally prepaid each month and held in trust;

(3) the employees of any person used by a rail carrier or rail carriers (as defined in section 10102 (5) of this title) in the operation of a route under this section shall be considered an employee of that carrier or carriers and subject to the applicable Federal laws and regulations governing similar crafts or classes of employees of Amtrak, including provisions under section 121 of the Amtrak Reform and Accountability Act of 1997 relating to employees that provide food and beverage service; and

(4) the winning bidder shall provide hiring preference to qualified Amtrak employees displaced by the award of the bid, consistent with the staffing plan submitted by the bidder and shall be subject to the grant conditions under section 24405 of this title.

(d) Cessation of Service.— If a rail carrier or rail carriers awarded a route under this section cease to operate the service or fail to fulfill their obligations under the contract required under subsection (c), the Administrator, in collaboration with the Surface Transportation Board, shall take any necessary action consistent with this title to enforce the contract and ensure the continued provision of service, including the installment of an interim service provider and re-bidding the contract to operate the service. The entity providing service shall either be Amtrak or a rail carrier defined in subsection (a)(1).

(e) Adequate Resources.— Before taking any action allowed under this section, the Secretary shall certify that the Administrator has sufficient resources that are adequate to undertake the program established under this section.

[V.Payne]

Well I am not a lawyer but I play one when I write contracts...

I realize if a bill actually revised Title 49 it would be written such that it struck and added to paragraphs, but I have included complete text. This post goes along with the Intercity Marketplace thread. There are three parts, the first this risk pool below, the second a shadow toll proposal for the pilot that never got off the ground, and a third a proposal to institute budget discipline that recognizes the realities of the US transportation marketplace.. Blue indicates revised text.

Proposed Additions to TITLE 49 USC 24xxx

Passenger common carrier service large loss risk pool program

a) In General. – Ground passenger carrier operations are highly complex, with three parties or more. To ensure an efficient market, an insurance pool is desired to spread the risk of infrequent accidents. Within 1 year after the date of enactment of (this act), the Federal Railroad Administration shall complete a rulemaking proceeding to develop a program that—  

(1) permits a ground passenger carrier providing for hire passenger service to enter into an insurance loss pool meeting the existing liability requirements (as defined in section 28103 of this title), by the payment of a subscription fee of $0.006 per passenger mile in the initial year. In the initial year the pool shall require first dollar coverage to $100,000 of sustained losses per occurrence to be borne by the carrier.

(2) requires periodic adjustments to the fee and first dollar coverage such that the pool is self-liquidating over a rolling 5-year average. The pool shall be authorized to a $50 million balance, and shall maintain such on a 5-year rolling average by -

(A) rating factors applied to the subscription fee for individual carriers after the initial plan year; and

(B) limiting yearly expenses for administration to no more than 2% of pool proceeds, or $200,000 whichever is greater; and

(C) borrowing by the pool at treasury rates to cover short-term loses; and

(D) funding of the pool initially by a appropriation through the Federal Railroad Administration; and

(E) adjusting the balance for any subsequent years at such level, adjusted for inflation, to be equivalent.

(3) allow any passenger carrier to use the pool, regardless of type or mode, subject to

(A) existing regulations found in Title 49 as applicable; and

(B) for intercity operators –

(i) provide, through ownership or partial lease, passenger facilities at the end terminals of routes and any intermediate points that board more than 10% of total passengers on average for a scheduled run.

(ii) terminals shall meet existing regulations contained in this title for transportation facilities.

(b) Compensation. – Upon operation, the pool shall compensate persons and parties for losses resulting from accidents occurring in the course of providing service such that–

(1) the owner of the infrastructure is in all instances to be held harmless from damages;

(2) awards to injured persons and parties are to include legal fees of no more than 10% of losses;

(2) losses shall include those to passengers or the carrier, personnel of the carrier, lease operators, infrastructure provider, or other directly affected persons;

(3) losses shall include those to equipment and fixed facilities damaged in accidents and losses in confirmed and probable revenue from loss of carrying capacity.

(c) Recovery. - In such instances where neither personnel of the carrier, lease operators, infrastructure providers, or passengers of the covered carrier are the primary initiator of a loss, as determined by the National Transportation Safety Board, the pool shall be able to recover funds –

(1) to the limits of held insurance from the party at fault;

(2) thereafter, from any federal fund for the mode of the at fault vehicle, as senior debt.