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48 Guidebook for Implementing Passenger Rail Service on Shared Passenger and Freight Corridors General and Administrative Activities These are functions of the host (usually freight) railroad, which will devote some fraction of its effort to supporting tenant passenger operations. Some expenses can be directly attributed to the passenger operation, such as staff dedicated to managing the interfaces with the passenger operators, or specific insurances only required with passenger service. However, most adminis- trative functions cannot be allocated in this way, and an alternative approach must be sought. Examples might be an allocation based on an overhead percentage, an allocation based on train- miles or some other measure of output, or a mix of both approaches. 3.4.3 Cost-Sharing and Allocation Approaches Before methods to estimate costs and the appropriate distribution of costs between multiple rail corridor users can be discussed, it is helpful to define the two principal costing concepts that are used when estimating cost sharing between host and tenant. These concepts are avoidable costs and fully allocated costs. Avoidable Costs Avoidable costs (sometimes called incremental or marginal costs) are those short- and medium-term costs that would be directly avoided if the tenant's operations ceased. For a pas- senger rail tenant operating on a freight railroad, avoidable costs typically include wear and dete- rioration of track and structures that can be attributed to the passenger operation, a share of dispatcher costs, and the cost of management directly associated with the passenger service. Fixed costs of operating the railroad and compensation for utilizing an increment of capacity are not included. This approach is used to compensate freight railroads for accommodating Amtrak services, as required by the legislation that established Amtrak as the national intercity passen- ger rail operator. Estimating avoidable cost becomes more complex if track quality or signal system improve- ments are required for a new passenger service. In this case, the avoidable-cost principle would require the passenger operator to be responsible for the difference between maintaining the higher quality under combined freight and passenger operations and what it would have cost the freight railroad for maintenance to freight service requirements. If the passenger agency had funded capital improvements to track and signals, then there is a further complication: mainte- nance costs to the freight railroad would be reduced for a number of years, until track compo- nents became due for maintenance or replacement. This issue was one of those at dispute between Amtrak and the host railroad prior to implementation of the Downeaster service, as dis- cussed in Appendix B, Section B.2.2. At present Amtrak is the designated operator of all intercity passenger rail services on shared corridors, using Amtrak's rights of access at avoidable costs. Amtrak already has operating agree- ments with all the major railroads, which include agreed-upon compensation for track use, usu- ally expressed as a cost per train-mile. Amtrak and the host railroads will negotiate an extension of this agreement for a new service with an amended track-use fee, where appropriate, to reflect local conditions, including infrastructure investments funded by the passenger agency. Any dis- putes between Amtrak and the host railroad regarding the avoidable-cost fees for a specific ser- vice can be referred to the STB or the NAP for resolution. Under most Amtrak agreements with freight railroads, the NAP would resolve disputes over the application of the costing methodol- ogy in that agreement to a new service. Fully Allocated Costs In this approach, the host railroad's full costs are shared between the host and tenant on a log- ical basis. A freight railroad may also add a charge to the allocated full O&M cost to provide a