Alaska Railroad Passenger Operations

[CMStPnP]

Are the Alaska Railroad Passenger trains profitable or do they lose money? 

 Because Alaska has to be one of the least densly populated states in the country........and yet they have rail passenger service and from the online brochures the trains look fairly decent.

[CMStPnP]

OK found something, passenger revenue was 20 percent of total Alaska railroad revenue according to the article linked below.    The railroad is profitable and recieves no state subsidy for the rail passenger service........

https://www.adn.com/business-economy/2018/04/10/alaska-railroad-returned-to-profitability-in-2017/

 Article is not entirely clear that passenger operations are profitable and by how much.

[beaulieu]

Passenger operations are profitable because the Cruise Lines contract with ARR to haul their passenger cars from Seward into Anchorage, Denali Park, and Fairbanks. ARR tacks on a few cars of its own to the train. 

[JPS1]

 

In 2017 the Alaska Railroad had total revenues of $165.2 million, of which $107.8 million was attributable to transportation and $57.4 million was from grants.  Operating expenses totaled $158.7 million.  The operating profit was approximately $6.4 million.  Non-operating revenues, e.g. real estate, net interest, and grants totaled $15.9 million, thereby resulting in net income for 2017 of approximately $22.3 million.

 

In 2017 the Alaska Railroad carried approximately 506,000 passengers, which was an increase of 2.4 percent over 2016. 

 

Passenger revenues were $35.4 million.  Direct passenger operating expenses were $13.5 million, which resulted in an operating profit of $21.9 million before allocation of overhead and capital expenses.  

 

Assuming the overheads were allocated to passenger operations in the same ratio as passenger direct operating expenses to total operating expenses before allocation of overheads, the overheads allocated to passenger operations would have been approximately $32.2 million, thereby leaving a fully allocated operating loss for passenger operations of $10.3 million.  Of course, the allocation of the overheads is just a guess. 

 

If the ratio of passenger revenues to total revenues was used to allocate the overheads, the fully allocated overheads allocable to passenger operations would have been $23 million, thereby leaving a fully allocated operating loss of $1.1 million.  Another guess using numbers from the 2017 Alaska Railroad Annual Report!

 

If the grant monies were allocated to passenger operations in the same ratio of passenger revenue to transportation revenue, the amount would have been $18.7 million, which would have more than covered the operating losses in the two scenarios presented above. 

 

Without access to the company’s books, it is impossible to know whether passenger operations covered their fully allocated expenses.  Without any allocation of the grant monies, the answer probably is no; with allocation the answer probably is yes.

[matthewsaggie]

What was the source and purpose of the grants you mention?

[JPS1]

matthewsaggie

 What was the source and purpose of the grants you mention? 

Federal Transit Administration.  Apparently, the railroad and Anchorage split the grant, although they have fussed about the split on occasion.  The railroad has been using its share of the grants for capital purposes.  

According the several sources, there is a plan afoot to have the railroad operate a commuter service into Anchorage.  This would help explain the reason for the FTA grants.  It may be that some of the capital expenditures for the service are to be covered by the FTA grants.  

In 2017 the grants accounted for 31 percent of the railroad’s revenues.  The railroad has also benefited from direct and indirect help from the state.  Based on a review of the company’s 2017 Annual Report, the notion that the railroad is not subsidized is not correct.

As an aside, one of the residents in the active adult community where I live is a retired Alaska Railroad Manager.  He has told me that the railroad could not make it on its own. 

[CMStPnP]

matthewsaggie

What was the source and purpose of the grants you mention?

Read the attached 5 year capital improvement plan:

 https://www.alaskarailroad.com/sites/default/files/Communications/2018_Report_to_State_Dec2017.pdf

They are a state corporation and they made the statement they have not recieved state funding in the last few years because they used to be run by the state DOT.   I believe they made that statement because they need to replace the passenger dock in Seward and currently lack funds to do that.   Though I think the Cruise lines should pay for that.......it will probably be a state project.

The FTA grants on an annual basis is based on the argument that the passenger service across the state operated by ARR provides an essential transportation or "transit" service for residents that live there.    It is a stretch of the definition of what "transit" funds should actually be used for.   See timetable for the Alaska Passenger train labeled the AuRoRa.    It is not a cruise train per se but is a flagstop by residents along the ROW type train........thats the "transit" part of their passenger service.

[BaltACD]

CMStPnP

It is not a cruise train per se but is a flagstop by residents along the ROW type train........thats the "transit" part of their passenger service.

What more is transit but to move a person(s) from one online location to another online location.  In Alaska it is not mass transit, but it is transit.

[JPS1]

The Alaska Railroad Corporation is the offshoot of three predecessor railroads, i.e. Alaska Central Railroad, Alaska Northern Railroad Company, and Tanana Valley Railroad. 

 

The Alaska Northern Railroad Company acquired the Alaska Central Railroad in 1909.  The federal government bought the Alaska Northern Railroad Company in 1914.  It took control of the Tanana Valley Railroad in 1917 and merged all three into what eventually became the Alaska Railroad Corporation.

 

During the years immediately following the purchase of the property by the U.S. Federal Government, the railroad was under the control of the U.S. Department of the Interior.  In 1967 control was transferred to the Federal Railroad Administration.  In 1985 Alaska bought the railroad from the U.S. Government. 

 

As per Management’s Discussion and Analysis on Page 1 of the 2017 Alaska Railroad Annual Report, “the ARRC is a component unit of the State of Alaska and operates as a stand along business. 

 

The ARRC is subject to the jurisdiction of the Surface Transportation Board, and the ARRC’s rates for services are established by its board of directors and designed to recover the cost of providing the service.   The financial statements report information about the ARRC using accounting methods similar to those used by private sector companies.”   

[CMStPnP]

JPS1

In 1967 control was transferred to the Federal Railroad Administration.

Which I believe at that time and at the time of transfer to the state was subordinate to the DOT.

Ronald Reagan signed the authorization to transfer control of the ARR from the DOT (FRA) to the state in 1983.

Clearly the DOT was the parent agency in charge of the railroad via either FRA budget or FRA personnel.    It was the DOT that signed off on the transfer of the railroad to the state, more specifically Secretary of DOT Elizabeth Dole specifically signed the inventory of railroad property in 1983 in order to establish a valuation for the property by the USRA for sale (later in timeline).

Alaska Railroad is a State Corporation regardless of how they word it.   It does not contribute it's dividends to the state as other State Corporations do    However, it reports to the state.   I believe in 1996 the Federal Grants and funding started as that is when the ARR first qualified for Federal Support.    The State tried to sell ARR to private interests in the not too distant past but it failed either a vote in the State Assembly or Senate.    Never came up again, so as far as I know the state still owns the railroad.

[JPS1]

CMStPnP

In 1967 control was transferred to the Federal Railroad Administration. 

True.  In 1967 the Federal Railroad Administration was part of the U.S. DOT.  

"The State of Alaska legislature created the Alaska Railroad Corporation (ARRC), a component unit of the State of Alaska, to own and operate the railroad and to manage the railroad’s rail, industrial, port, and other properties.   

The ARRC is an enterprise fund of the State of Alaska. Accordingly, the financial activities of the ARRC are reported using the economic resources measurement focus and the accrual basis of accounting, whereby revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows."

At the end of FY17 the ARRC enterprise fund had a net position of $338.6 million, an increase of $22.4 million over the FY16 surplus.  ARRC does not pay dividends, but it could transfer some or all of the surpluses in the enterprise fund to the general fund.  To know whether it has done so would required going through ever fund and cash flow statement since the railroad was acquired by Alaska.

I could not find any evidence that the Alaska Railroad was ever part of the Alaska Department of Transportation. 

[jtfftj]

From personal experience, the passenger service on the Alaska Railroad is expensive, but the service experience is fantastic. The trains are clean. the equipment is new, built in the 21st century. Meals and 2 adult beverages are included in the first class fare, with food prep and service on the lower floors oftheir double deck cars. Passengers enjoy scenery from the glass domed upper level and/or exterior viewing platform. Coach passengers can enjoy a variety of food items either freshly cooked or at least finished in the snack car. In short, superior in every category to Amtrak.

[Sunnyland]

glad to hear they are doing well.  Rode them as part of our land package with Princess Tours, but we flew into Anchorage and then after a few  days, we took train to Denali, overnight, and then onto Fairbanks for a couple of days. Train was crowded and this was before the cruise lines started putting their fancy cars on the train, but we did have a dome car that belonged to ARR.  We were supposed to fly on to Whitehorse and be bused to Skagway. But there was a wildcat strike on our ship and we were offered the option of taking a bus all the way to Skagway to catch the next ship or be flown home with full refund.  My friend and I opted for this and we were refunded the full amount, even though we had already been in AK for a week and got $1800.00 credit for following year cruise, which we did. So we had 2 free trips to AK.  Only bad thing was the WP&Y had not started up yet, that happened a couple of years later.  

[CMStPnP]

In the footnotes to one of their financial reports it was stated that the Alaska Railroad bought most of it's passenger cars from the Union Pacific prior to Amtrak purchase in 1971.    That would explain their longevity all those years without being touched by the butchers of Beech Grove. :)   

I remember when Alaska sent their railcars to the states to be rebuilt it was Northern Railcar in Milwaukee that did the work for at least one of the contracts.

[Electroliner 1935]

Believe they had bought some new passenger coach cars from Korea when my wife & I were there in the 90's.

[GARY WHITT]

The Alaska Railroad has received probably at least $200 million dollars from the federal government for various reasons--track replacement, bridge reconstruction,equipment. From what I have read, this is more subsidy than other railroads. Someone quoted that grants totaled over 30% of annual revenue.

[JPS1]

GARY WHITT

The Alaska Railroad has received probably at least $200 million dollars from the federal government for various reasons--track replacement, bridge reconstruction,equipment. From what I have read, this is more subsidy than other railroads. Someone quoted that grants totaled over 30% of annual revenue. 

The Alaska Railroad is dependent on the federal and state governments for grants, which made up 28 percent of revenues in 2018, 32 percent in 2017, and 30 percent in 2016.   

 

State and federal cash grants received in 2018, 2017 and 2016 totaled $141.5 million.  Grants help cover operating expenses, interest expense and capital expenditures. 

 

Federal grants were used for 54.4 percent and 38.1 percent of capital expenditures in 2018 and 2017 respectively.