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[quote user="V.Payne"] I am a bit of a loss in responding as Mr. Sam was quoting Fully Allocated numbers in the response while talking about Variable costs, aka more or less net subsidy.There are about $800 million in fixed infrastructure costs in the Fully Allocated number for NEC commuter infrastructure and stations used by others.  Maybe someone can answer this question. Where are the long term variable passenger mile metrics that PRIIA was supposed to get us? The FRA PRIIA reports were still blank last I checked. [/quote] What is the source for the $800 million in fixed infrastructure costs in the fully allocated NEC number? As per Page C-1 of Amtrak's September 2013 Performance Report, Total Costs excl. OPEB's, Capital Charge and Other Costs.  OPEB stands for Other Post Employment Benefits.  These costs, including the OPEBs, flow through the financial statements as variable expenses.  Sometimes mixed costs, as per below, have the appearances of being a fixed cost, but upon close examination it is clear that only the variable portion is flowing through the expense stream to determine the operating contribution/loss. When Amtrak buys something, i.e. fuel, labor, etc., it incurs a cost.  When the cost flows through the income statement, it is an expense. Accountants typically classify costs in one of three buckets.  As far as I know Amtrak follows the same cost accounting models. Variable costs are those that are incurred because Amtrak runs trains, operates stations, etc. Its biggest variable costs are direct labor, fuel, on-board supplies, and rents to hoist railroads. If it does not run any trains, most of these costs would go away within a year. Fix costs are those that are incurred because Amtrak owns an asset. Irrespective of whether the company has any operations, the costs have been incurred, and they flow through the income statement or statement of operations as an expense. Amtrak's biggest fixed costs are the cost of the NEC infrastructure and its equipment costs.  These items are capitalized and flow through through the income statement as depreciation expense. Another example is a fixed cost debt service, i.e. principal payments, interest expense, etc. Mixed costs are those that have some variable cost characteristics and some fixed cost characteristics. Maintenance is a good example. When Amtrak runs a train, it incurs some maintenance costs because of the mileage that it puts on the equipment. This is the variable portion of the mixed costs. If it parks the equipment, it still has some maintenance cost. It may have to energize the equipment to keep it from deteriorating, provide guards to protect it from vandals, etc. In addition, it still has the depreciation expenses associated with its maintenance facilities, tools, indirect labor, etc. The numbers shown in the second and fourth columns of Page C-1 are variable expenses, although some of them may appear to be fixed costs.  They include fully allocated variable costs, including the variable portion of any mixed costs.  These are the expenses, subtracted from the revenues, that generate the contribution/loss per route, passenger mile, and seat mile. The major fixed costs (depreciation and interest) are not assigned as per the following note:  Amtrak does not report depreciation on a route level due to the distortion caused by the sale and leaseback transactions of the late 1990’s and early 2000’s. Allocating depreciation and interest would unfairly burden routes whose equipment was sold and then leased back. Those transactions caused the value of those assets to increase and therefore their depreciation to increase, which is unrelated to the actual capital cost of that equipment. A synthetic capital charge is under development and will be allocated to routes and included in this report when available. There is one other cost that is misunderstood frequently. Avoidable costs (expenses)!  These are the expenses that would go away if Amtrak discontinued a business line or went out of business. Determining the avoidable variable expenses is relatively easy, but determining the avoidable mixed and fixed expenses, especially over the short run, would be a challenge. Amtrak claims that not all of the expenses associated with the long distance trains would be avoided if they were discontinued.  True!  But the key question is how many of them would a self servicing management team identify vs. how many would a disinterested consultant identify?   All costs and expenses are variable over long run. Equally important, most costs and expenses can be avoided in the long run. The avoidance amount depends on whether the company is discontinuing a line of business or the business is being liquidated.    I am a CPA.  I have worked with cost accounting models for years. I know how cost accounting models usually work.  Having said that, the only thing that I know about Amtrak's costs models and expense flows is what it publishes in its operating statements and financial reports. Sans access to its books and cost allocation models, any conclusions about Amtrak's costs and expenses, as well as how they are allocated, is speculation.
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