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Amtrak Accounting Tricks Cover Up Losses

September 5, 2019 in Economics

By Randal O’Toole

Randal O’Toole

Amtrak
recently announced
that it will begin operating nonstop service
between New York and Washington in 2 hours and 35 minutes in
September. This would be exciting were it not for the fact that
this is slower than trains operated before Amtrak 50 years ago. In
1969, the Penn Central Railroad ran trains between New York and
Washington in just
two hours and thirty minutes
.

Five minutes may not seem like much, but 50 years of progress
should have resulted in faster, not slower, trains. This is
especially true as Amtrak brags that its trains go “up
to 150 mph
” while Penn Central’s trains were
limited to 120. Amtrak also claims the Acela is profitable, but if
that were true, Amtrak would have put some of those profits into
improving its infrastructure. Instead, Amtrak acknowledges that the
Boston-to-Washington corridor has a
$38 billion backlog
of maintenance needs. If the route were
truly profitable, Amtrak would never have allowed such a backlog to
build up.

The reality is that Amtrak can only claim a profit by using an
accounting system that, as the
Rail Passengers Association
charges, is “fatally
flawed, misleading and wrong
.” This is the same
accounting system that Amtrak uses to claim that nationally its
trains earn enough passenger revenues to
cover 95 percent
of their operating costs.

Rather than give it
billions of dollars to restore or build infrastructure that it
can’t afford to maintain, Congress should simply agree to pay
Amtrak a given amount for every passenger mile it carries. This
will give Amtrak an incentive to focus on passengers, not
politics.

Amtrak covers up its losses with two major accounting tricks.
First, Amtrak counts subsidies it receives from 17 states as
“passenger revenues” even though the vast majority of
taxpayers who pay those subsidies never ride Amtrak.

Second, Amtrak doesn’t count the second biggest operating
cost on its
expense sheet
: depreciation. Depreciation is not just an
accounting fiction; it is a real cost indicating how much a company
needs to spend or set aside to keep its capital improvements
running. After correcting these two tricks, passenger revenues
cover only 55 percent of operating costs and none of the trains
earn a profit.

Amtrak’s fantasy that depreciation shouldn’t be
counted as a cost shows that it is engaged in the old railroad
accounting trick of propping up the bottom line by deferring
maintenance. For example, Amtrak’s fleet of passenger cars
have an expected lifespan of 25 years, yet their average age is

more than 33 years
and …read more

Source: OP-EDS