Lately, two talgo sets have been destined for storage as Wisconsin denied the contract to run them between Chicago and Milwaukee. Currently wisconsin is being sued by Talgo for denying to pay their dues.
But what about Chicago and St. Louis?
The train sets are 110 MPH rated, and come with plenty of features that the current sets operating on the route does not. The Chicago-St Louis Corridor is upgrading their track to 110 MPH standards, as we al know. Also, the route operates through Bloomington-Normal, where Illinois state University is based at. Great potential for ridership by college students, as well as tourists between the Gateway to the west and the Windy City. There has seen 11 percent ridership increases in the 2012 fiscal year alone between the two cities, as stated in an Amtrak article from October. This is the highest ridership increase in the Midwest.
The only downside I see to the cars is maintenance. That is tone of the big reasons as to why Wisconsin Denied the contract on short notice.
So why not make the offer to Quinn?
Is Illinois bound by the Midwest consortium for the next gen bilevels that have been talked about?
If Wisconson did not want to pop for a maintenance base, would Illinois be able to absorb the cost for the maintenance facility for only two trainsets?
I have ridden the Talgos in the PNW and would love to see them in Illinois, but don't believe it will happen.
The Chicago to St. Louis trains, sans the Texas Eagle, lost $15.9 million in FY12 before depreciation, interest, and adjustments. Presumably assigning the Talgos to this corridor, whilst desirable from a rider perspective, would increase the depreciation charges and, therefore, potentially acerbate the losses.
Illinois beats out California and most other states, if not all of them, for the state financial basket case award. Where would it get the money to take on additional taxpayer expense?
With a travel time of 3 hours between Chicago & St. Louis, I believe the 'Milk trucks' (that's what those power cars look like), I believe it would be possible to offer 4 daily departures from both terminal stations. Not much, but a good start.
In terms of speed, I also think that it will be possible to raise it from 110 to 125 Mph at a little extra cost. If the 'Milk Trucks' are based in Talgo's BT power cars (in use with Spain's ADIF - the company that owns all infrastructure there), wich have a top speed of 160 Mph, that shouldn't be a big issue.
Also of possible use is the limited 'tilting' ability of the sets (3 degrees), but in a line straight as a dash, like the Chicago - St. Louis corridor that will not be very usefull.
Sam1 The Chicago to St. Louis trains, sans the Texas Eagle, lost $15.9 million in FY12 before depreciation, interest, and adjustments. Presumably assigning the Talgos to this corridor, whilst desirable from a rider perspective, would increase the depreciation charges and, therefore, potentially acerbate the losses.
Sam1 - This doesn't make sense to me. Increased depreciation on the Income Statement would decrease a loss / increase a profit in a particular period. The increase in book value on the Balance Sheet because of retiring old "fully?" depreciated equipment and adding new, "more productive" equipment on the route would be noted. The proof of the pudding as to whether the purchase was a wise financial decision would be, in major part, the overall change in financial results in future periods. Any decision involves weighing risk. Isn't this so?
The upside of the rail corridor in Illinois is economic development, i.e., growth. Already, before it has been completed, ~$200 million new development as a direct result of the new line in Bloomington-Normal, which is just one city on the CHI-STL corridor. This phenomenon is typical elsewhere and overlooked by those who do not believe in investment for economic growth.
C&NW, CA&E, MILW, CGW and IC fan
jclass Sam1 The Chicago to St. Louis trains, sans the Texas Eagle, lost $15.9 million in FY12 before depreciation, interest, and adjustments. Presumably assigning the Talgos to this corridor, whilst desirable from a rider perspective, would increase the depreciation charges and, therefore, potentially acerbate the losses. Sam1 - This doesn't make sense to me. Increased depreciation on the Income Statement would decrease a loss / increase a profit in a particular period. The increase in book value on the Balance Sheet because of retiring old "fully?" depreciated equipment and adding new, "more productive" equipment on the route would be noted. The proof of the pudding as to whether the purchase was a wise financial decision would be, in major part, the overall change in financial results in future periods. Any decision involves weighing risk. Isn't this so?
Depreciation is an expense that is charged to income. All other factors being equal, an increase in depreciation would increase book expense and thereby decrease net income. Presumably the Talgos would be replacing fully or nearly fully depreciated equipment, which means that the depreciation charges would increase.
If the new equipment increased marginal revenues more than the marginal depreciation expense, then net income would increase. Or in Amtrak's case decrease net loss.
I see now. Depreciation being a non-cash expense was muddling my thoughts. Thanks, Sam1.
Mario In terms of speed, I also think that it will be possible to raise it from 110 to 125 Mph at a little extra cost. If the 'Milk Trucks' are based in Talgo's BT power cars (in use with Spain's ADIF - the company that owns all infrastructure there), wich have a top speed of 160 Mph, that shouldn't be a big issue
In terms of speed, I also think that it will be possible to raise it from 110 to 125 Mph at a little extra cost. If the 'Milk Trucks' are based in Talgo's BT power cars (in use with Spain's ADIF - the company that owns all infrastructure there), wich have a top speed of 160 Mph, that shouldn't be a big issue
The difficulty is far less the trainset speed capacity than the track geometry.
AREMA is looking at two forms of structure that will handle freight and also allow 110mph passenger. I know of no equivalent for 125mph -- that 15 mph is VERY significant for kinetics. Not to mention that maintenance on 125mph-capable geometry will have to be much higher... how much more profit did you say was coming from that speed. I realize Talgos are nominally lighter... but I'd have to worry about ride quality andsafety at the higher speed without concomitant track upgrade, even with active tilt enabled...
I believe worrying about depreciation based on their cost being charged to the Illinois trains is taking an approach that ignores the economic reality. Put another way, at present the Talgos are serving no purpose, so their worth is scrap value. Anything Illinois pays Wisconsin to lease or purchase these train sets is found money as far as Wisconsin is concerned and an improvement to that state's financial position. Negotiators for Illinois should approach a deal with that position.
If such a transaction were made, you would have a new and reduced cost basis upon which to base much reduced depreciation charges.
I have never ridden a Talgo, so i do not know if it is a good experience for passengers in terms of comfort, ride, aesthetics, etc. Apparently they have been well received in Cascades services, however, so let's assume they would be liked by Midwestern folks. Consequently, acquiring the unused and wasted brand new trainsets from WI is a good deal for both states
Dakguy201 I believe worrying about depreciation based on their cost being charged to the Illinois trains is taking an approach that ignores the economic reality. Put another way, at present the Talgos are serving no purpose, so their worth is scrap value. Anything Illinois pays Wisconsin to lease or purchase these train sets is found money as far as Wisconsin is concerned and an improvement to that state's financial position. Negotiators for Illinois should approach a deal with that position. If such a transaction were made, you would have a new and reduced cost basis upon which to base much reduced depreciation charges.
Without access to the accounting records, as well as the analytics associated with various scenarios for the equipment, it is not possible to determine whether transferring the equipment to Illinois would be a good deal.
If the equipment were transferred to Illinois and placed in service, assuming that the cost basis is greater than the cost basis of the current equipment that it would replace; further assuming that it would be replacing equipment as opposed to adding additional capacity, the depreciation charges would increase, which would have a bottom line impact on the operator. Either way depreciation increases.
If the equipment remains in Wisconsin and is not placed in service, there is no depreciation. Wisconsin and/or Talgo has a wasting asset on its hands.
If Illinois were able to acquire the equipment in a fire sale, it would mean a loss for Wisconsin taxpayers and/or the company that build the Talgos. Depending on the analytics there are times when scrapping new equipment is the best option. Competitive businesses do it all the time.
Perhaps that is what is wrong with tax law and accounting as the sole basis for making decisions Selling equipment that will not be used due to the decision of a governor to another state to use, even at a loss is better for the WI taxpayers than getting nothing. Using new equipment if it can be acquired reasonably is not wasteful. Scrapping perfectly good equipment is penny wise and pound foolish.
It would make more sense to sell the two Talgos to Washington State where there is already an existing maintenance base. This might be the chance with two train sets to operate a Seattle Yakima Tri Cities Spokane Wenatchee Everett service. Each train set could start from Seattle in the AM with one going north over Stevens Pass the other going to Auburn and before turning east over Stampede Pass and continue on to Spokane and completing a circuit each day giving new day service to the route covered by the Empire Builder. If this is not possible it would sure be a means of creating a Vancouver -Eugene corridor with even more frequent service than the two new Oregon Cascade trains will provide. Other than that Illinois is going to have to build a maintenance base for the train sets if they should purchase them another burden on the poor Illinois taxpayers.
Or maybe California could purchase the two orphan Talgo trains and Governor Jerry could use them in the States high speed service until he can afford to string wire .
Al - in - Stockton
passengerfan This might be the chance with two train sets to operate a Seattle Yakima Tri Cities Spokane Wenatchee Everett service. Each train set could start from Seattle in the AM with one going north over Stevens Pass the other going to Auburn and before turning east over Stampede Pass and continue on to Spokane and completing a circuit each day giving new day service to the route covered by the Empire Builder. Al - in - Stockton
This might be the chance with two train sets to operate a Seattle Yakima Tri Cities Spokane Wenatchee Everett service. Each train set could start from Seattle in the AM with one going north over Stevens Pass the other going to Auburn and before turning east over Stampede Pass and continue on to Spokane and completing a circuit each day giving new day service to the route covered by the Empire Builder.
Sam1 Without access to the accounting records, as well as the analytics associated with various scenarios for the equipment, it is not possible to determine whether transferring the equipment to Illinois would be a good deal.
Other than the possibility of doing something with Washington State as outlined by PassengerFan above there is no scenario to be examined. I take that back -- they could suffer the fate of the Turboliners and sit in a siding somewhere until some politician not yet born orders them scrapped.
Whether for Cascade service or CHI-STL or some other locale, putting this perfectly good, brand new equipment in use is the thing to do.
According to its website the state of Oregon plans to buy these trains.
http://www.oregon.gov/odot/comm/Pages/talgohome.aspx
John WR According to its website the state of Oregon plans to buy these trains. http://www.oregon.gov/odot/comm/Pages/talgohome.aspx
The confusion is over which train sets from the Talgo plant in WI:
"The Oregon Department of Transportation purchased the trains using federal ARRA funds that the Oregon Transportation Commission redirected to rail based on bids coming in lower than projected on highway projects. The original purchase agreement with Talgo was for $36.6 million; ODOT has approved an additional $441,276 in change orders to date. Partners in operating the train include Washington DOT and Amtrak."
Here is the mention in the article:
"Oregon's new Talgo trainsets are undergoing rigorous dynamic testing in Pueblo, Colo. in December. The trains traveled from Wisconsin to Colorado...." (black letters added)
But I did not realize Talgo has a manufacturing plant in Wisconsin. I really don't know if these are the same trains the State of Wisconsin is trying not to buy.
The solution to the two trains will depend on the courts. If the courts say Talgo has a case, and the State has to pay up, then the wise thing for the State to do would be either to put them into Hiawatha Service with whatever speed limitations apply or work out a straight lease with Amtrak, which could use the extra capacity for increased revenue, on the rental costs of Amtrak paying the State 90% of the PROFIT (revneue minus avoidable costs) the extra capacity brings to Amtrak. This should at least be a lot more than scrap value.
If the courts say Talgo does not have a case, then the same deal should be worked out by Talgo.
But why wait? Talgo or the State plus Amtrak would benefit by starting this deal now, and let the courts decide who owns the trains, with the Amtrak rental fees put in escrow until the courts decide.
daveklepperBut why wait? Talgo or the State plus Amtrak would benefit by starting this deal now, and let the courts decide who owns the trains, with the Amtrak rental fees put in escrow until the courts decide.
Given Wisconsin's political situation right now I doubt it will be that simple. Or sensible.
II would love to see Talgos used between Albany to Montreal. The route is curvy and scenic similar to the route Seattle to Vancouver. My idea is to send the two new talgos to the Northwest, and get in return two talgo sets that are pulled by conventional locomotives. These could be maintained in the A-R shops. With tilt equipment the schedule might be tightened, and from comments by passengers who use talgos in the NW. the trains might draw more passengers on this scenic route. Recently Canadian cars were used on this segment, with an across the platform transfer at A-R. With talgos a similar arrangement could be done.
Lets review what really happened here since from my read of the thread many do not know the issues involved.
First and foremost, Illinois is not going to take the trainsets. They have already agreed to the Amtrak "standard corridor car" concept and awarded a contract to Japans Shipiro (spelling?) to build corridor cars based on the Pacific Surfliner design for Illinois, Missouri, California and I think there was one other state and I want to say Michigan but I am not sure.
Second, former Wisconsin Governor Doyle rammed through this agreement with Talgo in the last days of his administration. It was controversial because it was not a product of compromise between both sides of the aisle nor was it handled according to past State procedure concerning such contracts. In fact, it was a no bid contract handed to Talgo. A significant Milwaukee manufacturer (Super Steel, Inc) was completely excluded from the process. Further, Doyle presumed wrongly that the Midwest HSR compact would settle on the Talgo if he first established a Midwest base for them using taxpayer money....whats more he could use it politically and state that he "created" jobs. This was the stupid part because Governor Doyle had nothing in writing from the other states that they would agree to use the Talgo trainset.......it was pure assumption on his part. To be fair, Doyle thought he could hide all this in the larger $800 million stimulus package that Obama was offering. The problem with the stimulus offer and specifically why Governor Walker balked was that Ray LaHood stated in the grant of money that the money had to be paid back in full and would become a loan NOT a grant if the state did not achieve a 110 mph rail system as a end result. In my view Walker was correct in rejecting the money on that basis because $800 million is simply not enough to fund a Chicago to Madison HSR corridor, the state would have to at least match that amount. Given it's deficit Walker responded appropriately. It will be interesting to see how Illinois comes up with the additional $4-5 Billion that it needs to complete the Chicago-St. Louis plan. Not saying that illinois cannot do that but if they don't they face a significant liability with the past Federal HSR grant becomming a "loan" that needs to be paid back.
So thats the whole story as I see it. I think the Talgo can be sold outside the Midwest HSR compact, maybe to Amtrak but I seriously doubt you will see the Midwest HSR compact running fixed trainsets anytime soon. Happy for the decision becuase I think the Spanish Talgo is crap. I also think Governor Doyle should have known better given Amtraks experience with the fixed trainset Turboliners between Chicago and Milwaukee (they need a more flexible solution in that corridor). Seems the Goivernor didn't even bother to ask Amtrak when faced with a large pot of money......he just became the railroad engineer himself and spent it as he saw fit vs what the operational experts would have told him.
Thanks for a good analysis. Needed that!
CMStPnP Lets review what really happened here since from my read of the thread many do not know the issues involved. First and foremost, Illinois is not going to take the trainsets. They have already agreed to the Amtrak "standard corridor car" concept and awarded a contract to Japans Shipiro (spelling?) to build corridor cars based on the Pacific Surfliner design for Illinois, Missouri, California and I think there was one other state and I want to say Michigan but I am not sure. Second, former Wisconsin Governor Doyle rammed through this agreement with Talgo in the last days of his administration. It was controversial because it was not a product of compromise between both sides of the aisle nor was it handled according to past State procedure concerning such contracts. In fact, it was a no bid contract handed to Talgo. A significant Milwaukee manufacturer (Super Steel, Inc) was completely excluded from the process. Further, Doyle presumed wrongly that the Midwest HSR compact would settle on the Talgo if he first established a Midwest base for them using taxpayer money....whats more he could use it politically and state that he "created" jobs. This was the stupid part because Governor Doyle had nothing in writing from the other states that they would agree to use the Talgo trainset.......it was pure assumption on his part. To be fair, Doyle thought he could hide all this in the larger $800 million stimulus package that Obama was offering. The problem with the stimulus offer and specifically why Governor Walker balked was that Ray LaHood stated in the grant of money that the money had to be paid back in full and would become a loan NOT a grant if the state did not achieve a 110 mph rail system as a end result. In my view Walker was correct in rejecting the money on that basis because $800 million is simply not enough to fund a Chicago to Madison HSR corridor, the state would have to at least match that amount. Given it's deficit Walker responded appropriately. It will be interesting to see how Illinois comes up with the additional $4-5 Billion that it needs to complete the Chicago-St. Louis plan. Not saying that illinois cannot do that but if they don't they face a significant liability with the past Federal HSR grant becomming a "loan" that needs to be paid back. So thats the whole story as I see it. I think the Talgo can be sold outside the Midwest HSR compact, maybe to Amtrak but I seriously doubt you will see the Midwest HSR compact running fixed trainsets anytime soon. Happy for the decision becuase I think the Spanish Talgo is crap. I also think Governor Doyle should have known better given Amtraks experience with the fixed trainset Turboliners between Chicago and Milwaukee (they need a more flexible solution in that corridor). Seems the Goivernor didn't even bother to ask Amtrak when faced with a large pot of money......he just became the railroad engineer himself and spent it as he saw fit vs what the operational experts would have told him.
unfortunately, these trainsets can not be touched until the LAWSUIT is settled between Talgo and Wisconsin
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