Is Private Rail the Future for Regional Routes?

[neroden]

We have historical evidence. If government doesn't subsidize *any* form of transportation, private railroads make a profit on passenger service. (A fellow showed me the P&L statements from some of the railroads in 1900). But as long as government is subsidizing the competition -- namely, roads -- it becomes impossible for private railroads to make a profit on passenger service.

So you have two options if you want railroads:

(1) Government pays for railroads

(2) Government stops paying for roads

Personally I'm fine with either, but I think (2) is not politically practical and hasn't been practical for 100 years, perhaps longer. The private turnpikes were bailed out and nationalized during the latter half of the 19th century; road subsidies have continuously increased since then, with the "Good Roads" program (which paved Route 66 as an early accomplishment) and then the Interstates.

My Dad remembers the time before they paved Route 66 and the other roads. His parents driving with a trailer across dirt roads from Los Angeles to San Diego. The roads were horrible. No doubt it is better for commerce to have these government-subsidized paved roads, but it's only fair to subsidize the railroads too (something which is also good for commerce).

 

[jebr]

How does government encourage private companies to deliver rail travel without spending any money on it? If we can get the same or better level of service from a private rail company as through Amtrak (same fares, same worker compensation, same equipment, same service, or better on any of those) and not have to subsidize it, I'm all ears. But I don't think that's possible by a long shot.

I don't buy the premise that using a private company to deliver a government service, subsidizing the private company in the process, is inherently better than having the government run it directly. There may be reasons that it's better to contract it out to a private company, but it would need to be justified, not just assumed that it would automatically be better.

 

[cirdan]

I don't buy the premise that using a private company to deliver a government service, subsidizing the private company in the process, is inherently better than having the government run it directly. There may be reasons that it's better to contract it out to a private company, but it would need to be justified, not just assumed that it would automatically be better.

One strong argument for private companies taking subsidies to run a public service lies in the ability to compare.

So say company A is running a train on route 1, and company B is running a train on route 2, and both routes are broadly comparable in terms of length, traffic potential, etc.

The government is interested in the service being as good as possible, but also in keeping costs down. So there is a trade-off between the two.

Now say company A comes up with some innovative way of making the service more attractive. They get down and do some smart marketing for example, or they improve catering, but all in a way that is cost neutral overall. At the same time company B says that doing that would be impossible. Now when the contracts come up for renewal, company B may well lose out and A gets both routes. So the competition situation forces both companies to be on their toes.

So effectively you have introduced competition where there wasn't any before. Not because the companies are competing for passengers (they aren't as the two routes are different) but they are competing to be seen as delivering the best value for money.

When you have a quasi monopoly, there is a tendency to rest and leave things as they are as there isn't really any direct reward for making small things better..

 

[A Voice]

There are three possible outcomes as to who pays:

1) Federal/State government pays and passes the bill onto taxpayers.

2) Private enterprise pays.

3) No one pays and the trains disappear.

I will never be convinced that #2 isn't the best option of the three. Certainly you can argue #2 isn't plausible and our "real" outcomes are #1 and #3. But if the government can encourage #2 I think we're better off. I'm not going to just say spend more of our tax money until the cows come home unless there is a future "payoff" (use your own judgment as to what qualifies as a payoff).

How can the government "encourage" option #2? Certainly you can contract-out operation of a service for which a subsidy is provided, but that still leaves the taxpayer as the one who's paying. What possible incentive could a private company have for willingly providing ("paying for") a service on which they lose money?

The "future payoff" lies in providing a public transportation service, much as done for schools, libraries, parks, and other services and facilities which create better, more livable communities but are not things which (generally) are done on a "for profit" basis.

I don't buy the premise that using a private company to deliver a government service, subsidizing the private company in the process, is inherently better than having the government run it directly. There may be reasons that it's better to contract it out to a private company, but it would need to be justified, not just assumed that it would automatically be better.

One strong argument for private companies taking subsidies to run a public service lies in the ability to compare.

So say company A is running a train on route 1, and company B is running a train on route 2, and both routes are broadly comparable in terms of length, traffic potential, etc.

The government is interested in the service being as good as possible, but also in keeping costs down. So there is a trade-off between the two.

Now say company A comes up with some innovative way of making the service more attractive. They get down and do some smart marketing for example, or they improve catering, but all in a way that is cost neutral overall. At the same time company B says that doing that would be impossible. Now when the contracts come up for renewal, company B may well lose out and A gets both routes. So the competition situation forces both companies to be on their toes.

So effectively you have introduced competition where there wasn't any before. Not because the companies are competing for passengers (they aren't as the two routes are different) but they are competing to be seen as delivering the best value for money.

When you have a quasi monopoly, there is a tendency to rest and leave things as they are as there isn't really any direct reward for making small things better..

Certainly competition can drive innovation and a quest for excellence. However, for a service which is provided on a subsidized basis is the cost structure really going to be significantly different than it is under a public-run entity such as Amtrak? As Iowa Pacific has demonstrated the hard way, an improved and upgraded service will attract more passengers but implementing such innovations is hardly "cost neutral". It requires more money, and thus a greater subsidy. Assuming the status quo, the cost for private industry to provide the same level of service as Amtrak is also likely to be similar - but the private company expects a profit margin on top of the expenses.

 

[Metra Electric Rider]

I'm not as familiar with European rail construction or Latin America, but certainly in the US the initial railway boom wasn't exactly what would be considered a totally un-subsidized process with land grants, franchises and such.

 

[dlagrua]

I completely understand all the arguments made BUT if Amtrak is the continued solution for providing passenger rail, then the problem of an ever shrinking Superliner fleet must be addressed. Look back at the last 10 years and all of the rolling stock lost to accidents. Point is that there will come a point in the next few years when insufficient equipment to meet demand comes to fruition. Will Amtrak be funded to replace Superliner equipment or will the government turn to private industry to take over some routes? I believe that it is highly likely that government will turn to the private freight railroads that already own the tracks. Its just a theory but again focus on a severe shortage of equipment and what the solution will be.

 

[jis]

I completely understand all the arguments made BUT if Amtrak is the continued solution for providing passenger rail, then the problem of an ever shrinking Superliner fleet must be addressed. Look back at the last 10 years and all of the rolling stock lost to accidents. Point is that there will come a point in the next few years when insufficient equipment to meet demand comes to fruition. Will Amtrak be funded to replace Superliner equipment or will the government turn to private industry to take over some routes? I believe that it is highly likely that government will turn to the private freight railroads that already own the tracks. Its just a theory but again focus on a severe shortage of equipment and what the solution will be.

I think your base assumption that the Superliner fleet is shrinking over the last ten years is bogus, considering the number of Superliners that were repaired with various Obama instigated funding schemes over that period.

Government cannot get out of the need for it to fund LD passenger rail by merely turning to private industry. There is no private industry that will self fund a scheme for losing money hand over fist, unless some other entity underwrites the expected losses. It is a theory based on faulty assumptions so it is a useless theory.

 

[A Voice]

Look back at the last 10 years and all of the rolling stock lost to accidents. Point is that there will come a point in the next few years when insufficient equipment to meet demand comes to fruition.

In September 2007, 180 Superliner II cars were in service. Today, February 2017, 185 Superliner Ii cars are serviceable.

In September 2007 there were 239 Superliner I cars available. Today there are 242.

The number of available singe-level long-distance cars is also expanding slightly with Viewliner II deliveries.

This doesn't exactly support your contention that the car supply is shrinking and will soon be inadequate to meet demand.

 

[west point]

This doesn't exactly support your contention that the car supply is shrinking and will soon be inadequate to meet demand.

You are looking only at the supply side. Let us look at the demand side. Some who has the figures can give us the number of revenue passenger miles for 2007 compared with the 2016. Also the population numbers for all the served areas in 2007 and 2016 ?

 

[jis]

Unless the demand side manages to get their politicians to step upto the plate nothing will change. There is not enough willingness to pay the true cost of providing service without judicious subsidy of required infrastructure in much of the demand side.

If passenger rail can be brought on the same footing as roads and air, in terms of subsidizing of infrastructure and core facilities then there is some hope. Not otherwise. And said subsidy is not going to come from the private sector, since they are no charity, but has to come from the public sector, or perhaps from some other country that is sitting on piles of Eurodollars and don;t know what to do with them. Money from public sector or other governments can be leveraged to release significant support from the private sector perhaps, but that is just another form of subsidy. So let us not kid ourselves. Absent that commitment from the government sector, we are where we are w and will remain there.

 

[jebr]

There's also not a lot of private companies that own a large stock of passenger rail equipment. I also don't think a private company would buy or refurbish a large number of coaches without a very strong and rather long contract to essentially guarantee they'll have the business for a long enough time to pay for the equipment.

Most of the contracting out is for crew only, at least that I've seen. As but one example, Metro Transit (technically the Metropolitan Council) still owns the equipment used on the Northstar line, despite the operating crew being contracted out to BNSF.

 

[A Voice]

This doesn't exactly support your contention that the car supply is shrinking and will soon be inadequate to meet demand.

You are looking only at the supply side. Let us look at the demand side. Some who has the figures can give us the number of revenue passenger miles for 2007 compared with the 2016. Also the population numbers for all the served areas in 2007 and 2016 ?

While an interesting statistic, that's not directly relevant to the topic at hand. The point I was refuting was that Amtrak's car roster is shrinking. It is not.

Nobody is claiming Amtrak has an abundance of rolling stock; The car supply has been limited since the 1970's and that's unlikely to change. Even where greater demand exists, there is still generally the same supply of equipment for about the same size train as ten tor twenty years ago. With (increasing) variations, Amtrak generally has long run long-distance trains with a "standard consist" of 3-5 (often four) coaches and 2-3 (often two) sleepers. Again, the car supply is not shrinking but stable; There is no looming shortage of cars and locomotives to operate the long-distance network as it currently exists.

 

[jis]

I would say that the NEC has seen significant infusion of equipment in the last 20 year timeframe, with the Amfleet stock remaining about the same, the electric engines (serviceable) going up slightly, and 20 additional Acela sets. This will be further augmented by the Acela II sets in the next 5 or so years.

Also, California has added significant rolling stock in the last 20 years as has the Cascade Corridor.

Situation remains pretty static in the LD sector and Midwest, pending the deployment of the new diesels and bi-levels whenever that might happen, and of course the much awaited Viewliner IIs too. The Baggage Cars were essentially one for one replacement, as will be most of the Diners (net 5 or so addition AFAICT). The Sleepers and Bag Dorms will be net add.

NEC has also added and renewed massive amount of rolling stock through the Commuter Agencies over the last two decades, as has California and to some extent Chicago.

 

[A Voice]

I would say that the NEC has seen significant infusion of equipment in the last 20 year timeframe, with the Amfleet stock remaining about the same, the electric engines (serviceable) going up slightly, and 20 additional Acela sets. This will be further augmented by the Acela II sets in the next 5 or so years.

Also, California has added significant rolling stock in the last 20 years as has the Cascade Corridor.

Situation remains pretty static in the LD sector and Midwest, pending the deployment of the new diesels and bi-levels whenever that might happen, and of course the much awaited Viewliner IIs too. The Baggage Cars were essentially one for one replacement, as will be most of the Diners (net 5 or so addition AFAICT). The Sleepers and Bag Dorms will be net add.

Interesting thing about the Viewliner II order is that the "net add" cars still just get us back closer to the numbers before most of the Heritage fleet was withdrawn (much without direct replacement) in the 90's. Amtrak had, off the of of my head, about 85 10-6 Heritage sleepers replaced by just fifty Viewliners; At least we'll get back to 75. The single-level baggage-dorms were retired years ago, replaced by Heritage sleepers, then removed altogether without replacement. So we get ten back, for two trains.

More new equipment to meet increasing demand (and offer new services, etc.) would be wonderful, but the discussion we need to be having is not what could be, what we'd like to see happen, or even what we fear could occur. The discussion that needs to happen is specifically and in detail exactly how we get Congress to pay for fleet expansion.

 

[jis]

Exactly. I completely agree with you. And as you can see above, my concern is that the more time we spend on fantasies about private industry paying for the whole shebang the less we talk about the reality of what needs to happen tog et more equipment.

 

[Ryan]

Look back at the last 10 years and all of the rolling stock lost to accidents. Point is that there will come a point in the next few years when insufficient equipment to meet demand comes to fruition.

In September 2007, 180 Superliner II cars were in service. Today, February 2017, 185 Superliner Ii cars are serviceable.

In September 2007 there were 239 Superliner I cars available. Today there are 242.

The number of available singe-level long-distance cars is also expanding slightly with Viewliner II deliveries.

This doesn't exactly support your contention that the car supply is shrinking and will soon be inadequate to meet demand.

Don't confuse Dennis' carefully constructed opinions with actual facts. He's impervious to them.

 

[cirdan]

Certainly competition can drive innovation and a quest for excellence. However, for a service which is provided on a subsidized basis is the cost structure really going to be significantly different than it is under a public-run entity such as Amtrak? As Iowa Pacific has demonstrated the hard way, an improved and upgraded service will attract more passengers but implementing such innovations is hardly "cost neutral". It requires more money, and thus a greater subsidy. Assuming the status quo, the cost for private industry to provide the same level of service as Amtrak is also likely to be similar - but the private company expects a profit margin on top of the expenses.

I understand your point and agree that a private operator needsto make a profit and this will come at the cost of increased ovrall subsidies.

So if your primary objective is to reduce susbidies, government ownership and operation is the way to go.

However, in my view susbidies are not the only factor at stake. trains do not exist in a vacuum but only really make sense if they are well used and appreciated.

We have recently seen lots of stories about people like Mica micro-meddling with Amtrak's catering. For the managers and staff having to actually run the whole thing that must be extremely annoying, and must be diverting their energies from more directly pressing issues. If you are at the mercy of somebody who doesn't like trains and the whole thing might well be shut down in 6 months time, that's not a good basis on which to build confidence or growth.

A private company would sign a contract with the government. the contract would lay down the level of subsidy but also the level of service, catering, etc etc. If the company fails to meet those criteria they would pay fines or be punished in some other way. But at least people like Mica can't come and micro manage anything because there is a legal contract for the duration and you can't come in and change a contract without both sides agreeing. So if operating contracts could be awarded for a period of say 8 tzo 12 years as in the UK, you have greater stability and are assured of a flow of future subsidies taking much of the risk out of what you're doing.

So yes, it costs more, but it may be worth it.

 

[cirdan]

Look back at the last 10 years and all of the rolling stock lost to accidents. Point is that there will come a point in the next few years when insufficient equipment to meet demand comes to fruition.

In September 2007, 180 Superliner II cars were in service. Today, February 2017, 185 Superliner Ii cars are serviceable.

In September 2007 there were 239 Superliner I cars available. Today there are 242.

The number of available singe-level long-distance cars is also expanding slightly with Viewliner II deliveries.

This doesn't exactly support your contention that the car supply is shrinking and will soon be inadequate to meet demand.

Don't confuse Dennis' carefully constructed opinions with actual facts. He's impervious to them.

According to my math, that's up 8 Superlines since 2007.

That may be a comfortable cushion but it's not really a massive improvement. All it would take would be one ot two serious crashes to wipe the fleet back to 2007 levels.

 

[neroden]

I'm not as familiar with European rail construction or Latin America, but certainly in the US the initial railway boom wasn't exactly what would be considered a totally un-subsidized process with land grants, franchises and such.

Continential European railroad development was largely government-driven as well. Same in Latin America. Also most of the rest of the world (Turkey, China, Iran, Australia, India, etc.)

The UK was the exception, with mostly private funding for their railroads, but they were enjoying an investment bubble; most of the investors lost money. They were still government-backed, with special bills in Parliament giving them compulsory land purchase abilities. (This is essential to build ANY road or railroad.) In addition, the situation of the roads in the UK at the time was awful *and* they were mostly not government subsidized.

The UK quite sensibly nationalized the railroads under the Atlee government after WWII.

The US... sigh. It's not just passenger traffic which is hurt by private ownership of the tracks; freight traffic is hurt too.

 

[jis]

All early railroad development in India was government backed private companies. So yeah, government instigated, but in general, not government funded. Government funding came later.

 

[neroden]

They would have called most of them "public private partnerships" if they happened today. There was a very different monetary environment (gold-backed and silver-backed currency), there was a substantially different legal structure from today; after looking at the way a bunch of these things were run, the "government backed private companies" of the 19th century are often best thought of as quasi-governmental agencies issuing quasi-governmental bonds, like Fannie Mae.

 

[west point]

If private passenger service is so good please explain the Iowa Pacific failures especially the Hoosier ?

 

[jis]

That is sort of like the difference between weather and climate. One single event like that doesn't really explain anything, so I suppose the question at least has rhetorical value and not much beyond that.

 

[bretton88]

Regional rail in Germany (The REs) are not profitable. The states subsidize those trains, mostly by paying the national operator (DB) to run them (some of the rural lines are run by private companies) Yet they have really nice new equipment. Only the intercity trains are profitable.

 

[dlagrua]

Amtrak was involved in a high number of accidents last year.

How many? How many cars are still sidelined as a result?

How does that compare to 2015? 2014?

Can't give you an exact number without doing a tally, but just add up what has occurred in the last 10 years and you will find a number of Amtrak cars that have been completely destroyed. Except for the recent Viewliner II order for sleepers, dining cars and baggage cars I cannot recall any new rolling stock equipment being purchased. From memory I recall an accident out West where a sand truck T-boned an Amtrak train and IIRC two Superliners were destroyed.,in the Philadelphia NEC accident three coaches were lost, and further back the Sunset crash lost cars that were not replaced. Give me some time and I will come up with a list of lost equipment that were never replaced. .