Amtrak: Operating Deficit, Government Operation, etc.

This month’s Trains Magazine has a good article on the quest for low O/R.

But yeah, Amtrak is making money - until states are able to reasonably find a third party to operate their Regionals. Beware.

BandA wrote:I think there is an assumption around here that inland route will resume at some point, requiring WOR-SPG double-track. Commuter rail may close the gaps on the shore line creating "friendly competition" for Amtrak, but probably actually increasing Amtrak demand. Coast Guard will possibly allow more slots for trains on the movable bridges? Are all the Coast Guard restrictions east of the New-Haven - Springfield line?

Inland Route is a state-sponsored service in its current NNEIRI study incarnation. What's being proposed is:

1) repurposing the Shuttles to run thru to Boston with a healthy-sized daily schedule...possibly with some CDOT-paid NHV-NYP extensions.

2) timed transfers at SPG between Inland Shuttles <==> new Boston-Montreal train and Inland Shuttles <==> Montrealer...giving both BOS/WOR and WSH/NYP/NHV/HFD a de facto two round-trips to Montreal each day between single round-trip directs on each routing and cross-platform transfers on each round-trip of the other routing.

3) (optional) a New Haven-St. Albans (or MTL) Vermonter short-turn strictly for the New England market. Wholly dependent on VTrans funding, and possibly a later-years tack-on.



What isn't being proposed right this second is wholesale extensions of Springfield NE Regionals to Boston. Part of that is just the way PRIAA puts more burden on the states, so CT/MA/VT have to spin a tight narrative in the NNEIRI study to make their play. And part of that is that it's up to the whims of Amtrak how much extra Regional service they want to send up the Springfield Line, and that hook is a lot more compelling if NNEIRI's Springfield Hub scheme really takes root. Hence, the state-level partnership is all about beefing up the fundamentals first. And yes, bridge openings and state-of-repair NYP-NHV do matter somewhat...although more for keeping the conga line of AMTK and MNRR traffic humming along delay-few with less necessary schedule padding rather than creating more absolute new slots out of thin air. Of the 5 New Haven Line bridges, Cos Cob does 50% of all cumulative bridge openings, and Walk Bridge 25%...with Devon, Saga, and nearly-inert Peck each being a relative drop-in-bucket in comparison to the Big Two. You've also got the funded Portal Bridge fixed-span replacement and upcoming funding decision on Pelham Bay fixed-span replacement bookending NYP. A lot of the potential for sending more full-length Regionals to SPG comes from tightening the bolts in and out of NYP incrementally. Since the Shuttle presence will already be pretty robust between NHV-BOS, if more slots to/from the south come available it's a seamless move to just swap a full-length Regional into a Shuttle slot. Functionally, it's still going to be the states' responsibility to pay for that leg any which way so they get what they want tending to service in their own backyards first.

And undoubtedly CSX will do a Pan Am and expect costly upgrades to their Springfield - Worcester main before allowing more than a token Inland Route service.

Costly upgrades would be necessary even if CSX donated the right of way to the state, because the curvy old line passes thru some extremely hilly turf.

In 2016, Amtrak bragged it "covered 94 percent of its operating costs with ticket sales and other revenues, up from 92 percent the year before".

https://media.amtrak.com/2016/11/amtrak ... l-results/" onclick="window.open(this.href);return false;

So by that measure, it can see the finish line.

Now one of the reasons of the jump recently could be of PRIIA and they forced the state supported routes onto the states. If they really wanted to cut that percentage they could try to blackmail the states into covering the LD routes or at least part of them like they did the state supported routes. I don't believe one of the state supported routes were actually cut as a result of PRIIA. You know which route I say could be the test pilot to blackmail the states to see if they can get off the federal "payroll" and onto the states. Maybe that brings it from 94% to 96% (takes one of the biggest if not the biggest mouth to feed off the payroll).

jonnhrr wrote:And undoubtedly CSX will do a Pan Am and expect costly upgrades to their Springfield - Worcester main before allowing more than a token Inland Route service.

No they won't, because MassDOT and CSX have been mapping out the terms of engagement on Inland Route service on a continuum for 10 years as another moving part in the grand package of deals the two sides struck for ops relocations, line sales, publicly-financed yard rebuilds and branchline upgrades, and cultivation of upgraded shortline partners at the interchanges. All of that is stuff that feeds CSX's main profit centers and jibes with their major cost-cutting initiatives. This isn't the dark ages of "<bleep> you, we're Conrail!" in Massachusetts. Terms of engagement for Inland slots are already hashed-out and reflected in the base costs for the NNEIRI study with the track class uprates, contiguous double-tracking, signal upgrades, and crossover installs specced for the B&A. In return, CSX will get some additional "pimp my yard" love at West Springfield with some presently unfunded MassHighway line items being advanced for truck clearance improvements and more direct driveway access to that yard. They will get to pad their margins vicariously through more of their shortline partners with more biz development and 286K weight uprate grants planned for NECR, Mass Central, and Pioneer Valley at their CSX interchanges. And they will keep two steps ahead of Norfolk Southern's master plan to buy out Pan Am Southern and upgrade speeds on the Patriot Corridor to cut its running time deficit vs. CSX. The increase in freight MAS from 40 MPH to 60 MPH between Springfield-Worcester resulting from these passenger upgrades will serendipitously coincide with the years NS is unleashing its self-funded moneybomb to get the Pat Corridor up to a uniform Class 3.

The only thing yet to be determined is what CSX's valuation for the B&A property is going to be, and how quickly they try to shotgun a sale of the real estate into the Inland deal as a requirement so they have an excuse to slash back more of their property tax burden in the state. Depending on how much haste E.H.H. wants to move at chainsawing any line ownership that can be flipped to cheaper trackage rights, that might not even cost as much as the previous Jacksonville regime was willing to hold out for. But other than that, CSX has gotten so much from the MassDOT gravy train that they almost have more to lose than the state by about-facing and not playing nice. NS is breathing down their neck up I-91; would they rather get those West Springfield yard improvements funded sooner than later? Or get obstinate and see NS's wishlist of grant awards to itself and shortline partners start getting prioritized over CSX's? Of course not...they've made out like kings from this 10-year business bromance with MassDOT. No way they see any tactical advantage in shutting off that gravy train by creating obstinate drama when it's taken them this far and simple follow-through on straightforward remainders is all it takes to make Boston Div. a more or less idealized cog efficiency-wise. They are fully rational actors about that kind of stuff, even with E.H.H. creating a fair amount of top-down turmoil in the organization.

Philly Amtrak Fan wrote:If they really wanted to cut that percentage they could try to blackmail the states into covering the LD routes or at least part of them like they did the state supported routes. I don't believe one of the state supported routes were actually cut as a result of PRIIA. You know which route I say could be the test pilot to blackmail the states to see if they can get off the federal "payroll" and onto the states

The long-distance trains actually generally require only a moderate level of federal subsidy; Far more money could be "saved" by mandating the northeastern states pay the full cost of the Northeast Corridor, which has costs several times that of the national system (remember that Acela's fictional profit is only "above the rail"). Not that I'm suggesting such a mistaken concept, of course.

The idea of the northeast states getting a free ride, via federal funding, while states in the remainder of the nation have to pay the full cost of all their trains is a counterproductive, indefensible concept and a non-starter. Regardless, the states do not pay the full costs for their regional trains; Amtrak continues to bear some expenses for these services, which is fair and reasonable; A revival of a modern 403(b) program could potentially be fruitful for expanded state and regional services.

I wholly agree with Mr. Grove's thoughts set forth immediately. While yes, the Corridor TRAINS put more into the "cookie jar" than they take out, considering it's capital costs and whatever attempts are made to catch up with 100 years of deferred maintenance, it is a money pit. No question whatever, the LD'S roll on providing some marginal public benefit but ensure that Federal level funding will flow to this regional operation.

Sure those in California with its large regional System must wonder why do we pay for ours when the Northeast has theirs paid for by the Feddytrough?

However unfair, it is simply political clout.

OrangeGrove wrote: The idea of the northeast states getting a free ride, via federal funding, while states in the remainder of the nation have to pay the full cost of all their trains is a counterproductive, indefensible concept and a non-starter.

It's not that indefensible. The NEC is critical to the economy of the entire Northeast region and as a result, the country as whole. If the NEC disappeared overnight, economic chaos would be unleashed. If all the long distance routes disappeared overnight, the impact would be negligible and probably unnoticed.

Not that I like the idea of dumping LD routes on the states but without the NEC, Amtrak would look a lot like the decaying corpse that is VIA rail

Gilbert B Norman wrote:Sure those in California with its large regional System must wonder why do we pay for ours when the Northeast has theirs paid for by the Feddytrough?

I think this is an oversimplification of the situation. For example, Metro-North territory on the NEC is paid for and maintained by the States of New York and Connecticut which must compete with the rest of the country for federal capital and operating funding from the FTA. Likewise under the new 209 formula Pennsylvania must pay for a greater share of the Keystone service than they did previously which includes calculations for the differences in motive power. California benefits greatly from having private sector partners who do not have the same funding requirements as Amtrak.

In many ways as a government entity Amtrak is disadvantaged by its own dependence on state partners and the expectation that it will provide maximum service levels to commuter rail agencies. The consequence of this is that they are really not in any position whatsoever to monetize their assets and real estate by creating new freight service options or enhancing existing freight service.

Returning to the original post ... This is what happens if you change the assumptions to account for a 30% increase in passenger carrying capacity:

FY 16 Acela Revenues: $593,720,009
Average Revenue Per Trainset (20 Trainsets): $29,686,000
Number of New Avelia Liberty Trainsets: 28
Projected Revenue (28 Trainsets @ $29,686,000 + ($29,686,000 x 30%)): $38,591,800
Projected Total Acela Revenues (w/Avelia Liberty Trainsets): $1,080,570,400
Projected Net Increase in Revenues: $486,850,391

So the range in new revenues appears to be somewhere between $237M and $487M. The upper number may still be a little low due to potential changes to the Northeast Regionals but I think at this point the estimate is closing in on the "real" figure. Worth noting that all of these figures are in 2016 dollars which would imply the following in 2022 assuming annual inflation at 2% from 2017 onwards:

2016 to 2017 CPI: $242,791,020 - $497,721,180
2017 to 2022 @ 2%: $268,060,904 - $549,524,400

The net improvement in operating income is impossible to calculate because Amtrak doesn't break out operating expenses by service (nor should they for trade reasons) and it is unclear what the debt service on the new trainsets will be. Reading through the Five Year Service Line Plans I thought it was interesting that Amtrak right now is not projecting a major increase in Acela revenues (probably just a little too far out at the moment) but they do project an increase of $40M/year in 2021 for debt service payments which coincides with initial deliveries of the new trainsets. Also noteworthy they are not projecting a decrease in Northeast Regional revenues (perhaps the more significant projection of the two). The annual debt service increase in 2021 gives us a ballpark figure to work with (to an extent) to begin to consider changes to net operating income.

Estimated Impact on Net Operating Income (-$40M Adjustment for Debt Service, in 2022 $): $228,060,904 - $509,524,400
Estimated Operating (Deficit) in 2022 $ (@ $227M in 2016 $): ($256,222,740)
Estimated Operating (Deficit)/Surplus in 2022 $: ($28,161,836) - $253,301,660

So even with the most conservative projections (which to me are completely unreasonable) we are still seeing Amtrak with an operating deficit that is now down to less than $30M/year (2022 $) from $227M/year in 2016 $. Assuming a backwards inflation calculation of 2%/year all the way to 2016 this would imply a $25M/year operating deficit ($25,006,904) in 2016 $ which equates to an 89% reduction in operating deficit.

I completely understand and respect the opinions of those who feel that the change does not reflect "profitability". That to me is not why this discussion is important. Amtrak's operating deficit is a source of serious political weakness for them and is treated very differently from capital requests by Congress. The ability to eliminate this operating deficit will actually significantly increase Amtrak's leverage in Congress for capital improvements because they will be able to demonstrate that new or additional service resulting from capital improvements will not necessarily imply an increase to annual operating subsidies as well. This was already a "given" for the Acela but in the future because of added financial flexibility there may be some room around the margins for Amtrak to do other things as well.

It may be Amtrak cannot project much revenue growth due to capacity problems . Until Ac-2s add more capacity to the most desired times that mostly sell out can Amtrak expect much more revenue ?

It would appear that the answer to that is a definite, "No". Which seems reasonable enough to me. I was a little surprised that they didn't show a revenue increase in 2021 as the new Acela trainsets were coming online but given that full final delivery really isn't expected until early 2022 that isn't too surprising.

For those who have made points about capital costs I thought this line from the FY 18 Grant and Legislative Request Debt Overview ("Next Generation High Speed Trainsets" section) was quite telling:

As part of a $2.45 billion loan from the FRA RRIF program, Amtrak will invest in significant station improvements at Washington Union Station and Moynihan Station in New York, as well as safety, track capacity, and ride quality improvements to the NEC. Amtrak is funding this project on its own through this loan, which it will repay through growth in NEC revenues.

I think we've known all along that Amtrak was intent on doing exactly this but it is still a significant capital cost (which includes some improvements to support and station facilities) that they are going to bear all on their own.

More seats on the trains on the corridor doesn’t necessarily mean more passengers in the seats.
Amtrak has 20 Acela train sets today, assuming one train set at each end of the corridor for standby and one train set in maintenance, that leaves 17 train sets in use on the corridor every day. With 28 train sets, even if we double to two the train sets undergoing maintenance, that’ll leave 24 train sets in use on the corridor every day. That’s 7 more Acela train sets, potentially 14 more Acela trains every day if each one made a round trip. Amtrak could retire every Amfleet train set that doesn’t leave the corridor and not displace any passengers. Amfleets trains in service “on the NEC” heading towards Springfield, Harrisburg, and Virginia’s two lines will be all they’ll need. Empire Service Line and Downeaster trains would also be using Amfleets.
Taking Amfleets away from just NEC trains means there will be more available to expand services to lines that branch off the NEC. And that’s when Amtrak should see increase revenues. But that will depend upon the states authorizing more trains they will be willing to subsidize.