textfiles/magazines/DELAWARERAIL/dvrp95am.txt

The Delaware Valley Rail Passenger



Special Issue: The Future of Amtrak



May 1995

Vol. XIII, No. 5A 

ISSN 1073-6859



Published by the Delaware Valley Association of Railroad Passengers

in the interest of continued, improved, and expanded rail service for

the present and potential railroad and rail transit passengers of

southeastern Pennsylvania, southern New Jersey, and nearby areas.



For more information about DVARP and good rail service, please contact

us: P.O. Box 7505, Philadelphia, PA  19101 215-222-3373







The Amtrak Crisis: How We Got Here



by Matthew Mitchell



Wasn't it just a couple of years ago when Graham Claytor said that

Amtrak was going to be able to operate without a Federal subsidy by

the year 2000?  Now Tom Downs says Amtrak faces imminent bankruptcy if

service is not cut immediately.  Did Amtrak's financial situation

deteriorate so quickly?



No.  Amtrak's basic financial situation didn't change much at all.

What did change was management's response to the chronic problem of

disinvestment in infrastructure and equipment.  In the Claytor

administration, Amtrak played along with the government's wishes to

have a nationwide passenger train service without paying for it.

Maintenance was deferred, and most importantly, Amtrak used up its

working capital to pay for everyday bills.



When Tom Downs took office in late 1993, he determined Amtrak couldn't

go on like this, as the working capital would be totally depleted by

this year.  He saw immediate reductions in spending as the only way

out, but with government regulations making some moves impossible, he

chose to cut service.



The cuts are especially painful because every cut in service means a

cut in fare revenue, which can lead to a downward spiral towards a

total end of Amtrak.  Much of the controversy over the present cuts

(see cover stories) is the result of how those cuts were made.  Down's

goal was to make the fewest cuts possible while still balancing the

budget.  That required an accounting of what each train costs to run

and what it brings in as revenue.  Downs commissioned a study by a

consulting firm to give him that data.



But people who have studied this issue know that deciding which trains

are the best financial performers depends greatly on how you allocate

the costs and the revenues.  Do you use the 'short-term operating

costs,' which are the immediate savings from shutting down a train?

Do you use the 'fully-allocated costs,' which include administrative

and capital costs?  Or do you use another formula?  Amtrak brought

much of the immediate controversy upon itself by keeping the

accounting questions private.  So everyone who lost trains felt that

the process was rigged against them, and any work Downs did to make

this an objective process was wasted.



With the immediate problems covered, let's look back further to the

root causes.  The real problem with our passenger rail system is the

vast government subsidies to its automobile and airline competitors.

The nationwide rail network, including the Northeast Corridor, was

built with private-sector capital.  Some lines in the West received

Federal land grants, but the value of those grants was repaid many

times over in reduced-price transportation provided to the Army and

other government agencies.  The railroads have to pay taxes on the

land and the rails, and pay dividends to the stockholders who supply

the capital that maintains tracks and buys trains.



Meanwhile, government capital was used to build roads and airports.

Bonds for them were further subsidized through tax-exemption.  Much of

that spending came from the military budget, definitely not from user

fees as the road- and airport-building lobby claims.  Exemption from

property taxes is a huge subsidy, made up for by every taxpayer



And adding insult to injury, railroads have been singled out for

discriminatory taxes for decades.  A 10 percent Federal tax on

railroad tickets (now repealed) went to the general budget, hastening

the demise of private-sector passenger trains.  Taxes on airline

tickets went to a trust fund for airways, while taxes on gasoline and

diesel fuel went into a highway trust fund.  With this kind of unfair

treatment, it's a miracle the trains survived as long as they did.

Discriminatory rail taxes continues today: over $100 million of

Amtrak's budget goes to payroll taxes levied only on rail workers.

(See "The Hidden Subsidies" in the June 1994 DVRP)







From the Editor's Seat:  Fixing Amtrak



There was some controversy within our organization when Jim Thornton

submitted his article on Andrew Selden's prescription for Amtrak's

fiscal woes.  Why publish views that nearly all of us oppose?  Why?

Because these views are out there, and responsible advocates have to

respond to them, not hide from them.  I'd like to thank Jim for

analyzing this point of view and letting me edit his original article

for this feature.  Thanks also to long-time DVARP and NARP member John

Dawson for his forceful critique.



I'm pleased to put this special edition of the DVRP together for you,

in the interest of stimulating constructive discussion and fixing

Amtrak's problems once and for all.  Fixing Amtrak is a big job:

balancing the budget in the short run, finding a source of capital so

Amtrak can maintain and replace its assets in the medium-term, and

restoring balance to the nation's transportation policies in the long

run, so the free market can work.  DVARP is working at all those

levels; your part of the task is to write or call elected officials,

to tell them you want a level playing field for trains, planes, and

automobiles.--MDM



DVARP President: Donald Nigro

Newsletter Editor: Matthew D. Mitchell

Amtrak Committee Chairman: John Dawson	



entire contents copyright (c) 1995 DVARP

Opinions expressed in The Delaware Valley Rail Passenger are not

necessarily those of DVARP or its members.



We welcome your comments: call 215-222-3373







DVARP Statement on Amtrak's Future



presented at Amtrak public forum, Philadelphia, May 3



The service cuts recently enacted, as well as those still pending, may

help Amtrak resolve its short term financial problems, but they can

only exacerbate its long-range problems.  The problem is not that

Amtrak's network is too large and needs to be pruned in order to

achieve maximum efficiency, but rather that it is too small and thus

suffers from a diseconomy of scale and connectivity insufficient to

achieve full market penetration.  Indeed, Amtrak found itself in a

similar predicament during the late 1970s.  A study conducted by the

U.S. Department of Transportation at that time showed that an expanded

network reduced the subsidy required per passenger-mile. Shrinking the

system can only lead to loss of ridership, revenue, and political

support.



The first round of cuts as proposed by Amtrak hit this region fairly

hard.  Amtrak service to Atlantic City was to be eliminated and that

to Harrisburg severely reduced. Long-distance cuts included one-third

of the Florida service and the overnight train to Montreal, as well as

reduced frequencies to New Orleans and elimination of the spur to

Mobile.



As it turned out, the full impact of these cuts was mitigated by

actions taken by the states.  The Atlantic City Expresses are gone,

but New Jersey has increased its own rail service to Atlantic City,

including extending more trains through to 30th Street Station in

Philadelphia, and has agreed to honor Amtrak tickets.  Pennsylvania

stepped in with $2.6 million to keep most of the Keystone Service

running another year.  And with the Adirondack extended to Washington

and Vermont's support of a daytime train along the Connecticut Valley,

Philadelphia has retained direct service to Montreal and Vermont.



The second round of cuts, scheduled for implementation this summer,

will greatly reduce the carrying capacity of the national system.

Service between the East Coast and Chicago will be reduced from 24

round trips per week to 14, and Philadelphia will lose all direct

service to the Midwest.  There will not be enough seats or berths to

meet demand, and the overall utility of the system to travel ers will

be reduced.



The states cannot be expected to help preserve long-distance service.

Their funds are limited, and as a practical matter, it would be almost

impossible to get multiple states to agree on the terms of support.

Even with respect to corridor service involving more than one state,

the record of cooperation has not been good.  The New York-Detroit

Niagara Rainbow (NY, MI), the Philadelphia-Washington Chesapeake (PA,

MD), and the New Orleans-Mobile Gulf States



(LA, MS, AL) have all failed.  If the states are going to assume

greater responsibility for corridor service, the quid pro quo must be

that the federal government accept full responsibility for a fully

connected national system.



Currently the airlines are engaged in ruinous competition with each

other.  Not only has this destroyed their financial viability, it has

impacted Amtrak's revenues.  Low airfares both capture passengers that

might otherwise travel by train and limit Amtrak's ability to charge

compensatory fares.  Further, Amtrak is forced to pay 6.8c tax on

every gallon of fuel it consumes.  The proceeds of this tax go toward

for deficit reduction, and it was originally intended to be applied on

most fuel consumed for transportation purposes.  Ironically, the

airlines received a waiver on grounds of financial distress.  [The

airlines' distress is not caused by their cost structure, but rather

by the competitive position in which they find themselves.]  Either

Amtrak should receive a waiver or the airlines should also pay the

tax.  Both should be subjected to the same rules.



While it is true that federal appropriations to support Amtrak have

increased since 1990, they are only now approaching the point where

they were in 1980, and this is when measured in constant dollars.

After allowing for inflation, federal support still lags behind what

the railroad received 15 years earlier.  Particularly telling was the

drop in capital support that occurred in the early 1980s.  For most of

the decade, new investment fell far short of depreciation.  The result

was steadily deteriorating service. Had Amtrak received a steady flow

of capital payments, it would not be in the position it finds itself

today.



Both the aviation and highway infrastructures benefit from the

existence of trust funds, but in contrast Amtrak must live on

year-to-year appropriations by Congress. This certainly makes

long-term planning more difficult, and it subjects Amtrak to the

vagaries of the political process.  It has long been suggested that a

trust fund be established for Amtrak.  One way to do this would be to

use 1c of the portion of the federal fuel tax currently dedicated to

deficit reduction.  This portion is now scheduled for reduction at the

end of FY 95, and 1c could be held back.  This would have no impact

either on the federal deficit or on highway trust funds, and its

impact on families would be measured in cents per week.  This would

generate over $1 billion per year and would provide all the capital

and operating funds Amtrak needs to expand into a healthy railroad

that meets the nation's needs for the 21st century.



There is a dangerous misconception circulating that there is a healthy

core to Amtrak that, with efficient management and the proper

incentives, could be operated free of federal subsidy.  This most

definitely is not true.  There is not a passenger railroad anywhere in

the world that is able to do this.  While the operating cost recovery

can always be improved, it probably cannot be eliminated, and to

improve the cost recovery requires a modern railroad supported by a

steady stream of capital investment.



The Delaware Valley Association of Railroad Passengers believes that a

national passenger railroad system is a strategic asset that provides

important economic and societal benefits.  Instead of simply trying to

reduce Amtrak's costs, we should be seeking ways to increase the

return on our investment.







Perspectives: Northeast Corridor



Cut Service in the Corridor? by James Thornton



Amtrak's service cuts for February and April 1995 are but 'phase I' of

its program to shrink its railroad to match its budget.  It includes

21 percent of its operations eliminated and 5,500 of its employees,

4,600 of them unionized, being shown the door.



In the January California Rail Passenger Review, Minnesota ARP

president Andrew Selden's article "Disaster Strikes Again" summarizes

Amtrak's latest cash crisis.  It describes possible savings, mainly in

cutting Northeast Corridor operations.  He states that $100 million

can be saved by cutting the top speed from 130 [the actual top speed

is 125] mph to 110 mph, but gives no specifics



Selden also proposes that Metroliners and conventional trains be

combined into a single hourly service with multiple classes of

service.  This is supposed to save another $100 million.



I assume savings would come in reduced track maintenance, energy

consumption, and wear and tear on equipment etc. from running 125 mph

trains.  Selden claims no revenue would be lost in such

reorganization of operations.  Some excerpts from the article:



Amtrak's failure to build up its business in some markets, and its

failure to build up business in capture available, hugely profitable

traffic in under-served, high-revenue markets, are a direct result of

14 continuous years of Claytor-Norman-NARP fixation on

semi-high-speed Northeastern corridor markets that are inherently

incapable of financial success however many short-distance riders they

carry.  At the same time, the regime neglected high-revenue

long-distance markets in the west due to their relatively lower

ridership counts (as compared to the NEC). The NEC by itself would

cost, according to Amtrak and the Congressional Budget Office, $350

million a year in subsidy.  That amount virtually equals Amtrak's

total national operating subsidy. And the NEC still consumes 95+% of

Amtrak's scarce capital resources.



Mr. Downs' actions are acceptable only as a very short-term response

because in the intermediate to long term, they won't work. Cutting

long-distance trains has never worked to stem loses-- revenues

disappear much faster than costs.



Viewing the crisis in an objective, long-term perspective, we are

witnessing the end result of 14 years of a steady, systematic

controlled liquidation of Amtrak--its equipment run into the ground,

depreciation vastly greater than capital replacement, its physical

facilities steadily eroding, its financial reserves exhausted.



The crisis at Amtrak is not over.  Still more route and frequency cuts

will occur later in 1995, with virtually all long distance routes

going to tri- or quad-weekly schedules, but only token reductions in

the NEC.... No new services will happen. [not true: Piedmont and

Vancouver services started last month]  Almost all Heritage Fleet cars

will be removed from service.  Unions will be asked for work rule

changes for greater productivity.  And fares will be going up again,

but no plan to expand Amtrak's sales or market share in non-NEC

markets.  Tom Downs has taken steps that should have been taken eight

or more years ago--slashed and decentralized a management bureaucracy,

redeployed assets, begun outsourcing programs to slash costs to true

market levels, and eliminated many of the executives who created the

mess in the first place.  But he has also cut trains which should not

have been cut.



Selden addresses NEC speeds, but doesn't mention that only Metroliners

are allowed 125 mph.  Conventional Amfleet-equipped trains are allowed

110 mph; long-distance trains powered by older six-axle E60 units and

diesel-hauled Atlantic City trains must travel at lower-than-Amfleet

speeds in many locations.  Some under 100 mph segments could be

speeded up, if only incrementally by 5-10 mph.



Dwell times at Penn Station in New York, now 20 minutes or more on

through trains, could be shortened, easing station congestion. Speed

afficionados who still want 125 mph capability would have it, if at

all, on two segments: New Brunswick--Trenton, NJ and Wilmington,

DE--Perryville, MD, the latter the only stretch of the Corridor not

shared with commuter trains.



Changes to the Northeast Co rridor Operations need not be limited to

those listed above.  Schedule patterns could be changed, replacing

Boston/Springfield to Washington combined trains and New

York-Washington trains with hourly service alternating between

Boston and Springfield.  Dwell time at New Haven would be reduced and

switching eliminated except for the locomotive change.



One Metroliner each way could be extended to Albany, replacing an

Empire Corridor turn.  Ditto for Richmond, VA, supplementing existing

service south of Washington.  No new equipment need be used save for

an extra car on each train and diesel units for off-corridor use.

These would be a step toward logical extensions of the corridor to

cover a greater portion of the Eastern seaboard. The revised Boston/

Springfield-Washington service would include existing Virginia trips.



These changes should be implemented as part of the second phase of

Amtrak's economy moves.  A third phase, if Congress relents and funds

Amtrak for another year, could be restoring some service lost in years

past, or starting new routes.



One long-distance change Selden and RailPAC favor, but which Amtrak

should not undertake, is to terminate eastern long-distance trains at

Washington or Albany instead of New York, forcing passengers to

transfer to regular Corridor trains.  Would the Postal Service accept

delays caused by switching mail cars between trains?  Could

long-distance trains thrive without the mail contracts?  Also,

clearances in the Capitol Hill tunnel haven't been increased yet.



Turning trains in Washington, according to Selden's source, would

save 892,010 gross train miles and $17.8 million, annually.  On the

Crescent, a set of equipment could be saved and used elsewhere.  But

the all-change-at-Washington idea doesn't mention lost ridership

resulting from the forced transfer.  It may be a ploy to thwart

Amtrak's ploy of burdening long-distance trains with disproportionate

Northeast Corridor operating costs.



Instead, trains like the Silver Star and the Crescent could be

diverted from the Corridor to parallel CSX and Conrail lines.  It

should be practical to use Superliners on the Lake Shore Limited,

provided clearances permit.





Why Corridor-Bashers Are Wrong by John A. Dawson



One of the more vociferous and persistent critics of Amtrak's

Northeast Corridor (NEC) Is Andrew Selden, who is a Minneapolis lawyer

and, though not opposed to rail passenger service, apparently

believes that this area receives more than its fair share.  Selden

believes that NEC costs can be reduced considerably, without adverse

effect on ridership or revenues, by combining Metroliners with

conventional Corridor trains, reducing top speeds from 125 to 105 mph,

running three-class trains on an hourly basis, and operating more

run-through trains to points beyond Washington and New York.



While the equity issue is certainly debatable (there are many other

programs which disproportionally benefit Midwest states), it behooves

us to question the validity and consequences of Selden's program, and

the impact it would have on the national Amtrak system, as well as the

NEC. First, it is not likely that any rail resources freed through

scaling back operations on the NEC would be redeployed to Midwest and

Western services; and second, showcase operations on the Corridor have

strengthened the case for Amtrak service expansion in new corridors

across the country by demonstrating the value of rail service.



While much of Selden's statements are only opinions, they are

sometimes based on erroneous and misleading facts.  Selden's basic

argument is that while the NEC carried half of Amtrak's passengers,

they are short-haul passengers who contribute relatively little to

operating revenues, so Amtrak could improve its financial performance

by cutting service on the Corridor and increasing it elsewhere.

Though his service figures are roughly correct, his revenue estimates

are grossly underestimated.  NEC passengers pay 50 percent more per

mile traveled than long-distance passengers, even when revenue from

sleepers is counted.  The revenue yield for Metroliner passengers is

more than double that of the national system.



All of this is not intended to denigrate the national system, or to

say its passengers are paying too little, but rather to demonstrate

that the NEC is contributing more than its fair share to the overall

system. We should be wary of any attempts to lessen its effectiveness.



Selden argues that his recommendations would add only seven minutes to

the New York-Washington travel time, and this would have little effect

on marketability.  This is patently ridiculous.  Station stops would

have to be added to many trains, and all those stops would be longer

as passengers are directed to the right part of the train.

Lengthening trains would slow acceleration, and further lengthen the

trip.  If Metroliner travel time is considered as the baseline, it

would increase about sixty minutes under Selden's plan. The

speed-restricted trains traveling today on the NEC take about four

hours to cover the distance between New York and Washington.



With its Metroliner service, Amtrak has demonstrated its ability to

reach different market segments and attract a business clientele away

from the airlines.  This gives passenger rail service important

ammunition to ward off criticism.  The operational and marketing

success of the Metroliners is based on frequency, reliability, and

speed. It would be foolish to destroy this market.



With respect to one of Selden's other points, Amtrak has increased

run-through service, but some of those branches do not perform as well

as the main Boston-Washington axis, and were cut just as midwest and

western trains were.  Passengers in Lancaster PA, Atlantic City NJ,

and Worcester MA are likely to dispute the claim that Amtrak is biased

in favor of Northeastern states. It is disheartening to see

statements like this coming from someone who claims to promote rail

passenger service. Selden's facts are often wrong or stated in a

misleading way. Pitting one part of the Amtrak system against the

others plays right into the hands of Amtrak's opponents in Congress.

As rail advocates, we should be supporting the service wherever the

market exists, not attacking the other guy's service.  Let's use the

good service of the Northeast Corridor as a model to support and

expand rail service nationwide.







Long-Distance Train Bashers Are Wrong, Too



The sniping about which part of the Amtrak system pays the bills and

which doesn't is not a one-way phenomenon.  Rep. Susan Molinari (R-NY)

is one of the people who claims that the Northeast Corridor could be

profitable if they were cut off from the rest of the system and

privatized.  As one of the leaders of the House railroad

subcommittee, she may try to force this breakup and privatization of

the system.



But like the arguments of the Corridor-bashers, this argument is also

based on a misinterpretation of the facts.  Corridor trains may be

profitable if only operating costs are considered, but the new

operator would have to bear the expense of maintaining and upgrading

the infrastructure too.  This could amount to a hundred million

dollars or more per year, even if the Federal government completes the

investment in electrification from New Haven to Boston.  The only way

any business running the trains, Amtrak included, could make a profit,

would be by running the system into the ground!--MDM



Amtrak Budget at a Glance

	amounts in millions



Operating expenses (approx.)     $1,970



Operating revenue (approx.)     1,480 

Reimbursement for taxes[1]        137.0

Federal subsidy[2]                351.7



Capital Investment (systemwide)   195.0 

NEC Improvement Program           225.0

Penn Station (N.Y.)[3]             10.0



Total Federal funds (FY 94)       918.7



Federal highway spending[4]    19,938

Federal airway spending         4,582



1-Paid directly to IRS 

2-19 percent of budget 

3-Earmarked funds for conversion of old post office 

4-25 times higher than rail spending, does not include hidden subsidies





Quotable



"Limited remaining capital funds are generally committed to short-term

projects that enable Amtrak simply to keep its equipment operating and

complying with Federal laws.  Very little is left over to invest in

projects that might increase revenues [or] improve the efficiency of

operations...."

     --U.S. General Accounting Office





"Ampenny" Could End Reliance on Congress



The budget resolutions now pending in the U.S. Congress will doom

Amtrak and greatly reduce the level of transit services in our cities

and towns.  Amtrak simply will not survive without Federal funding;

not even the Northeast Corridor. And the shift to highway and air

travel will be accelerated if the Federal match for rail and transit

projects is reduced from 80 to 50 percent, and highways remain at 80

percent. Given that a budget resolution along these lines will

probably pass and that it will serve as the budget blueprint for the

next several years, how can Amtrak service be preserved?



Two years ago, Senator Rick Santorum, then a member of the House of

Representatives, came to the regional meeting of the National

Association of Railroad Passengers, held in Pittsburgh.  There he

suggested that a trust fund be established for Amtrak, similar to the

trusts funding some of our highway and airway investments.  The trick,

of course, is funding a trust fund for Amtrak.  Obviously, it cannot

come from something as simple as a tax on rail tickets.  If that would

work, Amtrak could simply increase its fares and forget the trust

fund.  But perhaps there is a way a trust fund could be established.



Amtrak currently pays 6.8c federal tax on each gallon of fuel it

consumes.  This is the portion of the tax used for deficit reduction

which is levied on most transportation users [but not the airlines],

and it is scheduled to be reduced by one-half at the end of this

fiscal year.  Instead of reducing the tax by the full 3.4c, we could

hold back one penny and use it to establish a trust fund to support

intercity passenger rail service.  This would provide adequate capital

and operating support for Amtrak, as well as for future high-speed

rail projects.  Had this been done in the 1980s, Amtrak would not be

in the fiscal bind it finds itself in today.  And if Rep. Bud Shuster

from Altoona is successful in taking the trust funds 'off-budget,'

Amtrak could continue to maintain its full national system without any

impact on the U.S. Treasury.  These funds would not come at the

expense of highway spending, nor would they constitute a new tax.  We

would simply not reduce an existing tax by as much as previously

planned.  Considering that few households consume more than 20 gallons

of gasoline per week, the average cost per household would be pennies

per week.



This appears to be a workable concept, and it may be the only way

intercity rail service can be saved.  We should push for it.  The

alternative is the loss of a valuable transportation asset, one which

has served our region and our country well.--JAD







Support Amtrak:  Support DVARP



Yes, I want Amtrak to survive, and I want DVARP to work for me!



Here are my DVARP membership dues for 1995!





Name		



Address	



City, State, Zip	



Please choose a category below, enclose check and mail to:



DVARP, PO Box 7505, Philadelphia, PA 19101



(  ) Regular: $16.00     (  ) Family:  $20.00    (  ) Supporting: $25.00



(  ) Sustaining: $50.00   (  ) Patron: $75.00    (  ) Benefactor: $100.00



(  ) under 21 or over 65: $10.00	



(  ) I'm already a DVARP member: here is an extra contribution for our

fight to keep and expand Amtrak service nationwide