I Gave a Talk About Transportation in Connecticut
I gave a second talk this week about transportation, this time at Hartford Station, concerning the plans for Connecticut transportation. The starting point is Governor Lamont’s $21 billion plan for investment, including both expansion and repairs (read: the State of Good Repair black hole), of which $14 billion is highways, $6.2 billion is rail, and $450 million is buses. But most of the talk concerns what Connecticut should be doing, rather than the specifics of Lamont’s plan.
Here are my slides. The talk itself took around 40-45 minutes out of a nearly 2-hour meeting, so it was designed around taking many questions, and around further explanations. Something I didn’t put in the slides but explained verbally is how easy the modern track renewal process is. Nowadays, there are machines that use no infrastructure except the tracks themselves, running on the tracks at very low speed (slower than walking) and systematically replacing the rails, ties, and ballast. They can also regrade the tracks’ superelevation angle independently of the drainage angle, changing the tracks’ cant as they go. The upshot is that increasing the cant on tracks is almost cost-free, and would enable large increases in train speed on both regional and intercity trains.
Other technology that has negative cost in the future is getting higher-performance EMUs than the current equipment. The current trains are obsolete technology, built around superseded federal regulations. There’s no point in getting more of the same. They’re okay to run until end of life, but new purchases should involve electrification and modern European EMUs. Whereas infrastructure costs are rising (see here and here), technology costs are falling in real terms. The fall in train costs is not so quick as that of computer costs, but still the rolling stock factories are designed around making products for the 2020s, not the 1990s, and retooling them for older technology costs extra.
Hence my slogan from the talk: better things are possible, on a budget.
One question I was asked at the talk that I didn’t have an answer to was, why is construction in Connecticut so expensive? Plans for infill stations are budgeted extravagantly, ranging between $50 million and $100 million without any special construction difficulties. Boston builds infill stations (counting high-platform upgrades as infill since the preexisting stations have no facilities) for $20-30 million counting various hidden costs (e.g. regular MBTA employees, like project managers, count as operating and not capital costs even if they only work on capital costs); Berlin does for €10-20 million.
After the talk, Roger Senserrich explained to me (and a planner at the MBTA confirmed to me) that in Connecticut there’s no in-house design at all. Massachusetts has a mix of in-house design review, with the team stymied by uncompetitive wages making hiring and retention difficult, and outsourcing work to consultants. CDOT exclusively outsources to consultants, and has no in-house expertise to evaluate whether the contracts are fair or whether it’s being overcharged.
Interesting, I live just outside Hartford and had no idea this was happening. Regarding station costs, the figure you quote, is that for the design or the design and construction. I assume the latter. So rather than do a low bid lottery how about using a Target Cost approach to procurement, not cost plus but a real target cost where the contractor only gets a profit if he’s efficient. That should help get the costs under control and CDOT needs to hire consultants who have the right experience and not just their usual suspects.
I don’t think it was advertised on the usual channels, like my Twitter feed :-/.
CDOT needs to staff up more than anything. Hire a general project manager for rail, hire a design review team of maybe 10 people (Boston has 5 and it’s too few but the MBTA is a much bigger system than anything in Connecticut), study integrated timetable design as used in Switzerland and the Netherlands, work with European railroads in general on bringing in track renewal machines. And definitely don’t do a low-bid lottery, there needs to be some technical scoring.
The US freight railroads have the machines.
And yet Metro-North does not use them much, instead doing daytime work to the point that the New Haven Line is de facto 3- rather than 4-track.
Hell, Herzog rents the machines. I think a second company does too. Pricing is standardized for the rental, even.
Metro North can’t use them on most of its territory because none of them are designed to handle third rail, let alone quirky underrunning third rail. On the New Haven Lime, however, the track renewal machines would work fine.
Apparently Balfour Beatty too. https://www.youtube.com/watch?v=LhpKcnpebRk Though that video is getting old,
That’s the other company when rents them. Herzog and Balfour Beatty.
Do the US freights really have the machines needed for this? Just from perusing YouTube, the machines I see in Europe seem significantly more advanced than what is observable in the US. One exception is the Track Laying Machine that was used on the Hartford line. Is there anything on this side of the Atlantic capable of proper track setting with high cant deficiency? I don’t know. Maybe Amtrak owns one, but the freights? Why would they ever need anything capable of setting 300 cant deficiency? How about a ballast cleaning machine? I have never seen or heard of one this side of the pond. Here the ballast is left to deteriorate until the situation cannot be tolerated any more and then the whole track and ballast and subbase are ripped and replaced. This takes a lot of time and also guarantees decades of slower running before the deterioration cannot be tolerated any more. In Europe they run a ballast cleaner followed by tampers and such and the track is back in service at design speeds within days.
Precisely. No mystery. Except the mystery as to why the state allows this and why its citizens aren’t up in arms about it. Plus, if they wish to analyse any contract, that too will be outsourced to the usual suspects (one of the Big 4 accountants/consultants) which is even dumber/irresponsible. Of course independent of what happens in the state, Connecticut is possibly the world’s biggest home to consultants. So maybe not such a mystery …
And this is the answer to Simun’s misguided comment on your other article.
This is the core cause of overcharging in most of the US. You need in house expertise to evaluate whether you are being robbed by contractors.
In NYC they have enough in house employees but apparently none of them have expertise, so they still get robbed…
I assume more observations for the database is always better? I saw you only had one observation for the Netherlands, the Amsterdam Noord-Zuidlijn. In 2009 Rotterdam finished a tunnel with one reconstructed metro station at Rotterdam Centraal and a new one at Blijdorp (“Statenwegtracé), allowing through running of the former Hofplein heavy rail line into Rotterdam’s metro system. The cost is in this 2015 report: http://www.vanmeggelen.nl/wp-content/uploads/2015/01/RandstadRail-Rotterdam-Evaluatie-deel-2.pdf
In table 8 on page 81 are the final costs, €363,989,098 in 2012pp for the 3km tunnel (of which 2.4km bored with two single bores) including one cut and cover station with a single entrance, and €143,392,199 for the Centraal metrostation reconstruction. So this project puts Netherlands closer to France and Germany than to the Anglosphere.
Ooh, thanks! And yes, more observations is good, esp. when they conflict with my theory so starkly (I’d assume a Rotterdam tunnel should be as expensive as an Amsterdam one).
The Noord/Zuidlijn is famously complex (no two stations are even remotely the same) and suffered from huge delays in construction due to groundwater intrusion, subsidence, archaeology and contractor bankruptcies. It definitely doesn’t look like a normal Dutch infrastructure project in these respects. The long list of disruptions is summarised here (in Dutch): https://nl.wikipedia.org/wiki/Geschiedenis_van_de_Noord/Zuidlijn.
Is rolling stock actually getting cheaper in North America? Isn’t Stadler is still charging way more for European-style trains sold in the US, given what Caltrain/BART/TEXRail are paying for KISS/GTW/FLIRTs?
In a Buy America-ridden contract that I think only had one bidder. Elsewhere, rolling stock costs keep creeping up for essentially the same reason it gets more expensive over time to maintain COBOL code.
This is because Stadler is the only game in North America making DMUs.
Buy America is not going away any time soon, with both parties aligned away from anything that looks like shipping American manufacturing jobs overseas.
These are bilevel EMUs.
So it sounds like you should be advocating dumping Buy America more than the new EMUs?
I keep trying to tell various states (i.e. Massachusetts) not to rely on federal funding for that reason…
Leaving more money for red states to suck out of blue states. Buy American and Buy America aren’t unlimited pots of money.
Yeah, but there is nothing wrong in principle with Buy America. The reason it doesn’t work is because, despite the size of the US, the demand from its rail transit (all forms) is too low, is not sustained over time and subject to political shenanigans, including cost blowouts and other clstrfks due to the deliberate deracination of any expertise inside government.
Trump is a prime example, though he came in with enthusiasm for HSR. And we can’t just blame him as lack of proper support spans the last half century at least and the neglect is bipartisan. There was 8 years of liberal Democratic federal government and it didn’t budge the needle. There needs to be a major change in these things for anything to improve, and buying imports is not the answer, and in fact is counterproductive. However, supporting local manufacture (probably mostly assembly but that’s ok) can be a part of some aspect of a Green New Deal in which serious resources are aimed at city transit, and inter-city rail too. The big transit companies, Alstom, Bombardier, Siemens, Hitachi etc, are hesitant to bid on American projects because they have little faith in the political system or indeed civil service, or voters, to follow through. Not to mention the insidious influence of the major American companies (AECOM, Tutor Peroni etc) who dominate the industry and the whole army of consultants and sub-contractors dependent on them.
I’ve said it over and over, that the Anglosphere needs to rebuild its civil service. I’ve just read a piece by Peter Brooks (In Praise of Washington Insiders, published last few days) that is quite eloquent in setting out the case. He’s writing of the diplomatic service re the impeachment process, but it applies across the board. His closing para:
But in the Anglosphere, this is fighting against 4 decades of Thatcher-Reaganism where the government is the enemy. In reality government is the only thing that is going to make sure these things work in our interest rather than just private vested interest looking out for themselves.
[blockquote]Alstom, Bombardier, Siemens, Hitachi etc, are hesitant to bid on American projects[/blockquote]
Surprising a good chunk of those companies you mentioned are bidding for NYC area projects them directly or indirectly (eg Siemens supplies components for Kawasaki NYC bids) then. Outside NYC, the Siemens S70 LRV is really almost everywhere. In fact, all passenger railcar makers for the US are foreign (and are quite large in other countries too), if there’s any hesitation I don’t see it in the form of not bidding, they’ve managed to squeeze out all the local ones.
If there is any hesitation, they still wouldn’t want to pass on any chance to make some money, they would jack up their prices to providing a kind of insurance.
“There was 8 years of liberal Democratic federal government and it didn’t budge the needle.”
There was 2 years of center-left government. They were largely focused on health care and dealing with the financial crisis. Far right Republicans then retook the House of Representatives, and successfully pushed forward the ridiculous idea that we should limit spending during a major recession. They didn’t spend much money on infrastructure projects, despite the obvious need. You would think someone would push for something everyone agrees we need to do — say, fix our sewer system — but that doesn’t happen. Republicans opposed any spending — even in their own district — while Democrats spent little time worry about whether it would lead to long term value.
Then the Republicans had two years of control of all three chambers. All they did was pass tax cuts. Apparently deficits aren’t a big deal as long as someone gets a big tax cut.
Since Reagan got elected the U. S. federal government has been dysfunctional. There is no consensus on issues that are fairly non-political (like sewers). You are right — there needs to be a major change to fix these problems. Buy America provisions are the least of our problems.
I only pay attention to my own congresswoman. She loves to go to ribbon cuttings where she takes credit for bringing home the pork. Then gives speeches about how awful gobbermint spending is. They only care about deficits when there is a Democrat in the White House. To quote Vice President Cheney, deficits don’t matter… when it’s a Republican running them up. I’m still waiting for us to all get rich from the Reagan tax cuts. Or the Bush tax cuts. And the Trump tax cuts should kick in any day now.
….. if there are no T-Bills there can’t be T-bill money market accounts. Free market zealots would have to park their cash in the free market. If there was an infrastructure bank there wouldn’t be any triple tax free municipal bonds. Or the vigorish to underwrite them. Or bundle them into mutual funds. Single payer health care cuts out all the admin costs and the pink collar workers to handle it. And the umpteen CEOs and board of directors and dividend checks to share holders….
Sewers are built by local governments. The only Federal role ought to be enforcing clean water laws against localities that foul interstate waterways. Subsidiarity, and all that.
You are quite right. Those of us outside the US keep forgetting how the founders deliberately set up the system to completely knacker “strong” and purposeful government. OTOH, I always say that we should quieten down criticism of government and politicians, and refocus on the real culprits: the voters.
Having said that, I remain disappointed with Obama (of course I remain disappointed with every American president in my lifetime) because, despite all you say, he ignored that great maxim to “never let a crisis go unexploited”.
Have you noticed that recently (past month) that there is a new set of attacks on Warren in OpEds and on blog comments (by some who sound a lot like troll farm output)? Over the weekend there was a ridiculous piece in The Guardian by Nathan Robinson positing she is nothing more than a Republican in Dem clothes. To me this activity signals that some have taken notice that she is emerging as the only serious contender who could feasibly win and feasibly bring real change, so they are preparing for a future campaign to wreck her the way they henpecked HRC over absurd issues. It appears to be a repeat of getting Bernie Bros all fired up so they will turn on their own party when, inevitably, their boy doesn’t become the nominee. One has no faith that American voters can see thru the smog of disinformation, and that Dems (and Brit Labour and Aust. Labor) are Olympic gold medal winners at shooting themselves in both feet. The likelihood of someone like Warren (ie. someone who genuinely wants to change things, like HRC IMO) winning and then manage to legislate change (for the reasons you give) are too depressing to contemplate …
However, this weekend a tiny glimmer of hope amongst the gloom. The Hong Kong people have spoken loud and clear. Who would have ever thought it? Well, actually quite a few back at the time of the handover who speculated, perhaps desperately hoped, that HK would manage a reverse takeover. Sure, it’s still very unlikely but this certainly sticks a hot poker into Xi Jingping’s eye. Or an umbrella (this is from 2016 ago but even more appropriate today):
Hillary Clinton, the Senator from Wall Street, wanting to change things? Surely you jest.
Not at all. I think the theory about HRC and the Clintons as über-villains is so far over the top to be farcical. Of course anyone aspiring to the presidency has an abnormal outsized ego, and Clintons may seem excessively avaricious but mostly it is in the purview of accumulating power and influence, without which it is harder to get things done.
I came to believe, and yes with perhaps more hope than anything else, that HRC was playing the highly-managed game she needed to achieve the highest office. That means getting Wall St onside, getting the MIC onside and many other powerful players. Mostly so they wouldn’t fight her campaign; we’ll see how Warren manages on that front. Remember she earned the respect across the aisle when she was in the Senate and as Sec of State. I believe this came from her various experiences, from governor’s wife to First Lady where she went full bore for a healthcare plan that was shot down by all kind of adversaries. Then Senator and Sec of State, the failed run for presidency. I believe this incredible path intellectually hardened her to ‘do what it takes’, especially for a woman, to get in a position to do things. I think that being part of the Obama administration and witnessing all the frustrations of his 2 terms was the final push. She (and others, such as Samantha Powers) disagreed with Obama’s faltering steps over Syria (the Bernie Bros and assorted ignorant commentators want to label her a war monger but she was absolutely correct in wanting a Syria no-fly-zone which would have stopped the civilian carnage, snookered Russia/Putin and Turkey and Iran, and thus would have accelerated the defeat of Isis etc.)
She knew personally–and had their respect–of most of the most powerful people in the US and around the world from her almost 30 years in politics. Heck, she might have appointed Elizabeth Warren as Sec of Treasury. She would have been in an extraordinary position to bring change, and know just what it takes (some will disagree and I don’t discount the difficulties but I still think Obama could have done more, he seemed curiously indifferent and ‘too cool for school’ at times). I really don’t think she had done all this to reach the top job to then not try her best for change.
You can mock but I think it is a viable and compelling theory.
Oh, brother. You do know that much of that “civilian carnage” over in Syria was ginned up fake news, right? So a no-fly zone, for which there is no UN authorization, becomes an act of aggression against Syria. To what end, I’m not sure.
“A leaked email last night dramatically indicated that the UN’s poison gas watchdog had butchered and censored a critical report on an alleged chemical attack in Syria. If substantiated, the revelations will be severely embarrassing for Britain, France and America, which launched a massive military strike in retaliation without waiting for proof that chemical weapons had actually been used.
“Unconfirmed reports and videos, showing the corpses of adults and children foaming at the mouth in Douma, a suburb of Damascus, shocked the world in April 2018 and led to a joint Western attack on the supposed culprit, Syria, in which more than 100 missiles, including nearly 70 Tomahawk cruise missiles, were fired.
“Although the reports and films could not be independently verified, as the alleged events took place in a war zone then under the control of brutal Islamist militants, Western governments, and many Western media, took them at face value. ”
Come to think of it, a no-fly zone over Syria might do a lot to protect the people there from aggression from Western Powers.
Btw, Michael, you might like the book Scale, by Geoffrey West, for its explanations of the mathematics of underlying city economies. The inefficient national government at least permits the urban order to be emergent, and thus largely fractal.
I just finished The Power Broker, and one thing becomes clear from that book: Federal monies empowered Robert Moses to “rationalize” New York, and plow throw dense and rich neighborhoods with straight lines on the map drawn by engineers. The problem is that those interventions reduced the fractal dimension of the city, undermining much of its economic advantage.
Re The Power Broker: I wouldn’t say Moses “rationalized” New York. The rationalization and straight lines came 140 years earlier, with the street grid. What Moses did do was build highways and parks (while neglecting transit). If anything, the highways made NY more “fractal” not less, as they added another layer of attempted design while the vast majority of the city (by area) remained unchanged in its form.
Remember she earned the respect across the aisle when she was in the Senate and as Sec of State.
Bennnnnnghaaazeeee! Emailssss! Youranium Onnneee! Benghazi, emails, Comet Pizza, Benghazi, emails, Uranium One, emails, emails and emails. Benghazi. And emails.
I rest my case.
That really was about as lucid as the criticism got.
The argument in scale talks about scaling laws as related to cities. For every doubling in city size, only 1.85 times more infrastructure is needed. At the same time, the a city 100% larger typically has 115% larger income. This efficient organization is related to self-similarity, a feature of fractal systems. Moses was also in charge of slum clearance, reducing fractal neighborhoods into simplified superblocks, eliminating the self-similarity that feeds into Scale.
The roads had a negative feedback loop that is anti-scaling. Induced demand, as covered in The Power Broker, quickly fills the roads that were built to relieve traffic, requiring further road widening, inducing further demand. The effect of roads on dense neighborhoods causes a collapse in density, decreasing the benefits to scale and stranding the extra infrastructure originally put in place to deal with density. Its maintenance now becomes a burden to a population whose incomes have dropped with decreasing scale. If you’re lucky, you get only the South Bronx. If you’re not, Detroit.
Anyway, I highly recommend the book.
So, was it Kubrick (or his widow?) who created all those videos and footage of barrel bombs dropped indiscriminately over Syria? The double-tapping of hospitals. Or the flattening of entire cities? And the 1.5m Syrian refugees in Germany, and 5m+ scattered around the middle-east camps in Jordan, Turkey, Lebanon etc.
You don’t believe these things but seemingly believe in the truly absurd Clinton conspiracies listed by Adirondacker?
As to Moses, he built a good road system for NYC. And many parks and recreational grounds, beaches etc. Luckily (for him) (1) his worst instincts* were curtailed by citizen activism (Jane Jacobs etc) and (2) he wasn’t responsible for everything in NYC so the public transit system survived his desire to destroy it. The thing is one could imagine a NYC as a powerful city without the über-roads (as Eric pointed out it already had a functional road network), but not without its public transit. Well, it would be closer to Delhi or Djakata, definitely not its world peers London, Paris, Tokyo, Hong Kong, Shanghai.
*easy to say for most of us who were never likely to live in, or even notice what he did to the Bronx.
The restraints on Moses started only in the 1950s. The Power Broker tells the story of his, maybe not Waterloo, but Borodino, the battle that showed he had crested, in trying to build a parking lot for Tavern on the Green in 1956. That was 22 years after he had begun vivisecting NYC neighborhoods under Mayor LaGuardia. He did manage to destroy the parts of the public transit system that included Manhattan elevated trains and the conduit-powered street railway system (the rails caused problems for cars). Caro makes the point that, by building roads that encouraged car trips, Moses undercut ridership on railroads and transit, causing service to drop and setting off the spiral of disuse and disrepair that really only turned in the early 1980s.
Had the man been interested in transit, NYC would now be the world’s greatest transit city. He was a brilliant operator.
What people keep missing is that Moses is not some intentionalist story of one person. He represented something – namely, a tension between regionalism and localism. In the 1940s, various planners were talking about regionwide planning, which would include egalitarian goals, since there was upper middle-class WASP flight in New York already in the 1920s and 30s. This ran into the problem of redistribution – egalitarian planning would involve sharing resources, and wealthy suburbs did not want to share.
Moses was really a synthesis between the egalitarian regional thesis and the existing local hierarchy antithesis. Under his oversight, transportation planning would be regional (e.g. jobs in the city, residences in the suburbs), but would have no democratic oversight and would serve to heighten existing social hierarchies (sexism in an era when most women didn’t own cars, racial segregation, etc.). He would personally see to it that infrastructure would serve the white middle class, esp. white middle-class men. The failure of LOMEX came because Moses misidentified the Village as a slum; the neighborhood gentrified in his adult lifetime, so he did not realize that he was facing an increasingly well-off neighborhood.
Canal Street isn’t in the Village.
It was Village NIMBYism that defeated LOMEX.
Hmm, East 74th Street is in the Village? Hmm.
The Regional Planning Agency is often an ignored foil of Moses in The Power Broker. There’re several sections quoting Lewis Mumford about effective regional planning, and Moses ignoring the RPA and scoffing at its people. Fascinating is the coordination between the Port Authority and the Triborough Authority to build more bridges, and roadways between. One example given was the PA’s building the Verrazano Bridge with the goal of developing Staten Island so that its money-losing Bridges to the Island would increase traffic and make more in tolls.
I don’t know if you’ve read the book, but you’re exactly correct about some Moses motivations: he kept in his head a picture of the way things were when he was a young man, and did not re-think things as conditions changed (given his project workload, reflection was something he did not have time for). A slum was any overcrowded area, and reformers fired by the images of Jacob Riis determined to do away with them, ignoring the wishes of the people in them, and also the fact that many were, as JAcobs put it in Death and Life, unslumming. So Moses destroyed Mahattanville and East Harlem and was satisfying the demands of fin-de-siecle NYC, even though overcrowded NY of post-war crowding desperately needed the housing he clearcut to start over.
To a great extent, the recovery of the city in the 1980s was probably a reflection of the fact that Olympian planners stopped disrupting people in the huddled masses below. Given the value of Tribeca and SoHo today, the city’s yield in taxes versus the drain to maintain a LoMex highlights just one example of why it has recovered a bit. Moses also planned an elevated expressway across 30th street and only did not build it in a fit of pique against a reformer Manhattan Borough President (there would have been no neighborhood opposition there) who questioned his figures on it. That man deserves to have 30th street renamed for him.
That said, we could use a Moses of regional public transit. I’d love to see your regional rail idea, especially connecting the Harlem line to Staten Island, built out.
I think you’re right that costs are national, but there are also local factors playing in it, especially because public transport projects are managed locally, following national regulations.
For example, Milan has long-time been able to build relatively cheaply because since the construction of the first metro line in the 50s, they build up and maintained a well staffed technical office, called Metropolitana Milanese (MM), that has been in charge of the project of every extensions and new metro constructions that mostly never stopped until now.
MM even bids and do technical assistance in metro and rail construction elsewhere in Italy and abroad (recently in Mumbai). It’s technically an engineering firm, but it’s 100% public, owned by Milan municipality.
The result is simply designed station and line (sometimes dull honestly), but cheap.
Rome, on the contrary, didn’t have its own project company until they created “Roma Metropolitane” in the early 2000s to manage the project and construction of lines C and D and other extension. It never managed to get staffed properly, they often outsourced project management and design du to lack of internal expertise and has been recently dismantled. The result is a very expensive, for Italian standard, metro C line.
Similarly, the railway state company, FS, has its own engineering company, Italferr, staffed by competent engineers. They normally take care of all the design, bidding, and construction supervision process for rail works. Detailed design was outsourced for political decision only for the construction of the early high-speed network, following the general contractor (or design-build) formula. Costs escalated. Newer high or higher speed projects are being managed internally, and even if expensive, this has more to do with the geography of the country (mountainous and densely inhabited) than mismanagement.
Smaller municipalities need to relay on outsourced consultant for they projects, but they are always supervised internally, when there enough internal expertise (this is truer in bigger municipalities in the north, to be fair).
COBOL is highly maintainable…. Compared to assembly language, which Amtrak’s ticketing system is written in
Hello! I’ve been a fan of your work for a while. I just wanted to share a shocking Connecticut statistic I saw a few days ago. New Haven is considering whether to build multiple new BRT routes in the city – which would be a huge victory. The total cost of the project? $15.5 million – and that INCLUDES the cost of 18 new buses! See here: https://www.newhavenindependent.org/index.php/archives/entry/move_new_haven1/
As a current San Francisco resident, we’re building BRT at $250M per mile, no buses included… Better things are possible, on a budget!
Not to distract you from eating turkey, but FYI, the Nov 25 issue of Bloomberg Businessweek (yeah, the guy now running for president ..) has an article:
How To Save Amtrak. Or Ruin It.
by Devin Leonard
“The head of America’s passenger rail system isn’t particularly attached to trains. Maybe that’s a good thing.”
A former CEO of Delta Airlines? Sure, just the guy. Incidentally he was appointed CEO after Delta’s bankruptcy which is about the perfect time to assume control of such a giant corporation, especially one with huge capital flows. The bankruptcy has killed debt, usually struck some awful labor deals (awful for the airline’s workforce), written off assets like planes (which of course keep flying for many more years) thus creating tax credits for years to come. And in all likelihood, the whole industry will be turning into the up-cycle, and sure enough that happened (it happened to a lot of the industry; it’s in a rare profitability phase). The stock will have been bombed out so it is all upside.
But still, guys like Richard Anderson are acclaimed geniuses and turnaround experts. He was duly rewarded with $72 million in stock. Now he may or may not be a clever guy–I am assuming he is a finance guy because that is almost always the background of these types.
Funny how transit doesn’t work like that anywhere in the world.
Funny how these principles don’t seem to apply to the roads.
The US Interstate Highway System consumes $66bn p.a. in maintenance and works. $40.9 billion (57%) comes the Federal Government of which ≈$21bn is from fuel tax and the rest ($19.9bn ≈32%) from general government budget allocations. $25bn comes from state governments but less is from fuel tax and some tolls, thus even higher proportion comes out of general funds. This means at minimum 50% is direct government subsidy, about $30bn.
This is a very low cost recovery with public subsidy being more than ten times the subsidy to Amtrak; roads getting 50% while rail gets 5.3%. You could normalise to km travelled or per capita etc but the disparity is enormous, yet the bigger subsidy is considered a “cost” while the much smaller one is considered a “subsidy”.
Of course both road and rail are starved of capital for maintenance.
Despite which, Amtrak’s NEC made half a billion profit last year. The main problem with a lot of the rest of its network is that it doesn’t control its ROW and the freight owners won’t play ball. The new CEO’s ‘solution’ is to break up long journeys into small ones … which I can’t quite get my head around.
But there does appear to be a bipartisan sentiment growing to fix the trains. Pax numbers grew last year, perhaps related to “VMT per capita” dropping, perhaps fewer Millennials driving, and more boomer-retirees
choosing these long rail journeys. Also the freight rail barons might change their tune as the amount of coal being carried (by far the single biggest freight, 43.3% of tonnage and 24.7% of revenue) must be declining as the electricity from coal generators continues to decline.
Correction note: It was AMTRAK that had 32 million riders, $3.2 billion in revenue, and a loss of $171 million (not the MTA).
The Bloomberg article later makes the point, in contrast that, yes, the NE Corridor had $524 million profit. But, the state-supported routes, which lost $91 million, represented ~half the passengers. So Amtrak could be a profitable business if it simply stopped serving half its existing passengers. This is like GM and Ford announcing that they will no longer build cars, and only build pickups and SUVs, where all the profits are (and similarly, leave Europe, a geography with excess production capacity and no profits).
Oops, that was an inadvertent error as I knew it was Amtrak not the MTA! (Ha, that the MTA would only lose $170m!) I reckon I thought I had that square brackets thing was in memory to paste … Wish I could edit it …
My issue is beyond your point. Public transit is close to impossible to run ‘profitably’ but that’s not to say it doesn’t add hugely to the economy of where it operates. Just that it is tricky to measure and even trickier to capture. BTW, citing Japan, Tokyo subway or HK-MTA is technically untrue because none of these are repaying the capital cost of building, or extending, their networks. So Richard Anderson is deluded or dishonest, possibly both, when he talks like that. He can sack workers, cut up long routes or do all those management tricks (that probably had zip to do with Delta’s recovery) and it is avoiding the main issues. Of course on top of that is the hypocrisy concerning roads as if they aren’t massively subsidized also.
Nearly all of Amtrak’s trains are in fact profitable. Amtrak accounting is designed to hide this fact.
Amtrak as a whole is not profitable, but this is because of a couple of billions dollars in fixed cost overhead. If you ran fewer trains, the overhead would stay the same. So if you cut any state sponsored or long distance gain, the overhead would just be reallocated to the NEC and then the NEC would appear unprofitable.
“Allocated overhead” is an accounting fraud technique, and Amtrak uses it a lot.
Mr Anderson has proven that he does not understand economics, specifically the difference between fixed and variable costs, and that he cannot recognize when he is being handed fraudulent accounting.
That makes him a sap.
I could run Amtrak like a business. Mr Anderson cannot because he does not know where the revenue comes from or where the costs are. He actually believes Amtrak’s infamously fraudulent cost “allocations”.