Contracting out the long-distance trains

SouthernRailway wrote:To reply, I'd just have the tax credit be 90% (or 95%, if private operators couldn't reduce Amtrak's losses by 10%) of the operating and capital costs of long-distance trains....I do think that a freight railroad could cut Amtrak's losses by, among other things, efficiencies of scale; surely it would be cheaper for a freight RR to handle car switching, stations (many of which are housed in freight RR buildings), etc.

Honestly Mr. SRY, there's the deal killer. How could a railroad's interests be served by agreeing to public funding (tax credit or contract payment, what's the diff?) in an amount less than the avoidable-cost loss of any Amtrak train operating over their rails? Why should a railroad be required to direct their managerial resources to developing operational efficiencies with an objective of only breaking even? For example, wouldn't be more Return on Investment enhancing to have UP's management directing their efforts to, say, reducing "hull to flat car" time at Long Beach so that delivery to a Wally World distribution center in Rochelle IL be made with adequate time to have containers transloaded for local delivery to the outlets served rather than having, especially when PANAMAX becomes history, the shipper route to an East Coast port and with the UP ending up with an 80 mile Chi-Rochelle short haul in place of the 2300mile LB-Rochelle line haul? While we don't know the amount of contract payments UP receives from Amtrak each year other than that it is estimated to be about $125M, we do know that UP's Total Railway Operating Revenues for 2010 were $16,965M (source: 10-K). Really volks, how much of management's time is 125/16965, or seven tenths of one percent, deserve?

Under RPSA '70, any railroad that signed up was effective A-Day, "OUT" for their own account - whether or not they were party to a May 1, 1971 Operating Agreement. Those that were party continued to operate passenger trains, but for the account of Amtrak. With the railroads "OUT" under RPSA '70, what enacted legislation is there that can direct an industry to return to a line of business they exited over forty years ago?

With overwhelming likelihood, Amtrak could be rid of any route it wants after serving 180 Day Notice under ARAA '97. Sure, there would be the required public hearings at which interest groups would get to make their noise, but Amtrak has never been denied discontinuance of a route (I only hope that their "suspension" of Sunset East does not backfire, but that's the route they chose to travel on that one).

The moment any such proposal started to move forth, that is when the order for the Adios duumheads had best be placed.

disclaimer: author holds long positions CSX KSU NSC UNP

SouthernRailway wrote:Tax credits are subsidies, but are structured differently, and are less prone to criticism by those who are constantly trying to slash Amtrak spending,

One problem I have with your proposal is that the point you are arguing for seems to keep moving around.

Whether Congress would or would not actually agree to the proposal is a separate question from whether your proposal would work even if it got 100% support from current and future Congresses (and administrations.)

I'm going to leave the "how to get the <characterization deleted> Republicans to support it" question to the more politically savvy. I'm more interested in whether it would ever work.

I'm saying that the plan you proposed in the initial post would not work if implemented in the obvious way. We (the detractors) have many, many examples of such privatization schemes going wrong. Experience suggests that (a) service would be a lot worse, (b) it would cost more (in subsidies), and (c) there's a good chance that the freight railroads wouldn't agree to it anyway. You have nothing but faith on your side, a kind of "but this time we'll get it right!"

I will grant that it is conceivable that one could come up with a scheme which would

• shift more of the responsibility for running trains to the freight railroads,
• insure service levels and quality comparable with what we have under AMTRAK, and
• require less subsidy. (I'm including "tax credits" and government payments for infrastructure as "subsidy.")

But it would require getting all of the details right, details which you do not appear to have thought out.

SouthernRailway wrote:...Metra, for example, loses a fortune, but BNSF and UP, which operate some of its trains, make money from it, as does CSX from commuter trains that it has operated.

I'm not familiar with how Metra works. Do BNSF and UP "run them and [are] responsible for all decisions re: operations" and "take the financial risk"? Or does Metra make the schedules, pay for the equipment and possibly some of the infrastructure, and simply hire BNSF and UP to actually run the trains and do the maintenance? (The latter seems much more likely, but I'd like to hear from someone who knows how it's done.)

I'm not familiar with where CSX operates commuter trains, let alone what their responsibility. Does CSX run them in the Washington, DC area? I thought MARC and VRE had taken over responsibility for commuter trains.

Another poster has responded to your example of the UK.

SouthernRailway wrote:For switching and stations, one example of inflated costs that arise because of Amtrak's structure is found in the Crescent route improvement report found in another thread. Amtrak wants to switch cars in Atlanta in order to increase revenues, but it would have to lease a switch engine and hire a crew, which would be pretty expensive. NS could handle that at little added expense. Amtrak is also having issues with the station in Atlanta, and one issue is having to deal with NS to improve or move the current one. The process would be much simpler if NS were the only railroad involved.

Sure, training, etc. could be done by the railroads on a national level.

Atlanta is a perfect example I think; of how your plan would do little. NS can't easily move the station themselves. They still need the support of Atlanta, a town that seems fairly non-supportive of Amtrak in general. And moving the station to one of their railyards is probably not practical for most riders and it is most likely more likely to be disruptive to their own operations. Yes, the cost of a switcher is an impediment to switching cars at Atlanta because of the current location. But I highly doubt NS could magically come up with a better location. (and if they could and make money at it now, I'm sure they would.)

Mr. Moore, where you see the transit symbol is the location of the present Amtrak Station; "Little Google Man" will take you right to its front door.

Where you see Northside Hwy, US41, and it intersects with the tracks is where a new Amtrak station, complete with "overtures" of Local funding, has been proposed. There is plenty of room for a parking lot and even a house track for set out cars (I think "Little Google Man" can help you explore there as well).

What of course remains unresolved is how to obtain switching economically so that savings from one half less of four equipment sets is realized, along with reduced OBS employee count, train fuel, etc.

I can't imagine the big 7 freight railroads having one least bit interest in operating their own passenger trains. They fought like hell many years ago to divorce themselves from that business and paid dearly for that right. Some of them will tolerate passenger trains more than others will but they do not want the headaches of day to day responsibility for every aspect of passenger train operation. You might find one or two regional railroads that would be somewhat receptive to passenger trains for a price. The freight railroads today want nothing to interfere with their profitable and very important freight operations and passenger trains would interfere, of that there is no doubt.
Whether you like Amtrak or not, you have to admit that they created and built on a passenger train network that when they took it over back in 1971 was in an advanced state of decay and shambles and without an Amtrak to take it over it most likely would not have survived all of these past 40 years.
Noel Weaver

I cannot believe this topic has dragged on like this. The chance of the Class 1's taking over pax service is less than 1%. One of the main reasons...Labor costs. You'll need 2 pools; one for freight and one for paxs, each having it's own FRA rest requirements. That alone serves as a big deterrent.

SouthernRailway wrote:To reply, I'd just have the tax credit be 90% (or 95%, if private operators couldn't reduce Amtrak's losses by 10%) of the operating and capital costs of long-distance trains. The proposal is for long-distance trains only, since they run over freight RR tracks and the losses and tax credits would constitute only a small portion of freight RRs' budgets. (The Northeast Corridor would definitely not fit this proposal.)

I do think that a freight railroad could cut Amtrak's losses by, among other things, efficiencies of scale; surely it would be cheaper for a freight RR to handle car switching, stations (many of which are housed in freight RR buildings), etc. than it is for Amtrak to maintain those items for a skeletal network of trains. Adjusted for inflation, the Southern Railway's losses on the Crescent until 1979 were much, much lower than Amtrak's current losses are, for example.

The boards of directors of publicly held corporations such as the freight railroads by law owe a fiduciary duty to the railroad's investors, both equity (stockholders) and debt (bondholders, banks, etc.) That duty obligates the board to engage in business endeavors that are both a reasonable risk and have an expectation of a net return commensurate with that risk. Accordingly, any offer from the federal government would have to meet this requirement.

hi55us wrote:(due to failed experiments like MBCR in boston and VRE in Virginia)

Dude I don't know where you are getting that "failed experiment" nonsense from?????

I can't speak to MBCR. But I can assure you that VRE/Keolis is anything but failed! go to VRE's website and also listen to their customers...
I never thought I would say this, but the service has actually improved since Keolis took over, not withstanding all the "assistance to the contrary" they got from Amtrak and the local Amtrak Unions.... speaking as a daily rider who spends 3 hours a day on VRE, I hope Amtrak never comes back or at least not without a major attitude adjustment on the part of some of their employees....

Gilbert B Norman wrote:Mr. Moore, where you see the transit symbol is the location of the present Amtrak Station; "Little Google Man" will take you right to its front door.

Where you see Northside Hwy, US41, and it intersects with the tracks is where a new Amtrak station, complete with "overtures" of Local funding, has been proposed. There is plenty of room for a parking lot and even a house track for set out cars (I think "Little Google Man" can help you explore there as well).

What of course remains unresolved is how to obtain switching economically so that savings from one half less of four equipment sets is realized, along with reduced OBS employee count, train fuel, etc.

Oh, I'm quite familiar with the Amtrak Station, generally pass through there once a year (and most likely doing so in another month or so).

My point is that simply turning this over to NS doesn't solve any of the problems.

Ken W2KB wrote:The boards of directors of publicly held corporations such as the freight railroads by law owe a fiduciary duty to the railroad's investors, both equity (stockholders) and debt (bondholders, banks, etc.) That duty obligates the board to engage in business endeavors that are both a reasonable risk and have an expectation of a net return commensurate with that risk. Accordingly, any offer from the federal government would have to meet this requirement.

Boards of directors have wide discretion to enter into lines of business and make various decisions under the "business judgment rule". Examples of things that Norfolk Southern and its predecessors alone have done that didn't and weren't expected to be profitable are (1) running its own money-losing passenger trains after 1971, (2) running 21st Century Steam trains, (3) running steam excursions regularly in the '80s (and before), etc. Similarly, the Rio Grande ran a money-losing ski train (and even bought equipment for it) even in the '80s and '90s, as well as a long-distance passenger train until 1983, which lost millions.

Yes, boards should try to achieve the best returns for stockholders overall, but there are many ways of doing that, and I believe that running passenger trains, with losses covered and likely exceeded by tax credits, combined with giving freight railroads more control over their own property and less government interference- which is a much better deal than non-Amtrak Class 1 railroads took in 1971, and possibly a better deal than they have now- meets that.

To respond to a few other points:

(1) Yes, UK passenger rail subsidies have increased since "privatisation", but ridership has soared to its highest level since the 1920's, and there have been significant infrastructure investments (such as building Eurostar lines). The increased subsidies aren't necessarily due to private operators.

http://www.rail.co/2011/02/01/eurostar- ... nce-1920s/

(2) Freight railroads have thought about the idea. From Railway Age:

"Under what terms would freight railroads be willing to consider operating passenger trains?

The reaction of freight railroads ranged from cautious to 'no comment--now.'

As pointed out by Association of American Railroads President and CEO Ed Hamberger, the freight railroads have a critical financial interest in seeing that passenger train operators of the future continue to be a part of the Railroad Retirement system. He was less certain as to who these operators will be."

(3) Freight railroads did get rid of passenger trains for the most part in 1971, but they did so because passenger trains lost money, not because of some innate aversion to passenger trains; 20 years before, freight railroads were pouring money into them. If freight railroads in 1971 had been offered the choice of (1) tax credits in the amount of their losses (and more) for continuing to run their own passenger trains or (2) being part of Amtrak, I think that they would have chosen (1).

(4) Freight railroads already devote management and employees' time to passenger railroads. They all have a pretty senior-level person and a team below in charge of passenger trains--usually for relationships with Amtrak and commuter lines. CSX, for example, employed passenger ticket agents even until 2010.

(5) Other advocacy groups and industry participants have floated the idea:

http://www.unitedrail.org/1996/09/01/st ... er-system/
http://archive.railpac.org/reports/2006 ... ayage.html

Gilbert B Norman wrote:Honestly Mr. SRY, there's the deal killer. How could a railroad's interests be served by agreeing to public funding (tax credit or contract payment, what's the diff?) in an amount less than the avoidable-cost loss of any Amtrak train operating over their rails? Why should a railroad be required to direct their managerial resources to developing operational efficiencies with an objective of only breaking even? For example, wouldn't be more Return on Investment enhancing to have UP's management directing their efforts to, say, reducing "hull to flat car" time at Long Beach so that delivery to a Wally World distribution center in Rochelle IL be made with adequate time to have containers transloaded for local delivery to the outlets served rather than having, especially when PANAMAX becomes history, the shipper route to an East Coast port and with the UP ending up with an 80 mile Chi-Rochelle short haul in place of the 2300mile LB-Rochelle line haul? While we don't know the amount of contract payments UP receives from Amtrak each year other than that it is estimated to be about $125M, we do know that UP's Total Railway Operating Revenues for 2010 were $16,965M (source: 10-K). Really volks, how much of management's time is 125/16965, or seven tenths of one percent, deserve?

I think this is the best articulated argument as to why this wouldn't work. I'd like to add that I just don't see a need it just doesn't make sense to make private companies run a public service that is of no interest or even counter to their own interests, especially if there's no actual benefit in privatizing such a service. The UK has already shown us that privatizing passenger rail generally makes subsidies increase while seeing either no change or a decline in quality of service.

Gilbert B Norman wrote:Mr. Moore, where you see the transit symbol is the location of the present Amtrak Station; "Little Google Man" will take you right to its front door.

Where you see Northside Hwy, US41, and it intersects with the tracks is where a new Amtrak station, complete with "overtures" of Local funding, has been proposed. There is plenty of room for a parking lot and even a house track for set out cars (I think "Little Google Man" can help you explore there as well).

I believe you're thinking of Atlanta MultiModal Passenger Terminal which would be next to MARTA's Five Points station in downtown right here.

SouthernRailway wrote:Yes, UK passenger rail subsidies have increased since "privatisation", but ridership has soared to its highest level since the 1920's, and there have been significant infrastructure investments (such as building Eurostar lines).

Neither of which can be attributed to privatization.

trainmaster611 wrote:The UK has already shown us that privatizing passenger rail generally makes subsidies increase while seeing either no change or a decline in quality of service...

SouthernRailway wrote:Yes, UK passenger rail subsidies have increased since "privatisation", but ridership has soared to its highest level since the 1920's, and there have been significant infrastructure investments (such as building Eurostar lines).

Neither of which can be attributed to privatization.

Subsidies increase with increased ridership (as Amtrak is seeing these days),whether private or public operators are involved. UK subsidies have increased since privatization, but the subsidy per passenger mile in the UK has fallen since privatization, so the trains are being run more efficiently (viewed from an economic perspective).

There's an interesting article on TRAINS website by Fred Fraily, "Amtrak's next challenge: New rail competition"
that seems germane to this discussion.

"the Federal Railroad Administration is preparing to put up for bid to other interested parties one or two of Amtrak’s routes as an experiment"

http://cs.trains.com/TRCCS/blogs/fred-f ... ition.aspx

I can't imagine the big 7 freight railroads having one least bit interest in operating their own passenger trains. They fought like hell many years ago to divorce themselves from that business and paid dearly for that right. Some of them will tolerate passenger trains more than others will but they do not want the headaches of day to day responsibility for every aspect of passenger train operation. You might find one or two regional railroads that would be somewhat receptive to passenger trains for a price. The freight railroads today want nothing to interfere with their profitable and very important freight operations and passenger trains would interfere, of that there is no doubt.

Which is why BNSF, UP, and CSX, along with Canadian Pacific - ALL operate, using their own crews, daily, regular, scheduled, public passengers trains TODAY (October 19, 2011).

I can ride a BNSF operated passenger train in Seattle or Chicago - TODAY.

I can ride a UP operated passenger train in Chicago - TODAY.

I can ride a CSX operated passenger train in Baltimore/Washington DC - TODAY.

I can ride a CP operated passenger train in Vancouver - TODAY.

Heck, I can even ride a Genesee & Wyoming Industries operated passenger train just by walking a mile from my house - TODAY.

There is little reason why the commuter rail model could not be adapted to long distance trains. The railroad simply is a contractor that provides track space, an Engineer and a Conductor, and possibly railcar and (more likely) locomotive repairs, or in some cases could provide the locomotive themselves. (What better use is there for a BNSF or UP GP60 or B40-8 than sticking them on some city local in place of a SW-1500?)

The freight railroad itself would not be responsible for reservations, marketing, the "onboard experience", operating the dining cars or making up the bed linens.

I rode a train operated in such a manner just a few months ago. Operated with the consent of BNSF and with a BNSF pilot engineer and an Amtrak Conductor, the train was maintained, marketed and sold by a third party (not Amtrak) that also provided the cars (some of the cars were leased from Amtrak). And BNSF was even kind enough to provide security for our train (in other words, chase down rogue terrorist photographers who were trespassing on the ROW). But the train was neither a BNSF train nor an Amtrak train.

wigwagfan wrote:Which is why BNSF, UP, and CSX, along with Canadian Pacific - ALL operate, using their own crews, daily, regular, scheduled, public passengers trains TODAY (October 19, 2011).

However, none of these railroads own the rolling stock, nor do these trains typically travel farther than 100 miles from their terminals, nor do they even make a loss on these trains, as they're usually compensated, under contract, by the agency that owns the stock (e.g. Metra, MARC, MBTA, etc.). Dissolving Amrtrak would mean that someone would have to take ownership of that rolling stock, and the very willingness to operate such long distances. None of the Big 7 want to do that.