if they are making money, then why did all those plans for new amtrak routes get scrapped ?
Probably because passenger service as a whole has not even covered its solely related costs since 1953 or so, which is why Amtrak and the various urban transit authorities exist.
After the Post Office demonstrated that you cannot make a profit delivering letters, but you can make big money delivering packages, UPS was born. No letters, just packages.
After the Railroads demonstrated that you can not make a profit hauling passengers, but you can make big money delivering freight, they wanted to drop passenger service. The government recognized that, while not profitable, passenger service has an important place in a balanced transportation network and Amtrak was born.
Unfortunately, Amtrak is trying to do too much with too little and is, therefore, it's own worst enemy. Amtrak needs either much more equipment or many fewer destinations so that the corridors it serves can be serviced properly. ...fast, frequent, and on time.
Dave
Lackawanna Route of the Phoebe Snow
There was an intersting paper released by a Washington Think Tank yesterday explaining that public monies pay for over 50% of the cost of driving an automobile on highways and streets. This is a cost similar to public (tax, government, whatever your want to call it) subsidies for air and rail travel. To pick at Amtrak is only a third of the transportation subsidy picture in attribution and much less in actual dollars. Yes, some rail routes cover costs, Acela and NE Corridor, some of the California Corridors, for instance. But the real question we should be asking is if there is any stretch of the Interstate Highway system that has a 100% or better return on investment. Same with any airport or airlane. Then compare it with rail passenger services.
RIDEWITHMEHENRY is the name for our almost monthly day of riding trains and transit in either the NYCity or Philadelphia areas including all commuter lines, Amtrak, subways, light rail and trolleys, bus and ferries when warranted. No fees, just let us know you want to join the ride and pay your fares. Ask to be on our email list or find us on FB as RIDEWITHMEHENRY (all caps) to get descriptions of each outing.
Mr. Railman if they are making money, then why did all those plans for new amtrak routes get scrapped ?
Amtrak loses money anyway you'd like to count it. They only cover about 60% of their operating costs from fares. This excludes any money spent on capital items like ties for the NEC or new baggage cars or complete overhauls of existing equipment (capital rebuilds).
Some services do cover their operating costs. Acela, for example. Some others come close. NEC regional trains and AutoTrain for example. The big losers are the long distance trains.
The major reason Ohio and Wisconsin gave back the money for new routes was they didn't want to be on the hook for the ongoing operating subsidy. The money came with atring attached that said the states had to pay for any operating losses and were required to operate the trains for a certain period (probably a decade - I'm not sure)
It appears that if you can implement new service that covers it's operating costs, there's little resistance from either party, or the people in general, to coming up with the capital to build it. Fair or not, this is how the political landscape appears.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
henry6 There was an intersting paper released by a Washington Think Tank yesterday explaining that public monies pay for over 50% of the cost of driving an automobile on highways and streets. This is a cost similar to public (tax, government, whatever your want to call it) subsidies for air and rail travel. To pick at Amtrak is only a third of the transportation subsidy picture in attribution and much less in actual dollars. Yes, some rail routes cover costs, Acela and NE Corridor, some of the California Corridors, for instance. But the real question we should be asking is if there is any stretch of the Interstate Highway system that has a 100% or better return on investment. Same with any airport or airlane. Then compare it with rail passenger services.
In FY09 Amtrak required federal and state subsidies of $1.8 billion to cover its operating losses and capital expenditures. The operating loss was approximately $1.3 billion. In FY10 the preliminary operating loss subject to audit was also $1.3 billion rounded. In addition, in FY10 Amtrak received $1.3 billion in ARRA funds. These are the direct subsidies. In addition, Amtrak pays no federal, state, or local taxes. It does not even pay fuel taxes. Moreover, it receives a variety of other subsidies, i.e. assumption of station costs by local communities.
In FY09 the average federal and state subsidy per passenger mile was 21.15 cents, compared to 18.39 cents per passenger mile in FY08. By comparison the average federal subsidy for commercial airlines and motorists is less than a penny per passenger mile or vehicle mile traveled.
In FY09 only the Acela's and the Washington - Newport News trains had an operating profit. The NEC regional trains failed to cover their operating costs, but the Acela's profit gave the NEC is slim operating profit. However, after factoring in interest and depreciation, the NEC lost money. In FY10 only the Acela's and Washington to Lynchburg trains covered their operating costs. Again, the NEC regional trains failed to cover their operating costs, but the Acela's profit gave the NEC a slim operating profit. But interest and depreciation, if it was allocated by routes, would have pushed these trains into the red.
The Pacific Surfliners, The Capitols, and the San Joaquin's lost 14.0, 26.3, and 3.8 cents per passenger mile in FY09. In FY10 they lost 14.3, 15.9 and 8.1 cents per passenger mile.
At the end of the day motorists cover the cost of driving, although they don't see the full cost in the fuel taxes levied at the pump or in the fees they pay. Most motorists pay federal income taxes, state income taxes, property taxes, sales taxes, etc. They also pay a piece of corporate taxes every time that they buy goods and services. It is from these pools of money that funds are allocated for local streets, county roads, and state highways to the extent that building them is not covered by state and local fuel taxes. There is, however, an element of cost shifting in the process. Wealthy people pay more in income taxes, property taxes, etc. Accordingly, they subsidize less well off motorists, some of whom pay little if any federal and state income taxes.
If these sort of bus services will cut into all but higher speed rail?
http://frugaltraveler.blogs.nytimes.com/2011/01/04/a-guide-to-cheap-buses-including-how-to-score-1-tickets/?hpw
C&NW, CA&E, MILW, CGW and IC fan
It's extremely hard to get at the amount of public contribution to any form of transportation. The private contribution is somewhat easier to calculate. On a per-passenger basis, or per vehicle-mile basis, the information I have suggests that the total cost per mile -- adding together both public and private inputs -- is surprisingly similar between all modes. For example, if you were to look at how much it costs to operate a passenger auto on a federally supported highway, you might look at the following:
There's no law that requires anyone to include any of these costs in a benefit-cost calculation, but it's something to think about.
RWM
Railway Man It's extremely hard to get at the amount of public contribution to any form of transportation. The private contribution is somewhat easier to calculate. On a per-passenger basis, or per vehicle-mile basis, the information I have suggests that the total cost per mile -- adding together both public and private inputs -- is surprisingly similar between all modes. For example, if you were to look at how much it costs to operate a passenger auto on a federally supported highway, you might look at the following: private owner's fuel cost (which includes gas tax), vehicle maintenance cost, insurance cost, vehicle capital costs private owner's travel time opportunity cost emissions cost absorbed by the public safety costs absorbed by the public (e.g.., uninsured motorists) state sales tax exemption on the gas federal and state contribution to highway maintenance and construction not paid by the gas tax opportunity cost of land diverted from private to public realm to hold highways local connector street maintenance, capital, avoided property tax. There's no law that requires anyone to include any of these costs in a benefit-cost calculation, but it's something to think about. RWM
Exactly. A person believes that he buys a $30,000 car and looks only at the cost of of gas when figuring the cost of a trip of any kind. The cost of gas, servicing, housing-parking, mainetnance, insurance, highway taxes and bonding; rarely if ever considered. Similarly one does'nt normally think beyhond the cost of a plane or bus ticket without considering how that is weighed against government subsidy. But a train ticket is always weighed against the subsidy when the anti rail-pro highway-pro airline lobbies start talking.
NKP guy This is a worthy question, but may I ask: Does the Defense Dep't make money, or is it still subsidized? Does the EPA make money, or is it subsidized? Does Federal air traffic control make money, or it is subsidized? Is the FDA making a profit, or is it subsidized? Is the Interstate Highway network profitable, or it is subsidized? Does the Intra-Coastal Waterway make money, or is it subsidized? Does the Small Business Administration make money, or is it subsidized? Governments aren't in business to make money. Amtrak is, to my mind, something this country needs and I, for one, am GLAD to subsidize it, no matter the cost. One last thing, ever figure out what per cent of the Federal budget or deficit is caused by Amtrak? Then look at the items above. Tax me more, but give me an even better Amtrak. But another war, or Wall Street bailout? No thanks.
None of the aforementioned governmental activities are commercial activities. They don't make money because they were never intended to make money. Defense, for example, is a pure governmental activity. Accordingly, to say they are subsidized is inappropriate. However, several of them, e.g. FAA, Interstate Highway System, etc. are designed to recover their costs through user fees, which they do for the most part.
Some of the users of the airways, highways, waterways, etc. are commercial enterprises. They are expected to earn a profit for their shareholders. If they don't, they go out of business. Witness all the airlines that have gone belly up. The majority of the users of the airways, highways, etc. are not commercial enterprises. They are private individuals who pay for a portion of the infrastructure through a variety of user fees. Whether they pay their fair share is arguable.
Amtrak is a commercial enterprise set-up by and sponsored by the federal government. It was designed to cover its costs and, hopefully, earn a profit. It has not even come close. It is heavily subsidized because it cannot cover its costs and would go out of business without the subsidies.
Unlike private automobiles, private airplanes, pleasure boats, etc., Amtrak is a commercial carrier. Thus, for comparison purposes, it should be compared against commercial carriers, i.e. commericlal airlines, bus operators, etc.
I didn't see the particular "think tank" paper you are referring to. But I have seen other studies showing that "highway users" as a whole (not just automobile users) don't pay all of the highway related costs, and therefore are being subsidized.
The trouble with studies like this is that they don't distinguish between auto users and heavy trucks. There are other studies that show that heavy trucks impose exponentially greater costs on highways than autos. In other words, the costs don't go up pound for pound as weight increases, they go up exponentially. In fact, I recall that someone on another thread cited a study (possibly by AASHTO, an association of state highway officials) showing that one heavy truck equals 6,000 cars from the standpoint of highway damage. And, of course, a highway that handles heavy trucks is much more expensive to build than a highway designed to carry just passenger autos and light trucks. The relevance of this to the current debate is that auto users (ie., the highway users who are potential Amtrak customers) could very well be paying the full highway costs they impose, and also be partially subsidizing truck costs.
By the way, to my knowlege, there is no Amtrak service that covers its costs. There may be a few that cover "operating costs". But they don't come anywhere near covering the full costs of the service, particularly on something like the Northeast Corridor, where the capital costs are very high. "Operating costs" vs "capital costs" may be of interest to accountants, but a dollar is a dollar, regardless what bucket you throw it into. Take away the public subsidies, and the dollars coming in to Amtrak would be less than the dollars going out on every service they offer.
Now, this doesn't answer the question of whether paying subsidies for passenger service is a worhthwhile expenditure of public moneys. Personally, I believe there are many situations where is it worthwhile (the Northeast Corridor, some regional services, big city commuter operations). But we have a habit in this country of believing that, if a subsidy is warranted in some places, it is warranted everywhere, so the public ends up subsidizing passenger rail services in places where is little or no public benefit from the subsidy. You see this dynamic at work in the high speed rail frenzy of recent years. High speed rail works in the Northeast, so let's build a high speed line across Iowa.
The bottom line is this: Amtrak doesn't make a profit as a whole, or on any of the services it offers. Everything it does is dependent on public subsidies.
Sam1 NKP guy: This is a worthy question, but may I ask: Does the Defense Dep't make money, or is it still subsidized? None of the aforementioned governmental activities are commercial activities. They don't make money because they were never intended to make money. Defense, for example, is a pure governmental activity.
NKP guy: This is a worthy question, but may I ask: Does the Defense Dep't make money, or is it still subsidized?
None of the aforementioned governmental activities are commercial activities. They don't make money because they were never intended to make money. Defense, for example, is a pure governmental activity.
Tell multimillionaires like Erik Prince that Defense is never intended to make money. A large number of people have become wealthy beyond the dreams of avarice in the business of defense.
Blackwater USA is a private military company and security firm founded in 1997 by Erik Prince and Al Clark. It is based in the U.S. state of North Carolina, where it operates a tactical training facility that it claims is the world's largest. The company trains more than 40,000 people a year, from all the military services and a variety of other agencies. The company markets itself as being "The most comprehensive professional military, law enforcement, security, peacekeeping, and stability operations company in the world". At least 90% of its revenue comes from government contracts, two-thirds of which are no-bid contracts.
Whether or not something is subsidized is beside the point. It is a red herring. The one pertinent point is whether or not the users pay. When you compare private automobiles on public highways to public passenger rail, the highway traveler is far closer to paying their fair share than the rail traveler.
And if we must talk about subsidies, it should be noted that just because the money comes out of the public sector, does not mean that it is a subsidy, as is always falsely assumed in these types of debates.
As a point of definition, no matter whether users pay for a service directly out of their pocket or out of their tax contribution to the public sector, if the entire cost is paid by the users, there is no subsidy.
As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!!
schlimm As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!!
I'm curious why you're limiting the definition of subsidy to O&M costs. Wouldn't any externalized cost be considered a subsidy? For example, if the operation of a copper smelter causes emission of sulfur dioxide that damages fruit trees in orchards that reduces the harvest that reduces income to the orchard owners, are not the orchard owners effectively subsidizing the cost of the matte copper from the smelter?
Phoebe Vet Sam1: NKP guy: This is a worthy question, but may I ask: Does the Defense Dep't make money, or is it still subsidized? None of the aforementioned governmental activities are commercial activities. They don't make money because they were never intended to make money. Defense, for example, is a pure governmental activity. Tell multimillionaires like Erik Prince that Defense is never intended to make money. A large number of people have become wealthy beyond the dreams of avarice in the business of defense. Blackwater USA is a private military company and security firm founded in 1997 by Erik Prince and Al Clark. It is based in the U.S. state of North Carolina, where it operates a tactical training facility that it claims is the world's largest. The company trains more than 40,000 people a year, from all the military services and a variety of other agencies. The company markets itself as being "The most comprehensive professional military, law enforcement, security, peacekeeping, and stability operations company in the world". At least 90% of its revenue comes from government contracts, two-thirds of which are no-bid contracts.
Sam1: NKP guy: This is a worthy question, but may I ask: Does the Defense Dep't make money, or is it still subsidized? None of the aforementioned governmental activities are commercial activities. They don't make money because they were never intended to make money. Defense, for example, is a pure governmental activity.
Practically every government department engages consultants, contractors, etc. to help achieve its objectives. They consultants and contractors are in business to make money. But the departments, unless they have been set-up as enterprise funds, e.g. Amtrak, TVA, FDIC, do not generate service based revenues to cover their costs. They cover their costs with taxes paid into and drawn from the general fund.
The Defense Department does not make money. And it is not subsidized, other than to say that it is wholly supported with taxes.
I limited my example to O&M because those costs are pretty clear. Of course there are many other costs that are shifted to others, either in the short term, or more likely long term, but they are somewhat more murky and debatable, at least in the current climate.
NKP guy What about the Tennessee Valley Authority? Does the Federal government have any business in the commercial activity of making electricity?
Whether the federal government should be in the electric energy business is a policy choice.
The federal government, as well as many local governments and governmental authorities, perform commercial functions that are similar to those performed by private sector companies. The TVA is one example. Others at the federal level include the Federal Deposit Insurance Company, the Pension Benefits Guarantee Corporation, Ginne Mae, etc.
At the local level most airports, as an example, are designed to operate as independent enterprises. That is to say, their activities are separate from general government activities, e.g. defense, police, fire protection, etc. They are expected to cover their expenses and costs through user fees.
The TVA, for example, generates sufficient revenues through the sale of wholesale power to cover its costs. Accordingly, it does not require a direct subsidy from the general fund.
NKP guy How about this: What if Amtrak were given the resources and commitment by the Federal government on the scale given to TVA to fulfill its mandate? Do you think in 75 years it might be "generating sufficient revenue to pay for itself" like TVA?
No. My evidence for this? The Vision Report estimating a 10-fold expanded Amtrak, from a tenth of a percent of passenger miles to 1 percent of passenger miles, as costing half a trillion based mainly on the costs of rail in Europe.
Did you ever hear me advance the agenda of the "small-and-starved-government" crowd? No, I don't think so. I have never opposed subsidy for Amtrak based on idealogical positions. I just think it is a fair question to ask about the amount of Amtrak subsidy required for a given level of work product.
Sure there was opposition to TVA, but over time it indeed had paid for itself. Sure hybrid car subsidies are as much a government handout as Amtrak subsidy, but the hybrid car subsidies get phased out as hybrid car models gain market share. Amtrak has been around for a long time too, but the mere suggestion that it be held to the same standard is met with derision and scorn as being "anti train."
The claim was made by whoever did the studies. that the Midwest Regional Rail Initiative would have cost some 5 billion in capital expenditure to produce half-an-Amtrak in passenger miles, and the claim was that there would be no requirement for operating subsidies. So in constant-dollar terms, over the life of Amtrak, you could have taken the same government dollars, had 8 MWRRI's over time and been carrying the passenger load of 4 Amtrak's for the same money that had been dribbled away in Amtrak subsidy, and you would have had 8 regional rail networks across this land, meeting their above the contact patch operating costs just as airlines or bus companies do.
No, Amtrak does not utilize its subsidy money effectively, and that it is why it is stuck-on-small, and you can blame Big Concrete, and you can blame the Cato Institute, but it doesn't change this. Funny thing is how at a time our local group advocating for the MWRRI got all bothered about Amtrak wanting to drop the Three Rivers, a mail train holdover from the days Amtrak thought it was in the express business, of all things. Maybe, just maybe, we could look ourselves in the mirror as the advocacy community, our sense of priorities, and the political pressures we applied to the Amtrak network, and assign some blame to ourselves.
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
Paul Milenkovic No, Amtrak does not utilize its subsidy money effectively, and that it is why it is stuck-on-small, and you can blame Big Concrete, and you can blame the Cato Institute, but it doesn't change this. Funny thing is how at a time our local group advocating for the MWRRI got all bothered about Amtrak wanting to drop the Three Rivers, a mail train holdover from the days Amtrak thought it was in the express business, of all things. Maybe, just maybe, we could look ourselves in the mirror as the advocacy community, our sense of priorities, and the political pressures we applied to the Amtrak network, and assign some blame to ourselves.
And while assessing blame for the failures of Amtrak (which is a self-evident truth) perhaps the burden of a long distance passenger rail network designed by politicians and the burden of carrying non-competitive labor charges (especially for pensions) should also be examined.
Paul Milenkovic No, Amtrak does not utilize its subsidy money effectively, and that it is why it is stuck-on-small, and you can blame Big Concrete, and you can blame the Cato Institute, but it doesn't change this. Funny thing is how at a time our local group advocating for the MWRRI got all bothered about Amtrak wanting to drop the Three Rivers, a mail train holdover from the days Amtrak thought it was in the express business, of all things. Maybe, just maybe, we could look ourselves in the mirror as the advocacy community, our sense of priorities, and the political pressures we applied to the Amtrak network, and assign some blame to ourselves. The reality is the no money is EVER spent effectively when view by someone other than the person whose responsibility it is to spend it. The money I spend in my personal life is not viewed as being spent effectively when viewed by my Ex. When it comes to spending money, everyone believes they have a better more effective idea of how to do it than those that are charged with the responsibility. Everyone has their own personal axe to grind at the expense of the axe. Amtrak was created as a life support operation and the politics to Amtrak will only permit it to be a life support operation....not a life fulfilling operation.
The reality is the no money is EVER spent effectively when view by someone other than the person whose responsibility it is to spend it. The money I spend in my personal life is not viewed as being spent effectively when viewed by my Ex. When it comes to spending money, everyone believes they have a better more effective idea of how to do it than those that are charged with the responsibility. Everyone has their own personal axe to grind at the expense of the axe. Amtrak was created as a life support operation and the politics to Amtrak will only permit it to be a life support operation....not a life fulfilling operation.
Never too old to have a happy childhood!
BaltACD The money I spend in my personal life is not viewed as being spent effectively when viewed by my Ex.
The money I spend in my personal life is not viewed as being spent effectively when viewed by my Ex.
There is a friend-of-the-family whom I used to do some consulting work for on product development, and I had occasion to spend some time as a house guest on trips out to California to do this. This man had divorced his wife and mom to his two kids -- I met his wife before they parted ways. His ex-wife was a nice enough person, and you never know from the outside looking in why people divorce, but I picked up the vibe from the husband in the relationship that perhaps the ex-wife was somewhat critical of his ways.
Some time after the divorce my friend had finally found his soulmate, a woman who had kids of her own, and my friend was in the middle of a household where teen to young-adult kids came and went. I was single at the time, and my friend tried to recruit some sympathy regarding his new-found life situation. He was happy yes, but money was going in various directions.
"Paul, you being single and not having 'all of this' (the yours-and-mine grown kids), you probably have a lot more disposable income than I do." I think what he was trying to tell me was that as president of this small company I probably thought he was wealthier than I was, but he didn't have much money to his name, what with alimony he may have had to pay out along with financial support for two sets of college-age kids.
I probably did have more choice in how I spent my money and my friend, but I guess I dished back what I was supposed to take, "Gee, I know what you mean about the disposable income thing. But look at the car I drive. I have one of those Chevy Nova-Toyota clones, and by now the Blue Book on that thing is down to about $3000. Thing is, I heard you talking about spending that amount of money, $3000, just on a turbocharger to put on your Diesel van, just that you wouldn't have to slow down taking the Grapevine Hill towing your boat out to Lake Powell. Yeah, I suppose I have all of that discretionary money, but a person still makes some choices on what they spend it on."
My friend is ordinarily an easy-going guy, but I think that ruffled him more than a bit. "Yes, Paul. I heard good things about the Chevy Nova. It is a very sensible, economical car for a frugal person. Matter of fact, my ex drives one of those Novas. It suits her perfectly." Ooooo . . . just figured out who was considered the "big spender" in that marriage.
Yeah, the frugs dish on the spenders for being spenders and the spenders dish on the frugs for being obnoxious moralists. But the advocacy community has a big hand in shaping Amtrak as apart from a few anti-train malcontents, no one much cares one way or the other about Amtrak. I am not in the anti-subsidy camp, but you know by now I am in the frugal camp, and I believe that Amtrak can be steered in a more effective direction if the objective is to grow passenger service in the U.S. over time.
..then there is the ant and the grasshopper. In a nation of grasshoppers, the ants are nervous...
Railway Man schlimm: As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!! I'm curious why you're limiting the definition of subsidy to O&M costs. Wouldn't any externalized cost be considered a subsidy? For example, if the operation of a copper smelter causes emission of sulfur dioxide that damages fruit trees in orchards that reduces the harvest that reduces income to the orchard owners, are not the orchard owners effectively subsidizing the cost of the matte copper from the smelter? RWM
schlimm: As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!!
Absolutely correct. If you are trying to determine whether passenger rail service (or anything else) is being subsidized, you have to look at ALL of the costs, not just operations and maintenance. As I said in a previous post, a dollar is a dollar. If the number of dollars Amtrak is taking in from its users is less than the dollars it is paying out, it doesn't make any difference what bucket the outgoing dollars are dropped into. The government must still make up the difference, and that amount is a subsidy.
It's particularly important with Amtrak not to evaluate the relative financial performance of particular services based on O&M cost covereage. The reason is that many of Amtrak's infrastructure expenditures on the lines Amtrak owns (such as the NE corridor) are considered "capital" expenditures and don't go into the O&M bucket. But, where Amtrak operates as a tenant over another road, their entire share of infrastructure expenditures (whether included in the rent, or as a separate charge) will be treated as an O&M expense and go into the O&M bucket. The result is that, if you try to compare the relative financial viabiltiy (or, more properly, the relative non-viability) of various Amtrak services based on O&M coverage, you aren't comparing apples and oranges.
Falcon48 Railway Man: schlimm: As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!! I'm curious why you're limiting the definition of subsidy to O&M costs. Wouldn't any externalized cost be considered a subsidy? For example, if the operation of a copper smelter causes emission of sulfur dioxide that damages fruit trees in orchards that reduces the harvest that reduces income to the orchard owners, are not the orchard owners effectively subsidizing the cost of the matte copper from the smelter? RWM Absolutely correct. If you are trying to determine whether passenger rail service (or anything else) is being subsidized, you have to look at ALL of the costs, not just operations and maintenance. As I said in a previous post, a dollar is a dollar. If the number of dollars Amtrak is taking in from its users is less than the dollars it is paying out, it doesn't make any difference what bucket the outgoing dollars are dropped into. The government must still make up the difference, and that amount is a subsidy. It's particularly important with Amtrak not to evaluate the relative financial performance of particular services based on O&M cost covereage. The reason is that many of Amtrak's infrastructure expenditures on the lines Amtrak owns (such as the NE corridor) are considered "capital" expenditures and don't go into the O&M bucket. But, where Amtrak operates as a tenant over another road, their entire share of infrastructure expenditures (whether included in the rent, or as a separate charge) will be treated as an O&M expense and go into the O&M bucket. The result is that, if you try to compare the relative financial viabiltiy (or, more properly, the relative non-viability) of various Amtrak services based on O&M coverage, you aren't comparing apples and oranges.
Railway Man: schlimm: As you say, it isn't subsidized if all operating expenses are covered by users. And that is the key. If general tax dollars are used to make up the difference between op. exp. and fares, as it is unlikely that many of those taxpayers even have access to Amtrak, much less actually ever use it, it follows that those who do use Amtrak are being subsidized by the general tax revenues. Not that there is anything wrong with that, IMO!! I'm curious why you're limiting the definition of subsidy to O&M costs. Wouldn't any externalized cost be considered a subsidy? For example, if the operation of a copper smelter causes emission of sulfur dioxide that damages fruit trees in orchards that reduces the harvest that reduces income to the orchard owners, are not the orchard owners effectively subsidizing the cost of the matte copper from the smelter? RWM
This analysis is only correct if you are trying to score the amount of Amtrak subsidy. The analysis breaks down with respect to do we grow Amtrak to achieve economy of scale or do we shrink Amtrak to save on subsidy expenditure? The analysis breaks down with respect to determining the relative cost effectiveness of different services -- NEC, regional corridor, LD trains.
The first item of contention is how "rent on the infrastructure" is treated in the NEC and non-NEC. Do you mean the payments for "trackage rights?" Yes that is an apples and oranges comparison, but Amtrak doesn't pay all that much for use of the tracks to the host railroads. Whether that is "fair" or not is another question, but the trackage payments are a minor part of Amtrak's cost of operations.
A second item of contention is how you allocate fixed costs to the different services. The argument is that "you have to pay the bills in the end" so that you charge some apportioning of system aggregates to the different trains that doesn't change much. Another argument is that "Amtrak is a system/network" and that Amtrak shouldn't be picking winners and losers as to which trains should be increased, which should stay the same and which trains should be discontinued. Well, suit yourself on that one.
But it does as it speaks to economy of scale. What happens if you double train frequency on some regional corridor? There are some costs that increase in proportion to the number of trains, other costs that don't. If you simply allocate system costs in equal measure to every train, you won't see that advantage.
Looking at both capital and operating costs I don't think there is any passenger railroad in the world that makes a profit. If I am mistaken I trust that the members of this forum will enlighten me.
Why should Amtrak be any different?
Jack
Our community is FREE to join. To participate you must either login or register for an account.