Amtrak’s Real Problem

Amtrak is under fire from a lot of pro-rail groups and experts. “The Amtrak era is over,” declared a recent op-ed in Railway Age magazine by F.K. Plous, who works for Corridor Rail, a “passenger rail development, finance and management company.” Amtrak, continues Plous, has “no goals, no growth strategy and no meaningful success/fail criteria.” However, instead of defunding it, Plous predictably proposes even more subsidies managed by a new agency or company (perhaps Corridor Rail?) that would somehow be better than Amtrak, and of course, backed up by “all the statutory, budgetary and bureaucratic resources needed to take passenger trains into the post-Amtrak world.”

Railway Age is hardly a railfan magazine, but it is not the only passenger train supporter that is critical of Amtrak. A few months ago the Railroad Passenger Association (formerly the National Association of Railroad Passengers) released a study claiming that Amtrak accounting was “fatally flawed” resulting in a “a false framing of Northeast Corridor services as ‘profitable’ and the rest of the system as ‘unprofitable.'” In fact, says RPA, all of Amtrak’s routes are unprofitable, which leads it to the curious conclusion that all should be subsidized even more.

Trains magazine joined the fray with an article in its January 2019 issue that partly relied on the RPA report and partly on its own research arguing that Amtrak’s management has a “no-growth policy” that results from “misplaced priorities.” Much of the article is based on an accounting system that was developed by an outside agency that Amtrak doesn’t trust and doesn’t use. But Trains seems to think that, despite not using it, it has somehow distorted Amtrak’s policies. In any case, the magazine’s conclusion is the same: Amtrak is awful, give it more money.

Leaping to Amtrak’s defense is, not surprisingly, Amtrak’s senior executive vice president, Stephen Gardner, whose op ed was published by Railway Age in response to the magazine’s criticism of Amtrak routes and policies. Amtrak, claimed Gardner, had its best financial performance in history in 2018, when it “covered 95 percent of its operating costs from revenues.” As the Antiplanner showed last month, this claim is only possible by counting taxpayer subsidies as “revenues” and by not counting maintenance as an operating cost.

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Yesterday, Railway Age published a lengthy response to Gardner written by passenger rail consultant M.E. Singer. He charges that Amtrak accounting ignores generally accepted accounting principles in order to “‘put lipstick on a pig’ to disguise the deficits of the NEC by inappropriately ascribing NEC infrastructure and corporate overhead costs to the long-distance and state-supported sectors.” Singer suggests that Gardner got his job not because he knows anything about running a railroad but by being a political insider who served as a congressional staffer when Congress passed the Passenger Rail Investment and Improvement Act of 2008, which authorized increased funding for the company that supposedly covers 95 percent of its costs out of its revenues.

Amtrak may be poorly managed, but the problem with passenger trains has little to do with management. Instead, it is simply that they are one of the most expensive forms of intercity travel that cannot compete with air travel on either time or cost and cannot compete with highway travel on either convenience or cost. Creating a new agency or company, developing a new accounting system, shaking up Amtrak’s board of directors, or firing Amtrak’s current CEO will not fix this problem.

The solution is not to replace Amtrak but to end federal subsidies to it — or, at the very least, bring Amtrak subsidies per passenger mile into parity with subsidies given to airlines and highways. This means reducing Amtrak subsidies by at least 90 percent. If intercity passenger trains can’t survive without greater subsidies than that, then they shouldn’t.