United Rail Passenger Alliance

Volume 2 Number 40 – December 06, 2005

1. “Follow the money” is the mantra of many who are trying to get to the bottom of why some people and/or companies behave in a certain way. Amtrak is no exception to this rule. Below is a brief chart of Amtrak statistics from Fiscal Year 2004, the last complete year of information posted on the Amtrak web site (It’s too early for figures from FY 2005, which just ended at the end of September, 2005). Take a look at the figures, and follow below for analysis.
   

   State	Ridership	Expenditures	Employment	Payroll	Notes
   Alabama	48,466	$11,477,849	24	$1,224,391
   Arizona	76,424	$952,736	36	$1,561,816
   Arkansas	23,814	$199,260	32	$1,802,173
   California	9,332,501	$29,649,815	3,589	$154,921,344	[1]
   Colorado	200,693	$18,998,202	94	$5,558,480
   Connecticut	1,392,393	$9,963,185	636	$34,428,828
   Delaware	753,055	$5,109,985	1,173	$53,053,041	[2]
   Florida	913,553	$13,689,114	990	$43,924,411
   Georgia	142,965	$8,402,900	83	$3,943,655
   Idaho	4,932	$51,537	3	$162,802
   Illinois	3,065,680	$56,759,840	2,016	$83,493,489
   Indiana	102,754	$19,762,401	1,036	$41,356,652	[3]
   Iowa	54,365	$180,321	13	$572,091
   Kansas	31,549	$15,639,008	26	$1,213,867
   Kentucky	6,740	$6,428,567	6	$296,870
   Louisiana	180,475	$4,256,976	363	$14,212,305
   Maine	161,469	$972,711	24	$1,186,968
   Maryland	1,779,141	$22,142,799	2,609	$126,689,216
   Massachusetts	1,962,324	$13,837,498	1,477	$41,904,152
   Michigan	604,721	$2,858,461	133	$6,434,967	[4]
   Minnesota	172,177	$4,325,291	72	$3,768,858
   Mississippi	83,526	$868,272	102	$4,592,629
   Missouri	422,063	$9,160,987	98	$4,555,647
   Montana	129,044	$57,495	57	$3,293,052
   Nebraska	40,305	$322,463	22	$1,348,301
   Nevada	86,846	$4,910,032	47	$2,525,133
   New Hampshire	103,936	$48,136	67	$1,930,316
   New Jersey	3,855,311	$37,983,222	1,687	$89,069,111
   New Mexico	103,042	Not Available	72	$4,090,778
   New York	10,385,357	$49,277,453	2,051	$96,624,973
   North Carolina	485,459	$5,440,589	176	$8,321,782
   North Dakota	89,319	$28,354	16	$691,462
   Ohio	137,729	$9,567,180	88	$4,609,915
   Oklahoma	58,095	$686,799	4	$226,320
   Oregon	691,487	$1,166,188	112	$5,157,122
   Pennsylvania	4,849,022	$122,962,838	3,061	$149,652,070	[5]
   Rhode Island	616,122	$1,541,683	345	$16,801,298
   South Carolina	176,300	$15,067,197	77	$3,641,213
   Tennessee	50,295	$8,940,978	21	$906,524
   Texas	267,568	$9,332,108	210	$11,251,208
   Utah	34,914	$120,739	51	$3,106,249
   Vermont	59,860	$155,762	Not Available
   Virginia	803,695	$50,212,471	970	$51,446,428	[6]
   Washington	1,067,768	$7,500,299	504	$23,190,224
   Washington, District of Columbia	3,744,710	$18,322,022	413	$18,137,793	[7]
   West Virginia	50,699	$3,720,585	54	$2,693,082
   Wisconsin	547,590	$7,788,648	104	$5,129,011

   Note: The Northeast Corridor is comprised of Washington, D.C.; Maryland; Delaware; Pennsylvania; New Jersey; New York; Connecticut; Rhode Island; and Massachusetts.

   1. California hosts one of Amtrak’s two telephone reservations centers
   2. Delaware hosts Amtrak’s national operations center
   3. Indiana hosts Amtrak’s Beech Grove heavy maintenance facility
   4. Amtrak owns and maintains 97 miles of mainline track in Michigan
   5. Erie, Pennsylvania received $29,464,199 from Amtrak because GE Transportation is located in Erie, which provides locomotives to Amtrak; Philadelphia is home to one of Amtrak’s two telephone reservation centers
   6. One of Amtrak’s advertising agencies is located in Virginia; over $30,000,000 was technically spent in Virginia on advertising which appeared elsewhere
   7. Washington, D.C. is Amtrak’s corporate headquarters

   Who fights the hardest for “business as usual” for Amtrak? The members of Congress from the NEC states. Any attempt to improve Amtrak, its financial performance, or even financial transparency are met by yells and screams of anguish by this coalition of protectors of the Amtrak faith. Why?

   More newspapers along the NEC write editorials in praise of the NEC and against the Amtrak national system than any other part of the country. Their attitude is, “we’ve got ours, who cares if you get yours?”.

   Much of this is due to Amtrak itself, which for years has erroneously plugged the NEC as the savior of passenger rail in the United States. If only the NEC could survive and prosper, the company has said over and over and over again, then Amtrak will be saved, the Republic will stand, and there will be peace and harmony throughout the land.

   The really sad thing is how many otherwise rational people have believed this hogwash.

   Look at the numbers for the NEC and you’ll understand that to the NEC members of Congress, Amtrak is just another giant federal jobs and pork barrel project. They desperately don’t want any of these costs shifted away from Amtrak, even to another federal entity which they must fear they can’t control as much as Amtrak. The worst nightmare of NEC politicians is that one day, these huge costs may be put where they ultimately belong – as a burden of the states, and not the federal government. The NEC politicians want the flow of money (in the disguise of Amtrak) to keep coming as long as possible, even to the ultimate detriment of every other state in the union. Their attitude? Who cares about the rest of the country when the flow of money to the NEC is at stake?

   Collective NEC state Amtrak expenditures (for all trains that serve these states, including regional and long distance trains) – $281,140,685

   Collective NEC state Amtrak employees (for all trains and services that serve these states, including regional and long distance trains, and the company headquarters in Washington, D.C.) – 13,452

   Collective NEC state Amtrak employee payroll (for all trains and services that serve these states, including regional and long distance trains, and the company headquarters in Washington, D.C.) – $626,356,482

   When you add the expenditures and payroll figures together, Amtrak poured raw cash of $907,497,167 into these eight states and the District of Columbia for Fiscal Year 2004.

   California, Florida, Illinois, Indiana, and Virginia were the next largest recipients of Amtrak largess. California has the Pacific Surfliner, San Joaquin, and Capital Corridor routes; Florida has the Hialeah maintenance facility and crew base for the Florida trains and many stations; Illinois has the Chicago hub and Midwest corridor trains; Indiana has the Beech Grove heavy maintenance facility, and Virginia has many of the corporate headquarters workers living in the northern part of the state.

   Collective California, Florida, Illinois, Indiana and Virginia Amtrak expenditures – $170,073,641

   Collective California, Florida, Illinois, Indiana and Virginia Amtrak employees – 8,601

   Collective California, Florida, Illinois, Indiana and Virginia Amtrak employee payroll – $220,376,245

   When you add the expenditures and payroll figures together, Amtrak poured raw cash of $390,449,886 into these five states for Fiscal Year 2004. This is equal to 43% of the cash poured into the NEC states.

   The five bottom states, where Amtrak has operations but spends the least amount of money are Idaho, Iowa, Kentucky, Oklahoma, and Tennessee. No significant facilities other than stations are in these states.

   Expenditures are high due to supply purchases Amtrak made from national vendors located in these states; not necessarily due directly to train operations in these states.

   Collective Idaho, Iowa, Kentucky, Oklahoma, and Tennessee Amtrak expenditures – $16,288,202

   Collective Idaho, Iowa, Kentucky, Oklahoma, and Tennessee Amtrak employees – 47

   Collective Idaho, Iowa, Kentucky, Oklahoma, and Tennessee Amtrak employee payroll – $2,164,607

   When you add the expenditures and payroll figures together, Amtrak poured raw cash of $18,452,809 into these five states for Fiscal Year 2004. This is equal to 4.7% of the cash poured into the top five states after the NEC states, and .02% of the cash poured into the NEC states.

   Here are some observations:

   • FY 2004 ridership was 25,053,564 passengers. 5,557,588,000 revenue passenger miles were generated, from 37,227,000 train miles and 11,655,692,000 seat miles. Ticket yield was 22.61 cents per revenue passenger mile. It cost $74.01 per train mile to generate $42.32 in income per train mile. One obvious conclusion from these numbers is that either fares were too low, or costs were too high. A second conclusion would be a combination of those two factors.
   • Amtrak ticket revenue for FY 2004 was $1,256,424,267 (with an average ticket price of $50.15, a very low figure). Of the revenue, 53% was generated in the NEC. Yet, Amtrak spent $907,497,167 in the NEC states, or 72% of its ticket revenue, a very negative return on investment. Note that for FY 2004, Amtrak somehow with a straight corporate face claimed that Wondertrain Acelas made a profit of $61,100,000 on revenues of only $287,300,000, and that Metroliners made a profit of $7,400,000 on revenues of only $47,400,000, while Northeast Regional and Clocker services had a loss of $61,900,000 on revenues of $356,100,000. (The alleged profit of Wondertrain Acelas and Metroliners remains suspect because these two services shared the identical track, dispatching, stations, crew bases and other support services of the Regional and Clocker services. It’s highly suspect that Amtrak assigned a high amount of losses to the Regional and Clocker services inorder to make the Wondertrain Acela and Metroliners look profitable on paper, in the best fashion of Enron and WorldCom.)
   • The systemwide average load factor for FY 2004 was 47.7%. Load factors of 65% are considered breakeven by most common carriers. National system long distance trains averaged load factors of 51% to 63%, while NEC trains averaged load factors of 36% to 49%. Most long distance trains operated over routes where there is only one train a day in each direction (there are 16 long distance routes; the Cardinal and Sunset Limited offer only tri-weekly service), while the NEC hosted an average of 55 trains per day in each direction (weekday service). The sparsely populated long distance system routes, with absolute minimal travel choices (and many of those only in the middle of the night) created a higher load factor for the company than the over-populated NEC, which offers too many travel choices and wastes valuable and scarce assets.
   • In FY 2004, Amtrak had approximately 24,841 employees when the individual state counts are totaled. Of those employees, 13,452 lived in NEC states, or 54% of the company’s workforce lived in just eight states and the District. When you add the employee count in California, Florida, Illinois, Indiana, and Virginia of 8,601 to the NEC total, you reach 22,053 employees, or 89% of the total Amtrak workforce. Amtrak likes to talk about the number of employees that changes the workforce totals from year to year. In FY 1998, Amtrak had a net gain of 787 employees, a gain of 765 in FY 1999, 528 in FY 2000, a loss of 642 in FY 2001, a loss of 1,179 in FY 2002, a loss of 492 in FY 2003, and a net gain of 27 in FY 2004.
   • Amtrak’s corporate headquarters is in Washington, D.C. This location was determined by Congress when the company was founded. Any attempts to move the company away from this highly expensive employee environment is fiercely fought by the one non-voting member of Congress who represents the District, Eleanor Holmes Norton. Non-voting Representative Norton apparently considers Amtrak more of a federal jobs program than a company which needs to show fiscal responsibility. Also, as a result of this unfortunate location, Amtrak’s headquarters is peopled by professional bureaucrats who shift from one bureaucracy to another as opportunity arises versus experienced private sector workers that understand basic business principles.
   • Both of Amtrak’s highly populated telephone reservations centers are located in high payroll and high payroll taxes states, California and Pennsylvania. While Amtrak is exempt by Congress from paying most federal, state, and local taxes, it is not exempt from any type of payroll taxes or associated costs on any level. While most common carriers and other res center-high employee count companies such as hotel chains locate their telephone reservation centers in the lowest cost locations possible, Amtrak does just the opposite.
2. What does all of this mean? Amtrak, which was chartered with a mission statement to be a national passenger railroad, instead concentrates the majority of its resources and efforts in the Northeast and just five other states, of which California and Illinois have a heavy concentration of commuter operations instead of Amtrak’s original – and still – purpose of operating long distance trains.While much of Amtrak’s circumstances have been as a result of what it inherited at various points in the past, very little effort has been made to make changes which would have a dramatic effect on the financial bottom line. Beech Grove in Indiana is an example of this. Beech Grove migrated to Amtrak from its original freight railroad owner. Even at the time three decades ago, Beech Grove was old and antiquated, and would cost a lot of money to modernize. While the Beech Grove workforce has done exemplary work on projects such as the head end power project for the Heritage fleet inherited from the private passenger operators, it has been doing this with one hand tied behind its collective back because of the constraints of an outdated facility. Little effort has been made to either get out of the car rebuilding business and outsource this work to private firms, or to put together a new, modern and efficient facility.
3. Passenger rail economics have continually been ignored by past Amtrak staff managers and previous boards of directors.As Andrew Selden has said for many years, “Amtrak gets terrible financial results (getting steadily worse, too) because of, not despite, its investment strategy and business model (both largely unchanged from the 1960s). Amtrak continues to invest the greater share of its free federal capital into short corridor markets, including the NEC, where it earns negative rates of return on investment, while it neglects its long distance markets where it earns returns in revenue and transportation output, per dollar invested, that are five to seven times greater than the corridors.
   

   “It would be instructive for anyone to do what congress never has done: divide Amtrak’s revenues in the Northeast Corridor from corridor services alone by the total federal subsidy, whether labeled ‘capital’ or anything else, incurred to produce that revenue, to ascertain a federal cost per dollar of revenue. Then do the same with the long distance markets as a group. Then do the same long division, but this time divide revenue passenger miles in the NEC by their total cost of production, and RPMs from long distance trains by their total cost of production. The results are illuminating, and explain completely why Amtrak is such a perennial loser in both financial results and transportation relevance.”

4. This all adds up to several factors working against Amtrak becoming a financially healthy company that provides more than incidental transportation in the total scheme of America’s domestic transportation network.
   • Amtrak concentrates far too much of its resources in one area of the country, which provides a regional focus, not a national focus. While many cite the philosophy of federalism and how national resources can help individual problems, this concept does not explain how Amtrak can so heavily favor one part of the country over the rest of the country, which provides heavy annual doses of free federal monies running into the billions.
   • Politics play too large of a role in Amtrak’s decision making process. Often, decisions are made to placate politicians, versus making sound business decisions.
   • Until now, Amtrak has had a deeply flawed business plan that guarantees failure. Hopefully, the current board of directors, which seems to be moving quickly away from continuing this flawed plan, will move the company back to its original mission, of providing a relevant national passenger railroad, not a set of disjointed, non-profit corridors.
5. Where does following the money lead? Apparently, not very far away from Washington, D.C., especially if you’re in Idaho, Iowa, Kentucky, Oklahoma, or Tennessee. If you’re snuggled up against Washington, D.C. like an NEC state, you’re OK. If you’re part of the rest of America, in Amtrak’s book you must not be very important.