For those who operate steam, the more intensively the better:

Have you compiled a cost per unit (day, mile, whatever) for maintaining your locomotive?

I was asked about this the other day, it seems like it would be interesting and informative to compare how various locomotives in various kinds of service may cost differently to keep healthy.

Please share what you know about your line and its characteristics, assuming it isn't proprietary information.

dave

Resounding silence.

Does this mean we as businesspeople are not sophisticated enough to have developed these figures, or we know them and just don't wish to share?

Either way we have some maturing to do.

dave

I sort of think that it's not really a matter of maturity, or the lack thereof, to not want to post in a world wide public forum what the operating costs of a particular piece of equipment might be. Especially a locomotive.
Posting such private business data publicly can do no good for the posting business itself, but can do quite a bit of harm. At the very least it could open a business up to public ridicule. It can do harm when trying to negotiate pricing for public operations, and it can do harm when trying to secure financing. And much more.
I'd never post any information of that type for my own business, and I cannot see why any operator would post that information from their business.
My opinion only. Your mileage may vary
Mark D.

Must be a day for circuitous conversations - I have made myself obscure several times so far, here goes again.

My thinking is this:

Our industry is unusual in that we don't compete with each other, but with other industries, in an effort to attract leisure discretionary funds from the general public.

It is in our best interest therefore to assure that we all provide a high quality visitor experience. Scenario A - "Oh look - a train ride. Remember that really nice train ride we took at Strasburg? The cars were clean, the people friendly and the scenery was great. Let's ride this one too!" Scenario B - "Oh crap, a train ride. Remember that awful time the train broke down and we were stuck next to the sewer plant in a car with windows that wouldn't open in the hot sun for 3 hours and the toilets didn't work and when we tried to get out for a breath of fresh air the conductor yelled at us and made us get back inside to bake? I'll NEVER get on another train again!"

The more we know the more we can create scenario A. Sharing information makes us stronger and smarter, so we can do a better job which benefits us all, or at least doesn't hurt us.

If a comparison of maintenence costs shows somebody is paying a lot less in similar circumstances than I am, I am happy to know that so I can learn how they are managing to do better.

If patterns emerge that indicate certain types of locomotives, lubricants, operating strategies, etc are much more cost effective, wouldn't we all want to know about it and take advantage of it? Examples - when is the additional cost of maintaining a superheater recaptured in operating efficiencies? Is Bill Pettijean's great steam oil so much better than the crossover gear / steam oils in occasional demonstration service as to make it worth the extra cost? How about in mainline service?

Knowing about this stuff can help us make better decisions about long term planning and strategies as well.

I was using the term "maturity" in application to us as an industry, not criticizing individuals. Perhaps I could have used "businesslike" or "professional" instead, but my meaning was that this data is of value and we ought to be compiling and sharing it for our mutual benefit, and recognizing it as such.

If I had a few years of documented costs to draw some conclusions from, I'd gladly share them in hope that it could either help somebody reduce costs without decreasing reliability and durability, or it would prompt somebody else to tell me about how I could do it better their way.

I don't much care about opinions from people who don't understand enough about the business to make theirs worthy of consideration, and they are the only ones liable to ridicule any of us for trying to improve our understanding and practices.

dave

Dave,

Is it possible that the industry is not really capturing this data independent of all other operating costs? I can think of a few large operations where the maintenance and operational costs are probably maintained separately, but I would think most small operations lump it all into the overall cost of the business. Or maybe we really don't want to know how much it costs for fear of discovering it isn't worth the cost...

I'd like to think that is not the case, but I'm afraid that as long as the total costs of operating a tourist or museum train is adequately covered by all income (memberships, gate receipts, gift shop sales, donations, grants, etc.), most small operations don't worry about the cost of a specific piece of machinery. That might explain the silence.

The simplest method to determine an operating cost would be to divide the total annual expenditures by either train-miles per year or operating days per year. This assumes all expences contribute to operations, even in a static museum. More sophisticated accounting would require some serious record keeping and the time to compile that info. Categories such as insurance, fuel, rent, taxes, etc. could be examined using the same formula, but to what end? Each organization has its own decision process. Knowing another group is spending more per mile or operating day on fuel for example, probably won't alter their current decision (Don't run the Pacific use the Praire).

That said, I think the 1225 group figured out their costs, including a set aside for heavy repairs.

I am afraid that is probably the case, Stephen. More is the pity.....the quality of any decision is primarily the result of the facts available for review before making it.

Comparing costs between an all volunteer and a paid staff operation would provide us with a basis for valuing volunteer time and effort.

Fuel costs are easily seperated, as the bills come in seperately. Tracking time spent by staff on each seperate job, and other expenses on a job by job basis is commonplace in private industry, but it isn't fun or glamorous to do.

dave

Well, Dave posed two questions: have you analyzed your unit cost, and would you share it?

As Howard says, "Not for Profit is a tax status, not a business plan."

If no one in your organization is analyzing your costs on a regular basis, and looking for improvements, then you're not running a business - you're just playing trains. The other attractions in your area, and the successful tourist railroads, are.

If no one in your organization is analyzing your various revenue streams on a regular basis, and looking for improvements, then you're not running a business - you're just playing trains. The other attractions in your area, and the successful tourist railroads, are.

As to sharing, every company I've ever worked with does regular "benchmarking" to see how it compares to its competitors. If you're not doing something, you're not running a business - you're playing trains.

And if no one in your organization is running a business, then one day you won't be playing trains any more.

JAC

As much as I agree with the apparent consensus that the accounting and itemization of such operating expenses makes sense, I can certainly understand full well why such figures are not a column in the business's Excel or Money programs.

How many of these operations are even a business, to be honest?

The only real reason that, say, the Hoot, Toot & Whistle RR is going to take the effort (and it IS a real effort, I'm sure) to compare and contrast the various operating costs of, say, their SW1 versus their 2-6-0 pulling the train is if there is truly an alternative being offered--say, for example, that the salesman from Made In China Steamers comes a-knockin', or they have to decide between the FP7 pair, the Alco FA pair, or the U-Boat for their twice-weekly dinner trains, or decide between the oil-burner versus the coal-burner for restoration, or which mine's coal to buy.

VERY FEW excursion lines have any such option before them. They're stuck with what little they have, and there isn't likely to ever be the option of replacing the worn-out GP9 with an F40PH, or the 0-6-0 with a 2-8-0, absent a benevolent donor or grant money.

Is the Cumbres & Toltec ever going to replace any of their steamers with a rebuilt Cuban 3-foot steamer, should the opportunity ever arise? East Broad Top? Durango & Silverton? Tweetsie? Heck, no. So why calculate exactly how much it costs to operate that train one mile behind different locos? (Now, having said that, remember that the D&S did indeed upgrade to bigger ex-D&RGW power in the 1980s under Bradshaw..... and it would be interesting to determine if that was a purely economic decision or one driven by railfan desire.)

Off the top of my head, I can think of less than six operations that have enough operations, equipment and options before them that such analysis would be a worthwhile expenditure of effort--think in terms of White Pass & Yukon, Disney World, etc. The Grand Canyon RR, for example, presumably has to figure out the costs of steam versus Alco FPA versus EMD F40PH, and extrapolate the additional costs of the First Class equipment to figure out how much more to charge in fares for First Class. Strasburg's Linn Moedinger could probably, if he chose to do so, tell you off the top of his head the relative economic differences between 90, 89, 31, 475, and other locos past and possibly future. But even in the latter case, it's more a case of "we know 31 is harder on the track, but we've never figured out how much more the track repairs cost on a percentage basis...." And what does it matter? It's pretty much only relevant to him and the other stockholders.

In the case of the Wilmington & Western, when I was with that group, it was acknowledged that running the SW1 was cheaper than running the steamers. But ridership typically plummeted 40-50% when the steamer was nowhere to be found, so it was viewed as a wash and then some. (This was back in the 1980s, I will point out.)

So I think it's not so much that we're not interested or keeping that kind of data private. It really has so little relevance to most of what we do that it's inconsequential. Applying Mal-Wart accounting practices and techniques to Jim Bob's General Store isn't always practical or worthwhile.

Of course, why so many of us are still Jim Bob's General Store is a whole 'nother discussion.......... <:-/

.

David,

While I was the Chief Mechanical Officer at the Heber Valley Railroad I actually pursued a program to gather vital information and then turn it into useful data for annual budget calculation.

I do not agree that the size of the operation dictates weather or not such a study should be done. In fact, I believe that any operation that spends money, be it to gain profit or not, should be amply aware of all expenditures. As such, when I conducted my studies, I looked at the following in an effort to give myself a wide range of usable data.

First I looked at the total operating costs per year. I took all of the receipts that were directed to the operation and then divided them by the number of days that were operated. I also divided the same number by the number of miles that all of the equipment operated in the course of the same year. I also divided the total cost by the number of total passengers in one year to gain a good look at what it cost per passenger to operate a train. This specific test showed some not so good results. In our case at that time some trains that we “felt” were good money makers were actually costing us more money per passenger mile operated. In essence I ended up with a per day operating cost, a per passenger mile operating cost and a per mile operating cost.

Not only did I use the receipts from the direct cost of operating trains, I also did a study that included all of the “operations” department total receipts for the year. This included all employee pay, all direct and indirect costs and all overhead costs including track maintenance. The result of that study showed where costs were heavy or short.

You may want to consider for a minute Ray Kroc’s history as he grew McDonald’s into what it is today. He said…..”Quantify, quantify, quantify.” If you want to make a cheese burger for .25 cents, you need to know that it cost you less than .25 cents to make it. To so, you must know exactly how much ketchup, mustard, meet and bun are included in the burger. You need to know the cost of the wrapper, the time it took to cook it and the time it took to deliver it.” (Paraphrased)

If you can not quantify something, then how do you know if you have made money or not by doing it? If you can’t make money, how do you except to pay to operate it? If you can not pay to maintain or operate it, how do you expect to operate it in the future? It is basic business and it applies to any business.

David, start somewhere…..anywhere. Build a ground work and start quantifying your business and operation. For right or wrong, you will learn a whole lot about something you currently think you understand very well. It is a great process and one that is not to be criticized.

Respectfully,

John E. Rimmasch
Wasatch Railroad Contractors

Even given perfect information, there are difficulties in calculating the present value of operation. I suspect that most operations greatly undervalue the cost of operation. For example, determining the depreciation cost of operation is really tricky. Does one use the previous repair cost or the future repair cost? As labor costs go up, locomotive materials cease to be standard items (safety valves, flues, superheater pipe, rivets, brake valves, fittings, etc.), and technical skills disappear future repair costs are likely to only go up. What interest rate should be used? Is the objective only to "pay back" the cost, or should some investment return be realized to reflect the half a million dollars tied up in the locomotive for 10 years? The only operations that can reasonably estimate these costs today are ones that work their engines heavily enough to wear them out in a period short enough to reduce the unknowns in these financial equations.

There are other intangibles. For example, original appliances wear out and are replaced not with duplicates, but alternate models that are currently available. They are functionally equivalent, but not historically accurate. This would apply to safety valves, injectors, turbo-generators, flame cut instead of forged drive rods, etc., all discussed in this forum on occasion. How does this depreciate the value of the locomotive?

Truthfully, I think most operations, even "for profit" ones, are "investing" in restorations and then crossing their fingers and hoping that financial reserves will be adequate to perform the next overhaul.

From my POV, I'd consider other options such as new replica steam locomotives incorporating modern technological impprovements that can reduce costs and increase efficiencies and decrease noxious exhaust byproducts before repatriated Cuban worn out stock. Bradshaw made the most rational business choice he could have made at the time, we have other options available to us now, and the Bradshaw D&S then isn't the Harper D&S now.

If it could be proven that one new steamer could replace 1.5 old steamers in hauling capacity, while being in the shop only 75% of the time, and burn half the fuel producing half the pollutants, would it be worth replacing maybe 3 of the old units with 2 new ones? Interesting possibilities to consider.

Thanks John and John for adding fiscal sensibility. I am amazed at what little response a simple question engendered until it was given context, and then what an interesting line of discussion it has started.

dave

Dave:

I think I can speak for a lot of volunteer operations in that while we may know our rough costs to operate, the actual data to make the decisions you are talking about is really difficult to come up with. For example on the Niles Canyon Railway when we run our operating 2-6-2 we burn about 400 gallons of fuel oil a day and use around 5000 gallons of water. These two items and our major operating cost items. The fuel cost varies depending on whether it is donated or we purchase it. The water cost is not all that much even including water treatment. So what about lubricants, we don't really run enough to use a lot of oil so I am guessing we use a drum of valve oil every 2 years and 1 drum of journal oil per season. Frankly, its only been the past couple of years that we have really started to keep track of this. Regular maintenance is handled by budgeting for example $5K-20K a year depending on the projects we expect to work on for the year.

There is a cost that does not calculate too well and is more of an issue in our organization - ie. limited volunteer labor. The amount of skilled labor required when the engine operates takes away labor from other projects. This is where the actual cost question starts to get complicated - at least for our group.

We have played around with this question off and on over the years and its not that we do not want to come up with a better answer for this question ... its just that there is always something else to fix/work on in a volunteer operations like ours. Our organization as a whole has made big steps to better manage projects and finances in the last 10 years. Maybe we will have a more detailed answer for you in a couple years = ).

Alan Siegwarth
NCRy Steam Dept.

Dave,

When were were developing our strategic plan at National Capital Trolley Museum we used an estimate of $100,000 per year needed to keep up with the backlog of major restoration and overhaul projects for cars in the collection. This amount was based on experience with our restoration of the late Johnstown Traction Company 352 which used a combination of TEA-21 funds for the trucks and car body work, plus a significant number of volunteer hours on painting, reinstalling seats, window sash, etc. The assumption using $100,000 was that it would take a minimum of 2-3 years per car to bring one back on line. We were looking at two very non-operating PCCs and the Washington center door for starters, and assumed a heavy investment in outside contract work.

Like others have said, the operating costs are fairly minimal in terms of consumable supplies (lubricants, carbon shoes for the trolley, etc.).

Wesley