Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/amtrak-line-earns-profitnot

Reason Foundation

Amtrak Line Earns Profit...NOT

Samuel Staley
February 27, 2010, 8:19am

It's always good news when an Amtrak intercity rail line makes money. That means taxpayers and other non-users don't have to pay for a service provided to a very narrow and usually higher income segment of the transportation market. Unfortunately, accurate reporting on transportation finance is pretty thin, as this report from the Lynchburg, Virginia News & Advance demonstrates all too clearly. Despite the headline, the Amtrak line is not earning a profit.

The news is relatively good: The recently opened (October 2009) Amtrak line connecting Lynchburg with Washington, DC in Northern Virginia is earning higher revenues and covering its operating costs because ridership is higher than anticipated:

"Virginia had planned to provide a $242,000 monthly subsidy to keep the train running. It won’t need any of that money for November.

"The month’s results for the new train between Lynchburg and Washington were stronger than October’s ridership, according to Virginia’s Department of Rail and Public Transportation.

"Danville also provided a remarkable upward spike in the DRPT report: a quadruple increase in passengers boarding Amtrak’s previously operating Crescent train.

"Lynchburg is served by both the Crescent train and the new one, called the Northeast Regional, which leaves at 7:38 a.m. — later in the morning than the Crescent. The Northeast train returns from Washington earlier, at 8:36 p.m.

"More than 2,000 people boarded the Crescent in Danville during November, the DRPT said. During the same month of 2008, just 452 people boarded in Danville."

The problem with the news story is that it claims this means the line is earning a profit. It's not. The line is just covering operating costs, not the cost of building and financing the line. In other words, it covers the salaries of the engineers and ticket takers, not the rails, rail beds, or purchases of the rail cars.

That's a big gap, particularly on transit projects where most costs are capital costs, not operating costs.

We'll leave aside the point that this is just the second month of operation. The real test is whether ridership stays high. That can be the subject of another blog on another day.


Samuel Staley is Research Fellow


Print This