Last month I wrote about a Brookings Institution proposal to save Amtrak by shedding some of its most unprofitable routes while using the profits from the Acela Express along the Northeast Corridor to subsidize some of the routes that almost make sense.
What Brookings found is not surprising. There are only two routes that do better than break even — New York – DC and New York – Boston — and even those only make money on an operating basis, they don’t cover their capital costs.
Brookings finds that the operating profits (if the federal government subsidizes capital expenses) would cover the top 26 Amtrak routes (which carry 80% of passengers). They recommend having affected states cover the losses of other routes if they want those to survive.
I repeated their numbers that the Acela routes were profitable on an operating basis (while failing to cover their capital costs). But Don Phillips has a piece arguing that the Acela trains actually lose a ton of money, and it’s the way Amtrak allocates costs (shifting them away from Acela and to the already even bigger money losing long-distance routes) that makes it look otherwise. It’s just an accounting game that makes Acela look like it covers its operating costs.
Seldom in my life have I seen such a mass of misinformation spread about any one subject as is being spread now about the American passenger train. The misinformation is spread by confused and shallow politicians, young reporters who have no idea what they’re talking about, and by Amtrak officials who have learned they can count on the first two not to understand their technical jargon.
Before we go an inch farther, let me say something. This column is intended to hammer home this fact: The Acela does not make money. In fact, it loses money big time. What’s more, long-distance trains are losers but not big money losers.
And a new Department of Transportation Office of Inspector General report (.pdf) suggests that Amtrak’s cost allocation methods make their performance numbers highly misleading and difficult to draw conclusions from.
While written in typical polite bureaucrat-ese, the report is still rather scathing.
As it reorganizes, Amtrak will need APT and SAP to provide accurate and reliable financial information and data to evaluate its business lines’ performance. While APT and SAP represent an improvement over the prior cost accounting system, weaknesses such as overreliance on cost allocation may inhibit Amtrak from achieving improved operations and oversight of its business lines. Furthermore, these weaknesses will inhibit Congress from obtaining the information necessary to ensure the appropriate expenditure of tax payer provided funds.
I don’t know whether Don Phillips is correct that Acela Express — New York/Boston and New York/DC, generally the only Amtrak routes considered profitable — are actually money losers.
But that’s because, as the Inspector General’s report underscores, Amtrak’s poor accounting procedures make it impossible to know.