Trains versus Cars and the Future of U.S Transportation
In the Northeast, there has been great hope that fast trains such as the Acela could connect such cities as Boston, New York, Philly and Washington D.C and displace car use. But, it appears that Amtrak continues to flunk the market test. Why? What is it about its cost and pricing structure that this "green technology" needs continued government subsidy?
Given how much money Amtrak loses, a reasonable question is how green a technology is Amtrak? In the absence of Amtrak, how would people travel from city to city? Clearly, they would drive or take a short plane or bus ride. How much extra greenhouse gases would be produced? If we use Kirk Hamilton's subjective value of $20 marginal damage per ton of carbon dioxide created, what is the extra marginal damage measured in dollars? and how does this compare to the current subsidy?
what is amtrak doing to try to become a profitable enterprize?
November 4, 2005
Auditors' Report Says Amtrak Needs Outside Help
By THE ASSOCIATED PRESS
WASHINGTON, Nov. 3 (AP) - Amtrak needs to improve the way it monitors performance and oversees its finances to reach solid financial ground, and it will probably need outside help to do so, Congressional investigators said Thursday.
"Amtrak's management may be able to correct a number of these issues on its own," said the Government Accountability Office, the auditing arm of Congress, but it strongly suggested that Amtrak enlist help to improve its financial operations.
"While Amtrak has recently reduced costs, revenues are declining faster than costs, leading to operating losses exceeding $1 billion annually," the report said. "These losses are projected to grow by 40 percent within four years."
The agency recommended that the transportation secretary direct the federal railroad administrator to require Amtrak to submit a plan laying out specifically how it will improve its financial operations. It also called for the administrator to provide Amtrak with direction on how to do so, as well as to monitor the railroad's performance and to report to Congress on Amtrak's progress.
Transportation Secretary Norman Y. Mineta called the agency's report "unusual, if not unprecedented, in the scope of its review and the severity of its indictment."
As its response, Amtrak made public a letter dated Sept. 2 from its president, David L. Gunn, to the agency. In the letter, Mr. Gunn said that in the last three years, the railroad had focused on "maintaining liquidity, cleaning up the books, rebuilding plant equipment and building an organization that can manage the budget and control costs."
Amtrak has never made money in its 34-year history, and an operating loss of more than $550 million was expected for the fiscal year that ended Sept. 30. The railroad has a debt of more than $3.5 billion.
The Bush administration has called for no subsidies for Amtrak, but the House has approved an appropriation of nearly $1.2 billion for this budget year.
The Senate voted 93 to 6 on Thursday to include an Amtrak overhaul amendment in the budget bill.
The measure, sponsored by Senators Trent Lott, Republican of Mississippi, and Frank R. Lautenberg, Democrat of New Jersey, would cut Amtrak's operating subsidies by 40 percent, leaving it with $3.3 billion in subsidies over six years.
Given how much money Amtrak loses, a reasonable question is how green a technology is Amtrak? In the absence of Amtrak, how would people travel from city to city? Clearly, they would drive or take a short plane or bus ride. How much extra greenhouse gases would be produced? If we use Kirk Hamilton's subjective value of $20 marginal damage per ton of carbon dioxide created, what is the extra marginal damage measured in dollars? and how does this compare to the current subsidy?
what is amtrak doing to try to become a profitable enterprize?
November 4, 2005
Auditors' Report Says Amtrak Needs Outside Help
By THE ASSOCIATED PRESS
WASHINGTON, Nov. 3 (AP) - Amtrak needs to improve the way it monitors performance and oversees its finances to reach solid financial ground, and it will probably need outside help to do so, Congressional investigators said Thursday.
"Amtrak's management may be able to correct a number of these issues on its own," said the Government Accountability Office, the auditing arm of Congress, but it strongly suggested that Amtrak enlist help to improve its financial operations.
"While Amtrak has recently reduced costs, revenues are declining faster than costs, leading to operating losses exceeding $1 billion annually," the report said. "These losses are projected to grow by 40 percent within four years."
The agency recommended that the transportation secretary direct the federal railroad administrator to require Amtrak to submit a plan laying out specifically how it will improve its financial operations. It also called for the administrator to provide Amtrak with direction on how to do so, as well as to monitor the railroad's performance and to report to Congress on Amtrak's progress.
Transportation Secretary Norman Y. Mineta called the agency's report "unusual, if not unprecedented, in the scope of its review and the severity of its indictment."
As its response, Amtrak made public a letter dated Sept. 2 from its president, David L. Gunn, to the agency. In the letter, Mr. Gunn said that in the last three years, the railroad had focused on "maintaining liquidity, cleaning up the books, rebuilding plant equipment and building an organization that can manage the budget and control costs."
Amtrak has never made money in its 34-year history, and an operating loss of more than $550 million was expected for the fiscal year that ended Sept. 30. The railroad has a debt of more than $3.5 billion.
The Bush administration has called for no subsidies for Amtrak, but the House has approved an appropriation of nearly $1.2 billion for this budget year.
The Senate voted 93 to 6 on Thursday to include an Amtrak overhaul amendment in the budget bill.
The measure, sponsored by Senators Trent Lott, Republican of Mississippi, and Frank R. Lautenberg, Democrat of New Jersey, would cut Amtrak's operating subsidies by 40 percent, leaving it with $3.3 billion in subsidies over six years.
posted by Matthew Kahn at 3:04 AM
6 Comments:
One of the problems in the discussion of Amtrak is too many things are being clumped together which shouldn't be. There are routes (particularly in the North-east corridor) that are economically viable. Western and rural passenger rail travel isn't and they're what make the system a money-losing proposition.
I went to NY from DC last weekend, and I would have loved to have taken the train, but it would have cost well over $200 round trip, vs. $35 round trip for the bus. I'd love find out why it's so expensive.
Even the NEC isn't economically viable. By using some fancy accounting it can be made to appear that Amtrak revenues come close to operating costs. Unfortunately covering operating costs does not viability make. Oh and those fancy accounting procedures? Would you normally call State and local subsidies operating revenue?
Sigh. Can we even begin to count the problems?
That $200 fare puts it in Shinkansen (Japanese Bullet Train, or more accurately, platypus-nose train) territory. But the Acela is no Shinkansen. It doesn't run every few minutes, it doesn't do the 220-mile run from DC to NYC in 90 minutes or so, and it's very famously not terribly reliable.
Intercity trains exist in an environment, not in isolation. You've got to be able to get to them at each end of the trip. The DC Metro is a good system but very limited in coverage. If you had to use a DC bus, it almost certainly would take you through some very dangerous places, fuhgeddaboudit. If you're connecting to the DC suburbs, the VRE only runs at very limited hours. The New York end is covered better, but there are still lots of places you can't get to. And cabs are hugely expensive. Maybe intercity trains should run to airports instead of city centers, so convenient car rentals could be had.
Dirt-cheap, massively subsidized airfares are often available. Every city and county in the country that is able throws vast sums of free money at airports. This makes landing fees risible, covering virtually none of the costs. Given that alone, it's unreasonable to think an intercity train will or ought to make a profit.
On top of that, many airlines now receive extra vast subsidies in the form of free rides through bankruptcy court. All told, it's cheap to compete when you have no capital costs for the airports you use, and no capital costs for the planes you fly.
When all is said and done, most DC to NY travelers are better off to drive, and most DC to Boston travelers are better off to fly or drive.
amtrak sucks! it is always late.
^^ nice blog!! ^@^
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