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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.

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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.

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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 …read more

Source: OP-EDS

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