Lawmakers are ill at ease to launch new projects at a time when the House GOP is on a mission to hack into federal appropriations budgets. State lawmakers, too, face budgetary and political pressure, so the most probable source of funding for Amtrak’s badly-needed improvements is, well, you–private equity investors.
The federal government controls the stock of Amtrak, which runs long-distance passenger rail lines to every corner of the continental U.S. But its stewardship has been questionable. Projections have Amtrak losing as much as $1 billion annually, which will require continuously channeling taxpayer dollars into a money-losing venture that (like many things) is best not run by Washington.
New Jersey Senators Frank Lautenberg and Robert Menendez are pleading, alongside Amtrak officials, for funding for a new tunnel to be dug beneath the Hudson River in part because a new tunnel will in turn create a mini-housing boom and jobs to accompany it, never mind the long-term transit improvement. The American economy is making a remarkable rebound from the nadir it hit just 24 months ago, suggesting a bounty of tax revenue around the corner to finance such a thing.
But the appetite for big spending projects like this right now remains muted at best. Last week, the House GOP revealed plans to eliminate nearly a quarter-billion dollars from the near-term Amtrak budget and another $1 billion from other high-speed rail initiatives. Off of Capitol Hill, Washington doesn’t have much support to get this done, either.
The $13.5 billion Amtrak initiative to create the tunnel that New Jersey Governor Chris Christie was intent on smothering last fall only serves as a replacement for an $8.7 billion package the outspoken lawmaker called outsized. The Metropolitan Transportation Authority and the Port Authority of New York & New Jersey have other infrastructure fixes to tackle, and funding woes of their own. A continued push for the tunnel’s funding would need the blessing of New York Governor Andrew Cuomo, who in turn is already garnering a reputation for pinching a penny ‘til it screams. Even if the GOP House and the White House could agree to fully fund Amtrak, chances are, it would get killed in the state houses.
Can private firms ride to the rescue? Well, we appear headed for another golden age, with the biggest names somehow managing to put lenders over the barrel again, just-like-that. And there’s sufficient capital from the private equity overhang to invest in infrastructure, between the bigger players, including KKR’s infrastructure shop and dedicated funds from Alinda Capital Partners and Highstar Capital (Highstar is in the midst of a multi-billion dollar fundraising right now). Some of the passenger rail system’s necessary upgrades can be privately financed if state and federal lawmakers cannot, or will not, provide adequate financing.
Amtrak board member Tony Coscia said there is “reason to believe” private sector interest exists to fund the multi-billion dollar New Jersey-New York tunnel project. Certainly, he could be referring to strategic investors, but there aren’t many strategics capable of amassing the needed capital. From the looks of it, Amtrak will need as much cash as it can get.
Having a private-equity-funded rail service might even result in enhanced security, because the notion that federalized transportation translates into enhanced passenger safety has clearly been voided by now. Troubling, it seems that more often than not, it isn’t government bag inspectors who are preventing anti-American extremists from attacking planes. It is the passengers themselves who are stopping threats mid-flight and last-second (regardless of whether or not would-be bombers’ detonators would have worked, were they allowed to proceed uninterrupted).
Amtrak isn’t safer than an airport under its current operators, anyway. Regularly, slick panhandlers slip past security and onto trains, harassing passengers for a few bucks under the guise of needing it to achieve full fare, only to hop off once they’ve collected a few spare bills—or, once they’ve been caught by Amtrak’s ticket-takers. But at least someone is making money on Amtrak right now.