Posts about Brookings

Without long-distance trains, Amtrak is profitable? Not really

The report crunches the numbers on how many riders each route carries, how much it costs to run the trains, and how much revenue they generate. A number of people read the numbers to conclude that if Amtrak cut its 15 longest routes, Amtrak would operate in the black.

But this depends on how you define "in the black" or "operating profit." Cutting those trains would eliminate the need for a federal subsidy, but the states also contribute money for short-distance trains, and Brookings counts that as "revenue," not "subsidy."

The Adirondack, for example, runs between New York City and Montreal, via Albany. The report says that this train has a positive balance of $1.3 million. Amtrak makes a profit on it!

Not really. It costs $13.3 million to operate, and the train earns $7.0 million in revenue. That equals a loss of $6.3 million, but New York state pays Amtrak $7.6 million a year to operate the train. Add that in, and the "balance" ends up being a positive $1.3 million.

All told, the states fund Amtrak to the tune of $190.5 million a year. Counting that but no federal payment, Amtrak would have ended up with a surplus $30.9 million without the long-haul trains.

Even this doesn't mean the short-distance trains can be profitable. The report doesn't include the major cost of capital maintenance on the Amtrak-owned Northeast Corridor, which passenger revenues will never be sufficient to cover. Projects like the Gateway Tunnel, which will add capacity into Penn Station and new rolling stock to replace aging cars are also capital costs that can't be covered by the operating profit alone.

Amtrak's Adirondack in Westport, NY. Photo by The West End on Flickr.

Coverage or ridership?

One of the biggest problems with Amtrak from a political perspective is that people don't agree about the goal of the railroad. Is Amtrak supposed to make a profit, as conservatives tend to insist? Or is Amtrak supposed to provide a transportation service to much of the nation, as liberals tend to claim?

The Brookings report makes it clear that there really are two Amtraks.

One of the Amtraks is efficiently providing frequent short-haul service within or between metropolitan regions, such as on the Washington-Boston Northeast Corridor, Los Angeles-San Diego Surfliner, and Chicago-St. Louis Lincoln Service. A few services like these can run operating profits, but most still don't even if they're successful.

The other Amtrak provides basic service to other parts of the country. This service was never meant to make money. It was meant to include more states in the system and provide another (or in some cases the only inter-city) transportation alternative to rural communities.

Lawmakers did intend for the company to be profitable, despite evidence that it would not be, but that was changed in 1978 when it became clear that was unlikely to happen.

In this respect, Amtrak is like many transit systems. When Congress created Metro, they assumed it would run self-sufficiently without government support, too, but that didn't happen either. No transportation system, not roads, rails, or aviation, actually makes a profit when you incorporate all of the infrastructure.

Amtrak is a basic system plus extra short-distance services

The way Amtrak was set up is an important part of understanding the current situation.

In 1971, as Amtrak was coming together, a basic system was drawn on a map. This base would provide some minimum level of service across the nation, and be funded initially through federal subsidies and ticket revenue.

The Pacific Surfliner is a good example of a state partnership that grew out of the base system. In 1971, there were 3 roundtrips between Los Angeles and San Diego. These 3 roundtrips were part of the Amtrak basic system.

By 1976, California wanted more service, so it paid to add a 4th roundtrip. This train was specifically a California-subsidized train, while the other 3 were Amtrak-subsidized trains. Over the next 2 decades, California continued to add trains to the corridor, and Amtrak added 2 more to the basic system.

In 1995, California and Amtrak agreed to end having some individual trains be part of the basic system and others state-subsidized. Instead, California and Amtrak would split the cost of the San Diego-LA service proportionally. At the time, California covered 64% and Amtrak covered 26% 36%. It's now 70%/30%.

This seems like the best approach. Amtrak, in consultation with the US Department of Transportation and the states, and input from stakeholders, including organizations representing passengers, should determine what the basic federal system should look like. If the states want additional service beyond that amount, they can pay for it, perhaps with federal assistance in the form of competitive, merit-based grants.

Several successful services have grown out of arrangements like that, including the Surfliner, the Charlotte-Raleigh Piedmont Service, and the Cascades between Eugene, Oregon and Vancouver, British Columbia.

Congress is shifting costs to the states

However, the funding environment is changing.

Under Section 5 of the Passenger Rail Investment and Improvement (PRIIA) Act of 2008, starting in October, California will have to cover 100% of the cost operating deficit of running the LA-San Diego service. That's because all Amtrak routes less than 750 miles in length must become state-supported or be terminated.

The Brookings report supports shifting almost all costs deficits to the states for long-distance Amtrak trains as well.

That's the wrong approach, and would likely mean the end of most of the long-distance trains.

It is difficult to expect all the states served by each of the long-distance trains to support their own routes consistently, much less to agree on schedules, service amenities, and cost allocations. Many states are already facing a huge challenge in coming up with the funding to keep existing short-distance service running under the PRIIA mandate.

Just as governors in Ohio and Wisconsin blocked high-speed rail funding, some states will refuse to pay. Many have no history of supporting train travel at all in the modern era, and have conservative or divided legislatures. Long-distance routes would either have to stop at the state line or run through without stopping within it, neither of which makes for a useful transportation service.

Other states have no history of supporting Amtrak routes financially, and conservative or divided legislatures would make it unlikely that those states would step up to the plate to fund what has so far been a federal commitment.

Right now, several states are having the discussion about whether to keep their short-haul trains. While New York, California and several other states have budgeted the required funds to keep their short-distance trains running in fiscal 2014 (starting October 1, 2013), Pennsylvania could cut its Pittsburgh-Philadelphia/New York train and Indiana could lose the Indianapolis-Chicago Hoosier State unless their citizens convince state lawmakers to appropriate the needed funds

We need a national network

It's important to keep Amtrak's long-distance trains, even though they're not profitable. A recent white paper from the National Association of Railroad Passengers elaborates on many points.

One major reason is that the long-distance trains and shorter ones fit together into a system. They're not completely isolated.

The Southwest Chief might run over 2200 miles across the nation. But many riders are not going all the way from Los Angeles to Chicago. Some are only going between Los Angeles and Flagstaff. Others ride between Albuquerque and Trinidad. And Kansas City to Chicago is a very popular pair of stations on the route.

Brookings seems to think that 400 miles is where passenger rail stops being competitive. And that may be the case. But just because the train goes more than 400 miles doesn't mean that the passenger has to.

From the whitepaper by the National Association of Railroad Passengers and the Midwest High-Speed Rail Association.

For example, the report lists the Bay Area to Sacramento Capitol Corridor as one of the examples of a good corridor. The same corridor is also covered by the Coast Starlight, which continues north of Sacramento and south of the Bay Area.

Further north, the Coast Starlight overlaps with another success story from the report: the Cascades, which runs between Eugene, OR and Vancouver, BC. It provides an additional frequency on both corridors, and connects them with each other and points in between.

Having long-distance trains also creates a market and proves the demand for short-haul trains. One of the 3 profitable routes in the system, informally dubbed the "Lynchburger," only exists because of the longer New Orleans-New York Crescent. People wanting to take that train between Lynchburg and Charlottesville and Washington were having trouble getting a ticket because the Crescent would sell out frequently.

As a result, Virginia decided to pay for a new train to run between Lynchburg and New York/Massachusetts. It's proven to be so popular that it actually covers its costs with ticket sales. And Governor McDonnell has proposed funds to extend the train to Roanoke.

But the Lynchburger probably wouldn't exist if the Crescent hadn't demonstrated the demand. It's also very difficult (though not impossible) to get the host railroads to agree to passenger trains where they don't already run.

There are many other reasons as well. Having a national network also makes possible many operating efficiencies, such as the ability to move equipment to other parts of the system to meet demand, which would otherwise be lost.

Besides, ridership on state-supported short-distance routes has only grown so much because state investment has translated into increased capacity. If a similar investment were made in long-distance trains—meaning additional frequencies or longer trains—their ridership would soar as well.

Report is useful for its data, but reaches the wrong conclusions

The Brookings report provides a wealth of insight into Amtrak's operating costs and revenues. But the report is misguided in its suggestion to turn the primary responsibility for the basic national system over to the states.

Passenger rail is an essential component of our transportation network. The 55% increase in ridership since 1997 is an indication that more federal and state investment is needed, not less.

Improving service on the long-distance trains will lead to ridership increases just as improvements to the short-haul trains did. Now is not the time for the federal government to waver in its commitment to passenger rail.

It's better than leaving kids stuck in a bad school, sure. But this isn't a number we'd like to see go up indefinitely. Far better would be for most kids to want to choose their neighborhood school because it's a good school, while letting those who need or want a different or more specialized educational experience to make a different choice.

Charter schools have brought many educational innovations to DC and helped many kids. Unfortunately, the current track we're on is not to create high-quality neighborhood schools alongside high-quality charters and magnets, but just to eliminate one system in favor of the other.

Would that be a problem? Some proponents of education reform think that it would be just great to chuck our entire public education system and replace it with a collection of different schools, each competing for kids based on how good an education they can provide. That creates a strong incentive for schools to do better or get left behind.

Businesses cherry-pick the highest-margin customers

Would we want the market for schools to look like the market for banks, cell phone companies, or other businesses where you generally have an ongoing relationship with just one? This analogy shows some huge pitfalls for education if the objective is choice above all.

Most banks don't compete to get all customers. They compete primarily for the highest-margin ones: people who keep a lot of cash in their checking accounts, or charge a lot on a credit card. That's why these customers get big cash rewards or miles on credit cards, or perks like free checks, ATM withdrawal fee reimbursement, and higher interest rates.

Schools in the competitive market would have a strong incentive to get higher test scores, and to do so as cheaply as possible. The easiest way to do that is to try to attract the highest-performing kids and drive out the lowest-performing ones.

Test scores reflect a school's performance to some extent, but also the effect of parents and the community. At least right now, we don't have an effective metric that only reflects the effect of a school itself, and experts disagree on how to compare the progress of kid already ahead of grade level, with involved parents and extracurricular enrichment, against one from a kid starting well behind.

A purely competitive system will be a world where successful schools arbitrage flaws in the rating system and industry lobbyists convince legislators not to rejigger the formula in a way that pushes them to educate the more difficult kids.

Meanwhile, traditional neighborhood schools would end up being just a safety net system for any kids left over—the Medicaid of education. They would just serve those who have gotten kicked out elsewhere for disciplinary problems, those whose families lack the basic initiative to research and apply for other schools or the means to transport kids across town, and those whose parents went to the neighborhood school and feel nostalgic.

Charter schools were originally supposed to serve as innovation centers, free to try out new education approaches that, if successful, neighborhood schools could adopt. However, when the number of neighborhood schools is continually shrinking so dramatically, what schools will be left to adopt successful innovations?

While the DCPS's slow pace incorporating validated innovations into neighborhood chools is frustrating, the solution is not to create a two-tier education system with neighborhood schools as the educational safety net or destroy the neighborhood school system completely. For a parent of a child in a neighborhood with a bad local school, it's understandable to want to escape this failing system, but just writing these schools off will not serve DC kids, especially our neediest ones.

Last year, Brookings found that, on average, 70 percent of jobs in a metropolitan region are inaccessible to a typical resident via transit. Or at least, it would take over 90 minutes each way to get there.

This time around, Brookings looked at how large a pool of potential employees each employer has access to, assuming those employees would use transit to commute to work. And just as only 30 percent of jobs are accessible to most workers, only 27 percent of workers are accessible to most jobs, they found.

In terms of general access to transit, 70 percent of people in metropolitan areas live in neighborhoods that are served by transit and more than 75 percent of jobs are served by transit. Not surprisingly, the big divide is between suburban and urban locations within those metro areas. In cities, 95 percent of jobs are in transit-served neighborhoods, while in suburbs, only 64 percent of employers have transit service.

The Northeast and the West have better-connected job centers, while the Midwest and the South have more job sprawl and less transit access. In the Northeast, almost 100 percent of city-based employers can take advantage of transit. In southern suburbs, that figure falls to 52 percent.

"The suburbanization of jobs obstructs transit's ability to connect workers to opportunity and jobs to local labor pools," the report concludes. "As metro leaders continue to grapple with limited financial resources, it is critical for transit investment decisions to simultaneously address suburban coverage gaps as well as disconnected neighborhoods." The authors elaborate:

For example, consider the cases of San Jose and Richmond. Both metropolitan areas offer transit service to over 97 percent of city jobs. But while San Jose's suburban transit routes extend well beyond the city core, offering service to 84 percent of its suburban jobs, Richmond's suburban routes stop close to the municipal borders, offering service to only 29 percent of suburban jobs. The end result is that San Jose's overall transit coverage rate ranks fourth and Richmond's ranks 94th. And Richmond isn't the only metro that registers this extreme city/suburban dichotomy. Atlanta, Grand Rapids, and McAllen all show near-ubiquitous transit coverage in their primary cities and limited suburban coverage, pushing their overall coverage rates to the bottom quintile.

This report, like the last one, will likely invite observers to wonder whether it's incumbent on transit systems to undo their hub-and-spoke models and sprawl along with jobs using less efficient service patterns—or whether the solution lies with addressing job sprawl itself. After all, why should struggling public transit systems condone and subsidize employers who chose not to locate near their workers?

Brookings provides a reminder that one way or another, there's a problem that needs fixing: Unemployment is stubbornly high, while in some places there's a shortage of skilled and educated workers. Clearly, there needs to be a better way to connect jobs and people.

After all, commutes have grown longer and longer over the years, and a continued dependence on single-occupancy vehicles is simply unsustainable. The report says:

The nation's average distance to work jumped from 9.9 miles in 1983 to 13.3 miles in 2009.6 Meanwhile, as solo drivers topped 74 percent of all commuters, the average number of hours wasted in traffic increased from 14 hours in 1982 to 34 hours in 2010.7 Just as importantly, there is still a sizable portion of Americans that confront longer commuting distances without a vehicle. The costs of owning and operating a vehicle are such that ten percent of American households in the nation's largest metro areas do not have access to a private vehicle.

Transit can be part of the solution to these problems, and can provide employers with a more reliable way to bring their workers in to work on time every day. But whose job is it to make sure more workplaces are on the transit map? Does the transit system have to build a new line every time some company opens up shop in the exurbs?

Brookings suggests that both public and private sector leaders need to take responsibility for enhancing transit accessibility to jobs. They should route transit to where the jobs are, including in the suburbs, and do a better job of collecting and analyzing data so they can make good decisions, the report says.

But those are all tasks for public officials. What responsibility should private employers take in addressing the accessibility crisis? By locating in a city, an employer will have access to an average of 38 percent of available workers. That same job in a suburb will have less than half the labor pool to choose job candidates from via transit—just 17 percent of the population.

That doesn't necessarily mean there's no transit stop near the employer. But if it's so far out in the suburban hinterland that it would take the average resident more than 90 minutes each way to get there, it doesn't count—that's too long a commute to reasonably ask anyone to undertake.

So in addition to its list of recommendations to public officials, Brookings should add one addressing employers: Locate where your labor pool is. Don't make them drive alone for 13.3 miles each way to get to work. You'll suck their souls and waste their money and end up with a less healthy, less reliable workforce that shows up in the morning with a fresh case of road rage (or road fatigue).

Sure, transit agencies need to make sure their expansions are keeping pace with development and that their service is staying relevant. But employers need to realize there are good job candidates out there without cars, and those people won't work at a place that's inaccessible to them.

Cross-posted at Streetsblog Capitol Hill.