August 27, 2010
Two months ago we reported on the railroad industry's reaction to the FRA's directive setting forth the terms of the so-called "Stakeholder Agreements." Those are the agreements between state authorities and Class I railroads that will govern the shared-use freight-passenger rail service in rail corridors receiving federal aid under the Administration's high-speed rail (HSR) program. The FRA directive stunned and angered railroad executives by what they regarded as unreasonable demands, and burdensome requirements. For example, the government proposed to impose penalties on freight railroads for failing to meet on-time performance standards for passenger traffic. Railroad executives also objected to the peremptory manner in which the directive was handed down. Reportedly, they had no advance knowledge of the announcement nor did they participate in the preparation of the guidance. Although none of the parties would go on the record at the time as threatening to break off negotiations and walk away from the high speed rail program, senior railroad executives left no doubt that there were limits to how far they were willing to compromise their primary responsibility to maintain safe operations and keep commitments to their customers -- a responsibility that requires giving precedence to freight operations, especially in capacity-constrained corridors. As we wrote at the time:
"The final act in this imbroglio has yet to be written. In the months ahead, a number of Stakeholder Agreements will be executed and submitted to FRA for approval. The agency will have an opportunity to acknowledge the railroads' concerns and demonstrate flexibility in accepting [less demanding} terms. ... We hope the Administration will come to realize that there is too much at stake to let overly stringent performance standards and rigid grant-making procedures become obstacles to gaining the railroads' active support and cooperation. Surely, there are ways of protecting the public investment without imposing draconian conditions and unrealistic requirements that would lead to endless disputes, misunderstandings and litigation. We think that with good will on both sides, a workable compromise can be found. ("Is the High-Speed Rail Program at Risk?, NewsBrief June 16).
We are happy to report that reason and good sense have prevailed. In a press conference on August 20, FRA Administrator Joseph Szabo announced that the agency has withdrawn the controversial directive. We commend the Administrator for his integrity and candor in admitting that his agency "did not have an appropriate level of dialogue and vetting" with the railroads prior to releasing the directive. "It was poorly worded and poorly vetted," Szabo said, accepting personal responsibility for the failure to consult with the rail community and recognizing "the legitimate concerns and fears" the FRA directive caused within the rail community. The Administrator promised to engage in a "constructive dialogue" with the railroads in redrafting the directive and pledged to preserve and improve America's freight rail system. "We are not going to let anything harm our world-class freight railroad network," Szabo declared.
These are reassuring words. But the devil is in the details. It remains to be seen precisely what concessions the FRA will be willing to make in its earlier stance of requiring measurable service standards, and whether the freight railroads are prepared to relent in their opposition to quantifiable service outcomes. One thing is certain: the rail community will not let Mr. Szabo forget his pledge to "do no harm" to the freight rail system.
In the meantime, despite Secretary LaHood's confident prediction that high-speed trains would link 80 percent of America within 25 years, the debate about the future of high-speed rail in America is far from over. With new high-speed rail lines requiring massive sums of money and long-term financial commitments, railroad industry observers agree that the program will need a dedicated source of funds. This raises three questions: First, will high-speed rail engender grassroots support for a dedicated tax-financed rail fund similar to the Highway Trust Fund, that could sustain a rail investment program over several decades? Second, will there be enough passenger rail users to generate sufficient tax revenue for such an ambitious program (estimated at $500 billion)? And, lastly, will future presidents and Congresses share this Administration's enthusiasm for high-speed rail, or will concern about budget deficits oblige them to focus on other, more urgent infrastructure priorities? Despite the optimistic rhetoric of HSR boosters and Secretary LaHood about the "inevitability" of high-speed rail in this country, there are huge uncertainties concerning all three questions.
Both sets of issues will be explored at two forthcoming events: the former, at a conference on "Passenger Trains on Freight Railroads" sponsored by Railway Age at the Washington Marriott Hotel on October 18-19; the latter, at a National Press Club debate on High-Speed Rail, to be sponsored by the Progressive Policy Institute on September 29.
Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission. The content of Innovation Briefs does not necessarily represent the views of Cascadia Center.