schlimm Sam1The commuter agencies bill Amtrak for its use of the portions of the NEC owned by the commuter rail agencies. By the same token Amtrak bills the foreign carriers that operate on its segments of the NEC. If Amtrak funded the capital improvements on the NEC owned by the commuter rail agencies, the agency would have to adjust its billing back to Amtrak to reflect this fact. Otherwise it would be double billing Amtrak. See current (November) Frailey column. According to him, Amtrak is not currently collecting from the commuter and freight line their share of capital improvements on track they use.
Sam1The commuter agencies bill Amtrak for its use of the portions of the NEC owned by the commuter rail agencies. By the same token Amtrak bills the foreign carriers that operate on its segments of the NEC. If Amtrak funded the capital improvements on the NEC owned by the commuter rail agencies, the agency would have to adjust its billing back to Amtrak to reflect this fact. Otherwise it would be double billing Amtrak.
See current (November) Frailey column. According to him, Amtrak is not currently collecting from the commuter and freight line their share of capital improvements on track they use.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
The financial records for Amtrak, Southwest Airlines, DOT, etc. are primary source documents or roll up from primary source documents.
The accounting databases are constructed in accordance with rigid accounting rules, i.e. General Accepted Accounting Principles (GAAP) or Government Accepted Accounting Standards (GAAS). Equally important, they are audited by independent auditors. If those responsible for the data attempt to put a spin on it, or the records are not maintained properly, management will be called to task over it, and the results will be reported to the board of directors or the U.S. Congress. They are not partisan databases.
If the New York Times or the Cato Institute publishes select information from the data bases, it is a secondary source. If I cite or calculate statistics from one of the primary source databases, it too is a secondary source. If I want to verify the information in a New York Times article or from the Cato Institute to determine how much spin has been put on it, I can if I know where the data source. The same applies to the statistics that I cite.
A person who downloads data from the primary databases, slices and dices the numbers, and calculates what he or she believes are relevant statistics is not avoiding tedium. The tedium referred to having other people go through numerous links to get to the data. Most of them are not interested. And most of them probably would not understand the data even if they got there inasmuch as they are not accountants and financial analysts.
Again, the primary source for the Amtrak calculations is Amtrak's financial and operational records available to the public. If a person does not know how to get there, i.e. via Amtrak's website, my providing them with links is not going to help them.
Ultimately, people have to have some faith in the credibility of others once it can be determined. Although I have been chided for listing my experience and educational qualifications, it is important for people to have a rough idea of what skills I bring to the table. Of course, I could be lying, but the motivation for doing so in forum like this is not strong. By the same token, I appreciate know that several of our contributors are mechanical and civil engineers. That coupled with the fact that what they say appears to make sense is comforting. I rely on contributors like Oltmmand for an engineer's insights.
oltmannd schlimm Sam1The commuter agencies bill Amtrak for its use of the portions of the NEC owned by the commuter rail agencies. By the same token Amtrak bills the foreign carriers that operate on its segments of the NEC. If Amtrak funded the capital improvements on the NEC owned by the commuter rail agencies, the agency would have to adjust its billing back to Amtrak to reflect this fact. Otherwise it would be double billing Amtrak. See current (November) Frailey column. According to him, Amtrak is not currently collecting from the commuter and freight line their share of capital improvements on track they use. Like the frt roads aren't collecting their share from Amtrak outside the NEC, I suppose. I also wonder of the $600M/yr capital the NEC consumes, how much is for "catching up" with work deferred over the years.
In Frailey's column, he just mentions that unlike the US (apparently) the infrastructure for HSR's in Japan and Europe is amortized over 30 years.
C&NW, CA&E, MILW, CGW and IC fan
On Sept.30 I posted a message on this thread that was intended as a positive, constructive response to some of the Sam1's comments. Apparently my ideas were not worhty of consideration since no one responded to my message. In spite of the impression I get from reading many of the subsequent replies that there's a far greater interest in interpersonal attacks and counter attacks, I'm going to reiterate one of the points I raised in my earlier message.
KCSfan Sam1 Amtrak runs long distance trains that carry less than one per cent of intercity travelers, which is not the best allocation of the country's resources. Few passengers ride LD trains their entire route from from one end point terminal to the other (NEC excepted). The vast majority ride between intermediate stops or from an intermediate stop and an end point terminal. This suggest to me that perhaps we should think of LD trains as being akin to Essential Air Service (EAS). My knowledge of EAS is limited to its objective which I believe is to establish or maintain air transport to smaller cites that might otherwise be neglected by the airlines in favor of their more densely travelled and therefore more profitable routes. If the data is available it would be interesting to see a comparison of the subsidy per passenger mile paid for EAS vs that paid for LD Amtrak service.
Sam1 Amtrak runs long distance trains that carry less than one per cent of intercity travelers, which is not the best allocation of the country's resources.
Amtrak runs long distance trains that carry less than one per cent of intercity travelers, which is not the best allocation of the country's resources.
Few passengers ride LD trains their entire route from from one end point terminal to the other (NEC excepted). The vast majority ride between intermediate stops or from an intermediate stop and an end point terminal. This suggest to me that perhaps we should think of LD trains as being akin to Essential Air Service (EAS). My knowledge of EAS is limited to its objective which I believe is to establish or maintain air transport to smaller cites that might otherwise be neglected by the airlines in favor of their more densely travelled and therefore more profitable routes. If the data is available it would be interesting to see a comparison of the subsidy per passenger mile paid for EAS vs that paid for LD Amtrak service.
Any comments would be appreciated. For the benefit of those not familiar with it, a brief overview of the EAS Program follows.
Mark
Sam1 Without access to Amtrak's accounting records, as well as those of the foreign carriers that it operates over, it is impossible to know whether Amtrak is recovering the proportional cost of its capital improvements in the NEC or its other investments. By the same token it is impossible to know whether the commuter railroads are billing Amtrak properly for their capital investments. Determining the proper billing for government agencies with multiple streams of government payments to support their operations is a daunting task. Frank, I am not sure that it can be done. Over the years Amtrak's IG has conducted audits of the payments made by Amtrak to hoist railroad. They have found numerous problems. I read Frailey's column. He is a journalist. He does not appear to have access to Amtrak's property accounting records or those of the commuter railroads. He says that the commuter and freight roads will be required to pay their share for use of the NEC by 2015, in accordance with a 2008 law, without providing any details. What percentage are the paying now? And is Amtrak paying its proper share when it runs over the 94 miles of the NEC that it does not own? Again, without access to the property accounting records of the carriers, we don't know. And neither does Frailey. This is a example of relying on a secondary data source. And why it is important to take the views of journalists with a grain of salt.
"Proper share" is in the eye of the behold, kind of like the word "fair".
Once upon a time, Penn Central owned the NEC. They paid the entire electric bill. They didn't much care how much power a Metroliner used compared to and E44 on a freight train. They still got the whole bill. Then came Conrail with Amtrak owning the NEC and providing traction power on all the old PRR lines. The bill had to be split.
The next thing that happened was both parties didn't like the split! So, we put some power meters on some locomotives and started sampling consumption, trying to back into formula that would be "fair". We might have come up with a "better" solution, but I'm sure the wrangling would have continued.
It became a moot point as Conrail stored, then scrapped all their electric locomotives.
The cool part, was I got to ride a bunch of trains on the NEC to get meter readings. One of the meters just happened to be in a Metroliner parlor car! Tough duty!
Do you remember how much electricity a Metroliner train used between any specific city pair?
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
Paul Milenkovic Do you remember how much electricity a Metroliner train used between any specific city pair?
KCSfan: "On Sept.30 I posted a message on this thread that was intended as a positive, constructive response to some of the Sam1's comments. Apparently my ideas were not worhty of consideration since no one responded to my message. In spite of the impression I get from reading many of the subsequent replies that there's a far greater interest in interpersonal attacks and counter attacks, I'm going to reiterate one of the points I raised in my earlier message."
OK. Breaking some/all of LD out of the rest of the Amtrak, studying to see what portions are essential, i.e., serving places otherwise not served, might be useful. Comparing the cost per passenger out of and into a given town (the miles are irrelevant) with that of the EAS average and with bus service could be a benchmark for determining what, if any service modality to offer. In other words, to get someone out from Billings, MT to a connection hub, how much does EAS cost vs the train vs a bus?
This is in response to comments in several posts.
When a billing is allocated on the basis of an underlying accounting process, to bill properly means that the allocation of costs to be billed comply standard cost accounting principles. In the case of a public company or government agency,the allocation model is audited by the external auditors or the GAO. Amongst other things the allocations must be reasonable, supported properly, and consistent from year to year.
Power plants in the United States are depreciated over the estimated life of the plant. The plant's life is based on Iowa engineering curves, which if I remember correctly every power generator in the U.S. has agreed to use. This is important for jointly owned power plants, i.e. the South Texas Nuclear Steam Electric Station is owned by three utilities, each of which is billed proportionally for its stake in the plant.
Amtrak uses straight-line depreciation. It classifies its assets by group and amortizes the group as a whole. If it has a gain on the disposal of an asset, it does not recognize it, which is a conservate approach, although it is unlikely that it would have a gain on the disposal of its assets. Locomotives, cars, and other rolling stock are depreciated on schedules ranging up to 42 years. Right-of-way and other properties (excluding land) are depreciated using useful lives up to 105 years. Other equipment (office equipment, computers, etc.) is depreciated using useful lives up to 20 years. The cost of internally developed software is capitalized and amortized over 5 to 10 years.
I don't understand Frailey's comment regarding depreciation schedules in Japan. What do they have to do with the United States? If the NEC were depreciated over 30 years, its operating loss would be significantly higher than it is now.
Businesses in the United States follow GAAP. Government agencies follow GAAS. Amtrak is a business. It follows GAAP. The Europeans and the Japanese follow the accounting rules promulgated by the International Accounting Standards Board. As a result, a one for one comparison between U.S. entities and most overseas entities is difficult.
Paul Milenkovic Just think, a thread got locked that I didn't even comment on . Invariably the subject of subsidies comes up, someone advocating a cold-turkey approach to weaning Amtrak from subsidy, perhaps more of a free-market or privatized and contracted government service approach, and that view is slammed because of the many important functions performed by the government or as the result of government funding and why-are-you-picking-on Amtrak. Sometimes, this is expressed by saying that the Federal government wastes much more money in some area than it spends on Amtrak. I invariably weight in with I consider "The Subsidy (rate) Problem." It is not that Amtrak is subsidized, but that it is subsidized at a high rate in relation to the other modes of transportation. Or some portions of Amtrak have that condition, but it is hard to know from Amtrak's accounting practices some say. And when I contribute that point of view, including some figures, as of late I have been branded as "Anti-train" and that I need to wear the shameful Scarlet Letter ("A" for anti). Or more commonly, I am accused of being a "bean counter", knowing the "cost of everything and the value of nothing." In other words, the answer to the High Rate of Subsidy Problem is that passenger trains have a deep, intrinsic, but unquantifiable value that discussions of costs and subsidy rates are not taking into account. OK. But I still hold the view that the cause of Amtrak, of expanding Amtrak by giving it more subsidy money, could be advanced if the advocacy community would concentrate more on "bang for the buck", that is how could that subsidy dollar serve the most people and start a snowball effect of more people liking trains and wanting money for trains. This is in contrast with a 'fairness" approach, of "I live in rural Illinois far from O'Hare airport and Amtrak will take me to Denver for $75 and it is unfair if I lose that."
Just think, a thread got locked that I didn't even comment on .
Invariably the subject of subsidies comes up, someone advocating a cold-turkey approach to weaning Amtrak from subsidy, perhaps more of a free-market or privatized and contracted government service approach, and that view is slammed because of the many important functions performed by the government or as the result of government funding and why-are-you-picking-on Amtrak. Sometimes, this is expressed by saying that the Federal government wastes much more money in some area than it spends on Amtrak.
I invariably weight in with I consider "The Subsidy (rate) Problem." It is not that Amtrak is subsidized, but that it is subsidized at a high rate in relation to the other modes of transportation. Or some portions of Amtrak have that condition, but it is hard to know from Amtrak's accounting practices some say.
And when I contribute that point of view, including some figures, as of late I have been branded as "Anti-train" and that I need to wear the shameful Scarlet Letter ("A" for anti). Or more commonly, I am accused of being a "bean counter", knowing the "cost of everything and the value of nothing."
In other words, the answer to the High Rate of Subsidy Problem is that passenger trains have a deep, intrinsic, but unquantifiable value that discussions of costs and subsidy rates are not taking into account. OK.
But I still hold the view that the cause of Amtrak, of expanding Amtrak by giving it more subsidy money, could be advanced if the advocacy community would concentrate more on "bang for the buck", that is how could that subsidy dollar serve the most people and start a snowball effect of more people liking trains and wanting money for trains. This is in contrast with a 'fairness" approach, of "I live in rural Illinois far from O'Hare airport and Amtrak will take me to Denver for $75 and it is unfair if I lose that."
Amtrak's high cost mostly come because political reasons and years worth of complex regulations and general anti-rail policy that only at this point apply to passenger rail. In reality the cost of running a passenger train isn't that expensive compared to everything else and people will pay for it if the service is good as shown by system such as the Shinkansen which receives no subsidy.
Railroad to Freedom
Sam1I don't understand Frailey's comment regarding depreciation schedules in Japan. What do they have to do with the United States? If the NEC were depreciated over 30 years, its operating loss would be significantly higher than it is now.
I don't have the Frailey column here, but I believe he referred to amortization schedule of 30 years, i.e. a bond note schedule to pay for the infrastructure, not a depreciation schedule.
sam1: "I read Frailey's column. He is a journalist. He does not appear to have access to Amtrak's property accounting records or those of the commuter railroads. He says that the commuter and freight roads will be required to pay their share for use of the NEC by 2015, in accordance with a 2008 law, without providing any details. What percentage are the paying now? And is Amtrak paying its proper share when it runs over the 94 miles of the NEC that it does not own? Again, without access to the property accounting records of the carriers, we don't know. And neither does Frailey. This is a example of relying on a secondary data source. And why it is important to take the views of journalists with a grain of salt."
Why the need to knock on Frailey? Because you don't like what he said, so you challenge his veracity? He may be a journalist, but given that he has been writing about the rail industry for years, his credentials would seem to at least match yours as a utilities accountant.
schlimm Sam1I don't understand Frailey's comment regarding depreciation schedules in Japan. What do they have to do with the United States? If the NEC were depreciated over 30 years, its operating loss would be significantly higher than it is now. I don't have the Frailey column here, but I believe he referred to amortization schedule of 30 years, i.e. a bond note schedule to pay for the infrastructure, not a depreciation schedule. sam1: "I read Frailey's column. He is a journalist. He does not appear to have access to Amtrak's property accounting records or those of the commuter railroads. He says that the commuter and freight roads will be required to pay their share for use of the NEC by 2015, in accordance with a 2008 law, without providing any details. What percentage are the paying now? And is Amtrak paying its proper share when it runs over the 94 miles of the NEC that it does not own? Again, without access to the property accounting records of the carriers, we don't know. And neither does Frailey. This is a example of relying on a secondary data source. And why it is important to take the views of journalists with a grain of salt." Why the need to knock on Frailey? Because you don't like what he said, so you challenge his veracity? He may be a journalist, but given that he has been writing about the rail industry for years, his credentials would seem to at least match yours as a utilities accountant.
In a column entitled Passengers for a Profit: Can it be Done, which is the context, Fraily said amongst other things that the Europeans and Japanese governments amortize the capital contribution [for their rail projects] over 30 years. Presumably the capital contribution was used or is used for infrastructure.
Amtrak's capital contribution is embedded in its Property, Plant, and Equipment. Most of it is in right-of-ways and other properties. When a company buys or builds PP&E, unless it is cash rich, which is certainly not the case for Amtrak, it has to fund the acquisition. It usually does so with long term debt. In Amtrak's case, however, most of it capital funds are from government grants. The initial accounting transaction is a debit to cash and credit to long term debt. However, in the case of a grant, it would be a debit to cash and a credit to accounts payable, followed by a credit to cash and a debit to PP&E. Debits increase asset accounts whilst credits decrease them and vice versa for liability accounts.
Debt is a Balance Sheet Account. It does not flow through the Income Statement and, therefore, has no impact on net income (profits) or net loss. It is the depreciation associated with the capitalized value of the asset that flows through the income statement. Depending on the debenture governing the debt, the issuer may be required to set-up a sinking fund to pay the debt when it matures, but this is not an income statement account.
The interest associated with the debt flows through the income statement annually. Over what period of time this occurs depends on the debt maturity schedules. In the case of most capital intensive businesses, like a railroad, the debt is rolled over numerous times, so getting a fix on the maturity date of the debt for a particular project would be challenging. The debt interest (rate, amount, period) impacts the income statement.
The United States government, which is the principal supplier of funds to Amtrak, as well as the other U.S. transport operations that require a transfer from the general fund, issues debt over a variety of maturities. The most common issue of U.S. Treasury debt is the 10 year Note, but it also issues 30 year long bonds, and there is some talk, I believe, of issuing 40 year bonds. Short term debt usually costs more than long term debt, but the total interest charges for a 30 year bond vs. a 10 year Note are substantially higher.
Frailey is not a CPA. He does not appear to have a solid grasp of finance, as demonstrated by the statement regarding the amortization of capital. The fact that he is a long time rail journalist has nothing to do with his understanding of accounting and finance.
My message regarding passenger rail is straight forward. Tell it like it is. I am not knocking Frailey; I am questioning his facts. He overlooked three key points in his reference to European and Japanese amortization of capital.
Amtrak could show a profit if it could spin off the cost of its infrastructure. Based on my readings of several years ago, this appears to be what the Japanese and French companies did. If Amtrak and the feds pulled it off deftly, they could show a gain on the disposal of the assets and tell the taxpayers that they realized a profit. Accountants know how this works; those without a background in accounting and finance as a rule don't.
To think that an accountant only knows how to read the financial statements of one industry demonstrates a lack of knowledge of the accounting profession, accounting, and business. Depreciation is common across all businesses in the United States. It is scheduled in accordance with accounting standards that apply to everyone.
KCSfan Sam1 The reason to question the subsidies paid to Amtrak is because of the amount per passenger mile. They are the highest transport subsidies by as much as 20 times those for other modes of transport. That's in my spread sheets. My first reaction was to doubt the 20 times figure but as I thought more about it, it began to pass my "smell test". Common sense suggests that there's a relationship between usage and the subsidy per passenger mile. The higher the usage, the lower the subsidy and conversely, as in the case of Amtrak, the lower the usage, the greater the subsidy per passenger mile. Since you've already done the analysis, would you consider sharing with us what your spread sheets show to be the subsidy per passenger mile for the different modes of transport? These data should put to rest many of the arguments (my own included) presented on this and the other locked thread which are based on emotion and snippets of knowledge. Sam1 Amtrak runs long distance trains that carry less than one per cent of intercity travelers, which is not the best allocation of the country's resources. Few passengers ride LD trains their entire route from from one end point terminal to the other (NEC excepted). The vast majority ride between intermediate stops or from an intermediate stop and an end point terminal. This suggest to me that perhaps we should think of LD trains as being akin to Essential Air Service (EAS). My knowledge of EAS is limited to its objective which I believe is to establish or maintain air transport to smaller cites that might otherwise be neglected by the airlines in favor of their more densely travelled and therefore more profitable routes. If the data is available it would be interesting to see a comparison of the subsidy per passenger mile paid for EAS vs that paid for LD Amtrak service. Sam1 Since its inception Amtrak has lost more than $28 billion. This information can be found in the Amtrak FY11 financials if you want to verify it. After adjustments for inflation doesn't the data show a reduction in yearly Amtrak losses that corresponds with the increases in ridership in recent years? Sam1 The key question is where does passenger rail make sense? What should it look like and how should it be funded? I totally agree!! This should be the basis for any further discussions. As always, thank you, Sam, for your insightful comments and for the work you have done to develop the information on which they are based. Any comments on the points I have brought up in this reply would likewise be appreciated. Mark
Sam1 The reason to question the subsidies paid to Amtrak is because of the amount per passenger mile. They are the highest transport subsidies by as much as 20 times those for other modes of transport. That's in my spread sheets.
The reason to question the subsidies paid to Amtrak is because of the amount per passenger mile. They are the highest transport subsidies by as much as 20 times those for other modes of transport. That's in my spread sheets.
My first reaction was to doubt the 20 times figure but as I thought more about it, it began to pass my "smell test". Common sense suggests that there's a relationship between usage and the subsidy per passenger mile. The higher the usage, the lower the subsidy and conversely, as in the case of Amtrak, the lower the usage, the greater the subsidy per passenger mile.
Since you've already done the analysis, would you consider sharing with us what your spread sheets show to be the subsidy per passenger mile for the different modes of transport? These data should put to rest many of the arguments (my own included) presented on this and the other locked thread which are based on emotion and snippets of knowledge.
Sam1 Since its inception Amtrak has lost more than $28 billion. This information can be found in the Amtrak FY11 financials if you want to verify it.
Since its inception Amtrak has lost more than $28 billion. This information can be found in the Amtrak FY11 financials if you want to verify it.
After adjustments for inflation doesn't the data show a reduction in yearly Amtrak losses that corresponds with the increases in ridership in recent years?
Sam1 The key question is where does passenger rail make sense? What should it look like and how should it be funded?
The key question is where does passenger rail make sense? What should it look like and how should it be funded?
I totally agree!! This should be the basis for any further discussions.
As always, thank you, Sam, for your insightful comments and for the work you have done to develop the information on which they are based. Any comments on the points I have brought up in this reply would likewise be appreciated.
I am updating my data to take into consideration several items that I have not considered as federal subsidies for highways, i.e. the interest associated with the Cash for Clunkers Program and the on-going credits for alternative fueled vehicles. When I get it done (I have other priorities now), I'll share them, which I have done.
I am a bit tired of the subsidies argument: Nothing is going to unwind the country's investments in airways, highways, and waterways. Furthermore government subsidies paid to competing modes of transport are irrelevant since it is not a matter of slicing up a fixed size pie at the federal level, which is the major source of passenger railroad funding in the United States. If passenger rail is a good investment, the federal government can print the money it needs to fund it.
If Amtrak's annual loses were restated in 2011 constant dollars, they probably would show a higher loss per passenger mile, especially during the formative years. It would take a lot of work to get there, i.e. each year would have to be calculated, and I don't have the time or inclination to do it. Moreover, given the information given the public by Amtrak, I could only work with averages.
Amtrak's accumulated losses tell a simple story. Amtrak is a failed business.
The cost of the Essential Air Services Program is in the neighborhood of $175 million per year. I don't know the cost per passenger mile, but it is probably very high.
My long held view is that all transport subsidies should be eliminated over a reasonable period of time. They distort pricing and result in wasteful behaviors. I would nix the Essential Air Services Program. However, as I have stated in other posts, subsidies are not going away because of politics. The politicians are not going to give up this cookie jar. Moreover, beyond the financial implications of subsidies, there are social and economic justifications for some subsidized commercial services.
I guess henry6 had it pegged a few posts ago,
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