The corridor trains in the densely populated NE seem to have done best along with CHI-MIL. Beyond that, the corridor and LD trains seemed to be somewhat evenly dispersed. The surprise to me was the poor showing of the Cascades and California corridors.
If it were not for WisDOT and IlDOT direct supervision the CHI-MIL trains would have probably been discontinued at some point in the past because Amtrak wasn’t doing that well with customer service or with marketing.
So lets see Cost of Running them $24 million
Ticketing Revenue approx $16 million
They want to add three more RT in the next 2-3 years. I wonder how that will impact. Still $24 million in costs for an 85 mile corridor, seems like a lot. Then again I thought almost half a million for food service costs Amtrak used to charge was excessive.
I don’t think any of us know enough regarding how either “cost” or “revenue” is assigned by route to put much faith is tables like this. Certainly, over the years many authorities such as Mr. Frailey or the Illinois DOT have indicated doubts regarding Amtrak’s figures.
But they are better than nothing. The sticking point has been allocation of overhead. The blogpost included this down in the comments:
Stripping off the overhead, it still costs a lot to run the western long-distance trains ($128.8 million in 2012). The eastern ones are cheap ($22.3 million in 2012).
"I just reran my spreadsheet on this (fixing some typos). If you assume that overhead hasn’t changed since 2012 (a bad assumption), you would get before-overhead results as follows:
Auto Train: $30.2 million profit before overhead
Silver Meteor: $9.2 million profit before overhead
Frailey, Phillips, as well as others, have claimed that Amtrak’s cost accounting is flawed. But they have not offered any verifiable evidence to support their claims. They don’t have access to Amtrak’s books, so they are just guessing.
In 2015 the NEC trains had a contribution before interest and depreciation of $457.6 million or 23.5 cents per passenger mile (42.8 cents ppm for the Acela’s and 13.6 cents ppm for the Regional’s). Based on ticket revenues alone the NEC had an operating profit of $402.1 million.
Assuming the NEC gets 80 per cent of Amtrak’s interest and depreciation expenses, it had a fully allocated loss of $225 million or 12 cents ppm in FY15. Amtrak does not reveal how much interest and depreciation is attributable to the NEC, but given its overall infrastructure layout, which would account for a substantial portion of these charges, 70 to 90 per cent seems reasonable.
Based on total revenues the Hiawatha’s lost $3.8 million or 5.9 cents ppm. However, based on ticket revenues, the loss was $7.6 million.
The Pacific Surfliner’s lost $19.4 million on total revenues or 7.9 cents ppm. Based on ticket revenues, the loss was $55 million.
Total revenues include state operating payments and other revenues. I am not sure about the other revenues, but I suspect some of them come from dining car and lounge car sales, rents, allocation of fuel hedge gains, etc.
Amtrak’s overheads are allocated. The allocation categories can be seen at the top of the table columns on Page C-1 of the September 2015 Monthly Performance Report.
Amtrak’s allocation methodologies are not revealed. This practice is in line with most corporations. P&G as an example does not tell the readers of its financial statements how it allocates overhead expenses. Allocation of expenses is an internal cost accounting process.
Depreciation and interest are not allocated. Because of prior period sale and leasebacks of equipment, Amtrak claims allocating these items would be distortive.
Some people claim that Amtrak does not allocate its overheads properly, although they offer no evidence to support this claim. Unless they have access to the company’s books, they will only be able to speculate.
Some of those who claim Amtrak is not allocating its overheads have pointed to IG findings that Amtrak over relies on allocations. As long as the process is verified periodically through an independent audit, there is nothing inherent in allocations that cause them to be distortive.
SAP is an empty shell not much different than intuit QUICKBOOKS. If it is not configured or setup correctly your going to have a mess. Just because they use SAP and I use QUICKBOOKS does not mean either one of us is following GAAP or FASB rules. So I have no idea why you even mentioned SAP. No need to explain it though, Amtrak accounting doesn’t interest me in the least.
I disagree with your main premise though that nobody can second guess Amtrak’s accounting practices unless they have access to the books. Because we are seeing several states do just that by taking over the responsibilities from Amtrak or dropping services altogether. Look at WisDOT and the takeover of Amtrak Stations on the Hiawatha route because Amtrak was not maintaining them. Look at how they dropped food service after being bilked on it year after year. Slowly but surely WisDOT is getting closer and closer to the true costs of running trains Milwaukee to Chicago and I’ll bet IlDOT is as well with their METRA experience. Once WisDOT and IlDOT purchase their own cars and locomotives for the Chicago-Milwaukee Corridor, it will get more interesting. Soon the question will be asked…“Why do we need Amtrak for this Corridor?” And then they will RFP out the service and we’ll see what was real costs and what was fluff.
Anyone can second guess Amtrak’s accounting. No doubt about that! But that is all it is. A second guess! And without access to Amtrak’s books it remains a second or worse guess.
I would be keen to see the reports from any state department of transportation showing where Amtrak’s books and/or cost accounting procedures are distortive. A side by side analysis is critical.
The main point of the post is Amtrak’s policies and procedures regarding allocations. As noted it allocates all its overheads. It does not allocate depreciation and interest for the reasons stated.
Have had considerable experience implementing SAP in a very large financial institution, I am hard pressed to believe QuickBooks is in the same league. I have never heard of a Fortune 500 company using QuickBooks as its main accounting and financial report system. SAP is used by some of the most sophisticated companies in the world.
Whether it is SAP or QuickBooks, the system must be programmed to reflect the proper accounting standards.
The reasons for mentioning SAP was to show that Amtrak has the tools to allocate properly its overhead expenses as well as perform a variety of accounting, finance, and inventory management tasks. As is frequently the case, you missed the main point in the post and focused on an ancillary point, i.e. SAP.
The Financial Accounting Standards Board (FASB) sets the standards that forms much of the basis for Generally Accepted Accounting Principles.
Because it is like the Abortion argument and goes back and forth and back and forth with no resolution. I think that is why that Sam lady or guy (or whatever gender they identified as) got irritated and left. Some of us got sick of seeing the same argument over and over again.
I believe Samatha (? exact name) and JPS1 are the same person. Both have a background in the utility business in Texas with some experience in Australia. They share the same general opinion of Amtrak’s reporting, and both tend toward long, thoughtful posts on accounting matters. I don’t know why he changed the screen name, nor does it matter much.
I’d suggest JP read the exact language of the accountant’s certification. Ernst & Young recites the titles of the 5 statements for which they are being held accountable; any opinion E&Y might have regarding Amtrak internal cost allocations is not included but may have been privately communicated to Amtrak’s Board or management.
In 1968 the ICC did a forensic accounting type investigation of all avoidable costs of Class 1 passenger train operation per train-mile ™ and concluded they were about $6.5/TM in ($1968) using the cost ledgers that the ICC required, with investigation and some corrections for errors in assignment. The data was from an era of declining passenger volume and high remaining fixed costs after the cessation of 1st class mail carriage, with many underutilized union stations inflating fixed costs.
US ICC Investigation of Costs of Intercity Rail Passenger Service (1969) https://catalog.hathitrust.org/Record/000022941 (Page 25)
The ICC figure is about $47.0/TM in ($2016) after inflation adjustment for a long-term variable cost.
Amtrak reports Full Costs of about $70-80/TM today for much smaller, simpler long distance trains.
This is prima facie evidence that Amtrak is allocating large fixed costs onto the long distance trains using a formula that makes no sense when discussing cutting routes or services.
Previously the USDOT OIG determined that Amtrak’s methods used in RPS (Route Profitability System) are not appropriate to determine cost savings from the reduction of trains. It seems the formulas have survived into APT. I would not be surprised if they multiplied their hopefully internally known avoidable costs by 1.6 to get the full costs they report with no grounding in the reality of route costs.
Going back further, in a 1950 Industrial Eng
The external auditors attest to the five financial statements. I did not claim that they attest to the company’s cost accounting procedures.
The reference to FASB and GAAP was in response to a previous post that appeared to confuse the two, or at least did not show their relationship.
JPS1 began participating in these forums in February 2016. This is all you are going to know about JPS1. His or her bio data has nothing to do with the discussions on these forums.
Without direct knowledge of how Amtrak allocates its costs today, any conclusions about the appropriatness of its allocation procedures is speculation.
To try to apply 1950, 1968, and 1969 private rail figures to Amtrak 47-66 years later is (charitably) inappropriate.
Yes, the Amtrak costs should in fact be much less given the much reduced dining services and reduced consist sizes. That they are so much higher draws the cost reporting into question.
Remember, all the figures noted were inflation adjusted. Try as one may like, 1968 is the modern era. The steels like ASTM A242 all still exist today and are in use or have slightly different varities, wheels and rollerbearings are still nearly the same. Coaches built in 1965 are still in service with NCDOT.
HEP, PLC supervision for wheelslip and fire supression, engines, etc, and vacuum toilets are really the only differences.
OK well if true I am not going to get sucked into the Financial Arguments again, life is too short and as I pointed out with the BNSF rail accounting, the railroads were here long before the Utility Companies and their accounting is not the same, I can see arguing the financials of a specific type of passenger car but when you dive into the accounting of an entire passenger train…then roll in Amtrak on top…it’s just too opaque for anyone to make sense of.
So if Amtrak’s accounting methodology for overhead allocation is unknown and disputed, rather than returning to the glorious days of 1968, let’s look at an earlier post?
Stripping off the overhead, it still costs a lot to run the western long-distance trains ($128.8 million in 2012). The eastern ones are cheap ($22.3 million in 2012).
"I just reran my spreadsheet on this (fixing some typos). If you assume that overhead hasn’t changed since 2012 (a bad assumption), you would get before-overhead results as follows:
Auto Train: $30.2 million profit before overhead
Silver Meteor: $9.2 million profit before overhead
Palmetto: $4.8 million profit before overhead
Rather than start a new thread, I see a connection with this article here:
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