Rep. Kevin McCarthy (R-Bakersfield) penned an op-ed defending his attempt to strip California high-speed rail of all funding. In the usual litany of complaints about the deficit, he referenced a 2008 study by Amtrak’s Office of Inspector General claiming that European passenger railroads lose money but keep those losses off-books. The study is fraudulent. It does not specify a methodology, which means it’s hard to pinpoint where exactly the numbers don’t match actual reality; however, some hints are provided by the following claim:
1. Public Funding to the Train Operating Companies may be accounted for as revenue, and
2. Public Funding to the Infrastructure Managers enables them to charge “user fees” to the Train Operating Companies that may be significantly lower than the actual infrastructure maintenance expenses.
Ad 1, it is not difficult to separate transport income from public funding. The balance sheets often state the source of income clearly. Most public funding comes from operating regional trains under contract, which SNCF and DB keep separate from their core intercity business, which is profitable. A minority of public funding is subsidies for social services, for example state-mandated discounts to active-duty troops, the elderly, and the unemployed; a libertarian would instantly recognize such mandates as taxes and deduct them from the subsidies. See for example page 30 of SNCF’s books, which clearly shows the majority of public funding (not counting RFF, which is nominally private) is from local sources, for operating commuter rail.
It is true that regional rail is heavily subsidized in Europe, but the same is true in the US. But in the US there’s far less national railroad involvement in commuter rail than in Europe, so comparing Amtrak to every train that has an SNCF logo is disingenuous. Worse, the study picks and chooses which Amtrak trains to compare European trains to: it ignores the long-distance trains, and in one figure (p. 13) only compares the Northeast Corridor to European networks and ignores the state-supported corridors, organizationally the closest thing to the TER or DB Regio in the US.
Ad 2, the choice of how to set the track access fees is a political one, and often the political choice is to set the access fees high. In France, in anticipation of open access RFF has recently raised tolls to far above track maintenance costs, effectively moving all French rail profits from SNCF to RFF and preventing competing companies from making a profit on the popular Paris-Lyon segment. Even in 2006, the toll on Paris-Lyon was €14.60 per train-km, the highest of all European lines although, because it has the most traffic, its maintenance cost should be the lowest per train-km.
A 2008 study of the costs and benefits of HSR in Europe published by the OECD and International Transport Forum finds that the maintenance costs per single-track-km in Europe average €30,000. This is €82 per single-track-km per day; to find the appropriate cost per train-km, divide by the number of daily trains in each direction. The LGV Sud-Est’s 2006 tolls would cover that average maintenance cost in just six daily runs; maximum frequency on the line is ten trains per direction per hour. Of the five or six lines on the list of rail links and their tolls that are HSR, the average toll is €10 per train-km. Of course this excludes depreciation and interest, but at least on the LGV Sud-Est, depreciation is quite low since the line was cheap to construct, and the construction bonds have already been paid. SNCF’s complaint that it’s being milked by tolls far above maintenance costs seems correct.
Of course, RFF’s books are more than just maintenance costs. They’re also debt accumulated by SNCF when it was run far less efficiently than today. Much like with JNR, this debt may have to be absorbed by the state, leading to predictable claims of subsidies. In reality, all this would do would be retroactively subsidize losses from decades ago. This is exactly what happened with JNR: the state absorbed the debt coming from operating losses, but required the JR companies to take over the Shinkansen construction debt, see pp. 46 and 88 of this document on privatization.
That this study has been picked up by Heritage, Reason (p. 7), and others as evidence that high-speed rail will lose money is not surprising – those organizations are paid by industry groups including the Koch Brothers and Reason spreads disinformation about trains – but for Amtrak to mislead the people who are footing its bill is inexcusable. It is probably not a matter of incompetence. Amtrak’s claim that every railroad in the world receives public funds is very unlikely to be an honest mistake. Claiming that Japan absorbed Shinkansen debt could be an honest mistake – I only found the aforementioned privatization document while looking for sources for my privatization post. But claiming that SNCF keeps public funding hidden from view when in fact it clearly states it receives regional funding for regional rail requires actively searching for reasons to tar SNCF. The alternative possibility that Amtrak included commuter rail in the calculation merely turns Amtrak’s claim from an outright lie to intentional misleading.
Amtrak’s Office of the Inspector General most likely knows what it’s doing. Nominally it’s independent of Amtrak, but if Amtrak dies, it will have nobody to supervise. Amtrak is losing money when its peer first-world railroads make money, it’s under siege by Republicans who point to those losses as a reason to private and dismember it, and it has no intention of reforming. The only way out of this conundrum is to defraud the public about peer first-world railroad practices, and I believe that this is exactly what the OIG did here. Amtrak’s existing services are sufficiently well-patronized that they have special interests behind them; therefore, feeding Reason’s propaganda is not an existential threat. But House Transportation Committee Chair John Mica’s calls for fundamental change could resonate with Republicans and moderate Democrats, and this could mean the end of Amtrak. It’s rational to lie to the public that it’s impossible to do better.
What is not rational is public acceptance of this. Heads should have rolled about this document. All involved should have resigned or been fired. Mica should have suspected shenanigans and invited both the authors of the study and officials from SNCF and DB for a hearing. Amtrak proper of course embraces the results and continues along its merry way, but I expect no better from it anymore. What I do expect is that the public in general and rail advocates in particular will be as livid as I am about being defrauded.