Tuesday, June 17, 2014

All Aboard Florida is taking out a rather pricey loan for construction

From Bloomberg comes the news that All Aboard Florida wants a five-year $405 million dollar loan at 12%.

While such a bond offering certainly does help show that All Aboard Florida is indeed a serious concern, that high of an interest rate is absolutely ruinous for any plans to run a profitable rail line; even at their best, the margins are not terribly high. My personal supposition is that this is intended merely to get the ball rolling while they continue to seek an RRIF loan from the Federal government; part of that loan would then be used to refinance this loan into something rather more reasonable. Without the low interest rates of a Federal RRIF loan, however, I do not believe that this line can be profitably constructed, even with the potential revenue from their hotel and convention center plans.

A modest proposal for RailPac

Lately, it feels like almost every single update from RailPac has to do with the long distance train network. To a certain degree this makes sense; there is a question of interconnection with the national network and the long distance Coast Starlight is currently the only passenger train between Northern and Southern California (though not at terribly good times for anyone wishing to actually make such a journey), and of course the long distance trains are always under attack when Congress is putting together a budget. But the emphasis has gotten quite out of hand with so many messages and calls to action regarding the long distance trains: It calls into question whether RailPac is actually attempting to represent the rail passengers of California or whether they’re simply advocates for long distance trains who happen to be located in California. 91.7% of all the boardings and alightings within the state of California are on the state supported trains with an additional 4.7% coming from the Coast Starlight; the emphasis shown to the Sunset Limited and to the long distance trains in general is downright unseemly on that basis.

It does not help that they continue to endorse a conspiracy take on the Northeast Corridor, blaming it for all of Amtrak’s financial woes and the occasional claim of cooking the books as regards the long distance trains. That they continue to approvingly quote Andrew Selden is a strong mark against them, given his habit of lying, either by omission or commission, to distort the truth about long distance trains and the Northeast Corridor. Take, for example, RailPac President Paul Dyson’s recent post, in which he uses some figures provided by Andrew Selden to claim that “Amtrak’s early management was able to use its experience to operate at a moderate deficit. That deficit tripled as soon as the NEC was absorbed and has grown ever since.” I’m a bit surprised that he required Selden’s help to find those figures since they’re available a short google search away, but be that as it may, those reports very clearly show Andrew Selden to have deliberately misused numbers and misrepresented the numbers that he did use. Very simply, the numbers used for 1973 are not from the same set of numbers used for 1978 (in fact, Amtrak does not appear to use them again after 1973) and the numbers which are used for 1978 contain with them a breakdown of expenses which makes it clear that the rise in expenses is not due to Amtrak taking over the Northeast Corridor.  Here follow the actual compatible numbers for 1973-1978, followed again by the breakdown of expenses from 1972-1978

Year Revenue Expenses Deficit

Percentage change 1972-1978 Absolute change 1972-1978
Maintenance of Way
Maintenance of Equipment
Dining and buffet
Equipment rents

The large increase in expenses was not due to the absorption of the Northeast Corridor and its maintenance costs, though it did have the largest percentage change and was responsible for some increase in expense. It would be rather mind boggling if track maintenance, which, even with the old tunnels and bridges of the Northeast Corridor, is quite cheap, were to be the the cause of such a large increase. Instead, as the 1977 Annual Report notes: "Besides inflation and the ownership and operation of the Northeast Corridor, the increase in expenses, which led to the higher deficit, resulted from addition of new routes and services, and continuing increases in direct labor costs and the cost of equipment maintenance and overhaul." (Emphasis added).

But perhaps it might be too much to ask for that RailPac cease associating with a liar and promoting his distortions of the truth or that it cease to continue spreading what is, I admit, a quite popular, if grievously mistaken, view of Amtrak's finances. Instead, I offer up a modest proposal to RailPac, that they might actually represent the rail passengers of California: Balance.

For every call to legislative action to support the Sunset Limited, there should be a call to legislative action to support the introduction of the Coachella Valley rail service. Already the Thruway route from Indio to Fullerton has 20% of the Sunset Limited's entire ridership. Similarly, for every other call to action on other long distance trains, there should be a call to action for the Coast Daylight, for the San Joaquin extension to Redding, and expansion of the Capitol Corridor. For every post detailing a trip made on a long distance train outside of California, there ought to be a post detailing connections that can be made within California via the Thruway network. From the standpoint of California riders, both actual and potential, Solvang or Yosemite are far more relevant than is Tucson and it is such destinations that RailPac ought to be highlighting.