Cost Recovery
C&NW, CA&E, MILW, CGW and IC fan
The corridor trains in the densely populated NE seem to have done best along with CHI-MIL. Beyond that, the corridor and LD trains seemed to be somewhat evenly dispersed. The surprise to me was the poor showing of the Cascades and California corridors.
If it were not for WisDOT and IlDOT direct supervision the CHI-MIL trains would have probably been discontinued at some point in the past because Amtrak wasn't doing that well with customer service or with marketing.
So lets see Cost of Running them $24 million
Ticketing Revenue approx $16 million
They want to add three more RT in the next 2-3 years. I wonder how that will impact. Still $24 million in costs for an 85 mile corridor, seems like a lot. Then again I thought almost half a million for food service costs Amtrak used to charge was excessive.
I don't think any of us know enough regarding how either "cost" or "revenue" is assigned by route to put much faith is tables like this. Certainly, over the years many authorities such as Mr. Frailey or the Illinois DOT have indicated doubts regarding Amtrak's figures.
Dakguy201 I don't think any of us know enough regarding how either "cost" or "revenue" is assigned by route to put much faith is tables like this. Certainly, over the years many authorities such as Mr. Frailey or the Illinois DOT have indicated doubts regarding Amtrak's figures.
But they are better than nothing. The sticking point has been allocation of overhead. The blogpost included this down in the comments:
Stripping off the overhead, it still costs a lot to run the western long-distance trains ($128.8 million in 2012). The eastern ones are cheap ($22.3 million in 2012)."I just reran my spreadsheet on this (fixing some typos). If you assume that overhead hasn't changed since 2012 (a bad assumption), you would get before-overhead results as follows:Auto Train: $30.2 million profit before overheadSilver Meteor: $9.2 million profit before overheadPalmetto: $4.8 million profit before overheadLSL: $1.1 million loss before overheadSilver Star: $1.2 million lossCardinal: $4.5Empire Builder: $6.5Capitol Limited: $7.7CONO: $9.3Texas Eagle: $11.3Crescent: $12.5Coast Starlight: $15.3Sunset Limited: $19.1California Zephyr: $22.6Southwest Chief: $22.9 loss
Frailey, Phillips, as well as others, have claimed that Amtrak's cost accounting is flawed. But they have not offered any verifiable evidence to support their claims. They don't have access to Amtrak's books, so they are just guessing.
Rio Grande Valley, CFI,CFII
Total revenues include state operating payments and other revenues. I am not sure about the other revenues, but I suspect some of them come from dining car and lounge car sales, rents, allocation of fuel hedge gains, etc.
Amtrak has implemented SAP, which is one of the most sophisticated accounting, financial, and inventory management systems in the world. It appears Amtrak has been reducing its reliance on allocations in favor of direct charges. Nevertheless, allocations will always be part of Amtrak’s accounting, just as it is for every large corporation.
JPS1Amtrak has implemented SAP, which is one of the most sophisticated accounting, financial, and inventory management systems in the world.
SAP is an empty shell not much different than intuit QUICKBOOKS. If it is not configured or setup correctly your going to have a mess. Just because they use SAP and I use QUICKBOOKS does not mean either one of us is following GAAP or FASB rules. So I have no idea why you even mentioned SAP. No need to explain it though, Amtrak accounting doesn't interest me in the least.
I disagree with your main premise though that nobody can second guess Amtrak's accounting practices unless they have access to the books. Because we are seeing several states do just that by taking over the responsibilities from Amtrak or dropping services altogether. Look at WisDOT and the takeover of Amtrak Stations on the Hiawatha route because Amtrak was not maintaining them. Look at how they dropped food service after being bilked on it year after year. Slowly but surely WisDOT is getting closer and closer to the true costs of running trains Milwaukee to Chicago and I'll bet IlDOT is as well with their METRA experience. Once WisDOT and IlDOT purchase their own cars and locomotives for the Chicago-Milwaukee Corridor, it will get more interesting. Soon the question will be asked........."Why do we need Amtrak for this Corridor?" And then they will RFP out the service and we'll see what was real costs and what was fluff.
Anyone can second guess Amtrak's accounting. No doubt about that! But that is all it is. A second guess! And without access to Amtrak's books it remains a second or worse guess.
I would be keen to see the reports from any state department of transportation showing where Amtrak's books and/or cost accounting procedures are distortive. A side by side analysis is critical.
The main point of the post is Amtrak’s policies and procedures regarding allocations. As noted it allocates all its overheads. It does not allocate depreciation and interest for the reasons stated.
Have had considerable experience implementing SAP in a very large financial institution, I am hard pressed to believe QuickBooks is in the same league. I have never heard of a Fortune 500 company using QuickBooks as its main accounting and financial report system. SAP is used by some of the most sophisticated companies in the world.
Whether it is SAP or QuickBooks, the system must be programmed to reflect the proper accounting standards.
The reasons for mentioning SAP was to show that Amtrak has the tools to allocate properly its overhead expenses as well as perform a variety of accounting, finance, and inventory management tasks. As is frequently the case, you missed the main point in the post and focused on an ancillary point, i.e. SAP.
The Financial Accounting Standards Board (FASB) sets the standards that forms much of the basis for Generally Accepted Accounting Principles.
If you don't care about Amtrak's accounting policies, procedures, and practices, why did you respond to this post, which addresses a point regarding Amtrak's allocation procedures? They were raised in a previous post.
JPS1If you don't care about Amtrak's accounting policies, procedures, and practices, why did you respond to this post, which addresses a point regarding Amtrak's allocation procedures? They were raised in a previous post.
Because it is like the Abortion argument and goes back and forth and back and forth with no resolution. I think that is why that Sam lady or guy (or whatever gender they identified as) got irritated and left. Some of us got sick of seeing the same argument over and over again.
CMStPnP Because it is like the Abortion argument and goes back and forth and back and forth with no resolution. I think that is why that Sam lady or guy (or whatever gender they identified as) got irritated and left. Some of us got sick of seeing the same argument over and over again.
I believe Samatha (? exact name) and JPS1 are the same person. Both have a background in the utility business in Texas with some experience in Australia. They share the same general opinion of Amtrak's reporting, and both tend toward long, thoughtful posts on accounting matters. I don't know why he changed the screen name, nor does it matter much.
I'd suggest JP read the exact language of the accountant's certification. Ernst & Young recites the titles of the 5 statements for which they are being held accountable; any opinion E&Y might have regarding Amtrak internal cost allocations is not included but may have been privately communicated to Amtrak's Board or management.
In 1968 the ICC did a forensic accounting type investigation of all avoidable costs of Class 1 passenger train operation per train-mile (TM) and concluded they were about $6.5/TM in ($1968) using the cost ledgers that the ICC required, with investigation and some corrections for errors in assignment. The data was from an era of declining passenger volume and high remaining fixed costs after the cessation of 1st class mail carriage, with many underutilized union stations inflating fixed costs.
US ICC Investigation of Costs of Intercity Rail Passenger Service (1969) https://catalog.hathitrust.org/Record/000022941 (Page 25)
The ICC figure is about $47.0/TM in ($2016) after inflation adjustment for a long-term variable cost.
Amtrak reports Full Costs of about $70-80/TM today for much smaller, simpler long distance trains.
This is prima facie evidence that Amtrak is allocating large fixed costs onto the long distance trains using a formula that makes no sense when discussing cutting routes or services.
Previously the USDOT OIG determined that Amtrak’s methods used in RPS (Route Profitability System) are not appropriate to determine cost savings from the reduction of trains. It seems the formulas have survived into APT. I would not be surprised if they multiplied their hopefully internally known avoidable costs by 1.6 to get the full costs they report with no grounding in the reality of route costs.
Going back further, in a 1950 Industrial Engineering format study what we would now term the short-term avoidable cost of the Silver Meteor train was found to be $2.89/TM in ($1948) = $28.81/TM in ($2016) and this for a 17 car passenger train of coaches and sleepers. The addition of equipment capital costs, line-haul track costs, and intermediate stations would probably get one close to the ICC number.
Report on Streamline, Light-weight, High-speed Passenger Trains, Cloverdale and Colpitts Consulting Engineers. (1950) http://streamlinermemories.info/Reports/Report1950.pdf (Page 63)
It is interesting to note that the Silver Meteor was showing Net Revenue of $29 M ($2016), a profit on the 1948 operations
This profit was from an average (Coach/Pullman) fare of $0.24/passenger mile ($2016). Current coach fare is about $0.12/passenger mile, held artificially low by offsetting about $0.10/vehicle mile of the rather expensive costs of providing Interstate Highways onto taxes collected on the use of local roads paid for by local funds. Current Bedroom fares for (2) passenger are $0.74/mile on the Meteor two months out. http://www.nationalcorridors.org/df4/df06222015.shtml#Under
Finally, the train-mile cost values above are consistent with EU open operator values.
Amtrak’s reports are an anomaly from spreading fixed costs when they cannot be reduced.
The external auditors attest to the five financial statements. I did not claim that they attest to the company's cost accounting procedures.
The reference to FASB and GAAP was in response to a previous post that appeared to confuse the two, or at least did not show their relationship.
JPS1 began participating in these forums in February 2016. This is all you are going to know about JPS1. His or her bio data has nothing to do with the discussions on these forums.
Without direct knowledge of how Amtrak allocates its costs today, any conclusions about the appropriatness of its allocation procedures is speculation.
To try to apply 1950, 1968, and 1969 private rail figures to Amtrak 47-66 years later is (charitably) inappropriate.
Yes, the Amtrak costs should in fact be much less given the much reduced dining services and reduced consist sizes. That they are so much higher draws the cost reporting into question.
Remember, all the figures noted were inflation adjusted. Try as one may like, 1968 is the modern era. The steels like ASTM A242 all still exist today and are in use or have slightly different varities, wheels and rollerbearings are still nearly the same. Coaches built in 1965 are still in service with NCDOT.
HEP, PLC supervision for wheelslip and fire supression, engines, etc, and vacuum toilets are really the only differences.
Dakguy201I believe Samatha (? exact name) and JPS1 are the same person. Both have a background in the utility business in Texas with some experience in Australia. They share the same general opinion of Amtrak's reporting, and both tend toward long, thoughtful posts on accounting matters. I don't know why he changed the screen name, nor does it matter much. I'd suggest JP read the exact language of the accountant's certification. Ernst & Young recites the titles of the 5 statements for which they are being held accountable; any opinion E&Y might have regarding Amtrak internal cost allocations is not included but may have been privately communicated to Amtrak's Board or management.
OK well if true I am not going to get sucked into the Financial Arguments again, life is too short and as I pointed out with the BNSF rail accounting, the railroads were here long before the Utility Companies and their accounting is not the same, I can see arguing the financials of a specific type of passenger car but when you dive into the accounting of an entire passenger train........then roll in Amtrak on top.....it's just too opaque for anyone to make sense of.
So if Amtrak's accounting methodology for overhead allocation is unknown and disputed, rather than returning to the glorious days of 1968, let's look at an earlier post?
Rather than start a new thread, I see a connection with this article here:
Press the Enter key to select an item
For newly minted Amtrak President Charles Wickliffe (Wick) Moorman IV, a winter of discontent is nigh.
Amtrak is unlike the polished and profitable Norfolk Southern from which this Mississippi-bred civil engineer and son of college professors retired as president, chairman and CEO. Indeed, Amtrak, on life support since its 1971 creation, is a poster child for legendary talk-show host David Letterman’s signature empathy, “I wouldn’t give those troubles to a monkey on a rock.”
Neither U.S. presidential candidate shares President Obama’s passion for passenger rail spending; the electorate increasingly opposes higher taxes, more subsidies and bureaucracy; and Amtrak haters in Congress are a formidable force, successfully and progressively shifting financial responsibility for passenger trains to cash-strapped states.
Amtrak’s statutory dispatch preference over freight trains is under attack as neither absolute nor in perpetuity; a statutory provision allowing Amtrak to conspire with federal regulators to saddle freights with performance standards when hosting Amtrak trains was nullified by federal courts; and a Surface Transportation Board definition of “on-time” arrival of Amtrak trains on freight-rail track is ripe for court challenge.
Internally, Amtrak is troubled. Its top cop is ensnarled in a fraud and conflict-of-interest investigation over a $2 million contract given an alleged paramour. Previously, a chief engineer favored a neighbor with a $2 million consulting contract. Acela Express was plagued by 9,000 design changes, production delays and breakdowns that spawned extensive and costly litigation. Deception has been alleged in Amtrak financial accounting. And former presidents Tom Downs and George Warrington disingenuously proclaimed to Congress that Amtrak was on a “glide path to self-sufficiency.”
Recently, Amtrak was outed in a failed effort to suffocate commuter-operator competition by limiting access to Washington Union Station; Joe Boardman relentlessly changed out senior executives, many in essential safety positions; and Boardman, after citing declining revenue to justify limits on new hiring plus cuts in retiree health-care, pension benefits and departmental budgets, puzzlingly hired as a consultant the wife of a union boss deeply involved in Amtrak labor issues. As for Amtrak’s inspector general, charged with sniffing out waste, fraud and abuse, he serves at the pleasure of the Amtrak board.
While Amtrak’s White House-nominated and Senate-confirmed board of directors to which Moorman reports no longer is larded with political hacks, its oversight, given the above examples, is arguably weak. Moreover, it has passively allowed Amtrak senior management to ignore the loss of significant numbers of Northeast Corridor passengers to intercity bus operators offering more frequent departures and competitive trip times. Nor is there effort to partner with Uber—the world’s most valuable startup—to create a seamless “first” and “last” mile using an app to summon a car.
This all should be enough to make a preacher cuss, but Moorman, with his private-sector background, understands fully the tragedy of the commons—that when everybody owns something, nobody takes an ownership interest. Surely Moorman can encourage public-private partnerships injecting greater market-based disciplines.
The Federal Railroad Administration is writing rules to implement a congressional urging that up to three Amtrak long-distance routes be privatized—a pilot program to transfer, for up to eight years, 90% of Amtrak’s existing subsidy for that route to a responsible applicant proposing equal or better service.
Yes, it’s risky. Amtrak supporters fear that even limited privatization will further erode congressional support for a national interconnected rail passenger network. The reality is that Amtrak is an island of socialism in an American sea of capitalism, and the status quo cannot much longer endure.
Privatization also may be a viable solution for the 450-mile Northeast Corridor, whose price tag for renewal of century-old infrastructure, capacity expansion and increased train speeds conservatively exceeds $50 billion. Only an irrational romantic assumes Congress, which starves highway and other critical domestic infrastructure projects, will appropriate the funds.
The American Intercity Rail Network for the 21st Century (AIRNet-21), a public-private partnership prepared to invest $60 billion in NEC infrastructure renewal and expansion over 50 years, with zero from congressional appropriations, deserves Moorman’s attention, along with other responsible market-based alternatives to the status quo. Moorman has opportunity to transform a winter of discontent into a Casablanca-movie moment: Wick, this could be the beginning of a beautiful friendship with Congress and the American people.
Dave: Your post of someone's Yahoo e-mail will not display properly. So:
But possibly this should be deleted. Did not realize Randy was posting from Railway Age. Is posting this article legal and/or moral? Possibly the Moderator should review the situation?
Doubtful. People repost articles all the time, usually with links. It's free marketing for RA.
(from the RA article):
"Moreover, it has passively allowed Amtrak senior management to ignore the loss of significant numbers of Northeast Corridor passengers to intercity bus operators offering more frequent departures and competitive trip times. "
My guess is price has been the bigger factor (in the NEC), as with discount buses in Europe and the UK -- cheaper, though somewhat slower and less comfortable -- appealing to younger, budget-minded passengers. Different deal with Megabus in the Midwest.
The NEC should be looked at as part of the long distance train network as a Terminal Railroad. Many long distance passengers start or end there trips on the corridor so seperating the costs as just in the Northeast Corridor is a mistake....Not building other High Speed Corridors that string close cities together is also a problem since Amtrak tends to only benifit east coast and Chicagoland passengers. Certainly a midwest electric corridor is needed and if California does not fall into the Ocean because of her sins (Hollywood Types) we will will see a west coast high speed corridor soon as well.
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