A Quarter Trillion for the Northeast Corridor

A recent draft environmental impact statement published by the Federal Railroad Administration estimates that it would well over a quarter trillion dollars in capital improvements to make Amtrak “a dominant mode for Intercity travelers and commuters” in the Boston-Washington corridor. Even that is optimistic as the data in the report suggest that Amtrak would be far from dominant even aver spending that much money.

Click image to go to the download page for the draft environmental impact statement, which is downloadable in more than 30 parts totaling well over 30 megabytes.

The statement considers four alternatives:

  • No action would keep train service at current levels. This would nevertheless cost $19.9 billion in maintenance and improvements over the next 25 years.
  • Alternative 1 would increase service at a rate equal to the region’s population growth. This would cost around $65 billion (the average of a range given in the DEIS), or $45 billion more than No Action.
  • Alternative 2 would increase service faster than population growth at a cost of around $133.5 billion, or more than double Alternative 1.
  • Alternative 3 would supposedly make rail “a dominant mode” in the region at a cost of around $287.3 billion, more than double Alternative 2.

Improvements are needed because “The NEC lacks adequate capacity to meet today’s demand for rail service,” says the document. “Thus, it cannot accommodate the projected demand from growing regional population and employment.” Yet estimates of “today’s demand” are skewed by subsidies: In 2015, Northeast Corridor revenues were $479 million greater than operating costs, but if the corridor needs $796 million a year in maintenance and improvements ($19.9 billion divided by 25 years), then the corridor loses well over $300 million a year, which is $27 per Amtrak rider. Operating costs also don’t include unfunded pension and health care obligations, meaning the total subsidies are even greater. If Amtrak increased fares to cover full costs, the quantity of riders would be lower, possibly much lower, than today.

Amtrak’s FY 2015 performance report says Northeast Corridor Amtrak trains carried 11.7 million riders last year, with another 348 million riders carried on commuter trains in the corridor. Under the No Action alternative, Amtrak ridership would increase by 65 percent while commuter ridership would grow 21 percent. These are both much more than the region’s projected population growth–about 14 percent–calling into question the claim that huge spending is needed to keep up with growth.

Projected ridership gains from each alternative are far from proportional to expenses. Alternative 1 would increase ridership by another 75 percent above No Action, but as noted doing so would require more than a tripling of capital spending. Commuter ridership under alternative 1 would be just 13 percent more than No Action.

Alternative 2 would attract only 10 percent more Amtrak riders, and just 4 percent more commuters, at double the cost of Alternative 1. Alternative 3 would carry just 5 percent more Amtrak riders and 10 percent more commuters at more than double the cost of Alternative 2.

 2015No ActionAlt. 1Alt. 2Alt. 3
Intercity trips11.719.333.737.139.0
Commuter trips348.0419.8474.5495.4545.5
Capital cost19,90065,000133,500287,500
Incremental cost per Amtrak trip2,6213,13220,14781,053
Incremental cost per all trips2516532,8192,962
Average cost per annual trip45128251492
Trips and capital costs are in millions; incremental and average costs are in dollars. Except for the 2015 column, ridership projections are for 2040. The incremental and average costs are capital costs per 2040 trip and do not amortize capital costs over any period; a true cost-accounting would amortize those costs over the expected life of each improvement, which would mostly be 25 to 30 years. However, amortization would leave the relative numbers about the same.

FRA completely ignores the fact that this is a clear case of rapidly diminishing returns. The capital cost of the No Action alternative is $2,621 per new annual Amtrak trip. In other words, the $19.9 billion in additional costs divided by 7.6 million additional annual riders is $2,621 per added Amtrak trip. (These numbers don’t amortize the capital costs; they are just used to show the relative cost per added rider of each alternative.)

Figured the same way, relative to No Action, the capital cost of Alternative 1 is $3,132 per additional Amtrak trip; Alternative 2 relative to Alternative 1 is $20,147 per additional Amtrak trip; and Alternative 3 relative to Alternative 2 is $81,053 per additional Amtrak trip. In other words, getting one additional annual Amtrak trip in Alternative 3 costs more than $80,000. Your first clue that this is ridiculous should have come from the fact that Alternative 3’s projected capital costs are fourteen times No Action, yet it would attract barely more than twice as many passengers.

Of course, some of the added cost should be allocated to additional commuter passengers. But, as the table shows, since most increments in spending result in an even smaller increase in commuter trips than intercity trips, the returns to added spending rapidly diminish even if commuter trips are counted.

Calculating average instead of incremental costs, the capital costs under No Action equal $45 for every intercity and commuter trip in 2040. Under Alternative 1, the cost is $128 per trip; $251 per trip in Alternative 2; and $492 per trip in Alternative 3.

Regardless of cost, would a quarter of a trillion dollars make Amtrak a dominant mode in the corridor? Amtrak admits that today it carries just 5 percent of intercity passenger traffic (trips longer than 75 miles) in the corridor. If it managed to increase ridership to Alternative 3’s projection while overall travel grew at the rate of population growth, Amtrak’s share would grow to 15 percent. That’s a significant increase but it hardly makes Amtrak dominant. Amtrak’s share would be even less if other travel grew faster than population growth, which has been the historic trend. If a tripling of Amtrak’s riders doesn’t make Amtrak a dominant player in intercity travel, a mere 56 percent of commuter riders would fail to make Northeast Corridor commuter rail a dominant player in intraurban travel.

In short, this document reveals three things. First, far from operating at a profit, the Northeast Corridor loses hundreds of millions of dollars a year when capital, maintenance, and employment benefits are counted. Second, spending any more than the minimum amount needed to keep Amtrak running would cost a huge amount of money yet add trivial numbers of new riders. Third, given the large losses from current operations, it is even questionable whether we should spend the minimum needed to keep Amtrak running.

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9 thoughts on “A Quarter Trillion for the Northeast Corridor

  1. Henry Porter

    And then there’s the environmental consequences…and the political consequences. This idea would be DOA in any administration but the Obama Administration.

    Shame on FRA!

    ”My gut instinct is that more time would be helpful,” said DOT Commissioner Redeker. But he said some of the motivation for the current compressed timetable is to get things approved before the end of the Obama administration.
    http://ctmirror.org/2016/01/04/massive-rail-plan-leaves-connecticut-hopeful-but-mystified/

  2. Ohai

    First, far from operating at a profit, the Northeast Corridor loses hundreds of millions of dollars a year when capital, maintenance, and employment benefits are counted.

    So what? We don’t expect our roads, highways or air transport infrastructure to operate at a profit.

  3. msetty

    Ohai said:
    So what? We don’t expect our roads, highways or air transport infrastructure to operate at a profit.

    It matters when it (rail passenger service) is being ineffectively run and costs way more than it should. Amtrak is claiming that it makes somewhere north of $300-$400 million per year on Northeast Corridor operations, but many advocates of cost-effective rail service such as myself don’t believe that for a second.

    Ignoring the inherent biases against rail per se by The Antiplanner, he is mostly right about this one. “NEC Future” is such an absurdly expensive plan that it makes California High Speed Rail, Boston’s “Big Dig,” Britain’s High Speed Rail 2, and Britain’s various “Railtrack” fiascos competent and cost-effective by comparison.

    Fortunately, we may soon have private sector projects to measure these absurd projects against, e.g., All Aboard Florida and the Texas high speed rail project, and presumably others that haven’t yet been surfaced publically. We’ll see. If these work, they’ll be cures to California HSR and the absurdly costly NEC Future (perhaps it will soon be time to allow private sector investment in the NE Corridor, regardless of Amtrak’s predictable objections).

  4. Sandy Teal

    As they learned from California, the first step is to build a high speed train line in the middle of nowhere so the cost is low and it is less controversial. Then deal with siting the rest of the line later.

  5. Frank

    “We don’t expect our roads, highways or air transport infrastructure to operate at a profit.”

    We who? You and other statists who favor massive government intervention in the economy?

  6. C. P. Zilliacus

    Ohai wrote:

    So what? We don’t expect our roads, highways or air transport infrastructure to operate at a profit.

    Actually, in this corridor, between Washington, D.C. and New York City, most of the big roads running parallel to the NEC do pay for themselves, and they even subsidize other modes of transportation, including public transit.

    Why?

    Because long sections of this network are made up of toll roads, such as most of I-95 in Maryland and Delaware, the Delaware Memorial Bridge, the New Jersey Turnpike, and the bridges and tunnels between North Jersey and Manhattan. Most of them collect varying amounts of tolls (and the New Jersey Turnpike Authority completed a major widening project in 2014 at little cost to state and federal taxpayers.

  7. C. P. Zilliacus

    Frank wrote:

    We who? You and other statists who favor massive government intervention in the economy?

    While all of the highways between Washington and New York are in public-sector ownership, most of them are funded by their own users, not by taxpayers.

    Amtrak and the NEC? Not so much.

  8. Ohai

    While all of the highways between Washington and New York are in public-sector ownership, most of them are funded by their own users, not by taxpayers.

    Not all of them are toll roads, and none are “profitable” if you include, “capital, maintenance, and employment benefits,” as the Antiplanner does. The NJ Turnpike, in particular, has had to increase tolls 50% since 2008 to cover its mounting debt payments.

  9. prk166

    Ohai, it’s my understanding that for a long time New Jersey has used profits from the New Jersey turnpike to cover other state expenses not related to it. Has this changed recently?

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