RailPAC/NARP March Conference report 4: Selden March 20th, 2007
This report covers the presentation by Andrew C. Selden, representing the United Rail Passenger Alliance. He is President of the Minnesota Rail Passenger Association, and an author of many articles on rail passenger policy and theory. He was a finalist candidate to be CEO of Amtrak in 1998. In 1986 he was described by the late David Morgan at TRAINS magazine as “The dean of the pro-passenger Amtrak critics.”
A link to a video of Mr. Selden’s presentation can be found after report 5 below.
“We share a passion for passenger rail,” Mr Selden began. He expressed his confidence that much of what he heard from Mr. Kummant this morning was encouraging. The market for intercity rail traffic is exploding, but “Amtrak is flat and declining.” It “costs $3 to bring in $2, and the trend never gets better. The network is shrinking!”
Citing 2006 figures from Amtrak’s own reports, Mr. Selden reported Income from passenger related activity last year was $1.565.5 billion, other income (excluding Federal subsidy) was $451.4 million. Total Expenses were listed as $3,301.6 billion, yielding a loss of $1,284.8 billion which had to be covered by federal subsidy.
“They have reached the conclusion that growth is not possible without subsidy growth.” But, growth “is not possible with heavy subsidy. Look at their 30 year history. Why are we stuck with this situation?” For one thing, “ridership” is not output. Headcount does not translate into growth in the areas that do count.
Mr. Selden then cited examples of how Amtrak “does not know its product,” even though these same figures are available to them. The Chicago “hub” last year had two categories of trains, Group A and Group B:
Ridership (the headcount)
Revenue Passenger Miles (000)
Load factor (PM/TM)
“Now,” Mr. Selden said to a crowd carefully listening to something they had not heard before, “Obviously, Group B excels Group A in each of the important financial categories, so shouldn’t Amtrak be concentrating on providing resources to contribute to the success of Group B?” The question was then answered, that Group A is the 8 “corridor” trains going through the Chicago hub, while Group B is the 8 “long distance” trains that are criticized so heavily.
California has the same story: Group A outshines the ridership of Group B by a factor of 10; but the load factor (passenger miles/train miles) for A is 33% to 57% for B, the Revenue Passenger miles were close, 200 to 190, and the Revenue was 40 to 25 in favor of group A. Group A is the California corridors, while Group B is the Coast Starlight alone. Just one train does almost as well as all the corridor trains combined.
“If you want growth, put it where you are most likely to get a full return.” At Amtrak, like most big businesses, “management chooses where to put its capital resources and prioritizes spending.” The greatest growth for Amtrak “appears to come from the lowest cost potentials, the long distance trains!” Amtrak should “throw out the Route Profitability System of accounting that misleads management on its true revenue potentials and replace it with a business-oriented system.” Mr. Selden co-authored a study in 1984 on Amtrak Accounting, which was published in Passenger Train Journal.
Mr. Selden then discussed the Matrix theory of how many potentials for growth are being ignored at Amtrak, citing the Albany, New York hub as an example. This theory, developed by Mr. Selden with the late Dr. Adrian Herzog and Byron Nordberg of RailPAC and URPA, shows that today different trains serve that area, from Toronto, the Empire corridor services, long distance trains, Vermont and Montreal services, etc. He pointed out how by adding a train coming from Boston that the incremental increase in all the four categories discussed above explodes.
Time did not allow for a full Q & A period, but many meeting attendees came up to ask questions into the lunch period.