Amtrak Wasting Millions?

[The Davy Crockett]

From Environmental & Energy Publishing:

For Amtrak, the findings of a 2012 audit might have led to a minor windfall: Over an approximately four-year period, the passenger railroad had overpaid BNSF Railway Co. more than $9 million for use of the freight railroad's tracks.

But in the end, however, Amtrak settled for $1.4 million.

That pattern has played out repeatedly over the years, according to data provided by Amtrak's inspector general to Greenwire. Audits would uncover excessive payments to "host" railroads that control most of the track used by Amtrak trains. Amtrak, although perpetually hungry for cash, has regularly agreed to take significantly less than what the inspector general had concluded was due.

Link to article: http://www.eenews.net/stories/1060015115

 

[CHamilton]

This is frustrating, to say the least. Amtrak's accounting is notoriously opaque, which is what leads to situation like this. But Amtrak inherited peculiar accounting practices from its predecessors, the Class I railroads don't want the public to know how much they are soaking us for hosting Amtrak, and the politicians like playing "the NEC makes money" games, even though they know full well that there are billions of dollars of deferred maintenance that someone's going to have to pay for, and soon. I wish some of the number-crunchers on AU could get access to Amtrak's real income and expense numbers, but I'm not holding my breath.

Basically, no one wants real public accountability -- not Amtrak's management, not the politicians, and not the host railroads.

 

[dlagrua]

Here Amtrak pays more than what the host railroads are due and they are skimping on the customers food to save pennies! Incredible!

 

[lepearso]

Amtrak paying too much is an accounting error. However, Amtrak settling for far less than they are owed sounds like bad decision making in the legal department.

 

[neroden]

More evidence that Amtrak is actually subsidizing the "host railroads", contrary to their usual claims.

 

[StriderGDM]

Amtrak paying too much is an accounting error. However, Amtrak settling for far less than they are owed sounds like bad decision making in the legal department.

Or a wise one. Just because the auditors make the claim that Amtrak overpaid doesn't make it automatically true. It may have been far quicker and easier for Amtrak to negotiate a lower amount and pay that.

One of those "we'll probably never know for sure".

 

[Paulus]

More evidence that Amtrak is actually subsidizing the "host railroads", contrary to their usual claims.

Nothing of the sort.

 

[neroden]

I think that it's pretty solid evidence; the Class Is aren't just getting paid what they've negotiated for, they're getting paid more.

Meanwhile, the host railroads have *never* presented *any* solid data to support their (unsupportable) claims that they subsidize Amtrak. And believe me, I've looked for it.

They usually simply make vague complaints about how much work it is to run trains on time, which has nothing to do with the actual costs of doing so. It costs pretty much the same amount to run the trains on time as it does to run trains incompetently, and Matt Rose even said so a while back.

Amtrak performance has consistently acted as the "canary" telling the Class I whether they need to invest more for their freight service. Those which ignore the canary have serious problems; those which pay attention to the canary do well. Frankly, this is a service being provided by Amtrak to the Class Is, and a valuable one, whether or not the fools in the executive offices recognize it.

This is an issue of culture at the Class Is. They have had an irrational bias against passenger trains, as well as a general anti-shipper bias. This is unhealthy for any company with customers. Their unsupported and unsupportable claims that they are "subsidizing" Amtrak are just straight out of their pre-existing bias. They've been paid full avoidable costs as required by law for decades, and (as this shows) getting paid for services they haven't provided, and on top of that they get benefits which they don't measure.

 

[Thirdrail7]

Amtrak paying too much is an accounting error. However, Amtrak settling for far less than they are owed sounds like bad decision making in the legal department.

Or a wise one. Just because the auditors make the claim that Amtrak overpaid doesn't make it automatically true. It may have been far quicker and easier for Amtrak to negotiate a lower amount and pay that.

One of those "we'll probably never know for sure".

Exactly. The freights fight these findings with aggression. By the time you expend the resources to fight with them, sometimes it may be better to settle.

PS: Not that it matters, but I tend to agree with Neroden's post. I vote him for Board of Directors!

 

[The Davy Crockett]

While on one level these settlements might make sense, its not tough to not see the following scene play out in passenger's minds:

Phone Rings.

"Boardman here."

Voice on the line: "Mr. Boardman, this is Frank Jones over in Long Distance [trains]. Sir, I'm calling because dining car passengers have no entrees to eat."

Boardman: "No entrees? Let them eat cake!"

 

[Paulus]

I think that it's pretty solid evidence; the Class Is aren't just getting paid what they've negotiated for, they're getting paid more.

Meanwhile, the host railroads have *never* presented *any* solid data to support their (unsupportable) claims that they subsidize Amtrak. And believe me, I've looked for it.

Just off the top of my head, X-Train's negotiated slot price was ~30x Amtrak's average pay per train mile and there's several studies showing that significantly more double track is required when passenger trains are running on a line due to the speed differential. Opportunity costs of being able to run fewer freight trains are a thing which deserve compensation.

They usually simply make vague complaints about how much work it is to run trains on time, which has nothing to do with the actual costs of doing so. It costs pretty much the same amount to run the trains on time as it does to run trains incompetently, and Matt Rose even said so a while back.

Operational cost isn't all that much different most likely. Capital cost is going to be a different thing however and it must be remembered that much of Amtrak's OTP issues are of their own making.

This is an issue of culture at the Class Is. They have had an irrational bias against passenger trains, as well as a general anti-shipper bias. This is unhealthy for any company with customers. Their unsupported and unsupportable claims that they are "subsidizing" Amtrak are just straight out of their pre-existing bias. They've been paid full avoidable costs as required by law for decades, and (as this shows) getting paid for services they haven't provided, and on top of that they get benefits which they don't measure.

I have yet to see any evidence of an irrational bias against passenger trains by the Class Is. I have seen plenty of evidence of an entirely rational bias against completely unrealistic passenger rail plans. Need I point out that the most often cited "irrationally biased" Class I also hosts the corridor with the most daily trains and the best OTP in the entire Amtrak system, better even than Amtrak's trains on their own tracks?

 

[jis]

This is an issue of culture at the Class Is. They have had an irrational bias against passenger trains, as well as a general anti-shipper bias. This is unhealthy for any company with customers. Their unsupported and unsupportable claims that they are "subsidizing" Amtrak are just straight out of their pre-existing bias. They've been paid full avoidable costs as required by law for decades, and (as this shows) getting paid for services they haven't provided, and on top of that they get benefits which they don't measure.

I have yet to see any evidence of an irrational bias against passenger trains by the Class Is. I have seen plenty of evidence of an entirely rational bias against completely unrealistic passenger rail plans. Need I point out that the most often cited "irrationally biased" Class I also hosts the corridor with the most daily trains and the best OTP in the entire Amtrak system, better even than Amtrak's trains on their own tracks?

I tend to agree. Yes there are the usual business driven posturing that goes on. But the bit of irrationality I see in most of these discussions is the mild irrationality involved in the claims that you can just throw a bunch of passenger trains into a mix of relatively congested freight train mix and expect everything to work just fine, and by FRA decree all the risk of failure to meet OTP is to be borne by the host railroad, and all this should be achieved without any significant capital investment, at least on part of those that want to run passenger trains. I think that attitude comes from a bit of irrational bias itself. but hey, who's counting biases? Not me

This is not to say that there are not specific cases of complete incompetence like NS exhibited last year, or willful policy setting opposing passenger trains as practiced by CP or CN under certain leaderships. But I doubt that either of those are driven by irrationality.

 

[Guest]

Boardman: "No entrees? Let them eat cake!"

Yum yum!

Possibly chocolate cake?

 

[afigg]

The question for me is whether Amtrak could have realistically recovered more of the overpayments or was this the best the legal and finance team could get due to poor documentation records on Amtrak's part? Perhaps Amtrak should put some of the funds they did recover into hiring better accountants and financial staff.

Should go back and read the IG audit report. Link to Amtrak OIG Audit reports list. I see there is a recently posted on on Acela parts contract costs, which from a very quick skim, is not a good one for Amtrak. Boardman may get some heat for not fixing all the problems in contract and project management.

 

[neroden]

Just off the top of my head, X-Train's negotiated slot price was ~30x Amtrak's average pay per train mile and there's several studies showing that significantly more double track is required when passenger trains are running on a line due to the speed differential.

Sure. I'm looking at a fully double tracked line from New York to Chicago, a fully double tracked line from Philadelphia to Cleveland, a triple-tracked line from Chicago to Aurora, double-tracked some distance past Galesburg, double track from DC to somewhere past Richmond with stretches of triple track. There's also a mostly double-tracked line from Chicago to Los Angeles (double tracked for needs of freight), a soon-to-be double-tracked line from Minneapolis to western Montana (double tracked for needs of freight).

And some of that was paid for by government, including extra tracks from DC to Richmond and the money put into Conrail.

While the speed differential argument is accurate in theory, it's overblown in current practice. On most of these routes, I'm looking at a speed differential between 50 mph nonstop *at the slowest* and 79 mph with stops, which ends up being the same speed. The intermodals do go faster than this sometimes and should arguably be sped up; I don't think there's anything magic economically about 50 mph. Look at the routes Amtrak runs on: nearly all of them are primarily fast intermodal traffic routes.

CSX has much more to complain about on the Cardinal route (which is mostly slow coal trains and trains of empties) than any of the other Class Is have to complain about. And maybe the Class Is had more reasonable complaints when they were running mostly coal.

And perhaps this is what's actually happening: we're seeing a holdover attitude. With the speed differential from coal drags, the opportunity costs and incremental capital & maintenance costs of running passenger trains on a bulk-aggregates-focused network probably was really high, and I guess that meant that probably Amtrak was underpaying back in the 1980s. But now we have an intermodal-focused network, and the Amtrak trains are nearly all on the fast-intermodal-focused lines, with the notable exception of the Cardinal. So the speed differential has become less of an issue due to business changes.

I understand the complaints about running passenger trains at 110 mph without adding a third (state-owned) track, since this would bring back the speed differential. But this isn't happening.

This does make me realize that CSX may, justifiably, ask for a hell of a lot to run the Cardinal daily. The traffic mix on that line -- slow all of it -- makes the relatively fast Cardinal much more troublesome than running extra passenger trains on either of BNSF's Transcons, UP's Sunset Route, the Water Level Route, the Broadway Limited Route, the Florida routes, the Crescent route, etc., all of which are full of fast trains to start with.

Opportunity costs of being able to run fewer freight trains are a thing which deserve compensation.

What, the one train a day they can't run? If they're running that close to capacity, they need to invest in more capital.
If a line is under capacity, adding one passenger train per day is not going to be a big deal. If it's over capacity, the Class I needs to invest for its own account.

Running a *lot* of passenger trains per day *is* displacing a significant number of freight trains and should cost a lot more. I am under the impression that it does cost a lot more. And is quite uncommon. There's several reasons the Capitol Limited and Lake Shore Limited run back to back across Indiana, and I'd expect the cost of an 8-hour-off run to be much higher.

Operational cost isn't all that much different most likely. Capital cost is going to be a different thing however and it must be remembered that much of Amtrak's OTP issues are of their own making.

Much? A small percentage. It's a lot on the Empire Corridor (sigh, sigh), but really not much in most of the other corridors. It's quite easy to go through the details to figure out what the causes are on each route -- the two largest causes by *far* are bad dispatching (mostly by host railroads) and poor track maintenance on host railroads,

Need I point out that the most often cited "irrationally biased" Class I also hosts the corridor with the most daily trains and the best OTP in the entire Amtrak system, better even than Amtrak's trains on their own tracks?

UP seems to have changed its culture with the last change in CEO (which is quite a while ago now). They've been doing great. No argument there.
Anything run by E Hunter Harrison, on the other hand...

The hostility to passenger trains seems to come as part of a package, which includes a slipshod attitude towards maintenance and necessary upgrades, and terrorizing employees. This attitude seems to come from the top, or not, depending on the mentality in the executive office. It's obvious that the move of Hunter Harrison from CN to CP has given CP a worse attitude; I'm hoping that it will give CN a better attitude, but I've seen no evidence yet.

-----

The question for me is whether Amtrak could have realistically recovered more of the overpayments or was this the best the legal and finance team could get due to poor documentation records on Amtrak's part?

Unfortunately, it was probably the best they could do. I totally expect that the documentation was poor.

Perhaps Amtrak should put some of the funds they did recover into hiring better accountants and financial staff.

Should go back and read the IG audit report. Link to Amtrak OIG Audit reports list. I see there is a recently posted on on Acela parts contract costs, which from a very quick skim, is not a good one for Amtrak. Boardman may get some heat for not fixing all the problems in contract and project management.

Yeah, there are definitely still major problems in that area. I suspect Amtrak inherited the accounting and procurement disasters of the 1960s railroads (*all* of which were complete nightmares), and hasn't managed to fix all of it.

 

[Paulus]

Sure. I'm looking at a fully double tracked line from New York to Chicago, a fully double tracked line from Philadelphia to Cleveland, a triple-tracked line from Chicago to Aurora, double-tracked some distance past Galesburg, double track from DC to somewhere past Richmond with stretches of triple track. There's also a mostly double-tracked line from Chicago to Los Angeles (double tracked for needs of freight), a soon-to-be double-tracked line from Minneapolis to western Montana (double tracked for needs of freight).

And some of that was paid for by government, including extra tracks from DC to Richmond and the money put into Conrail.

Even a double or triple tracked line will run into issues as passenger trains are added to it.

While the speed differential argument is accurate in theory, it's overblown in current practice. On most of these routes, I'm looking at a speed differential between 50 mph nonstop *at the slowest* and 79 mph with stops, which ends up being the same speed. The intermodals do go faster than this sometimes and should arguably be sped up; I don't think there's anything magic economically about 50 mph. Look at the routes Amtrak runs on: nearly all of them are primarily fast intermodal traffic routes.

That's not the same speed. If you're going to use average passenger train speeds, you need to use average freight train speeds as well, which range from ~18-32mph. You're also ignoring the effect of higher priority which, from all that I can find, is the predominant cause of freight delays when passenger trains are added to the mix.

What, the one train a day they can't run? If they're running that close to capacity, they need to invest in more capital.

If a line is under capacity, adding one passenger train per day is not going to be a big deal. If it's over capacity, the Class I needs to invest for its own account.

The effect is greater than a single train.

 

[WoodyinNYC]

I understand the complaints about running passenger trains at 110 mph without adding a third (state-owned) track, since this would bring back the speed differential. But this isn't happening.

Opportunity costs of being able to run fewer freight trains are a thing which deserve compensation.

Running a *lot* of passenger trains per day *is* displacing a significant number of freight trains and should cost a lot more. I am under the impression that it does cost a lot more. And is quite uncommon. There's several reasons the Capitol Limited and Lake Shore Limited run back to back across Indiana, and I'd expect the cost of an 8-hour-off run to be much higher.


+++++++++++++++++++++++

Nathaniel, Thanks for explaining that factor.

So daylight service at Cleveland and Pittsburgh is doomed until a third, passenger-rail dedicated track, is installed.

The South of the Lake Project aims to get that passenger track from Chicago Union Station deep into Indiana where the Michigan trains branch off from the main line heading east. That will get us a good part of the way to Cleveland, the most expensive-per-mile segment.

Things aren't looking good for South of the Lake with the new Repub Gov of Illinois posturing against passenger rail. We'll need Illinois to chip in more than a chip to get the South of the Rail built. But maybe by the time big money is needed the Repub Gov of Michigan can get him to get real.

A new track from Chicago to Cleveland to Pittsburgh could allow a second run of the Lake Shore with decent daylight stops in Cleveland, a revived Broadway Limited, maybe a second Capitol Ltd., and of course, corridor trains Pittsburgh-Cleveland-Toledo-Chicago. Until then, probably nothing happening.

 

[neroden]

The effect is greater than a single train.

No it's not.