Amtrak still hasn’t published its August performance report. But I noticed a paragraph on its “Reports and Documents” page under “Monthly Performance Reports.”
“Going forward,” the page says, “Amtrak will report Adjusted Operating Earnings as the key financial measure to evaluate results, Net Income/(Loss) will continue to be reported for reference. Adjusted Operating earnings represents Amtrak’s cash funding needs and is a reasonable proxy for Federal Operating Support needed in line with the appropriation.”
This isn’t really new; according to archive.org, it has been there since 2018 but wasn’t on the Reports and Documents page in 2017. What the statement means is that, instead of following generally accepted accounting principles, Amtrak will claim its net income is equal to the amount of operating subsidies it needs from the federal government, not including capital subsidies or state subsidies.
Under generally accepted accounting principles established for railroads by the Interstate Commerce Commission in the 1980s, Amtrak should count depreciation as an operating cost. Depreciation appears on the “net income/loss” statement (it’s close to a billion dollars a year), but Amtrak doesn’t doesn’t really think of it as an operating cost. Depreciation is effectively a debt against the future, and since it doesn’t require an immediate operating subsidy, Amtrak allows its physical plant to deteriorate and counts on Uncle Sam to rescue it when trains start to crash.
The other part of emphasizing “federal operating support” is that Amtrak pretends to ignore “state support,” which amounts to around a quarter of a billion dollars a year (and which Amtrak hopes to increase to more than half a billion). Amtrak officials sincerely believe that it may be a subsidy when Congress gives them money to operate trains, but when states give them money for operations it is “passenger revenue.”
Amtrak has gotten away with these accounting fictions for several years now. I have to wonder if the reason why the August performance report is three weeks late is because it is trying to develop new ones.
You wrote: “Amtrak has gotten away with these accounting fictions for several years now.”
Accountants tell us their profession began by reporting the status of investments to absentee owners. I think that the public accounting of government transit needs improvement.
In particular, two items:
• Depreciation and deferred maintenance need to be entered as liabilities. Possibly depreciation could be shown by diminishing assets. Depreciation should reflect the actual market value of used equipment.
• Subsidies paid out of taxes need strong differentiation from other sources of income. I recommend something like: Taxpayer burden per boarding = ((Fares + Advertising) – Total Expenses) / Total Number of Boardings. When this number exceeds about $10, it would be cheaper to rent Mercedes sedans ($400 rent/month / 40 boardings/month) for two-way, five-days-per-week commuters.
Normative Core Adjustment Factor:
Perhaps this next item is not strictly an accounting matter. Many transit projects are sold to the public on the basis of “planned” cost/benefit ratios.
The planned benefit is number of riders. The planned cost is usually available in dollars(of a given vintage). The subsequent cost-overruns and consequent ridership are also available. So every cost/benefit ratio could easily be adjusted by a “normative core adjustment”.
For example, if extensive research shows that, for public transportation, actual costs / planned costs average 2.1 and actual ridership / planned ridership average 0.40, then the normative core adjustment factor for public transportation = 5.25. So for back-of-the-envelope calculations, the planned cost/benefit should be multiplied by 5 or so to arrive at the real cost/benefit ratio..