Passenger Trains > Above the Rail Route Justification - Financial Mechanics

For a Competitive Passenger Rail Service Pilot Program to gain widespread acceptance, public funding must be justified by metrics that preserve the freedom for the Contractor to offer market tailored services through upselling. While the calls to zero out NRPC funds have been muted with the recent “Pension Smoothing” funding gimmick for highway programs in the FAST act, there will surely be a time when the pushback reemerges even if the Contractor were only to claim 90% of the NRPC route total subsidy as allowed by law.

One concept is to justify Intercity Rail relative to the Interstate highway subsidy, prorated on a passenger mile or equivalent automobile vehicle mile basis. Of course subsidy has been argued before, but as a lump sum. The challenge is to divide the public funding in an understandable way that preserves the above-the-rail operational freedom needed in a consumer market while establishing certainty for more efficient equipment purchasing and clear rules of competition. This approach would allow for the operator to be free to offer quality food service, price segment the market, upsell accommodations, or offer fare sales at whatever level without public questioning as all these activities would be defined as “above-the-rail”.

A public Interstate Highway capital subsidy of around $0.09/Automobile mile exists as fuel taxes are collected on all classes of roads, regardless of City or County General Fund or Private Developer cost responsibility, while they are largely leveraged toward highway costs. The Interstate Highway subsidy can be determined by a Net Present Value analysis of program expenditures relative to the fuel taxes collected on the Interstates as good Financial records were kept by the FHWA starting with the 1956 program’s origin. I know this as I worked as an engineer for my state's DOT developing Plans and Specifications and writing contracts. New build interstate type highways have a much higher public subsidy above collected fuel taxes. A public Interstate Highway operational subsidy of around $0.02/Passenger Mile exists as society picks up a portion of accident costs even for those insured.

For the City of New Orleans route, a publicly funded Track Capital Lease of up to $7.0 Million, Casualty Loss Reserve of $0.8 Million, and Station Capital Lease of $2.2 Million, are easily justified on current route passenger miles (109 Million – PM) compared to a prorating of public funding for Interstate Highways. Should the Contractor increase the passenger miles then these funding sources would increase by the prorated amount.The Track and Casualty funding would be compared to the Interstate Highway capital funding. Capital investment and accidents on a facility are related to a certain degree as tradeoffs, so this is a logical bucket. When contracts for access are negotiated, these two items are related. Motorcoaches already benefit from the Interstate subsidy so would be ineligible for this public funding.

The Station funding could be rolled into the same bucket but would be compared to public automobile accident costs (see the previous Competition post for values of operations). Here an argument could be made that curbside motorcoaches are not providing a full public service without maintaining a public service station in metropolitan areas and thus there is a public good to be had as an inducement to safer intercity rail travel or Motorcoach travel should stations be provided. Thus the two funding programs could be kept separate. Additional monies needed to make station facilities ADA accessible could be placed in this category under a public good criteria without impacting operational freedom.

So there it is, the public cost of an intercity rail route could be justified as less than the equivalent public Interstate Highway subsidy for automobiles. This approach would allow for the operator to be free to offer quality food service, price segment the market, upsell accommodations, or offer fare sales at whatever level without public questioning as all these activities would be defined as “above-the-rail”.

It appears with the MBTA suit against the NEC Cost Sharing Policy determination that Congress is going to have to actually be prescriptive in a law governing interoperations as a powerful NEC state is now upset.Perhaps there is room for a technical amendment in this year’s appropriations bill to clarify the NEC terms for access as well as the off-NEC access rates and standards to allow for the continuation of NRPC’s public good access rights at a higher average cost host compensation level for the Competitive operators as envisioned by the Amtrak Reform Council.

The language for a suggested technical amendment is the next step.



Edited 1 time(s). Last edit at 02/06/16 11:48 by District.

It's all nonsense.

Posted from iPhone

The closely watched IRS reimbursement rate for personal vehicle use is a pretty good proxy for the "cost" of using the car. It includes the fuel tax.

Current amount is 54 cents, and does not include any parking fees at the train station.

Posted from Android

The problem is a source of depoliticized and steady funding, not justifying spending and operations.

The simple solution continues to be paying a refundable tax credit on a train mile basis to create a guaranteed minimum rate of return on the cost operations for a guaranteed minimum of service to cities and towns set on a rational basis such as population.  Similar tax credits can be used to incentivize double-tracking, building stations, and such.

If there are no appropriations, then there is no appropriation fight and no need for a source or justification of funding.

< Current amount is 54 cents, and does not include any parking fees at the train station. >

A very generous, hidden government subsidy.
For 2016 deduction for driving to medical appointments has been reduced from 23 to 19 cents/mile.



Edited 1 time(s). Last edit at 02/07/16 16:33 by joemvcnj.

The "financial mechanics" strike me as dense smoke and funhouse mirrors.

All these financial contortions and the ridiculous complexity in
funding a public necessity -- one very important form of transportation
*rail) -- is because far too many (most?) politicians refuse to automatically
support spending proper amounts of money on essential human needs.

The rest is just mere details, which decent adults would have no trouble
working ouot with each other.

The IRS vehicle deduction is limited to verified business travel...

Bill Deaver
Tehachapi, CA

I once was talking to a structural engineer, supposedly a smart bridge guy, who remarked "what is the gas tax?" while we were meeting to plan a large highway job. Of course his check and mine then came from it ultimately and it was nice for a time to have steady funding until everything started falling in financially with the highway trust fund. Perhaps a simple tax credit per train mile could work, but would it not be challenged as well unless one could show that Interstate Highways were greater public subsidy users, just in a very masked manner.

A lot of the consultants have simply worked within the system and never thought to question the basis. The Highway Trust Fund is a well established means of taking taxes on the use of roads not paid for by the fund, such as City and County roads, and redirecting those taxes only towards highways.You know, subsidizing highways, just in a under cover manner.

Defining the amount of financial leveraging of highways in order to establish a reasonable financial basis or argument for both passenger and expanded freight railroads requires a level of understanding that few consultants much less those in congress have the experience to perform.

But this basis is something worth getting to as it would solve a lot of the questions we face with how to fund and regulate either NRPC or other operators.

 



Edited 2 time(s). Last edit at 02/06/16 20:28 by District.

Unfortunately many people only consider what the gasoline costs, their immediate out of pocket cost, not the total cost of owning and operating a car.  I suspect many Uber drivers are not making as much money as they think they are. 

Years ago I leased a car for business, kept track of all my expenses, and the reimbursement based on the IRS business rate was pretty close to actual costs.


Lackawanna484 Wrote:
-------------------------------------------------------
> The closely watched IRS reimbursement rate for
> personal vehicle use is a pretty good proxy for
> the "cost" of using the car. It includes the fuel
> tax.
>
> Current amount is 54 cents, and does not include
> any parking fees at the train station.
>
> Posted from Android

<>  Attending a seminar on this subject would be a GREAT cure for insomnea.

<> If gasoline taxes are used to build and maintain highways, perhaps liquor taxes should be used to build and maintain taverns ????

Such financial machinations would tax the brain of any sentient being.