750 Mile Rule: Federal vs. State/Local Amtrak Funding

I think that many of us are against the so called "750 mile" rule requiring state funding for service below that distance. I can think of many < 750 mile routes that could be done if Amtrak did not need states to chip in.

On the other hand, there are some trains that I feel should require state support if the train(s) clearly serve a limited market as opposed to others that serve a larger percentage of the country.

Now which trains are "national" trains and which are "regional" is certainly up to debate and interpretation. If we can agree as to which are which, we can use federal money to serve national trains and state/local money to serve regional trains. But good luck with that.

Otherwise, maybe we have to say all trains must be funded by states they serve. Or you give Amtrak a blank check to start a short train in the middle of nowhere and use all of our money to pay for it.

Should we require all trains to be funded regionally or have no rules at all? Is there a compromise as to which trains are regional and which are national? I think the 750 number is very arbitrary. Maybe we can say a train that runs completely in one state is the responsibility of that state and local areas and that any interstate train can be funded nationally. Or 1-2 regionally and 3+ nationally (so if a train just touches the border of a neighboring state it still should be primarily the predominant state's responsibility). Can you think of a better "rule" to separate national vs. local?

You make the optimistic assumption that Amtrak has more available funds to fund operations than the states do. That is patently untrue. If Amtrak truly starts holding NEC operating surplus for NEC use we will actually start seeing LD trains off notices going out. That is why they will not do it. If Pennsylvania had not come up with funds for the Pennsylvanian there would have been no more Pennsylvanian! The sooner people start understanding this the more grounded in reality this discussion can become.

Of course an electoral miracle could change all that, but until then ....

Philly Amtrak Fan said:

I think that many of us are against the so called "750 mile" rule requiring state funding for service below that distance. I can think of many < 750 mile routes that could be done if Amtrak did not need states to chip in.

On the other hand, there are some trains that I feel should require state support if the train(s) clearly serve a limited market as opposed to others that serve a larger percentage of the country.

Now which trains are "national" trains and which are "regional" is certainly up to debate and interpretation. If we can agree as to which are which, we can use federal money to serve national trains and state/local money to serve regional trains. But good luck with that.

Otherwise, maybe we have to say all trains must be funded by states they serve. Or you give Amtrak a blank check to start a short train in the middle of nowhere and use all of our money to pay for it.

Should we require all trains to be funded regionally or have no rules at all? Is there a compromise as to which trains are regional and which are national? I think the 750 number is very arbitrary. Maybe we can say a train that runs completely in one state is the responsibility of that state and local areas and that any interstate train can be funded nationally. Or 1-2 regionally and 3+ nationally (so if a train just touches the border of a neighboring state it still should be primarily the predominant state's responsibility). Can you think of a better "rule" to separate national vs. local?

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You are quite correct, the '750 mile' rule seems largely or completely arbitrary and not a sound basis for such policy making. Expressed simply, trains which operate in only one state should ordinarily be the financial responsibility of that state (Empire Service, Surfliners, etc.) while interstate trains - those which routes traverse two or more states - should be a federal responsibility.

There are some 'gray areas' or potential exceptions, and the question thus arises how to write such special cases into policy. I would submit that trains primarily serving a single state, but which operate beyond that state's borders to a (nearby) major destination or rail hub (Hiawatha, Michigan trains, etc.) should still remain a state responsibility; Perhaps train which operate past the next major destination or logical terminal point into a second state should be classified as interstate trains. Secondly, Amtrak should have the legal right (subject to contracts and negotiations with the sponsoring state agency, of course) to extend state trains beyond the point the state funds the service (for instance, extend the Illini to Memphis). This would technically make it an interstate train (outside Illinois borders), but its operation contingent on the original state service. ch.

That said, we might be as well or better off just to go back to the rules under the old 403(b) state supported services. Let Amtrak run whatever it chooses within the limits of its federal appropriation and let the states add what they will with the corresponding federal match.

jis said:

You make the optimistic assumption that Amtrak has more available funds to fund operations than the states do. That is patently untrue. If Amtrak truly starts holding NEC operating surplus for NEC use we will actually start seeing LD trains off notices going out. That is why they will not do it. If Pennsylvania had not come up with funds for the Pennsylvanian there would have been no more Pennsylvanian! The sooner people start understanding this the more grounded in reality this discussion can become.

Of course an electoral miracle could change all that, but until then ....

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The amount of federal funds available to Amtrak for Northeast Corridor and nationwide operations is not written in stone. Amtrak annual appropriation is completely up to Congress and could increase or contract sharply on a whim or as the political winds blow - and has done both in the past. Other than maybe very limited exceptions I don't see Congress going along with much increased funding for more long-distance trains in particular, and probably not much for Amtrak operations of any sort. Amtrak could always present a plan for increased national service (short, medium, and long distance) if Congress chooses to fund it. I don't think anyone here would expect such a proposal to get very far in Washington - more accurately it would go over like a lead balloon - but we'll never get anywhere just assuming Amtrak cannot ever have money for greater service levels.

Political fortunes can change at the state level too - look at what happened in Wisconsin and other states a few years back. It is not at all inconceivable that even in states with a longer history of state-funded trains a change in political administrations or political control of state legislatures could curtail funding for those trains. This seems less likely in the midwest with contracts in place for state purchased equipment, but again it is not impossible. You don't want large or critical segments of your rail network at the mercy of individual states, because just one could always pull the plug. This further illustrates why the '750 mile' rule is arbitrary and makes little sense; It is not practical to even try to get two or three states to coordinate and agree on funding passenger rail for interstate trains. Even for intrastate service, the states are often cash-strapped as well; Congress, if only they would stop micromanaging and start actually governing the nation, has a far larger budget at its disposal.

The 750 mile rule is a big handicap IMHO. Some of you have clearly said that shorter trains are more popular and more profitable. Anytime I ask for more LD service or extending an existing train even five feet I get the "it will add to the delays" response. But Amtrak's hands are tied less than 750 miles and you can bet they're not really pushing down the doors for anything over 750 miles.

Here's another big problem I see. How many trains serve Las Vegas? Las Vegas I believe is the largest market with no train service (if you consider Maricopa part of the Phoenix area).

https://en.wikipedia.org/wiki/List_of_major_cities_in_U.S._lacking_Amtrak_service

In addition, it's obvious Vegas is a big tourist attraction many people want to go to.

I know right now I cannot take Amtrak to Las Vegas right now unless you count Thruway bus. No one can.

Now would Amtrak want to start a 750 mile route just to serve Vegas? That's a lot of money and it requires sleepers they probably don't have. Do you think Amtrak wouldn't want to start an LAX-Vegas train? Do you think it would not be successful? You add that train and anyone who can get to LAX on Amtrak can go to Vegas. I claim this train serves a national purpose. I think there are others that certainly can serve a big population (3 C's, CHI-MSP, CHI-CIN, ATL-Carolina) but it's still mostly regional. But I think anyone who wants to visit Las Vegas whether in California or Philly gains from this service. So telling Amtrak to beg Nevada and California to support it hurts anyone who wants to visit Vegas.

Quite a few of us agree that there are plenty of unserved or under served markets/routes that would add quite a bit of R & R to the Amtrak system but Amtrak can't even touch them without state support. Maybe Iowa Pacific will be a game changer and other states will seek private support to help them support state supported trains.

Even if the rule disappears, that does not suddenly mean Amtrak has the funds to start all these new trains.

The issue still remains of where the funding comes from, whether federal, state, or other sources.

I don;t view the rule as a deal breaker. All that has to happen is that any federal funding has to get routed through the state(s). It is in general good to have a local stake in these things. Witness what is happening with the Southwest Chief even when there is no 750 mile rule applicable.

I think no small part of the issue at hand is that of "direct costs" versus "fully allocated costs". Basically, you've got at least some trains that are doing well on direct costs but which get sandbagged with all of those "additives" for generically computed advertising costs and overhead (not to mention capital charges...which get interesting from the standpoint of the states often being stuck using roughly 40-year-old equipment and/or breakdown-prone locomotives but Lord only knows how they're being billed for it).

The other issue is the "fig leaf" of running money through the state(s), which involves playing games with (1) who's going to put in the application and/or (2) a stray governor deciding to throw a spanner in the works. This can reach a point of silliness such as we saw in VA (where if a bill hadn't passed, the VA Regionals would have been axed immediately (1) in spite of running in the black and (2) in spite of there being a substantial surplus that VA hasn't requested back).

I'm not necessarily opposed to requiring states to pick up some share of the tab for shorter trains (or indeed encouraging them to pick it up for part of longer trains if they can get better service in the deal); the issue is, I think, more deeply, the fact that now you have to throw in an "extra actor" and force them to pick up part of the bill for Amtrak's dubious accounting.

Eric S said:

Even if the rule disappears, that does not suddenly mean Amtrak has the funds to start all these new trains.

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That's where I get stuck as well. Without additional funding how is the 750 rule an issue?

Devil's Advocate said:

Eric S said:

Even if the rule disappears, that does not suddenly mean Amtrak has the funds to start all these new trains.

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That's where I get stuck as well. Without additional funding how is the 750 rule an issue?

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Exactly. Congress wrote the 750 mile rule into law. Congress can write it out as well. But unless Congress also appropriates funding for one, some, or all of these train proposals, why does the 750 mile rule matter?

Eric S said:

Devil's Advocate said:

Eric S said:

Even if the rule disappears, that does not suddenly mean Amtrak has the funds to start all these new trains.

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That's where I get stuck as well. Without additional funding how is the 750 rule an issue?

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Exactly. Congress wrote the 750 mile rule into law. Congress can write it out as well. But unless Congress also appropriates funding for one, some, or all of these train proposals, why does the 750 mile rule matter?

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Well, no state wants to plan one that's either more or less than 750 miles. LOL.

No way this Congress will back down on making the states' pay 85% of the existing short corridors, leaving Amtrak to absorb the 15%.

But perhaps explore another option like, on new routes that pass thru more than one state, and over 600 miles, but less than 1,000 miles, Amtrak will pay 50% for the first 5 years, then 30% for the next 5 years, then 15% thereafter. That would make Amtrak share more of the costs of starting a new corridor train, but not forever; after the new route is established, it would go to the same PRIIA formula as the older corridors.

All the real cost issues are in the overhead anyway.

-- Amtrak badly needs to finish its "IT project from hell", which is to get everything in ARROW replaced with something which is not written in mainframe assembly language. This has been very expensive and very slow and as a programmer I understand exactly why.

-- Amtrak is finally getting its maintenance cost allocations straightened out.

-- Amtrak needs to figure out what's going on with "ancillary", which is officially losing very large amounts of money. What IS this, anyway?

neroden said:

All the real cost issues are in the overhead anyway.

-- Amtrak badly needs to finish its "IT project from hell", which is to get everything in ARROW replaced with something which is not written in mainframe assembly language. This has been very expensive and very slow and as a programmer I understand exactly why.

-- Amtrak is finally getting its maintenance cost allocations straightened out.

-- Amtrak needs to figure out what's going on with "ancillary", which is officially losing very large amounts of money. What IS this, anyway?

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Ancillary was just a term I used to cover things like cash F&B, PV fees, etc., as opposed to ticket revenue. The "loss" also is the result of some weird accounting and only showed on a monthly basis for one year.

I was referring to the "ancillary customers" who are listed in the "fully allocated" numbers in the monthly reports. But of course my mistake is to look at fully allocated numbers, which are of course meaningless gibberish.

On a "fully allocated" basis,

-- "freight and other customers" lose large amounts of money for Amtrak

-- "ancillary customers" lose large amounts of money for Amtrak

And I don't even know what the "ancillary" customers are.

I tried to match up "freight and other customers" revenue ($185.1 August YTD) with the revenue earlier in the same report; it's close enough to the sum of "freight access fees" and "other transportation" (which is what the commuter railroads pay Amtrak).

I suppose it's reasonable to say that Amtrak loses money on these after considering incremental maintenance costs, given how little the commuter railroads pay... but...

However, "Ancillary revenue" is 394.4, and I can't figure out where that number comes from. I guess it's "reimbursable revenue" plus "commercial development". But what the heck is "reimburseable revenue"?... after looking at the 2011 (!!!) report, I see that this is contract work by Amtrak for others. maybe?

There is no sane way in which Amtrak is losing money on contract work or commercial development.

Fully allocated numbers are absolute garbage.

I had posted comments about this topic in another post but just to not clutter that post any more I'll repeat my comments here.

Unless you want to get into which routes are of a national interest and which cater to a local/regional/state level, have a common formula for funding of all Amtrak service, long distance and otherwise. It shouldn't be all federal or all state but a combination of both (50-50? 75-25 one way?) A state like Pennsylvania would have to put up funding for trains that pass through like the Silver Meteor and Capitol Limited but would also receive more aid from the federal government for the Pennsylvanian and the Keystone routes. They'd have to figure out a reasonable formula as to proportions of each route each state is responsible for. Maybe they can use train miles through each state. Or ridership (but this puts more burden on states with big cities like Illinois). The level of train service should not be dictated on the state's willingness (or lack of) to pay for it. On the other hand, should the nation be paying for service through states with small populations that they would unlikely ever ride?

Maybe we just put an amendment to the 750 mile rule as follows: You can run a route less than 750 miles funded fully by the federal government for a period of three years. Then after three years the states/cities must pay any operating losses. So we start DAL-HOS for three years at no expense to Texas but after that either they pay or the line gets shut down (or maybe it runs a profit). Hopefully in those three years the state(s) involved will see the benefit of the train running and be more likely to run it. In theory the state would be more likely to pay for a currently running train with a good track record than to start up a new train with no guarantee of success. Even Scott Walker isn't stupid enough to shut down the Hiawatha service.

And if Amtrak/Congress has no money to even fund a short train then it needs to look at its national map and either cut or truncate some under performing or unnecessary routes. I would absolutely hurt 1,000 passengers if I can help 10,000. Otherwise unless Amtrak gets more money, we'll be stuck with the same crap with no gains in service ten years from now.

I think the fundamental problem is the use of "fully allocated" garbage numbers. I don't know what Congressional hatchetman pushed this, but it was a terrible idea.

Congress should be paying for the overhead. Period. After that, it becomes possible to take some sort of rational look at the variable costs of routes and argue about who should pay for them. Without that, it's just fake numbers.

I'm not opposed to allocating some costs (if only as an incentive for Amtrak to try and encourage new operations) but I agree that "full" allocation leads to baloney.

You asked. ...

neroden said:

All the real cost issues are in the overhead anyway.

...
-- what's going on with "ancillary", which is officially losing very large amounts of money. What IS this, anyway?

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Here's an old but perhaps timely document full of interesting stuff.

http://www.gao.gov/assets/160/154870.pdf

I mean, how much of this has changed in 20 years, ya think?

p 76

[SIZE=11pt]The financial contribution from Amtrak’s ancillary activities is largely unknown. During our review, Amtrak had difficulties in identifying the costs of these activities and, for the most part, was unable to provide us with financial statements for them in a timely manner. This was particularly true for commuter rail activities. Data on revenues and ridership were available but data on expenses were not. We also had difficulty identifying general and administrative expenses for these activities and the way these costs are allocated to specific lines of business or specific contracts. According to Amtrak, these costs are not accounted for separately but are instead allocated according to standard corporatewide formulas. We did not audit these formulas. As a result, it is not clear what the financial contribution of Amtrak’s ancillary activities might be, nor whether costs are being allocated correctly. [/SIZE]

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At least the LD gang has claimed for quite a while that a lot of NEC costs are surreptitiously being charged to the National account and thus getting reflected as inordinately high allocated costs in LD trains. And for whatever reason to date apparently Amtrak has not been able to dispel that impression conclusively. Admittedly, I have no clue about the details of all this, but this is what the argument boils down to as presented by the likes of RailPac and Selden and such.

Bluntly, I think every single sector of Amtrak has bad accounting due to the pervasive "allocations". None of the segments and none of the routes has a meaningul accounting, and the commuter and freight services have the least meaningful accounting.

The only way to get a meaningful accounting is to rip off all the allocations and look at the real underlying numbers. "Direct costs". And for the overhead, look at each category: how much does the national reservations system cost, how much is being spent on Beech Grove, how much is being spent on Bear, et cetera.

Honestly, the only way I'd be thoroughly convinced one way or another is if someone went in and did a deeply detailed audit, broke out the "indirect" costs, and gave a specific rationale as to why each line was being handled in a certain way (e.g. "Shared station expenses are being allocated slightly more heavily towards the LD trains than their passenger loads might indicate because of higher lounge use, redcap use, etc." or "Management overhead is split up on a per-business-line basis rather than a per-frequency basis"). At least then we could dicker over whether the allocation was reasonable (and/or ignore the allocation).

Anderson said:

... a deeply detailed audit, broke out the "indirect" costs, and gave a specific rationale as to why each line was being handled in a certain way (e.g. "Shared station expenses are being allocated slightly more heavily towards the LD trains than their passenger loads might indicate because of higher lounge use, redcap use, etc." or "Management overhead is split up on a per-business-line basis rather than a per-frequency basis"). ...

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Good suggestions.

But Amtrak probably thinks that Critters of Congress already indulge in too datum much micromanaging, and this sort of info would just bring on more such. I think they're probably right.

However, just as we are exasperated by the opaque "Amtrak accounting", the Congress Critters are exasperated as well. That probably isn't helping things.

I've got issues with both sides of that fight. Yes, Congress micromanages things they probably shouldn't, but part of the problem with that micromanagement is that it's often based on bad data...but the bad data is Amtrak's own data, so in a sense Amtrak is in a hole of their own making on that front. Of course, they made that hole due to calculations in another era that it was the "lesser of the evils" since the LD network serves far more states than does the NEC, for example.

A Voice said:

Philly Amtrak Fan said:

... many of us are against the so called "750 mile" rule requiring state funding for service below that distance. ...

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Amtrak should have the legal right (subject to contracts and negotiations with the sponsoring state agency, of course) to extend state trains beyond the point the state funds the service (for instance, extend the SB Saluki/NB Illini to Memphis). This would technically make it an interstate train (outside Illinois borders), but its operation contingent on the original state service.

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This is a great idea.

Adding a day train to/from Memphis would gain at least 100,000 riders. (The two state-sponsored trains CHI-Carbondale carried 289,000 passengers in 2015, not counting the CONO, running overnight on this stretch.) The added revenue on the SB Saluki and the NB Illini would reduce their operating loss CHI-Carbondale. If Illinois would agree to lock in to paying the same subsidy as before, no more but no less, that could get the extension past the Illinois-Kentucky border, probably to the Tennessee border. In turn, that would make the subsidy required from Tennessee to be much less. Of course, Tennessee could very well refuse to pay any reduced amount. In that case, Amtrak would have to eat it. But it would be easier to eat if Illinois kept paying its share.

Extending one of the CHI-Carbondale runs to Memphis would require no more equipment. No idea where they could store the train at Memphis. Or if there would be crew hours problems. (Depart CHI at 8:15 am., arrive Memphis before 8 p.m., leave Memphis by 11 a.m., arrive CHI at 9:45 p.m.)

It frustrated me so much I toyed with a second frequency of the City of New Orleans extending all the way: CHI-Champaign-Carbondale-Memphis-Jackson-Hammond-New Orleans. But that does have big problems: It would need more equipment, probably including a sleeper. Arrival in Jackson (the biggest intermediate station after Memphis) could be 2 a.m., arrival in Hammond (Baton Rouge) 4 a.m., into New Orleans around 6 a.m. Maybe go slow on purpose to make Hammond at 5 a.m. and NOLA at 7 a.m.? (With a good connection to 3-days-a-week Sunset Ltd Lafayette-Houston-San Antonio train leaving about 9 a.m.)

Nah. Maybe next time. Right now I'd just like to see a day train CHI-Memphis. Under current rules that's not going to happen, but your little change could fix that problem.

Presuming the 100k rider figure were to be accurate (I'm not saying it isn't accurate but let's presume that it is), let's fiddle with some numbers:
-In FY15, ridership was 292,187 and revenue was $8.387m. Thus per-passenger ticket revenue was $28.705.

-Total revenue (incl. cafe revenue and state subsidy) was $15.4m

-Total costs were $19.6m. NB this included two round trips and I presume only one would be extended to Memphis (probably 391/392; you lose an equipment turn, but the other options involve awful-hour times for Memphis which would defeat the purpose of the exercise), so the cost per round trip was $9.8m.

I'm strictly spitballing here, but presuming you add 100k riders off of Memphis (and the two existing flag stops, and I would presume one or two additional stops, flag or otherwise), I'd put 40% of those as being to/from Chicago at an average fare of $80 ($3.2m in revenue) [1] with the remainder behaving as existing passengers at an average fare of $30 ($1.8m in revenue). This would give $5.0m in new revenue plus whatever extra you might get from the cafe. I might be able to kick out a slightly larger revenue figure with some massaging. Note that this only increases the overall PPR to $34.13 (not an insane hike). However, given that you're adding 4-5 hours of runtime to the train (nearly doubling it) and increasing mileage by about 220 (on a base of about 310) as well as adding a set of equipment (and possibly adding a car or two to each set) and adding crews? I suspect your costs are going to jump by at least $6m (I'm presuming that there's at least some shared costs that won't increase, but this is close to doubling the needs/cost drivers of that train).

[1] $80/passenger is probably too low; coach fares on the CONO CHI-MEM run $105-202; however, assigning the endpoint market 40% of the new business probably skews a bit too high.

Edit: Just to be clear, I like the idea of enabling Amtrak to do something like this. The issue is, of course, that if costs increase down the line Amtrak could have trouble getting the state to kick in to cover "their part" (since the state would likely say, in response, that the increases were probably on Amtrak's extension). Amtrak could of course respond by . I think you'd need a formula, probably which slightly advantages the state(s) already funding a route, to deal with that.

Anderson said:

Honestly, the only way I'd be thoroughly convinced one way or another is if someone went in and did a deeply detailed audit, broke out the "indirect" costs, and gave a specific rationale as to why each line was being handled in a certain way (e.g. "Shared station expenses are being allocated slightly more heavily towards the LD trains than their passenger loads might indicate because of higher lounge use, redcap use, etc." or "Management overhead is split up on a per-business-line basis rather than a per-frequency basis"). At least then we could dicker over whether the allocation was reasonable (and/or ignore the allocation).

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Yeah. At the moment, the allocations just look like complete garbage. And they're huge: they're bigger than the direct costs by quite a lot.