NARP's take on the proposed transportation bill

NARP has published their analysis of the proposed transportation bill, and its passenger rail provisions. I think they got slightly punchy after reading the whole thing, since the intro is a bit light-hearted, but the details are interesting.

The FAST Act is a 1,300 page bill—not exactly light reading, even if you’re the type who enjoys dense, legal text.

But don’t worry! NARP went through the passenger rail title to analyze all the promising provisions, the worrisome proposals, and everything in between. From Gulf Coast restoration to pets on trains, we've got you covered!

Click to expand...

Section By Section Analysis of FAST Act

Charlie, Thanks for the comprehensive breakdown of this bill. Looks like some improvements may come about if the money is truly allocated and support from the states is forthcoming. Unfortunately, I think getting Ohio to step up in our present political environment will be a tough sell.

My only real disagreement with the analysis is with the skepticism about the private sector investment. It's one of the more neglected bits, but I can't help but wonder if on some of the Eastern LD trains (namely the Silver Meteor, Auto Train, and Lake Shore Limited) we couldn't see someone propose something along the lines of the Caledonian Sleeper. The Hoosier State situation is something of a "perfect storm" (it's an insanely complicated route, it doesn't run daily, Indiana didn't have half a clue what they were doing, and Amtrak hasn't exactly been a helpful partner to put it lightly).

Put another way, through the end of August 2015 (for FY15, so 11 months) Amtrak posts a "pre-asset allocation loss" of $38.1m on the Star, $30.3m on the Meteor, and $11.0m on the Palmetto. In theory, that's $68.4m in losses on the books for a Meteor/Star contract or $79.4m for a "full service" contract. On the basis of Boardman's figures from 2012 (or thereabouts) the combined losses here come to roughly $1m/yr in direct expenses.

So, what happens if someone comes in and says "Give me a RRIF loan for new, expanded sets of equipment and I'll bid the cost of paying off that loan to Amtrak"? Eight 18-car sets of equipment would run about $360m (assuming $2.5m/car); you could add 15% spares [1] and you're still looking at "only" $415m for the cars and $70-96m for locomotives [2] [3]. I'm presuming they expect to cover RRIF interest (at something like 3-4%) out of operations...which in such a scenario would be comparatively unconstrained by equipment shortages (e.g. the trains could run with 6-10 sleeping cars as demand dictated).

[1] Probably a reasonable proportion...keep a coach, sleeper, and food service car at each end as spares (6 spares, maybe 8) and be willing to vary train sizes by a bit here and there and you probably wouldn't need to keep 21-22 spare cars in reserve) and run your annual inspections between 9/15 and 10/31 and simply plan to run the trains short for that slow period (cut from 18 cars to 14 or something like that...or do the sleepers then and the coaches in Jan/Feb). Or just effectively buy 9 sets plus a small set of spares for one end of the route, which would have the same effect.

[2] The locomotive numbers vary a bit since I don't recall whether to presume $5m or $6m for a diesel locomotive, and whether to presume 8 sets of locomotives or 7 since the diesels aren't needed north of WAS.

[3] Why "only"? Well, $415m over the course of a 15-year contract comes to $27.6m/yr and $511m comes out to $34.1m/yr. Compared with present accounting losses, Amtrak notionally shelling out $34m/yr rather than booking $68m/yr in losses would...well, explaining turning down that offer to Congress would get very interesting very quickly.

"pre-asset allocation loss"

One does not think Amtrak accounting practices would provide you with any numbers that are useable.

Given the amount of conflict of interest that Amtrak has with any private outfit trying to run anything, I suspect that any serious attempt to run a private service that depends on Amtrak to provide any help will eventually fail spectacularly, since Amtrak's existential interest lies in making it fail and trying to do so in a way that moves responsibility of the failure away from Amtrak. The only pure private operations that will succeed are the ones that keeps Amtrak well away at arms length (e.g. AAF). This is unfortunate. but it is human nature. It is also unfortunate because this spells doom for a national ticketing and reservation system like they have in the UK. It is also unfortunate because this will also cause outfits like AAF to try to avoid cooperating with Amtrak lest they get sucked in. Hence my expectation is that there will be no through Amtrak service on FEC for a long time to come.

A private operation has a some hope of succeeding if it comes with the imprimatur of a state support from a state which is willing to stand up and cause sufficient pain to Amtrak upon misbehavior to bring it to heel. It is the nature of how organizations act like organic beings that go as far as they are allowed to, to protect their turf. This sort of thing happens even within large corporations in conflicts between large business units etc.

I know this may not sound like music to the ears of Amtrak supporters. But it is just the nature of things.

The bottom line is that piecemeal attempts to privatize are more likely to fail than succeed, unless sufficient curbs are placed on Amtrak. As for whether such should be attempted and if so, what the right approach for that is, is subject of considerable debate.

I'm not entirely sure, Jis. I think the biggest opportunity for partially-private services in the short term arises from Amtrak's chronic shortage of cars and constant political pressure to sabotage amenites. Amtrak has therefore been relatively cooperative with operations which propose that Amtrak supply the engineers, conductors, locomotives, and track access; while the other guys supply the cars and the OBS.

This is completely dissimilar to the type of "private operation" proposed in the transportation bill, which is a complete nonstarter.