This is topic The Amtrak Accounting Controversy in forum Amtrak at RAILforum.


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Posted by Gilbert B Norman (Member # 1541) on :
 
There has been much controversy regarding Amtrak accounting practices both within recognized railroad media (TRAINS) and at Amtrak related discussion sites - one of which emblazoned the discussion with adjectives such as "fraudulent".

I think we need to divide Amtrak accounting into two distinct distinct parts. One part is the Financial Accounting and the other is Responsibility Accounting.

Financial Accounting is that addressing the change in the Balance Sheet (that document that shows "what you got", "what you owe", and "what's left over"). The changes that have occurred between the two Periods Ended result from either additions or retirements of assets (the stuff you have acquired in the current or prior periods that will generate sales/revenue during the current and into future periods), or from the Revenue and Expenses that occur during the period. That is known as the Income Statement, which in the case of Amtrak, has always been a Net Loss and presently something under $1B.

The resulting Financial Statements have always been audited by a "Final Four" (which were the Big Eight when I started out) firm to determine that the assets and results of operations are "fairly stated". Amtrak has always received a "Qualified Opinion" owing to that if it did not receive an Appropriation, it could no longer be considered a "going concern".

Now to address the other area of accounting - Responsibility Accounting. This "picks up" where Financial Accounting leaves off by allocating all the revenue and expenses over all the entity's activities. That means the CEO's and lesserlings expenses are allocated over all operations Systemwide. Same for any other activities that cannot be assigned to one route or the other.

Now this is where the LD advocates and Corridor interests differ. The LD's hold that disproportionate costs are being assigned to the LD's and, as a result, their expenses, and hence Loss, are being inflated.

Now we must note that in any Responsibility Accounting system, everthing must be assigned to one Responsibility Location (known as a ResLoc in Amtrakese) or the other. The allocation of the Expenses fall into two groups
- Direct and Allocated. Direct Expenses are definite and determinable, and hence, easiest to understand.

Obviously gas up the engines on the Empire Builder that gas will be charged to a ResLoc that eventually will be assigned to the train. Same will be for the employees, except things get a bit more cloudy when you add the "fringe benefits" (Vacation, Holiday, Health, et magna alia). So long as there is only one train on the route, so will all the costs of the stations.

Now where things get cloudy is the allocation of the indirect and fixed expenses - right down to the rent on One Mass and the salaries of everyone in it.

You can be sure the various "interested parties" both within and without Amtrak all will feel "they're getting screwed". I'm sorry, that's how it is within any entity using Responsibility Accounting.

For whatever their reasons may be and on substance they draw from, the LD advocacy community holds that the LD's get disproportionately charged (think that's called "screwed") with allocable expenses and, you'll have to ask them, contend the LD's actually break even or even make $$$$ on a cookie jar basis. They learn of discrepancies such as snow removal allocated over all stations without regard to those that never see snow. I have complete confidence that when detected, such is addressed.

There are the demands from such advocates that Amtrak Accounting is "fraudulent" and that Responsibility Accounting should be within the scope of a Financial Audit.

Well volks, it ain't. Likely the only reason that Amtrak has the annual independent audit is that some party in interest "slipped it in" to RPSA 70 in the name of the "for profit" corporation charade.

Of course "Corridors only" contend that that they too are getting shafted. How much of the One Mass bureaucracy, and even the Wilmington CNOC, is directed to the support of LD's; is it sufficient, or "otherwise".

The Local agencies that support regional Amtrak operated services are also picking through the Amtrak ResLocs associated with their supported services. They of course "find things" - and make sure there is a reporter or two around when they announce such.

To wrap this up, I have presented many a point of contention, but, I admit, no solutions. While I haven't seen any advocacy group suggest such, the suggestion could be made that Amtrak be split into three independent business entities - Corridor, Outside Supported, and Long Distance. Such would only add to the costs, and I'm certainly not about to advocate such (I really don't ride anymore so I just observe) as a taxpayer. There are also many Responsibility Accounting issues arising in any business entity having a system of such, i.e. how many costs of the closed Lordstown plant is General Motors allocating over other plants that have accepted displaced Lordstown workers? Do they belong to that receiving plant, or not?

Wish I knew.
 
Posted by yukon11 (Member # 2997) on :
 
I guess this link would be in accordance with those who believe that Amtrak's accounting method is flawed:

https://is.gd/RyRWKS

From the article: "Rather than collecting specific data that would clearly show what costs would disappear if, say, the Southwest Chief were eliminated — “avoidable costs,” in the parlance of Congress’ 2005 directive — allocation protocols permit Amtrak to use measurements it already has or believes it can estimate. The resulting process has 60,000 allocation rules, with 1,600 “responsibility centers” grouped into nine similar “cost families” (for example, transportation operations), which are divided into 36 “subfamilies” (onboard service), and finally 44 “subcategories” (linen)."

Having no background or understanding of accounting, it's all gibberish to me.

All I know is "what is the final Amtrak product?". Except for some commuter trains, it seems to have sadly become an unacceptable one.

Richard
 
Posted by Gilbert B Norman (Member # 1541) on :
 
Here is Management's discussion of where the Net Loss arises which is contained within the FY 18 Audit Report:

While there has been a growth in our State Supported Services, our current route map still closely
resembles the service Amtrak provided when we began operations in 1971. The only Amtrak service
in most of the fastest growing regions in the country (i.e., the South, Southwest and Mountain States),
is provided by long distance trains that operate once a day or less, serve many major metropolitan
areas in the middle of the night or not at all, have unreliable on-time performance, and account for
the vast majority of our operating losses. They do not serve the significant demand for more frequent,
reliable, trip time competitive passenger rail service in short distance corridors between major cities
in these fast-growing regions. Our failure to restructure the service we provide along our long distance
routes, and add new corridor routes serving growing metropolitan areas and megaregions, in order
to become relevant to present and future travelers in these underserved or not served regions and
corridors that account for the vast majority of the nation’s population growth could negatively impact
future revenue growth and financial performance, and hinder our ability to attract the state funding
support that has enabled us to expand our operations and increase our attractiveness to potential
customers in other regions;


The LD advocacy community obviously takes issue with this conclusion.
 
Posted by palmland (Member # 4344) on :
 
I get a bit frustrated with Amtrak whining about not being able to offer convenient daylight service to many metro areas. The Silver Service enjoys 3 trains - more than any other LD service. With a.little imagination (not abundant at Amtrak) service could be restructured to proved better daylight service south of Richmond. How about running the Silver Star down the A line on the Palmetto schedule but continuing to south Florida. Make the Palmetto a Columbia-Savannah daylight train.

On the Crescent route change the schedule to provide a early morning arrival at Charlotte and evening departure northbound. This provides daylight service between Charlotte and Atlanta-Birmingham. With a little work I believe the new station at Birmingham could activate the station track and platform and layover/servicing. Another day train would take care of the service onto New Orleans.

Full disclosure - these changes would help me greatly with my central SC location not to mention Charlotte (the next Atlanta).

The discussion on Amtrak accounting reminds me of CSX. In the late 80’s, shortly after Chessie and SCL were combined operationally, the decision was made to split the combined railroads into separate business units: Transport (Operations), Mechanical, Technology, Intermodal, and Commercial (Sales and Marketing). Each had their own administrative staff, like HR and Finance. The idea was each unit would have their own budget and buy services from other units. So I guess this was supposed to make each unit understand their own costs and contribution to the bottom line. It didn’t last long. Costs increased and accounting was mysterious.

But, on a smaller scale could something like that work at Amtrak where LD and NEC are clearly defined businesses with each generating their own revenue and costs. LD services would be handled as a separate business unit that included all direct costs and income. They would buy services through transfer pricing of admin services they didn’t have, such as technology (including reservations) and legal. But, they would have their own budgeting of revenue and costs, including some admin functions such as HR, Marketing, and Finance. Consequently those functions would be directly related to LD costs. Both units would have their finances rolled up to the corporate level for funding and perhaps large capital projects. One caveat. Railfans might not like the result.
 
Posted by Vincent206 (Member # 15447) on :
 
The problem with the LD trains is their inability to generate as much revenue per seat as the corridor trains. If I want to go to Portland tomorrow, I can buy a coach seat for $35 for the 3:30 trip. My cost works out to $10 per hour for my trip. If I want to go to Oakland tomorrow, I can buy a coach seat for $89 for the 22:50 trip. My cost works out to $3.90 per hour for my trip.

Amtrak can also use the Talgos on 2 or 3 legs per day on the Cascades corridor and sell that seat 2 or 3 more times and generate $105 or more. The Coast Starlight is only able to sell the seat once between Seattle and Oakland.

The sleepers on the Starlight do generate more revenue than coach tickets. The lowest sleeper fare is $305 which works out to $13.36 per hour of travel time, which isn't a huge premium over the Cascades fare. Considering all the expenses included in the sleeper fare (free food!, shower and linen, coffee and juice), it's hard to see how Amtrak would be generating profits on the LD trains.

Of course, my examples don't consider dynamic pricing but my point is that the LD system has some fundamental revenue limitation problems when compared to corridor services. The LD trains are also much more expensive to operate from a labor cost perspective.

Nevertheless I am a supporter of keeping an evolved LD system in place. Mr. Palmland's plan for the Atlantic network makes some excellent suggestions and there are plenty of other ways that Amtrak could improve the LD trains without denying essential service to any community.
 
Posted by PullmanCo (Member # 1138) on :
 
Let me offer 3 city pairs out of LA which could do well, IF competitively priced and negotiated for time on the line with UP

LA-Vegas
LA-Phoenix
LA-SFO

Offer
- High speed, high capacity bandwidth to every seat
- 1st glass of wine, beer or liquor free
- A decent wrap sandwich.
- Along with bandwidth, offer quality cell service.

Do the traffic analysis of auto and air, Amtrak. Find the city pairs that need coverage. Help pay for the FRA Class 5 trackage. Implement service that has comfort and capacity.
 
Posted by PullmanCo (Member # 1138) on :
 
One problem I perceive is Amtrak still pays its penurious rate for its trains on the host rr lines.

Let me build a train here
Baggage
48 seat coach
52 seat coach
Food service
54 seat Euro style business compartment
54 seat Euro style business compartment

208 pax. Get it at a 70mph vector + LA-Vegas. Stops in San Bernardino, boarding only, and Barstow, boarding only. Get the running time at 3 hours 30 minutes.

Sell it on a morning departure, lunchtime arrival, lunchtime departure, late workday arrival, evening departure, ahead of bedtime arrival.

Sell it on the time spent at LAX, BUR, John Wayne is part of that trip.
 
Posted by Vincent206 (Member # 15447) on :
 
Last I heard the price tag for modern LA-SFO train service was approaching $77 billion. Maybe the LA-Las Vegas builders will apply some "lessons learned" from the CAHSR project and be able to provide a more cost effective service.

LA-Tucson daylight service would be an interesting offering. It would require some investment in rehabilitating the line into Phoenix (Maricopa is not Phoenix), but there would likely be good ridership LA-PSP and PHX-TUS. A train that left LA at 1000am, allowing connections from the Surfliners and Metrolink, would arrive in Palm Springs about 1230pm and Tucson about 730pm. If the westbound trip left Tucson at 700am, it would arrive in LA at 500pm, again allowing connections to Metrolink and the Surfliners. The Sunset could continue to run on its current schedule and add some additional options.
 
Posted by yukon11 (Member # 2997) on :
 
[QUOTE]Originally posted by Vincent206:

The sleepers on the Starlight do generate more revenue than coach tickets. The lowest sleeper fare is $305 which works out to $13.36 per hour of travel time, which isn't a huge premium over the Cascades fare. Considering all the expenses included in the sleeper fare (free food!, shower and linen, coffee and juice), it's hard to see how Amtrak would be generating profits on the LD trains.

************************************
Interesting bit of information, Vincent. I can't help wondering what the picture would look like if sleepers were to predominate or if the Starlight was All-Pullman. Could the increased revenue from sleeper passengers supersede the cost of providing sleepers? On the other hand, you would need an upscale in food, service, and amenities which probably would make that idea impractical.

It also reminds me of a a rumor, which I've heard, which may be entirely fallacious. The rumor is that the eastbound Empire Builder might not allow sleeper bookings for a passenger going no further than Glacier Park, I guess for economic reasons. If the rumor is true, I think the idea is absurd.

***********************************

A great thread. All of the ideas and opinions expressed are really interesting.

Richard
 
Posted by George Harris (Member # 2077) on :
 
I have not attempted to work out your average speeds between points on these routes, but here is a major reality check on speeded up service on existing tracks:
1. Alignment geometry
2. Needed additonal tracks for reliability.

1: Changing the speed limit is meaningless if curves prevent higher speeds, and also if geographic obstacles result in longer distances between given points.

Not the same part of the country but I give you this as an example: Atlanta to Birmingham, 165 miles, run time for the Crescent 4 hours, which is about as good a run time as there has ever been on this line. The line has a 79 mph speed limit for passenger trains, but the line is so curvey that the length of line where this speed can actually be achieved is zero. Soooo, the current average of a little over 40 mph is about as good as you can ever do without major realignments. According to Google Maps, the distance is 147 miles and can be driven is 2 hours 16 minutes. Thus, on the road, I-20, the distance is 18 miles less, and the drive time is about 1 hour 45 minutes less. This is obviously assuming holding 70 mph for most of the distance. By the way, pre Interstate, you would be pushing hard to get down to close to 4 hours driving time. Also, reality is that if you are holding 70, you better stay in the right hand lane because there will be many cars passing you.
 
Posted by George Harris (Member # 2077) on :
 
OK, I know it has been about 1 1/2 months, but all these proposed speed ups suffer from unreality in the needed track structure and alignment improvements. A good example:
quote:
LA-Tucson daylight service would be an interesting offering. It would require some investment in rehabilitating the line into Phoenix (Maricopa is not Phoenix)
"some investment in rehabilitating the line" is a gross understatement. The whole reason the Sunset was moved was the need for major track work, and probably signal and bridge work as well. The track consisted of life-expired jointed rail and probably need for a major tie replacement and new ballast. That ain't cheap. If it were to be done, then should be for a 90 or faster speed limit. The difference in the required trackwork for 79 mph and for 110 would be nil. There is no way that UP is going to do this work nor should they be expected to. Government entities would have to do it. IF a couple of daily trains were to be run, that MIGHT be worth thinking about. For the Sunset only, not worth it and not going to happen.
 
Posted by Gilbert B Norman (Member # 1541) on :
 
quote:
Originally posted by yukon11:
It also reminds me of a a rumor, which I've heard, which may be entirely fallacious. The rumor is that the eastbound Empire Builder might not allow sleeper bookings for a passenger going no further than Glacier Park, I guess for economic reasons. If the rumor is true, I think the idea is absurd.

Richard, "back in railroad days", this was done all the time.

Good luck trying to book a day occupancy Bedroom Denver to Glenwood on the Zephyr. They did wisely not wish to be deprived of, say, a Chicago-Oakland sale. However if the human reservation clerks saw a room booked, say, Chicago-Granby and then again Grand Jct-Stockton, they would of course allow the Denver-Glenwood sale.

Imagine the 1963 "oh...." my Mother and Father had to go through when arriving at Glenwood. Their friends from Aspen were waiting for them at the East end of the platform where the Pullmans were, and here come my Mother and Father off the Coaches!! Reportedly, such was quickly resolved when friends found out they had flown IDL-DEN, then Zephyr.

Finally volks, if I may add at this as good as user-moderated forum (Lori please take no offense), we really are moving astray from Amtrak accounting issues. There are many another topics addressing possible new routes.
 
Posted by palmland (Member # 4344) on :
 
Richard, it doesn’t makee sense that Amtrak wouldn’t allow that booking. Why not just charge a very high fare comparable to those going a longer distance. But even that may not be wise. Many passengers, including ourselves, book Chicago to Glacier then Glacier to Portland or Seattle. Why would you want to discourage that?

Maybe Amtrak should consider letting passengers book at a through rate to, in this case, Chicago to Seattle, but allow a stop off for an additional charge/fee. This would discourage those passengers that really just want to go only the short segment. Better yet, add a set out sleeper Seattle to Whitefish!
 


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