Report from the NEC Commission on the NEC

Quick excerpt from the introduction to a report produced by the NEC Commission:

The Northeast Corridor and the American Economy

The Northeast Corridor (NEC) rail network between Washington, D.C. and Boston, Massachusetts is an engine of economy activity for the United States in the delivery of workers to jobs, business to clients, goods to market, and people to their friends, family, and leisure activities. Seven million jobs are located within five miles of a NEC rail station, almost a third of all jobs in the NEC Region. The Corridor’s commuter and intercity services move 750,000 people each day. The NEC moves a workforce that contributes $50 billion annually to the American economy.

The NEC is a shared resource, used by eight commuter rail operators, Amtrak, and four freight railroads. It connects eight states and the District of Columbia, but its impacts extend across the country. On its own, the NEC Region would be the fifth largest economy in the world, ahead of France and just behind Germany. An unexpected loss of the NEC for one day alone could cost the nation nearly $100 million in transportation-related impacts and productivity losses, roughly the daily economic output of cities like Winston-Salem, NC, Portland, ME, or Boulder, CO.

Explore the report below and view the Interactive Map.

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You can see a report produced by the NEC Commission pursuant to part of its mission as defined in PRIIA 2008 Section 212 at http://www.nec-commission.com/reports/nec-and-american-economy/

Railway Age published an article on it which you can access at: http://www.railwayage.com/index.php/passenger/intercity/northeast-corridor-is-an-economic-engine-report.html

You can see the entire report in PDF form at: http://www.nec-commission.com/wp-content/uploads/2014/02/NEC_american_economy_report.pdf

The most interesting part occurs on Slide 61. It says:

[SIZE=11pt]New York Penn Station Redevelopment [/SIZE]

[SIZE=9pt]Although these plans are currently less developed than those for a new Moynihan Station concourse, there are also [/SIZE][SIZE=9pt]complementary proposals to redevelop the existing New York Penn Station complex. One of those proposals is the Amtrak Gateway program, which is considering the expansion of Penn Station southward to create additional platforms and tracks [/SIZE][SIZE=9pt]underground. Depending on the details of Gateway implementation and how historic property issues are addressed, this [/SIZE][SIZE=9pt]project may yield potential real estate development opportunities immediately south of the existing Penn Station complex on property such as Block 780, between 30th and 31st Streets and Seventh and Eight Avenues. [/SIZE]

I personally found this part more interesting (along with most of the rest of the report):

A Critical Link in Mitsubishi’s Supply Chain

Mitsubishi Motors manufactures Outlander Sport vehicles in Normal, Illinois and uses freight rail via the NEC to

transport vehicles to the Port of Baltimore for export to various countries in South America, Africa, and Eastern Europe.
This year, approximately 30,000 vehicles manufactured in Normal will travel on the NEC to be exported via the Port
of Baltimore.
As part of this process, Mitsubishi reserves space for vehicle exports on oceangoing vessels based on the time they are
scheduled to arrive at the Port. Mitsubishi calculates production in terms of units per day, and the time it takes them
to travel on rail to port. Since Mitsubishi cannot send a partial shipment, a delay in part of a vessel-bound shipment
of automobiles arriving may cause hundreds of automobiles to be held at the port, increasing the time to market and
resulting in additional costs. Occasionally an entire shipment of cars is held for weeks for a single delayed unit.

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(page 48 of the report)

Andrew said:

The most interesting part occurs on Slide 61. It says:

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That is page 61, not slide 61. This is a document, not a viewgraph presentation. It is not the most interesting part because there is no new info in that paragraph. Of course, Block 780 would provide real estate development opportunities to help pay for eminent domain of the entire block.

There are good economic arguments and examples in the report to help build the case for a substantial increase in the investment in the NEC by the federal government and the states. Figure 2.3 shows the turn-around from population decline in the 1970s to growth in recent years for the major cities of the NEC. Not the suburbs, but the cities themselves. DC is booming these days in construction of residential buildings. Which has implications for growth in travel on the NEC as more people move back into the cities and take transit and trains to travel.

It should not be this difficult to get adequate federal and state funds for capital investment in the NEC. But the states of the NEC look to the federal government to step up. Congress, especially the House, gets bogged down in politics when it comes to providing funds for "transit" in the northeastern states. Even if most northeastern states are among the biggest donor states which pay more in total federal taxes than they get back from the federal kitty. Hence the examples of how the NEC affects transportation of goods to the mid-west.

Chapter 5 on development around the major stations shows, IMO, why the NEC can't realistically be privatized. There are only a few parcels left where Amtrak or the owner of the NEC can capture some additional real estate value. But the dollar amounts are small against the capital needs of the NEC. The valuable land, air rights, and assets around the major stations were mostly sold off long ago. Only the local, state, and federal governments can really capture the economic value generated by the NEC in the properties and developments around the major stations and in the metro regions through property, business, income, sale taxes.

If the the Amtrak owned portions of the NEC were turned over to a private operator, that private company would struggle to pay for the huge backlog in needed capital improvements because they couldn't raise enough revenue from access fees by the commuter agencies, ticket sales for intercity trips, and what property assets remain. A more greenfield HSR project such as Dallas to Houston may be able to be privately funded because they can buy open land and get the state to turn over or lease other land & property they need to them in return for future payments. The private projects, of course, like All Aboard Florida, would also be contingent on low interest government backed loans to pay for them because commercial loans of that size are too expensive.

This is the third report generated by the NEC Commission over the past 15 months. Do they have more in the works?

Edit: fixed sentence

Given the alleged importance of the NEC, it make no sense for Amtrak to own it. O'Hare airport is hugely important. It is not owned by United Airlines. The NEC should be owned, dispatched and maintained by a public agency. Operations on the NEC should be by contract between the NEC ownership agency and the various train operation organizations, including Amtrak. Amtrak was granted NEC ownership by default as a means of getting the NEC off the books for Conrail. It is time to make the NEC ownership more like an airport - publicly owned with contracted private use.

That sounds very reasonable, right up until the second to last word.

I have a fundamental problem with socializing losses and putting profits into private concerns. Any operating profit from the NEC should go towards service improvements, be they infrastructure projects, equipment upgrades, or increased service - not towards lining the pockets of private citizens.

I've got no issue with taking away the NEC infrastructure from Amtrak (provided that the new controlling entity is actually sufficiently funded to bring it into a state of good repair and then keep it there), and that entity contracting with public agencies to operate the various services. If those public agencies can manage to make an operating profit, good for them - the funds can be put to use for the public good.

The NEC Commission has actually got the powers to evolve NEC to a different organizational structure along the lines mentioned. As for what may or may not happen is another matter. I do agree with Ryan that privatizing profit and keeping the losses in the public sector on the whole is a bad idea and does not even produce the best outcome. OTOH keeping infrastructure in private even if highly regulated hands, does not exactly produce the best results either. Look at the state of the pwoer infrastructure in this country, and compare it with say, Germany or France.

Looking at the NEC Commission website, they have a rather challenging task:

"Mandated by Congress, a major responsibility of the Northeast Corridor Commission is the development of a standardized formula and methodology to determine and allocate costs, revenues, and compensation among Northeast Corridor (NEC) owners and operators that ensures each service takes proportional financial responsibility for its use of shared NEC infrastructure and related facilities. The statute requires that the formula ensure there is no cross-subsidization between commuter, intercity, and freight transportation." (boldface emphasis mine)

Is it even feasible to come up with a cost allocation formula that ensures there is no cross-subsidization between the different users of the NEC? The use of the infrastructure is so intertwined, I don't see how a completely accurate and agreed to cost allocation formula can be derived. Easy for Congress to insert such language in a bill, not simple for others to figure out how to apply it.

2014 is going to be a busy and pivotal year at Amtrak with the LD trains and the NEC funding structure at stake. Perhaps the next report from the Commission will be from the Cost Allocation Committee. From the website:

"Work Plan

The Commission established a Cost Allocation Committee to lead the development of the standardized formula and intends to reach agreement on the policies required to implement the formula by the statutory deadline of October 16, 2014."

jebr said:

I personally found this part more interesting (along with most of the rest of the report):

A Critical Link in Mitsubishi’s Supply Chain

Mitsubishi Motors manufactures Outlander Sport vehicles in Normal, Illinois and uses freight rail via the NEC to

transport vehicles to the Port of Baltimore for export to various countries in South America, Africa, and Eastern Europe.
This year, approximately 30,000 vehicles manufactured in Normal will travel on the NEC to be exported via the Port
of Baltimore.
As part of this process, Mitsubishi reserves space for vehicle exports on oceangoing vessels based on the time they are
scheduled to arrive at the Port. Mitsubishi calculates production in terms of units per day, and the time it takes them
to travel on rail to port. Since Mitsubishi cannot send a partial shipment, a delay in part of a vessel-bound shipment
of automobiles arriving may cause hundreds of automobiles to be held at the port, increasing the time to market and
resulting in additional costs. Occasionally an entire shipment of cars is held for weeks for a single delayed unit.

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(page 48 of the report)

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If this is supposed to be for the sake of justifying the NEC due to freight usage, it is really an extreme stretch. How much of the trip is on the NEC? 2 miles? 5 miles? 10 miles? 1/2 mile?

Roughly 40.

FYI, Amtrak has issued a news release about the economic report from the NEC Commission. Nothing new in the release; it just part of the campaign to build political support for increased federal and state funding for the NEC infrastructure.

NORTHEAST CORRIDOR IS AN ECONOMIC ENGINE

It is from Perry to Bayview over some of the fastest tracks on NEC south. So maintaining it for both freight and Acela is quite a challenge. The other freight on this track is even more damaging, heavy coal train headed to a powerhouse. There are autoracks that also run north from Perry to the Wilmington area. Don;t know exactly where they go. In addition there are POL trains to the refineries around Wilmington and Marcus Hook. There is quite a bit of freight that runs on the NEC between Wilmington and Baltimore, typically all coming in on the Port Road into Perry by Susquehanna River on NS and then going either north or south from there. These are all NS trackage rights service.

CSX also runs coal trains from Landover to Bowie - that's maybe 10 miles or so.

jis said:

It is from Perry to Bayview over some of the fastest tracks on NEC south. So maintaining it for both freight and Acela is quite a challenge. The other freight on this track is even more damaging, heavy coal train headed to a powerhouse. There are autoracks that also run north from Perry to the Wilmington area. Don;t know exactly where they go. In addition there are POL trains to the refineries around Wilmington and Marcus Hook. There is quite a bit of freight that runs on the NEC between Wilmington and Baltimore, typically all coming in on the Port Road into Perry by Susquehanna River on NS and then going either north or south from there. These are all NS trackage rights service.

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That the NS freight trains interfere with and complicate NEC passenger operations and any long range MARC plans for extension to Newark DE and the passenger trains limit NS access is the reason for covering it in the economic impact discussion. Continuing to move the freight trains off of the high speed NEC may be the best solution, but one that will take money.

The Chesapeake Connector is mentioned in the 2010 NEC Master Plan for this segment without any details and I had seen nothing about it in some time. Did a google search and turns out that there is a webpage for the Chesapeake Connector study with a brand new draft feasibility study report on the options. Skimming the draft, there have been a number of studies over the years on this extended segment of the NEC which have gone on the shelf. Option A with a 3rd main track and crossing over the NEC with a grade separated structure for the freight trains is ballparked at $350 million. One of the projects that can be tackled by a proper NEC modernization and expansion program if it can be put together and funded.

RyanS said:

I have a fundamental problem with socializing losses and putting profits into private concerns.

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Me too. This particular type of scam -- foisting all the costs on the taxpayer, but diverting all revenues into the pockets of profiteers -- is one of the main causes of the ruination of this country.

The NEC Commission has posted their NEC Commuter and Intercity Rail Cost Allocation Policy documents. I have only done a quick skim read so far, but yes, properly allocating the capital and operating costs is rather complex. Massachusetts is in dissent with the hammered out policy.

Comments, anyone?

Early thought: the Massachusetts dissent is correct, and hits on some important issues.

-- The public disclosure issue is going to cause several states (at least 4 judging by the voting) to actually reject the Commission's findings and rulings, until it's addressed. (The states have no choice, public disclosure laws compel them.) Probably this will be fixed.

-- It does look like the formula is a scheme to shaft the states which did their part previously, while helping out the freeloaders. However, they'll probably get away with that.

-- Because the formula is supposed to be implemented in each individual contract between a commuter authority and Amtrak... it won't be! Each commuter authority will fight for a better deal, and they mostly have the clout to get it. MA and CT in particular own their own lines and can afford to just refuse to go along with it.

The NEC Commission has posted their Five Year Capital Plan for FY2016 to FY2020. The plan is both available an interactive link on the website and as a PDF document (link to 8 MB PDF). The headline would read many projects that could get started in the next 5 years, but billions short in funding. Lots of specific dollar numbers for projects that I have not seen broken out before. $310 million shortfall for starting construction of the B&P Tunnel, $610 million for the Gateway project (through FY2020), $165 million for Pelham Bay Bridge replacement, and so on.

afigg said:

The statute requires that the formula ensure there is no cross-subsidization between commuter, intercity, and freight transportation." (boldface emphasis mine)

Is it even feasible to come up with a cost allocation formula that ensures there is no cross-subsidization between the different users of the NEC?

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Nope.

The use of the infrastructure is so intertwined, I don't see how a completely accurate and agreed to cost allocation formula can be derived. Easy for Congress to insert such language in a bill, not simple for others to figure out how to apply it.

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It's completely impossible. It's like Congress ordering a square circle.
There are economies of scale in railroading. When you have agency A running 10 trains a day and agency B running 10 trains a day, who gets credit for the economies of scale inherent in going from 10 trains to 20 trains a day?

It's completely arbitrary. In a certain sense, there is no such thing as "cross subsidization" here. The question is who the fixed costs are charged to. But the fixed costs are fixed, not dependent on the amount of operations. The allocation of fixed costs is utterly arbitrary. But it cannot be considered "subsidization" because if the fixed costs aren't spent, the trains can't run.

let me know when the NEC makes it to Appalachia

we'll be waiting

The language and terminology needs to change from one that is focused on "subsidy" to one that revolves around "contract cost" The government "contracts" with an organization that is capable of providing a service that the government desires to provide to the nation/state/whatever, and the price associated with the contract is the money that it contributes. Of course what we do now is in some cases we call it a subsidy, in some cases we call it an investment and in some cases we try to pretend that it is paid for through fees. This is what leads to a whole bunch of pointless posturing which gets in the way of making rational decisions about such important things as the mix of fundamental infrastructure necessary to provide the transportation that the nation deserves, to enable it to grow.

I presented this view to various Congressmen and Senators offices yesterday during the NARP Day on the Hill. All (both Republican and Democrat) agreed that this is the way it should be viewed, and also all said that the current conceptualization is so ingrained that would be heck of an effort to change the way of thinking. BTW, we had surprisingly supportive meetings with several Republican Congressmen yesterday, which was gratifying. Needless to say all the Democrats that we met were very supportive too. Now to see if it has any effect on anything.

jis said:

...

I presented ... to various Congressmen and Senators offices yesterday during the NARP Day on the Hill. … both Republican and Democrat) ...

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Well, it's a dirty job, but somebody has to do it.

Srsly, thanks for doing this. And keep up the good work.

Thanks to all of yall that are able to do this important work as advocates for rail in this country! It is appreciated!

Thank those that advocated for Amtral and all passenger rail. Having been there and done that all I have left is memories and now occasional responses to my e-mails. I can tell you that the only politician or his staff that gave specific answers directly to my questions was a then Senator from my home state Illinois. His name was Barak Obama.

Looks like this this important report may get some attention after all, with a ref on the Huffington Post that links to this article:

http://www.citylab.com/commute/2015/04/8-critical-rail-projects-that-amtrak-cant-afford/391038/