LaHood: Amtrak Makes Money

Speaking in Indiana last week, Secretary of Immobility Ray LaHood said Amtrak’s success shows that American should build high-speed rail. “Amtrak is doing very well,” claimed LaHood. “They’re making money, that wasn’t true a few years ago.”

This led BoydGroup, an aviation consulting firm, to say, “This guy is lost in space.” BoydGroup points out that Amtrak lost $1.4 billion in 2010, which is actually underreported because Amtrak counts state subsidies as “revenues.”

In fairness to LaHood, he may have been misquoted and was probably talking about the Boston-to-Washington Acela, not Amtrak as a whole. According to Amtrak’s September, 2010 ridership report (and September is the relevant one because Amtrak’s fiscal year ends in September), the Acela covered its operating costs in 2010 (see p. C-1). In fact, it earned $100 million more than its operating costs. This does not mean, however, that it made a profit.

First, under “Capital Charge” the ridership report lists only “n/a,” meaning not available. When these charges, including interest, are counted, the Acela would not appear nearly as profitable.

Second, unlike most proposed high-speed rail routes, the Acela shares most of its costs–track maintenance, stations, ticket agents–with slower speed trains which Amtrak calls “NE Regional Trains.” These lost money in 2010 and every other year. To run the Acela, these costs would have to be paid whether the slower trains are there or not, so it is hard to argue that the Acela really makes money: it covers its operating costs only because it shifts half of those costs onto other, money-losing trains.

So, even giving him the benefit of the doubt, Secretary LaHood is still lost in space.

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11 thoughts on “LaHood: Amtrak Makes Money

  1. the highwayman

    O’Toole, even you’ve admitted that roads are there regardless of economic conditions. They’d even be there if there were no automobiles.

    So then don’t be angry that Acela service made $100 million.

  2. metrosucks

    The famous Highwayman accounting method, just ignore whichever costs are inconvenient to the delusion being discussed!

    the highwayman Reply:

    Metrosucks do us a favor and go jump in the back of a garbage truck!

    The street in front of your house doesn’t make money!

  3. C. P. Zilliacus

    The Antiplanner wrote:

    In fairness to LaHood, he may have been misquoted and was probably talking about the Boston-to-Washington Acela, not Amtrak as a whole. According to Amtrak’s September, 2010 ridership report (and September is the relevant one because Amtrak’s fiscal year ends in September), the Acela covered its operating costs in 2010 (see p. C-1). In fact, it earned $100 million more than its operating costs. This does not mean, however, that it made a profit.

    First, under “Capital Charge” the ridership report lists only “n/a,” meaning not available. When these charges, including interest, are counted, the Acela would not appear nearly as profitable.

    I am shocked, just shocked.

    The Antiplanner must have missed the memo which states that (at least in the United States) that the cost of capital to build steel rail on steel wheel passenger transportation systems and procure the railcars (be they for Acela, Northeast Direct, light rail, streetcars, heavy (third rail) rail subways, commuter rail or any other type of rail) is alsways free, and need never, ever be re-paid.

  4. Andrew

    Antiplanner:

    Acela shares most of its costs–track maintenance, stations, ticket agents–with slower speed trains which Amtrak calls “NE Regional Trains.” These lost money in 2010 and every other year. To run the Acela, these costs would have to be paid whether the slower trains are there or not, so it is hard to argue that the Acela really makes money: it covers its operating costs only because it shifts half of those costs onto other, money-losing trains.

    True, but you should also then include the revenues made from freight trackage rights on the NE Corridor, and the revenue paid by commuter authorities to use the NE Corridor (which are artificially held below costs by federal law as a hidden subsidy to certain commuter rail operators). About 1/3 of the track miles of the NE Corridor exist almost soley to benefit freight and commuters. These tracks have also accounted for a disproportionate amount of recent capital spending. Using Amtrak to slip hidden commuter rail capital spending into their operations is hardly a cost of the actual Amtrak NE Corridor operation.

    Bottom line however, is that Amtrak cost beyond revenue about $450 to actually operate, and another $600 million to purchase various items to make up for depreciation. The remaining $300 million was actual net improvements.

    This should be compared to the $100+ billion loss produced by the interstate and related US highway system, to say nothing of the ongoing loss of treasure in defense spending to secure the middle eastern fuel oil it operates on.

  5. Borealis

    Let us celebrate the accomplishment of past government planners…. http://www.soc.iastate.edu/sapp/PruittIgoe.html

    Why They Built the Pruitt-Igoe Project

    Alexander von Hoffman
    Joint Center for Housing Studies, Harvard University.

    St. Louis’s Pruitt-Igoe housing project is arguably the most infamous public housing project ever built in the United States. A product of the postwar federal public-housing program, this mammoth high-rise development was completed in 1956.

    Only a few years later, disrepair, vandalism, and crime plagued Pruitt-Igoe. The project’s recreational galleries and skip-stop elevators, once heralded as architectural innovations, had become nuisances and danger zones. Large numbers of vacancies indicated that even poor people preferred to live anywhere but Pruitt-Igoe.

    In 1972, after spending more than $5 million in vain to cure the problems at Pruitt-Igoe, the St. Louis Housing Authority, in a highly publicized event, demolished three of the high-rise buildings. A year later, in concert with the U.S. Department of Housing and Urban Development, it declared Pruitt-Igoe unsalvageable and razed the remaining buildings.

    Pruitt-Igoe has lived on symbolically as an icon of failure. Liberals perceive it as exemplifying the government’s appalling treatment of the poor.

  6. MJ

    True, but you should also then include the revenues made from freight trackage rights on the NE Corridor, and the revenue paid by commuter authorities to use the NE Corridor (which are artificially held below costs by federal law as a hidden subsidy to certain commuter rail operators).

    Amtrak includes this as revenue in its financial statements.

    The remaining $300 million was actual net improvements.

    Net improvements for whom?

    This should be compared to the $100+ billion loss produced by the interstate and related US highway system, to say nothing of the ongoing loss of treasure in defense spending to secure the middle eastern fuel oil it operates on.

    I’d be very interested to hear where where the $100 billion figure comes from. The Persian Gulf oil defense cost argument is a tired one and becomes basically insignificant once you bother to look at it carefully. Of course, any additional charge to recover such costs would be likely to hit Amtrak as well, since it is a large consumer of fuel.

  7. Andrew

    MJ:

    “I’d be very interested to hear where where the $100 billion figure comes from.”

    Federal and state expenditures on roads. Its not like the roads generate any revenue to the Department(s) of Transportation aside from licensing fees.

    Gas taxes are collected by the Treasury and are not user fees.

    “The Persian Gulf oil defense cost argument is a tired one”

    It is a tired argument, because many of us are tired of paying the exhorbitant level of taxes necessary to fund the military-industrial complex and its consumption of 40%+ of world military spending. Your article notes that peacetime costs of securing access to oil are 10%+ of the defense budget (its not clear if the costs of troops and bases in forward deployment in places like Germany are counted when they really serve no actual threat purpose aside from forward deployment near the Gulf). War time costs where we are spending $50-100 billion per year of debt money to wage war are obviously add-ons. Also to be considered are the military pensions and veterans benefits necessitated by these wars. Each of these items is now running close to $100 billion per year, and per the conclusions, at least 10% of them needs to be considered Gulf Oil related.

    “Of course, any additional charge to recover such costs would be likely to hit Amtrak as well, since it is a large consumer of fuel.”

    Either all fuel consumers should be billed with this tax in which case $0.35 per gallon of fuel would produce $100 billion per year, or it should be a specially assessed tarriff on oil from the Middle East, including other obnoxious places requiring military oversight and periodic military action like Libya, which would come to about $55 per barrel to produce $100 billion. It appears from your article that the actual costs are closer to $150 billion when pensions and veterans beneits are also considered in the nearly $900 billion of military related spending (to say nothing of war related debt). This cost should be compared to the almost zero military cost invested in securing oil from South America and Africa (no wars there, no US Navy Fleets permenantly stationed there, no Air Force Wings there, no massive foreign aid handouts, etc.).

  8. metrosucks

    Yes, there’s Andrew again shilling for an obviously wasteful and unnecessary service like Amtrak. If Union Pacific and BNSF want to run passenger trains on their own dime, let them.

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