Truck and Barter: Amtrak and Opportunity Cost

Amtrak owns Penn Station, and doesn't see why it should move next door and rent the planned Moynihan Station:

Amtrak notes that it already has a sweet rent deal.

��We own Pennsylvania Station, and we pay no rent,�� Mr. Black said of the current station below Madison Square Garden. ��We wouldn�t want to incur new rent.��

I shouldn't find it incredible that Amtrak representatives don't understand that owning property is not costless, but I do.

While it's true Amtrak doesn't have to pay to rent for Penn Station, it's also true they don't collect rent from another company. The real cost to Amtrak of owning Penn Station is the highest sale price or rent they could receive if they were to put it to its best alternative use.

Amtrak representatives seem to preclude the opportunity of Amtrak profiting by selling or renting Penn and moving to other rented quarters?

In fact, that was part of the original plan:

According to Mr. Gargano, Amtrak had committed to paying about $3.9 million a year for the space. He also suggested that Amtrak could lease its current space below Madison Square Garden for more money than that.

Of course it's also possible that this is just strategy:

Amtrak may simply be bluffing to get a better rent deal and that the agreement is not in any danger after all.

Comments

Stephen Karlson wrote:

By that logic, The Pennsylvania Railroad would not have had to sell the real Pennsylvania Station for air rights development, as it was using the real station for free.

-- June 1, 2004 9:34 AM ∞

Forbes wrote:

Well, the whole thing is a gigantic boondoggle, as the federal government, in a paen to Sen. Moynihan (now deceased), wants to give Amtrack a new station by way of a renovated Post Office, across the street. I don't recall what they're planning for the post office.

You can quibble over whether some public official is speaking precisely when it comes to economics and/or accounting, but there is a much larger issue--new capital expenditures, based on the aesthetics of a new (to them) facility, that perhaps has better alternatives uses, including not expending.

-- June 1, 2004 7:00 PM ∞

Forbes wrote:

Well, the whole thing is a gigantic boondoggle, as the federal government, in a paen to Sen. Moynihan (now deceased), wants to give Amtrack a new station by way of a renovated Post Office, across the street. I don't recall what they're planning for the post office.

You can quibble over whether some public official is speaking precisely when it comes to economics and/or accounting, but there is a much larger issue--new capital expenditures, based on the aesthetics of a new (to them) facility, that perhaps has better alternatives uses, including not expending.

-- June 1, 2004 7:19 PM ∞

Truck and Barter

Amtrak and Opportunity Cost

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