Sam,
You and I make two.
Mac
PNWRMNM Sam1 In another post, I don't remember where it is located, a comment was made that the freight railroads lose hundreds of millions of dollars a year hoisting Amtrak's trains. Unless one has access to all of the freight railroads books, how would one know that? Sam, That was probably one of my posts since I seem to be he only one who cares about this issue. Mac McCulloch
Sam1 In another post, I don't remember where it is located, a comment was made that the freight railroads lose hundreds of millions of dollars a year hoisting Amtrak's trains. Unless one has access to all of the freight railroads books, how would one know that?
In another post, I don't remember where it is located, a comment was made that the freight railroads lose hundreds of millions of dollars a year hoisting Amtrak's trains. Unless one has access to all of the freight railroads books, how would one know that?
That was probably one of my posts since I seem to be he only one who cares about this issue.
Mac McCulloch
You are not the only one who cares about the issue. The freight railroads should be able to recover all the costs associated with hoisting Amtrak's trains. Forcing them to hoist Amtrak's trains without being able to recover the full cost of doing so is an expropriation of shareholder wealth. What makes it even worse is that it is a hidden expropriation.
By law the railroad can only bill ATK for marginal costs. Carriers can not bill ATK for delays to freight train incurred meeting ATK and ATK is required to have priority treatment. This is clearly a marginal costs that the carriers can not bill for! Railroading is a high fixed cost business so marginal costs are a small part of revenue and total cost.
One could make a reasonable estimate by getting what ATK pays host railroads per train mile from ATK reports.
One could make reasonable estimate of the value of a train slot by taking average revenue per freight train mile and removing fuel, labor and equipment costs. The remainder would be the value of the slot per train mile. Subtract ATK payment from value and that is what the freight carriers are subsidizing ATK per train mile. Multiply by ATK train miles on freight carriers on an annual basis. See freight carrier's R1 report. ATK probably also has to file an R1 but I have never looked for it. This figure is biased low since it does not include the cost of ATK caused delay to freight trains.
IIRC you were in the utility business. If you were required to wheel power for someone else at marginal cost what costs could you include? Certainly not depreciation on the transmission lines and transformers. I would expect that power wheelage fees are based on average costs, not marginal costs, and I would expect the average costs to include a return on invested capital.
The habit of abusing freight carriers dies hard in the hallowed halls of congress.
PNWRMNM Sam1 The hoist carriers may pass some depreciation through to Amtrak in their billings. Again, without being able to look at the books, we simply don't know. Sam, Freight railroads "hosting" ATK can not pass thru their MofW depreciation. All they get is marginal cost, which is next to nothing. Mac McCulloch
Sam1 The hoist carriers may pass some depreciation through to Amtrak in their billings. Again, without being able to look at the books, we simply don't know.
The hoist carriers may pass some depreciation through to Amtrak in their billings. Again, without being able to look at the books, we simply don't know.
Freight railroads "hosting" ATK can not pass thru their MofW depreciation. All they get is marginal cost, which is next to nothing.
The freight railroads supposedly bill Amtrak for the cost of hoisting its trains. Included in the hoist railroad's costs would be depreciation. Clearly, any depreciation that flows through to Amtrak would be very small.
How do you know that they don't include a small amount of depreciation in their billings to Amtrak. I know that they cannot flow through any taxes, but I was not aware that they cannot flow through any depreciation.
Amtrak's trains hoisted by other carriers have equipment depreciation. Amtrak depreciates equipment (locomotives and cars) in groups up to 42 years, which probably means that the newer equipment is still incurring some depreciation and embedded interest charges, albeit relatively little.
jeffhergert John WR PS. Where does this leave Don Phillips' point? If the current Acela has a large but hidden deficit then certainly new Acela service on a whole new rail line would have a much larger deficit. Yet many people -- and I confess to being one of them -- believe northeast rail service must be continued because we simply have run out of space for more roads and planes. So deficit or no we need northeast rail service. But how do you feel about LD trains such as the California Zephyr, Empire Builder or the Southwest Chief, etc.? Not wanting to speak for anyone, but I've always thought of Don Phillips as an Amtrak supporter. All of Amtrak, not just the corridor or state sponsored local services. It may be he is afraid that at by showing the LD service as big money losers, Amtrak may be thinking about shedding these trains. Something like the plans of the MILW RD (successful) or the RI (unsuccessful) to shrink down to a "profitable" core system. Or at the very least, Amtrak themselves saying the LD service is a money pit akin to the Grand Canyon, it gives critics who want to shut down most, if not all, of Amtrak fuel for their fire. I doubt that he's against Acela trains, or even the expansion of them. He just might think all the services should be treated the same when it comes to the way they are accounted for. Jeff
John WR PS. Where does this leave Don Phillips' point? If the current Acela has a large but hidden deficit then certainly new Acela service on a whole new rail line would have a much larger deficit. Yet many people -- and I confess to being one of them -- believe northeast rail service must be continued because we simply have run out of space for more roads and planes. So deficit or no we need northeast rail service.
PS. Where does this leave Don Phillips' point? If the current Acela has a large but hidden deficit then certainly new Acela service on a whole new rail line would have a much larger deficit. Yet many people -- and I confess to being one of them -- believe northeast rail service must be continued because we simply have run out of space for more roads and planes. So deficit or no we need northeast rail service.
But how do you feel about LD trains such as the California Zephyr, Empire Builder or the Southwest Chief, etc.?
Not wanting to speak for anyone, but I've always thought of Don Phillips as an Amtrak supporter. All of Amtrak, not just the corridor or state sponsored local services. It may be he is afraid that at by showing the LD service as big money losers, Amtrak may be thinking about shedding these trains. Something like the plans of the MILW RD (successful) or the RI (unsuccessful) to shrink down to a "profitable" core system. Or at the very least, Amtrak themselves saying the LD service is a money pit akin to the Grand Canyon, it gives critics who want to shut down most, if not all, of Amtrak fuel for their fire.
I doubt that he's against Acela trains, or even the expansion of them. He just might think all the services should be treated the same when it comes to the way they are accounted for.
Jeff
Agree. But, the problem is "treated the same" and "treated fairly" aren't always the same thing and often subject to interpretation. Too often the interpretation depends on the outcome you wish. Both sides know it and are quick to point the finger at the other.
I would bet that the LD trains ARE treated the same at all other Amtrak trains on the NEC - costs allocated per train/car/axle. It's just that some would say that's not fair. Why should the LD trains have to pay for expensive, high speed tracks they don't need?
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
...and we haven't even begun to talk about the opportunity cost of train operation. What if the LD trains didn't operate on the NEC. What is the value of what could fill their slots on the railroad. More NJT commuters? More Acela riders? More trains in generals since the 110 mph LD trains wouldn't be in the way of the 125/135 mph trains. A chance to turn the order for those 125 mph baggage cars into coaches?
John WRNo one is going to pay you money for saying "Amtrak is doing all the right things."
Worse, they might lock you away!
oltmannd Probably the most straightforward way - linearly by train-mile or car mile since all traffic takes advantage of the high speeds available as best they can. So, it is "unfair" that those LD trains have to pay for a proportional share of track ownership and maintenance that they don't "need". But, to try to add a factor based on commercial need or, to a lesser extent, exactly which trains are causing the most wear and tear would be a nightmare.
Probably the most straightforward way - linearly by train-mile or car mile since all traffic takes advantage of the high speeds available as best they can.
So, it is "unfair" that those LD trains have to pay for a proportional share of track ownership and maintenance that they don't "need". But, to try to add a factor based on commercial need or, to a lesser extent, exactly which trains are causing the most wear and tear would be a nightmare.
Or perhaps several nightmares. But it is also an opportunity for commenters who want to take a somewhat different position. The obvious reason is that a person has a different political position. But there is another reason. There is a group of people -- some call them the "chattering classes --" who earn their living because of their writing skills and often have limited knowledge of their subject. They need things to write about. No one is going to pay you money for saying "Amtrak is doing all the right things." They have got to charge Amtrak is doing some wrong things if they hope to get attention. So the nightmares can pay off.
MP173 Mac:Great explanation on the depreciation of the NEC and how it effects Amtrak. Owning your own railroad is an expensive proposition. Ed
Mac:Great explanation on the depreciation of the NEC and how it effects Amtrak. Owning your own railroad is an expensive proposition.
Ed
...when you can only charge the tenets your marginal cost for hosting them. That's like a hotel only changing you for the cost to wash your towels and power the TV.
Of course, Amtrak's NEC is like staying at the Plaza for NJT et.al. and like the Taj Mahal for NS!
That whole LD cost sharing of the NEC thing is most likely about cost allocation rules within Amtrak.
Remember, now, that the NEC has all this nice class 6 track that cost a bundle to keep in shape for 125+ mph service.
You absolutely have to have this for Acela, and even the conventional service to work.
It's "nice to have" for the commuter operators but it doesn't kill their business not to have it.
The LD trains don't really need it at all. 80 mph up the NEC would only add an hour or so to 20+ hour trips. Nobody's buying tickets because of the speedy trip times. You only need to have class 4 track track for this.
So, how does Amtrak allocate their cost of owning and maintaining this high speed track appropriately? Probably the most straightforward way - linearly by train-mile or car mile since all traffic takes advantage of the high speeds available as best they can.
PNWRMNMI do not see how ATK as a whole benefits. I do see how it supports the narrative that ATK needs more Acela train sets.
I agree, Mac. Amtrak is taking this narrative and running with it. They propose not only to buy more Acela trainsets; they also want to build a whole new rail line between New York and Boston. This line, if built, would be a sort of corridor line that would serve the end points. Under current legislation it should be built by the states it passes through but there is no suggestion here that anyone but the Federal Government would fund it. Of course, Connecticut and Rhode Island might be reluctant to fund it since it would not serve those states. Would New York and Massachusetts fund such a line? Well, Amtrak does not propose that.
But the narrative is still there. And I think it will stay simply because so many people agree with this particular narrative.
John
John,
I do not see how ATK as a whole benefits. I do see how it supports the narrative that ATK needs more Acela train sets.
Mac,
Phillips argues that Amtrak benefits my minimizing Acela losses or even showing an Acela profit while maximizing losses on long distance trains that use the Northeast Corridor. I just don't see how Amtrak benefits.
schlimm The bottom line {pun sort of intended} is that we don't really know the breakout for depreciation for Acela (NEC) vs. LD routes, as sam1 pointed out. And we do not know if Don Phillips is accurate or what his agenda is, just as Joe Boardman undoubtedly has one also.
The bottom line {pun sort of intended} is that we don't really know the breakout for depreciation for Acela (NEC) vs. LD routes, as sam1 pointed out. And we do not know if Don Phillips is accurate or what his agenda is, just as Joe Boardman undoubtedly has one also.
We know with regard to fixed plant. Anything operating on freight carrier is ZERO depreciation. On NEC ATK is exposed to 100% of the depreciation. ATK can not manipulate those figures. What they can do is choose a basis of allocation that favors one service over another on the NEC.
C&NW, CA&E, MILW, CGW and IC fan
Convicted One A thought occurred to me while I was awaiting your reply. Phillips states that the costs triple once the long distance trains are on home rails. I wonder if the cost structure that the long distance trains incur once on the NEC varies from that which they must support when running on lines owned by the freight railroads BECAUSE of the nature of the agreement with the freights? In theory, with more trains using the freight lines, fixed costs are spread over more trains POSSIBLY resulting in the passenger trains having a smaller share to support? Anyone know?
A thought occurred to me while I was awaiting your reply. Phillips states that the costs triple once the long distance trains are on home rails.
I wonder if the cost structure that the long distance trains incur once on the NEC varies from that which they must support when running on lines owned by the freight railroads BECAUSE of the nature of the agreement with the freights?
In theory, with more trains using the freight lines, fixed costs are spread over more trains POSSIBLY resulting in the passenger trains having a smaller share to support? Anyone know?
Three things are happening.
First the LD trains are paying only a small (5-10%) fraction of the market value of the capacity they consume. The freight carriers are subsidizing the LD trains to the tune of hundreds of millions of dollars per year.
Second, since ATK owns the NEC it is faced with the full cost of ownership of the line. No subsidy from the freight carriers.
Third, the commuter carriers are in the same situation as ATK is on the freight carriers, the commuters pay only marginal cost of the capacity they consume. That is far less than full cost so ATK is subsidizing the commuters. As an example assume full cost of ownership is $110,000 per mile. Assume 40 ATK moves per average day and 80 commuter moves per average day. The 80 commuters pay only marginal cost which we will assume to be $10,000 per year, so ATK has net cost of $100,000. For simplicity allocate on basis of train miles, or train count since we are only dealing with 1 mile. Each ATK train is charged $2,500 for this mile per year. If all trains were charged at the full rate. would be $110K/120 or $916.66 per train. Huge subsidy to commuters.
A separate issue is the basis of allocation as between a LD train on NEC and Acela. Different basis will yield different results. We did train miles above. Car miles would charge long trains more than short ones. If I was trying to make Acela look good, and assuming it is lighter than LD trains, then I would allocate on ton-miles, or tons in this case. Choice of allocation method is probably allowed under the accounting rules. Left to myself, I would allocate on train miles since it is best single proxy for use and can be reasonably applied to a variety of expenses like dispatch and supervision. Ton-mile basis makes sense for track maintenance, but not for fixed plant depreciation and not for dispatching and supervision.
Murphy SidingI wonder if the cost structure that the long distance trains incur once on the NEC varies from that which they must support when running on lines owned by the freight railroads BECAUSE of the nature of the agreement with the freights?
Yes. Partly. The other part is that 125 mph class 6 ROW is mucho costly to keep. Class 4 track is much simpler.
Hey Murphy, that's a very long word.
Thanks to Chris / CopCarSS for my avatar.
John WR .............. It seems like a loose -- loose strategy.
.............. It seems like a loose -- loose strategy.
Convicted OneI am in no way accusing Amtrak of unlawful or illegal conduct.
OK. But there is a snag. Based on the information Don Phillips provides, in order to reduce the losses or show a profit on the Acela it is necessary to increase the losses shown for the long distance trains that use those tracks. By increasing the long distance losses the arguments of those who say long distance passenger trains cost too much are supported. And by showing a profit or small loss for Acela you the arguments for those who say it should be sold to the private sector are supported. It seems like a lose -- lose strategy.
John WR it does not follow that Amtrak does. After all, all of us can lie, cheat and steal. But all of us do not do so.
Nor,I might add, is your preferred outlook any assurance that they don't.
And, let me be abundantly clear about this, I am in no way accusing Amtrak of unlawful or illegal conduct. There is ample opportunity to shade the books within the law, while perhaps only skirting issues that touch more on ethics, than law.
Bottom line, if an authority having the final say has the inclination to sift through the books and make creative allocations and slanted amortization schedules to penalize their perceived 'red headed stepchild' segments of their operations, while giving "fair haired son" segments of their operations completely different treatment.....neither your nor my personal preferences are going to be able to do a thing to stop them.
John WR oltmanndHave you never seen "Dr. Phil"? Yes, I have never seen Dr. Phil. I looked him up on Wiki. I hope to continue never seeing him.
oltmanndHave you never seen "Dr. Phil"?
Yes, I have never seen Dr. Phil. I looked him up on Wiki. I hope to continue never seeing him.
There are no shortage of folk who don't think - or at least act - rationally.
Convicted One Well, I finally read Phillip's June article, and there is not a doubt in my mind that he is spot-on about Amtrak's Inclusion of EVERY CONCEIVABLE COST charged against it's long distance trains (including sleeper service) in it's accounting. And it wouldn't surprise me if they were likewise cherry picking their ACELA figures to make their pet project look better than it is. I used to have an extremely wealthy and cost savy employer. (Iron fisted sole proprietorship), and a large part of my job was to establish working budgets for projects we were contemplating.
Well, I finally read Phillip's June article, and there is not a doubt in my mind that he is spot-on about Amtrak's Inclusion of EVERY CONCEIVABLE COST charged against it's long distance trains (including sleeper service) in it's accounting. And it wouldn't surprise me if they were likewise cherry picking their ACELA figures to make their pet project look better than it is.
I used to have an extremely wealthy and cost savy employer. (Iron fisted sole proprietorship), and a large part of my job was to establish working budgets for projects we were contemplating.
While your previous employer may have engaged in certain questionable practices it does not follow that Amtrak does. After all, all of us can lie, cheat and steal. But all of us do not do so.
It is hard to understand how the costs of many long distance trains can be charged to Northeast service when many such trains do not come remotely near the Northeast corridor.
Amtrak may we well able to explain its accounting practices. However, Don Phillips never asked Amtrak to respond to his allegations. As a result the article is kind of one sided.
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