A passenger rail startup says it wants to take over Amtrak’s Northeast Corridor service

Scott R. Spencer is used to doing hard stuff.

As work was finishing on the Center City commuter tunnel in 1984, Spencer was a senior planner for SEPTA. His small team was in charge of meshing the separate maintenance crews, electrification gear and control bases of two decrepit commuter rail networks the authority had inherited from the Pennsylvania and Reading railroads.

The mess needed to quickly become “one system, a seamless operation,” he said. The tunnel meant SEPTA’s commuter rail system would be the first in North America to run trains through a city’s downtown, creating faster rides to work and helping grow the east side of Center City.

Now Spencer is chief operating officer of AmeriStarRail, a Wilmington start-up that wants to take over and run Amtrak’s Northeast Corridor, which connects eight states between Washington and Boston. It’s the latest big project in Spencer’s 40-year railroad career.

The firm promises more frequent trains, 30 new stops, and one fleet of high-speed trains with seating for three classes of service, instead of the current approach: fast, costly Acelas for business travelers and slower, cheaper regional trains for coach passengers.

“Airlines wouldn’t fly jets for business and first-class customers and propeller planes for coach passengers,” said Spencer, 62, calling Amtrak’s practice “unjust” discrimination against people with lower incomes, considering taxpayer support for the quasi-government corporation.

It’s also inefficient to use two train sets with different speeds, Spencer said: Acelas are capable of traveling 160 mph, while Northeast Regionals top out at 125 mph. “Instead of one Acela train an hour to New York, or one regional train an hour, you can have a [fast] train every 30 minutes,” Spencer said.

Financial viability

AmeriStarRail met with Amtrak several years ago, but so far, the company’s executives aren’t buying what Spencer and his team are pitching. Amtrak has its own plans for growth, including potential new medium-range service between pairs of cities such as Reading and Philadelphia or Scranton and New York.

A senior Amtrak executive strongly disputed AmeriStarRail’s contentions and called its plans unworkable and expensive in a July 19 letter to Spencer, adding that the railroad did not intend to pursue further discussions with the company.

“Your proposal is not financially viable and would not achieve the unprecedented levels of ridership and revenue needed to attract and sustain the investment it would require,” Bruno Maestri, vice president of government affairs and corporate communications, wrote. He was responding on behalf of Amtrak’s CEO to Spencer’s latest request for a meeting.

Yet some transportation experts say now is an apt time to consider reforms as the 2021 infrastructure law pumps $66 billion over five years into Amtrak, the largest capital investment since its founding more than five decades ago.

Firms could compete for the rights to run aspects of Amtrak’s Northeast Corridor business, such as train operations, ticketing, food service and marketing, said R. Richard Geddes, an economics and public-policy professor at Cornell University who specializes in infrastructure.

The concept is known as “unbundling,” separating competitive parts of a business from those where it has a “natural monopoly,” Geddes said. For instance, utility regulators allow electricity generators to compete to sell power on the grid.

“This is not some revolutionary idea in economics,” Geddes said.

In the context of the Northeast Corridor, he said, it could make sense for private contractors to pay Amtrak fees for the rights to run some of its operations while the railroad continues to own and maintain assets such as tracks, electric power gantries and stations — with continued taxpayer money for infrastructure improvements.

Amtrak’s busiest service

The dense Northeast Corridor, with relatively short distances between cities and millions of potential customers, has been Amtrak’s biggest revenue generator by far. It is also Amtrak’s busiest service and includes curves, bridges, and tunnels that prevent Acela from reaching the speeds common on high-speed rail in Europe and Asia.

Amtrak also owns nearly all the 457 miles of track and electric power equipment from Washington to Boston.

Congress created Amtrak in 1970 as a private corporation with the government holding the controlling stock shares, aiming to preserve passenger rail service. The legislation required Amtrak to earn enough to limit subsidies.

“America’s Railroad” has needed about $40 billion in government grants over the years, in part because Amtrak was not linked to a permanent funding source like the federal trust funds that finance highway, mass transit and airport infrastructure.

It currently has a backlog of repair needs that will cost an estimated $42 billion.

Inspired by deadly Philly derailment

In a sense, AmeriStarRail began with the 2015 derailment of Amtrak Train 188 in Philadelphia, which killed eight passengers and injured dozens more. Spencer and one of his mentors, Paul Reistrup, Amtrak’s second president, thought the 40-year-old Northeast Regional cars, several of which were crushed, contributed to the toll.

New rail cars are connected closely to each other and share a set of wheels so they are more stable and less likely to derail. Newer cars are stronger. The two men met with Amtrak executives and followed up with phone calls and memos, urging the railroad to replace the oldest cars first.

The next year, Amtrak announced it was buying new Acelas.

Since then, Spencer has been thinking about ways to reinvent the rails. In 2017, after decades working as an operations consultant to railways around the world, including the Cairo metro and Taiwan High Speed Rail, Spencer and lawyer Neil Glassman incorporated AmeriStarRail. They brought on board as advisers Reistrup and Bill Vigrass, a consultant and retired assistant general manager for PATCO.

Increasing speed and frequency

French manufacturer Alstom is assembling 28 new Acela nine-car train sets at a plant in upstate New York for a $2.5 billion order from Amtrak; they will be capable of traveling up to 160 mph (on part of the route) and are scheduled to begin service on the corridor next year.

AmeriStarRail would like to negotiate a deal to lease or purchase the Alstrom Acela trains that are in the works — taking on the federal loan Amtrak used to pay for them — and then order 76 more that it would finance, backed by investors, Spencer said.

In addition to a standardized high-speed fleet with “stretch” trains of 12 cars each, the company’s plan for the Northeast Corridor would use “through running,” ending the downtime trains have in terminals waiting for their next trips and having them continue. That would open up new routes such as service to Long Island and new stations, Spencer said.

In general, something like the AmeriStarRail operations plan would help increase frequency of trains and reduce trip times, said Rick Harnish, executive director of the Chicago based High-Speed Rail Alliance. He said he can’t evaluate he company’s financial plan because he does not know the details.

“Frequency is critical to whether someone takes the train,” Harnish said.

He added that having a standard Northeast Corridor fleet and running longer trains, as Spencer wants to do, also make sense.

“Amtrak has always had a strategy of restricting capacity and charging high ticket prices” for the faster trains. “Since the cost of operating a train doesn’t vary whether it has 200 seats or 500 seats or more, they are not carrying as many people as they should.”

Commuter tunnel’s legacy

For months, Spencer has been presenting AmeriStarRail’s case to business and government leaders and lining up support from civil rights organizations, government watchdog groups and consumer advocates.

“Basically Amtrak’s response always boils down to them saying they’re a business, not a public entity,” said John Flaherty, a longtime activist who heads the Delaware Transportation Equity Coalition. “But it’s silly … when you get billions in taxpayer money.”

William Ritzler, a director of the Delaware Valley Association of Rail Passengers, said the organization heard a presentation on the AmeriStarRail plan and it seemed sound.

“Certainly we think that Amtrak as it’s currently structured in the Northeast Corridor could do much better at moving people,” said Ritzler, who lives in Pitman.

A phone-company retiree, he, too, thinks Amtrak ticket prices are high. Because the corridor is busy and a big source of revenue, “we’re in a spot where Amtrak will charge what the market bears.”

To Spencer, it all goes back to merging two legacy commuter rail systems for SEPTA long ago. “The efficiencies I learned developing that are the backbone of our plan for the Northeast Corridor.”