According to Fred Frailey in TRAINS magazine,

Union Pacific has told Amtrak that changing the Sunset Limited‘s frequency from tri-weekly to daily will cost the government-supported company about $750 million in capital improvements.

That’s almost as much as Phoenix spent building an entirely new 20-mile “light rail” system — including two large bridges and a complete modern maintenance facility and fifty computer-controlled trolley cars. We eagerly await U.P.’s wish-list. One wonders, once you spend some millions to restore a missing connection at San Antonio to eliminate back-up moves, add a couple formerly removed station tracks at places like Tucson, add a bridge here and some signals there … how do you come up with three-quarters of a billion dollars to run one train once a day?

Meanwhile, Berkshire’s BNSF issued a two-part $750 million bond, $250 million for a 10-year period at 3.616% and a 30-year $500 million part at 5.074%, both paying a premium over Treasury bonds.

In his annual letter to shareholders, Berkshire chief Warren Buffett wrote: “Overall, we expect this regulated sector to deliver significantly increased earnings over time, albeit at the cost of our investing many tens — yes, tens — of billions of dollars of incremental equity capital…” So the same dollar figure that U.P. wants for one passenger train, it seems, is the same as BNSF’s first installment in sprucing up its entire system. Does one of those numbers seem a bit off?

Next, to Ohio, where Republican gubernatorial candidate John Kasich has “vowed to kill the 3C plan if elected.” This train, which would connect Cincinnati, Dayton, Columbus and Cleveland, is in line for a $25 million for a preliminary study. Kasich and his advisors apparently are fretting over the $400 million starting price tag, and continuing state outlays. One does wonder, where is one penny of income from Ohio’s libraries? From Ohio’s fire departments? From Ohio’s superhighways? Oh, you say they result in increased education, decreased property losses, and increased economic and social activity, right? So why do we not frame trains in the same way? What is the cost of a trip not taken…

Yet we rail advocates find ourselves in a nasty predicament. Every time good work gets done, as in Ohio, toward a new train… or in Boise… or anywhere across the country where cities and states who want better transportation, and the social and economic benefits that stem from trains… Every time new Amtrak service is proposed, the price is so high and the service to be so slim that nothing ever happens. A year ago we looked at Amtrak’s Ohio report, one of three wrong-think reports issued around that time. We saw how “Amtrak really doesn’t want to be in the passenger railroad business” and, although there were some hopeful signs in subsequent months, we seem still stuck in the same doldrums as for the past 40 years.

One correspondent writes,

Amtrak’s complaints are so ingrained in politicians’ and voters’ minds that when some good public relations is needed, the cupboard is not only bare, but snarling back at those seeking relief.

Another writes that Amtrak,

has spent most of the last forty years not only saying, but proving, that passenger rail is a fiscal sinkhole. Needless to say the green eye-shade brigade in state capitals that must produce a balanced state budget every year takes on massive new obligations only with trepidation.

Add to this carriers like Union Pacific pulling massive numbers, some might think out of a hat, but perhaps out of reasonable expectations based on past dismal performance of a government-run passenger railroad, and here we sit, stalled again.

Perhaps the most excellent description of the conundrum is Steve Forbes’ recent commentary on high-speed rail. Forbes, logically unconvinced by what trains might be able to do, looks at projects like the Acela so-called high speed train which have failed to deliver on practically any of their promises, and at the cost of billions including a hidden billion-dollar loan from Canada… and rightly asks, Where is the benefit? Forbes doesn’t see any. And without benefit, what is the point of pouring billions more dollars into it? At some point, there have to be results.  Call it return on investment.

To succeed in business, to succeed in the real world, you have to become indispensable. Apple has done that. Google has done that. Some might say Amtrak seems to have concentrated on becoming irrelevant.

Perhaps the renaissance of passenger trains will have to occur from the bottom up. USA Today reports that Denver has broken ground for its commuter train to the International Airport that replaced Stapleton Field. This is to be the long-anticipated first of four commuter lines radiating from Union Station which will complement Denver’s light-rail system.  The article continues,

Denver joins a growing list of U.S. airports that are trying to promote public rail transportation. Others that will be connected directly via rail in the coming years include Dallas Love Field, Salt Lake City, Phoenix, Miami, Dallas/Fort Worth, Oakland, Washington Dulles and Los Angeles.

An AP newswire story tells how even Arizona is planning on a commuter and regional train system:

“It will not be possible to accommodate growth and avoid traffic congestion by improving roadways alone, so passenger rail should become a key component of the Sun Corridor transportation system,” the draft plan stated, referring to a planning area that stretches from Prescott on the north to Nogales on the south and includes both Phoenix and Tucson.

Phoenix is seeing results with its Metro trains, with monthly averages up to 44,000 daily riders, far above the projected 26,500, and continuing year-over-year increases.  With few exceptions, every city that has built a rail system in the past decades has met or exceeded expectations, and brought new development and a renewed sense of place and community pride. The cost has shown its benefit. Why should there be any different standard for intercity trains?

Finally, as promised, this on first-class accomodations.

AMTRAK SLEEPING CARS ARE THE BEST VALUE AMTRAK OWNS

Commentary by Andrew C. Selden and Randy Schlotthauer, URPA

Note: This item was on (Congressman) Eric Cantor’s list of budget cuts he wants people to vote on. Only 48% of respondents to the poll favored the idea, but on Thursday, July 22, Mr. Cantor and some of his followers appeared on the floor of the U.S. House to extol the desirability of this cut. An amendment to a pending bill was introduced to implement the idea, but was rejected 234-179. We asked Mr. Selden and Mr. Schlotthauer to comment on the reasons this idea was not a good one. – Russ Jackson

Eric Cantor: “Prohibit ‘First-Class’ Subsidies on Amtrak; Potential savings of $1.2 billion over ten years. While only 16 percent of Amtrak long-distance passengers opt for “sleeper class” travel, as opposed to coach class, federal taxpayers provide substantial extra subsidies for this first class travel. Passengers in long-distance first class travel are provided a sleeping room, many with a private toilet and shower, turn-down service, and complimentary entertainment and pre-paid food. Yet, Amtrak loses more than twice as much per passenger (an average of $396) for first class service as compared to coach class service. These losses are made up by taxpayers. This proposal would eliminate subsidies for first-class service and require Amtrak to provide any first class service at cost.”

Andrew C. Selden: The issue is the corrupt Amtrak RPS-based internal MIS/cost accounting system. Large subsidies to western sleepers are an artifact, if not an intentional distortion, caused by the system, not the business activity. We can show (and have often done so) that these sleepers are substantial net contributors of free cash flow to Amtrak, failing only to cover arbitrarily allocated shares of other system, not operating, costs, only some of which are even indirectly related to the operation of these services.

The Superliner sleeping car, measured by business economic factors like return on capital investment, load factor, revenue per dollar invested, etc., is the best thing Amtrak owns. These members of Congress should look closely at actual sleeping car fares out west, where many passengers are paying thousands of dollars for a single trip. There is NO POSSIBILITY that these fares are losing money on a direct cost basis. The catch is always to audit deeply what costs Amtrak is charging against the sleeping car revenues to determine that a loss exists in the first place. That is where the members of Congress were being conned.

The collateral issue is the subsidy that these sleepers provide to the dining cars. FIRST, diners are indispensable to all travelers on LD trains, where the AVERAGE trip runs 15-20 hours in duration (varying by route). These people therefore (including every coach passenger) are on board over two to four meal periods (and of course some for even more). Lose the diner, and you’ll lose ALL the passengers, not just the “fat cat” families and retirees in the sleepers. The sleeper fare transfer to the diner is what keeps the diner on at all—by including meals in the sleeper fare, Amtrak guarantees a predictable base of revenue to the diner. Take away the sleepers and that fare transfer, and with the loss of sleeping car passengers (most of whom wouldn’t be caught dead making a two or three day trip in coach) and their fare transfers to the diner, the diner would have to charge obscene prices that would drive out the remaining coach passengers, and without meals over two to three day trips, no one will ride and the trains would be empty.

If Congress wants to look for subsidies to first class riders, have them divide the Acela first class revenue by its proportionate share of the annual two-thirds of a billion dollars of subsidy “invested” each year into the NEC. Those numbers are real and staggering, even though Amtrak never reports them as such.

Randy Schlotthauer: Were it not for the frightening lack of concern by our government about the concerns of citizens, not to mention their misplacing of the Constitution (I have several copies of my own that I would be happy to donate to them), this entire debate over “first class” subsidies would be so tiresome that I would not be drawn to the laptop to respond to it. Those of us that have been involved with Amtrak since THE BEGINNING (that would be before many supporters and opponents were born) have seen this windmill tilted at every year. I remember when we were desperately phoning and writing politicians, interest groups, and anybody else that would listen over a $246M TOTAL SUBSIDY that promised that the pin would be pulled on October 1, (fill in the year). This was in the good old days when there were just two types of cars: Amfleet and everything else, which wasn’t much. Though few of us at the time would have granted it, Amtrak President Graham Claytor managed to “modernize” the fleet with new equipment which in retrospect probably saved the LD trains, which we were convinced he was conspiring with THEM to eliminate.

Though designed with the promise and physical capability to deliver a high quality LD experience, through active sabotage by some crew members and a benign neglect (read: stupidity) on the part of management. None of the LD trains ever made full use of the features designed into the cars, and did not repair equipment that was damaged or stolen by passengers, crew, and the denizens of 16th St, 8th Street, and other “maintenance facilities”. As a result, even the best attempts by individual route managers to ended up flowering and then all too soon downgraded due to budget cuts that often were the disguised jealousies of other route managers. Despite the efforts of the original RailPAC-URPA group to introduce market economic laws and theories to Amtrak and it’s 485 owners, every year it was a battle for survival, with Amtrak management’s RPS accounting system proving that they could be profitable if not for those nasty LD trains.

Never was enough capacity provided to even approach break even, which was all any serious advocate discussed. If every seat in every car on every train on every day were filled at the highest tariff fare, there would still be a loss. Even Herb Kelleher (Southwest Airlines) couldn’t do anything with one triweekly plane to its largest potential markets. He recognized that planes (and trains too!) make money only if they are moving and filled with people. In fact Herb was one of Amtrak’s greatest opponents, because he knew what a well run passenger railroad could do.

So today we are discussing the proposed elimination of the First Class Subsidy, in order to “save” the railroad. First of all, the last trip I took in a Deluxe Bedroom on #3 and #4 could not be called luxury by any stretch of the imagination. Indeed, Denny’s offers superior food, service, and even entertainment (if you are at the right one at the right time of night). When you kill the sleepers you kill the diner and lounge. When you kill those, you are the Southern Pacific in the 1960′s, although this time there are not enough people that buy the line that America NEEDS Amtrak. I can build you a great case for a quality passenger rail service, including multiple classes of service. I can even build you a case of how you make it break even in 10 years. RailPAC-URPA’s Dr. Adrian Herzog did the math a long time ago, and it still works. What I cannot do is build a case to justify an Amtrak First Class Subsidy for LD trains. There is corporate culture at Amtrak that would fight any attempts to a really make things work.

1. Amtrak is three for three. The third report (and, there are more to come) about the start of new service is just like the two previous reports: Amtrak really doesn’t want to be in the passenger railroad business.

   The third report is a feasibility report on proposed Amtrak service for the 3-C Corridor, which encompasses Cleveland, Columbus, and Cincinnati by way of Dayton, Ohio. The two prior reports concerned the restoration of service on the Sunset Limited route east of New Orleans, and restoration of the Pioneer route from Denver northwest to Seattle.

   It’s important to note that of the three reports, this report has the best detail and lays out its arguments for implementation better than the other two reports.

   Let’s start with some facts and numbers as outlined in the report.

   Length of route	255 miles
   Number of freight host railroads	3
   Proposed scheduled running time, end to end	6 hours, 30 minutes
   Capital costs for infrastructure improvements	$236,200,000
   Capital costs for track upgrading	$51,400,000
   Capital costs for mechanical facilities	$55,000,000
   Capital costs for equipment procurement	$175,000,000 or $4,380,000 per piece average
   Estimated annual ridership (passengers)	478,000
   Estimated annual revenue	$12,200,000
   Estimated annual operating expense	$29,200,000
   Estimated annual operating subsidy	$17,000,000

2. Let’s start with annual revenue. Extrapolating from Amtrak’s numbers, the average fare proposed is $25.52 per passenger, or about 11 to 12 cents per revenue passenger mile.

   Why Amtrak has proposed such a low number (Even though, as said in this space many times before, conservative estimates for income and high estimate for expenses are best.) is another Amtrak mystery. Amtrak’s average revenue passenger mile income for its 26 corridor routes is 20.65 cents per mile; the figure Amtrak proposes mirrors what is earned on the Kansas City-St. Louis corridor, which has an annual load factor of only 37.4%.

   A bump to 14 or 15 cents a revenue passenger mile, which still puts the corridor below other routes such as the Pere Marquette, Carolinian, Wolverine, or even the Illinois Zephyr, would generate a more realistic revenue figure of $15,000,000 or more.

   Look at the consist; probably 300 seats per consist of five coaches and one food service car which also has business class seating. Using the number above, Amtrak is estimating just over 1,300 passengers per day total, breaking down to 163 passengers per each of eight departures a day. While that is a robust 54% load factor, that still falls 10% or more under most other Midwest route load factors.

   Amtrak has estimated operating costs of $80,000 a day for the eight departures. Train mile costs to the host railroads will run an estimated $10,000 a day, which leave another $70,000 for maintenance, crew costs (less than $11,000 a day), reservations, station costs, and corporate overhead. At these rates, Ohio could probably do better with a non-Amtrak operator than the high costs of Amtrak operations.

   As with the other two reports, Amtrak says it has no equipment available in its pool of stored and wrecked equipment to get these trains on the road, and – again – trots out the line all new equipment must be purchased with years-long lead time.

   Not true. Amtrak says it needs five trainsets of five coaches, one food service/business class car, one locomotive, and one non-powered control unit for push-pull operations. All of this, says Amtrak, will cost an astounding $175,000,000, or an average of $4,380,000 per car/locomotive/unit.

   In its current stored/wrecked inventory, Amtrak has 55 stored Amfleet I coaches and food service cars, and 24 wrecked cars which can be restored. That’s a total of 79 pieces of equipment, for an equipment pool need of 30 passenger cars. Amtrak also has 30 P40 locomotives in storage, and nine F40 locomotives stashed away, waiting for use. Certainly, somewhere in 39 pieces of equipment, five locomotives and five NPCUs can be found without having to buy new equipment. Even at upgrading/rehab prices of $1,000,000 per car or locomotive for 40 pieces of equipment, that’s miles and miles ahead of the $175,000,000 Amtrak says it needs for all new equipment, or, a savings of $135,000,000.

   The capital costs for maintenance facilities is a little steep, too. The majority of the fleet maintenance will be done in Cleveland, with turn-maintenance being performed in Cincinnati and Columbus. Fifty-five million dollars for one enclosed shop facility and one wash facility, plus a few other goodies for the turn facilities in the two other cities is high; probably by at least 40%, unless the ground these facilities are being put on is tragically expensive.

   And then, there is training, which seems to be Amtrak’s favorite category to overcharge anybody who will pay the price. Estimated road crew training for this route is an astounding $5,900,000. As with the Pioneer route similar figure, it’s impossible to imagine how training road crews for a 255 mile route could even approach even half of this figure. Amtrak is doing nothing but padding its pocket at the expense of Ohio.

3. Amtrak makes a good case for the chosen route, and it’s apparent the Ohio Rail Development Commission laid down some positive guidelines for this route study. The proposed route is one of three, and it is the shortest, most direct route from Cleveland to Cincinnati via Berea, Columbus, Dayton, and Middletown.

   After departure from the existing Cleveland Amtrak Lakefront station, every inch of the route is over freight tracks which do not currently host passenger trains. Some track has speed restrictions of 15 to 25 miles per hour, and goes through a lot of congested city areas.

   But, the route has a nearby population of roughly 6,900,000 residents, with a large collection of colleges and universities. The cost of improving the freight infrastructure is significant, and the cost of the coming Positive Train Control must be considered in any proposal. As with the Pioneer study, most likely the early infrastructure numbers in this report represent more of a “wish list” between Amtrak, the three host railroads, and the Ohio Rail Development Commission. As with all wish lists, when reality sets in, costs usually go down, not up.

   The Cleveland Lakefront station is the only current station considered for use; it’s been so long since this Ohio route area has had passenger service, no suitable stations exist for recreating this route. When you are talking about stations, you are also talking about train platforms, parking, and waiting areas. Wisely, this report and Ohio assume if a local city wants a station stop, it will pay for the construction of a station stop, as well as on-going maintenance of the station.

   One bothersome aspect of the report is the proposed station in Cincinnati. Currently, Amtrak’s Cardinal stops in Cincinnati in the dead of night for three roundtrips a week. The Cardinal uses a small part of Cincinnati’s magnificent and huge art deco station. For the 3-C service, a proposal has been made another station be created out of a riverside restaurant instead of the train going a longer distance into the Cincinnati terminal complex.

   The assumption is made in the report that since the Cardinal is a nocturnal train for Cincinnati, little cross business will be created. The report seems to forget passenger train riders are an intrepid lot, and when a connection can be found – no matter how inconvenient – some riders will use it.

   The argument about whether or not to use the existing station and create a second station will have to be settled by those in Ohio who will eventually be writing the check for this intrastate service. However, for all of the money which will be put into infrastructure for this route, exploring the costs of extending the route – if reasonable – into the existing Cincinnati station is a worthy goal. In the end, connectivity is everything, and optimists can hope that one day more than just a nocturnal Cardinal will be calling at Cincinnati.

   An interesting note in the report, talking about the Cleveland station and proposed maintenance facilities there says, “Therefore, this study recommends the construction of a shop and repair facility in Cleveland to perform all maintenance, repairs, washing, fueling and sanding, as well as layover and turnaround servicing, for the entire fleet of 3-C cars and locomotives. This should include the capability in future years to perform heavy repairs as the equipment ages. It should be noted this facility is planned, not only for the maintenance needs of the initial 3-C Corridor, but also for the future Cleveland Hub System with passenger train service proposed to be initiated rom Cleveland to Pittsburgh, Buffalo, Detroit, and other points.”

4. This report is an expensive start for Ohio, but, costs aside, it provide a rational starting point. It will be up to the Ohio Rail Development Commission to sit down with Amtrak eye to eye and go over every costly step and find out the real costs and real revenues. It’s interesting one news report said this report represents $400,000,000 more in start-up costs than Ohio had anticipated. Ohio needs to follow the leads of California and North Carolina when negotiating with Amtrak, and figure out how much is bluff and how much is fact. California learned years ago that if it left route advertising up to Amtrak, the state’s annual share of operating costs for its corridors would sky rocket. But, if California relies on its own resources, it can influence the amount of ridership, and, conversely influence the amount of subsidy needed for some trains. Ohio needs to take note.
5. Every day’s e-mail to This Week at Amtrak is a never-ending parade of thoughts and ideas. Here’s the latest.
   

   Hello once again URPA,

   I’m glad that others share my view on letting other companies operate long-distance routes in this country. Even though a lot of people in the rail community are (deservedly) excited about the aspect of high speed rail coming to their states, they should also remember that competition also applies to the long-distance trains as well, and that pressure needs to be kept on Amtrak. After reading some of the more recent TWA articles, it’s obvious to me that certain people in Amtrak’s management need a wake-up call (whether it’s by losing out on the majority of the HSR corridors or by watching some of its long-distance routes return to the freight railroads, something big needs to happen to shake them up). After all, the poorly handled Sunset Limited report, a failure to drastically upgrade overnight fleet, and demanding states to pay for long-distance routes have all happened on their watch.

   Division B, Title II, Section 214 of the Passenger Rail Investment and Improvement Act of 2008 says:

   (a) In General – Within 1 year after the date of enactment of the Passenger Rail Investment and Improvement Act of 2008, the Federal Railroad Administration shall complete a rulemaking proceeding to develop a pilot program that –

   `(1) permits a rail carrier or rail carriers that own infrastructure over which Amtrak operates a passenger rail service route described in subparagraph (B), (C), or (D) of section 24102(5) or in section 24702 to petition the Administration to be considered as a passenger rail service provider over that route in lieu of Amtrak for a period not to exceed 5 years after the date of enactment of the Passenger Rail Investment and Improvement Act of 2008.

   Now, with all the talk about whether Amtrak is really disinterested in operating long-distance trains in the long-term, why don’t some of the friendlier host railroads contemplate bidding for some of the overnight routes? Pullman may be gone, but the hosts could talk to a manufacturer like the revived Colorado Rail Car company about acquiring some real dining cars and sleepers.

   At last year’s Railway Age conference, railroad author Frank Wilner advocated returning intercity passenger trains to the freight companies because he thought that “a sound business model” would win over anti-Amtrak politicians in Congress (Source: January 2009 Railfan & Railroads). While it sounds tempting, I’m not sure that all passenger routes can be returned to the host railroads. Instead, I propose that the hosts talk to the likes of Herzog, First Group America, and some of the foreign bidders for HSR and get them to run the trains. I would definitely like to see routes like the Crescent and Silver Star be supplemented with daytime counterparts so I don’t have to go from the Carolinas to Atlanta or Florida in the middle of the night.

   The hosts would work out a three or four-way partnership with each other and the new entity operating the route (for example, a daily Sunset Limited could have an agreement with BNSF, CSX, Union Pacific, and First Group America) as a way of avoiding the problem of changing trains. Meanwhile, BNSF could run the Southwest Chief by itself and add routes and branches like a spur to Phoenix (a similar situation would apply to Norfolk Southern with the Crescent).

   One more thing, the Auto Train concept could be added to other markets by the host railroads (after all, those empty auto racks currently seen on freight trains could be very useful). It may not have been feasible to have a Midwest-Florida Auto Train route 26 years ago, but if gas ever returns to September 2008 levels, it would be more than practical for the Auto Train concept to be extended to other parts of the country.

   – Anonymous

   P.S. Based on the discussion in the URPA Intranet group during the Labor Day weekend, states like Florida should contact Veolia or any of the companies which fail to get HSR bids to operate conventional speed routes as a precursor to high speed service.

6. Coming in the next issue of TWA: William Lindley of Scottsdale, Arizona has more thoughts on the future of passenger rail.

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