Squaring the circle – Andrew Selden’s better way to look at NEC passenger demand

May 12, 2017

By Andrew Selden, President, United Rail Passenger Alliance, Steel Wheels, 2nd Quarter 2017

Used with permission of Andrew Selden

Perhaps the greatest threat to the nation’s modest rail passenger service lies not in the Administration’s budget proposals but in the underlying financial source of the annual loss that must be covered by the controversial federal
subsidy.

It is now well understood that the Northeast Corridor (NEC) creates that loss, in the amount of nearly a billion dollars every year (even more factoring in depreciation), because while NEC revenues, from trains and real estate, may cover all of the direct operating (variable) costs, they cover at most only a small part of the annual costs of maintaining and renewing the NEC’s large base of fixed assets. The fixed assets are every bit as necessary to generate the NEC’s revenues as the direct costs such as crew labor and electricity, but they too have substantial and very real cash costs. The fixed assets include track, bridges, tunnels, yards, power generating stations, passenger stations, signal systems, and heavy maintenance shops such as the Bear, Delaware complex. Amtrak claims a (carefully phrased) “operating profit” in the NEC because Amtrak does not charge NEC fixed facility costs against NEC revenues.

Click here to download and read the full story: Andrew Selden Squaring the Circle Steel Wheels May 2017

 

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