Murphy Siding, the cost is somewhat of a factor,
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.
And the disparity was amazing just how ruthlessly cost conscious he was (at the 'build-it/pass-on-it' point of consideration) for projects he really wasn't all that interested in, while at the same time reckless to the point of cost negligence for projects he had a personal favor for. In the former he would insist upon charging costs against the project which he was going to have to pay regardless if the project was done or not. While in the latter, he would scoff at my inclusion of the very same costs to be charged against his pet projects.
Since I've "been there, done that", it requires no imagination what so ever on my part to believe Phillips knows what he is talking about here. This will likely be a big part of any consideration whether or not to abolish the long distance services.
John WR Every known society in the history of the world has had government. Government is not going to go away. Not only railroads but also all businesses must live with government. That is simply the way things are. Government is a great many people on a great many levels engaged in governing. This is what you call regulation. Sometimes people in government make mistakes. Sometimes people in private industry make mistakes. When it comes to American railroads I think people on both sides have at times made mistakes. Historically, wheat farmers and farmers who raised other grains have not always agreed that they were best served by unregulated railroads. Because of that the Grange movement emerged and that movement was a strong force for the regulation of railroads. The farmers did not regard themselves as worse off because railroads were regulated. The United States has always had government. We have had railroads for most of our history. At different times there have been different relationships between the government and railroads. While the relationship has not by a long shot been perfect I think it has not been a complete failure either.
Every known society in the history of the world has had government. Government is not going to go away. Not only railroads but also all businesses must live with government. That is simply the way things are.
Government is a great many people on a great many levels engaged in governing. This is what you call regulation. Sometimes people in government make mistakes. Sometimes people in private industry make mistakes. When it comes to American railroads I think people on both sides have at times made mistakes.
Historically, wheat farmers and farmers who raised other grains have not always agreed that they were best served by unregulated railroads. Because of that the Grange movement emerged and that movement was a strong force for the regulation of railroads. The farmers did not regard themselves as worse off because railroads were regulated.
The United States has always had government. We have had railroads for most of our history. At different times there have been different relationships between the government and railroads. While the relationship has not by a long shot been perfect I think it has not been a complete failure either.
C&NW, CA&E, MILW, CGW and IC fan
Bravo Greyhounds!
Mac
John WR So all of the people involved acted in their own best interest. Which is something all human beings do.
So all of the people involved acted in their own best interest. Which is something all human beings do.
The difference is significant.
In a free will/free market transaction there is a welfare gain by all parties involved. Otherwise, the transaction would not occur.
I'll give a trivial example that demonstrates the point, then expand it to explain why government economic transportation regulation hurts the people. The government types, acting in their own best interest, will seek to expand their power by prohibiting free market transactions. That's how they hurt the people while pursuing their own best interest. This is different from free people pursuing their own best interest by making free will, free market transactions which benefit all involved.
Example:
I really like bi-color fresh picked sweet corn. I go to farmers' markets and buy it when I can. When I make the exchange of my money for the corn I realize a gain in my wellbeing. The corn is worth more to me than the money I have. Otherwise, I wouldn't buy it.
Conversely, the farmer values my money more than he/she does his/her corn. When we freely exchange for a what we know to be a greater value to us we both realize a wellbeing gain. Expand this small transaction out to include all products and services in the US economy and you get a overall net welfare gain for the society as a whole.
By each of us non-government types acting in our own best interest we not only improve our own situation, we improve the overall wellbeing of the nation's people by growing the economy. The wealth of a nation is created by such free will, free market transactions.
End Example.
On the other hand, government types involved in economic regulation seek to pursue their own best interests (gain power) by prohibiting free will/free market transactions. This reduces the wealth of the nation but benefits the government types. While my purchase of the corn benefited all involved, government economic regulation harms people, except for the government types and groups with political connections. Very unlike the free will, free market transaction.
In transportation (rail, truck, air, etc.) the government types were more than willing to embrace the chants of groups seeking economic gain by restricting free market transactions. Why not? The government types wanted power and the public be damned.
Think of what a railroad does. The railroad corporation pursues its own best interest by enabling others to pursue their own best interest. (No one would ship anything on a railroad unless they realized a net benefit in doing so. Kind of like my purchase of the corn.) By using a railroad a Kansas wheat farmer has access to buyers all over the world. He/she can sell to the buyer who will most benefit from the wheat while gaining the most from the sale. This increases the wealth of our nation. Which is a good thing. Without that wealth creation we have no money (wealth) for schools or hospitals.
When the government gets involved it restricts the ability of the railroad (or trucking company, airline, etc.) to enable others to pursue their own best interests. This harms our people.
That's the difference. Government acting in its own best interest is harmful. A free people freely acting in their own economic best interest is beneficial.
Murphy SidingThe selling price of anything is dependant on what the market will bear, based on supply and demand. For example, my opinions are woth nothing, as opinions are everywhere, and everyone gives them away for free
You make a fascinating observation, Murphy. Do you mean that if I stop offering my opinions her the supply will go to zero. That will push up the demand so I will be able to sell them?
John
Convicted One oltmanndYes, and maybe it isn't quite as stiff as we think it is.. Well, if in fact operating cost is in no way a factor used in calculating fares (obligatory mention that I have seen no actual proof of that here, btw) then the true foundation of Amtrak's shortcomings become more obvious
oltmanndYes, and maybe it isn't quite as stiff as we think it is..
Well, if in fact operating cost is in no way a factor used in calculating fares (obligatory mention that I have seen no actual proof of that here, btw) then the true foundation of Amtrak's shortcomings become more obvious
Thanks to Chris / CopCarSS for my avatar.
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.
Have you never seen "Dr. Phil"?
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
CSSHEGEWISCH As most of you know, BRC is a joint subsidiary of the Big 6 Class 1's (BNSF, CN, CP, CSX, NS, UP). If a specific run has not been pre-blocked at an outlying yard like for a specific connection, it's probably easier and cheaper to run it to Clearing and let BRC do the classification.
As most of you know, BRC is a joint subsidiary of the Big 6 Class 1's (BNSF, CN, CP, CSX, NS, UP). If a specific run has not been pre-blocked at an outlying yard like for a specific connection, it's probably easier and cheaper to run it to Clearing and let BRC do the classification.
Agree. It's not all bad just because it's expensive on a per unit basis.
MP173 Oltman:$10 to $30 per humped car seems pretty reasonable to me, I anticipated more. A few years ago I was bored and spent an hour on the Chicago Fort Wayne and Eastern tariff. IIRC properly there was either a $300 or $600 per car fee for cars rolling thru the IHB yard. Granted, there was more done than classification as CFE used IHB trackage rights to Tolleston, but that seemed really excessive. Why do so many trains go thru BRC? CSX by my count has 9 and NS has 4 (could be incorrect on both of these). Is it due to lack of classification capacity in Chicago?Ed
Oltman:$10 to $30 per humped car seems pretty reasonable to me, I anticipated more.
A few years ago I was bored and spent an hour on the Chicago Fort Wayne and Eastern tariff. IIRC properly there was either a $300 or $600 per car fee for cars rolling thru the IHB yard. Granted, there was more done than classification as CFE used IHB trackage rights to Tolleston, but that seemed really excessive.
Why do so many trains go thru BRC? CSX by my count has 9 and NS has 4 (could be incorrect on both of these). Is it due to lack of classification capacity in Chicago?Ed
More due to the lack of capacity just upstream and downstream from Chicago at places like Elkhart and Bellevue and the ability to do enough pre-blocking to move the freight through Chicago. BRC charges 2-3X what it cost to do the classification elsewhere.
You try to build blocks for your interchange partners so they can take the traffic decently deep into their territory, but there are limits to how many blocks you can make, how many they can take and how far those blocks might take the "dribs and drabs" out of their way. There might be more efficiency if each road thought the other wasn't trying to "pull a fast one." All of this conspires to keep the BRC, IHB et. al. in business.
BaltACD There are two things that can be argued without end - Accountants and psuedo Accountants arguing how to 'accurately' account a company they have no 'inside' information about Engineers and psuedo Engineers arguing on the intricacies and application of the various formulae concerning dynamic engineering situations.
There are two things that can be argued without end -
Accountants and psuedo Accountants arguing how to 'accurately' account a company they have no 'inside' information about
Engineers and psuedo Engineers arguing on the intricacies and application of the various formulae concerning dynamic engineering situations.
Spot on! Unless one has access to Amtrak's accounting records they don't know how much depreciation is assigned to any capital investment. All we know from the public information, which as corporations go, Amtrak is pretty forthcoming, is the total depreciation charged to the income statement.
John WR greyhoundsThey greatly restricted the line haul routes allowing almost no deviation. (US Highway 6 west to the junction with US Highway 45, then south to state route 17, etc.) Thank you for this fascinating explanation of what was wrong with regulating the trucking industry. I hope I may be allowed a question: Exactly how did the ICC enforce their regulations on trucks? A railroad can only operate on railroad tracks. A truck, however, can operate on any highway except those from which they are legally restricted. And a local truck driver knows his local roads. So what is there to prevent a local truck driver from simply driving from the pick up point to the delivery point despite ICC restrictions? Truck drivers are professionals who know the rules of the road and do not violate them; generally there is no reason for the police to pull over a truck. So what is to stop a truck driver from driving the obviously sensible route?
greyhoundsThey greatly restricted the line haul routes allowing almost no deviation. (US Highway 6 west to the junction with US Highway 45, then south to state route 17, etc.)
Thank you for this fascinating explanation of what was wrong with regulating the trucking industry. I hope I may be allowed a question: Exactly how did the ICC enforce their regulations on trucks?
A railroad can only operate on railroad tracks. A truck, however, can operate on any highway except those from which they are legally restricted. And a local truck driver knows his local roads. So what is there to prevent a local truck driver from simply driving from the pick up point to the delivery point despite ICC restrictions? Truck drivers are professionals who know the rules of the road and do not violate them; generally there is no reason for the police to pull over a truck. So what is to stop a truck driver from driving the obviously sensible route?
"Well the ICC is a checkin' on down the line
I'm a little overweight and my log book's way behind
But nothin' bothers me tonight
I can dodge all the scales all right
Six days on the road and I'm gonna' make it home tonight"
From "Six Days On the Road" sung by the late Dave Dudley
http://www.youtube.com/watch?v=wHbGhEfnh2E
That's from a song about an independent owner operator trucker. Those guys often moved commodities that were never regulated, i.e. lettuce. They worked for themselves and broke (and continue to break) every rule they could get away with breaking. That's not applicable to the regular route carriers, which were the carries I was specifically writing about. The O/O's didn't move a lot of LTL, which was regulated, unless it wasn't, as in the case of lettuce. (All rail movement of lettuce was regulated. No truck movement of lettuce was regulated. Guess who wound up hauling the lettuce.)
The regular route carriers were corporations whose employees were paid by the hour. These employees were almost universally organized by the International Brotherhood of Teamsters. Now there's is a big difference between the motivations of an independent O/O working for himself and an hourly unionized worker.
The unionized worker had no incentive to break rules which promoted inefficiency. He, and his union brothers, benefited from the inefficiency. If he bypassed the terminals he took work away from the dock workers, who were also Teamsters. If he got to his destination sooner he cut his own paycheck.
If an LTL carrier did cheat they were very quickly turned in by the union.
The ICC did have an enforcement division which did go out and check as best it could. But they got a lot of help from people who liked the fact that the system was inefficient and wanted to keep it that way.
But this wasn't "The" problem with motor freight regulation. The problem with the regulation was that it existed at all. There is no possible valid economic reason for regulating truck rates. None. Zero. Zip. Nada. It was done to protect politically connected interests at the expense of the American people.
The government fools (economic illiterates) went along with it because they're always seeking to increase their power over the American people. Government types don't act in the best interest of the population, they act in their own best interest.
Convicted One oltmannd They'd have to go WAY UP from where they are to get to what it costs to provide the service. They are set by supply and demand, Well if the "demand" is all that stiff, then isn't it more than just a little foolhardy to operate at a loss?
oltmannd They'd have to go WAY UP from where they are to get to what it costs to provide the service. They are set by supply and demand,
They'd have to go WAY UP from where they are to get to what it costs to provide the service.
They are set by supply and demand,
Well if the "demand" is all that stiff, then isn't it more than just a little foolhardy to operate at a loss?
Yes, and maybe it isn't quite as stiff as we think it is....
Never too old to have a happy childhood!
As a non accountant all that can be seen is a bucket full of worms.
All the following numbers are arbitrary. I buy 50 sleper cars at $4M per car taking 2 years delivery times. . I could depreciate each one as straight line based on expected miles traveled with a schedule of 20 years for no salvage value. Normal maintenance is an operating cost. Assuming equal mileage on each car after 10 years I then need to make a major life extension overhaul of each car of say $1M.extending life to total of 30 years
Now do I make that a one time maintenance cost or add that to the basis of each car? Do I make the mileage depreciation extend for another 10 years to 30 years or use initial mileage deduction? Extending makes value after overhaul now $3M.That would reduce the mileage depreciation how?. Do I keep same depreciation schedule so at 20 years value would be $1M at 20 year mark or extend value to 30 yrs & drop mileage depreciation to 67& of original ?
Then another overhaul at 20 years can extend life further.
As I see it there are just too many ways to do this and each car will have a different mileage and some may have been wrecked how ? All the methods of depreciation explained earlier in this thread can make it even more complicated and that is only one cost of operating a LD train.
MP173Don, I believe the entire costing model can only be based on historical accounting data. Thus, if your 1000/day yard cost $X, then you divide $X/number of cars handled and factor in inflationary costs and you have your new cost for the year.
Yes. But it doesn't tell you what your costs would be if you got 100 additional cars a day or if you shifted 100 cars a day from yard A to yard B. You can't just take the "rate" times the volume. The costs come in "chunks".
Convicted One oltmanndFaster depreciation makes costs in the out years lower, anyway. Funny, but I don't recall Amtrak ever lowering ticket prices as the result of completed depreciation cycles.
oltmanndFaster depreciation makes costs in the out years lower, anyway.
Funny, but I don't recall Amtrak ever lowering ticket prices as the result of completed depreciation cycles.
Like I said, the rates have nothing to do with the cost. They'd have to go WAY UP from where they are to get to what it costs to provide the service.
They are set by supply and demand, like Ed said.
MP173Does anyone know what railroads allocate for humping a car? $100? $200? I cannot even get a handle on that cost by guessing.
It is location dependent around here. The cost model grinds out a different number for each location every month. Ball-parky: $10-$30 a car, long term variable. Which is what makes folk so cranky about sending cars to the BRC, et. al.
MP173 Ken:I would really enjoy sitting down with you over a diet cola or adult beverage and discussing costing of transportation. My experience in LTL trucking was similar to the carload railroading. At certain points it becomes next to impossible and you just have to go with assumptions. How does one allocate costs for humping 3 extra cars at Markham...or the costs of 3 pallets thru a terminal? I basically figured the LTL peddle run was a fixed cost and tried to throw as much freight onto that truck as possible, both for deliveries and pickups. Ed
Ken:I would really enjoy sitting down with you over a diet cola or adult beverage and discussing costing of transportation. My experience in LTL trucking was similar to the carload railroading. At certain points it becomes next to impossible and you just have to go with assumptions. How does one allocate costs for humping 3 extra cars at Markham...or the costs of 3 pallets thru a terminal? I basically figured the LTL peddle run was a fixed cost and tried to throw as much freight onto that truck as possible, both for deliveries and pickups.
Ed
Ed,
I'd sure like to get together over a cold one and talk about transportation costing and pricing. I'm fascinated by those things and, frankly, I don't find too many people I can talk with about the long run average cost curve of a railroad.
If you think your LTL operation was similar to a railroad operation, there's a reason for that. When interstate motor freight was regulated in 1935 a bunch of guys at the ICC went into a room and came out with a design for the US motor freight system.
Now, normal folks would have flinched at such a daunting task. But, unfortunately, these guys plowed ahead. The fact that they knew almost nothing about trucking didn't seem to bother them a bit. What they designed was ludicrous, but we got stuck with it for 45 years.
They created the regular route LTL system in the image of a railroad. A local truck (local train or industry job) would go out and do pick ups and deliveries. Then it would bring the freight back to a terminal (rail yard). Then the LTL would be sorted into line haul trucks (switched into trains). The line haul truck would then move to another terminal (destination rail yard). At the destination terminal (another rail yard) the LTL would be sorted (switched) into local trucks (locals or industry jobs) and delivered.
They greatly restricted the line haul routes allowing almost no deviation. (US Highway 6 west to the junction with US Highway 45, then south to state route 17, etc.)
They literally designed a trucking system in the image of a railroad, because a railroad was what they knew. This denied one of the main economic advantages of a truck, its flexibility. Because of the very restrictive route assignments the highways unnaturally became as restrictive as a rail line in geographic coverage.
This nut bag Federal design greatly increased the cost of moving goods and hurt the economy as well as the American people. It was centralized economic planning. Something that has never worked. But it was all the rage under FDR.
You know what happened after deregulation. More efficient methods of moving the LTL quickly developed and the regular route carriers, the truck lines created in the image of a railroad by the central planners, died like flies. And the country got a better, more efficient, logistics system.
Nope, it is all (sleeper fares) a matter of supply and demand.
Don, I believe the entire costing model can only be based on historical accounting data. Thus, if your 1000/day yard cost $X, then you divide $X/number of cars handled and factor in inflationary costs and you have your new cost for the year.
I like to know what level of volume is driving a business and for railroads in my area, I listen carefully to the defect detectors which give axle counts. True, it is not a scientific measure, but certain trains typically run certain lengths and axle counts. When that number increases, or the railroad runs X or S trains, one know the volumes are picking up.
Does anyone know what railroads allocate for humping a car? $100? $200? I cannot even get a handle on that cost by guessing.
Convicted One CSSHEGEWISCHI'm not sure how much discretion is allowed in determining depreciation rates since there has to be consistency in this matter. It would indeed be informative to know if Amtrak uses the same projected service life that the private railroads used back in the day. My recall is that the last time I priced sleeper service, the charge appeared way too high. And a few months later I read somewhere (perhaps an item in Trains mag?) that the service life projections were being shortened. At the time is was just a 'wrinkle the eyebrows" moment for me, but for an expert like Phillips to take notice might be worth pondering.
CSSHEGEWISCHI'm not sure how much discretion is allowed in determining depreciation rates since there has to be consistency in this matter.
It would indeed be informative to know if Amtrak uses the same projected service life that the private railroads used back in the day.
My recall is that the last time I priced sleeper service, the charge appeared way too high. And a few months later I read somewhere (perhaps an item in Trains mag?) that the service life projections were being shortened.
At the time is was just a 'wrinkle the eyebrows" moment for me, but for an expert like Phillips to take notice might be worth pondering.
I seriously doubt Amtrak's sleeper pricing has anything to do with cost. They can't raise the fares high enough to cover the costs w/o driving away all the traffic. The Superliners and Viewliners are nearly all fully depreciated, anyway. Faster depreciation makes costs in the out years lower, anyway.
MP173 Divide that by the number of trains and one has significantly higher depreciation rates for the trains running on the NEC. Add in the station costs, etc. and soon you are talking real $$$.
As soon as you start allocating, you can't accurately get the true cost of an incremental anything. The increment changes the denominator, but you have no idea what will happen to the numerator.
If you have a hump yard that humps 1000 cars a day and has, maybe, 12 yard jobs to make it happen. What happens if I dump 100 more cars a day in there. Maybe nothing....maybe I need some overtime a bit more often. Maybe I need another job a day? Cost models won't tell you that.
Suppose I have a medium sized flat yard that has a fairly low cost per car handled. A large customer dries up. Now, my cost per car handled go up. Oh, no! Better try to drive traffic to lower cost places! Oh, no! Even less traffic, unit costs rise some more! Better start yelling at the supervisor to get his costs under control! What happened to the traffic you drove away? Some of it is now being handled twice at other "lower unit cost" places. Overall costs go up. Network velocity goes down. All driven by misusing the cost model.
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