This Week at Amtrak; February 11, 2008

A weekly digest of events, opinions, and forecasts from
United Rail Passenger Alliance, Inc.
1526 University Boulevard, West, PMB 203
Jacksonville, Florida 32217-2006 USA
Telephone 904-636-7739, Electronic Mail info@unitedrail.org
http://www.unitedrail.org



Volume 5, Number 6



Founded over three decades ago in 1976, URPA is a nationally known policy institute that focuses on solutions and plans for passenger rail systems in North America. Headquartered in Jacksonville, Florida, URPA has professional associates in Minnesota, California, Arizona, New Mexico, the District of Columbia, Texas, and New York. For more detailed information, along with a variety of position papers and other documents, visit the URPA web site at http://www.unitedrail.org.


URPA is not a membership organization, and does not accept funding from any outside sources.


1) (Yawn) It’s that time of year when all sorts of ill-informed people run amuck over Amtrak’s free federal money request. (Gasp!) President Bush, in his final budget request to Congress has requested $900 million for Amtrak, as opposed to the $1.3 billion Amtrak received during the current budget year from the national money trough. While various organizations which support Amtrak for all of the wrong reasons and in all of the wrong ways cry “the sky is falling and the Earth is rushing up to meet it” the wrong headline is being used.

The real – and most important headline – is “White House recommends enough annual subsidy to keep Amtrak’s national system running as is, but may imperil Northeast Corridor upgrades.”

2) There is an incorrect presumption, mostly made by the Northeast news media, that all monies flowing to Amtrak must first be applied to the financial black hole of the Northeast Corridor, and then, any leftovers may be parceled to the several other of these united states which constitute the rest of the country.

Does anyone have a good reason why this is so? Is it written anywhere the aggregate population of the District of Columbia, Maryland, Delaware, Pennsylvania, New Jersey, New York, Connecticut, New Hampshire, Rhode Island and Massachusetts have first dibs on federal money before Florida, Texas, California, Ohio, Illinois, and all of the rest of the states which host Amtrak’s national system?

The breakdown of the White House’s budget recommendation is $300 million for train operations, $500 million for capital projects, and $100 million for development of new state partnerships.

3) Let’s look at the numbers, straight from Amtrak. If you were a staffer in the White House Office of Management and Budget, you would be looking at Amtrak’s financial reports, which are made available to us in the great unwashed public via Amtrak’s web site. Figures taken from the September 2007 monthly report to Congress as available on the web site (Total figures in the September report are cumulative for the fiscal year, as September is the last month in Amtrak’s fiscal year) show this information.

Financial Performance of Routes - Strategic Business Line format, September 2007 YTD Unaudited

Northeast Corridor (Acela/Metroliner, Regional, NEC Special Trains, NEC Bus Route)

Total Revenue – $885.2 million

Total Attributed Costs – $626.8 million (these in the real world are expenses)

Contribution/(Loss), Excluding Depreciation and Interest – $258.3 million (Amtrak doesn’t use the word “profit,” but instead uses the word “contribution.”)

So, before depreciation and interest costs, Amtrak says the entire Northeast Corridor made the company $258.3 million dollars.

State Supported and Other Short Distance Corridor Trains (All other trains outside of the NEC which are not classified as Long Distance trains, including Illinois and California corridor trains)

Total Revenue – $491.6 million

Total Attributed Costs – $619.2 million

Contribution/(Loss), Excluding Depreciation and Interest – ($127.6 million)

Before depreciation and interest costs, Amtrak says all of its Short Distance trains cost the company $127.6 million more to operate than they take in via revenue and state payments.

Long Distance Trains (All other trains)

Total Revenue – $416.5 million

Total Attributed Costs – $856.9 million

Contribution/(Loss), Excluding Depreciation and Interest – ($440.4 million)

Before depreciation and interest costs, Amtrak says all of its Long Distance trains cost the company $440.4 million more to operate than they take in via revenue

Company Totals

Total Revenue – $1,793.3 billion

Total Attributed Costs – $2,103.0 billion

Contribution/(Loss), Excluding Depreciation and Interest – ($309.7 million)

Which brings us to a difference of a mere $9.7 million between what the White House is recommending for train operations and what Amtrak says it spent in FY 2007 for train operations. What’s the problem, then? The tiny sum of $9.7 million is negligible to be arguing over in the global picture of Amtrak. Why all of the gnashing of teeth and predictions of doom and the end of the company?

If Amtrak says it takes $309.7 million to run its trains for a year, why isn’t the National Association of Railroad Passengers and anyone else believing them? The White House allocated an additional $500 million for capital improvements, most of which automatically goes to the NEC, so that keeps any modernization programs on schedule (Amtrak executives have made statements in the past it would be difficult for the company to manage more than approximately $500 million in capital projects a year, so, again, why would it need more?).

4) Last week, on February 8th, respected Amtrak spokesman Cliff Black told a reporter from Media General News Service Amtrak lost $480 million last year. One has to presume that is based on a full allocation of interest and depreciation, plus Amtrak’s annual contribution to the Railroad Retirement System, which funnels huge amounts of money annually into the system as a conduit of system funding.

Even with Mr. Black’s statement, the additional $180 million beyond what Amtrak says it lost in FY 2007 is a relatively small amount which is likely to instantly be made up by Congressional budget writers.

Again, this is not the crisis those seeking to gain from membership drives would like everyone to believe. And, again, this is the sort of annual bad publicity Amtrak receives which tends to draw more people away from Amtrak instead of to Amtrak because they fear Amtrak won’t survive and their money will be wasted buying tickets in advance for vacation travel. While NARP and its minion state organization may gain from this annual silliness, Amtrak suffers at the expense of NARP’s membership drives by promoting alleged Amtrak grievous woes.

5) Let’s look at a few realities. Here is what one Florida wag has to say about Amtrak.

[Begin quote]

Here's a truth I've learned along the way:

A. No matter how much money Amtrak gets, it doesn't improve.

B. No matter how much money Amtrak doesn't get, it doesn't go away!

[End quote]

That sage statement has been true all of Amtrak’s corporate life. Amtrak always survives, and the NEC always receives the lion’s share of Amtrak funding.

Regular readers of TWA know a $480 million shortfall in operating expenses is not insurmountable, if Amtrak put to use all of its assets and resources, including an improved national marketing program. Every piece of rolling stock which sits in the weeds on some siding instead of being used on the road is one more poor example of Amtrak squandering its it resources and ignoring its future. Every marketing program which ignores the national system where space is available on a daily basis for sale is one more poor example of Amtrak ignoring its greatest potential for success in favor of short corridors which cost more money to operate and produce less revenue for the company than long distance trains.

And, lets look at the greatest reality of them all. The figures above from Amtrak are wrong, and Amtrak’s cooks its books. As National Review Online staff reporter David Freddoso wrote on November 1, 2007:

[Begin quote]

Amtrak’s routes in the Northeast Corridor, many will argue, make money. This claim is actually false, the result only of Amtrak’s shady bookkeeping. The northeast routes have made $272 million this year, but only if you completely exclude $414 million in depreciation losses, $88 million in debt service, and $211 million in nationwide losses, none of which Amtrak allocates by route. If the company actually kept honest books, we would likely see that Amtrak loses some money even in the Northeast Corridor.

[End quote]

Mr. Freddoso’s quote partially explains the difference in Amtrak’s figures used at the beginning of this column, and Mr. Black’s figure of $480 million in losses for the year. Mr. Freddoso also doesn’t make mention of the hundreds of millions of dollars Amtrak spends annually to keep the NEC infrastructure in operating shape, which should be charged against any and all trains operating over the infrastructure, but is not.

All of this is confusing. What are the real numbers? Nobody knows for sure. What we do know is in the short run, Amtrak does need an annual infusion of free federal money, which the company, as it has done in the past few years since the departure of former President and CEO David Gunn, is quietly and professionally asking Congress for in a separate budget request.

Everyone seems for forget that no matter who is in the White House, a White House suggested budget is rarely what comes out as an end product from Congress, which is the ONLY governmental body which can ultimately authorize expenditures from the federal treasury. It’s never mattered what the White House has recommended, be it in the day of David Stockman during the Reagan Administration, or today’s George Bush Administration, Congress always makes the last call for Amtrak funding based on its own findings, not the White House OMB recommendations. Everyone forgets the OMB budget is just a recommendation, not a mandate.

6) Here’s a less than clairvoyant prediction, but an almost guaranteed prediction: Amtrak, by the time the final budget is written and signed by the White House, will have an annual free federal monies amount close to the $1.3 billion it had for FY 2007. No trains will go away, but no major changes will be made in the way Amtrak conducts business. The NEC will continue to reap the lion’s share of money, while the rest of the country languishes with pent up demand for passenger rail service. NARP and related organizations will pat themselves on the back for allegedly a job well done preserving Amtrak funding for another year, and the membership rolls and incomes of these organizations will have increased slightly as they “fight” to preserve passenger rail from evil forces which don’t exist.

7) Going back to National Review’s David Freddoso, in the same article as mentioned above from National Review Online (Money Train – Another subsidy, no real reforms for Amtrak), another quote must be featured.

[Begin quote]

Another false claim is that Amtrak does not get its “fair share” of transportation subsidies. Airline passengers pay taxes and fees at every turn and receive a subsidy less than one-thirtieth of Amtrak’s per-passenger mile. Motorists receive no subsidy at all, once they have paid tolls and gasoline taxes.

The fact that Amtrak hemorrhages money is not the only things that makes it so awful. There’s also the maddening inefficiency of a system that has no competition and practically no accountability.

[End quote]


If you are reading someone else’s copy of This Week at Amtrak, you can receive your own free copy each week by sending your e-mail address to


freetwa@unitedrail.org


You MUST include your name, preferred e-mail address, and city and state where you live. If you have filters or firewalls placed on your Internet connection, set your e-mail to receive incoming mail from twa@unitedrail.org; we are unable to go through any individual approvals processes for individuals. This mailing list is kept strictly confidential and is not shared or used for any purposes other than the distribution of This Week at Amtrak or related URPA materials.


All other correspondence, including requests to unsubscribe, should be addressed to


brucerichardson@unitedrail.org


URPA leadership members are available for speaking engagements.


J. Bruce Richardson
President
United Rail Passenger Alliance, Inc.
1526 University Boulevard, West, PMB 203
Jacksonville, Florida 32217-2006 USA
Telephone 904-636-7739
brucerichardson@unitedrail.org
http://www.unitedrail.org