Amtrak’s Losses Widen in Fiscal 2015

[afigg]

Is the money appropriated for the Northeast Corridor the total for the Northeast Corridor or IN ADDITION TO the NEC operating profit?

Andrew, the 5 year surface transportation bill is not an appropriations bill, but an authorization bill laying out guideline funding amounts for each of the 5 years. Congress still has to provide those amounts each year and it usually falls short for Amtrak. The $450 million for the NEC would be the federal capital funding if provided, which is independent of any NEC operating surplus that Amtrak may be able to allocate towards NEC maintenance or capital projects.

The key is the $1 billion, which increases up to $1.25 billion by FY2020, for the National Network. If Congress were to actually provide that much, it would cover all the operating losses for the LD trains and the state corridors; leaving roughly circa $350 million for equipment overhauls and other capital expenses. It would then allow Amtrak to apply most of the NEC operating surplus towards the NEC rather than use it to reduce the system total operating losses. However, based on the reports on what is in the FY2015 appropriations, the total funding for Amtrak will be several hundred million less than the $1.67 billion authorized in the 5 year transportation bill.

 

[afigg]

I think we are going to need a separate thread for discussions of the many provisions and aspects of the FAST 5 year surface transportation bill. If someone or a modearior wants to start one, the 2 NARP links analyzing the bill would be a good place to start.

NARP analysis of the bill's provisions (and there some odd micro-management ones): SECTION BY SECTION ANALYSIS OF FAST ACT

 

[cirdan]

That is one reason that the Brits worked hard to create the ROSCOe (ROlling Stock COmpanies), which provide a more fluid market for both leasing and recycling rolling stock. It is through the ROSCOs that the Brits are able to cascade rolling stock from one operation to another as the richer operations go about acquiring newer rolling stock either themselves or through ROSCOs. Indeed because all TOCs (Train Operating Companies) operate under limited term franchise, they have relatively little motivation to outright own rolling stock, since they would not know what to do with them should they lose a franchise. The fact that there is no such market in US is partly due to the way things are governed or not in that space rather than an inherent lack of need for such.

From what I've read on this forum, Amtrak is actively trying to prevent others from acquiring servicable equipment, so ROSCOs would mean third parties would get a fairer chance at acquiring what Amtrak doesn't need but possibly has some useful life left.

It would also fluidify the transfer of equipment between sectors. So suppose Illinois discovered it had a Charger too many and Californioa was one short, the transfer would be far simpler than if a sale had to be set up. Ditto with the Talgos. Or maybe even AAF's equipment.

 

[neroden]

Despite the "authorization" for $1.4 billion, I'll bet you Congress will only appropriate $1 billion. Because this is the pattern every single year, authorization higher, appropriation roughly $1 billion.

The only major additional injections of money have come from (a) ARRA and (b) the "downloading" of costs to the states. With the states paying more, Congress has been paying the same amount, which amounts to a budget increase for Amtrak.

 

[jis]

TIGER! Don't forget TIGER!

 

[neroden]

TIGER's been helpful, but did any of the TIGER funding for Amtrak qualify as "major"? I thought it was mostly tiny stuff.

 

[jis]

TIGER by its nature is tiny, but it has helped keep projects alive that would otherwise have died, specially in station renovations.

Similarly CMAQ has played a role too, though often indirectly.

And then again there is FTA funding that has helped NEC infrastructure, sometimes in significant ways too, like some of the high speed universal crossovers and all of Secaucus Jct. in NJ funded via NJT.

In the big stuff there was HSIPR too in addition to ARRA.

 

[Andrew]

Is the money appropriated for the Northeast Corridor the total for the Northeast Corridor or IN ADDITION TO the NEC operating profit?

Andrew, the 5 year surface transportation bill is not an appropriations bill, but an authorization bill laying out guideline funding amounts for each of the 5 years. Congress still has to provide those amounts each year and it usually falls short for Amtrak. The $450 million for the NEC would be the federal capital funding if provided, which is independent of any NEC operating surplus that Amtrak may be able to allocate towards NEC maintenance or capital projects.

The key is the $1 billion, which increases up to $1.25 billion by FY2020, for the National Network. If Congress were to actually provide that much, it would cover all the operating losses for the LD trains and the state corridors; leaving roughly circa $350 million for equipment overhauls and other capital expenses. It would then allow Amtrak to apply most of the NEC operating surplus towards the NEC rather than use it to reduce the system total operating losses. However, based on the reports on what is in the FY2015 appropriations, the total funding for Amtrak will be several hundred million less than the $1.67 billion authorized in the 5 year transportation bill.

Thus, $450 million plus a few hundred million per year from Amtrak's NEC profit could potentially do a lot to improve service, whether the money gets invested in Portal Bridge, new tunnels in Baltimore and Gateway, etc.

So it sounds as if the Federal Government will pick up the tab for the Long-Distance trains, instead of as in previous years when Amtrak used NEC profit to help pay for the Long-Distance Trains?

 

[neroden]

Right, I forget about HSIPR, which was enormous and extremely helpful.

 

[afigg]

Despite the "authorization" for $1.4 billion, I'll bet you Congress will only appropriate $1 billion. Because this is the pattern every single year, authorization higher, appropriation roughly $1 billion.

The only major additional injections of money have come from (a) ARRA and (b) the "downloading" of costs to the states. With the states paying more, Congress has been paying the same amount, which amounts to a budget increase for Amtrak.

Amtrak received $1.39 billion total in (direct) federal funding for FY2015. The FAST FY2016 authorization has a total of $1.67 billion including the new programs. The FY2016 appropriations may be passed in the next week, but based on the reports of a week or two ago, Amtrak will again get around $1.4 billion. We'll see how the $1.4 billion is applied to the programs/categories in the FAST bill.

One observation is that Amtrak received $289 million for operating subsidy in FY2015. If had an adjusted operating loss of $306.5 million, so there is a $17.5 million "overrun" that will have to be covered from somewhere else than the federal operating subsidy.

 

[afigg]

TIGER's been helpful, but did any of the TIGER funding for Amtrak qualify as "major"? I thought it was mostly tiny stuff.

Depends on how you define "tiny stuff". $10 to $20 million grants combined with matching grants of 20% or more have been critical to advancing a number of station and smaller projects including a few grade crossing separations. With the what was to be $2.5 billion in proposed annual HSIPR funding killed starting with the FY2011 appropriations, the TIGER grant program has been the best chance to land federal funding for smaller projects, along with in the right circumstances, as Jis noted, CMAQ grants and FTA funding (for commuter rail).
If it wasn't for the TIGER grants filling in gaps in available state and local funding, a number of station projects would still be stalled and, for example, Vermont might have had to put into deep freeze plans for extending the Ethan Allen to Burlington. If there is $600 million in TIGER funding in FY2016, could see another $50 to $100 million in federal grants doled out to a range of medium sized improvement projects that directly benefit Amtrak service.

I don't know if it has been noted on AU, but both Washington state and Michigan, which have been facing serious shortfalls in transportation & road funding, have recently passed transportation bills that raised the state gas taxes, fees, and other revenue sources to provide more money for transportation. I haven't read about whether any of the additional funding is directed for passenger rail, but I expect both state DOTs will have more funds available to put towards passenger rail and transit. So WA and MI might be in a better position to apply for TIGER grants with state matching funds for improvement projects next year for their state supported corridor services.

 

[neroden]

TIGER's good, and it's helped a lot with catching up on the deferred-maintenance situation with stations. But we had a whole year where none of the TIGER grants helped Amtrak. It's dwarfed by the amount the states are putting into Amtrak's operating budget due to PRIIA, which will be recurring yearly. We saw the effect of that only in the last two years. The capital charges haven't arrived yet, either. 2015 was a year with disasters damaging revenue and raising costs on both the NEC and the better-performing LD routes, which disguises the benefit somewhat. I seem to remember that there were also some disasters in 2014. If Amtrak can just run all year, the financial benefit should be more visible in 2016.

 

[dlagrua]

I believe that this all leads to more privatization of passenger rail routes. Look at the Illinois Metra route and its says Burlington on the side of the passenger cars. I believe that route is being run by the BNSF railroad. Iowa Pacific runs the Hoosier state route.

Consider that Amtrak has not improved on much in years, fares are rising rapidly, cuts keep cheapening the value of the service, the equipment is getting older, the on-time rates are in many cases poor, LD airline travel is faster, more economical and gasoline is now under $2.00 per gallon. Then add in the cost of the NEC crash, and there you have it. Additionally, our government does not want to change this.

 

[Eric S]

I believe that this all leads to more privatization of passenger rail routes. Look at the Illinois Metra route and its says Burlington on the side of the passenger cars. I believe that route is being run by the BNSF railroad. Iowa Pacific runs the Hoosier state route.

Eh, Metra is a rather complex situation. Suffice it to say, it is not an example of passenger rail being privatized, but rather a passenger rail line that has always been privately operated but for the last few decades has been subsidized by the regional transit system. What is now the Metra BNSF Route has always been operated by BNSF and its predecessors (BN, CB&Q). And other Metra routes have different characteristics.

 

[dlagrua]

I believe that this all leads to more privatization of passenger rail routes. Look at the Illinois Metra route and its says Burlington on the side of the passenger cars. I believe that route is being run by the BNSF railroad. Iowa Pacific runs the Hoosier state route.

Eh, Metra is a rather complex situation. Suffice it to say, it is not an example of passenger rail being privatized, but rather a passenger rail line that has always been privately operated but for the last few decades has been subsidized by the regional transit system. What is now the Metra BNSF Route has always been operated by BNSF and its predecessors (BN, CB&Q). And other Metra routes have different characteristics.

Thank you for pointing that out. While I am not an advocate for the privatization of passenger rail, it appears that the political climate in Washington is forcing things in that direection. Amtrak is continually and deliberately starved of the funds necessary to improve and build the network so what does that say? There is little money for improvemnts,new equipment and to add new routes. The freight railroads own the tracks and may one day feel that they need to gain control of everything on them. My prediction is that privatization of passenger rail may be the eventual path but most likely with government subsidy. What say you?

 

[neroden]

For the last 40 years, the trend has been the *opposite* of privatization. Municipalization has been the trend: ownership of lines by cities or states.

The freight railroads are going to sell nearly all their tracks to the states, bit by bit. This has many advantages for them, including no property taxes, and no maintenance costs -- the fees they pay the states for access will be a lot less.

 

[afigg]

One item in the just passed Transportation 5 year FAST act that is going to cost Amtrak money that it does not have to spare is the provision retroactively raising the cap for payments from any single accident from $200 million to $295 million. From the Washington Post article, it appears that Amtrak's insurance coverage is only up to the cap limit of $200 million; which is after a really big deductible of possibly $50 million. If Amtrak has to come up with an additional $95 million, that could threaten capital spending projects. Hopefully the 130 car Viewliner II order is not at risk. If Amtrak does a write-off of some sort for the extra $95 million hit in FY2016 or FY2017, that could result in another headline of Amtrak losses widen.

Washington Post: Amtrak faces $95 million hit as Congress celebrates new highway bill. Excerpt from the start of the article:

The new highway bill being celebrated on Capitol Hill could cost Amtrak $95 million and may delay the settlement of claims made by victims of a fatal Amtrak derailment in Philadelphia this year.

The new law increases a cap on payments a railroad can make to accident victims from $200 million to $295 million. It makes the higher limit retroactive, a nod to the families of eight people killed and more than 200 injured — 11 of them critically — in the May 12 derailment of an Amtrak train bound from Washington to New York.

“There are two of my clients with medical bills that exceed $1 million already and are approaching or have hit $2 million,” said Robert Mongeluzzi, a lawyer in Philadelphia. He says it’s too early to know for certain, “but based upon the extent of the damage that we know, the number of dead and the number of catastrophically injured, we believe [the claims] will exceed the $295 million cap.”

The crash has resulted in 98 cases filed against Amtrak, with more said to be coming. Some lawyers question whether Amtrak will challenge Congress’s decision to make the cap increase retroactive.

 

[neroden]

Yep, that could be a one-time hit on Amtrak's finances. Amtrak may challenge the retroactivity in court. (The raised cap will basically wash out for future years, since Amtrak will get new insurance with the higher coverage limit, and the premium won't change much.)

If not, well, the entire loss will have to be assessed to the NEC business line, so the other routes won't be at risk.

Amtrak's getting $67 million in new capital financing from the states; so the bottom-line books would look about $28 million worse if the year was otherwise the same as 2015. Except this is less than the typical year-over-year improvement in recent years, and there should be a rebound in 2016 after the disasters in 2015 (plus more riders from expanded Wifi, improvements to Chicago Union Station, new Viewliners, Holyoke station, etc). If Amtrak manages to avoid any disasters in 2016, its finances will look improved.

 

[Just-Thinking-51]

If not, well, the entire loss will have to be assessed to the NEC business line, so the other routes won't be at risk.

Wow ever with the Smiley face, still WOW.

 

[neroden]

That was definitely sardonic humor.

I don't think much of the Congressionally-imposed division of Amtrak into business lines. If they're taking this silly division seriously, all the costs of the crash will have to get assigned to the NEC business line. Which shows how silly the division is, right?

 

[jis]

It is indeed true that all the losses on NEC will have to be assigned to NEC, and it will indeed be. However, I don;t see how "shows how silly the division is" follows logically from that. There may be many reasons why it is silly, but this particular one seems to be a bit of a reach.

 

[neroden]

Well, the crash was really caused by systemic factors endemic to the entire national railroad system -- resistance to installing automatic train control systems, which is a nationwide issue. The crash could have happened in any number of locations without PTC, and it was a bit of a statistical fluke that it happened where it did, rather than on the Keystone or Empire line. Assigning the after-the-fact costs to the corridor where it happened to happen is a bit arbitrary, actuarially speaking.