RPA Blasts Faulty Amtrak Accounting in Report

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ohle

ohle

Train Attendant
Joined
Aug 29, 2015
Messages
65
The Rail Passengers Association today issued a paper blasting Amtrak's faulty accounting, which it claims unfairly places more costs on the long-distance trains than they are responsible for.

RPA calls Amtrak’s route accounting system "catastrophically flawed" and contends it "grossly misrepresents – and exaggerates – the public cost of providing passenger trains as a mobility choice for the entire nation."

https://www.railpassengers.org/happening-now/news/releases/amtraks-route-accounting-fatally-flawed-misleading-wrong/

https://www.railpassengers.org/site/assets/files/7353/amtraks_route_accounting_-_fatally_flawed.pdf

Excerpt:

The Rail Passengers Association (RPA) strongly believes that the ongoing debate concerning the future shape of Amtrak's national network has been distorted by its use of fully allocated costs rather than avoidable costs as required by statute. The adverse outcome of using fully allocated costs is the widespread and incorrect perception that Amtrak’s Northeast Corridor is financially self-sufficient and that Amtrak’s need for taxpayer funding results entirely from its operation of passenger trains in the rest of the nation – the National Network, which consists of state supported regional and federally supported long distance routes.

In our companion White Paper, RPA explains why fully allocated costing combined with Amtrak’s catastrophically flawed route accounting system grossly misrepresents – and exaggerates – the public cost of providing passenger trains as a mobility choice for the entire nation.

Faulty route accounting has, in turn, led to the popular misconception that the abandonment of long-distance trains will eliminate Amtrak’s need for taxpayer funding. Nothing could be further from the truth.

The funding needed for the Northeast Corridor dwarfs that of what’s needed for the rest of the nation. RPA’s white paper explains the history of Amtrak’s route accounting methodology and demonstrates that if Amtrak applied the more economically sound avoidable costing methodology to assess the performance of its various routes, Amtrak’s leadership team would not be working to replace the current national network with disconnected groups of short distance regional trains serving only a small number of major metropolitan areas.

The Rail Passengers Association asks Congress to require Amtrak immediately to halt all route, schedule and frequency reductions as well as recent on-board service modifications; then require Amtrak’s leadership team to explain to, and gain the approval of, the Congress, the states and stakeholders of its vision of the passenger train system and service they envision for the future. Cover, concealment and stealth tactics are appropriate for a military operation but not for a Government Sponsored Enterprise whose purpose is to provide passenger train service to the nation.
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The report is long, but full of valuable information.

Take this inconsistency:

APT (Amtrak Performance Tracking) reported the same wide variation in the cost allocations of Yard & Equipment Moves to trains that
originate and terminate in Chicago. For long distance routes, the cost varied considerably and inexplicably:
The City of New Orleans was just under $200,000, The Capitol Limited just over $200,000, The Texas Eagle just over $300,000, The Southwest Chief just over $400,000, The Empire Builder over $1.6 million and the California Zephyr nearly $1.8 million. If there is a reason for such wide variation, it is not obvious. The more likely explanation is that APT’s allocation rules do not reflect actual costs.
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Very interesting. I would love to see a detailed cost accounting and allocation of the F&B service.

I have always suspected that it was flawed even if you accept the premise that the F&B should be a separate “profit” center.

Amenities, in which I include the F&B Service, should be accounted for in a different manner since the benefits to the bottom line are more than just the direct revenue from sales, but are more properly considered to be a profit driver as they contribute to the brand and desireability of rail travel.

Just my opinion.
 
The report says Amtrak overstates long distance costs by $300 million per year, while understating NEC operating costs.

Example: Maintenance of way costs for the NEC are counted as capital costs, not operating costs.

Likewise, state payments are considered to be "income", while federal payments for long distance services are not.
 
ohle said:
The report says Amtrak overstates long distance costs by $300 million per year, while understating NEC operating costs.

Example: Maintenance of way costs for the NEC are counted as capital costs, not operating costs.

Likewise, state payments are considered to be "income", while federal payments for long distance services are not.
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OMG. If Amtrak were to (be able to) consider federal payments as income, Amtrak as a corporation would be showing a PROFIT (or at least break even). That would just not do. There would be no controversy for anti rail flamers and pro rail foamer to get riled up about. Some congresscritters and think tankers just cannot allow themselves to be ignored.
 
This is the reason that for the purposes of accounting the NEC should be viewed as two separate companies -

(a) A train operating company, and

(b) An infrastructure company.

The accounting relationship between the two should be in terms of trackage (slot) and electricity charges. Other than that, the two companies should manage their finances as separate companies would. That way the TOC would be similar to the rest of Amtrak's train operations and the Infra company can deal with the myriads of transit agencies and what not.
 
ohle said:
The report says Amtrak overstates long distance costs by $300 million per year, while understating NEC operating costs.

Example: Maintenance of way costs for the NEC are counted as capital costs, not operating costs.

Likewise, state payments are considered to be "income", while federal payments for long distance services are not.
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Why wouldn't State payments be considered income? The States are clients which are paying Amtrak for service. States and commuter rail can pick and choose whoever they want to operate their train services.
 
Actually both state and federal payments should be considered as income since they really are a payment for a contract to run passenger service. VIA handles it that way. All European Railways handle it that way. Computing subsidies is a separate matter from maintaining proper accounting books for a corporation. Somehow the home of capitalism seem to be incapable of figuring that out.
 
JRR said:
Very interesting. I would love to see a detailed cost accounting and allocation of the F&B service.

I have always suspected that it was flawed even if you accept the premise that the F&B should be a separate “profit” center.

Amenities, in which I include the F&B Service, should be accounted for in a different manner since the benefits to the bottom line are more than just the direct revenue from sales, but are more properly considered to be a profit driver as they contribute to the brand and desireability of rail travel.

Just my opinion.
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F&B service on Amtrak, while it does bring in millions in revenue, should more properly be considered an enticement for people to spend $$$ on coach or sleeper tickets. It's part of the overall train experience. Take it away and it's just a too-long Greyhound bus.

I'd make this analogy: Restaurants and bars sometimes offer live entertainment of various kinds as incentives to spend money there on food and beverages. It often works! Some of this entertainment is provided without charge to the customers. Other times, a modest cover charge may be present. But is that entertainment expected to turn a profit?
 
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Skyline said:
JRR said:
Very interesting. I would love to see a detailed cost accounting and allocation of the F&B service.

I have always suspected that it was flawed even if you accept the premise that the F&B should be a separate “profit” center.

Amenities, in which I include the F&B Service, should be accounted for in a different manner since the benefits to the bottom line are more than just the direct revenue from sales, but are more properly considered to be a profit driver as they contribute to the brand and desireability of rail travel.

Just my opinion.
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F&B service on Amtrak, while it does bring in millions in revenue, should more properly be considered an enticement for people to spend $$$ on coach or sleeper tickets. It's part of the overall train experience. Take it away and it's just a too-long Greyhound bus.

I'd make this analogy: Restaurants and bars sometimes offer live entertainment of various kinds as incentives to spend money there on food and beverages. It often works! Some of this entertainment is provided without charge to the customers. Other times, a modest cover charge may be present. But is that entertainment expected to turn a profit?
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Exactly what I was driving at!
 
The F&B thing is a latter day Congressional brilliance on display, and is not something that the Volpe, FRA or OIG specifically deal with AFAICT.

Indeed, even adding the Diner F&B to the ticket for Sleepers was something that Amtrak did pretty much on its own AFAICT. And then of course when they removed the Diner from the Star they ostensibly reversed it for Star Sleeper tickets.
 
Skyline said:
JRR said:
Very interesting. I would love to see a detailed cost accounting and allocation of the F&B service.

I have always suspected that it was flawed even if you accept the premise that the F&B should be a separate “profit” center.

Amenities, in which I include the F&B Service, should be accounted for in a different manner since the benefits to the bottom line are more than just the direct revenue from sales, but are more properly considered to be a profit driver as they contribute to the brand and desireability of rail travel.

Just my opinion.
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F&B service on Amtrak, while it does bring in millions in revenue, should more properly be considered an enticement for people to spend $$$ on coach or sleeper tickets. It's part of the overall train experience. Take it away and it's just a too-long Greyhound bus.
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Back in the "good old days" airline F&B service didn't bring in any revenue, and I supposed was considered "an enticement for people to spend $$ on airplane tickets." In fact, it was "part of the overall flying experience." ("such lousy food! And the portions are so small, too!") Take it away, and it's just an ultra fast Greyhound Bus....

That's exactly what the airlines did, and now they're making $$$$ flying ultra-fast Greyhound buses. In fact, they put long-distance Greyhound out of service, much to the detriment of smaller communities that can't support hub airports.

In the 1970s, I insisted on booking meal flights between Philadelphia and Chicago. (This was partly because if I didn't, I'd find myself in the airport at meal time, and back then, the food offerings, even at the big airports, were not very good.) I also enjoyed the fact that most flights were half full, so I could spread out into 2 or more seats. In fact, on TWA they designed the middle seat so it could fold down and make a nice console table if no one needed the seat. I also kind of insisted on a nice 4 engine widebody for longer flights. Doesn't bounce around in turbulence as much. Then the American airline industry evolved, and now, like everyone else, I cram myself into a 737 with no food service for a 6 hour transcontinental non-stop. I'm even willing to pay Southwest $15 extra so I can get far enough to the front of the boarding queue to be able to snag an aisle seat not too far back.

We'll have to see what downgrading the food service does to overall ridership on long distance trains. It seems like the Silver Star is doing all right without a diner.

But I do agree that the accounting is probably suspect. I deal with estimates of overhead and cost allocation on the contracts I manage and shake my head with wonder at how they can jack up prices.
 
A solution to this problem would be to completely split Amtrak operations and Amtrak infrastructure into completely separate companies, like almost every RR in Europe does now. You'd get a much clearer picture of what it costs to run the trains and much clearer picture of what the capital needs of the NEC really are.
 
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Amtrak's accounting system has always been a source of irritation for passenger rail supporters. RPN's "white paper" certainly points up the problems with assigning fixed costs to various trains. I'm not sure how Amtrak can be forced to adjust its procedures to give a clearer picture of what actual operating costs are. Perhaps, congress could put stipulations in the next Amtrak legislation, but we've all seen what "Mica managing" by Congress does to Amtrak. Maybe the attorney general can launch an investigation, but I'm not sure that Jeff Sessions even knows what Amtrak is, or Amtrak's own solicitor general could investigate. The solicitor general (is that the right title, I'm not sure) certainly has investigated wrong-doing by various Amtrak employees, mostly on a lower level, so maybe a high-level probe will be successful.

I think the whole "the Northeast Corridor is profitable" stance that has been around for the past few years just isn't true, if you consider the high maintenance costs involved. So, something needs to be done to shake up and further investigate Amtrak's internal accounting. Hopefully, the RPN's report is a starting point.
 
bretton88 said:
A solution to this problem would be to completely split Amtrak operations and Amtrak infrastructure into completely separate companies, like almost every RR in Europe does now. You'd get a much clearer picture of what it costs to run the trains and much clearer picture of what the capital needs of the NEC really are.
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That's what Brightline does, right?
 
Well really what I think is needed is the more European method that is open access. We shouldn't just be focusing just on the NEC.

Why don't we focus on the entire rail network and make it all publicly owned. The private class ones can stay around but instead of owning the track. They pay a payment to the track owner (government). Thus making it more capitalistic when anyone with an engine, who can afford the trackage fees, and insurance can move a shipment to anywhere.

For example if I own the former DuPont plant in Lugoff, SC that ships 20-30 carloads daily with CSX. Say CSX bids 20,000 to do the daily move. But NS wants the business NS could counter with 15,000. Or if DuPont wanted to just do the moves them self they could buy an engine and hire crews.

This would also make passenger rail expansion a lot easier as no longer would they be beholden to what freight railroads want in exchange.

It would also allow competitors to Amtrak to arise. And let's be honest it really does need someone to compete with.
 
The reason we don’t discuss changing anything with private railroads too much is because any attempt to acquire their property into public domain will almost certainly get thrown out by the SCOTUS due to it running afoul of the taking clause, unless of course extremely large pots of money can be found to compensate them adequately, which seems unlikely.
 
While the idea of a government-owned track system with open access is very interesting, the amount of money required to purchase all of the privately owned tracks in the U.S. would be staggering.
 
MikefromCrete said:
While the idea of a government-owned track system with open access is very interesting, the amount of money required to purchase all of the privately owned tracks in the U.S. would be staggering.
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Exactly. Looks like there's about 140,000 miles of freight track in the United States, 95,000 of which are owned by Class Is. Compare that to the 1,219 miles of track on the NEC, and you'll start to get a sense of what it would cost to buy and maintain all the freight track in the United States.
 
I have a solution... let's split Amtrak into two companies. NEC becomes Amtrak NE, and Anderson can run it. The rest of the US becomes Amtrak America and a new management team runs that. Funding is split based on current accounting, and the America's team can choose who comes over to operate their trains. Only overlap would be LD trains operating into Washington and NY. Bet we'd see a major improvement in LD cost efficiencies in short order with this one change.
 
MikefromCrete said:
While the idea of a government-owned track system with open access is very interesting, the amount of money required to purchase all of the privately owned tracks in the U.S. would be staggering.
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They’re the government - they can print more...

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