Friday, April 12, 2013

Guest Blog: “Amtrak is not the problem”

Written by  Don Knapik
The following commentary was submitted in response to my recent blog, “If the source of funding isn’t fares, then Amtrak needs to go away.” It’s an eye-opener. There are very few people, in my opinion, who won’t learn something:

Everyone knows how to run trains. Just ask any commuter on the Northeast Corridor, in San Francisco, Chicago, Miami, or any of the dozens of commuter agencies and companies who move millions of people every day.

The passenger rail industry has been around for close to 200 years, and we are seemingly still learning and relearning the lessons of the past. I once heard a self proclaimed “expert” (a lawyer) lament the “fact” that there were no competent passenger railroad managers in the industry because of its decline over the past 50 or 60
years. That was in 1999, and I dare say that today there are many “journeymen” out there who are as competent as any of the “experts” of the past. There is also an emerging cadre of master craftsmen whom you, I, and the American public will rely on to build the next generation of high speed trains in the United States.

As for the economics, the widely held belief that passenger trains cannot earn a profit is only partially true. If a service actually pays for the amount of allocated services utilized, the picture is very different, at least from a typical Northeast Corridor scenario. I would point to Amtrak’s
Metroliner service, which in 1996 made a fully allocated profit of $14 million. Today, 20 Acela Express trainsets generate one-third of every Amtrak revenue dollar.

I know that there are a lot of folks out there who are just shaking their heads, but consider the following: There are approximately 2,200 trains operated on some portion of the Northeast Corridor each day. When you consider that Amtrak is a minority user but pays a majority of the expenses of the NEC, the economics look very different. When the Metroliners turned a profit (using “profit” and a passenger train in the same sentence should get people talking), there were 36 trips on the NEC daily between Washington and New York. At that time, there were 1,100 trains in and out of Penn Station New York. If you allocate the costs for that “service” at PSNY, the actual cost for utilization of this asset is very low. If you allocate full costs to every commuter train that operates in and out of PSNY, the costs for commuter services skyrocket. The only real variables are how the costs are paid, and who pays them.

To keep any piece of railroad at a state of good repair represents a relatively fixed amount of money plus some amount for contingency. The only variable is how the allocations are formulated. Whether it’s Amtrak, FTA,
state, etc., funding, the cost is the same. The only real difference is in the accounting. The federal government, state governments, commuter agencies, and the farebox all share the costs. If you reduce the cost allocated to Amtrak, the commuters pay more. The actual cost for a given piece of track with fixed usage is relatively stable. Accountants love to argue allocations; the bad news is that there is little agreement on the allocations themselves and even less agreement on who has the “right” formula.

Bombardier, Veolia, Herzog, and other contract operators are working hard to eat Amtrak’s lunch. But, privatization of the NEC would be particularly difficult, as some authority would have to allocate costs and usage. With the many players involved, Amtrak is presently particularly well-suited to the task. But as others have noted, there is an increasing number of experienced Amtrak alumni now working with other agencies. When the Acela Express was scheduled for full service, over 200 commuter schedules had to be adjusted. In the future, that number will rise dramatically. The U.K. has tried any number of solutions—and is still trying.

Then there is the question of how much private companies will have to pay for the infrastructure. None presently “buy” the property, and it is unlikely that any will. Shall we “give away” these regional assets? How about public/private partnerships, where the private sector gets the operating profit and the public pays for the investment—and all user costs rise. Is this what we really want?

Can the numbers be improved? Absolutely. Start with new rules: Every train on the NEC should pay its fully allocated cost per mile of operation. Commuter costs may increase ever so slightly, but if we are to level the playing field at Amtrak, this will be a necessary element of the new financial order.

Amtrak (at least on the NEC) has the capability to distribute electrical power, but is prohibited by law from doing so. Even though our nation’s power grid is increasingly overburdened, our leaders have precluded redundancy by law. Allowing this could reduce overall costs of the catenary and power distribution for all NEC users. In Europe, the railroads provide a secondary (and sometimes primary) power distribution service, and in some cases all costs associated with catenary are part of the “national infrastructure.” The costs don’t change, and ultimately somebody pays. However, the business model would be radically changed. With all the power distribution difficulties in California, someone might consider this as the state moves ahead with high speed rail.

Interoperability will gradually emerge as a difficult problem to overcome as individual HSR programs progress. With little agreement on equipment, infrastructure, signaling and train control, and power transmission, many potential cost savings, efficiencies, and opportunities will become increasingly expensive to achieve. Europe is still rationalizing these issues; we have an opportunity to capitalize on the lessons learned. The UIC is the agency trying to put these issues to bed; Amtrak is the logical agency to do that here. By standardizing equipment, infrastructure, etc.—and not through regulators whose motives are not optimization—the purchasing power of all is enhanced through economies of scale.

The experienced people available to operate a high-speed, high-density, mufti-use railroad are few and far between, and most reside at Amtrak. There is one training center for high speed rail in North America. Amtrak operates it. Those who think you can simply go from an 80 mph railroad to a 180 mph railroad over new territory, with new signal systems on new equipment with new employees, have some “learning curve” issues. I think it’s unfortunate that so many people seem to think that these jobs are the answer to their regional employment problems when few have the specific skills to do this work without the fundamental, specialized, highly technical skills to safely operate and maintain railway equipment and infrastructure.

Changing the name on the door will surely not mitigate any burdens our lawmakers have heaped upon Amtrak. I spent a lifetime making passenger trains work and there are no simplistic answers. Amtrak is not the problem. In many ways, it is the only agency that can maintain and move passenger rail forward in America. Throughout all the criticism, each Amtrak administration managed to keep the company going to get to where it is now. In some ways, Amtrak was created to fail, but without the perseverance and efforts of its thousands of employees, past and present, we would not even be having these conversations.

I’ve presented various high speed rail scenarios to a number of agencies, committees, etc., in many different states. I believe that the overall problem is that as a nation, we have a four-year attention span, and such projects all take longer than that to execute. The Acela Express program—I know, it’s not “real” high speed rail—was started and completed during the Clinton Administration with Congressional power changing during that period. Florida seems to start these projects every eight years and has yet to have the first shovel hit the ground. California estimates that it will bring in HSR for basically half of the cost per mile of what the Chinese spent to build their system, and over very difficult terrain and seismically active areas. I can’t wait. I also think the Midwest will do well using the incremental approach.

The cost per minute of trip time improvement (Editor’s note: This would seem to be a very valid cost/benefit analysis approach, yet it’s probably not well-known) is between $5 million and 
$7 million. On the Paris-Marseilles TGV line, SNCF invested nearly 10 times that amount and built 500 structures. Amtrak upgraded 50 [on the New Haven-Boston segment of the NEC]. And as we move further into “Sequester,” I think HSR funding is about to slow down to a trickle. If the “all or nothing voices” in Congress can’t even agree on our existing passenger rail system, do you honestly think that same mentality will get HSR built?

I would favor a more incremental approach. Amtrak’s Harrisburg Line now operates at 110 mph. This line in the 1980s was lucky to accommodate 60 mph. Through a mutually beneficial arrangement [with PennDOT and Norfolk Southern], the players ended up with significantly better reliability, maintainability, and ridership. I would argue that this line could be upgraded to even higher speeds and is as close to a state of good repair as it has been in the past 60 years. I once offered to sell line to the Commonwealth of Pennsylvania for $1.00—and they wouldn’t take it. Now try and get a parking spot at any station on the line. All you have to do is get there before 6:30 a.m.!

It’s all about trip time, parking, reliability, comfort, and convenience. When you’re sitting in traffic on the Schuylkill Expressway, the $6.00, 23-minute trip by rail from Paoli to Philadelphia is high speed. Developing higher average speed is much more cost effective than building very-high-speed rail systems when sources of financing and maintenance have not been identified nor committed.

Of course, you can have HSR and VHSR tomorrow, off the shelf. Just send money!

Don Knapik has more than 37 years experience in high speed, high density, multi-use rail transportation systems, including customer service, and process and product innovation. He was head of Amtrak’s High Speed Rail Product Development Group, Metroliner Product Line, and the Acela Product Line. He was General Manager of MBTA’s commuter rail service, and a Master Mechanic and Senior Director of Business Improvement and Integration at Amtrak. Don has represented U.S. passenger rail interests as Vice President and member of the board of the International Travel Catering Association. He is a founding member of DO iT-LLC, which consults on the design, building, operation, and maintenance of transportation systems. The company represents and supports manufacturers and operators of rail and air transportation systems.