Amtrak funding for 2013

[jis]

The final numbers are in. According to NARP:

The U.S. House of Representatives voted to approve Senate spending levels for the bill setting transportation funding for the remainder of fiscal year 2013.

The Senate had amended a House proposal that slashed transportation funding, reinstating the funding levels to those approved in the 2012 surface transportation bill passed this fall. The House voted to pass the Senate-amended bill by a vote of 318-109.

With the passage of the bill, highways will receive roughly $39.7 billion, with transit receiving around $8.48 billion. The House proposal had slashed $780 million from highway and transit funding.

Amtrak gets $1.347 billion for FY 2013. This is the FY 2012 level ($1.418 billion) minus 5% from sequestration.

 

[VentureForth]

Amtrak gets $1.347 billion for FY 2013. This is the FY 2012 level ($1.418 billion) minus 5% from sequestration.

Which should be no problem because the states are making up the difference, right?

 

[PRR 60]

Amtrak gets $1.347 billion for FY 2013. This is the FY 2012 level ($1.418 billion) minus 5% from sequestration.

Which should be no problem because the states are making up the difference, right?

This appropriation is for FY2013 which ends 9/30/13. The increased state contributions start in FY2014.

 

[afigg]

Which should be no problem because the states are making up the difference, right?

No, the additional state subsidies don't start until FY2014, beginning in October. The sequestration is cutting both the operating subsidy and the capital & debt grants. The 5% cut to the FY2013 federal operating subsidy does not hurt much because Amtrak was asking for less in FY13 than they got in FY12 anyway. The likely surplus in the FY13 operating subsidy will probably go towards progress payments on the CAF order.
The 5% cut in capital grant over FY12 does hurt because some NEC or rolling stock maintenance or capital projects get postponed. Still, the FY13 budget and sequestration hurts Amtrak far less than many federal agencies. I have comments on the budget situation which I plan to post later. The FY14 budget battle will be a doozy.

 

[jis]

The FY14 budget battle will be a doozy.

It might very well be the case that we get more continuing resolutions with adjustments at the edges of the order of 5% to 10% again. It looks quite unlikely that any grand bargain would be struck addressing the problem comprehensively. But I guess one never knows until the proverbial fat lady sings.

Frankly, I don't understand why rolling stock mainteance (as opposed to rebuild) should considered Capital expense. In my thinking, routine maintenance does not increase the capital value of anything, as complete or partial rebuilds do. But what do I know?

 

[VentureForth]

The FY14 budget battle will be a doozy.

It might very well be the case that we get more continuing resolutions with adjustments at the edges of the order of 5% to 10% again. It looks quite unlikely that any grand bargain would be struck addressing the problem comprehensively. But I guess one never knows until the proverbial fat lady sings.

Frankly, I don;t understand why rolling stock mainteance (as opposed to rebuild) should considered Capital expense. In my thinking, routine maintenance does not increase the capital value of anything, as complete or partial rebuilds do. But what do I know?

Capital improvements are indeed Capital expenses. Though not outright purchases, those funds are allocated to preserve the value of existing equipment (as opposed to scrapping and buying).

 

[Anderson]

The question is whether the maintenance is routine (i.e. expected within the course of the car's normal life) or whether it adds to the expected life of the car. For an extreme pair of examples, cleaning out the toilet tanks would be routine maintenance, as would be replacing a broken chair or burned-out light bulb. On the other end, a car rebuild would definitely be a capital project. Of course, there's some room to fudge between the categories.

 

[jis]

The question is whether the maintenance is routine (i.e. expected within the course of the car's normal life) or whether it adds to the expected life of the car. For an extreme pair of examples, cleaning out the toilet tanks would be routine maintenance, as would be replacing a broken chair or burned-out light bulb. On the other end, a car rebuild would definitely be a capital project. Of course, there's some room to fudge between the categories.

Exactly. My point was that at present I find it hard to believe that there is any ongoing "Capital Project" going on involving the normal rolling stock used in the NEC. AFAIK the Acela refurbishments that were going on are over, though I could be wrong on that. I am not aware of any further Amfleet work that could be characterized as "Capital Project" at present.

 

[PRR 60]

The question is whether the maintenance is routine (i.e. expected within the course of the car's normal life) or whether it adds to the expected life of the car. For an extreme pair of examples, cleaning out the toilet tanks would be routine maintenance, as would be replacing a broken chair or burned-out light bulb. On the other end, a car rebuild would definitely be a capital project. Of course, there's some room to fudge between the categories.

Worldcom thought there was a lot of room to fudge expense to capital. Those determinations did not work out too well. The former Worldcom CEO is eligible to get out of prison in 2028.

 

[NE933]

Budget Budget Budget Budget Budggg....----........ Everyone in DC talks budget and no one hows to manage money or even do simple arithmatic.

I don't give a damn about the 2014 budget process. Know why? Because every year it's the same bs sequel, akin to Rocky Part 100, or Friday the 13th # Two Thousand: Jason crashes a train.

Let me share a few beliefs I feel are trueisms, captured both beautifully and also horrifyingly tragic in an open letter Iraqi Vet Tomas Young sent to the press this past week, which sums up much of todays' problems in the U.S., and causes:

1. The attacks on September 11, 2001 started much of America's downfall, in a myriad of ways. The loss of life, and physical buildings, rail stations and tunnels, and trust resulted in mental trauma many still struggle with, and, it also flowed into the inevitable blossoming of security excessiveness. Some of the security gates we see now are true needs, others -- like TSA's involvement -- are a shambles that costs ten figures after the dollar sign, and it caused a loss of peace of mind when we train watchers want to just sit back and enjoy watching our trains, maybe photographing them too. The possibility of a team of police or other law inforcement showing up is a cause of great anxiety, where you say to yourself "gee, this is yet another thing that isn't the way it used to be..". If the airlines had installed better cockpit doors, if the executive branch took Osama bin Ladin's warnings seriously, the destruction on 9/11/01 might have been watered down.

2. Phantom weapons of mass distruction was the premise for going into Iraq, a war costing $3 trillion or more, not to mention the massacre of innocents on both sides.

Anyone still wonder how we got in debt? I don't. I just wonder WHY we allowed such a major blunder of leadership to escape our public debates and national discussion that took place just a few months ago. From war crimes to a misdirected military decision that bankrupted the USA, folks talk with no mention of it and those that do are scorned. Sometimes I think I'm the only normal one.

So, here we are in a mess that gets worse with the pillaging by corporate exectives from banks and insurance companies. And the saving of the Pennsylvanian -- they call that a victory? A disgrace is more like it, that a crucial rail link is threatened (again) to be discontinued, and then the sickening little back stories and lies, of Amtrak's executive dance with Pennsylvania's governor, over who will cave in first to avoid contributing the lion's share of the cost to operate it. If that's the future of state supported routes then the people in those states have big time disruptions ahead, and, maybe we should give up a few states. Problems at the southern border? sell a few thousand square miles of it back to Mexico, half of Alaska to Russia, and drop the plan to buy Puerto Rico. Take the proceeds to pay down our invented debt while relieving the cost of owning national land that we clearly can't manage.

It's a cold, dark, scary outlook with very little sun and smiles. Enough with budget process, when someone who knows a little about math can truly set us on a course of recovery, wake me up.

 

[Bob Dylan]

"Smoke and Mirrors" is what we used to call the Budget Process in Washington! But of course we Re-elect the Same Clowns over and Over, Why Should Anyone be Surprised by the Continuing Circus @ the Capitol?? The Definition of Insanity is Doing the Same Thing Over and Over and Expecting Different Results!

On Jan. 20, 2001,President Clintons Last Day in Offcie there was a Surplus in the Budget of Billions! 13 Short Years Later We Owe More than Actually Exists in the World! Who's to Blame? As Pogo used to say, "We have met the Enemy and The Enemy is Us!"

 

[Anderson]

The question is whether the maintenance is routine (i.e. expected within the course of the car's normal life) or whether it adds to the expected life of the car. For an extreme pair of examples, cleaning out the toilet tanks would be routine maintenance, as would be replacing a broken chair or burned-out light bulb. On the other end, a car rebuild would definitely be a capital project. Of course, there's some room to fudge between the categories.

Worldcom thought there was a lot of room to fudge expense to capital. Those determinations did not work out too well. The former Worldcom CEO is eligible to get out of prison in 2028.

I know there's always track/maintenance-of-way work, some of which would qualify. As to Worldcom: There's discretion and there's abuse, and the line is very much up to interpretation. It's sort of like handling things by depreciation vs. expense: In theory, you should depreciate almost anything with a long life, but keeping track of some assets that you have a large number of (say, desks) can be impractical in a large enough organization.

 

[afigg]

On the subject of federal capital grants, Amtrak can spend them on whatever Congress allows them to. If that includes major or minor maintenance overhauls of rolling stock, then its ok. What the frak the shenanigans at WorldCom have to do with it, beats me. I don't think there is that much distinction from an accounting viewpoint between an equipment rebuild or refurb and a scheduled overhaul.

If I may get back to the funding situation for FY2013, now almost half over. Amtrak's funding is set by the FY12 appropriations, minus a 5% sequester. They could be some cost of inflation adjustments buried in there, but I'll ignore that. Pulling up the FY12 and proposed FY13 budget docs, the FY12 amounts were $466 million for operating subsidy. $607 for general federal capital, $50 million for ADA compliance, $15 million for NEC Gateway engineering, and $271 million for debt service grant with a net funding of $1.409 billion.

The FY13 amounts will be those minus 5% sequestration. The Senate was proposing to provide a $400 million operating grant, the House had a bill with $350 million. So Amtrak comes out ahead on the operating grant. The damage is to capital grant because the House Appropriations committee back in June had voted to provide Amtrak with a total of $1.8 billion for FY13, taking $500 million from the TIGER grant program and give it to Amtrak; as far I can tell, to stick it to the Senate Dems mainly. The Senate Appropriations committee voted on $1.45 billion total to Amtrak with a bump in capital grants. But that is water under the bridge because the FY13 appropriations bills got swept away in the revised continuing resolution.

Amtrak is also getting $110 million in FY13 in direct transfers from the Treasury to exercise Early Buyout Options of equipment leases. The EBOs are clearing a lot of Warrington era debt and lease payments off of the books. Whether the $110 milion is subject to sequestration, don't know, but my guess is no it wouldn't be.

Then there is $150 million in Hurricane Sandy relief and mitigation funds, which are incidentally subject to sequestration. The flood and storm mitigation parts of those funds might be used for drainage improvements, ROW clearance, protecting the tunnels & power station projects that were probably on Amtrak's long NEC to-do list anyway.

Another interesting outcome of the continuing resolution on transportation funding, if I understand it correctly, is that the FY12 $500 million TIGER grant program continues, minus a 5% sequestration. So there should be an opportunity for states to apply for TIGER grants for passenger and freight rail projects. Chicago CREATE, VT, ME, IL, VA, MD, NJ, NY, MA, CT might take a shot at getting funding for Amtrak related track & intermodal station projects.

So the funding situation for Amtrak is not bad. But the capital grant funding amounts fall well short of what Amtrak needs at a sustained level for NEC state of good repair projects and rolling stock acquisition. We will see a fight over that in the FY14 appropriations and Amtrak's re-authorization bill.

I have some comments on what is happening at the state level with major pushes for increased gas and other taxes for transportation funding taking place in a number of states that could help passenger rail and transit, but this is a long winded enough post as it is amd its late. Tomorrow.

 

[Anderson]

So, I have to ask...I know PRIIA expires (except for certain annoying sections), but what does it mean if that were to come to pass?

 

[jis]

So, I have to ask...I know PRIIA expires (except for certain annoying sections), but what does it mean if that were to come to pass?

Don't understand your question. Could you elaborate? If what comes to pass?

 

[OBS]

The question is whether the maintenance is routine (i.e. expected within the course of the car's normal life) or whether it adds to the expected life of the car. For an extreme pair of examples, cleaning out the toilet tanks would be routine maintenance, as would be replacing a broken chair or burned-out light bulb. On the other end, a car rebuild would definitely be a capital project. Of course, there's some room to fudge between the categories.

Exactly. My point was that at present I find it hard to believe that there is any ongoing "Capital Project" going on involving the normal rolling stock used in the NEC. AFAIK the Acela refurbishments that were going on are over, though I could be wrong on that. I am not aware of any further Amfleet work that could be characterized as "Capital Project" at present.

If I am not mistaken, the Acela sets are going in one at a time for Truck Rebuilding or Overhaul. I believe it is something that is due based on age or mileage. Anyway each set goes in to shop for 2-3 months at a time to accomplish this.

 

[Anderson]

So, I have to ask...I know PRIIA expires (except for certain annoying sections), but what does it mean if that were to come to pass?

Don't understand your question. Could you elaborate? If what comes to pass?

Ok, there's some talk that PRIIA "expires" at some point, and if this happens it does something very bad to Amtrak, but I'm not clear on what this actually means (or, to be honest, if we even need a "reauthorization" of PRIIA). Because I don't know what it means, that makes it a bit tricky to ask about (if that makes any sense).

 

[afigg]

Ok, there's some talk that PRIIA "expires" at some point, and if this happens it does something very bad to Amtrak, but I'm not clear on what this actually means (or, to be honest, if we even need a "reauthorization" of PRIIA). Because I don't know what it means, that makes it a bit tricky to ask about (if that makes any sense).

The PRIIA authorization expires on September 30. You could pull up the 2008 PRIIA bill and figure what are the permanent rule changes and what expires at the end of the 5 year period. But I don't think anything much directly happens to Amtrak; they probably can keep running. There might be issues on whether US DOT and the FRA have to be re-authorized to oversee and provide the capital and operating grant funds to Amtrak.
One item I noticed when looking at the 5 year plan is that the Treasury transfers to exercise the Early Buyout options (EBO) on equipment leases are only committed through FY13. There are equipment leases with EBOs in FY14 to FY16. My guess is that the PRIIA act only covers these transfers through FY13 and that would need to be re-authorized. The EBOs are important because they are allowing Amtrak to clear its books of a lot of debt and lease payments on aging rolling stock. Clearing the old debt will allow Amtrak to take on debt (RIFF or commercial loans) to buy new rolling stock, which is a healthier type of debt to have. New rolling stock and locomotives to reduce maintenance costs, expand capacity & service, and bring in more revenue.

The issue withe new re-authorization is whether House Republicans will try to stick in new constraints on Amtrak, go after the LD trains, force privatization of the NEC again. The indications are that Rep. Bill Shuster as the Chair of the House transportation and infrastructure committee, will be less idealogical and more bi-partison than Mica was. If the process gets stalled because the Senate and Administration have to block it to protect intercity passenger rail service, then they pass a continuing resolution on the PRIIA act. If there is anything that Congress has gotten good at in the last several years, is last minute continuing resolutions to keep things running.

 

[Nathanael]

If I may get back to the funding situation for FY2013, now almost half over. Amtrak's funding is set by the FY12 appropriations, minus a 5% sequester. They could be some cost of inflation adjustments buried in there, but I'll ignore that. Pulling up the FY12 and proposed FY13 budget docs, the FY12 amounts were $466 million for operating subsidy.

Giving us $442.7 million. The (cash) operating costs for FY12 were $445 million. That includes the losses from Sandy; but there's a separate appropriation to compensate Amtrak for Sandy losses, as noted below. So Amtrak should be able to continue operations without cutting anything. Revenues continue to go up faster than costs, so there should be a small surplus coming from operations.

$607 for general federal capital,

Giving $576.65 million.

$50 million for ADA compliance,

Giving $47.50 million, if this is subject to the sequester (it might be exempt). This isn't likely to be material since there's still leftover ADA money from previous years, and it's being spent very slowly due to the difficulty in getting all the stakeholders to agree to station renovation designs.

$15 million for NEC Gateway engineering,

Giving $14.25 million.

and $271 million for debt service grant

Not subject to the sequester because it's debt service, so this is $271 million.
Gross interest expense was only $83.1 million in 2012.

Can the debt service grant can be used to extinguish debt? There's still $1.2 billion in debt. If it can, that would be a wise way to use it.

But usually "debt service" only includes regular payments, not prepayments. Even with scheduled principal payments on things like the mortgages, the total is far under $271 million. Bizarrely, this would mean that Amtrak should take out more loans. Otherwise it can't access its full debt service grant! I suggest the low-interest RRIF loans. There are several worthy pays-for-themselves causes they could be used for, most notably additional rolling stock.

The FY13 amounts will be those minus 5% sequestration.

...so now you know the numbers.

Amtrak is also getting $110 million in FY13 in direct transfers from the Treasury to exercise Early Buyout Options of equipment leases. The EBOs are clearing a lot of Warrington era debt and lease payments off of the books. Whether the $110 milion is subject to sequestration, don't know, but my guess is no it wouldn't be.

It isn't. The Treasury has exemptions from the sequester for any debt-manipulation, which includes these buyouts. It's good to get rid of these high-interest equipment leases, which were an accounting headache.

Then there is $150 million in Hurricane Sandy relief and mitigation funds, which are incidentally subject to sequestration. The flood and storm mitigation parts of those funds might be used for drainage improvements, ROW clearance, protecting the tunnels & power station projects that were probably on Amtrak's long NEC to-do list anyway.

This gets us $142.5 million if it's subject to the sequester.

Another interesting outcome of the continuing resolution on transportation funding, if I understand it correctly, is that the FY12 $500 million TIGER grant program continues, minus a 5% sequestration.

So $475 million.

So there should be an opportunity for states to apply for TIGER grants for passenger and freight rail projects. Chicago CREATE, VT, ME, IL, VA, MD, NJ, NY, MA, CT might take a shot at getting funding for Amtrak related track & intermodal station projects.

Grand Crossing and South of the Lake, pretty please. Fix the "Chicago east" bottleneck and reap the benefits of network effects. I wouldn't say no to the "west side" route in Vermont, either.

 

[NE933]

Giving us $442.7 million. The (cash) operating costs for FY12 were $445 million. That includes the losses from Sandy; but there's a separate appropriation to compensate Amtrak for Sandy losses, as noted below. So Amtrak should be able to continue operations without cutting anything. Revenues continue to go up faster than costs, so there should be a small surplus coming from operations.

$607 for general federal capital,

Giving $576.65 million.

$50 million for ADA compliance,

Giving $47.50 million, if this is subject to the sequester (it might be exempt). This isn't likely to be material since there's still leftover ADA money from previous years, and it's being spent very slowly due to the difficulty in getting all the stakeholders to agree to station renovation designs.

and $271 million for debt service grant

Not subject to the sequester because it's debt service, so this is $271 million..

Amtrak is also getting $110 million in FY13 in direct transfers from the Treasury to exercise Early Buyout Options of equipment leases. The EBOs are clearing a lot of Warrington era debt and lease payments off of the books. Whether the $110 milion is subject to sequestration, don't know, but my guess is no it wouldn't be.

It isn't. The Treasury has exemptions from the sequester for any debt-manipulation, which includes these buyouts. It's good to get rid of these high-interest equipment leases, which were an accounting headache.

Howdy Guest Nathaneal. Your post contained alot of important stuff, but I wanted to focus on the themes I thought were key, namely capital, debt service, operations, and ADA related expenses. In all, your words sum up a not so dismal picture, like the kind I had this past week. In other words, Amtrak will take bit of a hit but there are areas where sequester doesn't touch, and those that it does, like the all important capital (new rolling stock), those projects will still roll on. Does that kind of sum it up? We here on AU are slap weary of the news of late, and many of us - me included - are finding it hard to see anything encouraging. But your posting offered what seems to be a well reasoned and stable view. I hope that it comes true.

 

[NE933]

Just a note that I just posted a reply to 'Guest Nathaneal' above, guess i made an error because it appears in his quote bubble and I can't change it to reflect that it ought to be in mine.

I don't ever want to put words in someone's mouth by making it appear he said what was posted and not me. It was me, commenting on how GN gave a badly need rational breakdown of Amtrak's funding in light of the sequester. I hope Alan can fix.

 

[PRR 60]

Just a note that I just posted a reply to 'Guest Nathaneal' above, guess i made an error because it appears in his quote bubble and I can't change it to reflect that it ought to be in mine.
I don't ever want to put words in someone's mouth by making it appear he said what was posted and not me. It was me, commenting on how GN gave a badly need rational breakdown of Amtrak's funding in light of the sequester. I hope Alan can fix.

Done.

 

[afigg]

Not subject to the sequester because it's debt service, so this is $271 million.
Gross interest expense was only $83.1 million in 2012.

Can the debt service grant can be used to extinguish debt? There's still $1.2 billion in debt. If it can, that would be a wise way to use it.

But usually "debt service" only includes regular payments, not prepayments. Even with scheduled principal payments on things like the mortgages, the total is far under $271 million. Bizarrely, this would mean that Amtrak should take out more loans. Otherwise it can't access its full debt service grant! I suggest the low-interest RRIF loans. There are several worthy pays-for-themselves causes they could be used for, most notably additional rolling stock.

What exactly can Amtrak can do with the excess debt grant funding is restricted by the wording in the applicable bills. The FY13 request was for $212 million in debt grant funding, so Amtrak may have $50 to $60 million left over. Figure it is restricted to and lease payments. Maybe use the excess for ACS-64 RRIF loan costs or payments? Or use it to pay down the remaining mortgage principle on NYP? Or use it to pay off leases that are not covered by the Treasury transfer program? Or as the down payment on a RRIF loan for Amfleet II replacements, if funds can remain unspent for several years? The accounting dept may have an interesting challenge to figure out to best use the 'windfall".

So there should be an opportunity for states to apply for TIGER grants for passenger and freight rail projects. Chicago CREATE, VT, ME, IL, VA, MD, NJ, NY, MA, CT might take a shot at getting funding for Amtrak related track & intermodal station projects.

Grand Crossing and South of the Lake, pretty please. Fix the "Chicago east" bottleneck and reap the benefits of network effects. I wouldn't say no to the "west side" route in Vermont, either.

The TIGER FY12 grants were widely spread out with the largest grant at $21 million. A portion of the funds also have to go to rural areas (hello, VT and Maine). So there are not enough funds for big projects, although the TIGER grant might contribute to covering the shortfall in a several hundred million dollar project. Still, if $100 million of the FY13 TIGER grant funds can be combined with $50 or $100 million of matching state funding for passenger rail projects, that could provide big benefits for the right projects.

 

[Anderson]

Ok, two questions;
(1) How much of the non-sale/leaseback debt is still around? According to the 2012 financial statement, long-term liabilities were mainly "Capital Lease Obligations" ($1,062m), followed by RRIF debt ($159.5m), "Mortgage Obligations" ($139.6m), and "Equipment and other debt" ($45.2m). There's also short-term maturities of long-term debt ($149.3m), which gets popped into short-term liabilities.

(2) Could an RRIF loan be taken out in part to clear the old debt and in part to buy new equipment while keeping the debt service levels more or less stable?

(3) And of course, with the above, I'm wondering if that debt couldn't be extended to keep a debt service level within the allocated level to do some good stuff. Working with some likely rates for RRIF loans/terms, here's what I get:

For a 10-year loan:
$110,416.20 per year per million at 2.0% ($905.7m at $100m/yr)
$113,123.88 per year per million at 2.5% ($883.9m at $100m/yr)
$115,872.84 per year per million at 3.0% ($863.0m at $100m/yr)

For a 15-year loan:
$77,221.08 per year per million at 2.0% ($1294.9m at $100m/yr)
$80,014.68 per year per million at 2.5% ($1249.8m at $100m/yr)
$82.869.84 per year per million at 3.0% ($1206.7m at $100m/yr)

For a 20-year loan:
$63,588.36 per year per million at 2.5% ($1572.6m at $100m/yr)
$66,551.76 per year per million at 3.0% ($1502.6m at $100m/yr)
$69,595.20 per year per million at 3.5% ($1436.9m at $100m/yr)

For a 30-year loan:
$50,592.48 per year per million at 3.0% ($1976.6m at $100m/yr)
$53,885.40 per year per million at 3.5% ($1855.8m at $100m/yr)
$57,289.80 per year per million at 4.0% ($1745.5m at $100m/yr)