The Borealis isn’t doing as well as you’ve been told

Photo: AMTRAK MIDWEST

“Profit”

A couple of weeks ago, I noted the flurry of excitement in the local media over the news that the new train service between St. Paul and Chicago — the Borealis — had earned a “profit” of $100,000 over its first 11 days of operation. Amtrak’s monthly performance report for May showed that:

Operating Revenue was $600,000 over that period and Operating Expenses were $500,000 so Adjusted Operating Earnings — profit, if you like — was $100,000.

I wasn’t the only person to notice the strange air of delirium around these data. “I’ve been covering rail transportation in the region since the 1990s,” Adam Platt wrote for Twin Cities Business a week later, “and the drumbeat of nonsense got so thick on social and mainstream media that I decided to do some of my own ciphering.” What he found presents much less cause for celebration.

Regarding that “profit,” Platt writes:

The problem is that’s wrong on multiple levels. First, explains [Amtrak spokesman Marc] Magliari, Amtrak’s data only measures direct costs like crew and fuel and microwave pizza. It doesn’t include indirect costs shared by Borealis and the Builder and items like debt service and depreciation, etc. Secondarily, even a casual reading of the single line of financial data Amtrak shows $300,000 in gross ticket revenue but $600,000 in operating revenue. That other $300,000 constitutes state subsidies to the train. Without them, Borealis would have lost $200,000, or an average of $10,000 per trip. (I don’t mean to suggest the train, as a public service, isn’t justified—it just ain’t making money.)

I noted that: “against the Operating Expenses of $500,000, the Borealis made just $300,000 in Gross Ticket Revenue,” and that “[f]ortunately, for the service if not the taxpayer, a federal grant is to provide 90% of the first year operating costs.” However, as Platt notes, “Initially the federal government pays 90% of the cost of those services, but over time the states became increasingly responsible for deficits.”

In short, the Borealis’ “profit” comes entirely from government subsidies of $10,000 per trip and, over time, the states of Illinois, Wisconsin, and Minnesota, will be obliged to cover those if the service is to remain “profitable.”

Ridership

I wrote:

The report showed that 6,600 passengers used the Borealis over those 11 days in May, so it had 600 riders daily…

It has been suggested that this data make the case for further trains running the route.

This only makes sense, however, if the extra service will generate extra travelers rather than simply shifting them from existing services. 

Platt’s analysis suggests that it won’t. Noting, correctly, that “The new service can’t be deemed successful unless it expands existing ridership in the corridor, rather than simply sharing what exists” and that “summer is MSP-Chicago’s busiest season, and the early data was expected to be robust,” he continues:

Then there’s the issue of Chicago–Milwaukee ridership. Remember, Borealis is an existing train in that corridor. Amtrak would not provide data about how many of Borealis’s riders rode only that portion of the route, but WisARP released WisDOT data in May noting 38.5% of Borealis May ridership was Chicago–Milwaukee, meaning fewer than 200 of the train’s roughly 300 daily riders were using the “new” train. In June 2023, Chicago–Milwaukee service averaged 144 riders per train. Extrapolating the data, it’s possible nearly half of Borealis ridership is existing Hiawatha riders. And a portion inevitably have switched off the Empire Builder, which arrives in St. Paul from Seattle several hours late many days. 

Off the rails

Platt concludes:

Best-case scenario, Borealis is generating around 150 new riders per trip outside the Chicago-Milwaukee corridor. But it’s impossible to know without endpoint data from the Empire Builder if all 150, or 100, or just 50 are new riders on the route. That data is key to judging the train’s success. And any way you cut it, Borealis will need hundreds more riders to turn a profit and justify a third service and new equipment, which is at best, years off.

And this, remember, is the line they told you was one of the “profitable” ones.