Fred Frailey Blog

The world's oldest argument

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Actually, the world’s oldest argument goes like this: If a tree falls deep in the forest and nobody knows, is it still the husband’s fault? But here’s one almost as old: Is Amtrak worth it? I’ve been reading the manuscript of a book Indiana University Press will publish, by retired Norfolk Southern corporate strategist Jim McClellan, who during a stint of government service in 1970-71 was present at the creation of Amtrak. He notes that “the debate about rail passenger service is just as intense today as it was 40-plus years ago.” The economic issues, he adds, have never changed, either.

Then as now you had three “buckets” of passenger trains. There were the commuter trains in a few major cities, the short-distance trains (including those on the Northeast Corridor), and the long-distance trains. Privately owned railroads bore the costs of all these services. But there was a belief then (as there is today) that if done right, dense corridors such as the NEC could be profitable. This, at least, was the message being broadcast by the federal government’s Office of High Speed Rail, McClellan writes.

Since Amtrak’s creation, we’ve had 40 years of additional experience running passenger trains. What’s different is that the public sector now bears the costs. That’s one reason why we have such a vibrant private freight-rail system today, I should add.

And as McClellan says, the economics of passenger trains remain about the same. The one major change we’ve seen is evidence that high-speed corridor operations can recover all of their operating costs and then some. Amtrak’s NEC is on track to earn $325 million above its fully allocated operating costs in the fiscal year that ends this weekend. But the capital needs of the corridor (some $600 million a year and growing) drown those profits. Want better, faster NEC trains? Then double the capital spending and really lose money.

So passenger trains, with some possible exceptions that I’ll discuss in the December issue of Trains, lose money. The real question, as I said at the start, is whether they’re worth it. I cannot imagine the chaos you would see on the roads of New York-New Jersey, Chicago, Los Angeles, San Francisco, and Washington, D.C., if you took away the suburban train services. The nation would be thrown into recession, probably. Commuter rail is worth it and on politically safe ground virtually everywhere.

The same is true in the Northeast with Amtrak. What we achieve in mobility between Washington, Baltimore, Philadelphia New York City, Providence, and Boston is easily worth the capital investment, which is partly returned by Amtrak operating profits over that stretch. It’s a fraction of what we pay in public money for roads and airports and air-traffic control in this region.

What we’ve really argued about these past 41 years are the short-distance trains outside the corridor and of course, the relatively few long-distance trains. Congress has decreed that as of 2014 the states underwrite all the operating losses and capital costs of short-distance trains, and their fates will be decided at the state rather than national level. I suspect that few states will find reason to dump their short-distance trains. More likely, they’ll want to add more. For goodness sake, look at what California has accomplished on its three corridors.

The long-distance network that so frustrates Amtrak’s critics is the price paid to have a majority of members of Congress vote to put any federal money into passenger rail. The argument I make in favor of these mere 16 routes is twofold. First, take them away and political support in Congress for the short-distance and NEC services would be imperiled. A lot of votes in places like Texas, Arizona, Florida, Indiana, and Ohio would change, because without the long-distance trains, there would be no benefit for people in these states. So take away one bucket and you might lose the other. Second, while the operating costs of long-distance trains are large, their capital needs are small, because the host railroads make their infrastructures available at a modest price. My takeaway from looking at the numbers is that the Northeast Corridor and long-distance trains each end up costing taxpayers about the same amount of money.

Yes, passenger trains are worth it. But Amtrak itself? I think it needs to do a better job of dealing with its costs, across the entire spectrum of its operations. To provide just one example: Joe Boardman appears to have decided that the price of keeping his job as president of Amtrak is to let the unions have everything they want. I don’t begrudge Amtrak employees the wages they earn, but they owe taxpayers higher productivity, and it’s up to management and Amtrak’s board of directors to demand it. If they won’t, then maybe it’s time to let the private sector compete for those subsidies and try doing more with less in the passenger realm. Several state governments are coming to this very conclusion. — Fred W. Frailey

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  • You say that long distance trains are needed to keep congress' support for short distance trains.  If the feds are removing support for the SD trains in 2014, will there no longer be any reason for the LD trains?

  • Fred,  

    Just how many battles to do expect Joe Boardman to fight at the same time?  He is fighting a teaparty movement which never existed before Barak Obama was elected President, aggressive hostility in the Congress and struggling with a reduced budget.  If now he moves against Amtrak's unions to demand greater productivity his current attackers will use that very move to hit him on his flank and by taking him out greatly weaken our passenger rail system itself.  Over the long haul Amtrak employees must compete with private railroad employees.  At times they will do a little better than their private sector counterparts and at times they will do a little worse but ultimately is is competition that will keep their wages in check.  In a few weeks we will have an election.  If the Democrats win Amtrak will be stable enough to review labor contracts and a lot more with an eye to rationalizing them to benefit the general public.  If the Republicans win the teaparty will get a new life and we will be lucky if Amtrak survives.  

  • MidlandMike, you are correct. My wording was inelegant. But imagine Congress being asked just to support the NEC if long distance trains are suspended and states pay for the short-distance trains. The NEC would be very vulnerable.

    Fred Frailey

  • I forgot about the cost of track and cat maintenance on the NEC.  On the other corridors, I wonder if some states will have to let them go because of generally dismal state budgets.

  • OK, folks, let's try to deal with this rationally before 100-plus comments are posted and the original issues raised by Fred get lost.

    Track must be maintained.  Sounds simple, right?  I go back to the days when railroads had and published data for delayed capital and deferred maintenance.  That was not a good time for railroads.  The system works to the degree that it works at all because LD Amtrak trains pay an infinitesimally small amount of the total cost of right-of-way.  

    Some states, Virginia and North Carolina come to mind immediately, have demonstrated a willingness and ability to fund (subsidize) the cost of passenger operations on short-haul corridors within their states.  Others have made it clear that there is no way in Hell they will "play."  Colorado seems to fall in that category, but there are others.  

    So Joe Boardman has too many battles to fight.  Perhaps if he had dealt with them early in his tenure - as good CEOs do - there wouldn'[t be so many to worry about today.  Labor productivity is a must.  Unions will scream bloody murder if greater proiductivity is demanded, but when push comes to shove, and the alternative is no trains to run at all, they will give the required productivity.  Right now, Amtrak employees do not compete with private railroad employees.  It's having two different sets of workers using some of the same facilities, but comparisons end at that point.  Perhaps a new set of private operators will be able to get labor for lower costs and higher productivity and thus require lesser subsidy, but I won't hold my breath waiting for that to happen.

    Tea party politicians tend to view the most complex of issues in the most simplistic of terms.  Among the issues that will have to be dealt with if Amtrak is to be radically restructured or even abolished as an institution are little things like Railroad Retirement, which relies on Amtrak's work force to keep it solvent.  Liability insurance.  Think UP or NS or any other Class I wants to deal with multiple companies on liability issues.

    And, let's not forget that Amtrak got exclusivity when it did because there was a cadre of interests that wanted it at least to appear successful.  Railroads did not fight Amtrak exclusivity at the time because they were so anxious to shed the burden of passenger losses.  Do away with Amtrak now and Congress may find that it is engaging in a 5th Amendment taking if it tries to legislate that railroads must provide access to their systems to anyone who comes along and calls himself a passenger railroad.

  • I'm not so much anti-long distance trains as I am anti-status quo for the service on the routes - particularly the eastern routes.

    The problem is more than just labor productivity.

    These trains are largely unchanged from the schedules and service of the streamliner era.  Why?  Who rides trains and why has changed in the past 60 years.  State and city population has shifted.  Amtrak service - generated by Amtrak itself -  has not changed a whit.

    Some glaring examples:  

    Florida is now the 4th largest state, and a huge tourist destination, yet Amtrak runs NYC - Miami streamliner schedules with only a token attempt at intra-state corridor development.

    The population of NC, SC and GA has grown like a weed in the past 40 years, yet nearly all the service through these states is in the dead of night.  (NC's own efforts excepted...)

    The population of Atlanta has grown from 1.8M to 5.2M in the past 40 years.   The lions' share of the growth has been on the north side of town. The Crescent runs right through the middle of this growth area.  In 1980, it was all pine trees.  Now, it is wall-to-wall suburbia.  There are more people close to Duluth GA than there are near Atlanta's Amtrak station.  The next station to the north is 50 miles from Atlanta.  Why has the ridership out of Atlanta not kept pace with the growth of Atlanta?  They don't stop where the people live.  Why not?

    Because it's hard?  No excuse.

  • While Amtrak's mission on LD trains is more appropriately the national system, they have worked with many states on expanded local services in states in the Northeast, Pacific coast states , and midwestern states centered around Chicago, as well as NC and VA.  Work was started on a Tampa-Orlando service but the plug was pulled by Florida.  Have Georgia and SC really worked for enhanced service?  A station in Duluth GA should be started as a local initiative, rather than be imposed by a federal agency.

  • Midland Mike-

    Amtrak's "working with" states comes from initiatives that began with the states.  Amtrak has not approached the states and said, "Hey, lets expand service!"  It's the other way around.

    The Tampa-Orlando project was non-Amtrak from the start - right to when the plug was pulled. The Amtrak-California work?  All driven by CA.  Pacific Northwest?  Pushed primarily by the state of Washington.  Piedmonts and Carolinian?  NC driven.

    That's the problem.  Amtrak has not shown any initiative outside of the NEC in decades.  It's all be driven from the outside.  Amtrak was chartered to stand around and wait for states to tell them where the local market for service is?  Really?

    A station in Duluth GA "imposed by a federal agency"?  Absolutely!  But, only if the "agency" happens to be a passenger transportation company that actually thinks it's in business to transport people....

    ...as opposed to run trains and beg for subsidies.

    The Crescent is nearly invisible in Atlanta.  Hardly anyone there even knows it exists.  It goes useful places to the north and makes decent time - but it does it in the dead of night.  Who wants to get to or leave Charlotte at 2 AM?  To the south - it goes to few useful places and is just plain too slow to be useful.

    That's what I really don't get.  The LD network is what Amtrak relies on for political support, yet there is nearly zero effort put forth trying to improve the performance of these routes.  

  • If Amtrak had a slush fund to add more service, maybe they would initiate it, however, they are usually facing threats of shortfalls for existing service.  Perhaps state sponsoring is the bar set by Amtrak to know the project has legs.  All transportation infrastructure projects are local politics.  Even private freight RRs must get the local pols on board before facility construction.

  • "Even private freight RRs must get the local pols on board before facility construction."

    All of NS's latest PPPs have started with NS and gotten the local pols on board once they had a plan to pitch.  What was the last thing Amtrak "pitched" to anyone (outside the NEC)?

  • Fred -- I think you're missing a lot of the reasons why Americans need, and Congress is willing to support, long-distance trains. I suggest you read NARP's recently-published White Paper on the subject: www.narprail.org/ldtrains. I'd like to hear your reaction to the points the paper makes. -- Malcolm

  • oltmannd:  Amtrak has a desperate need for a CEO of the caliber of the late Graham Claytor.  Mr. Claytor did what he believed should be done and Amtrak was better for it.  As for slush funds, that sounds an awful lot like a plea for the paying of bribes to local public officials.  Aside from being against the law, the payer ends up getting about what it deserves - support from someone who goes to the highest bidder.  Do they stay bought by the first buyer?  Hardly.  What comes through the comments to this blog and those that focused on the future - if any - of the Southwestern Chief is that there is little connection between many rail fans and their knowledge or understanding of the political process.

  • I suspect many of us who ride and observe Amtrak get very frustrated with the senior management's total lack of entrepreneurial interest. There are opportunities not requiring vast capital outlays which seem to be invisible to them as they spin multiple billion dollar NEC schemes/dreams.  I tend to lay first blame on the governing structure of the organization followed by the Board's choice of management leadership. Fred may be perfectly correct in noting that after 40 years of "place holding," Amtrak has run its useful lifetime.

  • I couldn't agree more.

  • The 800-pound gorilla in the room no one mentions is the $1 Trillion yearly expenditure to maintain our world-wide empire.  To have anything more than a mediocre national transportation system would require a 300 million person brain transplant, which isn't going to happen.  We're probably all wasting electrons here, even discussing this subject.

The world's oldest argument