Saturday, March 08, 2008

Amtrak High Speed Rail Coming to Ohio?

Ohio Governor Ted Strickland has requested that Amtrak, the nation's only passenger rail system, study the possibility of connecting Cleveland, Columbus, and Cincinnati by a passenger high speed rail line with other various stops along the way.

An Amtrak spokesman said that Strickland would have to wait 12-18 months for the high speed rail study to be completed because at least 5 other states have requested similar reports from Amtrak.

I think this plan is a good investment in the infrastructure of Ohio and a solid alternative for travelers in Ohio looking to avoid higher gas prices. Amtrak, however, should not be in charge of the passenger rail line. Even if the Ohio rail line found a way to become profitable, Amtrak would surely find a way to squander a good business opportunity. For decades now (since about 1971), Amtrak has talked about becoming self-sufficient and at least breaking even on the balance sheet. But as of yet, that has never happened. All told, the federal government has provided billions in subsidies over the years. For FY 2008 alone, Amtrak executives asked for $1.68 billion from Congress, without any strings attached for enhanced performance or to ensure efficient use of the public funds.

And despite manipulation of the numbers by Amtrak's press office, total ridership has been done on Amtrak trains for the past three years running. Even the only almost-profitable train line in America, the Northeast corridor, has seen ridership steadily decreasing.

The moral of the story here should be quite clear for Strickland and Ohio. Keep Amtrak out of the picture. High speed rail is the transportation of the future and it can connect Ohio cities in a way that cars simply cannot. But handing over the rail lines to a dying railroad bureaucracy is not the answer. Cooperation and participation of the private sector is crucial for any such plan to work effectively. A lack of private sector interest and political willpower doomed high speed rail plans in both Florida and California to failure.

Everyone has to be on board for high speed rail to be an Ohio success. If a private carrier is brought in and given the rights (for a price) to develop a line and bring in trains, Ohioans will have an alternative mode of transportation that will likely be more efficient and cost-effect than Amtrak could ever hope to be.

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Blogger gildone84 said...

Just because Amtrak is doing the ridership study, don't assume that they are going to be in charge of the line. The State of Ohio is in charge and will remain in charge it. This is just an interim step toward the broader Ohio Hub plan which will be managed like the state-run passenger services in California where Amtrak is just a contract operator.

As for your comments about Amtrak not being profitable, no passenger rail system in the world earns a profit. Some high speed lines in densely traveled corridors earn an above-the-rail profit, but none of them earn a profit over and above the full cost of the infrastructure.

Even in Europe, for example, "profitable" lines depend upon money-losing regional lines to feed passengers into the "profitable" ones. It's not unlike the airlines depending upon money-losing short hauls to feed passengers into the more lucrative long-distance flights.

Speaking of the airlines-- they have made zero money net over their 80+ year lifetime (just ask Warren Buffet why he has never invested in a common-carrier airline) and they depend heavily upon subsidies to airports and the air traffic control system.

While part of Amtrak's operating losses are due to things like their NE Corridor dispatching system which is the railroad-equivalent to to air traffic control system, yet $2 billion per year of the cost of the air traffic control system comes out of the federal government's general revenues (which is more than Amtrak's total budget, by the way). Long story short: It's an operating subsidy.

And take a look at highways... no one ever complains that our interstates don't earn a profit, despite the fact that gasoline and license taxes (i.e. user fees) barely pay for 2/3 of the total infrastructure and maintenance costs.

No form of common-carrier passenger transportation is profitable when all costs are considered.

As for your comments about Amtrak manipulating their ridership numbers, because your information comes from the Heritage Foundation, it's not trustworthy. They are one of the most heavily biased think tanks out there.

I just looked at their ridership charts, and they are--by their own admission if you look at the footnotes-- basing their assertion on a few cherry-picked months rather than total ridership on an annual basis.

They even omitted very important information about the Lott-Lautenberg bill. They only focused on the amount of money and completely ignored the structural reforms to Amtrak that are in the bill and broader federal policy reforms that will put passenger rail on equal footing with other modes of transportation.

Granted, additional reforms than what are in the bill are needed, but the fact of the matter is, the bill makes some important first steps. This is yet another example of the Heritage Foundation cherry-picking only the information that supports their position and ignoring what doesn't.

The biggest problem with our passenger rail system is that this country has never made it a priority. If Congress had funded highways or aviation the same way they have funded passenger rail over the years, both would be skeletal, underperforming systems. We have to stop holding passenger rail to a different set of standards than other modes of transportation.

Also, the idea that Amtrak will become more disciplined by cutting their budget is ludicrous. This is something that Amtrak foes have been saying for years, but every time Amtrak has eliminated lines for example, revenues have fallen faster than costs because you still have the same fixed costs and overhead spread over fewer trains.

Amtrak has also done a good job of controlling costs starting when David Gunn was hired as president and continuing with Alexander Kummant.

As for other carriers being involved with Ohio's plans, that's a possibility when the Ohio Hub starts to get off the ground. Both Norfolk Southern and the Ohio Central railroads have expressed interest in operating the trains.


Blogger Brian G. said...

Hi gildone84, thank you for the comment!

I don't necessarily think Amtrak will be the carrier if the Hub project goes through but I definitely don't want them to be.

It's interesting you bring up the high speed rail project in Califorinia because the idea there of hundreds of miles of rail line is basically dead. Why? Because the state did not sell the idea to the public. The same thing happened in Florida. As I said in my original post, this is a wonderful idea that could prove to be a great investment into Ohio's infrastructure but everyone needs to be brought on board. If not, it will fail like many other similar proposals around the country.

As for the assertion that no rail system in the world is proftable, that's simply not true. Japan’s Shinkansen high speed rail system is highly profitable and has already recouped the costs of its initial investment.

Japan also provides a perfect case study in the success of the privatization of rail lines. The central government in Japan continually lost money on operating passenger rail lines until being divided up by the government-run rail corporation Japanese National Railways (JNR) in 1987 into six different privately-held corporations. The result was success and profits for all, within only a few years.

We are in complete agreement about subsidies constantly provided to the airline industry. Discount airline carriers have proven that government subsidies are not necessary to be in business. Congress should end its handouts to airlines without a doubt.

And to address Amtrak and its management generally, a GAO report commissioned by Congress concluded that Amtrak lost $245 million in food and beverage services alone in two years' time. How is that even possible?! Concerns have also been raised about Amtrak's legal department and awarding of legal contracts. Reform is needed within the upper echelons of management in Amtrak. The best reform would be pure privatization of the rail line. A sell off that uses Japan as the model.

I'm confused as to how the NE Corridor dispatch system could be contributing to Amtrak's losses when the dispatch center, by your admission, is already being funded by the federal government. That subsidy should be helping Amtrak's operations a lot, not hurting.

Blogger gildone84 said...

Food and beverage services on trains have lost money since the private railroads began using them many decades ago. They were used, and are still used, to attract and retain riders. Passenger trains in the days of the private railroads in the US made most of their money hauling mail and in some cases high margin freight o the head end. Some heavier lines used a profit, some did not. And all of the lines depended upon cross-subsidization from more profitable freight services to share some of the operating costs, like dispatching.

I have to question the $245 million figure for food and beverage losses and will look into it. I know the GAO accused Amtrak of paying more for a bottle of Heineken beer than they were selling it for, but it wasn't true. Sometimes the GAO gets manipulated for political reasons. I know they are supposed to be an independent arm but it doesn't always work that way.

Regarding the California services, I was speaking of the state-supported trains they are running NOW-- like the Capitol Corridor services as one example. The state owns and pays for the maintenance of the rolling stock and they paid for the infrastructure needed to make it happen. All Amtrak does is operate the trains. Ultimately, for the Ohio Hub, it will be a similar set up here, except, as I said, a couple of freight railroads have expressed interest in bidding on the operations.

Oh, and I forgot to mention yesterday the proposed FOX high speed rail plan of the late 1990's was not killed because of a lack of private investment. There was plenty of private investment in the proposal. They were 3 weeks from finalizing the deal with the state. Governor Jeb Bush killed it right after his inauguration for political reasons. Then he said he wanted to pursue other rail plans and never did.

Regarding the Shinkansen, those are the high-speed bullet trains. Japan is unique in that it is a small, string-bean of a country with 120 million people. They can't have a car-oriented culture like the US for lack of space. As a result, their Shinkensen is very heavily used. In extremely dense travel corridors, it may be possible to recoup the total cost of capital, eventually. The proposed Kuala Lumpur-Singapore line is another. As to the rest of Japan's railways, I know they earn an above the rail profit, but I'll look into this as well.

Regarding discount airlines: even they wouldn't exist without the government-funded airports and air traffic control, government funded security, etc.

Regarding my comment about Amtrak's dispatching system. Let me try to explain it this way: Amtrak's dispatchers on the NEC are an operating expense that is on their books. One of the reasons Amtrak gets government money is because it has a negative operating ratio. Dispatching costs are one of many things that contribute to their negative operating ratio.

And another way to look at it: Name an airline that has air traffic control expenses on its books? Answer: There isn't one.

Amtrak has several operating expenses on its books that the airlines don't have. Here are a few more: Railroad Retirement pensions for employees who never worked for Amtrak (over $100 million per year), Amtrak police (these are real police, not just security guards), maintenance-of-way employees for the NEC.

The point I'm trying to make here is that Amtrak's operating losses are more involved that the anti-Amtrak types out there try to make them out to be. As I pointed out, Alexander Kummant and David Gunn both made considerable progress with costs and restructuring management.

Japan isn't the model for the United States because, except for the NEC, because we have no passenger-dedicated rights-of way outside the NEC. And even for the NEC, the private sector will have no interest even in the NEC until the huge maintenance backlog is dealt with. An aside: the maintenance backlog didn't develop because Amtrak wasted money elsewhere. They've simply never been given anything but a shoe-string budget that's fought over in Congress year after year. When you don't know what your budget is going to be even one year out, you can't do any medium or long term capital planning. This hurts efficiency and raises costs because you are constantly forced to deal with your maintenance needs in a triage manner.

The some of the public-private partnership and partial privatization models in Europe are more applicable to the US, but primarily when we get to the position when we start building dedicated rights-of-way for true high speed rail.

With the exception of the planned true-high-speed network that California is trying to plan, all of the services being planned in Ohio and 20+ other states will use, with only a very few exceptions, 110 mph services (not true high-speed) on existing rights-of-way that are shared with the freight railroads.

The freight railroads are private property and they have stated over and over that they do not want to deal with multiple operators on their lines. They want to deal with one operator: Amtrak, except when they are in a position to be able to bid on services over their own lines.

But, before we can even get to a position where even the freight railroads can bid on passenger operations, they need to be given the same liability protections that Amtrak has. The Lott-Lautenberg bill actually takes a very small step in this direction. This is something that will have to be an incremental process because of the demands of the freight railroads.

One more general comment about Amtrak: I have no problem admitting that Amtrak has done some dumb things and had some significant management blunders over the years, but Amtrak's problems, have never been as bad as Amtrak foes try to make them out to be. Amtrak is structured they way Congress structured it in its enabling legislation. As I said yesterday, the Lott-Lautenberg bill makes some important first steps in changing that structure.

Amtrak's biggest problem is lack of infrastructure investment so the trains can run at competitive average speeds and run on time. This country has never invested in rail infrastructure the way it should have. We've neglected it for far too long.

Blogger hardiho said...

Confusion raineth here! Where did the term "high speed" enter this topic? Amtrak does not operate any true high speed rail passenger service. (While its NEC Acela trains are theoretically capable of 150 mph [as were the previous Metroliners], they rarely achieve even 110 mph and average about 83 mph.) The governor-requested Ohio study is about providing service between Cleveland and Cincinnati via Columbus, primarily on existing but somewhat improved railroad tracks at speeds not higher than 79mph. True "high speed" service operates at or above 110 mph. Japanese, Chinese and European high speed trains operate at top speeds of 180 mph and above and average above 100 mph in actual service.

Privatized rail passenger service in Great Britain now costs the national treasury more than did British Rail as a government-owned service. Privatization occurred in Japan only after huge national government capital investment in new rail infrastructure and trainsets. European privatization is being considered/attempted only after extremely large -- and on-going -- national government capital investments in rail infrastructure and trainsets. No comparable public investment in rail infrastructure has been made in the US and no private company is seriously interested in unsibsidized operation of high speed rail passenger service in our nation.
Amtrak service has failed to achieve parity with European or Japaneses rail passenger service largely because of (a) grossly inadequate public rail investment, (b) grossly excessive federal spending on highways, airports, air navigation and waterways, and (c) national post WW II failure by Congress and all presidents to recognize this nation's need for a comprehensive national transportation investment policy. The resulting chaos has made it impossible for private, for-profit operators to profitably operate rail passenger service. Strangely, it has produced a situation in which, when all measurable factors are considered, direct user fees (fares and/or user fee taxes) pay about the same percentage of highway, aviation and rail passenger service costs -- about 33%.

brian g seems to be very confused about airline subsidies and Amtrak funding. EVERY operating airline in the US receives substantial federal, state ad local subsidies, not just the so-called "legacy" carriers. These subsidies take many forms, including tax-free airport land, government bond funding of airport improvements, and air traffic control operations that are increasingly paid for from general fund revenues, not federal aviation user fees. If a plane flies in this country, it is subsidized by these government-funded services.
Amtrak's very costly NEC dispatching system is paid for via the federal funding of Amtrak. It is not paid for by additional federal funds. Thus, even if Amtrak only operated the NEC, it would still require federal subsidies because the revenue lost from eliminating all other Amtrak routes and services would be greater than the operating cost reduction.
Amtrak critics who argue that eliminating "unprofitable" trains will reduce Amtrak subsidy needs apparently do not understand that Amtrak operates an integrated network of trains, not a series of isolated routes. Analysis of actual Amtrak ridership data documents that a very high percentage of Amtrak passengers use more than one train on their travels. For example, passengers traveling from Charleston, SC to Omaha, NE may use one train between Charleston and Washington, DC; a second train from Washington, DC to Chicago; and a third train from Chicago to Omaha.
Or, a traveler from Detroit, MI to El Paso, TX would use one train between Detroit and Chicago; a second train between Chicago and San Antonio, TX; and a third train between San Antonio and El Paso. If any one of these trains is eliminated (or drastically rescheduled), the whole trip would disappear along with 100% of its revenue.

Perhaps brian g should talk with Gene Skoropowski -- currently head of California's Capitol Corridor service -- about why Florida's high speed rail proposal failed. Gene was deeply involved in that proposal's development when he worked for the primary project consultant. Gene knows that the Florida project did not fail; it was sabotaged by incoming governor Jeb Bush who summarily cancelled it for purely political/ ideological reasons.
Gene could also explain that the GAO study of Amtrak food service losses was deeply flawed. The GAO did not/does not understand the role of food service in rail passenger service. It can no more be analyzed in isolation than can individual train routes. The food service is an integral part of the whole operation, vital to attracting passengers. Elimination or reduction of food service guarantees reduction or elimination of passsengers. That is not to say that food service efficency cannot be improved, but privatization is no magic cure-all for its relatively high cost. Amtrak has tried to have private operators take on food service provision, but most providrs have rejected the opportunity because they cannot find a profitable way to operate such service.

Blogger Brian G. said...

The fact that Japan is so conducive for rail commuters and yet the government-run rail lines continued to loss money should illustrate the folly of having government corporations controlling everything.

The $245 million figure on food and beverage services comes from the GAO report on Amtrak. There's no reason to believe the report was politically motivated or tainted. Unless you have evidence proving otherwise, you really shouldn't indict the report like that.

The full GAO report on Amtrak can be found here:

Specific questions regarding Amtrak's food and beverage services can be found here:

And an important point regarding the Heineken Beer. The GAO went to Amtrak with the Heinken Beer example. Amtrak maintained it was a data entry error but provided no evidence. It took over a month for that evidence to be furnished. That wasn't GAO's fault. And in that second link above, it appears Amtrak purchased strip steaks for $7.58 per 10 ounces of meat. Amtrak than called the purchase an "emergency" but again provided no evidence. This time the evidence never came.

My point on the airline subsidies was referencing Southwest and JetBlue specifically. They have found a business equation that doesn't require the massive payouts that Delta, United, American, and Continental apparently need every year. Yes, there are indirect subsidies in the form of airports, air traffic controllers, etc. but my point was they don't rely on direct government payouts to simply remain in business. The big carriers do. As you have said before, any mass transit requires at least initial governmental support and investment including airplanes, trains, automobiles, you name it.

But the direct airline subsidies illustrate why the government should not be in the business of subsidizing airline carriers OR Amtrak. They just continue to dig a deeper hole. As corporations, these carriers (Amtrak included) become dependent on the direct subsidies. It's hard for them to imagine life without them. The government should still support mass transit systems in various forms, but it should not be propping them up just to stay barely afloat on the balance sheet.

The FOX high speed rail plan in Florida was not the end of the story for high speed rail there. In 2000, voters approved a constitutional amendment to the state constitution that called for developing of a high speed rail system by 2003. The amendment was later repealed by voters in 2004. But the Florida Legislature still has laws on the books requiring funding.

It is true that Jeb Bush was squarely against any high speed rail in Florida and that is unfortunate but it took more than the Governor to bring the whole thing down. The public-private partnership was falling apart anyhow. For instance, Walt Disney Co. wanted a stop at Walt Disney World and its adjacent properties but not any other stop in the city of Orlando.

I don't think Amtrak is evil or useless but I do think greater efficiency and protocols should be used, particularly when they're handling taxpayer dollars. And I'm not willing for the airline carriers to go off the hook like others may be. The same should go for the airlines as well as Amtrak. What's good for the goose is good for the gander.

Blogger hardiho said...

OUR VIEW: Get Cleveland-Lorain commuter rail going, plus downstate rail
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Let's hope that Gov. Strickland's call for passenger rail service from Cleveland to Cincinnati via Columbus also gives a boost to the long-sought commuter rail service from Cleveland to Lorain and beyond.

Strickland has asked Amtrak to study the idea and approach it from the angle of using existing tracks to get things up and running more quickly than building an entirely new high-speed system. Trains could travel at nearly 80 mph, according to rail proponent Ken Sislak of the non-profit group All Aboard Ohio.

Blogger hardiho said...

Oh, please! Government is not the evil monster of waste you seek to portray it as being. The non-Shinkansen Japanese rail lines do not make a profit because of the nature of the service provided, not because they are government-run. Indeed, no private operators are willing or able to profitably operate these local, short-distance services, so government is the provider of last resort.

The GAO's $245 million figure is, at best, suspect because of the assumptions behind it. Among the other GAO report flaws is the assumption that elimination of food service costs will have liitle or no effect on passenger volume. Still another flaw is the assumption that only sleeping car passengers want or use on-board food services. Both these assumptions -- and many more -- demonstrate what I said earlier, that the GAO report authors do not understand the actual role played by food service in passenger train operations.

If government should not be in the business of subsidizing transportation, how then would we build, maintain and operate public streets and highways? First, the very existence of a highway trust fund with dedicated revenue sources is a subsidy to highway users not available to rail passenger service users. The trust fund reduces highway financing costs that would otherwise require the costly services of private commercial banks. The trust fund drastically reduces the need for bond issues that would incur high private bond interest charges. Even with state and federal highway trust funds, about one third of all highway construction & maintenance costs are covered by non-user fee tax revenues such as local and state income taxes, property taxes and special assessments. Several years ago, at least three separate studies concluded that to make highways truly user-funded only would require added users fees roughly equal to $3.00 per gallon of gasoline. If all identifiable auto user costs to society were to be covered by direct user fees, the gas tax would have to rise by as much as $30 to $40 per gallon!! Given the inflation in highway cosntruction costs since these studies were completed, current gas tax increases would be vastly higher. No sane person can seriously argue that this nation could or should even try to impose such charges directly on auto users.
What about tolls? On limited access highways, old fashioned toll booths with "FastPass" facilities could work. To impose user tolls on all public streets and highways would require use of highly intrusive automatic tracking devices, giving some government agency detailed info on where each and every motor vehicle is at any given moment. Is economic purity worth such intrusion upon our privacy? I do not think so!
Florida voter repeal of that state's high speed rail program was the result of a well-crafted propaganda campaign by rail opponents, not the well-informed choice of enlightened voters. Disney's myopic demand that its property be the site for the only off-airport station near Orlando just demonstrates the threat to good public policy posed by public-private partnerships. A truly progressive approach to such problems is to politely inform potential participants that their private preferences cannot and will not control such public policy decisions. Disney could and should have been told that it had the choice of having a station within its property if it participated, or on its periphery if it did not, leaving Disney with the expense of getting its customers between said station and its property; there would be no publicly funded connections provided.


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