Tuesday, February 17, 2009

Why Amtrak Can’t—and Never Will—Make Money

Article by Rush Loving Jr. in the Richmond Times Dispatch comments on the view of Amtrak funding. Amtrak has been trying to turn a profit since its inception but has never achieved. Rush Loving discusses why a focus on profitability by Amtrak's leadership has hamstrung the company.

Recently the tone toward funding Amtrak with higher amounts of government dollars has become more palatable and governments insistence that Amtrak be profitable has lessened. Achieving profitability is definitely a goal to strive for and some Amtrak services do indeed make money. But the benefits of a modern and efficient rail infrastructure to minimize congestion on roads and airways and to promote business by facilitating transportation are worth funding with tax payer dollars. Exactly what the proper public funding level is I don't know but it needs to be more than it has been and the new stimulus bill provides a good boost to make rail service better and more efficient which will ultimately benefit the economy.

Some points from the article:

"The entire history of Amtrak is replete with examples of CEOs who have tried to get government to commit long-term funding for the company, only to be ignored. Unfortunately, all but David Gunn made a fatal mistake: They never told Congress Amtrak couldn't ever make money."

"None the wiser, Congress has always expected a profitable company, and over the decades Amtrak's chief executives dutifully have talked of putting Amtrak into the black."

"Amtrak cannot ever make enough to attract the capital it will need for new equipment. Even if load factors are increased and the trains make a profit, operating and maintenance costs will prohibit Amtrak from earning enough to attract investors and lenders and finance new equipment or expand services."

"When David Gunn succeeded Warrington in 2002, he wasted no time telling Congress it had no clothes. 'Amtrak will never be profitable,' Gunn told a Senate hearing five weeks after taking office. Congress' mandate that Amtrak be in the black was, he dubbed, 'an impossible goal.'"

"Some politicians, doctrinaire conservatives in particular, insist that passenger trains should be run with private capital, and government has no business subsidizing them. It's a strange concept since government helped the early railroads develop, providing land and even capital .... government has subsidized transportation, building lighthouses and roads, dredging rivers, and so on. Amtrak's critics ignore the hard fact that regularly scheduled passenger trains might have made money 100 years ago but can't today -- not just here, but almost anywhere in the world. The incredible passenger networks of Europe are government-subsidized."

"The sooner Washington accepts Gunn's warning, the quicker America will have better transportation."


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