Amtrak State Partnerships
Section 209 Pricing Discussion
John Bennett
AVP – Policy Management
Policy & Development Department
AASHTO SCORT Meeting, March 8
Washington, DC
Today’s Discussion
• Framing the Challenge
• Actions Completed
• Next Steps for Section 209 Development
• Opportunities, Challenges, Key Questions
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Amtrak Network Today
Long Distance Routes: National network, greater than 750 miles
Corridor Routes: Less than 750 miles
Freight railroads: No passenger service
2
Statutory Evolution of State Supported Services
1975
• 1970 Rail Passenger
Service Act:
• Basic System –
Amtrak required to
operate designated
routes
• 403(b) – states can
request additional
service if they cover
portion of costs
1985
• 1974-86: State
share of costs
specified under
403(b) amended
by Congress 6
times; modest
expansion of
state service
• 1986 provision:
States required to
pay portion of “shortterm avoidable loss”
(45% in Yr 1, 65% in
Yr 2), plus 50% of
associated capital
costs; significant
expansion beginning
in early 1990s
1995
• 1997 Amtrak Reform Act:
Repeals 403(b),
eliminating statutory
requirements re: statesupported trains; also
repeals requirement for
Basic System trains
• 1995-2001: Amtrak seeks
higher state payments; but
approach varies widely
across 3 new “SBUs”
2005
• 2002-2007: Cost
terms for all statesupported trains
(formerly “403(b)”)
standardized –
states pay full
“direct and shared
operating costs not
covered by
revenues”
Meanwhile system corridor trains continue to operate
without state financial support creating an equity issue
3
PRIIA Initiatives and Requirements
Sec. 207 - Metrics and Standards
Sec. 210 - Long Distance Routes
Sec. 209 - State-supported routes:
Amtrak, states, and FRA must
develop and implement a single
nationwide standardized
methodology for establishing and
allocating operating and capital
costs among the states and Amtrak
Sec. 212 – NEC Infrastructure &
Operations Improvements
Sec. 213 – Passenger Train
Performance
Sec. 301 - Capital Assistance
Sec. 302 - Congestion Grants
Sec. 303 - State Rail Plans
Sec.305 - Next Generation Corridor
Equipment Pool
Sec. 307 - Federal Rail Policy
Sec. 501 - High Speed Rail Grants
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Section 209 Overview: Clarifying the State/Federal Partnership
• Federal government supports Amtrak service with operating support and
capital infusion
– Capital investments in equipment and infrastructure allow operating revenue to
be used for operating support
– Obviates need for ‘profit’ to be reserved for capital investment
• State governments determine the amount and level of intercity corridor
passenger rail desired:
– State Rail Plans: “this is what we want”
– Understanding of operating and capital cost implications (TBD through Sec 209
process): “these are the costs we have to cover”
– Amtrak service agreements: “this is the deal”
• States benefit from Amtrak’s Federal Government-supplied support:
– Incremental cost access rights and dispatching priority to host railroads (the
“public bargain” the private railroads made in return for federal relief from
passenger service losses)
– Rather than pay fully-allocated costs, states only pay direct costs, and some
shared costs as determined through Sec 209 process—difference is federal
support through Amtrak
– Sec 209 and Sec 301 (Capital Assistance) allow states to use PRIIA capital
funding for host railroad capital payments and Amtrak capital charge
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State Supported Service Pricing - Section 209 Overview
• Section 209 of PRIIA requires, within 2 years (October 16, 2010), that the
Amtrak Board of Directors, in consultation with the DOT Secretary, the
governors of each relevant State, and the DC Mayor, or entities
representing those officials, develop and implement a single nationwide
standardized methodology for establishing and allocating costs among
the States and Amtrak.
• Methodology applies to both the operating and capital costs
• Applies to all current and future intercity passenger rail routes over a
federally-designated HSR corridor and/or of less than 750 miles,
excluding the NEC spine
• Methodology must:
– (1) Ensure equal treatment in the provision of like services of all States and
groups of States (including the District of Columbia); and
– (2) Allocate to each route the costs incurred only for the benefit of that route
and a proportionate share, based upon factors that reasonably reflect relative
use, of costs incurred for the common benefit of more than one route.
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Section 209 Overview: Consequences of No Agreement
• Methodology is to be defined and agreed upon within 2 years
(October 16, 2010) and adopted and implemented within 5 years
(October 16, 2013).
• Failure to agree by all parties results in the development and
imposition of a formula by the Surface Transportation Board
(STB).
• STB shall develop the methodology in accordance with section
24904(c) of Title 49, United States Code:
– “…the costs Amtrak incurs only for the benefit of the carrier, plus a
proportionate share of all other costs of providing transportation”
(Emphasis added)
• STB methodology would be implemented within one year after the
Board's determination.
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State Supported Train Pricing – Principles and Challenges
• Basic principles for new operating cost methodology:
– Consistency: “System” corridors must be converted to state support
– Transparency: Understandable/straightforward
– 100% of direct costs plus a proportionate amount of indirect costs
– Service level based (as service changes associated costs change)
– Management/assignment of risk
• Challenges:
– Linkage of future costs with future service plans
– Linkage to the new Amtrak Performance Tracking (APT) system
– Definition and cost recovery for capital costs—largely equipment and
facilities
– Cost forecasting and alignment with Amtrak’s operating budget
– Type of service contract (pure cost-based, performance-based,
negotiated contract structure)
8
Corridor Services – Impacted Routes
NEC Spine: Excluded from Section 209
State Supported Routes: Require consistent agreements under Section 209
System Corridor Routes: Require new agreements, no state support in place
Mixed State/System Routes: Requires conversion of system trains to state support
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• Framing the Challenge
• Actions Completed
• Next Steps for Section 209 Development
• Opportunities, Challenges, Key Questions
10
First Steps Toward a Standard Structure
• Adopt Amtrak Performance Tracking (APT) system as the
analytical framework for defining the future policy—new Federally
supported model
– Replaces RPS (Route Profitability System)
– Jointly developed with US DOT Volpe National Transportation Systems Center
– Incorporates analysis of “capital charge”
• Begin transformation to a uniform structure: FY 2010 agreements
based on an attempt to provide consistent treatment of major
categories and risk—for those states with existing contracts
(though not all states have concurred)
– Payments based on:
- Actual passenger revenues and host railroad payments
- Agreed-upon fuel usage and cost methodology
- Fixed values for remaining costs—defined as “service fees”—based on
inflation-based increases (as adjusted, in some cases) to FY 2009 contract
amounts
– No change in current state-specific agreements on cost sharing— for now
11
Significant Advantages of APT – Technology and Structure
RPS
APT
APT Advantage
Mainframe based
Client-server based
•More transparent
•Easier updates, reporting
•Mainframe at end of life cycle
Legacy RPS
“Lines”
“Families” of Res
Centers and
General Ledger
Accounts
• Res Centers and GL accounts
widely used and understood at
Amtrak
Shared costs
allocated only to
Amtrak trains
Shared costs
allocated to Amtrak
trains, commuter
trains, freights,
others
• Improved accuracy and more
equitable allocation
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Amtrak Performance Tracking – Overview of Improved Process
Cost Type
Examples
How Handled in APT
Direct, trainspecific data
• Train & engine labor
• OBS labor
• Host RR payments
•Assigned directly to a train
Direct, no trainspecific data
• Fuel & power
• Turnaround
servicing
• Route stations
• Assigned or allocated to trains
• If allocated, a statistic is used
Shared costs
• Shared stations
• Maintenance of way
• General &
administrative
• Allocated to relevant trains
(including commuter and
freights) based on a statistic
Capital charge
• Rolling stock
• Infrastructure
• APT calculates capital charge
(described later in
presentation)
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2
Computation of Route-Specific State Payments Under Section 209
• State payment has two components:
Operating Charge
(Direct Costs + Proportionate Shared Costs) – Passenger Related Revenue
Capital Charge
• Direct Costs
– “Costs incurred only for the benefit of that route”
– Direct labor and other direct costs
• Shared Costs
– “Costs incurred for the common benefit of more than one route”
– Proportionate share based on factors that reasonably reflect relative use
– Policy determination among the states and Amtrak:
- Cost categories to be established
- Methods to use for allocation
• Passenger-Related Revenue
– Ticket, Food & Beverage
– Treatment of through revenue in extensions of NEC spine
• Capital Charge
– Cost for asset replacement
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Examples of Direct, Shared, and Capital Costs
Direct Costs (1)
Direct Labor
Shared Costs (2)
Capital Costs (2)
•Stations – Shared
•MOE Supervision,
Training and Overhead
•MOW Support
•Yard Operations
•Marketing and
Distribution
•Police, Environmental,
and Safety
•T&E Overhead and
Operations Management
•Utilities
•General and
Administrative
•Rolling stock
•Stations
Other Direct
• Train & Engine
Crew Labor
•Host RR Maintenance
& Incentives
• On Board Service
Labor and Support
•Fuel and Power
•Commissary
•Car & Loco
Maintenance and
Turnaround
•Direct Advertising
•Commissions
•Reservations and Call
Centers
•Customer Concession
(Passenger
Inconvenience)
•Connecting Motor
Coach
•Stations – Route
1) Required charge under
Sec. 209
•Amtrak-owned ROW
•Maintenance Facilities
•Technology & Systems
2) Some amount to be charged
under PRIIA Sec. 209
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Key Milestones Toward a New Policy—Capital Charge
• Volpe Center finalizing capital charge to be added to APT
• Capital charge will equalize effects of different financing
arrangements for similar assets/equipment
– Example without capital charge: one Amfleet coach is owned; another
is leased at a low interest rate; another is leased at a high interest rate
• Components of capital charge include acquisition expense; useful
service life; interest rate
– Example with capital charge: all users of Amfleet coaches charged
same capital charge
– Also, working capital balances required to support larger operations
• Where states own equipment or have financed capital projects,
capital charge will be reduced accordingly
• APT is starting point of capital charge—details to be worked out
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• Framing the Challenge
• Actions Completed
• Next Steps for Section 209 Development
• Opportunities, Challenges, Key Questions
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Process Steps and Support
• Collaboration at two levels: National and State
– Policy for consistent application—national policy proposal review and
discussion meetings
– Application of policies at state level—state-specific working group
meetings
– Feedback from state-level meetings back to national policies to gain
consistency in approach (even if the state-specific results of the
national policy vary due to the uniqueness of each state)
• Support desired to accomplish the mission:
– Representation of states in regional workshops and/or structured
interviews
– Logistical support could be provided by AASHTO or others (to be
negotiated)
18
Regional Workshop Meetings – April & May
• Proposed Schedule and Duration of Workshops
– Sacramento: CCJPA, Caltrans (2 days)
– Portland: Washington, Oregon (2 days)
– Chicago: Michigan, Illinois, Wisconsin (2 days)
– Oklahoma City: Missouri, Oklahoma, Texas (1 day)
– New York: New York, Pennsylvania (2 days)
– Boston: Vermont, Maine (1 day)
– Richmond: Virginia, North Carolina (2 days)
• Agenda
– Existing contract review
– FY2011 forecasts
– Cost Families – “establishment” and “allocation”
– Capital charge discussion
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Current Vision of Schedule and Development
• National meeting #1—March 2010 
• Regional workshop meetings—April, May (for both multi-state
discussions and one-on-one discussions)
– Amtrak’s formulation of first pass methodology based on regional workshops
• National meeting #2—June 9-10, 2010: Update/refinement of
methodology
– Operating Support principles update:
- Review/discussion of ResCens for operating cost sharing
- Statistics to use for cost sharing
– Discussions of Capital Support principles update:
- Review/discussion of Amtrak-owned assets for cost sharing—and off-set
potentials—linked to Section 305 (Next Gen Corridor Equip)
- Process for determination of annual forecasts
– Results of first pass methodology
– State and Amtrak roles in collaborative forecasting: operating costs, operating
statistics, equipment requirements, passenger revenues, etc.
– Standard contract structures
20
Current Vision of Schedule and Development—2
• Review of Proposed Section 209 pricing with Amtrak Board of Directors,
July 28-29, 2010
• Regional workshop meetings—July, August (for both multi-state discussions and
one-on-one discussions)
– Application/testing of the principles at state level, refinement recommendations,
suggestions for adjustments
• National meeting #3—Sep/Oct 2010 (two days): Review of Proposed Policies in
draft form
– Operating Support principles
– Discussions of Capital Support principles
– Capital contribution offset process (e.g., fleet replacement from capital grant applications
by states)
– State and Amtrak roles in collaborative forecasting
– Standard contract structures
– Phase-in schedule to full implementation — no later than 2013
– Logistical support (travel?) provided by AASHTO/others (to be determined)
• Submission of Letters of Concurrence to DOTs—Oct/Nov
– State-specific meetings as required
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• Framing the Challenge
• Actions Completed
• Next Steps for Section 209 Development
• Opportunities, Challenges, Key Questions
22
Opportunities and Challenges
• Opportunities
– Section 209 state support structure will provide framework for state
planning for intercity passenger rail
– Provides a basis for supporting capital grant applications to the FRA—
as the question of operating support will be addressed
- Contributes to system viability and maturation
– Simplifying the process while capturing the essence of the support
payment process
- Ease of implementation
- Ease of audit
- Ease of billing
• Challenges
– Risk apportionment—who takes the forecasting risk and for what
elements?
– Gaining concurrence
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Key Questions
1. Extent of Shared Cost recovery
2. Contract term – FRA requirements for long-term operating
commitments accompanying capital grants.
3. Incorporation of capital contributions from states—specific
contracts with offsets for state-furnished funding for state of
good repair/replacement/improvement of Amtrak-owned assets
used in state supported service
4. Management of the input process—what service changes
expected and when; what are implications?
5. Risk sharing/structure of contracts
6. If not every state agrees, what happens?
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Appendix
Methodology for Determining the Avoidable and Fully
Allocated Costs of Amtrak Routes
Vol. I, Main Report (December 2009) – available on website
Vol. II, Appendix A and Vol. III, Appendix B – forthcoming
http://www.fra.dot.gov/Pages/1996.shtml
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