Congressional Action Is Needed To Resolve the Northeast Corridor Cost-Sharing Dispute

CED-81-97: Published: Apr 30, 1981. Publicly Released: Apr 30, 1981.

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Three types of rail service jointly use the Northeast Corridor rail system tracks. These include the intercity passenger trains, regional commuter trains, and freight trains. Since Amtrak acquired the tracks and facilities of the rail system, the users of this system have been unable to agree on how to share joint operating and maintenance costs. GAO was asked by a congressional committee to review the dispute.

The dispute arose because some operating and maintenance costs cannot be directly attributed to a specific user, and each user wishes to pay as little as possible. Applicable law is vague. Amtrak argues that the Railroad Revitalization and Regulatory Reform Act prohibits it from charging any Corridor user less than a full share of the joint operating and maintenance costs because that would constitute cross subsidization. The commuter authorities argue that they are legally required to pay only the avoidable costs directly attributable to commuter trains. Conrail argues that it should not have to pay more for its freight trains than other railroads charge Conrail for similar services. The difference between Amtrak's position and that of the other interested parties is about $32 million for fiscal year 1979. Since Amtrak took over Corridor ownership, the parties have been operating under interim cost-sharing arrangements providing for interim cash payments and retroactive payments when a final agreement is reached. GAO found no evidence which would clearly favor one of the cost-sharing proposals. On the contrary, all of the parties have presented substantial economic and legal rationales in support of their proposals.

Matters for Congressional Consideration

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should encourage the parties to negotiate. Congress can do this by directing the Interstate Commerce Commission to settle the dispute unless the disputing parties arrive at a negotiated settlement within a fixed time.

  2. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should decide in general terms how the various users should share the Corridor's joint operating and maintenance costs. Among the alternatives which Congress can choose from are (1) full allocation of all costs among all users prorated according to use; (2) allocation of long-run variable costs plus a percentage of joint costs to users other than Amtrak, and allocation of the remaining costs to Amtrak; and (3) allocation of long-run variable costs only to users other than Amtrak, and allocation of the remaining costs to Amtrak. This policy decision by Congress is essential, since the ambiguities in the existing statutes make it difficult for the parties to reach agreement on what is legal, equitable, and efficient. Congress can accomplish this by amending the 3R and 4R Acts to specify the Federal cost-sharing policy for the corridor. Such legislation should clarify the meaning of cross subsidization if the term is retained.


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