Should Metrolink operate the Surfliners? July 7th, 2012
Opinion by Noel T. Braymer
A major reason for reorganizing LOSSAN from a Joint Powers Agency into a Joint Powers Authority is to make it possible for it to take over management of the Pacific Surfliners. Much of this is modeled after the arrangement the Capitol Corridor Joint Powers Authority has over the operation of the Capitol Corridor trains. The general assumption is that the new LOSSAN JPA will continue to contract with Amtrak to operate the trains. But before doing that it would be a wise to look at other possibly better alternatives.
Metrolink is a larger rail operation than the Pacific Surfliners. It is responsible for much of the trackage over which most of the Metrolink trains run on as well as that used by the Surfliners. Metrolink’s farebox recovery is nearly the same as for the Surliners despite having higher train mile costs and lower fares. Plus its on-time performance and reliability of its equipment is much better than Amtrak’s on the Surfliners. Metrolink has the infrastructure to take over operation of the Surfliners with yards and operational experience.
There would issues to be worked out. Metrolink doesn’t have food service. This shouldn’t be a major obstacle. There are many food service companies that are available to contract out food service and handle the job of a commissary. There is the question of manning the Amtrak Stations along the line and joint ticketing. Already Metrolink ticket machines sell Amtrak tickets and arrangements would be needed to insure Amtrak Passenger transferring from the Surfliners have through ticketing. Metrolink could hire station agents or contract with Amtrak to continue to man the stations on the route. There is the issue of trackage rights. Amtrak gets a discount for using the Class I railroads tracks and has legal rights to use them that Metrolink doesn’t. However Metrolink has a working relationship with both the BNSF and the UP. There is the possibility of more cooperation and better relationships between Metrolink and the railroads, particularly if Metrolink is in a positions to pay more than Amtrak for use of their tracks The greatest unknown is the issue of equipment. Most of the equipment on the Surfliners is owned by Amtrak. For Metrolink to take over operation of the Surfliners, LOSSAN would have to either lease or buy from Amtrak the Surfliner equipment or find equipment from other sources. The big question there is how would LOSSAN pay for new equipment?
The way Amtrak or most commuter rail operators buy equipment is with tax money. Financing is a possibility although even that requires tax revenue to pay for financing or leasing. But what if the Surfliners could pay for financing with operating revenues? Lenders are happy to lend money if you have the income to make payments. But wouldn’t that mean the Surfliners would have to make a profit? Looking back on the history of the Surfliners, Amtrak reported that the fairbox recovery for the the San Diegan was 36% in 1976-77 when California first subsided one round trip in addition to the 3 run by Amtrak. By 1979-80 with 7 total trains with 4 subsidized by the State the farebox was 60.4%. By 1985-86 the cost recovery was up to 88.1%. In the fiscal year 1987-88 Amtrak was able to extend one round trip to Santa Barbara. That year the cost recovery hit 104.4%. That year the the State paid no subsidy for the San Diegans. For the next 6 years the State paid little or no subsidy to Amtrak for the San Diegans. Then for Fiscal Year 1993-94 a new contract was negotiated that included a new item for “Amtrak Costs”. For 1993-94 this added $727,987 to the costs of the San Diegans and dropped the the fairbox recovery to 90.8% By 1996-97 the item for Amtrak Cost rose to $10,000,000 and the fairbox recovery dropped to 37.4%. By 1990-00 Farebox was up to 47.7%. But expenses charged by Amtrak for the San Diegans had risen to $37,497,489 with Amtrak Costs at $1,381,986. But back in 1992-93 total expenses charged by Amtrak was $13,254,709.
Should Amtrak’s cost figures for the San Diegans/Surfliners be accepted at face value? No. Amtrak’s accounting is capable of reporting exactly how much money they spend for a given year and how revenue is received from different sources. But Amtrak’s accounting can’t tell you exactly how much it really cost to run an Amtrak train. Amtrak allocates costs to its trains. Much of this is arbitrary. Amtrak generally takes its costs and assigns them to all of their trains. This opens the possibility of favoritism so some trains can be charged less to make their performance look better by dumping charges on other trains that make their performance look worse. Generally the costs are based on the route miles of the trains. This is one reason on paper Amtrak long distance trains have such high costs and high subsidy needs compared to shorter distance trains. But does this reflect reality? Based on their cost assumptions, Amtrak has eliminated some long distance trains a few times times over the years expecting to save money. Each time they did this their losses increased. Why was that? First eliminating trains reduces revenue. The second was much of Amtrak’s overhead remained. Each Amtrak train is assigned a portion of Amtrak’s total overhead cost. Since it is largely based on route miles the longer trains are charged more to cover overhead. When a train is eliminated, the overhead costs remain. No Vice-Presidents are fired, terminals, many of the stations and yards used by the axed trains are still there, no reservation centers are closed or agents let go. But now the overhead costs has fewer trains to bring in revenue to cover these costs and more has to be charged to the remaining trains. To illustrate the reverse of this when Southwest Airlines first flew it lost money. To save money management proposed layoffs and cut backs. The employees suggested faster turnaround of flights would allow keeping both employees and same level of service but with one less plane of the 4 the airline had then. Southwest got rid of the plane lowered their overhead and made money ever since.
Before LOSSAN takes over management of the Pacific Surfliners it should find out exactly what they will be paying for. The prices Amtrak charges for state supported trains are on the high side. Amtrak’s billing should be independently audited. Most of Amtrak’s overhead costs are centered on the East Coast where its headquarters are. A major part of Amtrak’s overhead costs comes from owning and operating most of the railroad between Washington and Boston. This busy railroad has over 1,200 trains running on it most days but only about 100 of these trains belong to Amtrak. Most of the traffic is from commuter trains on the East Coast. There should be a detailed examination of the costs Amtrak is charging on the Surfliners. Metrolink should be asked to write a budget of what it would cost them to take over and run the Surfliners and then we can see who would operate the Surfliners more economically. We don’t know how much of Amtrak’s overhead is being charged to California as an operating cost and how much of that overhead the Surfliners are really responsible for.