Hypothetical - What if: It Happened?

Cato Institute fellow and transit critic Randal O'Toole made the following testimony to Congress in November of last year: https://transportation.house.gov/imo/me ... timony.pdf . Without getting into partisan politics - what if we got a different regime in Washington that had more of the view of Mr. O'Toole and the federal government made the decision to get out of the business of passenger rail? How would it happen? Would Amtrak survive in some manner as for profit operator or would the government spin off its assets to companies like Herzog and Keolis to operate service? Curious what peoples' takes are on how this would happen, what would remain of passenger rail, and what would go?

Make the following assumption:
- Amtrak is still running its current system and no current routes/services have been discontinued prior to this decision.
- The federal government wants out completely - all Amtrak federal funding would be phased out - responsibility for the Northeast Corridor would have to transition to state agencies, state supported and long distance routes would have to be fully taken over by states or coalitions of states or discontinued - any bridge funding would be to assist in transitioning the NEC To state ownership along with any national network services to states who intended to continue or take over services and to transition Amtrak into the private sector.

Consider the following also: such a plan could be part of a broader government spending reduction program which could include cuts to other federal transit spending that could affect states' abilities to get federal grant funding for passenger rail projects.

Lord, I hope that you, being much more the enthusiast than I, can accept that Mr. O'Toole does make worthwhile points.

The only market in which Amtrak has a measurable share is the Northeast Corridor; and if it were not there, severe economic disruption would occur. But, even if Amtrak can claim "we're profitable" over it, let it be noted hat measurement, along with the FY19 "we almost did it, systemwide" is some kind of "cookie jar" accounting of "more went in from fares than taken out for drivers, fare collectors, and electricity".

By that measurement, and that of the advocacy community, Depreciation is some kind of fiction. This CPA wholly agrees with Mr. O'Toole, for Depreciation simply represents a systematic allocation of expenditures that will not only benefit the period in which made but also future periods. Electricity and Drivers represent "here and now"; Infrastructure represents the "hereinafter". But either way, both are Railway Operating Expenses.

The locally funded Corridors are hopeless - especially the Midwest with lines from six different directions converging at Chicago (not quite as true for the likes of LA-San Diego save that there are not as many bodies as the NEC can draw upon and a "car centric" sprawl landscape). But Sec 403-b of RPSA70 was wise legislation in that it allowed local agencies to fund passenger trains - and have the only operator with the necessary institutional expertise available to operate such. On that point, what Amtrak receives, and contrary to Mr. O'Toole, IS revenue.

The "need" for LD's; let's not go there - at least at this topic.

All told, Mr. O'Toole notwithstanding, the NECorridor will see continued improvement, as will so long as the local funding prevails the other "Corridors". The LD's, I can only hope that a decision regarding their long term future can be made before someone actually pushes the button to order new cars for them (flaw with both Carter and Clinton cuts; new LD equipment was on order when both were announced).

I can certainly admit to that - He certainly made good points in this and other publications about WFH and its potential impact on the viability of transit in general - even if I don't agree with his general philosophy and his desired outcomes. Additionally - he is completely correct about depreciation and the idea that Amtrak claiming it almost made a profit is a farce when you account for the massive backlog on the NEC and the federal dollars that they are looking for to address that and how they often don't take capital into account when they say the Acela/NER make money - they only make a profit if you assume the taxpayer contribution to the infrastructure is there - and Mr. O'Toole would probably argue that while a private Amtrak could certainly make money as a contract operator on a state financed NEC - he would probably argue that there are options that would be more efficient than continued taxpayer funding of the NEC infrastructure such as replacing it with more highway lanes and bussing.

lordsigma12345 wrote: ↑Fri Jul 16, 2021 8:35 am ...and Mr. O'Toole would probably argue that while a private Amtrak could certainly make money as a contract operator on a state financed NEC - he would probably argue that there are options that would be more efficient than continued taxpayer funding of the NEC infrastructure such as replacing it with more highway lanes and bussing.

Mr. Lord that is the model existing in much of Europe - Germany and Austria at the least.

https://www.brb.de/en/welcome-to-brb

https://westbahn.at/en/

The rails in both countries are State owned - and they do have competition from the State roads.

I've used 'em both; definitely cheaper than either EuroCity or RailJet (never been on an ICE), but service is inferior.

I've ridden Westbahn Salzburg-Linz. An English speaking Conductrix (married to a retired US Army officer), was telling me how the OBB "wasn't exactly happy they were there" ( have kept them out of the Vienna Hauptbahnhoff). They have had continual litigation with OBB for "willful delay".

Also ridden Meridian Munich Ost (Airport)- Salzburg. It's just glorified commuter equipment; and you get to see a number of Bavarian towns "up close". But don't make the mistake of boarding the wrong train with the wrong ticket. One year going to Salzburg, I boarded a EuroCity as it was next train. I didn't see any big deal (just Second Class), but did this "not exactly English speaking" DB Conductrix thought otherwise. A very helpful college age girl "terped" for me. This "Brunhilde" was not to exactly tuned to my "it's just a train; Second Class is Second Class". To stay aboard she wanted €50; forget it. Well, at least she didn't stop the train and put me off on the tracks, but at Rosenheim she definitely "saw me off". Fortunately, no "Polizei". A Meridian came along half hour later and I completed the trip to Salzburg without further incident.

I think the biggest issue for the NEC and other state sponsored service if this sort of thing were to occur - and what would make it different from Europe is that - as I stated it would likely be part of a larger program of reductions in transit spending which means states would have to get creative to fund this infrastructure and fares would certainly have to go up. Some states would surely abandon their service absent the current federally funded Amtrak model.

As you stated - we probably need not even go far what would happen with long distance service - the only thing that could possibly emerge from the LD corpse is selling off some of the long distance equipment to private operators who may be interested in launching tourist train service in particular scenic areas - such as what Rocky Mountaineer is doing along a portion of the Zephyr route. There could be other areas where such a thing could occur and possibly a private interest assuming ownership of the Auto Train (if they could assume the assets but be able to start from scratch as far as liabilities - union agreements, etc.)- such services would be strictly for profit and likely seasonal.

Or alternatively for the Auto Train a privatized Amtrak contract operator could ultimately decide to retain and continue to operate it if they can make the numbers work - but that's probably the only LD route that could make the jump to private.

I can't remember where I saw this but there was some internal Amtrak performance documents that leaked a few years ago which could shed some light on why Amtrak treated the AT differently during COVID than the other routes. The documents had three performance measures by which they evaluated route performance internally - the first measure which evaluated the train's revenue against the route's direct costs, the second which evaluated against direct plus indirect but related costs and the third which is the performance against fully allocated costs which of course is the number that is released publicly in financial reports. While some advocates saw this report and cried foul - Amtrak likely doesn't release the other measures for obvious business reasons and I can totally understand why fully allocated costs is the official measure. However what I saw may at least explain why the Auto Train is treated differently - it is the only long distance route whose performance landed between the second and third measures - in the time examined it was revenue positive in terms of direct and indirect costs and lost money only when fully allocated costs were assigned - most LD services were revenue negative in all three categories - a couple eastern routes barely broke even in the first category looking at direct costs. So it's probably not impossible Auto Train could survive but probably adios as far as the rest.

I think if the Feds gave all the money to the northeastern states it drained out of the corridor for decades to support operations elsewhere it would largely eliminate the deferred maintenance backlog.

rcthompson04 wrote: ↑Fri Jul 16, 2021 9:40 am I think if the Feds gave all the money to the northeastern states it drained out of the corridor for decades to support operations elsewhere it would largely eliminate the deferred maintenance backlog.

Really? Amtrak has existed around 50 years. To accumulate the $110+ Billion the commission wants to rebuild the NEC, eliminate deferred maintenance, it would take $2 Billion for every one of those 50 years. Amtrak rarely, if ever, received $2 Billion in subsidies for any of those 50 years. So there is no way the money lost to subsidizing long distance trains would have kept the NEC in a state of good repair.

Long distance trains exist solely for political reasons is difficult to argue with. An interesting statistic often overlooked today was how much Amtrak’s long distance trains were able to substitute for the lack of commercial flights immediately after 9-11-2001. What did cross country businessmen do when there were no flights? Did they choose the train or their own private vehicles?
Amtrak ridership:
2000 23 million
2001 23.5 million
2002 23.3 million
2003 24.6 million
2004 25.1 million
2005 25.1 million
Not much of an increase when there were no flights. So that means most chose to drive.

What lack of flights after 9/11? Airlines resumed flying around noon on 9/13, and were more or less at an 80% or higher schedule. Amtrak ran extra trains on 9/12 and 9/13, but a lot of that was accommodating people stranded during the shutdown.

In general, domestic demand fell off a cliff for the rest of September until Thanksgiving when things came back to more or less normal levels. International recovery took until the following summer.

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Having read Mr. O'toole's book Romance of the rails, he makes several valid points. Concerning the NEC, with state of good repair costs near 50 billion dollars, he asks if it is worth it. The powers that be have asked and answered that question in the affirmative. Noting this and the fact that the NEC is by and large technically a federal asset. This means that the federal government is on the hook to help pay for upgrades and replacement of worn out infrastructure, like it or not. That being said, I would hope that the feds will say that they are not the only ones footing the bill. Here are some possible ground rules going forward:
1. Since much of the ridership total are commuters, There would be an insistence that a maintenance surcharge of at least one dollar be attached to any ticket sold, be it Amtrak or commuter for any trip originating or terminating on the NEC. These funds raised would go solely to right of way infrastructure maintenance.
2. Except to service debt on new rolling stock, any extra operating surplus as well as access fees collected from commuter carriers and freight railroads using the NEC would likewise go towards maintenance, if it is not being done so already.
3. If not already proposed, all real estate that can be redeveloped be done so. This would include leasing naming rights of stations, for example, JP Morgan Chase Penn Station.
4. For the federal part of the funding, I seem to recall reading somewhere that there is a net inflow of around 2 billion dollars from oil and gas leases and royalties from federal lands and offshore. That could provide a fair amount of the funding.
5.If I am not mistaken, much of the electricity used for the NEC comes from hydroelectric sources. Since this is a "green" source, Amtrak should play this up to the max in this era of climate change concerns as opposed to buses spewing diesel exhaust.
I am sure there are other potential ideas, but these are some that I came up with, for what they are worth.

At the risk of digression, it might be worthwhile to consider an alternative, perhaps more likely, scenario. What would happen if carbon was taxed at a rate commiserate with its environmental and social impacts? If the cost of driving and flying doubled could Amtrak add enough corridor capacity to satisfy the market? What would happen when private operators (Brightline, Texas Central...) were competing to provide corridor service and creating new markets?

Bob Roberts wrote: ↑Fri Jul 16, 2021 1:49 pm At the risk of digression, it might be worthwhile to consider an alternative, perhaps more likely, scenario. What would happen if carbon was taxed at a rate commiserate with its environmental and social impacts? If the cost of driving and flying doubled could Amtrak add enough corridor capacity to satisfy the market? What would happen when private operators (Brightline, Texas Central...) were competing to provide corridor service and creating new markets?

You're probably right - I merely brought this up just to have a what if discussion to see what peoples' thoughts are of the scenario I described - politically that is clearly not where we are and it hasn't happened with Amtrak 50 years later. I will say I think the only likely politically viable choices are - the status quo with federal Amtrak and what I described where the feds step away. So long as the federal government owns/maintains responsibility for the NEC we will have Amtrak as it is with state supported and long distance trains. I think Anderson and company tested the waters with the SWC bus bridge move and I think they realized politically they still have to maintain the LD trains to keep the support coming for the corridor. If you want to get rid of status quo Amtrak (IE ditch the network) that probably comes with the states assuming the NEC. I don't think a federally funded NEC works without the other trains because of the politics - which is why they still exist. Remember - during the most recent stimulus reconciliation process every single Republican voted for a symbolic amendment that would have scrapped all NEC funding calling it a "wasteful railroad" that benefits a few northeastern liberal states - their amendment did not touch the proposed national network funding because certain GOP senators were not going to vote for something that defunded their home trains. Politically - the parts of Amtrak are still very much intertwined.

If it did happen and a private Amtrak emerged it would probably have to look something like the GM bailout - where the feds hold on to the NRPC and some of Amtrak's liabilities such as possibly some retirement pensions that a for profit company would have a hard time assuming and transferring its business assets to a "new private Amtrak." The new private Amtrak would be a for profit entity that would have to be able to start from scratch and negotiate all new labor agreements - otherwise you'd get no investors. This new Amtrak would serve as a contractor for the NEC states and whatever state corridors decided to bring them in and maybe give it a go at running a completely for profit Auto Train (and of course they'd have to compete with other companies such as TASI/Hertzog and Keolis.) Another million dollar question would also be do the states also assume ownership of all the equipment?

The problem with many cost accountants and their conservative fellow travelers is that they are so pleased that they can identify the "costs" of a passenger rail service and compare that to the "revenues" and then think that the losses exposed justifies a policy of eliminating such service.
This is just too simplistic economics. The vast majority of passenger rail services worldwide are not viable without public finance to make up the difference between the fare box revenue and the costs. There's immense social value to having reliable rail service to and from communities in terms of providing mobility to people to travel out of their immediate environment. Buses are the answer! If private intercity bus service was an alternative, why has it not flourished? Forget the "ends" of these state sponsored or LD trains, just realize that there are dozens of intermediate stops that benefit from being "connected". so let's stop saying "LA to San Diego" as if that comes close to describing the service provided.

After Santa Barbara the Pacific Surfliner calls at:
Carpenteria,
Ventura
Oxnard
Camarillo,
Moorpark
Simi Valley
Chatsworth,
Van Nuys,
Hollywood/Burbank,
Glendale,
Then
Los Angeles
followed by
Fullerton,
Anaheim,
Santa Ana,
Irvine,
San Juan Capistrano,
San Clemente Pier
Oceanside
Solana Beach
and then San Diego.

So ten stops between Santa Barbara and LA, and eight intermediate stops between LA and San Diego. That makes eighty possible travel itineraries that are from "North of LA" to"South of LA" that don't start or end in LA or San Diego. That is why California is happy to pay some of the cost of the Pacific Surfliner. And the same can be said for all the other routes outside of the NEC.