Sunday, August 26, 2012

A "Faux"; All Aboard Florida

In all likelihood, readers of this material are aware that there has been a proposal set forth by the Florida East Coast Railway to enter the intercity passenger train business and operate trains for their own account, i.e. a private concern prepared to risk loss in the expectation of earning a profit, between Miami over their existing lines to Cocoa, then over a line that they will build from there to Orlando.

Quite simply, there will never be a passenger train operating over the Florida East Coast Ry for their own account. I give Amtrak operation over the FEC, which is independent of this proposal, at best a 50-50. So long as Martin County FL remains "train hating", Fox News watching, country, I do not foresee any northward expansion of Tri-Rail to locations such as Stuart (FEC) or Northwestward to, say, Indiantown (CSX) as Florida law requires any county desiring rail service to impose a tax (ad valorem or excise) dedicated to that rail service's funding.

But there are unfortunate facts of life that need be addressed. Despite the appearance of a well run railroad, the FEC simply is not “making it” The 2010 Florida East Coast Annual Report reports the FEC made some $43M from railroad operations during that year. However, owing to the "leveraged buyout" debt on which the debt service cost is some $66M, FEC had a Net Loss of some $23M. Possibly the only sale, given the bleak earnings outlook, is to a public agency. I think the FEC is so over leveraged that a private investor would be scared away. Even a minor recession, a Longshoreman strike, or a natural disaster, could have FEC in deep trouble. But to reiterate, with the commitment being made to have the post-PANAMAX Port of Miami something beyond where the Love Tubs tie up, the State has a vested interest in the FEC remaining a viable, and independent, line.

While on a national level, government is averse to go into profit seeking ventures in competition with the private sector, there is no law precluding them from doing so. Florida, with its conservative governance at present has nevertheless committed massive public funds build "world class' maritime ports at both Miami and Port Everglades and may want control of the FEC to protect their investment in such so that, in a post PANAMAX world, they are competitive. An open access railroad which has a 350 mile captive line haul to Jacksonville, would ensure that either Norfolk Southern Railway and CSX Transportation can access the traffic affording the shippers of the "competitive route" they desire and yet having a favorable division of the line haul with FEC. .

Even if either NS or CSX were "interested" (and again with the debt structure, I doubt if they are), the public sector party that is bankrolling the improvements to Miami, wants to be able to tout to the maritime industry "we have competitive rail routings" (never mind such is 350 miles away). If FEC ever got into CSX or NS hands, either would have no reason to provide good service as they collectively serve every major East Coast port as is. FEC would simply become a long branch line and maybe even abandoned. As previously noted, neither of its JAX interchanges is interested in acquiring it owing to the debt structure - and the shippers, be they in place or "in waiting" post-PANAMAX, do not want any merger either, for they want the South Florida maritime ports to be "open", i.e. there is a competitive rail service, albeit in this case it is 350 miles away. However, there is a caveat to any Port commission/authority and to anyone who follows maritime affairs. This is a recent report in The New York Times, that the East Coast may have overbuilt its ports anticipating a post-PANAMAX traffic boom. There is distinct possibility that these ports, of which Miami is one of such, may be on a ruinous competitive run. The unfortunate outcome could be they are all getting ready to throw a post-PANAMAX party - and nobody came.

So how does this passenger service initiative play into the picture? What better way would there be to get "man on the street" support than to tout "we will give you some trains - and you won't have to pay for them unless you choose to ride'. Politicians since the Roman Empire have bemused the Proletariat in such a manner. It simply generates public visibility so that when the private equity concern that owns FEC approaches a public agency such as the State to buy the road, all this public excitement about passenger trains will translate to voters saying "buy it" (or we'll find someone else to vote for). But since the political climate in Florida, with its ever increasing conservative tilt, will have nothing to do with publicly funded passenger trains beyond the existing Tri Rail and the "in the works" Sun Rail, this passenger service proposal simply represents a "faux". Should such a sale be consummated, the passenger initiative will sort of go the way of Sunset East, or otherwise “Adios“.

“All Aboard Florida” is a ploy; enjoy the fun and dreaming while it lasts.

4 comments:

  1. Gilbert:

    A few comments on your FEC post. First, the state of FL has already made capital investments to add capacity to FEC at several locations (double track and crossovers). They've also gotten Federal money to restore rail access to the Port of Miami, to build a highway tunnel to Dodge Island that will take trucks off the streets of downtown Miami, and to deepen Government Cut to 50 feet.

    So nothwithstanding your concern over FEC's financial position, the state has a lot of reasons to see FEC survive as an independent.

    But CSX also reaches Miami, and NS runs a pair of daily "haulage" trains with FEC crews. Because of the labor situation (and perhaps the debt) neither Class I is going to acquire FEC, but neither would like to see it abandoned.

    So I don't think FEC is going anywhere anytime soon. One thing they MAY do is sell the railroad south of Jupiter to the state so commuter trains can be run.

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  2. Great to have you reviewing and commenting on my material over here at the blog, Ms. Bly. I hope that it is evident that I seek to have a maturity level over here much higher than at other outlets through which we exchange thoughts.

    It appears we both agree that the State is not about to let anything bad happen to the FEC; for, as we both note, they have too much tied up in the development of the Port of Miami.

    To my knowledge, while CSX serves Miami with limited trackage rights over what used to be the SAL and now is state owned for Tri Rail, I must ask if they make rates out of the Port. Has FEC opened it for a reciprocal switch, my hunch says no.

    Regarding the pair of NS trains you note, while they could well physically represent a solid train received or forwarded from/to the NS and oper FEC rails with NS power, does NS actually make rates from FEC points with some kind of access payment to the FEC or is it simply a traditional interline train in which the rate is divided in accordance with AAR guidelines. That you note the train is operated by FEC crews would suggest this is a train comprised of interline shipments. How the locomotives are paid for, $$$$ or horsepower hour run throughs, to me matters not, but then, I have away from the railroad industry for over thirty years.

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  3. Sorry for such a late comment, but there are two possibilities A) FEC is smoking whatever the URPA is smoking, and actually thinks that this is a good idea, or B) they're trying to game the system here.

    I'm not familiar with the FEC, I'm not a fan of East Coast roads, and I'm more of a history buff anyway. I'll assume that you and Nellie Bly know your stuff. Assuming that A is the case, and the FEC is in as foul a financial condition as you claim, then well adding a passenger train to the mix could make things much worse. (As in MILW during your tenure there worse) Even a sold out passenger train can be a tremendous money loser. The secret of the profitable passenger trains of the silver age (for me, this is the launching of the Hiawatha to Santa Fe filing to end the Chief and Grand Canyon) was of course head end business. I doubt that the FEC has the resources to completely rebuild the REA system, and the post office is happy with it's current arrangements, so there goes that. The sad thing about passenger trains is that the mental infrastructure, the idea that a package could be sent at express speeds from the train station, or that there are even intercity passenger trains is dead. (Of course, for the first it's dead because you can't anymore but I digress) It's unlikely that FEC hasn't done their due diligence, and that they haven't read over the ICC finance dockets where the railroads plead for mercy as their life blood is consumed by the passenger trains. (It took the WP having to in the words of the ICC, "devote it's entire freight operation at least 3 months out of the year" just to pay the operating costs of the CZ before they would kill part of the CZ off.) This information is there in black and white, in almost every ICC finance docket volume of the 60s. (It also shows how hard it was to kill a passenger train, and still may be. I'd assume that Florida's public utilities board or whatever they call it, still has jurisdiction over non government run passenger trains in Florida) Even if FEC hasn't gone that far back, and is only looking at Amtrak financials, they can't have decided this was a good idea.

    That leaves option B). That the FEC is somehow acting in bad faith, or is otherwise pipe dreaming. The fantasy proposal seems to be the option that you favor, with the FEC really wanting to run this service, but just not having the resources. This is unlikely, given the reasons I stated above. What I think the FEC is trying to do, is either A) run some transit oriented development based land scam IE (FEC provides temporary transit long enough to get some kind of tax credit, and then stops service (There will be a transit oriented development on some FEC land as a result of the project which I assume involves some land formerly occupied by a train station) or B) The FEC wants an NEC style buyout. (Where the state of Florida buys and maintains the FEC's infrastructure to run the All Aboard trains, which presumably could then be ended by some future Republican in a cost cutting plan, leaving the state of Florida owning and maintaining a railroad solely for the benefit of the FEC.)

    While as someone who loves passenger train travel (and firmly believes that first class rail travel is the ONLY civilized way to travel), and would love more than anything to see the return of a profitable private passenger train service to this country, a short distance train run by a cash strapped road isn't going to be that. We can't just stick our finger's in our ears, and ignore the fact that streamlining (American style "high speed" rail) has been tried before, and failed, and that this country is unsuited for European style high speed rail.

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