In most instances depreciation is a function of the expected life of the asset, as stated in years, although partial years may be used in some instances.
The number of years that an asset is expected to last is determined by a primary driver(s) that correlates with the expected wasting of the asset, e.g. the number of miles that the equipment can be operated before it is ready for salvage. Time is also a factor, although it is seldom a primary factor.
Amtrak probably calculates the expected useful life of its equipment on expected miles to salvage divided by the number of anticipated annual operating miles. However, without access to the company's records, it is not clear what variable(s) it uses.
The amount of the annual depreciation is determined by dividing the initial cost of the asset by the years of its expected useful life. The cost of the asset includes the acquisition price, transportation-in, set-up costs, training, and capitalized interest, reduced by any expected salvage value.
If the equipment is subsequently overhauled, and the cost of the overhaul meets the GAAP capitalization tests, i.e. extends the useful life of the equipment, or increases the units of output, or increases the quality of the outputs, the cost of the overhaul is capitalized, which usually changes the depreciation schedule.
The accounting models used to determine the useful lives of the equipment, as well as the estimated salvage value, are audited robustly by the external auditors. The notion that the numbers are just cobbled together, based on the differing whims of the cost accountants, is wrong.
If Amtrak's cost and depreciation models materially distorted its financial statements, the external auditors would be compelled to issue a qualified opinion. Amtrak has never received a qualified auditor's opinion. That is not to say that its cost accounting cannot be improved. Apparently it can be. But its costing models are not distorting its financial statements.
6. Current Fleet Composition Amtrak has not acquired any new equipment since 2002. The entire fleet is generally quite old, which creates numerous financial, marketing, and operating challenges. The age profiles of the existing fleet are as follows: Table 4: Amtrak Passenger Car Portfolio Amtrak Passenger Car Fleet - Age
Equipment Type Active Units 12/1/2011 Year Started Age in 2012 Mileage Amfleet I 473 1974 to 1977 35 - 38 Years 4,125,000 Horizon 95 1988 to 1990 22 - 24 Years 2,750,000
Surfliner (c) 49 2000 to 2002 10 - 12 Years 1,580,000
California Cars 78 1995 -1996 17 - 18 Years 1,875,000
North Carolina Cars 12 1950s 60+ Years 675,000
Amfleet II 145 1980 to 1981 31 - 32 Years 5,640,000
Heritage 99 1948 to 1956 56 - 64 Years 5,000,000
Viewliner / LDSL 51 1995 to 1996 16 - 17 Years 3,065,000
Superliner (I & II) 428 1979 - 1996 16 - 33 Years 4,880,000
Auto Carrier 80 2005 7 Years 1,160,000
Acela 20 * 1999 to 2000 12 - 13 Years 1,620,000
(from pages 22-23) http://www.amtrak.com/ccurl/36/921/2012-Amtrak-Fleet-Strategy-v3.1-%2003-29-12.pdf
The Superliner II fleet of 140 cars 1993-94 at a cost of $340 million (average per car = $2.43 mil.)
Acela: $1.2 billion for the 20 trainsets (6 coaches plus 2 power cars at each end) 15 extra high-speed locomotives and the construction of maintenance facilities in Boston, New York, and Washington.
C&NW, CA&E, MILW, CGW and IC fan
Superliners are younger than all Amfleet
Amfleet II is younger than Amfleet I
Horizon is slightly younger than Amfleet
Acela is slightly younger than Viewliners.
So, on the avg, LD trains have younger eqiupment than NEC.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
Oltmannd, good point about the varibles of mileage. But, considering the history of the various routes, Amtrak should be able to say which routes have hihger maintainence associated with them.
Schlimm, I don't believe deprecitation based on mileage is used in accounting, though there are various schedules that can be used (straight line is one)
And there seems to be some miscommunication/misunderstanding about my comment that Amtrak spends more on equipment for the NEC. I didn't mean to imply that they bought more/have more equipment for the NEC, just spent more. Either on upgraded/newer equipment or new service add ons. Acknowledging that the NEC stuff is specialized and does cost more, it just seems that there is an imbalance on whats provided for the NEC and whats provided for the LD fleet (much of which is frankly ancient) Or said differently, the NEC gets what it needs comparatively easily compared to getting new LD equipment.
And no doubt the NEc has better utilization than LD or the regionals.
Modeling the Cleveland and Pittsburgh during the PennCentral era starting on the Cleveland lakefront and ending in Mingo junction
oltmannd A mile at 125 mph is worse than a mile at 79 mph. A mile on 3 degree curves is worse than a mile on tangent. The point is, it isn't easy to do costing. And, the method of allocation is going to depend on what question you're trying to answer. Full allocation isn't going to get you avoidable costs - those are two different and serve to answer different questions. Costing is very poor "what if" tool.
A mile at 125 mph is worse than a mile at 79 mph. A mile on 3 degree curves is worse than a mile on tangent.
The point is, it isn't easy to do costing. And, the method of allocation is going to depend on what question you're trying to answer. Full allocation isn't going to get you avoidable costs - those are two different and serve to answer different questions. Costing is very poor "what if" tool.
Wouldn't the depreciation be calculated on a schedule based on years used, not mileage or some other measure of degree of use? Amtrak sets the life for equipment in years up to 42 and uses the group method for the class (all the various sub-types are treated equally), it but does not specify the specific life of passenger cars in the auditor notes. It uses a straight-line depreciation method, meaning equal amounts of depreciation expense are charged each year. In most settings, railroad cars are considered to have a service life of 15 years.
ruderunner Mileage seems to make the most sense to me, that's likely what puts the most wear and tear on equipment. And yes include dwell, it's an expense associated with running that train.
Mileage seems to make the most sense to me, that's likely what puts the most wear and tear on equipment. And yes include dwell, it's an expense associated with running that train.
blue streak 1 schlimm [. Someone thought most cars were for the NEC. The fleet of LD cars is huge because so many are needed because of the low sustained speeds. Common miscomputation. If you study Amtrak's fleet strategy you will find that the Amfleet-2s have much more mileage than the Amfleet1s even though the 1s are much older. Average speed of the -2s probably much higher because they usually operate about 36 hours in the East before layover and then go out within 24 or less hours. The Superliner fleet probably gets 48 Hours on long distance before layover. So remember 24 hours a day average speed of -2s is higher. Cannot get mileage while writing this post of the other fleets as computer will not switch back and forth from post to site.
schlimm [. Someone thought most cars were for the NEC. The fleet of LD cars is huge because so many are needed because of the low sustained speeds.
[. Someone thought most cars were for the NEC. The fleet of LD cars is huge because so many are needed because of the low sustained speeds.
That makes sense. Utilization is higher, but productivity (in revenue per day) is llkely lower because value of service is lower.
Not including Heritage cars, Amtrak owns 428 Superliners, 181 Viewliners, 95 Horizon cars, 618 Amfleet I and IIs, There are 20 Acela trainsets (120 cars), and 7 Talgo trainsets. So at a minimum 704 cars are used in LD service, plus some of the Amfleet cars.
Amtrak owns 63 electric locomotives for NEC and 268 diesels for other services. To claim that most of the capital equipment is for the NEC is not accurate.
ruderunnerIf by safety stock you mean back up equipment, then allocate based on usage.
Run time? Mileage? Include or exclude dwell at turn points?
Is the NEC paying for it's capital expenses? Or just the interest on loans? Or just the above rail costs? Do bridge replacements on the NEC get charged only to NEC or is it spread around? I just don't see how the NEC can claim a profit, meaniing it's self supporting. Unless maintaince or upgrades are being deferred so they don't have to show up on the balance sheet.
I need to go back and find the gross revenues of the NEC and compare it to the proposed costs of rehabbing the NEC, seems to me though the gross revenues don't cover the propsed costs of the infrastructure repairs (31 billion)
OK I took the numbers from the 2015 budget: Toatal system revenue 3.2billion (about half from NEC) plus total fed fundng 1.6b totals 4.8 billion in "gross revenue" for Amtrak. Using ALL of Amtraks gross revenue for the next 7 or 8 years will cover the NEC infrastructure needs/planned upgrades. Or using just NEC revenue (1.6b) you start to strecth out 20years. This leaves out any expenses at all for anything else, not even toilet paper.
If by safety stock you mean back up equipment, then allocate based on usage. That is if one train uses 10% of the backup equipment through the year then that train gets charged 10% of the cost. Wether that use is through planned maintainence or accident replacement of a certain car doesn't matter. That train used it and should be charged.
Equipement depreciation is pretty striaghtforward IF the new equipment is for a specific train then absolutely that train gets the charge. Why should say the Lake shore get whacked for an Acela cars cost? It doesn't make sense. If the equipment is for the general pool, then tracking and charging by useage shouldn't be difficult.
What percentage of manpower hours does a train use off the extra board? That train should be charged accordingly. There should be enough historical data to get a sense of that so one could make it an average charge, or just bill it as used. It may also help figure out if a train delays are causing an increased labor charge by having to bring in relief crews. That's a big expense that needs to be charged to that route/train, not averaged over all trains.
I'mm not saying that charges should be static from year to year, or even scheduled, but there should be enough data from the past to say "Here's the trend and now that we see the trend we can plan for next year"
Currently the freights only get to charge incrementally which is good for Amtrak. It's a steal actually. But keeping in mind an open market, why shouldn't the freghts get to chare Amtrak what they would charge another railroad for trackage rights? Basically the value of the slot. Again though charging by value is something that is not a current situation
ruderunnerWhat I have trouble with is capital expenses of the NEC being sloughed off onto the LD trains. Amtrak makes it difficult to determine the actual costs of anything, which sems like they are trying to flimflam the holders of the purse strings.
That statement keeps being made, but I see no evidence to support it. The capital costs of upgrading the NEC (new cat, etc.) are allocated to the NEC. Equipment capital costs (major refurbishments and new) should be easy to allocate and I have yet to see any evidence that the Acelas are charged against the LD sector. Someone thought most cars were for the NEC. The fleet of LD cars is huge because so many are needed because of the low sustained speeds.
oltmannd How much (more) of the NEC capital should be paid by LIRR, NJT, VRE, MARC? If you do that "right", maybe the NEC is a winner?
How much (more) of the NEC capital should be paid by LIRR, NJT, VRE, MARC? If you do that "right", maybe the NEC is a winner?
Don:
There appears to be no absolute way to allocate costs however just some items will use NJT as example but can apply to all carriers =============
Operational costs-----
1. Number of Axels that are operated. Freight trains would require a higher per axel charge as their axel load is higher. This would also apply to locos of passenger trains.
2. Per train charge.
3. train scheduled speed over segments of track. ie higher speeds would require more allocation.
4. Stations train counts. ex. local NJT stops ( no Amtrak ) 100% NJT.
5. Station dwell times Good idea.
6. ROW maintenance along lines of 1-3.
7. allocated power useage
Capital costs allocated among users.
11. CP upgrades to improve fluidity
12. ROW changes for one or another carrier.
13. The gateway & additional east river tunnels and how much each carrier will use. Probably over a 10 - 20 year span.
14. Additional yard storage space especially BOS, New haven, Sunnyside. PHL, WASH ivy city.
15. upgrading CAT power.
16. expansion for unplanned problems. ( ex Sandy )
17. Benefits for passenger destinations EX NYC.
ruderunnerI'm not talking about how much things should cost, more what do they actually cost.
Sounds simple... But:
Who owns how much of the "safety stock"?
Who owns the equipment dwell between runs at Chicago?
Who owns the fringe from the crews on the extra board?
How do you allocate equipment depreciation? Actual equipment? If so, when the new Viewliners come, the trains getting them will get hammered.
And, on the other side:
Do the freight railroads get to charge:
The incremental cost of providing a passenger "slot"?
The fully allocated cost of the slot?
The value of the slot?
Oh I agree that there are various expenses that can't be pinned down directly to any sigle train. What I have trouble with is capital expenses of the NEC being sloughed off onto the LD trains. Amtrak makes it difficult to determine the actual costs of anything, which sems like they are trying to flimflam the holders of the purse strings.
And if I held those pursestrings, I'd be very leery of giving money to Amtrak too.
I have no impression that passenger rail will ever make profit, it will continue to need infusions of money from the govt. But I think it's time to come clean, show the facts and tell the govt in no uncertain terms "This is what it costs to do this, that and the other. Her is how much we get back from this, that and the other. And $X is what we need to cover the shortfall and that amount will go up yearly due to inflation etc." The claim that the NEC makes profit simply continues the lie that has saddled Amtrak from the begining. And keeps up the expectations that someday Amtrak will stand on it's own, we just need to cut costs (like food or tri weekely schedules)
Yes I know that their are politcians meddling in these areas.
An interesting side effect is that one would finally know just what the price of a trip should be in order to cover costs, not that it would mean much in the real world. OTOH that number is a good comparison to use to see if adding service to a certain route helps or if cutting service helps. I'm certain they already do this (or should anyways) so why not share that info? It's not like there's a lot of competetors wondering the secret to Amtraks sucess! It may also help to defuse the political meddling if say Amtrak wants to discontinue a train and a senator wants to keep it, tell them in no uncertain terms that their state is required to make up the shortfall.
But alas, I'm getting off into politics rather than the subject at hand.
ruderunnerWhat I'm having trouble with is why can't Amtrak just come out and say "this is what it cost to runthe Empire builder last year" and include things like, payroll for on train employees, maintaince charges for equipment from Beech Grove, track fees and the other expenses that are honestly attributable to that train, without watering it down with NEC expenses. It seems you need to know what things actualy cost before saying it makes or loses X amount every year. And after you know that, then you can got to the NEC users and say "this is what we need to charge for use of our tracks" Fully expecting some of that money will go to paying for track usage after the freights come to Amtrak and do the same.
Supposedly that precision is coming. But many of the charges are already allocated correctly. Overhead for administration has to be allocated on some formula. That is true in most endeavors, and always a source of irritation for those who feel they are carrying too much.
OK I admit the oversight of equipment being a capital expense, but over the years hasn't Amtrak spent much more on NEC equipement than LD equipement?
And yes the freights aren't chargning LD what it should, but that's the contract. I'm not talking about how much things should cost, more what do they actually cost. It would be interesting to figure out what LD expenses woudl be if paying the proper amount for use of tracks. Might even be able to say "We can up our on time incentives since we are getting such a savings on track usage" That would make the freights happy for sure, or at least have less animosity to passenger trains.
And I wholeheartedly agree that the NEC users should pay their share, but that's the flipside to the freight subsidy. If Amtrak is allowed to charge full price, why can't the freights. And again that's a what might be, as opposed to what is.
What I'm having trouble with is why can't Amtrak just come out and say "this is what it cost to runthe Empire builder last year" and include things like, payroll for on train employees, maintaince charges for equipment from Beech Grove, track fees and the other expenses that are honestly attributable to that train, without watering it down with NEC expenses. It seems you need to know what things actualy cost before saying it makes or loses X amount every year. And after you know that, then you can got to the NEC users and say "this is what we need to charge for use of our tracks" Fully expecting some of that money will go to paying for track usage after the freights come to Amtrak and do the same.
ruderunner I'd bet the NEC is actually the biggest single money loser (due to it's tremendous capital needs)
If you count the hidden subisidy the LD trains are getting from the frt roads, maybe the LD trains are even worse losers?
At the end of the day, it's all money coming out of one of Uncle Sam's suit pockets. Does it really matter which one? The Amtrak budget is an explanation, not a menu, and it probably does a pretty fair job of what it set out to do....whether we like the "story" or quibble with the details.
BaltACDIf you have 100 cost accountants on a project, each will assure you that the other 99 are applying the wrong methodology to the project.
...and they can all prove it!
ruderunnerIt also makes no sense to allocate capital investement expenses to the LD trains, the only real infrastructure that Amtrak owns is the NEC.
The capital cost of the LD trains is most likey capital rebuilds of the existing equipment. If you put enough into it, a rebuild can be capitalized.
If you have 100 cost accountants on a project, each will assure you that the other 99 are applying the wrong methodology to the project.
Never too old to have a happy childhood!
From what I see, some of what Boardman says makes sense. But I see a glaring error in the statement that the NEC covers it's costs. Yes it might cover operating expenses, but what about capital expenses? Track isn't free, nor are bridges. True Boardman did say the excess from NEC can cover the interest on capital loans, but makes no mention of the principle on those loans.
It also makes no sense to allocate capital investement expenses to the LD trains, the only real infrastructure that Amtrak owns is the NEC. And most LD trains don't use it. True LD trains do have some capital expense (station buildings, yards and repair shops) but most track is rented, which normally is an operating expense.
After seeing how costs are "randomly" allocated and the inconsistant reporting, I have to wonder if Amtrak even knows what it spends and where the money really goes. I'd bet the NEC is actually the biggest single money loser (due to it's tremendous capital needs) and the :LD trains may be doing well. That's not to say any make profit, but the NEC certainly doesn't.
OTOH kudos for standing up and stating the fact that Amtrak needs to be properly funded, and to not do so will cause major greif.
I just feel that a true representation/accounting of the profit/loss for each train would go farther to getting the fundinig, rather than a feel good story about the star of the show.
How you allocate fixed costs and overhead is completely dependent on the question you are trying to answer.
In the case of Amtrak's budget, it's probably a pretty reasonable view of what the total cost of each type of service is - not a view of short term variable costs.
Certainly, the NEC is expensive to own and operate, and just as certainly, Amtrak could not be allocating NEC costs based on system pass-miles! That would be real, prosecutable fraud.
As for method of allocation, pass-miles is not a panacea, but it probably correlates well enough with train miles and car miles to make little difference at the end of the day.
Also, it is equally misleading for Congress to read the budget request as a "what if I sell the corridor to the states, then all I have to pay is XX for state and LD trains"
P.S. I would allocate Penn Station costs by total train time from the time the train enters the interlocking on each end of the station with a factor for train length.
Here is an example from the Claytor years, the 1992 Annual Report, of what the annual budget presentation looked like. Note the Revenue to Short and Long-Term Avoidable Cost ratios (What is missing from the PRIIA reporting), back when the equipment wasn't very easy to maintain (there was also a recession in 1992). Note the ($2014) 1,164 million fixed difference being expressed between Revenues and Expenses.
This fixed gap is reality, stemming from the NEC infrastructure used by others, equipment purchases of that era, government agency costs, and just the high costs of owning infrastructure. What is not reality is trying to allocate this fixed amount onto various trains, dividing it by passenger miles, and then acting like you could save that amount if the train was discontinued. This is the problem of the Fully Allocated Costs Boardman cited. Claytor was well liked in Congress from what I have read, why can't we do the same type of reporting today?
Consider as well this example of the train density into New York Penn Station. Amtrak is a minority user of its own line, the rest being commuter trains. How you allocate a fixed infrastructure cost is a hard question, but given the ratio of users, I would lean toward the FTA being responsible for this line more than Amtrak's operations.
Finally, consider this GAO analysis of the Autotrain from 1985 and note a similar pattern of ratios. Since this route uses completely separate terminals, equipment, and crews it was a good way to check what the actual costs were to operate off Corridor.
oltmannd V.PayneI wish Mr. Boardman had just come clean on the need for $400 million, maybe $600 million with recapitalization, in infrastructure support for commuter operations by others over the NEC instead of blaming it on the LD trains. There is a current effort to sort this out now, so maybe it's a bad idea to "stir this pot" now. I don't think he's blaming the LD trains for anything. I also think he knows that, in the end, there is a near zero chance they don't get funded. It's just a "put up or shut up" moment. And, you really don't want to get into the hidden subsidy the frt roads are paying to keep the LD trains running. $10 a train mile doesn't cover the cost of the capacity used. Just ask BNSF about that. There's a chance that ND doesn't melt down if the EB doesn't have to run. A single oil train grosses much more than $10 a mile and the EB is consuming multiple frt train slots.
V.PayneI wish Mr. Boardman had just come clean on the need for $400 million, maybe $600 million with recapitalization, in infrastructure support for commuter operations by others over the NEC instead of blaming it on the LD trains.
There is a current effort to sort this out now, so maybe it's a bad idea to "stir this pot" now.
I don't think he's blaming the LD trains for anything. I also think he knows that, in the end, there is a near zero chance they don't get funded. It's just a "put up or shut up" moment.
And, you really don't want to get into the hidden subsidy the frt roads are paying to keep the LD trains running. $10 a train mile doesn't cover the cost of the capacity used. Just ask BNSF about that. There's a chance that ND doesn't melt down if the EB doesn't have to run. A single oil train grosses much more than $10 a mile and the EB is consuming multiple frt train slots.
V.PayneI think Mr. Boardman got himself into a trap with this one as he quoted the Fully Allocated Cost of the LD trains as the $618 million number that needs to be provided, or by inference could be cut.
You are assuming that Boardman doesn't know what his costs are or what can be cut. It's just as likely that whacking a portion of those "shared cost" areas could be done in any event. Amtrak's attempts at austerity in the past have been focused on creating political pain - not operating efficiency. There have been hints from Boardman in his public statements that he knows this and "wants to change the culture".
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