Amtrak Line Earns Profit…NOT

It’s always good news when an Amtrak intercity rail line makes money. That means taxpayers and other non-users don’t have to pay for a service provided to a very narrow and usually higher income segment of the transportation market. Unfortunately, accurate reporting on transportation finance is pretty thin, as this report from the Lynchburg, Virginia News & Advance demonstrates all too clearly. Despite the headline, the Amtrak line is not earning a profit.

The news is relatively good: The recently opened (October 2009) Amtrak line connecting Lynchburg with Washington, DC in Northern Virginia is earning higher revenues and covering its operating costs because ridership is higher than anticipated:

“Virginia had planned to provide a $242,000 monthly subsidy to keep the train running. It won’t need any of that money for November.

“The month’s results for the new train between Lynchburg and Washington were stronger than October’s ridership, according to Virginia’s Department of Rail and Public Transportation.

“Danville also provided a remarkable upward spike in the DRPT report: a quadruple increase in passengers boarding Amtrak’s previously operating Crescent train.

“Lynchburg is served by both the Crescent train and the new one, called the Northeast Regional, which leaves at 7:38 a.m. — later in the morning than the Crescent. The Northeast train returns from Washington earlier, at 8:36 p.m.

“More than 2,000 people boarded the Crescent in Danville during November, the DRPT said. During the same month of 2008, just 452 people boarded in Danville.”

The problem with the news story is that it claims this means the line is earning a profit. It’s not. The line is just covering operating costs, not the cost of building and financing the line. In other words, it covers the salaries of the engineers and ticket takers, not the rails, rail beds, or purchases of the rail cars.

That’s a big gap, particularly on transit projects where most costs are capital costs, not operating costs.

We’ll leave aside the point that this is just the second month of operation. The real test is whether ridership stays high. That can be the subject of another blog on another day.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.

Staley is the author of several books, most recently co-authoring Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry aid Staley and Moore "get it right" and world bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

He is also co-author, with Ted Balaker, of The Road More Traveled: Why The Congestion Crisis Matters More Than You Think, and What We Can Do About It (Rowman and Littlefield, September, 2006). Author Joel Kotkin said, "The Road More Traveled should be required reading not only for planners and their students, but anyone who loves cities and wants them to thrive as real places, not merely as museums, in the 21st Century." Former U.S. Secretary of Transportation Mary Peters said, "Balaker and Staley clearly debunk the myth that there is nothing we can do about congestion."

Staley's previous book, Smarter Growth: Market-based Strategies for Land-use Planning in the 21st Century (Greenwood Press, 2001), was called the "most thorough challenge yet to regional land-use plans" by Planning magazine.

In addition to these books, he is the author of Drug Policy and the Decline of American Cities (Transaction Publishers, 1992) and Planning Rules and Urban Economic Performance: The Case of Hong Kong (Chinese University Press, 1994).

His more than 100 professional articles, studies, and reports have appeared in publications such as The Wall Street Journal, The New York Times, Washington Post, Los Angeles Times, Investor's Business Daily, Journal of the American Planning Association, Planning magazine, Reason magazine, National Review and many others.

Staley's approach to urban development, transportation and public policy blends more than 20 years of experience as an economic development consultant, academic researcher, urban policy analyst, and community leader.

Staley is a former chair for his local planning board in his hometown of Bellbrook, Ohio. He is also a former member of its Board of Zoning Appeals and Property Review Commission, vice chair of his local park district's open space master plan committee, and chair of its Charter Review Commission.

Staley received his B.A. in Economics and Public Policy from Colby College, M.S. in Social and Applied Economics from Wright State University, and Ph.D. in Public Administration, with concentrations in urban planning and public finance from Ohio State University.