The problem with rail advocacy organizations

In America, there is no such thing as an effective or unbiased rail advocacy organization. Indeed, those rail advocacy organizations which do exist are generally self-defeating. The National Association of Railroad Passengers has turned into nothing more than a cheerleading section for Amtrak and there is a very odd focus, perhaps even monomania, towards the long distance trains, with a cheerful disregard for facts accompanied by a strong aversion towards modern intercity corridor service and especially the Northeast Corridor.

Take, for example, this excerpt from a letter by Andrew Selden, President of the Minnesota Association of Rail Passengers, passed on by RailPAC today

The western trains ALL cover their variable and direct fixed costs of operations handily, but fail only to cover Amtrak’s allocations of system fixed costs which exist irrespective of the fact or volume of long distance train operations. It is still the case also that Amtrak deliberately misallocates substantial shares of NEC fixed costs to long distance trains, including long distance trains in the west that never use the NEC. The purported “success” or “profitability” of the NEC is a BIG LIE because to make that claim (and to hide the NEC’s staggering and growing annual losses), Amtrak routinely mischaracterizes its infrastructure costs as “capital” items, as if that changes the fact that these costs are caused by and indispensible for the operation of trains in the NEC. Your column hinted at this, but failed to grasp the significance. Amtrak’s claim is like a bankrupt airline claiming that it was “successful” or “profitable” without revealing that it was not charging against its revenues its landing fees, gate rentals, or heavy equipment maintenance, because those are “capital” costs. That would be a lie, and in the private sector a publicly-traded business that made such claims and its executives would be prosecuted for crimes.
Measured by GAAP, Amtrak loses somewhere between $600,000,000 to $700,000,000 every year in the NEC, but only about $200,000,000 in the long distance segment, where it produces 160% more transportation. Thus, its return on federal investment is probably six times (600%) higher in the long distance trains than in the NEC trains. Amtrak’s tens of billions of dollars of “investment” into its NEC markets, including the more than $3 billion sunk into the Acela program, have to date produced a negative rate of return on investment. Its annual loss on operations rose following the inauguration of Acela service 12 years ago, and has risen every year since.

I should first and foremost note that he appears to be president of nothing; the Minnesota Association of Rail Passengers has had no web presence since early 2006 and said website does not appear to have been actively updated for several years prior to then. He is described as "Vice President of Law and Policy" at United Passenger Rail Alliance and does seem to be mildly more active there, but I do get the impression that everyone involved with UPRA is at least a vice president.

It is in fact an outright lie to state that the Western long distance trains (Empire Builder, Coast Starlight, California Zephyr, Southwest Chief, Sunset Limited, and Texas Eagle) "cover their variable and direct fixed costs of operations handily." The recent testimony to Congress clearly shows that it is not the case currently, and it was not the case in previous years either. In 2004, none of the named services made enough revenue to off-set their FRA defined costs ("FRA allowable expenses include train costs, primarily train crews, food and beverage, fuel, railroad costs and commissions and certain shared costs, primarily equipment maintenance and reserves") and in fact they ran a deficit of $84.1 million (Page C-2). In 2005 this increased to $122.3 million (ibid, C-1). 2006 and 2007 are given in different formats, but in 2008 these services lost $115.4 million on FRA defined costs (Page C-2) and in 2009, $92.8 million (ibid, C-1). Using these same costs, however, the Northeast Corridor does even better as well, with the Acela earning $278.6 million more than the FRA defined costs in FY2009 (a total of $67.4 million after all costs are allocated).

The claim that large shares of the NEC are currently allocated to the long distance trains improperly, including the Western long distance trains which never cross the Northeast Corridor, is a tiresome myth; frequently stated, but never backed up. Indeed, it runs counter to his next claim, that Amtrak is inappropriately identifying the infrastructure costs as "capital costs" rather than operating costs. While I am not an accountant, and will cheerfully admit to a lack of knowledge where GAAP is concerned, the characterization of infrastructure maintenance as a capital cost at the very least appears to be a railroad standard; see, for instance, Union Pacific's 2012 Annual Report, pages 35-36. The specific claim that Amtrak loses $600-700 million annually on the Northeast Corridor is additionally quite wrong. The Northeast Corridor covers its capital costs; such a loss would require inappropriately putting the entire burden of Amtrak's depreciation upon the Northeast Corridor. It should go without saying that if Northeast Corridor is held to GAAP and depreciation, the long distance trains will similarly do quite worse as well.

A somewhat unrelated point is brought up here, though it connects with a general monomania for long distance trains: The focus on passenger-miles instead of passenger trips and hence the remark that long distance trains do 160% of the transportation of the Northeast Corridor. Is a single trip from Los Angeles to Chicago really worth ten trips between New York and Washington D.C. or twenty trips between Los Angeles and San Diego? Of course not, but that's what exalting passenger-miles leads us to. I do not wish to suggest the exaltation of passenger trips as a contrary error; though I do think it a generally more relevant metric. However, it is blatantly biased in favor of long distance trains (which can have distances between stops exceeding the total route lengths of corridor services) and not a terribly useful figure when there are city-pairs with sufficient demand and proximity to warrant multiple frequencies, unlike the trips that the long distance trains currently make. This also leads to somewhat lower load factors. Running an off-peak train will necessarily reduce your total load factor. However, it enables trips not otherwise available for many potential passengers, who may very well take the peak train. This is not perfect of course and it does require a bit of a balancing act. This is also mildly exacerbated by the low passenger capacity of long distance trains. A Superliner II consist with three sleeper cars and three coach cars carries only 387 seats compared to 509 seats on a Surfliner or Northeast Regional, and 304 seats on an Acela. Additionally, the closer stops will tend to result in a lower load capacity due to higher turnover.

This mythicism is directly harmful to any attempts to run Amtrak as a potentially profitable rail agency. What is the single largest expense for Amtrak? Salaries, wages, and benefits. In 2012, they amounted to $2.03 billion, larger than all Amtrak ticket revenue, which came only to $1.968 billion (Page A-1.2). Of this cost, and others for that matter, the lion's share belongs, by far, to the long distance trains. In fiscal year 2008, the last year for which I have information, long distance trains were responsible for 41.7% of total wages, salaries, and benefits for the national train system as well as 46% of fuel, propulsion power, and utilities (PDF page 15). This percentage decreases somewhat if infrastructure operations, ancillary businesses (such as commuter rail contracts), and the simply unallocated are added to the mix, but it is clear that long distance trains, with their crews of a dozen or more, are responsible for a hugely disproportionate share of Amtrak's costs. Indeed, for every $1 of passenger revenue on the long distance trains, Amtrak spent $1.17 on salaries, wages, and benefits. While 8.5% of Northeast passenger revenue went to pay for fuel or overhead power, nearly a third of long distance passenger revenue had to be set aside for the very same purpose.

Until such time as rail advocacy organizations and those who speak on their behalf stop peddling arrant nonsense and stop trying to pretend that the nostalgic trips of old ought to be the focus of modern American rail efforts, they will get nowhere with the good ideas that they do possess.