A quick thought: One of the advantages of cooking on the train is that your meals are still on-time even if your train is late. Kind of tough on both riders and off-train meal preparers when the train falls down.
If I were backing the expansion of the long distance trains, I would want to see a sophisticated market study of the potential for using the expanded capacity.
In FY11 the average load factor for the long distance trains was 62 per cent. I suspect that it varies widely depending on the segments, days of the week, and the season.
The Great Southern Railway in Australia has taken a different approach to Australia’s major long distance trains. For most of the year, for example, there is enough traffic to run the Ghan from Adelaide to Darwin one day a week. But during the winter months, when Aussies head north for the warmer climate in Darwin, the train runs twice a week.
The Great Southern Railway is a stock company. Its operations are subsidized by the federal government, but it must earn a return for its investors. Thus the flexibility of scheduling the trains in accordance with market demand. What a novel idea!
OK, I see where you are coming from. 15 billion expenditure to support 140 billion vehicle miles – that is your 11 cents per vehicle mile, and what is that on average, about 8 cents per passenger mile?
So the reasoning is that “most of us” start our car in our driveway, head out on the local streets, merge onto the Interstate to get to some remote destination, and are cross subsidized to the tune of 11 cents per vehicle mile, 8 cents per passenger mil on the rural Interstate portion of the trip. Maybe they are “cross-subsidizing” themselves because the day-to-day driving is paying gas taxes against the cost of the rural Interstate portion of the trip, but what if a person preferred that their cross-subsidy go to a train station in their local community and then take a train for the cross-country part of the trip?
Good. Let’s set the standard for subsidizing intercity trains at 8 cents per passenger mile. In the name of fairness and leveling the playing field. In the name of giving a person an alternative between a rural Interstate and a long-distance train.
So we set the current Amtrak subsidy at 400 million per year and make allowance for increasing that subsidy with increased Amtrak traffic levels or a cost-sharing arrangement with individual states. This is pretty much the number that President George W Bush arrived at in 2006 as an Amtrak “reform” proposal and as a "reasonable le
Two solutions:
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Meal provider gets ETA from the train. Meals arrive hot.
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Train has provision for warming ala trans-Atlantic aircraft.
or both
A good idea if you can find something else for the equipment to do while it would be otherwise idle. At the extreme, you wouldn’t size your fleet for the day before Thanksgiving only to have 15% of your fleet sit idle for the other 364 days of the year.
With the exception of the locomotives, all the equipment used by The Great Southern Railway is from the 1950s. It was built in Australia under license from Budd. It is fully depreciated. Of course, it would be more effective if the equipment could be better utilized, but it does not carry the same financial burdens as new equipment.
A “useful” function for the idle equipment could be scheduled maint/overhaul. You could have 20% of your equipment out of service during the down periods and try to get 100% on the road during the peak.
don; very astute. at present AMTRAK shows AVERAGE equipment availability at about 87% . So maybe most times availability is somewhere between 80 - 85% ? and at peak periods may be above 95% ? am wondering if the Michigan derailment cars will be fixed by thanksgiving ?
Pretty much Paul has it, but the number is for “long run” variable costs on the government side. Amtrak moves around 6 billion passenger miles so $480 million is the rough variable subsidy, inclusive of equipment capital, terminals, stations, and operations. The report was mostly meant to examine the long-distance network, off-corridor.
However, it seems that there are fairly high cost for the corridor that are non-variable with respect to Amtrak operations, around $300-400 million off hand though I need to look through the appendices from the SAM_APT method that Amtrak is using as of this summer. A fair amount of this is to support non-Amtrak commuter corridor operations, which access the NEC at incremental costs per the old ICC decision that is supposed to be going away with PRIIA.
Then throw in about $200 million in agency overhead costs that I am not too keen on figuring out. Does it include more railroad retirement than is fair? I really am not equipped to figure that out. But I didn’t include highway administration or unfunded state pension tails, though I am not saying they are equivalent financially.
Put all that together and you are pretty close to the Amtrak budget minus the crazyness of recent years.
Now, check Page 23 & 24 of the report draft. If the Crescent route was operated according to the PRIIA recommendations the variable costs, inclusive of equipment capital, is around $0.105 per equivalent automobile vehicle mile. In other words a modest capacity and operations change gets you to the historical interstate cross-subsidy number. For more demand you have to have lower fares of course. The paper draft has attempted a crude estimate of this on Page 24.
As to ideas to rotate most of the OBS crews off the trains at night so as not to require accomodations, that might just take care of itself under the arrangement. The game would be changed from lets see how much money we can get, the “big pot of money” plan, to lets provide the
Mr./Ms. V.Payne,
You keep referencing a “cross subsidy”. 1) Just who is structuring such a cross subsidy?, 2) Who is the money being taken from?, 3) Who is the money being given to?
There may well be a subsidy involved, but I question the existence of any cross subsidy. My understanding of a cross subsidy is defined well at:
http://rru.worldbank.org/Documents/PublicPolicyJournal/107irwin.pdf
Are you using some other definition of a cross subsidy? If so, could you clue me in.
One other question. Who will hold the guns on the people to get them out of their cars and on to a train that: 1) doesn’t leave from where they are, 2) doesn’t go to where they want to be, 3) doesn’t leave or arrive when then want to do those things?
from Barron’s Dictionary of Accounting Terms: Cross subsidy = Improper assignment of costs among objects such that certain objects are overcosted while other cost objects are undercosted relative to the activity costs assigned. For example, traditional cost accounting systems tend to overcost high-volume products and undercost low-volume products.
from article at https://docs.google.com/open?id=18YLhGo9pGaJlmAgYYmUu_MWJmxd1tEftERD37NuqV_ZjuBJOSKID9xCErV2I there are four differing criteria:
1: MARGINAL COST CRITERION a price scheme is said to have
cross subsidies, if some consumer prices are lower
than the marginal cost.
2: AVERAGE COST CRITERION a price scheme is said to have
cross subsidies if some consumer prices are below
average costs and others are above.
3: INCREMENTAL COST CRITERION a price scheme is said to have
cross subsidies if revenues from a consumer or a
group of consumers are less than the incremental
cost of providing services to that consumer or group
of consumers.
4: STAND-ALONE CRITERION a price scheme is said to have
subsidies if the revenues from a consumer or group
of consumers are larger than the cost of providing
service alone to this consumer or group of consumers.
No, this is wrong. I think you need to reread the dictionary and quote it directly…
A cross subsidy, or any subsidy, is not an “improper assignment of costs”. A subsidy is not a costing exercise.
An improper assignment of costs may well lead to a cross subsidy. But the cross subsdy would be a but a possible result of the improper costs assignment. It is not the actual improper assignment.
If the accountants don’t get the costing correct, a firm may price a good or service below the incremental cost of production without knowing they are doing so. That would be a cross subsidy. (Contrary to popular belief, you can fix stupid. Fire the accountants and replace them with people who know what they’re doing.)
I’m still waiting on the OP to tell me how this gets to his contention of a cross subsidy. Where does the money come from, where does it go? There may be a road subsidy (probably is), but I don’t see any cross subsidy.
I generally agree that all Interstate Highways and controlled access highways should be supported only by tolls. Heck Fire, Adam Smith knew that the “High Roads” of the 18th Century should be toll supported least they be built on government whim.
But getting from tolling the Interstates to getting people on long distance passenger trains is quite a big get.
I would say either definition/test series for cross-subsidy fits. The data is in the draft report I wrote, linked near the beginning of the post. It is an analysis of FHWA historical reports for government infrastructure and accident costs. I am certainly not advocating forcing anyone into anything, but rather expanding choice at equal levels of financial cross-subsidy.
Lets suppose that your argument is valid. If I understand it correctly, you believe the government (we the people) should increase the subsidy for intercity passenger rail to place it on a par with your perception (analysis) of roadway subsidies. Where will the money come from? The answer should be set in a realistic context, i.e. politically feasible.
Government debt (federal, state, and local) in the United States stands at $19.7 trillion. This works out to approximately $50,000 per person or more realistically $205,000 per taxpayer with a federal income tax liability. Taxpayers have to service the debt; two years olds are not likely to be able to do so. If these numbers don’t get people’s attention, one can throw in the unfunded liabilities, which stand at an estimated $46.9 trillion.
Governments must make the interest and principal payments on the debt or default. In the case of the unfunded liabilities, the government can get out from under them by reducing the benefits, or it can eliminate them.
If passenger rail were a viable commercial proposition, i.e. it covered its costs and provided a return to its investors, the proponents could borrow the money in the capital markets as long as they had a viable business plan to pay it back. They don’t. Passenger rail is a ward of the state; no one in the capital markets is likely to fund it. It is dependent on the government for funds. And the government simply does not have a lot of cash lying around.
Irrespective of the definition of subsidies, it appears that all modes
Both were in fact, direct quotes, the 2nd linked to the paper, the first with citation. Sorry if those generally accepted definitions don’t match your notions.
Since you seem pretty comfortable with Northwestern, here’s how Ian Savage of their econ faculty uses it in a paper on bus transport:
http://faculty.wcas.northwestern.edu/~ipsavage/415-manuscript.pdf
Thank you for this fascinating study, Schlimm.
For many years I rode buses in Hudson County, New Jersey. Reading about the use of mini buses in the 7 metropolitan counties and then comparing it with what I experienced is a little scary.
In Hudson County New Jersey Transit controls all routes and directly operates most service. However, it contracts some service out to private operators. Mostly, these operators existed before NJT was formed and want to continue in business. Generally the private operators’ fares are lower but you cannot get a transfer from one line to another as you can with NJT. My experience is that both are generally excellent.
However, there are also a number of panel truck or vans fitted out as mini buses similar to those in the study. The vans are always cheaper than either NJT or private operators. They are often faster as they will fill up and then run express to their destination. They use the “sweep” strategy and often set up their own schedules to be just before NJT or legal private buses and so pick up their passengers. The real problem is that they are illegal which means they cannot be insured as common carriers. If a person in a van is injured there is no insurance to cover the injury. Since the vans are owned by the drivers there is not nearly enough equity in the business to begin to pay the costs of injured passengers. Of course, this is a real calamity for anyone who is injured while riding in one of the vans. It is also costly for the taxpayers as riders tend to be poor and when disabled look to various welfare programs for their support.
What is clear to me is that the USA is not Britain. In certain circumstances using a van for a bus can result in real savings. However, in the USA they can also be a disaster for individual riders and a real expense for the tax paying public.
I propose to use 90% of the historical rural (intercity) interstate cross-subsidy as the level for Amtrak. That would Make it cheaper for the government to provide the service in that manner if you are worried about transportations impact on the overall budget deficit, which is nearly entirely out of control medical spending and social security IOUs. I have another proposal that is a bit to complex to restyle in the forum in the paper.
Well, I read your latest link. It’s a captivating paper on local bus service in the UK.
I could find no reference by the authors to a cross subsidy being a “missassignment of costs” as you falsely claim. They do discuss cross subsidies of bus services. And they do so using the correct definition of a cross subsidy. That would be a bus service being provided at below marginal/incremental cost with the money being made up by charging other service users more. How you get from that to a “missassignment of cost” is beyond decipher.
And with that, I’m done here. If anyone wants a good analysis of passenger train service they should read “Who Shot the Passenger Train” by David P. Morgan. Available on this site for $5.95. It’s over 50 years old but it’s still true today.
Morgan loved trains, and riding trains. But he also had a knowledge of railroading and economics. He could see that the long distance passenger train had been made redundant by air travel. It’s over guys. Things change. Live with reality.
I’m not going to waste my time arguing with people who make up their own definitions or think that Robert R. Young was some kind
Facts are that there were at least four definitions of cross-subsidy, besides the definition from Barron’s Dictionary of Accounting Terms, all of which you chose to dismiss because they don’t fit into your notions. But I guess you believe, as the Queen of Hearts said, that words mean what you say they mean. As to your dismissal of the other posters’ ideas…
Greyhounds,
I’m the guy who wrote the post you refer to about Robert R. Young. It seems I never made myself clear. Young really knew nothing about railroading but he was able to persuade a majority of New York Central stockholders that he did. He did have vision but his vision was disconnected from one basic fact: For years government regulation had been slowly bleeding the railroads. Ultimately Young’s vision fell apart when he took his own life. Alfred Perlman did see the problem and tried to stop the bleeding. Ultimately he could not. The Penn Central collapsed.
What does this have to do with Amtrak? So far Amtrak has managed to continue to exist despite strong opposition and unfriendly administrations. For example, George W. Bush began his Presidency wanting to end Amtrak but, in 2008, wound up doubling its budget. If we lop off Amtrak’s long distance trains will be have enough of a political consensus to maintain any Amtrak at all? I doubt it.