Passenger Trains > A Step to Split Amtrak into Two Parts

A House panel unanimously approved legislation on Wednesday that would split Amtrak's operations into two accounts — one for the profitable Northeast Corridor and one for its money-losing national network.

For the remainder of the article see:

http://triblive.com/usworld/nation/6815291-74/rail-speed-corridor#ixzz3DdAVVx13


Marty Bernard



Edited 2 time(s). Last edit at 09/17/14 23:14 by MartyBernard.

I welcome the split! Long overdue!
I wonder if they will reduce some of the
National headquarters overhead, read NEC, charges
dumped on the LD trains at the same time?

Well, they COULD shift some costs from the "profitable" account/portion of Amtrak to the "unprofitable" account/portion. Or vice versa. I fear, though, that the more likely course of action would be to just get rid of the "unprofitable" portion. So, I for one do not welcome this move.

Nickatnight



Edited 2 time(s). Last edit at 09/18/14 00:43 by nickatnight.

nickatnight Wrote:
-------------------------------------------------------
> Well, they COULD shift some costs from the
> "profitable" account/portion of Amtrak to the
> "unprofitable" account/portion. Or vice versa. I
> fear, though, that the more likely course of
> action would be to just get rid of the
> "unprofitable" portion. So, I for one do not
> welcome this move.
>
> Nickatnight

Second it. Was the first thing that I thought of after reading that. I'll go one further: I'll bet that it's all part of the plan...

What would happen to the regional services that Amtrak runs under contract?

One of Amtrak's long standing accounting issues is its difficulty in explaining how shared services are divided. How is Joe Boardman's salary and the salary of his entourage / assistants divided? How about the expenses of the Chicago diesel shops which serve state supported corridor and long distance trains? Or, Richmond / Lynchburg state supported NEC trains. Are more expenses shoved over onto the state accounts, or vice-versa? Careful readers may recall the costs of continuing the Pennsylvanian service shifted a few times before settling at about 1/2 the original demand. Where did those extra costs get hidden? Or were they ever real?

Dividing costs, or doing away with the overhead entirely makes a lot of sense. The skinflint Warren Buffett, for example, has fewer than 150 people in the holding company for Berkshire Hathaway. For a $350 billion company. All the levels and jobs that Amtrak has at its headquarters, NOC etc are in the units Berkshire operates. Outside auditors assure the information and controls are compliant. But you don't need an army of people at HQ, driving up costs.

Create a "NEC company", a "state supported company" and an "LD" company. Outsource the diesel shop work, passenger shop work, bid out trains to the best operator for five year deals, and go from there...

(Didn't Amtrak have a senior vice president of human resources not long ago who was spending 30 hours a week of company time on Vince Grey's mayoral campaign? She was busted while handing an envelope of cash to a bag man, again while on company time. Far too much spare time of folks' hands. Which came out in the charges.)

I wonder how they would count the LDT's that use the NEC to/from NY? Which part would they count...

"Profitable" NEC = Voodoo economics.

Cole42 Wrote:
-------------------------------------------------------
> I wonder how they would count the LDT's that use
> the NEC to/from NY? Which part would they
> count...


That's a perfect example. Do you use revenue miles, passenger miles, individual travelers, train miles, etc? How do you account for the 12 cents per mile Crescent passenger alongside the $2 a mile Acela passenger? That seat may fill twice and produce $400 in 250 miles, while the Crescent seat produces $27.

They already had a operations/capital split. Now the dichotomy is NEC/All-else. Let's see how they divide SSY and Chicago yard costs.

MartyBernard Wrote:
-------------------------------------------------------
> A House panel unanimously approved legislation on
> Wednesday that would split Amtrak's operations
> into two accounts — one for the profitable
> Northeast Corridor and one for its money-losing
> national network.
>
> For the remainder of the article see:
>
> http://triblive.com/usworld/nation/6815291-74/rail
> -speed-corridor#ixzz3DdAVVx13
>
>
> Marty Bernard


Shouldn't it be "the money-losing Northeast corridor" and the "profitable national network"?

As we all know, everything the House does in regard to Amtrak is designed to destroy it. This is based on the canard that the NEC makes money, and you spin off the LD services and then get rid of them because they allegedly lose money.



Edited 1 time(s). Last edit at 09/18/14 08:06 by Ptolemy.

Ctillnc, I'm with you. Amtrak's done a great job of repeating the mantra that the NEC "makes money," and the media dutifully repeats it, and thus it is so.

The NEC is a revenue boon and a capital bottomless pit. That's the nature of high-capacity, high-speed passenger railroading. It's true that Acelas charge as much as $2 per mile, while off-NEC services charge about 25 cents per mile. But The Crescent only requires an 80-mph railroad while Acela requires 135-mph or 150-mph tracks. The capital costs increase exponentially with the higher speeds.

Amtrak's always been a steward of a national passenger-rail system. If that's going to end, the logical next step is to create an NEC Infrastruture company, since the Federal government has used billions of our national tax dollars to rebuild it a couple of times, and open the railroad to private operators, as the UK has done with Network Rail hosting Virgin, a First, Keolis and other private operators. The NEC was created with Congressional legislation and funding, and this logical next step could be accomplished the same way.

Seems like everyone is an expert in Amtrak Accounting matters. Everyone wants to micro-manage it. If Amtrak does it "this way"; everyone thinks "their way" is better.

In case you haven't looked; the House Bill makes Amtrak more of a "Government Run Railroad" than ever before, with all the oversight; direction; and new reporting Amtrak will have to provide the Feds.

It looks like the politicians in DC will be deciding Amtrak accounting matters for all of us.

In this regard, we pass. rail fans and supporters are in the same boat as Mr. Boardman--we must accept whatever accounting changes the politicians dish out to us.

Joe

Ptolemy Wrote:
-------------------------------------------------------
> MartyBernard Wrote:
> --------------------------------------------------
> -----
> > A House panel unanimously approved legislation on
> > Wednesday that would split Amtrak's operations
> > into two accounts — one for the profitable
> > Northeast Corridor and one for its money-losing
> > national network.

>
> Shouldn't it be "the money-losing Northeast
> corridor" and the "profitable national network"?

I agree that this looks like an accounting nightmare. Kind of like a “product liability / class action” lawsuit for accounting firms. I assume no two accountants will ever agree on a methodology that proves which system is “profitable” and which is “not profitable”. We will just have endless “he-said, she-said” accounting arguments to fuel Rail blogs and forums, LOL.

I thought this was an interesting readers comment on Progressive Railroading regarding PRIIA 2014 and Amtrak's accounting and funding. The author's analysis sounds knowledgeable but I can't verify it. Or is it, in the words of Mark Twain just; "Lies, Damn Lies and Statistics", LOL.


HR5449 (Amtrak) appears to be built on a severe misapprehension of the role and performance of Amtrak’s various train services. Amtrak’s mission is to carry passengers over distance. Thus, the best (if not only) measure of its performance of its mission is the output of passenger-miles produced by its trains, not simple transaction volume represented by “ridership.” A static equipment display produces “ridership” but zero transportation output. “Ridership” is meaningless in measuring the performance of any intercity passenger carrier.

Measured by passenger-miles, the NEC is Amtrak’s smallest sector; the other regional corridors as a group produce more output (by about 110%) and the long distance interregional trains produce far more (about 155% more) than the NEC. This comes as a surprise to most people, but these are Amtrak’s own numbers, and they show plainly that the NEC is the smallest division that Amtrak operates by passenger-miles.

The NEC is also Amtrak’s weakest sector. Its NEC load factor is about 53% overall, so almost half of its NEC seat-miles go unused. Since trains are heavily loaded only in the short quasi-commuter markets between Philadelphia, New York and New Haven, it necessarily follows that elsewhere in the NEC Amtrak’s load factors are VERY low, in the range of 25% or less. These load factor numbers by themselves show that Amtrak is already heavily OVER-invested in the NEC, since it is able to sell only about 25% of its existing inventory.

The NEC is also Amtrak’s weakest segment because its market share of intercity passenger transport–in the NEC travelshed–is less than 2%. So, despite the “investment” of about a hundred billion federal dollars (in constant 2014 dollars) into the NEC, Amtrak’s market share and social relevance there is trivial (with the possible exception of the short Philadelphia-New York-New Haven market, where SEPTA, NJT and MetroNorth could easily pick up the slack; elsewhere in the NEC, Amtrak could vanish tomorrow without a ripple). Amtrak’s market share in long distance markets varies, but in some cases may be as high as 5%.

By contrast, long distance trains have a load factor of about 63%. On these trains, a LF of 65% is functionally sold out due to the large number of en route on and offs over a 1000-2000 mile itinerary, where average trips are in the range of 650 to as much as 850 miles. Thus, the NEC trains are substantially under-utilized, while the long distance trains are statistically nearly full.

The NEC is also by far Amtrak’s most heavily-subsidized sector, both in gross and per passenger mile. The NEC relies on about three quarters of a billion dollars a year of federal cash. (Amtrak’s rhetoric distinguishing “capital” from “operating” costs is both arbitrary and inconsistent with Generally Accepted Accounting Principles, it is also meaningless. Follow the annual federal cash grant to Amtrak, and you will see that the large majority of it ends up in the NEC (and servicing debt incurred to support the Acela program). The federal grant cash consumed in the long distance network is negligible–in fact Amtrak represented in writing to a US Senator in 2011 that shutting down ALL long distance services would not save any losses or subsidies! Amtrak’s reported “losses” in the long distance network are an artifact of management’s internal cost accounting system, not a statement of its actual cash cost to the treasury.

The NEC is therefore the smallest, weakest, and most heavily subsidized of Amtrak’s services. If the Committee is concerned about Amtrak’s losses and inefficiency, or its persistently awful returns on invested capital, the answers lie in rationalizing the NEC rather than attacking Amtrak’s largest, most commercially successful, and least subsidized segment–the long distance trains.

I would like to see the California corridors separated from Amtrak and run by the state, along with all commuter operations. This would take strong leadership and some arm twisting but the potential for better connectivity and efficiency have a lot of promise.

If someone might help me to understand better,
Amtrak says NEC is a money-maker, others say it is a cash hog. IF they split NEC from the rest of Amtrak, would there be enough time to let the chips fall and verify where the money comes from and goes to? I am afraid that after splitting the NEC judgement will be too rushed to give the long-distance trains a fighting chance.



prech786 Wrote:
-------------------------------------------------------
> Ptolemy Wrote:
> --------------------------------------------------
> -----
> > MartyBernard Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > A House panel unanimously approved legislation
> on
> > > Wednesday that would split Amtrak's
> operations
> > > into two accounts — one for the profitable
> > > Northeast Corridor and one for its
> money-losing
> > > national network. <snip>

> The NEC is therefore the smallest, weakest, and
> most heavily subsidized of Amtrak’s services. If
> the Committee is concerned about Amtrak’s losses
> and inefficiency, or its persistently awful
> returns on invested capital, the answers lie in
> rationalizing the NEC rather than attacking
> Amtrak’s largest, most commercially successful,
> and least subsidized segment–the long distance
> trains.

Thank you for you time,

Jim Montague
IRVINE, CA
Train and Nature photo Art

This is just a first step. Give Amtrak the NEC and lets see them 'make money' on it. lol. Take the LD network and farm it out to a private operator that doesn't load it up with bloated overhead and lets see if it can at least break even. The State operated regional services will take care of themselves as the States start to put these services up for bid to the most efficient operator which may or may not be Amtrak. We know that Amtrak's accounting is bogus as they themselves admit that they allocate over 80 percent of their costs vs the industry standard of around 20 percent. Amtrak doesn't really know what it costs to run a specific train. Look at what happened to the Pennsylvanian's costs. LD train run on freight railroads tracks. They have few manned stations other than the end points which are shared with many other trains. So their overhead is minimal. Their biggest costs are on board labor costs which are tied to length of the route and the hours it takes to run the route and the make up of the train.

To: 3751_loony

Amtrak insists the NEC (and Acela) is profitable. Even the House has used this term. Yet, we have the "profit deniers" among us.

To join the "profit denier" Club; you must ALSO believe that the Airline Industry is NOT profitable; EVEN if they report they are to Wall Street and their investors.

The short explanation is: Airline and the NEC are slimier in that both have large fixed costs picked up by the Federal Government (last figure I saw for the Airlines was $54B per year). If you accept that these fix costs properly belong to the Government; and just look at the airplanes and NEC trains themselves; then both can be profitable (called "operating" profit).

Airline "profits" have always been accepted on this basis; but our "profit deniers" can't accept, for some reason, that NEC/Acela profits can be measures on this same basis.

Joe

And just how would you rationalize it? Have you ever seen it in action?

And just how "profitable" are highways?

Bill Deaver
Tehachapi, CA

Joe, if airlines cover the cost of their capital, they're profitable. If they don't cover that cost, they're unprofitable.

I agree that the NEC "makes money" if you only include the "operating" costs of the trains, the basic crew costs, fuel, basic equipment maintenance. However, Amtrak wants to separate out the tremendous costs of NEC capital from the operating costs and have it be a separate appropriation.

In years past, when Amtrak was being subsidized roughly $800-900 million per year, Congress would order it to get rid of the money-losing long-distance trains so it could focus on the money-making NEC. In every case, Amtrak said, alright, now we just need $400 million per year. For what? NEC capital costs.

It costs a lot of money to maintain and upgrade a high-capacity, high-speed railroad. It might be worth it. I think it is, just like highways are worth it. But we, especially Amtrak, need to be honest that it costs money. Amtrak and Congress are leading people to believe that the NEC "makes money," which implies that it doesn't require a subsidy, and that's simply not true.