Tag: Amtrak

NY-NJ Should Put Up or Shut Up

New York Governor Andrew Cuomo is upset that the Trump administration doesn’t want to fund new tunnels under the Hudson River. Cuomo sent an angry letter to Trump earlier this week accusing the president of being prejudiced against New York and New Jersey because they didn’t vote for him. Cuomo claims the tunnels should be federally funded because “the Northeast is home to 17 percent of the entire population and contributes 20 percent to the national domestic product.” 

But gross domestic product and regional populations aren’t among the criteria Congress established for federal funding of transit infrastructure. Instead, one of the most important criteria that the Department of Transportation is required to use is whether the project is “supported by an acceptable degree of local financial commitment.” Based on the lack of local support, the Federal Transit Administration’s 2020 New Starts funding recommendations gave the project a “medium-low” rating, and under federal law, that makes it ineligible for funding. Not counting some very small projects (such as the downtown Los Angeles streetcar), the only other project to get a medium-low rating was the Portal North Bridge, which is also part of the Hudson Gateway megaproject.

Cuomo argues that Trump has ignored “the financial commitments made by New York and New Jersey.” The FTA’s profile of the project reveals just what those commitments are.

First, the states are asking the federal government to put up $6.7 billion, or 49 percent of the projected $13.6 billion cost. Second, they want the federal government to make them a loan of $2.3 billion that will be “repaid with PANYNJ [Port Authority of New York and New Jersey] funds.” Third, they want another federal loan of $2.0 billion that will be “repaid with project revenues.” These two loans total to 32 percent of the projected costs.

Another billion dollars (7%) is supposed to come from “unspecified private capital sources” who will be “repaid with project revenues.” Further, $1.4 billion (10%) would come from “GDC funds” derived from “project revenues.” GDC is the Gateway Development Corporation, which consists of Amtrak, New Jersey Transit, the Port Authority, and the U.S. Department of Transportation. It currently earns no revenues of its own, so it will have a hard time paying $1.6 billion in construction costs. Finally, $178 million, or 1.3 percent of the total, would come from the Port Authority of New York and New Jersey.

In short, New York and New Jersey are nobly committing themselves to cover 1.3 percent of the cost of the project, while they are relying on the federal government to fund a mere 81 percent. Of course, some of that would be loans, but the states may not be obligated to repay those loans unless the project earns sufficient revenues to do so. The private capital sources who are supposed to put up 7 percent are almost purely imaginary, and even if they existed they would demand that they be repaid out of project revenues before the federal government. But before repaying anyone, these mythical project revenues are supposed to cover another 12 percent of the cost.

Pardon me if I sound naive, but what project revenues are we talking about? Amtrak, New Jersey Transit, and the Port Authority are all money-losing operations. Amtrak claims to make money in the Northeast Corridor, but that’s only because it ignores depreciation and the corridor’s $51 billion infrastructure backlog, only part of which is the Hudson Tunnels. New Jersey Transit trains don’t even earn enough fares to cover 60 percent of their operating costs, much less any to pay for maintenance or capital costs.

In other words, Cuomo is asking Trump to have federal taxpayers pay nearly all the up-front costs and to take nearly all the risks of this project. What if self-driving buses put New Jersey Transit and Amtrak out of business – or at least reduce their ridership enough that they have no surplus revenues to repay federal loans? What if many of the firms now located in Manhattan realize that the subway system is never going to be repaired and decide to move away? Who is going to pay for the inevitable cost overruns? New York and New Jersey are clearly trying to get these tunnels while putting up as little of their own money as possible.

The FTA has long had a policy that applicants for transit capital funds must put up half the cost in matching funds, and federal loans don’t count as matching funds. Following this policy, it rated the Hudson Tunnels “medium low.” Congress made the rules, so Cuomo is complaining to the wrong party when he writes Trump, as the Department of Transportation just followed Congressional direction when it gave the project a medium-low rating. If anything, the DOT was generous: the project really deserves a “low” rating.

Will Congress Let Amtrak Stem Losses?

The federal government does a lot of things poorly, including trying to run businesses such as an electric utility, a postal system, and a railroad.

After the government helped ruin private passenger rail in the post-WWII years, it took over the remaining passenger rail routes in the 1970s under the Amtrak brand. Amtrak was supposed to become self-supporting, but it has consumed tens of billions of taxpayer dollars over the years.

Today, Amtrak operates 44 routes on 21,000 miles of track in 46 states. Amtrak owns the trains, but freight rail companies own nearly all the track. A Pew analysis found that Amtrak loses money on 41 of its 44 routes, and an analysis by Randal O’Toole found similar results. More information is here and here.

The few routes that earn positive returns are in the Northeast, and the biggest money losers are the long-distance routes. That brings us to a story in the Wall Street Journal regarding Amtrak head Richard Anderson’s current efforts to stem the losses.

Will Congress let Anderson cut money-losing routes or will it continue to put parochial interests above the system’s overall soundness?

Seeking to attract millions more passengers, Amtrak is preparing an overhaul of its national network targeting increased service in the South and West—at the expense of long-haul routes beloved by train buffs and their allies in Congress.

The goal is to revamp the way Amtrak runs trains on the aging network of national routes it already maintains, with more frequent service between pairs of cities, such as Atlanta and Charlotte, N.C., or Cleveland and Cincinnati. Running more trains over shorter distances would allow Amtrak to better serve those commercial corridors where rail can compete with flying and driving, railroad officials said.

The new service could come at the cost of curtailing some long-distance routes, where storied trains like the Empire Builder and the Southwest Chief have small but fervent bases of support and lineage stretching back to the golden age of U.S. railroads. Any change in Amtrak’s management of the national network will require approval from Congress, which has aggressively defended the long-distance routes in the past, even while pressing Amtrak to focus on improving its financial performance.

Amtrak’s long-distance routes carried about 4.5 million riders in fiscal 2018, down slightly from the previous year. Amtrak reported an adjusted operating loss of $543 million on those routes in 2018, more than offsetting the $524 million in earnings coming from its operations on the Northeast Corridor.

… Amtrak Chief Executive Richard Anderson, a former Delta Air Lines Inc. CEO, has hinted at his desire to boost ridership along densely populated corridors where Amtrak currently runs infrequent service—and has already tangled with supporters of long-distance trains in the process.

… “The present network simply does not fit the future,” [Anderson] said.

Anderson is right. But the best fit for the future would be a privatized Amtrak. Privatization would allow for innovation and cost-cutting to improve service and make rail more financially viable. A private rail company (or companies) could prune excess workers and end harmful union rules. It would be able to close the routes that are losing the most money and shift resources to the core routes to improve service quality.

Congress should get out of the passenger rail business and give rail the private-sector flexibility it needs to better compete against other transportation modes.

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Questions to Ask About Amtrak 501

The wreck of the 501–the Amtrak train that crashed near Seattle on Monday–is raising lots of questions about Amtrak operations, but they aren’t always the right ones. Here are some questions that should be asked and some of my preliminary answers. Answers from Amtrak (the operator), FRA (the funder), Sound Transit (the track owner), or WSDOT (the train owner) may differ.

1. Congress required passenger railroads to install positive train control (PTC) by the end of 2015. Why did the Federal Railroad Administration (FRA) give money to the Washington Department of Transportation (WSDOT) for a new passenger rail line that would not open until after 2015 when the project didn’t guarantee funding for positive train control?

Answer: The Obama administration wanted to distribute high-speed rail funds to as many states as possible in order to build political backing for the program, so it couldn’t be bothered with positive train control. The tracks the train was on are owned by Sound Transit, which says it is installing PTC, but it won’t be finished until spring. Public releases of WSDOT’s application for funds for this train didn’t mention PTC.

2. Around 800 people die in railroad accidents a year. PTC would prevent only about 1 percent of these fatalities; far more would be saved by spending the same amount of money on better grade crossings and fencing of rail rights of way. Why do we put so much emphasis on an expensive technology that will do so little?

Answer: Accidents that PTC could have prevented tend to be more spectacular than people getting killed when a train hits their car at a grade crossing. This suggests that, when politicians decide where private businesses spend their money, it’ll get spent on grandiose programs rather than things that could really make a difference.

A Horrible Way to Be Right

Today is not a proud day for the Washington State Department of Transportation (WSDOT). The agency spent close to $800 million of federal funds on a so-called high-speed rail project between Seattle and Portland–only “so-called” because top speeds would be just 79 mph, which is conventional rail. Much of the money was spent upgrading existing tracks to give passenger trains a shorter (but less scenic) route through and around Tacoma.

As you probably know, the very first train to use this route derailed on an overpass over Interstate 5, blocking half the freeway and killing at least six people. To make matters worse, Mayor Don Anderson of Lakewood, Washington, about 10 miles north of the crash, warned WSDOT a few weeks ago that it was not taking safety seriously enough. “This project was never needed and endangers our citizens,” he cautioned.

To be fair, Mayor Anderson was worried that grade crossings in Lakewood were inadequately protected for 79-mph trains. But his comments more generally suggest that WSDOT was putting the goal of saving Seattle-Portland passengers ten minutes of time–increasing average speeds by just 2.7 mph–ahead of safety.

In response to the accident, President Trump tweeted, “The train accident that just occurred in DuPont, WA shows more than ever why our soon to be submitted infrastructure plan must be approved quickly.” The implication was that this is an example of crumbling infrastructure, when in fact it is an example of misplaced infrastructure priorities.

In fact, what the accident shows is why the federal government should get out of the infrastructure business. As Mayor Anderson said, this project was unnecessary, and it was only done because President Obama wanted to spend billions of federal dollars on ideologically driven high-speed rail projects and WSDOT had a shovel-ready project (despite not being high-speed rail) on which to spend some of those dollars.

Reversible Lanes, Not Trains

In the days before Hurricane Irma made landfall in Florida, the state ordered 6.3 million people to leave their homes. As people in the rest of the nation watched videos and photos of bumper-to-bumper northbound traffic on Interstates 75 and 95, while the southbound lanes were nearly empty, most had one of two reactions. Some said, “If only Florida had large-scale passenger train service that could move those people out,” while others asked, “Why aren’t people allowed to drive north on the empty southbound lanes?” 

The aftermath of the storm has already opened a debate over what Florida should do to increase its resilience in the future: build more roads or build more rail lines. The right answer is neither: instead, state transportation departments in Florida and elsewhere need to develop emergency plans to make better use of the transportation resources they already have. 

Rail advocates like to claim that rail lines have much higher capacities for moving people than roads, but that’s simply not true. After the San Francisco earthquake of 1906, the Southern Pacific Railroad moved 300,000 people–free of charge–out of the city in what was probably the largest mass transportation evacuation in American history. While impressive, it took the railroad five days to move all of those people on three different routes. Even accounting for improvements in rail capacities in the last century, moving 6 million people out of south Florida by rail would take weeks, not the four days available between Florida’s first evacuation orders and the arrival of Hurricane Irma.

At the same time, the state of Florida could have done more to relieve congestion on major evacuation routes. The most it did was to allow vehicles to use the left shoulder lanes on part of I-75 and part of I-4 (which isn’t even a north-south route), but not, so far as I can tell, on I-95. What the state should have done, since there was very little southbound traffic, was to open up all but one of the southbound lanes of I-75 and I-75 to northbound traffic.

The Economics of Amtrak

Amtrak’s co-CEO Wick Moorman has announced that the passenger railroad is thinking of offering a new service to compete with the airlines: economy seating that is crammed together as tightly as airline seats. This was immediately blasted by Senator Charles Schumer (D-NY), saying, “Amtrak should not throw out one of the best things about Amtrak and train travel — that is, you at least get a seat you can sit in and be comfortable.”

In fact, this idea makes no sense not because heavily subsidized train travelers somehow deserve more comfortable seats but because it would cost Amtrak more in lost revenues than it will save. Airlines fill 85 percent of their seats and on lots of flights they fill 100 percent. Amtrak fills only 51 percent of its seats, so cramming more seats into a railcar will simply mean more empty seats.

According to USA Today, Amtrak seat pitches–the distance from the back of one row of seats to the back of the next–are 39 inches for day trains and 50 inches for overnight trains. Airline seat pitches are 30 to 33 inches while buses are 28 to 31 inches. That means Amtrak could squeeze in four rows of seats where it now has three on day trains and five rows where it now has three on overnight trains.

Amtrak’s overnight trains rarely have more than four coaches. Substituting one economy coach for two regular coaches would save a little bit on fuel and maintenance and results in an overall loss of seating capacity. Many coach riders on the overnight trains are price sensitive, so most of the people attracted to the economy coaches would have otherwise taken the regular train. Thus, Amtrak is likely to lose more revenue than it gains by attracting few people away from buses or planes.

Amtrak’s World-Class Losses

Amtrak issued its F.Y. 2016 unaudited financial results last week with a glowing press release claiming a “new ridership record and lowest operating loss ever.” Noting that “ticket sales and other revenues” covered 94 percent of Amtrak’s operating costs, Amtrak media relations called this “a world-class performance for a passenger carrying railroad.” The reality is quite a bit more dismal.

Many new high-tech firms attract investors despite losing money, but a 45-year-old company operating an 80-year-old technology shouldn’t really brag about having its “lowest loss ever.” The “world-class performance” claim is based on the assumption that passenger trains all over the world lose money, which is far from true: most passenger trains in Britain and Japan make money, partly because they are at least semi-privatized.

Moreover, a close look at the unaudited report reveals that Amtrak left a lot of things out of its press release: passenger miles carried by Amtrak declined; ticket revenues declined; and the average length of trip taken by an Amtrak passenger declined. The main reasons for Amtrak’s positive results were an increase in state subsidies (which Amtrak counts as passenger revenue) and a decrease in fuel and other costs.

Ridership grew by 1.3 percent, but passenger miles fell because the average length of trips fell by 3.1 percent. One of the biggest drops in trip lengths was on the New York-Savannah Palmetto. Starting at the beginning of F.Y. 2016, Amtrak added stops at Metropark, New Brunswick, Princeton Junction, and Baltimore-Washington Airport, effectively turning the supposedly long-distance train into a Northeast Corridor train. In 2015, the train’s average trip length was 396 miles, but in 2016 that dropped to 257 miles.

A decline in passenger miles means more empty seats. In 2015, Amtrak filled 51.4 percent of its seat-miles; in 2016, this fell to 50.0 percent. In other words, the average Amtrak train is half full; when was the last time you were on a half-full airliner? The biggest declines were on the Washington-Richmond state-supported train, the Seattle-Los Angeles Coast Starlight, and the Auto Train.

Some trains did show an increase in passenger miles. One of the biggest increases was the Chicago-Indianapolis Hoosier State, which saw an 11 percent increase in passenger miles and a 16 percent increase in revenues. This train is supported by Indiana, which got fed up with Amtrak service and contracted it out to another operator, Iowa Pacific. Amtrak is a “partner” because it allows people to make reservations on the train from its web site. But the lesson may be that privatization (or semi-privatization) can result in bigger ridership gains than Amtrak.