from Barron's Dictionary of Accounting Terms: Cross subsidy = Improper assignment of costs among objects such that certain objects are overcosted while other cost objects are undercosted relative to the activity costs assigned. For example, traditional cost accounting systems tend to overcost high-volume products and undercost low-volume products.
from article at https://docs.google.com/open?id=18YLhGo9pGaJlmAgYYmUu_MWJmxd1tEftERD37NuqV_ZjuBJOSKID9xCErV2I there are four differing criteria:
1: MARGINAL COST CRITERION a price scheme is said to havecross subsidies, if some consumer prices are lowerthan the marginal cost.
2: AVERAGE COST CRITERION a price scheme is said to havecross subsidies if some consumer prices are belowaverage costs and others are above.
3: INCREMENTAL COST CRITERION a price scheme is said to havecross subsidies if revenues from a consumer or agroup of consumers are less than the incrementalcost of providing services to that consumer or groupof consumers.
4: STAND-ALONE CRITERION a price scheme is said to havesubsidies if the revenues from a consumer or groupof consumers are larger than the cost of providingservice alone to this consumer or group of consumers.
C&NW, CA&E, MILW, CGW and IC fan
No, this is wrong. I think you need to reread the dictionary and quote it directly..
A cross subsidy, or any subsidy, is not an "improper assignment of costs". A subsidy is not a costing exercise.
An improper assignment of costs may well lead to a cross subsidy. But the cross subsdy would be a but a possible result of the improper costs assignment. It is not the actual improper assignment.
If the accountants don't get the costing correct, a firm may price a good or service below the incremental cost of production without knowing they are doing so. That would be a cross subsidy. (Contrary to popular belief, you can fix stupid. Fire the accountants and replace them with people who know what they're doing.)
I'm still waiting on the OP to tell me how this gets to his contention of a cross subsidy. Where does the money come from, where does it go? There may be a road subsidy (probably is), but I don't see any cross subsidy.
I generally agree that all Interstate Highways and controlled access highways should be supported only by tolls. Heck Fire, Adam Smith knew that the "High Roads" of the 18th Century should be toll supported least they be built on government whim.
But getting from tolling the Interstates to getting people on long distance passenger trains is quite a big get.
I would say either definition/test series for cross-subsidy fits. The data is in the draft report I wrote, linked near the beginning of the post. It is an analysis of FHWA historical reports for government infrastructure and accident costs. I am certainly not advocating forcing anyone into anything, but rather expanding choice at equal levels of financial cross-subsidy.
V.Payne I would say either definition/test series for cross-subsidy fits. The data is in the draft report I wrote, linked near the beginning of the post. It is an analysis of FHWA historical reports for government infrastructure and accident costs. I am certainly not advocating forcing anyone into anything, but rather expanding choice at equal levels of financial cross-subsidy.
Lets suppose that your argument is valid. If I understand it correctly, you believe the government (we the people) should increase the subsidy for intercity passenger rail to place it on a par with your perception (analysis) of roadway subsidies. Where will the money come from? The answer should be set in a realistic context, i.e. politically feasible.
Government debt (federal, state, and local) in the United States stands at $19.7 trillion. This works out to approximately $50,000 per person or more realistically $205,000 per taxpayer with a federal income tax liability. Taxpayers have to service the debt; two years olds are not likely to be able to do so. If these numbers don't get people's attention, one can throw in the unfunded liabilities, which stand at an estimated $46.9 trillion.
Governments must make the interest and principal payments on the debt or default. In the case of the unfunded liabilities, the government can get out from under them by reducing the benefits, or it can eliminate them.
If passenger rail were a viable commercial proposition, i.e. it covered its costs and provided a return to its investors, the proponents could borrow the money in the capital markets as long as they had a viable business plan to pay it back. They don't. Passenger rail is a ward of the state; no one in the capital markets is likely to fund it. It is dependent on the government for funds. And the government simply does not have a lot of cash lying around.
Irrespective of the definition of subsidies, it appears that all modes of transport in the United States receive some subsidy, i.e. the users get back directly or indirectly more than they pay at the pricing points. Ultimately we the people have paid for or are paying for transportation in the United States. The exception would be the funds provided by overseas investors and shippers, which I suspect has been minimal, especially in the modern era.
greyhounds No, this is wrong. I think you need to reread the dictionary and quote it directly..
Both were in fact, direct quotes, the 2nd linked to the paper, the first with citation. Sorry if those generally accepted definitions don't match your notions.
Since you seem pretty comfortable with Northwestern, here's how Ian Savage of their econ faculty uses it in a paper on bus transport:
http://faculty.wcas.northwestern.edu/~ipsavage/415-manuscript.pdf
Thank you for this fascinating study, Schlimm.
For many years I rode buses in Hudson County, New Jersey. Reading about the use of mini buses in the 7 metropolitan counties and then comparing it with what I experienced is a little scary.
In Hudson County New Jersey Transit controls all routes and directly operates most service. However, it contracts some service out to private operators. Mostly, these operators existed before NJT was formed and want to continue in business. Generally the private operators' fares are lower but you cannot get a transfer from one line to another as you can with NJT. My experience is that both are generally excellent.
However, there are also a number of panel truck or vans fitted out as mini buses similar to those in the study. The vans are always cheaper than either NJT or private operators. They are often faster as they will fill up and then run express to their destination. They use the "sweep" strategy and often set up their own schedules to be just before NJT or legal private buses and so pick up their passengers. The real problem is that they are illegal which means they cannot be insured as common carriers. If a person in a van is injured there is no insurance to cover the injury. Since the vans are owned by the drivers there is not nearly enough equity in the business to begin to pay the costs of injured passengers. Of course, this is a real calamity for anyone who is injured while riding in one of the vans. It is also costly for the taxpayers as riders tend to be poor and when disabled look to various welfare programs for their support.
What is clear to me is that the USA is not Britain. In certain circumstances using a van for a bus can result in real savings. However, in the USA they can also be a disaster for individual riders and a real expense for the tax paying public.
I propose to use 90% of the historical rural (intercity) interstate cross-subsidy as the level for Amtrak. That would Make it cheaper for the government to provide the service in that manner if you are worried about transportations impact on the overall budget deficit, which is nearly entirely out of control medical spending and social security IOUs. I have another proposal that is a bit to complex to restyle in the forum in the paper.
schlimm greyhounds No, this is wrong. I think you need to reread the dictionary and quote it directly.. Both were in fact, direct quotes, the 2nd linked to the paper, the first with citation. Sorry if those generally accepted definitions don't match your notions. Since you seem pretty comfortable with Northwestern, here's how Ian Savage of their econ faculty uses it in a paper on bus transport: http://faculty.wcas.northwestern.edu/~ipsavage/415-manuscript.pdf
Well, I read your latest link. It's a captivating paper on local bus service in the UK.
I could find no reference by the authors to a cross subsidy being a "missassignment of costs" as you falsely claim. They do discuss cross subsidies of bus services. And they do so using the correct definition of a cross subsidy. That would be a bus service being provided at below marginal/incremental cost with the money being made up by charging other service users more. How you get from that to a "missassignment of cost" is beyond decipher.
And with that, I'm done here. If anyone wants a good analysis of passenger train service they should read "Who Shot the Passenger Train" by David P. Morgan. Available on this site for $5.95. It's over 50 years old but it's still true today.
Morgan loved trains, and riding trains. But he also had a knowledge of railroading and economics. He could see that the long distance passenger train had been made redundant by air travel. It's over guys. Things change. Live with reality.
I'm not going to waste my time arguing with people who make up their own definitions or think that Robert R. Young was some kind of "Visionary".
I like an honest discussion of ideas, but such a thing is not often found with passenger train advocates. Especially long distance passenger train advocates.
Facts are that there were at least four definitions of cross-subsidy, besides the definition from Barron's Dictionary of Accounting Terms, all of which you chose to dismiss because they don't fit into your notions. But I guess you believe, as the Queen of Hearts said, that words mean what you say they mean. As to your dismissal of the other posters' ideas...
Greyhounds,
I'm the guy who wrote the post you refer to about Robert R. Young. It seems I never made myself clear. Young really knew nothing about railroading but he was able to persuade a majority of New York Central stockholders that he did. He did have vision but his vision was disconnected from one basic fact: For years government regulation had been slowly bleeding the railroads. Ultimately Young's vision fell apart when he took his own life. Alfred Perlman did see the problem and tried to stop the bleeding. Ultimately he could not. The Penn Central collapsed.
What does this have to do with Amtrak? So far Amtrak has managed to continue to exist despite strong opposition and unfriendly administrations. For example, George W. Bush began his Presidency wanting to end Amtrak but, in 2008, wound up doubling its budget. If we lop off Amtrak's long distance trains will be have enough of a political consensus to maintain any Amtrak at all? I doubt it.
John WR If we lop off Amtrak's long distance trains will be have enough of a political consensus to maintain any Amtrak at all? I doubt it.
If we lop off Amtrak's long distance trains will be have enough of a political consensus to maintain any Amtrak at all? I doubt it.
This often-made point is one Amtrak supporters discount at their peril, in my opinion. For myself, I am neither an altruist nor a lover of passenger trains in the abstract. I like passenger trains that I -- and not just other people -- can ride. And if I can't hook up to the system (albeit after a 100-mile drive), I don't really care if anybody else rides, either. I certainly wouldn't support their riding on my nickel; let them (and their states) bear the cost themselves.
I think my two U.S. senators -- the same number that the rest of you folks have got -- feel the same way.
You make a good point, Fred, about why should you pay for benefits given to others. Old Andy Jackson would be proud of you; this is the same reason he opposed all internal improvements.
I don't know which Dakota you live in, Fred. If you live in North Dakota your two Senators are doing a great job for you. According to Fox News North Dakota is state number one in getting money out of the Federal Government. But if you live in South Dakota your Senators should take some lessons from your northern neighbors. South Dakota didn't even make the top 10.
Here is the link to the article: http://www.foxbusiness.com/government/2012/08/03/states-that-get-most-federal-money/
dakotafred This often-made point is one Amtrak supporters discount at their peril, in my opinion. For myself, I am neither an altruist nor a lover of passenger trains in the abstract. I like passenger trains that I -- and not just other people -- can ride. And if I can't hook up to the system (albeit after a 100-mile drive), I don't really care if anybody else rides, either. I certainly wouldn't support their riding on my nickel; let them (and their states) bear the cost themselves. I think my two U.S. senators -- the same number that the rest of you folks have got -- feel the same way.
I think Fred presents the best argument for the continuation of the long distance trains -- the Great Compromise of 1787 otherwise known as the US Senate. While I appreciate the position of Sam and others that Amtrak ought to be trimmed to the shorter high density corridors, such a move robs Amtrak of a majority of the Senate's constituents receiving any Amtrak service. In that case, the states that are still receiving service had better be prepared to step up to the plate to carry the full financial load, including capital expenditures. Some states have accepted a good portion of that challenge, but many have not.
Even the dreamers at the NARP understand this reality. When they issued the Vision map, a 60 mile detour from the logical Kansas City/Twin Cities route was included so that my state would have some (token) service.
Dakguy201 dakotafred This often-made point is one Amtrak supporters discount at their peril, in my opinion. For myself, I am neither an altruist nor a lover of passenger trains in the abstract. I like passenger trains that I -- and not just other people -- can ride. And if I can't hook up to the system (albeit after a 100-mile drive), I don't really care if anybody else rides, either. I certainly wouldn't support their riding on my nickel; let them (and their states) bear the cost themselves. I think my two U.S. senators -- the same number that the rest of you folks have got -- feel the same way. I think Fred presents the best argument for the continuation of the long distance trains -- the Great Compromise of 1787 otherwise known as the US Senate. While I appreciate the position of Sam and others that Amtrak ought to be trimmed to the shorter high density corridors, such a move robs Amtrak of a majority of the Senate's constituents receiving any Amtrak service. In that case, the states that are still receiving service had better be prepared to step up to the plate to carry the full financial load, including capital expenditures. Some states have accepted a good portion of that challenge, but many have not. Even the dreamers at the NARP understand this reality. When they issued the Vision map, a 60 mile detour from the logical Kansas City/Twin Cities route was included so that my state would have some (token) service.
Whether the federal government would stop supporting Amtrak if it was reduced to serving high density corridors is not known. It is one possible scenario. Another scenario is that the states losing Amtrak service would agree to support Amtrak in exchange for compensating goodies.
Actually, except for a national reservation system, I vote for regionalizing passenger rail inasmuch as it is really not a national system in the sense that the Interstate Highway System and the federal airways are national systems. This would mean that the NEC states would pick-up whatever subsidies are required to hoist the NEC.
If I had my way, the NEC, as well as the other viable corridors, would stand on their own within five years or go the way of the stagecoach. By the same token I would eliminate all transport subsidies, thereby requiring each mode to stand on it own and allowing the most efficient and effective mode to emerge. This is not to say that I would not have the federal government use its resources to promote the development of transport infrastructure. But only in those cases where there is a reasonable probability that the users will pay for it.
Would eliminating subsidies for air transport include eliminating the Essential Air Service program and the privatization of the air traffic control system?
CSSHEGEWISCH Would eliminating subsidies for air transport include eliminating the Essential Air Service program and the privatization of the air traffic control system?
Yes.
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
John WR You make a good point, Fred, about why should you pay for benefits given to others. Old Andy Jackson would be proud of you; this is the same reason he opposed all internal improvements. I don't know which Dakota you live in, Fred. If you live in North Dakota your two Senators are doing a great job for you. According to Fox News North Dakota is state number one in getting money out of the Federal Government. But if you live in South Dakota your Senators should take some lessons from your northern neighbors. South Dakota didn't even make the top 10. Here is the link to the article: http://www.foxbusiness.com/government/2012/08/03/states-that-get-most-federal-money/
I think you want to revisit your own link, John. Fox starts its list with No. 10 -- North Dakota -- and counts down to the biggest per-capita recipient, Alaska.
Fox notes, "With the 3rd-smallest population in the U.S., North Dakota's federal spending per-capita was understandably larger than (that for) more populous states."
Also we grow a lot of your food (hence farm-program $) and cover your ear with a couple of air bases. Also host a pair of border-to-border interstates for when you want to drive through flyover country.
But that's all right -- you're welcome.
Unless it could be shown that people would be isolated without the Essential Air Service Program, I would eliminate it. There may be a few locations in the far west and Alaska where it should be retained, in which case I would treat it like the Rural Transit Assistance Program and Emergency Medical Services.
Most of the EASP locations are within a reasonable distance of an airport served by non-subsidized commercial airline service. For example, in Pennsylvania, at the end of FY10, Altoona, Bradford, Dubois, Franklin/Oil City, Johnston, and Lancaster had EASP service. All of these cities are less than 102 miles from a commercial airport. In Texas, only Victoria gets EASP. It is 85 miles from Victoria to Corpus Christi, which has excellent service from Southwest.
I would bid competitively for the operation of the air traffic control system, under tight regulatory oversight, and award the contracts with stiff performance standards. I would retain government ownership of the airports, harbors, etc., but I would contract their operation to private operators, again with tight regulatory oversight.
Contractors have incentives to perform at the top of their game. This is especially true when the contract is on the line periodically. Without a competitive environment where is the pressure for management and employees to stretch?
Each outsourcing possibility would need to be examined thoroughly. I don't favor privatization where it clearly will not work. I understand that there may be exceptions in every case, i.e. there may be a small number of locations in the U.S. where withdrawal of the EASP would result in an undue hardship.
Fred,
I apologize for the error in ranking North Dakota No. 1 in Federal largesse when in fact it is no. 10. Still, it does better than South Dakota or my own state of New Jersey.
I have been through your beautiful state but not on an interstate. I was on Amtrak's Empire Builder.
John
Thanks, John. The EB is our own connection to the national system, and one I am anxious to preserve. I think -- as I think you do -- we can preserve that national system while concentrating future development where it will do the most good, in the "corridors."
If the Sams and Oltmannds are willing to scratch our backs, we'll scratch theirs. If not, the whole thing could go up in smoke ... witness Obama's HSR. (Amtrak -- say what the Sams and Oltmannds will - HAS survived for 41 years, as is.)
There is no groundswell of opposition to Amtrak's long distance trains such as the Empire Builder. There are some very vocal people the the great group of middle of the road voters has never found them persuasive.
As far as high speed rail goes, I think we could do a lot better with current technology at a much lower cost. That should be done first.
Of course costs are important and funds are not unlimited. But the Empire Builder is a national treasure too. We don't get rid of the Gettysburg Battlefield or Yosemite National Park because of lack of profits and we need to bring that kind of awareness to our national rail system.
So I recently took Megabus on the Memphis to Knoxville route during the Thanksgiving travel season. The complete 600 mile one-way trip involved a transfer from Greyhound and then the overnight segment on Megabus. Since I needed to catch back up with my family after working late into the week, a trip of this kind was required. I made the most of it and did a little field investigation and some price comparisons for adjacent markets of similar lengths.
Before beginning, I was struck by this recent quote regarding Spirit Airlines from their CEO…
“You tell me what percent of the traveling public cares about price above all else… We are not in business to build an airline that maybe any of us specifically want to fly” (Flying Spirit’s ‘Dollar Store in the Sky’ to Profit, WSJ 11/21/2012 Page B5) Google the title to read.
That is an important question. But I would also suggest there is a point where being cheap with $100 is good but with $10 and 10 hours of your time, not so smart. Where exactly is that line? Of course a price elasticity of demand value attempts to explain this in aggregate though it differs significantly by person.
To make comparisons to Amtrak’s service offerings I looked at the adjacent Chicago to Memphis market, where Megabus has been operating for a few years, to compare pricing.
Chicago to Memphis City Pair Marketplace Pricing Power
(Note schedules for Megabus and Amtrak are nearly identical on the overnight run, despite many more stops by Amtrak. Also the overnight motor coach has higher price demanded than day trip, indicating a user preference in their time use)
- City of New Orleans Coach $99 One Way Std., or $89 with discounts (1-Week out);
$120, $155, $194 Buckets in play over Thanksgiving
- Megabus $25-49 Day Trip, $41-59 Overnight One Way Std. (1-Week out), $1 promos, I booked five weeks out and paid $6.50
$59 to $99 Buckets in play over Thanksgiving
- Greyhound was slightly above the Megabus prices.
- Hypothetical Spirit Airlines average price $140 One Way (assuming non-stop and average of 26% baggage fee extras) 28” Seat Pitch Non-Recline. $188 + baggage is cheapest std. carrier, much higher buckets over Thanksgiving
I am sure most of you know that Megabus is a curbside carrier. How that practically works out is they use an urban street with parking nearby, adjacent to a city bus transfer area, as their station with a sidewalk sign to let you know you are in the right place. I deal with ADA rules on occasion and I am a little confused on how this works legally but it appears to hinge on the lack of control by the motor coach operator according the Federal Register below.
49 CFR § 37.201 Intermediate and Rest Stops.
(b) If an OTRB operator owns, leases, or controls the facility at which a rest or intermediate stop is made, or if an OTRB operator contracts with the person who owns, leases, or controls such a facility to provide rest stop services, the OTRB operator shall ensure the facility complies fully with applicable requirements of the Americans with Disabilities Act.
(c) If an OTRB equipped with an inaccessible restroom is making an express run of three hours or more without a rest stop, and a passenger with a disability who is unable to use the inaccessible restroom requests an unscheduled rest stop, the operator shall make a good faith effort to accommodate the request. The operator is not required to make the stop. However, if the operator does not make the stop, the operator shall explain to the passenger making the request the reason for its decision not to do so.
Memphis is a hub terminal for Megabus, so when the motorcoaches finish their run they drop the passengers off on the sidewalk and head off to refuel and get cleaned. The same bus typically returns in about 2-3 hours to pick up passengers for another segment, there is no through vehicle.
Connecting passengers wait on the sidewalk and a single dispatcher is present. Policing is by the city police force, no security or bathroom facility is provided. I was connecting from Greyhound, so I took a cab from their station and then ended taking my bags around Memphis Main St. to get dinner near Beale and the streetcar back to wait as no checked baggage is provided. Main St. is a pretty nice area reminding one that cities were the original intermodal terminal.
Back by the sidewalk stop, I observed several people using the service only over the limited stop 200-400 mile segment, with an auto pick-up at each end upon arrival. I don’t know how much their connecting traffic is relative to single rides. However, that evening the crowd on the sidewalk was probably 180+ people connecting to later departures. Loading took 15-20 minutes in a complete mob rush. When we arrived in Knoxville in the morning the city bus transfer station was closed, so the dozen or so connecting passengers waited on the cold sidewalk from 7 AM till the next schedule at 10 AM.
The buses themselves seat 81 max at a 29-31” o.c. seat spacing by my estimate. However, the driver reported that the capacity had been down-rated to 77, some of which might be linked to the overweight bulletin the FMCSA put out. I guess this makes them 1000 # lighter. One bathroom for everybody, one bag in the luggage compartment only, and no storage racks above your seat. The top deck is about 61” tall, with a few inches more at the glass skylights. The ride is a bit rough at times, probably due to the higher seating height and tighter curves on this route.
According to Megabus-CoachUSA-Stagecoach’s 2012 Annual report they are still running a loss on Megabus, though the entire North American operations included contracted services have a profit. They refer to the Megabus loss as “investment mileage” to enter the market and no breakdown of costs relative to revenue is provided. For reference the Chicago-Memphis market has been operating for a few years so it should be mature.
Of course the group has rail operations in the UK as well so to a large degree they are entering the US market according to our subsidy policies. I figure their long-run variable costs are around $3.40/bus-mile + $0.008/PSGM for insurance, so you would need to charge a $0.093/PSGM + administration charges to break even at 60% occupancy. Given that, ticket prices would have to be around $0.10/PSGM on average with a 6% margin, return on the private capital is a bit higher I hope. I appreciate that somebody is willing to work for that return and that we are not all out there selling apps…
Great you say, pure, unsubsidized transportation, let the public pay for what they want, buy the old hotdog at the truck stop, stand on the sidewalk in the rain, wait up to three hours to use the restroom, just as long as it doesn’t cost society anything.
Look again, recall that motorcoaches must only pay a federal tax of $0.073/gallon + state tax of diesel instead of $0.243/Gallon. So even though the fuel charge for interstate use has been reduced by cross-subsidy and leveraging as explained above, they are paying still less than the already low bottom of the pyramid average rate. To put it in perspective, if Amtrak pays around $4.5/mile for track access an intercity motor coach of Megabus capacity should be paying around $7/gallon extra on a per passenger basis at 6 MPG. This is illustrative of the difference in the infrastructure financial models out there.
The clientele all looked like they could spare $50 to $100, but were trying to save the money. They were dropped off in nice looking cars by a relative or friend, few arrived by city bus. I wonder if this isn’t a further working out of the recession, in that fewer people are able to capitalize a new-to-them car and are retaining their older cars for city driving but don’t trust them for a longer trip with added fuel costs. I would suggest this experiment points out some important things but also has limited applicability. The biggest problem with the discount motor coach carriers is that they are only servicing larger urban areas, and so skimming off the top so to speak. In many cases the cost to be dropped off or picked up at each end might exceed the fare, whereas if you could travel to an intermediate city it would reduce the overall cost to all involved.
The idea that everybody drives except the very poor is no longer defensible. However, I can’t really see the Megabus service being usable by all due to the lack of terminals and the long connection waits. It was described it as a youth hostel by folks hearing about the trip. So is now the time for a new two-tier coach class for intercity rail? I figure the long-run variable cost, inclusive of capital, of a bi-level coach added to a train to be at most $3.15/mile a little above $2 at the least. What kind of pricing structures could you accommodate given that constraint?
Proposed Tiered Intercity Rail Service Offerings:
Price + (For those who are largely price conscious, $0.12 PSGM)
Capacity of 102 in a Single Level Coach (2-2) @ 30.6” o.c .; (2) Restrooms, (1) HC, (1) Std.
Capacity of 130 in a Bi-Level Coach (2-2); (3) Restrooms, (2) HC, (1) Std.
The “+” is that compared to a motor coach the service has: reasonable sized washrooms, wider seats 22” wide (3”+ greater width over motor coach) though at same o.c. spacing, better ride quality, and (2) terminal counter checked bags on trips over 200 miles.
Reserve (Inherits the old Amtrak coach class rates ($0.19 PSGM but with seat grouping improvements aimed at the singel traveler)
Capacity of 61 in a Single Level Coach (2-1) @ 37.7” o.c.
- (21) 2-Seat pairs on one side of the aisle and (19) 1-Seat pairs on other
Capacity of 78 in a Bi-Level Coach (2-1)
This would allow almost all people traveling alone to get a single seat. Option to reserve complete seat pair for a single at slightly higher price based on odds/buckets in reservation system
OK, so Amtrak is at a $4.50 per train mile cost disadvantage relative to Megabus because it has to pay for trackage rights?
Making some assumptions regarding train seats and load factors, the trackage rights amounts to about 2.5 cents per passenger mile. Good. Make the Amtrak subsidy 2.5 cents per passenger mile and call it a level playing field. You can get as much train service as you want out of John Mica or Bud Schuster at that rate.
What is the gripe? That someone (Megabus) is able to charge fares that cover their "above the contact patch" costs, and that people are willing to endure the privations of Megabus travel in exchange for a low-price ride? That the fact that people are willing to endure Megabus is evidence of widespread poverty in American society, even if those people appear to be well-enough off? That if we are not paying high rates of subsidy into a common carrier mode of transportation, that such constitutes a lack of social justice for non-auto owners? That someone eating a truck stop hotdog is a matter that needs to be taken up with the United Nations Commission on Refugees?
What if instead of subsidizing Amtrak at 20 cents a mile, we subsidized intercity motorcoach carriers at 10 cents a mile in exchange for more bathrooms, reduced seat density, and maybe better accomodations at the stops? Maybe we induce the cities benefiting from public intercity transportation serving their less-affluent citizens to provide the bus stations?
Is this discussion about accomodating people with a (ground) common-carrier transportation option, or is this fundamentally about trains because we believe trains are kewl and whatever amount of money Amtrak wants to run them is what we need to pay?
V. Payne,
Your analysis completely over looks the fact that your imagined payment of $4.50 per train mile reflects a huge subsidy to ATK by the freight carrier that receives the pittance ATK pays. If ATK paid per mile rates in the same ball park that a freight train earns, less equipment costs, then the hidden subsidy the freight carriers are paying for the dubious joy of hosting ATK would go away and we could all see what ATK truly costs society.
Until the day ATK pays its way on the freight network, I will advocate for its abolition.
Mac McCulloch
Ultimately, it is about equitable financial treatment and providing a ground service a reasonable percentage of people will use. I am pretty sure that you could make the actual variable subsidy for the entire train around $0.04-0.06/PSGM for intercity rail off-corridor and it could work for a much larger audience as long as you allowed the consists (capacity) to expand to a financially reasonable size. But suppose you wanted to start small.
My point in regard to the new service offering (Price +) is that you could add a coach set up as I have suggested above and more than fully cover the long run marginal cost and then some. Maybe around a $0.04/PSGM profit. Essentially, this is the same thing that is asked of Megabus, just cover your long range variable costs, irrespective of the total costs, but they are allowed to siphon off the more profitable long haul riders while perhaps destroying any common carrier service to the intermediate points. In the proposal above I am merely suggest a market segmentation as you need to keep your revenue base. I suggest doing this by the seating layout.
As to why this won't happen tomorrow, passenger rail here went through the WWII to mid-1960s period of negative subsidies (the 15 and 10% ticket taxes + property taxes on terminals), to a property taxes only for 5 years, to under-capitalization, to direct subsidy. All the while capacity was shrinking and the costs per unit of output going up. There is going to be a bit of a lag going back the other way. Ultimately, there is nothing to say that if you allowed for capital funded capacity expansion of the intercity trains that you would not get back to a very low subsidy figure (including the invested capital), but you have to allow for the expansion, which isn't politically doable until you explain what is going on in a financial proposal, which Amtrak hasn't done. Maybe you could make the Sunset East an example. Include a service offering with two classes of coach, sleepers, and auto carriers. In other words as many segmented services as possible.
As to road user charges-trackage rights, the way I see it is you move up in degrees of full cost coverage, from interstates with the cross-subsidy, to Amtrak's now negotiated rights, to say 200% of variable in certain freight cases. If I take the average long run MOW costs for a mainline, say $80k and put 24 trains a day on it I get around $10/Trainmile. But almost all those costs are being driven by axleloads right? There is probably some degree of subsidy from capacity use in the numbers for Amtrak now, but is it really that large given the difference in axleloads?
In the original paper above I answer the mainline capacity question by suggesting that the highway freight cross-subsidy be eliminated through a new class of un-dyed diesel with a new rate gradually applied so that capacity can be added. I think this is a holistic solution. At the point we are at now that would push most Class I to completely double track, and then capacity would have no relevance. The additional use and public utility might also be used to get public funds to improve further grade crossings thus benefiting the entire system. There is a certain amount of need to advocate for a growth solution or your going to get stagnation.
PNWRMNM V. Payne, Your analysis completely over looks the fact that your imagined payment of $4.50 per train mile reflects a huge subsidy to ATK by the freight carrier that receives the pittance ATK pays. If ATK paid per mile rates in the same ball park that a freight train earns, less equipment costs, then the hidden subsidy the freight carriers are paying for the dubious joy of hosting ATK would go away and we could all see what ATK truly costs society. Until the day ATK pays its way on the freight network, I will advocate for its abolition. Mac McCulloch
With the 100s of millions of dollars of public money going to the National Gateway Project, do you think the Capitol Limited should be abolished?
There is a lot of postings mentioning the subsidity that freight RRs provide AMTRAK. Now how about the subsidity that AMTRAK and state governments provide the freight RRs? A partial list of those items are --
A. All of these items help the freights to lower per diem payments for foreign cars, reduce crew on duty times, allow more consistent speeds saving fuel, serve customers by more reliable and quicker service.
1. Downeaster route -- Pan Am RR
2. Wooster - Boston -- CSX route
3. Albany - New York -- CSX to be completed
4. WASH - Richmond -- CSX additional tracks that are useable overnight and some in mid day.
5. Richmond - Selma -- new cross overs to be installed making for more fluidity.
6. Charlotte - Selma -- NS has gained much operational flexibility on this route.
7. West Palm beach -- Mia CSX has good track that they run over day and night
8. A biggie Chicago - St Louis -- the potential for UP using this route for intermodals will be great.
9. Everette - Seattle - Portland -- BNSF gets additional passing tracks and bi - directional signaling.
B. A question -- do the freight RRs have to pay for useage of these improvements when they use them or all the improvements folded into the RR's charging of AMTRAK and the various agencies?
blue streak 1 There is a lot of postings mentioning the subsidity that freight RRs provide AMTRAK. Now how about the subsidity that AMTRAK and state governments provide the freight RRs? A partial list of those items are -- A. All of these items help the freights to lower per diem payments for foreign cars, reduce crew on duty times, allow more consistent speeds saving fuel, serve customers by more reliable and quicker service. 1. Downeaster route -- Pan Am RR 2. Wooster - Boston -- CSX route 3. Albany - New York -- CSX to be completed 4. WASH - Richmond -- CSX additional tracks that are useable overnight and some in mid day. 5. Richmond - Selma -- new cross overs to be installed making for more fluidity. 6. Charlotte - Selma -- NS has gained much operational flexibility on this route. 7. West Palm beach -- Mia CSX has good track that they run over day and night 8. A biggie Chicago - St Louis -- the potential for UP using this route for intermodals will be great. 9. Everette - Seattle - Portland -- BNSF gets additional passing tracks and bi - directional signaling. B. A question -- do the freight RRs have to pay for useage of these improvements when they use them or all the improvements folded into the RR's charging of AMTRAK and the various agencies?
Do you have any financial data to support your argument?
PNWRMNMYour analysis completely over looks the fact that your imagined payment of $4.50 per train mile reflects a huge subsidy to ATK by the freight carrier that receives the pittance ATK pays.
"Huge" may be overstating it a bit...
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
Don,
I will stick to huge. Freight gross earnings are in the range of $1.00 to $1.50 per car mile, assuming 100% empty return. that is $ 2-3 per loaded car mile. At 100 cars per train that is $100-150 gross revenue per train mile. If delete equipment and crew costs we are down to $80-120 or so per train mile, say $100.
If Mr. Payne's $4.50 per train mile is accurate, the passenger train pays 4.5% what a freight train does and imposes more congestion costs than the average freight train due to it legally mandated prefferential treatment. That is a huge discount, that is a hidden tax on the freight carriers, and a hidden subsidy to ATK. It would be nice to see the passenger train advocates admit that fact. I have yet to see anyone acknowledge that fact on this website.
As to the other poster who listed capacity improvement projects that various government agencies are funding on ATK's behalf, the freight carriers have no need for these projects BUT FOR the presence of ATK. The freight carriers are simply being made whole for the new capacity ATK will consume. The fact that one can list a few projects simply proves that these are the exception to the rule of imposing a free ride for ATK on the freight carriers.
I still say shut it down.
Mac
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