Amtrak: Railroading the Taxpayers

[GSkid]

Today is our lucky day, the day each year my wife and I get to be on the receiving end of multiple doses of federal welfare — gratis money we didn’t ask for and don’t need that will be picked from taxpayers’ pockets in order to lower the price of our breakfast, dinner, travel, and unlimited pours of pinot noir and chardonnay.

As I’m writing this, an Amtrak attendant is driving our ruby red Lexus ES350 up the ramp onto Amtrak's Auto Train in Lorton, Virginia (near Washington, D.C.), for our overnight train excursion to Sanford, Fla. (near Orlando).

Before it headed off to the loading area, another Amtrak attendant slowly circled our car with a video camera, carefully filming the condition of every panel so there’ll be clear evidence when we arrive in Florida whether a scratch or dent was a preexisting condition.

Generally stretching about three-quarters of a mile in length, the Auto Train is often said to be the longest passenger train in the world, counting the enclosed freight cars transporting the cars, vans, motorcycles, jet skis, limos, hot rods, SUVs and small boats. Purist, conversely, maintain the Auto Train is a mixed-use conglomeration of freight and passengers rather than an unalloyed passenger train.

In any case, regarding train subsidies and taxpayers’ costs, Fred Frailey reported in the November 2013 issue of Trains magazine in his “Amtrak's fiscal report card for 2013” column that Amtrak's operating losses were $1.2 billion in fiscal 2013, a jump of $28 million in losses over fiscal 2012.

Amtrak’s biggest losses occurred with the long-distance passenger trains. The Chicago-to-Oakland Zephyr lost a whopping $74 million in 2013. Altogether, long-distance passenger trains lost $627 million in fiscal 2013, slightly more than half of Amtrak's total losses last year, and up $37 million in red ink from 2012.

The Lorton-to-Sanford Auto Train that we’re riding loses 14 cents per passenger mile. For the 1,710-mile round trip, that's a loss of $239.40 per passenger. For two of us, that's a $478.80 federal subsidy per trip.

To kick off the trip, there's a daily 4 p.m. complimentary wine-and-cheese party for sleeper-car passengers while the crew is connecting the train's passenger cars to the vehicle-carrying rail cars.

The Auto Train's wine-and-cheese party, along with complimentary wine parties offered to sleeper-car passengers on three other long-distance routes, cost Amtrak $428,000 in 2012, according to Amtrak's Inspector General Theodore Alves.

Amtrak loses another $260,000 or so per year in its food operation, according to Alves, by way of providing free meals to Amtrak’s employees who are enjoying free rides on the rails via employee freebie travel passes.

With a reserved seating in the dining car at 5, 7 or 9 p.m. and a nice rose (plastic, but realistic) on the table, our dinners were included in the price of our sleeper-bedroom ticket. Inspector General Alves estimated in testimony in November 2013 to the House Oversight and Government Reform Committee that Amtrak's food service losses were $72 million in 2013, with almost all of the losses due to providing meals on long-distance trains.

The $72 million, unfortunately, might hugely understate the losses, according to the chairman of the Government Operations Subcommittee, Rep. John Mica, R-Fla. “The Amtrak inspector general has confirmed,” said Mica, “that Amtrak cooked the books to cover up food service losses that now approach $1 billion.”

If everything goes all right after we’ve been rocked back and forth to sleep all night in our bunk beds, we’ll hear a wake-up announcement on the intercom stating that a complimentary breakfast of bananas, oranges, cereals, bagels, muffins, milk, orange juice and coffee will be served in the dining car starting at 6:00 a.m. and we’ll be arriving at the Sanford station around 9 a.m.

Endpoint to endpoint, the Auto Train runs at an average speed of 49 mph — a third of the 150 mph top speed of Amtrak's Acela in the Northeast Corridor and a sixth of Japan's 300 mph passenger trains.

Note to our central planners in government budgeting who seem unable to reduce Amtrak’s rising levels of red ink in its food operations: We'd eat and drink less per trip if the trains doubled or tripled their speed.

http://www.thenewamerican.com/economy/c ... -taxpayers

I love trains, but this is where I have to separate myself from that and put on my taxpayer hat. The subsidies have to end. Either they have to come up with a successful business model or they need to shut it down. The passengers need to pay more or Amtrak needs to bring down costs or BOTH. I'm so tired of Amtrak coming to the government with their hand out every year with the usual excuses. Short $1.2 billion!

I'll be sad not to see passenger service across the nation, but business is business. In addition to raising ticket prices and cutting costs, they need to reduce the amount of trains run each week.

[philmoberg]

I spent twenty-five years in the numbers, during which time I've heard this argument (as well as a lot of others) that are based on incomplete assumptions and incomplete analyses. Most of the people who listen to them wouldn't be in a position to know this because they've never been deep enough into the numbers - much less the legislation and particularly the regulation that drive them - to be aware that there a the jigsaw puzzle is missing more than a few bits, so it would be a mistake to take my comments personally. Like most such arguments, they are valid as far as they go, but they tend to stop well short of the full accounting of the situation.

With respect to passenger trains, and consistent with principles of sound cost accounting, at least most of the long-distance passenger trains are making money from the rails up, and in the best cases, at least from the crossties up. They would be doing better than this except that their capacity is constrained - particularly on the high-margin sleeping car business - as a matter of policy. The amount of business turned away for lack of capacity is astounding. One of the chief reasons their numbers look as bad as they do is that they are allocated substantial portions of overhead from the Northeast Corridor which most of them never get near to, much less actually use.

More broadly speaking, it is accurate to say that all the Federal transportation programs are subsidized to a similar extent. Federal-Aid Highway program spending routinely outstrips Highway Trust Fund collections and has done so for decades. The highway program hasn't "paid for itself" since the early-'60s, and I can point you to the specific tables in FHWA's annual Highway Statistics series where these data are diligently recorded and, except for a couple of years, timely reported. A long time ago, in the run-up to Conrail, a colleague of mine applied the line abandonment criteria - particularly the one requiring a given threshold of ton-mileage generated by any given line segment - and determined that whole segments of the Interstate System - the western half of the Massachusetts Turnpike, for example - would qualify for abandonment. The most crucial unspoken assumption with respect to Federal highway funding - and this is true of most of the Federal programs enacted in the last century, is that they rely on a perpetually growing base of users (i.e. taxpayers) to make the funding work. That reality began to wind-down around '64, and the trend became quite firm in '73. This demographic reality has had broader implications for private markets as well, the collapse of the housing market in '89 '-90 having been driven primarily by this, for example.

An unfortunate reality with policy questions is that, once something becomes an issue, the problem(s) underlying them become forgotten: the question at that point becomes whether one of for or against the issue. This has the consequence - intended or otherwise - of ensuring the problem(s) are rarely-if-ever solved, lest the issue be lost. This is why we tend to have issues, such as the one you've brought up, which serve mainly to generate more heat than light. Right now, none of the issues, from any perspective I'm familiar with (and I've head more of them than I can count) accurately reflect the reality of the situation, and none of them are worth raising your blood pressure for. John N. Westwood, formerly of British Rail, summed up the situation quite accurately in his forward to his 1963 book, Soviet Railways Today, in noting that it is helpful to remember there are three realities in any discussion such as this: 1.) what is planned to happen, 2.) what is said to happen, and 3.) what actually happens. The "debate" (and I use the term very broadly here) is taking place in the second reality, which leaves the first reality, at best, incompletely known and poorly understood, and the third reality at a level well short of its best potential.

[BNSFdude]

There isn't a single public transportation network in the world that makes money. Either we pay for it, or the services will simply cease to exist, much like how they did starting in the 60s when private railroads ran them.

[FourEightFour]

Why don't we get rid of all subsidies for all modes of transportation? Rail might be more attractive to both the passenger and the shipper then.

[philmoberg]

Why don't we get rid of all subsidies for all modes of transportation? Rail might be more attractive to both the passenger and the shipper then.

It's probably one of the best-kept secrets in freight transportation that the rail freight carriers have become a very attractive proposition, both to a lot of shippers, and to the investment community as well. I haven't seen railroads advertizing in the broadcast media like they are now since I was a little kid, back in the early-'60s. The notion that somebody like a Warren Buffet would be interested in a railroad as an investment prospect would have been laughable when I was in B School in the late-'70s (when he was first getting started as an investment prodigy and the railroad industry was all but written-off). A large part of this is that the industry has been relieved a large part of the over-regulation and taxation - mostly indirect taxation - that they had to deal with three-to-four decades ago. It's also due to a couple of truckers - UPS and J. B. Hunt - making a great effort to encourage the modernization of the railroad industry because they saw the increasing economic advantage of intermodal movement over long-haul trucking at the kinds of volumes they were moving. The situation has only improved with the widespread adoption of double-stack container equipment offering economic advantages in "land bridge" service that even the new post-Panamax container ships would be hard-pressed to compete with. It's an outcome that even the most optimistic of us, back in the late-'70s and early-'80s, would hardly have dared to dream of.

[Rich_S]

If you are going to cut subsidies to Amtrak, then you also need to cut all Federal subsidies to Airports, Interstate highways and waterways. It's the same old thing with them as well, States continue to look to Washington every year for more money to maintain the Interstate highways, National and International airports and waterways within the various states. When is the last time Interstate 80 made a profit? Has JFK International Airport ever made a profit?

Freight railroads got out of the passenger business in 1971 because it was no longer profitable. The playing field was not level, Airline companies and Bus companies operate on Federally funded right of ways, that the railroads were forced to subsidize through taxes. In a nut shell, the railroads were being forced to subsidize their competition. Thanks to Amtrak, we once again have an alternative to conjested highway traffic and packed airports.

At this stage of the ballgame we cannot afford to get rid of Amtrak, just look at the number of people that ride the NEC on a yearly bases. Without Amtrak, the majority of those passengers would end up on the Interstate highways, can you imagine that traffic jam on Interstate 95 everyday between Washington, DC and New York City, NY?

Should Amtrak strive to be profitable? Yes, should we shut the operation down when it is not? No. But just maybe would could stop sending all that money over seas to countries that hate us and give it to Amtrak instead?

[BillS]

I don't know Rich, sounds like you're letting logic cloudy your thinking.

[BlueLight]

The Interstate Highways system was developed and was built in the 1950's by the Department of Defence. It primary purpose was to quickly move troops from one end of the country to another. Commerce was a secondary consideration. As we all know, the development and deployment of the commercial jetliner in the 1960's was the final nail in the coffin that was passenger rail. The railroads had been loosing money on passenger service for years and in the late 1960's the Class I's had decided that they had lost enough money and were getting out of passenger service. Congress stepped in and said that we had to have intercity passenger rail service even thought they knew that it was a money loosing proposition. In 1971, by an act of Congress, AMTRAK was created.

[GSkid]

Well Rich....

I ain't asking them to make a profit. Break-even is fine with me. All those people that depend on the NEC? Start charging them a lot closer to what it costs. Make up the rest in efficiencies on Amtrak's side. Subsidies only make people and industries dependent on government instead of figuring it out for themselves.

High-speed rail is another example of this. I always hate how supporters of it list the countries that have it, stating how America is falling behind without it. Just like when America wisely cancelled it's foray into supersonic airliners, we should realize that we will be just fine without it. We don't need to burden our country with yet ANOTHER heavily subsidized passenger rail system just because other countries have it. I admire their rail systems, but don't admire the financial burden on their taxpayers.

[philmoberg]

... As we all know, the development and deployment of the commercial jetliner in the 1960's was the final nail in the coffin that was passenger rail. ...

This was the "classical argument" that was advanced, beginning in the early-'60s, for massive airport expansion at public expense, and is one of the earliest examples of the planning-by-"everybody-knows-..." methodology. At that point, in an environment in which all modes were pretty heavily regulated, the minimum economical stage length of a commercial jet aircraft was somewhere around 500-600 statute miles, depending on the model of jet aircraft in question. At the same time - Lyndon Johnson was filling out the balance of what had been John Kennedy's second term - intercity passenger trains were handing two principal markets: 1.) coach passengers whose average journeys were 200 to 400 miles, depending on the corridor, and 2.) sleeping car passengers whose journeys were typically endpoint-to-endpoint of most passenger trains, with set-out sleepers at significant intermediate stations. Most corridors still had three to five frequencies a day, and it was not unusual to see sleeping cars outnumber coaches by a factor of two- or three-to-one. Most of these trains were still operating at 90MPH or better (a point unknown to both HSR planners and advocates), except on those lines which didn't have cab signals: in those cases, the Feds had restricted passenger trains to 79mph, which began to severely impede their formerly attractive overnight schedules. At that point, most of the passengers lost turned to automobiles.

Fast forward about four or five years, and Postmaster Larry O'Brien began declining to renew RPO contracts. This is the point at which both the economics of intercity passenger service and the economics and reliability of mail delivery to smaller communities began to be badly hurt. When Amtrak took over, the Union Pacific's passenger trains were still making money from the wheels up. This was also true for the Southern and the D&RGW, who declined to join; and it was probably also true for SCL, which still enjoyed heavy seasonal service to Florida, and for BN which still enjoyed a lot of national park traffic, as well as traffic from large number of communities ignored by the large airlines and as yet unserved by the Interstate System. The final nail in the coffin - or so it was perceived at the time - was the truckers capture of the high-margin freight business such as merchandise and perishables. This is what ultimately forced many carriers to further downgrade their tracks (and consequently, to further lengthen their schedules), being the only player on the board who had to finance their investments at market rates, pay taxes on them, and still wait for a nearly interminable regulatory process to give them permission to do anything more than feed and clothe themselves.

At that point, with little, or in the case of most corridors, no practical option for long-distance travel, the jet aircraft won the game. It was a Pyrrhic victory for them, because shortly thereafter, Jet A began to get increasingly expensive, and despite the economics of greatly increased capacity, the minimum economical stage length began to grow to such a length that smaller communities were losing direct jet service, or losing air service outright. Enter the hub-and-spoke system, the regional carriers operating turboprops and oversized bizjets, and the essential air service subsidy program. Airport access times began to become a real issue, further impeding the attractiveness of air service, making it a more practical alternative to endure the trip by car. In essence, the mature air passenger business found itself in the same problem the mature rail passenger business had found itself a couple of generations earlier: completely commoditized and therefore unable to operate at anything better than a minimal profit margin, the golden days of air travel having become as much a movie fantasy as the golden days of rail travel.

At the same time, a mature trucking industry was having to deal with much the same problem, and a few of them made the deliberate choice to see whether the intermodal options that had been rejected two or more generations earlier (RoadRailers date back to a C&O project in the '50s, and piggyback service, in the sense that we understand it today was originally developed by a couple of Samuel Insull's interurbans in the '20s, IIRC) had any potential. It took some effort, but eventually the carriers were able to come to an agreement - and, no doubt, helped by a greatly relaxed regulatory environment - and the resurgence in traffic has forced the reconstruction and expansion of much track capacity that was "rationalized" back in the '70s and early-'80s. Both the railroads and the truckers who have been party to this are in a much better position to keep their investors happy.

As I read in one of the blogs I follow, several months back, "Reality is often more complicated and more interesting than the stereotypes." The reality of the transportation in industry - particularly in the latter half of the Twentieth Century - is certainly more complicated than most of us are aware of, and the rather simplistic approach to it that has been popularized by many of those who have been involved with its overall direction has not served us well. There is a good deal of difference between what the issues would lead us to believe is the case and what we're actually having to deal with.

(edit: to clarify a couple of sentences in the second-to-last paragraph)

[arizonachris]

Whew! I must say, y'all, I am really enjoying this discussion. Wish I had a way to vote on this Thread I'd give it five gold stars. Not being sarcastic at all. Wish I had something to comment about all this stuff, but seems like here in So Cal it's quite a different situation from the rest of the nation as far as railroads, light rail, airports and the like. We seem to like the "one-person-per-car" on the freeway thing which I hate, and is killing us. Light rail around here is kinda growing up, but access to it can be a chore. But weekdays, Metro is full. Prices are cheap. For $10 I can get a 24 hour Metro pass that lets me ride any number of busses, light and heavy rail, all over LA county, from Long Beach all the way to the North Valley. (doesn't include Metrolink)

Only close access to Amtrak is LA Union Station, a 20 mile drive. Of course, LAX is a 20 mile drive. Really depends on where I want to end up at. These days, airlines are not necessarily cheaper either. Faster overall, yes. Guess I'm glad I really don't need to get anywhere right now.

[Rich_S]

Well Rich....

I ain't asking them to make a profit. Break-even is fine with me. All those people that depend on the NEC? Start charging them a lot closer to what it costs. Make up the rest in efficiencies on Amtrak's side. Subsidies only make people and industries dependent on government instead of figuring it out for themselves.

High-speed rail is another example of this. I always hate how supporters of it list the countries that have it, stating how America is falling behind without it. Just like when America wisely canceled it's foray into supersonic airliners, we should realize that we will be just fine without it. We don't need to burden our country with yet ANOTHER heavily subsidized passenger rail system just because other countries have it. I admire their rail systems, but don't admire the financial burden on their taxpayers.

Actually I would like to see Amtrak make a profit, as profits allow you to purchase new equipment and upgrade facilities. Amtrak suffers from a lot of the problems freight railroads use to suffer from, they are being forced to operate passenger trains that are loosing money. I don't have all of the numbers handy, but I do know Amtrak is not loosing money on the NEC. From what I've read, Amtrak is loosing a lot of money on 15 short haul routes. If Amtrak was allowed to shed these routes, it may become profitable. As for high speed rail, it is my understanding that Amtrak currently beats all other modes of transportation in the New York City to Washington DC door to door corridor, including airplanes. When it comes right down to it, do we really need a train that travels 300 mph? If you need to get there that fast, take a airplane.

I think another issue is the publics view of passenger trains. We have been brain washed by other modes of transportations that trains are old, dirty and slow. Amtrak does not have the money to change that opinion through advertisements, so they are caught in a catch 22 type situation. I recently rode a Amtrak passenger train, coach between two major cities. I found the seating very comfortable, more leg room than on airplane, a better selection of snacks and light meals, the ride was very smooth and we actually arrived 15 minutes early.

If Amtrak is to succeed, we need to be part of their success. Maybe as a nation we need to take it down a notch and the next time we take a trip, take the train instead of driving.

[buzz456]

Just as an aside to this conversation, there is not a single one part of our transportation system that isn't subsidized in one form or another. We have a great metro rail system in the Chicago area and I hate to think what the driving would be like without it even though all of us subsidize it. But to say that passenger rail is a particular bad guy is just not accurate. The airlines have all kinds of public perks and so does the interstate highway system. It's all well and good to say the costs must be born by the users but just remember it will fall the most on the people that can afford it the least.

[GSkid]

Just as an aside to this conversation, there is not a single one part of our transportation system that isn't subsidized in one form or another. We have a great metro rail system in the Chicago area and I hate to think what the driving would be like without it even though all of us subsidize it. But to say that passenger rail is a particular bad guy is just not accurate. The airlines have all kinds of public perks and so does the interstate highway system. It's all well and good to say the costs must be born by the users but just remember it will fall the most on the people that can afford it the least.

Buzz.... passenger rail was singled out cuz this is a forum that pertains to trains. Starting a thread complaining about airline subsidies would have gotten a rebuke from staff...and rightly so. You are absolutely right though. Passenger rail is not alone and other subsidies should end too.

It's like when your kids become adults. It's okay to financially help them for the first few years of adulthood to get them on their feet, but at some point you gotta take off the training wheels. My problem is that Amtrak is going on 44 years with training wheels on and no end in sight. To put that into perspective.... Amtrak would be like a child that never left home at 18 and is now 62 years old!!

As for costs on those that can afford it the least? Shielding people from the costs of the real world at the expense of others is in itself patently unfair. It's redistribution of wealth, which I'm against. It's just legalized theft of assets from one person to hand over to another. Unions also artificially raise the costs of passenger service cuz they aren't forced to compete in the marketplace. It would be like you wanting to build a house for your family and being told you are ONLY allowed to go to the biggest, most powerful and most expensive construction company to build it. Despite 10 other construction companies available to compete for your business and save you and your family thousands of dollars on your house.

To Rich....

Shedding unprofitable routes? That's what I meant about finding efficiencies. Not only to cut costs in order to save a particular route, but to also cut particular routes in order to save the entire company.

[BNSFdude]

Just as an aside to this conversation, there is not a single one part of our transportation system that isn't subsidized in one form or another. We have a great metro rail system in the Chicago area and I hate to think what the driving would be like without it even though all of us subsidize it. But to say that passenger rail is a particular bad guy is just not accurate. The airlines have all kinds of public perks and so does the interstate highway system. It's all well and good to say the costs must be born by the users but just remember it will fall the most on the people that can afford it the least.

Buzz.... passenger rail was singled out cuz this is a forum that pertains to trains. Starting a thread complaining about airline subsidies would have gotten a rebuke from staff...and rightly so. You are absolutely right though. Passenger rail is not alone and other subsidies should end too.

It's like when your kids become adults. It's okay to financially help them for the first few years of adulthood to get them on their feet, but at some point you gotta take off the training wheels. My problem is that Amtrak is going on 44 years with training wheels on and no end in sight. To put that into perspective.... Amtrak would be like a child that never left home at 18 and is now 62 years old!!

As for costs on those that can afford it the least? Shielding people from the costs of the real world at the expense of others is in itself patently unfair. It's redistribution of wealth, which I'm against. It's just legalized theft of assets from one person to hand over to another. Unions also artificially raise the costs of passenger service cuz they aren't forced to compete in the marketplace. It would be like you wanting to build a house for your family and being told you are ONLY allowed to go to the biggest, most powerful and most expensive construction company to build it. Despite 10 other construction companies available to compete for your business and save you and your family thousands of dollars on your house.

To Rich....

Shedding unprofitable routes? That's what I meant about finding efficiencies. Not only to cut costs in order to save a particular route, but to also cut particular routes in order to save the entire company.

The minute we quit subsidizing Amtrak, we will be down to the NEC and Pacific Surfliner, and maybe two or three long distance trains. You cannot dispute this, as most other services lose money like paracites.