Amtrak – Better than Portrayed

By: Glen Bottoms and Eric Peterson

We recognize Mr. Poole (“Amtrak’s Future in Congress’s Hands,” March 21, 2013 Jefferson Policy Journal – click here ) as a preeminent spokesperson for the unrelenting anti-Amtrak faction, rivaling Randy O’Toole. But what Mr. Poole wants readers to believe are myths about Amtrak, are in fact reality. For example:

Myth#1:  “Amtrak boasts 75% of the share of the passenger rail/aviation market between New York and Washington.”

Of course, that statistic is not a myth.  Both Amtrak and the airlines are competing for the lucrative business market between the two cities and Amtrak is, well, faring quite well.  The 2% figure for the share of intercity travel Mr. Poole cites is absolutely meaningless.  Does Mr. Poole mean intercity travel trips?  He is vague.  Amtrak is operating at near capacity (daily train paths) which tells us that Amtrak service is well-patronized.   Mr. Poole does not mention that Amtrak’s Northeast Corridor service is quite profitable (yes, in the full sense of the word).  Mr. Poole’s use of load factors is not clear.  Since we don’t have access to his statistics, we haven’t a clue how he calculates “load factor.”  Suffice it to say that Amtrak sells the same seat a number of times over between New York and Washington, DC.  We wonder how Mr. Poole accounts for this factor.

Myth #2:  “Amtrak ridership grew by 55% since 1997, faster than other major travel modes, and now carries over 31 million riders, an all-time high.”

Mr. Poole quotes Randy O’Toole’s erroneous assertion that using 1997 as the base year distorts the comparison, since that was the purported low point in Amtrak ridership.  Actually, 1996 was the low point.  However, even using 1990 statistics, a high point some 23 years ago and not reached again until 2000, Amtrak ridership has risen some 40% compared to 2012.  And measured from 1996, Amtrak ridership has soared by 71%.  Mr. Poole judiciously avoids the most salient fact.  Amtrak ridership has taken off.  Broken down, all three segments of Amtrak operations have increased significantly since 1996 (NEC Spine (53%), Short Distance (115%), and Long Distance Trains 24%)).  So, regardless of the base year, Mr. Poole’s statistics are not very informative.

Myth #3 Operating Balance vs. profitability

We find some of Mr. Poole’s statements here to be reasonable.  What Amtrak sees as cost recovery, we see as a subsidy, especially the treatment of state subsidies paid to Amtrak for operating short distance trains.  But we also believe in a level playing field, and ALL modes are subsidized (we’ll get to Mr. Poole’s argument here in the next myth).  Please note that after 9/11, Congress passed a bailout giving the airlines more than $12 billion to ease the pain, enough to fund Amtrak for quite a while.  We see no reference to that by Mr. Poole.

Myth #4:  “Washington’s historically outsized support for other transportation modes.”

We would agree with Mr. Poole’s definition of a subsidy.  However, we would, of course, disagree with his efforts to dilute (miniaturize, actually) the actual subsidy. We are truly perplexed as to how Mr. Poole reaches the conclusion that ‘the feds collected slightly more in highway user taxes than they spent on highways.’  Federal Highway Administration figures clearly show that ALL highway user fees collected (gas tax, fees, etc.) total 51% of highway expenditures.  The gap is filled with general revenues (state and local).   Mr. Poole also clearly did not get the memo on what’s happening to the Highway Trust Fund, including the large amounts of general funds injected to make ends meet.

We sympathize with Mr. Poole over his sorrow as a life-long Railfan (this is analogous to ‘…..some of my best friends are…..’).  Crocodile tears, we think.  Trapped in his own paradigm, Mr. Poole can’t free himself to see what is actually happening, that is, a renaissance of truly historic proportions of intercity passenger rail in the United States.  We see a robust Amtrak (or competing private services a la ‘All Aboard Florida’ between Orlando and south Florida) as providing a valuable and viable choice to American transportation consumers.  And they are voting with their patronage.  The ridership track record bodes well for the future in spite of what Mr. Poole would have us believe (his myths).

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Glen Bottoms serves as Executive Director of The American Conservative Center for Public Transportation.  He is a retired federal executive, having worked for the Federal Transit Administration for twenty-five years.  

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Eric C. Peterson is a transportation policy consultant.  Previously he served on the staff of former U.S. Senator John Warner (R-Va), was Deputy Administrator for the U. S. Department of Transportation’s Research and Innovative Technology Administration, and Executive Director of the Landowners Economic Alliance for the Dulles Extension of Rail (LEADER) – the entity that organized the tax district in the first phase of the Washington Metrorail’s Silver line extension to Dulles Airport and Loudoun County, Virginia. 

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2 Responses to Amtrak – Better than Portrayed

  1. Everyone gets an opinion, of course, but this article plays loose with data. That is never good.
    Here are a few basics that these authors haven’t accounted for:
    1. Amtrak’s actual market share in the NEC (rather than it’s modal split–and who flies to/from any intermediate points in the NEC anyway?) comes from the US DOT Bureau of Transportation Statistics. Amtrak contributes next to nothing to regional mobility (outside the special case of Philadelphia-NY-New Haven quasi-commuter markets). The measure is for non-recurring trips over 100 miles.
    2. The biggest of the big lies about Amtrak: that the NEC is “profitable.” Amtrak claims this only because they exclude ALL of their infrastructure, heavy equipment maintenance, overhead, and similar costs (like a bankrupt airline claiming it is “profitable” so long as it doesn’t have to count its “capital” costs like landing fees, gate rentals, aircraft acquisition or heavy maintenance, or headquarters costs). In the private sector, if you do this, it’s a crime and you go to jail–ask Bernie Ebbers. At Amtrak, it’s called “marketing.” In fact, if the NEC operation were charged all of its annual infrastructure and related costs as well as the above-the-rail costs that Amtrak acknowledges, the NEC (by GAAP criteria) would lose more than $600,000,000 a year, every year.
    3. Load factors are reported by Amtrak itself in its annual reports. In the NEC, they hover under 50% (Acela) and under 40% (everything else). Amtrak cannot sell more than half its inventory in the NEC. Since the trains are all pretty much full between Philadelphia, NY and New Haven, arithmetically they have to be (statistically) pretty much empty elsewhere in the NEC. And these NEC seats are not sold and re-sold as these authors assert–that occurs ONLY on the western long distance trains, where on average, every seat and berth is sold approximately 2 1/2 times on each trip. On the western long distance trains, load factors are 60-65%, which IS a sold-out condition (uniquely on these routes) due to the very long routes, many en route stops and seat turn-over. These load factors alone prove conclusively that Amtrak is heavily over-invested in the NEC and underinvested in its long distance services.
    4. Because the long distance trains are statistically sold out already, or nearly so, and their capacity (available inventory) has shrunk over the last 20 years, there can be no meaningful growth at all in this segment, just small infill in off-peak seasons. Because Amtrak cannot give away more than half its existing short corridor inventory, including especially the NEC, it has lots of empty seat-miles to foster modest growth in these markets.
    5. “Ridership” is always the wrong measure of performance (except in urban transit systems where fares are uniform). Ridership measures transaction volume. Static equipment displays generate “ridership” but zero transportation. “Passenger miles” measures actual transportation output (which airlines always use to report performance). In actual transportation produced, the NEC is by far Amtrak’s smallest and weeakest segment. Long distance trains produced more than 150% of the PMs as the NEC in FY2012. Even the hapless regional corridors outside the NEC produced more transportation output than did the NEC, and both segments did so at a small fraction of the (real, full) cost of the NEC. Thus, in terms of profit and loss using GAAP rather than phony “Amtrak accounting” the NEC was by far the worst performer in the system in both absolute terms AND in terms of federal cost per passenger and per passenger mile. The return on investment on each dollar of federal support invested in a long distance passenger in terms of incremental output and revenue was five to seven times greater (500-700% more) than from each dollar invested in the NEC. That’s arithmetic and GAAP accounting, not policy or opinion (or Amtrak propaganda).
    In sad fact, federal money spent in the NEC has produced a negative rate of return on capital every year since 1975 and continues to do so, even as Amtrak’s NEC share and financial results worsen every year.

    • Fritz Plous and Janek Kozlowski says:

      I believe that both the article and the first response present valid points. But to ensure that everyone is comparing apples to apples, I would like to expand on the statement, “like a bankrupt airline claiming it is ‘profitable’ so long as it doesn’t have to count its ‘capital’ costs like landing fees, gate rentals, aircraft acquisition or heavy maintenance, or headquarters costs”.

      The airline capital costs cited reflect but a small portion of the capital that must be invested to assure safe and effective airline service. While airlines must in invest in airplanes, maintenance bases, terminal lounges, computer systems and other fixed and mobile assets, they do not have to bear the full cost of the very expensive Air Traffic Control (ATC) infrastructure owned and operated by the federal government. The airport control towers, the Terminal Radar and Control (TRACON) facilities in each major metro area, the many buildings owned and occupied by the Federal Aviation Administration (FAA), the high-speed computer hardware that controllers use to manage air traffic and the telecommunication systems that link these systems are not carried on the books of any airline but represent capital investments made by the taxpayers but not offset by revenues from the Airline Ticket Tax and deposited in the Airport and Airways Trust Fund. They represent a federal subsidy to the nation’s air travelers totaling $2.6 billion per year and representing a taxpayer subsidy of $45 on each airline ticket sold.

      Amtrak, while federally subsidized, does not have the option of masking its subsidies in the same fashion as the airlines. Amtrak has to cover out-of-pocket such expenses as Rail Traffic Control—the rail equivalent of the government’s Air Traffic Control — along with maintenance of the track structure—the rail analogy of runways, taxiways—station and right-of-way out of its own budget. At Amtrak, the transportation company and the infrastructure provider form a single organization under a single ownership. At the airlines, the transportation company is responsible largely for ownership, operation and maintenance of the vehicles, while the fixed assets and their employees belong to government and enjoy lavish access to government subsidies in return for a less-than-compensatory usage fee—the Airline Ticket Tax. The airlines also receive similar subsidies from most of the communities they serve. Except in the largest cities local airports are not profitable business ventures and must be subsidized from taxes. Terminal concessions and parking revenues provide the airport with a large income stream, but the actual construction costs of the runways are 90-per-cent financed by the federal government with a 10-per-cent local match.

      Despite widespread subsidies to the highways and civil-aviation infrastructure, with which it must compete, Amtrak is expected by its critics to fund all of its capital and operating costs itself through ticket sales, its direct subsidy, and disproportionately small user fees paid by tenant commuter railroads.

      If the taxpayers provided Amtrak with the same level of infrastructure support as they provide the airlines, Amtrak’s fiscal numbers would look much, much better.

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