[Senate Hearing 110-]
[From the U.S. Government Publishing Office]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2008
----------
WEDNESDAY, FEBRUARY 28, 2007
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:33 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Bond, Specter, and
Allard.
AMTRAK
STATEMENT OF ALEXANDER KUMMANT, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will come to order. This
morning, the subcommittee is going to hear testimony on the
Nation's intercity passenger railroad Amtrak. This past year,
like the year before it, Amtrak posted a new record ridership,
24.3 million passengers. The reasons behind Amtrak's recent
success go right to the heart of the debate over whether we
need a national intercity railroad.
People boarded Amtrak in record numbers because gas prices
were too high, because highways were too congested, because
runways were too congested, because weather eliminated other
travel options, and because airlines abandoned air service to
rural communities. Amtrak certainly isn't the perfect solution
to all these problems, but it certainly is part of the
solution.
Many of my congressional colleagues have sited Amtrak's
service problems and subsidy needs and have called for dramatic
reforms. I agree that there are opportunities for reform at
Amtrak, but we would all do well to remember some things about
Amtrak's history before we launch into wholesale reforms with
unknown outcomes.
Amtrak was created several years ago by combining the
money-losing passenger operations of several different
railroads. The Government didn't have the luxury of designing a
national passenger railroad from scratch. To the contrary, with
several railroads heading rapidly into bankruptcy, Amtrak was
created to take over these financial liabilities and link
together all these money-losing passenger lines. Today, Amtrak
as we know it is still a hodgepodge. Amtrak owns its track in
one region of the country, but not in other regions. Some
States, like mine, pay for both the operating costs and some
capital costs of their trains. Some States pay just a portion
of the operating costs, and still other States pay absolutely
nothing for their Amtrak service. Some Amtrak services run with
equipment that is just a few years old. Some services run with
equipment that is several decades old. Even today some of
Amtrak's equipment dates back from before the railroad was
founded. Some of it even dates back to before World War II.
When you are dealing with a hodgepodge system, you need to
be very suspicious of reforms where one size is expected to fit
all. I believe that reforms are needed at Amtrak, but I also
believe these reforms should not just be about cutting
employees, cutting wages, and cutting communities off the
national rail map.
When it comes to cutting employees, Amtrak has already
dropped its employee head count by almost 6,250. That is a cut
of more than 25 percent in the last 6 years. When it comes to
wages, most Amtrak employees haven't seen a real wage increase
in almost 8 years. Last year, in the name of reform, Amtrak's
Board of Directors proposed to send some Amtrak jobs overseas.
That's right, a company that receives over $1 billion in
taxpayer money each year would be using those tax dollars to
send jobs overseas. Senator Byrd and I included an amendment on
last year's appropriations bill to prohibit that. As a result,
the Amtrak board abandoned its plan. But my point here is not
everything that is proposed in the name of reform makes sense
for the American people, or the taxpayers, or for Amtrak's
passengers.
I can think of a number of reforms at Amtrak that do make
sense and are long overdue. They include reforming the way the
Nation's freight railroads dispatch Amtrak trains so that the
passengers have a fighting chance to arrive on time. Reforming
the way Amtrak compensates its employees so they can attract
and retain the skilled personnel they need. Reforming the way
the Bush administration budgets for Amtrak's needs so that the
administration and Congress can focus together on truly
modernizing the railroad rather than battling annually over
whether the railroad will be allowed to limp into next year.
When you look at the recent record, Amtrak has been able to
increase riders and revenue, not just on the Northeast
Corridor, but on its State-supported and long-distance trains
as well. That fact is all the more impressive when you look at
the abysmal on-time performance on some of these trains outside
the Northeast Corridor. Outside the corridor, Amtrak travels
over track that is owned, maintained, and dispatched by freight
railroads. But as a matter of Federal law, those freight
railroads are required to give Amtrak trains preference over
freight traffic when dispatching traffic over their rails. When
you look at the on-time performance of many of these Amtrak
trains you have to question whether the law is being ignored.
There is no question we need our freight railroads to move
cargo. Freight mobility is an essential part of our economy,
especially in an agricultural and trade State like mine. It is
simply not realistic to expect our freight railroads to put
every coal and container train on a siding so passenger trains
can breeze through. But right now, more than half of Amtrak's
long-distance trains arrive late--many of them extremely late.
When you review the data as to why these trains are late,
there's one factor that outweighs all the others: interference
with freight trains.
More than 76 percent of the delay time that these trains
endure is associated with problems at the host freight
railroad. It is either interference with freight traffic, slow
orders due to deferred maintenance, signal delays, or other
problems. When you look at some of the Amtrak trains that are
supported by State subsidies, the record is not much better.
Let me just talk about two examples of States that get a
lot of attention by this subcommittee, Washington State and
Missouri.
My home State does not only finance the operating losses of
the Cascade Trains, it has even purchased some of the railcars
for that service. But last year these trains still arrived late
almost half the time. In Missouri, the State puts up millions
of dollars to operate twice daily trains between Kansas City
and Saint Louis, but last year those trains were allowed to
arrive on time less than one-third of the time. The on-time
performance of these trains in December was no better. It is a
deplorable record. Given that record, it is amazing, indeed,
that Amtrak can sell any tickets on this train. Yet here too,
ridership has increased because people want to use the service.
When you look at the Bush administration's budget for
Amtrak and the separate budget request submitted by Amtrak's
Board of Directors, there is one notable area where they are in
agreement. Both budgets want this subcommittee to set aside
$100 million in matching funds, for the States to launch new
passenger corridors. When both Amtrak and the Bush
administration agree on a budget proposal, you have to take
notice.
But given the problem with the on-time performance of these
State-supported trains, I am left here asking, ``What is the
point in providing additional funds for new State-supported
rail services if those trains are just going to suffer the same
congestion and dispatching problems that befall Amtrak's
current trains?'' If we're going to put Federal tax dollars
into capital improvements over privately-owned freight track,
shouldn't we be focusing those on improving the current
services, before we start paying for new services? Why should
States like mine--States that already make substantial cash
contributions for Amtrak service--have to put up even more
State dollars just so that their existing trains don't arrive
consistently late?
That was his bell for being late.
So, one Amtrak reform this subcommittee must look at, is
how we can better ensure that Amtrak trains have a fighting
chance of arriving on time. No one should expect Amtrak to
dramatically improve their ridership and financial performance
of the Northeast Corridor when it is more likely than not that
those trains won't arrive on time.
Another Amtrak reform we should look at is seeing to it
that Amtrak has the resources that it needs to recruit and
retain the employees they need. Amtrak and its labor unions
have not been able to reach agreements on a new contract for 7
years. It's time for that impasse to end. Many crafts have not
experienced a meaningful pay increase in all of that time. The
result has not just depressed employee morale. Amtrak is now
facing serious shortages in a number of skill areas, because
trained and experienced employees are taking better paying jobs
with commuter railroads, freight railroads, or outside the
railroad industry. Amtrak will not be able to improve its
efficiency, safety, and service quality if it's lowest paying--
if it is the lowest-paying competitor in the industry.
Finally, it is my hope that we can start having a
meaningful, fact-based dialogue with the Bush administration
about Amtrak's real financial needs. President Bush's Federal
Railroad Administrator will testify to us today that if we cut
overall funding for Amtrak by almost 40 percent, Amtrak can
stay out of bankruptcy next year. I'm not sure that any other
witness here is going to agree with that observation.
The DOT Inspector General has performed a valuable service
for this subcommittee, by being an impartial monitor of
Amtrak's financial condition. Today's witness from the
Inspector General's office will testify that what Amtrak really
needs is to be reauthorized. I totally agree that Amtrak
desperately needs comprehensive legislation that addresses each
of the challenges I have cited and many others. I sincerely
hope this legislation is signed into law this year. This
subcommittee's practice of providing incremental reforms
through appropriations legislation each year is not the ideal
way to do business. But absent the enactment of a comprehensive
Amtrak reform bill, we will continue to do what needs to be
done to address these areas and keep Amtrak alive for the
steadily growing number of citizens that demand the service.
Senator Murray. Senator Bond.
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Thank you, Madame Chair. And I join with you
in welcoming our witnesses today, and look forward to hearing
the differing views on each of you on the current needs of
Amtrak and how best to meet the growing challenges that face
intercity passenger rail. I have many concerns about Amtrak and
look forward to an opportunity to discuss these.
I might say, for the record, that I was for Amtrak when it
was first cool. About a third of a century ago as Governor of
Missouri, I recommended and signed into law the appropriations
to provide roughly $1 million a day for Amtrak. And I enjoyed
the service, but I have a lot of questions about the economic
feasibility.
Now, the good news is that my Representatives and Senators
and Governor of Missouri have been putting about, I believe, $6
million a year into subsidizing it. So, they see the need. But
the question is, ``How do we make this viable for the long
term?'' Our highways continue to become more and more
congested, and our airports are full of passengers--snowstorms,
they stay there in the airports and I've done that--and people
look for alternative modes of transport.
On the Northeast Corridor, I would love to be able to hop
on the train to head to New York for the weekend versus trying
to fight the traffic. But as I understand that while the
highway traffic has increased markedly on 95, the ridership on
Amtrak has been relatively stable. And obviously one of the
reasons is because of the capacity constraints. So, I think
that needs to be addressed for the Northeast Corridor.
But again, we need also to look at the economics of east
coast to west coast service, and how that's going to be paid
for. We are caught in a spiral where the costs are increasing
significantly, while overall ridership on Amtrak has gone up.
In other areas it does not--it is not coming close to paying
for the service.
I, too, look forward to comprehensive legislation, but the
measures that I've seen require significant infusions of
additional Federal money. Given the budget constraints under
which this committee operates, I don't see that money being
available. So I look in the comprehensive legislation for what
is proposed to pay for the additional costs that this
legislation would incur.
Now, to talk about the specific budget, while I have
questions, I do believe that the budget provided by the
administration did not provide the funding needed to meet
Amtrak's anticipated expenses for fiscal year 2008. As we know,
for this coming fiscal year, the administration recommended
$900 million for Amtrak, $800 million directly, and $100
million dedicated to issuing capital matching grants to States
for intercity passenger rail projects.
Of the $800 million provided directly to Amtrak, $300
million is required for Amtrak's new management team to make
the necessary decisions to act on its mandate and reshape the
company. I expect Mr. Kummant, with Amtrak, to explain where we
are today, where we're going, and how much it's going to cost.
Amtrak must be able to account for its expenditures with
long-term plans for individual capital improvement similar to
State TIPs or Transportation Improvement Plans. If the detailed
Transportation Improvement Plans were provided by Amtrak, we'd
be better able to understand what unmet needs are out there.
And we could then decide whether or not we agree with providing
additional funding for passenger rail service.
Currently, labor costs require 82 percent of the revenue
generated for Amtrak, and Amtrak estimates that healthcare
costs will total $238 million for this 2007 calendar year,
approximately 22 percent of the total payroll. No business is
sustainable at this level of operations, regardless of the
amount of money put in to the efficiency incentive grant
program.
Amtrak estimates that the savings they could achieve with
labor changes is between $82 million and $100 million annually.
But, unless all options are on the table to achieve savings--as
highlighted by Amtrak's board--we're going to be unable to
preserve Amtrak and passenger rail service for the long term.
As you know, Amtrak spends $2 for every $1 of revenue collected
on food and beverage service. If you factor out the cost for
food and beverage, every dollar of revenue equals the labor
cost to deliver it. We have yet to see results of how Amtrak is
dealing with this.
I'm concerned that the budget submission we received for
Amtrak does not include any funds for debt service payments.
These payments are necessary, and will be paid whether they are
a line item for debt service added by this subcommittee, or
from the $500 million provided for capital costs. We can not
ignore the fact that debt is there, and that there is an
immediate and legal obligation to repay it.
To be blunt, we need a dynamic plan and commitment that
will transform Amtrak into a viable transportation option. We
can not afford to tread water year after year where all funding
basically supports the status quo, while labor costs and
infrastructure needs continue to explode faster than the
ridership.
Thank you, Madame Chair.
Senator Murray. Thank you Senator Bond.
Senator Lautenberg, you have an opening statement?
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thanks very much, Madame Chairman, for
holding this hearing. I had the opportunity yesterday in the
committee--subcommittee in commerce--we had a chance to hear
from Mr. Kummant and Mr. Boardman, and we're pleased to have a
chance to talk to them as well as the other witnesses today.
In New Jersey we have enormous traffic problems, but we're
not unique. Traffic problems across--all we have to do is look
into Washington, DC and see how long it takes to cover routes
that used to be 10 minute rides, like to my house--or 12
minutes--are now a half an hour, if you're lucky. And that's
the way it is throughout the country. It's very hard to get
into any area that has any development associated with it,
where the traffic doesn't overwhelm the efficiency.
So, in New Jersey, for example, the average New Jerseyan
spends 300 hours commuting by car each year, and 15 percent of
that time is wasted in traffic. And, it's not simply the late
arrivals. When you look at the problem with importing oil
that's required to maintain those engines as they idle along,
and the pollution that's created. Last year was the worst year
for flight delays since 2000. One in four planes was late, and
we expect nearly 5,000 new light jets to go into service over
the next 10 years. The sky, we learn now, is finite, it just,
you don't have room to put everything up there that you'd like
to.
With this in mind, Amtrak requested what it needed to keep
trains running safely and reliably. And then President Bush
went ahead and requested half as much. And yesterday, when I
chaired that subcommittee, we discussed the bipartisan bill
being done by Senator Lott and myself, to fully fund Amtrak and
expand its service into more cities, because it's critical in
the traffic movement that is required in this country.
Last year the Senate approved our plan by a vote of 93 to
6, because America's travelers need another choice. Now, I look
forward to getting the same kind of response and support this
year. In the meantime, we can not continue to let Amtrak
deteriorate, which is what the President's budget would do.
Now, when we look at what is spent in other countries to
achieve first-class rail service, it dwarfs everything we do.
Germany spent more in a year than we spend in a half a dozen
years to get their service going. It's excellent. And you've
got to pay for what you want. And we can not do it on skinny
budgets that--many of which were designed to bankrupt Amtrak.
And so I'm working with the Budget Committee to ensure that
Amtrak gets the Federal resources it needs to provide services
and options to our citizens.
And in my new assignment, in this committee, I'm happy to
work with the Chair and the ranking member to ensure that
Amtrak is a priority.
I heard, Madame Chairman, as you were making your
statement, some of the equipment was as old as World War II. I
think some of things that, during World War II, still have the
viability as we go along, and I'm of that vintage. Thank you
very much.
Senator Murray. Thank you, Senator Lautenberg.
Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Madame Chairman, thank you for holding this
hearing. I followed Amtrak carefully, on the authorizing side
for a number of years, so I appreciate the opportunity to be
more involved on the budget side.
While passenger rail has a role in efficient modern
transportation infrastructure, I'm concerned about how Amtrak
has performed in providing that service. As my colleagues may
know, I'm a strong proponent of results and outcomes. Amtrak
and other Government-funded entities should not be judged based
upon how much they receive in Federal funding, but by the
results that can be demonstrated by those taxpayer dollars.
In the case of Amtrak, I'm afraid those results are not
very impressive. In the administration's PART Assessment--
that's their tool for evaluating the effectiveness of
programs--Amtrak was rated as ineffective. I'm afraid that
Amtrak's history before this Congress is plagued with
unfulfilled promises over the years, stories of inefficiencies
and a waste of taxpayer dollars. In fact, it was the only
program in the entire Department of Transportation to receive
an ineffective rating.
I want to be clear on what this really means. From the
administration's description, ineffective means ``programs
receiving this rating are not using taxpayer dollars
effectively.'' That seems pretty clear to me, and I'm pleased
to see that the budget contains a proposal to incentivize more
State participation.
Nearly every other area of transportation, including
highways, mass transit, and aviation, is a partnership between
the Federal and State or local governments. Passenger rail
should follow the same model. It should not be considered the
sole jurisdiction or responsibility of the Federal Government.
States and localities are also in a position to better
understand the transportation needs of their citizens. Not only
does the budget ask them to prioritize their needs, it does so
in a meaningful way by asking them to share joint funding
responsibilities. This will help ensure that the highest needs
are met, rather than producing a wish list of wants.
I am concerned however, that this change may not be enough.
I'm unconvinced that Amtrak has completely turned the corner
and is solidly on the path of financial soundness. I look
forward to the opportunity to hear from the witnesses about
this budget request and how it fits into Amtrak's future. Their
testimony will be helpful as we move forward with the
appropriation process.
Thank you Madame Chairman.
Senator Murray. Thank you, Senator Allard.
We have five witnesses before our committee today. Mr.
Kummant, President and CEO of Amtrak, Mr. Boardman,
Administrator of the Federal Railroad Administration, Mr.
Tornquist who's the Assistant Inspector General for Competition
and Economic Analysis, Mr. Wytkind, President of Transportation
Trades Department, and Mr. Serlin, President of Railroad
Infrastructure Management.
You each will be allocated 5 minutes and I ask you to keep
your remarks within those 5 minutes, so we can get to committee
member questions.
And Mr. Kummant, we will begin with you.
STATEMENT OF ALEXANDER KUMMANT
Mr. Kummant. Madame Chairwoman, and members of the
subcommittee, thank you for the opportunity to testify before
you today.
While my testimony will primarily focus on the fiscal year
2008 budget request, I'd like to take a few minutes to update
you on how the company is doing. With that, I'll reiterate a
number of the points you made in the opening comment as well.
AMTRAK STATUS UPDATE
As you know, we finished the fiscal year 2006 by
establishing new ridership and revenue records. Through
January, we're continuing to outpace the previous with
ridership and revenue ahead by 4 percent and 10 percent,
respectively. The ridership increases are reflected across all
services, and outside the Northeast Corridor ridership is up
about 5 percent nationwide, though some corridors have seen
double-digit growth.
Overall, the big driver right now is, of course, the
Northeast Corridor, and particularly the Acela service, where
ridership is up about 19 percent over the same period last
year. This is the result of a number of improvements to the
onboard experience, better reliability and much better on-time
performance. We've consistently been hovering around 90 percent
on-time for Acela, and that's the result of having
significantly reduced the backlog of state of good repair work,
leaving the Northeast Corridor in the best shape it's been in
for years.
Our safety numbers--another key indicator--are also lower
than last year's final numbers, and we finished this January at
a 40 percent run-rate improvement over last year. Finally, we
continue to pay down our debt, and have not assumed any new
debt for 4 years in a row.
Within the next few months, we expect to send to Congress
an update of our multi-year strategic plan, which will
underscore, again, the need for a fiscal year 2008 funding
request and provide a vision of where we hope the company will
be within the next few years.
In summary, our vision for Amtrak is one of growth,
particularly in corridor services, product excellence as we're
demonstrating with Acela, and overall sound management. Looking
forward, much of the success of passenger rail service will lie
in the establishment of clear multi-year Federal policy,
including a Federal-State matching program to fund corridor
development. The other major initiative we'll have to undertake
soon is procurement of new equipment as was also alluded to
earlier. We have an aging fleet with little excess equipment,
and as corridor service grows, it will be exhausted.
FISCAL YEAR 2008 FUNDING REQUEST
Let me turn to the fiscal year 2008 request. On February
15, we submitted to Congress our Grant and Legislative Request,
which I would ask be enclosed for the record. This document
contains both the specific request and details to explain the
need for this funding. In short, Amtrak is requesting $1.53
billion, which is less than last year's request of $1.598
billion and an increase over the fiscal year 2007 enacted
amount of $1.3 billion. The budget request breaks down as
follows: for operating support, $485 million; capital, $760
million; and mandatory debt service, $285 million.
We've also suggested that Congress fund $100 million for a
State corridor match program and an additional $50 million for
ADA Station accessibility needs. It is worth noting that the
administration's fiscal year 2008 budget request for Amtrak
also recommended $100 million for State corridor match program,
as was referenced earlier.
With regard to our operating request, the $485 million
continues a downward slope of operating needs over the last 10
years. For comparison sake, in fiscal year 1996, operating
support represented 23 percent of our total budget request. In
fiscal year 2008, the amount now represents about 19 percent.
This reduced operating need is accomplished in the face of
rising costs, particularly in the areas of health and benefits,
insurance, and fuel. Keep in mind, the absence of new labor
agreements has certainly helped to keep the operating costs
relatively constant.
For our capital needs, Amtrak has requested $760 million,
which would be used to continue state of good repair
initiatives, including modernization of our fleet. As I said
earlier, Amtrak has completed a substantial investment of the
Northeast Corridor infrastructure, which we own and maintain.
The on-time performance numbers for all users of the corridor
reflect the benefit of these investments. For instance, on-time
performance for New Jersey Transit, a major user of the
Northeast Corridor, was 94 percent in fiscal year 2006.
Finally, we continue to invest in our fleet, and expect by
the end of fiscal year 2009 to bring the entire fleet to state
of good repair. During the short time that I've been with
Amtrak, I have been struck by the enthusiasm and support that
exists for passenger rail services, particularly at the State
and local levels. And parenthetically, too, I must say the
energy and drive of our frontline folks, as you alluded to--in
the face of a long time without labor settlements--is also
impressive. I believe that we're on the verge of significant
growth and development of our Nation's rail infrastructure, and
the steps we're taking today are essential to meet the need for
the eventual expansion of passenger rail service.
PREPARED STATEMENT
Thank you again for the opportunity to testify today, and I
look forward to working with you--with each of you in the
coming months. I'd be happy to answer any question. Thank you.
[The statement follows:]
Prepared Statement of Alexander Kummant
Madame Chairwoman and members of the subcommittee, thank you for
the opportunity to testify before the subcommittee today. While my
testimony will primarily focus on the fiscal year 2008 budget request,
I would like to take a few minutes to update you on how the company is
doing.
As you know, we finished fiscal year 2006 by establishing new
ridership and revenue records. Through January we are continuing to
outpace the previous year with ridership and revenue ahead by 4 percent
and 10 percent respectively. The ridership increases are reflected
across all services, and outside the Northeast, corridor ridership is
up about 5 percent nationwide though some corridors have seen double
digit growth. Overall, the big driver right now is the Northeast
Corridor (NEC) and particularly the Acela service where ridership is up
about 19 percent over the same period last year. This is the result of
a number of improvements both to the onboard experience, better
reliability and much better on time performance (OTP). We have been
consistently hovering around 90 percent OTP for Acela, and that is the
result of having significantly reduced the backlog of state-of-good
repair work, leaving the NEC in the best shape it has been for years.
Our safety numbers, another key indicator, are also lower than last
year's final numbers and we finished this January at a 40 percent run
rate improvement over last year. Finally, we continue to pay down our
debt and have not assumed any new debt for 4 years in a row.
Within the next few months we expect to send to Congress an update
of our multi-year strategic plan which will underscore again the need
for our fiscal year 2008 funding request and provide a vision of where
we hope the company will be within the next few years. But, in summary,
our vision for Amtrak is one of growth (particularly in corridor
services), product excellence (as we are demonstrating with Acela), and
sound management overall. Looking forward, much of the success of
passenger rail service will lie in the establishment of clear multi-
year Federal policy, including a Federal-State matching program to fund
corridor development. The other major initiative we will have to
undertake soon is procurement of new equipment. We have an aging fleet
with little excess equipment, and as corridor service grows, it will be
exhausted.
Let me turn to fiscal year 2008 request. On February 15 we
submitted to Congress our fiscal year 2008 Grant and Legislative
request which I would ask to be enclosed for the record. This document
contains both the specific request and details to explain the need for
this funding. In short, Amtrak has requested $1.53 billion which is
less than last year's request of $1.598 billion, and a slight increase
over the fiscal year 2007 enacted amount of $1.3 billion.
The budget request breaks down as follows:
--Operating, $485 million;
--Capital, $760 million; and,
--Mandatory debt service, $285 million.
We have also suggested that Congress fund $100 million for a State
corridor match program and an additional $50 million for ADA station
accessibility needs. It is worth noting that the administration's
fiscal year 2008 budget request for Amtrak also recommended $100
million for a State corridor match program.
With regard to our operating request, the $485 million continues a
downward slope of operating needs over the past 10 years. For
comparison sake, in fiscal year 1996, operating support represented 23
percent of our total budget request. The fiscal year 2008 amount now
represents about 19 percent. This reduced operating need is
accomplished in the face of rising costs particularly in the areas of
health and benefits, insurance and fuel. Keep in mind, the absence of
new labor agreements has helped to keep operating costs relatively
constant.
For our capital needs, Amtrak has requested $760 million which
would be used to continue state of good repair initiatives including
modernization of our fleet. As I said earlier, Amtrak has completed a
substantial investment of the NEC infrastructure which we own and
maintain. The on time performance numbers for all users of the corridor
reflect the benefit of these investments to the NEC plant and
structures. For instance, on time performance for New Jersey Transit, a
major user of the Northeast Corridor, was 94 percent for fiscal year
2006. Finally, we continue to invest in our fleet and expect by the end
of fiscal year 2009 to bring the entire fleet to a state-of-good-
repair.
During the short time that I have been with Amtrak I have been
struck by the enthusiasm and support that exists for passenger rail
service, particularly at the State and local levels. I believe that we
are on the verge of significant growth and development of our Nation's
rail infrastructure and the steps we are taking today are essential to
meet the need for the eventual expansion of passenger rail service.
Thank you again for the opportunity to testify before the subcommittee
today and I look forward to working with each of you in the coming
months. I would be happy to answer your questions.
Senator Murray. Thank you.
Mr. Boardman.
DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
STATEMENT OF HON. JOSEPH H. BOARDMAN, ADMINISTRATOR
Mr. Boardman. Chairwoman Murray, ranking member Bond,
Senators Lautenberg and Allard, thank you for having me here
today. I'm here on behalf of Secretary Peters and the Bush
administration to talk about the budget proposal for 2008.
ADMINISTRATION FISCAL YEAR 2008 BUDGET PROPOSAL
As you've already noted, the administration requests $800
million in direct subsidies to Amtrak, and $100 million to fund
a program of matching grants to the State under the capital
investment projects for passenger rail services that the State
believes are important.
The request includes that $500 million in direct Federal
subsidies for Amtrak's capital costs, and in addition--I'll
discuss in a moment--the $100 million, 50 percent Federal match
program with the States. With this amount, Amtrak and its State
partners could carry out a capital improvement program that,
when combined with other collections from Amtrak, can address
the most pressing investment needs, and given the system today,
is an amount that they can reasonably manage in 2008. The
administration also requests $300 million for transitional
operating costs. The Government Accountability Office, the DOT
IG, the Amtrak IG, and others have recently presented options
for achieving the savings necessary for that number.
STATE MATCHING PROPOSAL
Most publicly-supported transportation in the United States
is undertaken through a partnership between the Federal
Government and the United States--and the States, excuse me.
This model--which has worked well for generations for highway,
transit, and airports--places the States--and in certain cases
their subdivisions--in the forefront of planning and
decisionmaking.
States are uniquely qualified to understand their mobility
needs and connectivity requirements through state wide and
metropolitan area inter-modal and multi-modal transportation
planning, funded in part by the U.S. DOT. While intercity
passenger rail has historically been an exception to this
application of the model, in recent years some States have
taken an active role in their rail transportation services.
Several States have chosen to invest in intercity passenger
rail provided by Amtrak as part of strategies to meet their
passenger mobility needs. And over the past 10 years, ridership
on intercity passenger rail routes that benefit from State
support has grown by 73 percent--over that same period,
ridership on Amtrak routes not supported by States, only by 7
percent.
State involvement and planning and decisionmaking for
intercity passenger rail identifies where mobility needs
justify public investment. An excellent example, you've already
identified this morning--in Washington State, which has
invested in intercity passenger rail from Portland, Oregon
through Seattle, to Vancouver to make this service a viable
alternative to highway travel on the congested I-5 Corridor.
Illinois provides another example where its recent
investments have doubled the number of intrastate trains
operated by Amtrak. Additionally, State involvement in planning
and decision making helps ensure that the infrastructure such
as stations and connectivity to other forms of transportation,
support inter-modalism within the State. There's no better
example for that than North Carolina.
State involvement in funding intercity passenger rail
service also provides an added discipline on Amtrak to
continually seek ways to provide the highest quality of
service. An example of that can be found in Vermont where the
State--when presented with prospects of higher State operating
subsidies for its current service--is working with Amtrak to
restructure this service, which will not only drive down
operating costs, but will also increase the frequency of
service.
Amtrak's own strategic reform initiative seeks to build on
Amtrak's experience with the States. Amtrak is seeking to
create a stronger role with the States in designing and
supporting the services the States believe are important. The
administration supports this aspect of Amtrak's internal
reform.
In discussions with interested States, the U.S. DOT has
found that the single greatest impediment to implementing this
initiative is the lack of Federal-State partnership, similar to
that which exists for highways and transit. For investing in
the capital needs of intercity passenger rail, such a
partnership is one of the five principles of intercity
passenger rail reform laid out by former Secretary Mineta in
2002, and was a central element of the administration's
Passenger Rail Reinvestment Reform legislative proposal.
PREPARED STATEMENT
Therefore, the administration is proposing a capital grant
program that will encourage State participation in its
passenger rail service. Under the new program, a State, or
States, would apply to FRA for a grant up to 50 percent of the
cost of investment. Priority would be given to infrastructure
improvements, and projects that improve the safety,
reliability, and schedule of intercity passenger trains, reduce
congestion on the host freight railroads where the freight
railroads commit to an enforceable on-time performance of
passenger trains of 80 percent or greater. Additionally, the
specific project would have to be on the State Transportation
Improvement Program at the time of the application.
Thank you for the opportunity to speak.
[The statement follows:]
Prepared Statement of Hon. Joseph H. Boardman
Chairman Murray, Ranking Member Bond, I appreciate the opportunity
to appear before you today on behalf of Secretary of Transportation
Mary Peters and the Bush administration to discuss the President's
budget proposal for fiscal year 2008 as it relates to the Federal
Railroad Administration and Amtrak.
The administration remains committed to improving the manner by
which intercity passenger rail services are provided. This, of
necessity, also includes improvements to how Amtrak provides this
service and laying the groundwork for the States to have a stronger
role in determining the important characteristics of services that
States support financially and for the participation of other entities
in the provision of intercity passenger rail service under contract to
the States and/or Amtrak.
Since 2002, the administration has drawn a distinction between
intercity passenger rail service, a form of transportation, and Amtrak,
the company that provides the service. The administration supports the
form of transportation as a component of our national transportation
system but recognizes there are shortcomings with the service provider.
The administration's advocacy for change is beginning to see results as
Amtrak, through its Board of Directors, has acknowledged the urgent
need for reform and issued a Strategic Reform Initiative plan that
mirrors major elements of the administration's plan, such as
introducing competition; empowering States to participate in
infrastructure decisions; reducing operating subsidies; and enabling
management to separate Amtrak's train operations from its
infrastructure management. There is also a new management team being
put in place with a mandate to overhaul the company. Congress similarly
has taken steps to encourage cost efficiency and accountability.
Nevertheless, much more is required to resolve Amtrak's well-documented
problems.
For fiscal year 2008, the administration requests $800 million in
direct subsidies to Amtrak and $100 million to fund a program of
matching grants to the States to undertake capital investment projects
for passenger rail services that the States believe important. This
amount would support continued intercity passenger rail service and
would enable Amtrak's new management team to act on its mandate to
reshape the company. However, it would also require that Amtrak
undertake meaningful reforms and control spending. The fiscal year 2008
budget request marks part of a multiyear effort to reduce, and
eventually eliminate, operating subsidies for Amtrak. Overall, this
level of subsidy is appropriate because it will provide Amtrak
continuing incentive to grapple with costs, rationalize its services,
and pursue innovations. It would also expand State support for
intercity passenger rail, thus putting more of the decisions on what
should be operated with public subsidies in the hands of those who know
best what intercity passenger needs exist and how best to meet those
needs.
Consistent with fiscal year 2006 appropriations account
restructuring, the fiscal year 2008 budget seeks Amtrak funds through
the Capital Grants and Efficiency Incentive Grant accounts. The
administration agrees that using distinct budget accounts for Amtrak
makes Federal spending more transparent. The budget also contains many
of the stipulations included in the fiscal year 2006 appropriations
language.
CAPITAL GRANTS
The request includes $500 million in direct Federal subsidies for
Amtrak capital costs. In addition, the budget, as discussed below,
includes $100 million to fund a program of grants to States, requiring
a 50 percent match, to fund capital costs associated with intercity
passenger rail services that the States deem important. With this
amount, Amtrak and its State partners could carry out a capital
improvement program that, when combined with other collections from
Amtrak partners, can address the most pressing investment needs on the
Northeast Corridor infrastructure as well as essential equipment
investments. The request represents close to the maximum capital budget
that Amtrak could reasonably manage in fiscal year 2008, given that it
can complete only a certain amount of work annually.
AMTRAK OPERATING EFFICIENCY GRANTS
The administration requests $300 million for transitional operating
costs. The request for operating subsidies is sufficient to avoid a
bankruptcy, provided Amtrak acts to cut its costs by focusing on core
services. To ensure this occurs, the administration proposes DOT be
able to target funding based on Amtrak's progress in implementing cost-
cutting measures. For example, the Secretary of Transportation could
review and approve grant requests for individual train routes, or
require Secretarial approval for the use of funds for specific
operating expenses, such as subsidies of food and beverage service
which, in fiscal year 2006, accounted for more than 10 percent of the
total Federal subsidy of Amtrak. Amtrak must also improve its operating
performance through revenue gains, debt service reductions, or other
means. Ultimately, the $300 million request should lead to a more
efficiently run railroad by causing Amtrak's management to explore
opportunities for savings and for revenue gains. The Government
Accountability Office, DOT Inspector General (IG), Amtrak IG, and
others have all recently presented options for achieving savings.
INTERCITY PASSENGER RAIL GRANT PROGRAM
Most publicly supported transportation in the United States is
undertaken through a partnership between the Federal Government and the
States. This model, which has worked well for generations for highways,
transit and airports places the States, and in certain cases their
subdivisions, at the forefront of planning and decisionmaking. States
are uniquely qualified to understand their mobility needs and
connectivity requirements through Statewide and metropolitan area
intermodal and multimodal transportation planning funded, in part, by
the U.S. Department of Transportation.
While intercity passenger rail has historically been an exception
to the application of this successful model, in recent years some
States have taken an active role in their rail transportation services.
Several States have chosen to invest in intercity passenger rail
service provided by Amtrak as part of strategies to meet their
passenger mobility needs. Over the past 10 years, ridership on
intercity passenger rail routes that benefit from State support has
grown by 73 percent. Over that same time period, ridership on Amtrak
routes not supported by States has increased by only 7 percent.
State involvement in planning and decisionmaking for intercity
passenger rail service identifies where mobility needs justify public
investment. An excellent example can be found in Washington State,
which has invested in intercity passenger rail from Portland, Oregon
through Seattle to Vancouver, British Columbia, to make this service a
viable alternative to highway travel on the congested I-5 corridor.
Illinois provides another example, where its recent investments have
doubled the number of intrastate trains operated by Amtrak.
Additionally, State involvement in planning and decisionmaking
helps assure that the infrastructure, such as stations, and
connectivity to other forms of transportation support intermodalism
within the State. No better example of this exists than in North
Carolina where the State has undertaken the redevelopment of its
intercity passenger rail stations and transformed them into multimodal
transportation centers serving the mobility needs of the communities in
which they are located.
State involvement in funding intercity passenger rail service also
provides an added discipline on Amtrak to continually seek ways to
provide the highest quality of service. An example can be found in
Vermont where the State, when presented with the prospects of higher
State operating subsidies for its current service, is working with
Amtrak to restructure the service that will not only drive down
operating costs, but will increase the frequency of service.
Amtrak's own strategic reform initiative seeks to build on Amtrak's
recent experience with the States. Amtrak is seeking to create a
stronger role for the States in designing and supporting the services
the States believe important. The administration supports this aspect
of Amtrak's internal reform. In discussions with interested States, the
U.S. Department of Transportation has found that the greatest single
impediment to implementing this initiative is the lack of a Federal/
State partnership, similar to that which exists for highways and
transit, for investing in the capital needs of intercity passenger
rail. Such a partnership is one of the five principles of intercity
passenger rail reform laid out by former Secretary Mineta in 2002 and
was a central element of the administration's passenger rail investment
reform legislative proposal.
Therefore, the administration is proposing a Capital Grant Program
that will encourage State participation in its passenger rail service.
Under this new program, a State or States would apply to FRA for grants
of up to 50 percent of the cost of capital investments necessary to
support improved intercity passenger rail service that either requires
no operating subsidy or for which the State or States agree to provide
any needed operating subsidy. Priority would be given to infrastructure
improvement projects that improve the safety, reliability and schedule
of intercity passenger trains; reduce congestion on the host freight
railroads where the freight railroads commit to an enforceable on-time
performance of passenger trains of 80 percent or greater; commit States
to contribute other additional financial resources to improve the
safety of highway/rail grade crossings over which the passenger service
operates; and protect and enhance the environment, promote energy
conservation, and improve quality of life. To qualify for funding,
States would have to include intercity passenger rail service as an
integral part of Statewide transportation planning as required under 23
U.S.C. 135. Additionally, the specific project would have to be on the
Statewide Transportation Improvement Plan at the time of application.
I appreciate your attention and would be happy to answer questions
that you might have.
Senator Murray. Thank you, Mr. Boardman.
Mr. Tornquist.
Office of the Inspector General
STATEMENT OF DAVID TORNQUIST, ASSISTANT INSPECTOR
GENERAL FOR COMPETITION AND ECONOMIC
ANALYSIS
Mr. Tornquist. Thank you, Chairman Murray and members of
the subcommittee. I appreciate the opportunity to present our
views on Amtrak's fiscal year 2008 financial needs.
DOT IG FISCAL YEAR 2008 AMTRAK BUDGET PROPOSAL
Let me begin by providing some context for our 2008 funding
recommendation for Amtrak. The fact that Amtrak set records in
both ridership and ticket revenue in fiscal year 2006, ended
the year with over $200 million in the bank, and achieved $61
million in savings from operational reforms might lead one to
think that Amtrak has turned the corner. However, to the
contrary, we believe that Amtrak remains in a precarious
financial condition.
Amtrak deserves credit for the recent progress it has made
in providing improved service and achieving cost savings.
However, systemwide on-time performance declined again last
year, operating losses remained unsustainably high, the
infrastructure still shows a toll of years of underinvestment,
and debt service continues to significantly cut into available
funds. While much has been done to improve Amtrak, much more
work remains.
Given this context, we believe Amtrak would need in fiscal
year 2008, $465 million for cash operating losses, $600 million
for capital spending, and $285 million for debt service to
operate a nationwide system, while maintaining modest progress
towards achieving a state of good repair.
Not all of this $1.35 billion needs to come from direct
appropriations. Some could come from Amtrak's cash balances,
depending on its projected year-end cash position later in the
year. The $465 million operating subsidy would enable Amtrak to
provide nationwide passenger rail service, while focusing its
attention on needed reform and operational improvements. We
also recommend that Amtrak's operating subsidy be appropriated
separately from capital and debt service, just as Congress did
in fiscal year 2006. This would prevent the deferral of capital
projects, in order to avoid the more difficult work of
improving Amtrak's operating efficiency. The capital amount
would allow modest progress for a state of good repair, and the
debt service amount we're recommending is Amtrak's estimate of
its fixed cost for principal and interest.
In addition, we support--with caveats--the State capital
matching grant program, as included in the President's fiscal
year 2008 budget, and in S. 294, the Passenger Rail Investment
and Improvement Act, as a means to stimulate rail corridor
development. Rail corridors hold the greatest potential for
future ridership growth, and steps need to be taken to begin to
address the expected demand for these routes.
OIG CONCERNS WITH STATE MATCHING PROPOSAL
Our concerns with the proposed program are as follows.
First, we believe it must be designed to ensure the Federal
investment leverages new State investments, and does not simply
supplant investments the States otherwise would have made.
Second, Amtrak must finalize and gain acceptance for its
route restructuring, cost recovery for State services, and
labor reforms to improve the efficiencies of its core
operations, before turning its attention to expanding those
operations. Put simply, Amtrak needs to get its own house in
order before investing in another property down the street.
And third, we recommend an 80/20 match rate similar to that
for the Federal Highway Program--rather than the 50/50 match
rate proposed by the administration--to put State investment in
rail on equal footing with other transportation modes.
AMTRAK REFORM EFFORTS
Increased investment in intercity passenger rail must go
hand to hand with improved operating efficiencies. Mr. Kummant
and his senior management team have come onboard at a critical
time. In the ongoing efforts to instill fiscal discipline at
Amtrak. The board and current management seem committed to
reform. However, the real test of that commitment will come
soon as Amtrak moves from implementing relatively easier
reforms, to implementing the more challenging ones. As Amtrak
stated just 1 year ago, ``The test of its reform efforts will
be its ability to implement substantial sustainable change that
will deliver not only ongoing financial improvement, but a new
environment for passenger rail that moves us beyond the
stalemate of the last 35 years.''
Amtrak's initial set of operating reforms saved $61 million
last year. Amtrak reduced the cost of its food and beverage
service, improved the productivity of its train operations,
reduced corporate overhead, and increased revenues through
variable fares in the Northeast Corridor, and enhanced services
on the Empire Builder. This is a commendable start. Amtrak has
committed to saving an additional $61 million in fiscal year
2007 and $82 million in fiscal year 2008.
We do have some concerns regarding Amtrak's reform efforts.
These include a concern that Amtrak may miss its reform target
in fiscal year 2007, because some planned reforms are on hold
while their potential to generate actual savings is being
reevaluated. We're concerned that Amtrak has limited details on
its planned 2008 reforms, it has only high-level long-term
implementation plans for its planned reforms--where it has any
long-term plans at all--and that it may be overemphasizing
revenue enhancements instead of cost reductions.
Over the long term, reauthorization holds the key to
Amtrak's future. As we testified previously, our long-term
proposal for financing intercity passenger rail would focus on
three key goals: continuing improvement in cost effectiveness
of services provided; devolution of power to determine those
services to States, and adequate and stable sources of Federal
and State funding. Absent a fundamental restructuring of the
company through reauthorization, it will again fall to the
Appropriations Committee to maintain fiscal discipline at
Amtrak, specifically by limiting the funds available to
subsidize operating losses, fencing those funds to prevent the
shifting from capital to operating expenses, and then making
Federal support conditional upon further operating
restructuring.
PREPARED STATEMENT
Madame Chairman, that concludes my statement. I'd be happy
to answer any questions you might have.
[The statement follows:]
Prepared Statement of David Tornquist
Chairman Murray, Ranking Member Bond and members of the
subcommittee, I appreciate the opportunity to present the views of the
Office of Inspector General on Amtrak's fiscal year 2008 financial
needs, its recent efforts to improve its financial condition, and
alternatives for financing intercity passenger rail. My statement today
will draw upon the Quarterly Reports on Amtrak's Savings from
Operational Reforms your committee and your House counterparts have
requested of our office, as well as other work we have undertaken on
Amtrak's financial and operating performance.
Amtrak's Condition Remains Precarious.--Amtrak set records in both
ridership and ticket revenue in fiscal year 2006, ended the year with
over $200 million in the bank, and achieved $61 million in savings from
operational reforms. Does this mean Amtrak has turned the corner
operationally and financially? No, unfortunately, it doesn't. While
improvements have been made, we believe Amtrak's condition remains
precarious.
Amtrak deserves credit for the recent progress it has made in
providing improved service and achieving cost savings. The result of
this progress is evident in Amtrak's improved ridership and revenue.
Nevertheless, Amtrak has a long way to go before it can reach, let
alone turn, the proverbial corner. Systemwide, on-time performance
declined for the fifth consecutive year, operating losses remain
unsustainably high, the infrastructure still shows the toll of years of
underinvestment, and debt service continues to significantly cut into
available funds. Much has been done to improve Amtrak, but much more
work remains.
Amtrak Requires More in Capital and Less in Operating Subsidy in
Fiscal Year 2008.--Based on the information available today, Amtrak
would need $465 million available to it in fiscal year 2008 for cash
operating losses, $600 million for capital spending, and $285 million
for debt service to operate a nationwide system while maintaining
modest progress towards achieving a state of good repair. As Amtrak
revises its revenue and expense estimates during the year, our estimate
also may change. Not all these funds need come from direct
appropriations, some could come from Amtrak's cash balances, depending
on its projected year-end cash position later in the year.
A $465 million operating subsidy in fiscal year 2008 would enable
Amtrak to provide nationwide passenger rail service, while focusing its
attention on needed reform and operational improvements. As Congress
did in fiscal year 2006, appropriating the operating subsidy separately
from the capital and debt service would prevent the deferral of capital
projects in order to avoid the more difficult work of improving
Amtrak's operating efficiency. The capital amount will allow modest
progress toward a state-of-good repair and the debt service amount is
Amtrak's estimate of its fixed cost for principal and interest.
We have testified previously that we support a State capital
matching grant program as a means to stimulate corridor development.
With caveats, we support the $100 million capital matching grant
program included in the President's fiscal year 2008 budget and in S.
294, the Passenger Rail Investment and Improvement Act. We believe this
program must be designed to ensure the Federal investment leverages new
State investments and does not simply supplant investments that States
otherwise would have made. Further, Amtrak must finalize and gain
acceptance for its route restructuring, cost recovery for State
services, and labor reforms to improve the efficiency of its core
operations before turning its attention to expanding those operations.
Finally, we would support an 80/20 match rate, similar to that for
highways, rather than the 50/50 match rate proposed by the
administration, to put State investment in rail on an equal footing as
other transportation modes.
Increased Investment in Intercity Passenger Rail Must Go Hand in
Hand With Improved Operating Efficiencies.--Amtrak's new CEO and his
senior management came aboard at a critical time in the ongoing efforts
to instill fiscal discipline at the corporation through operational
reforms. Since the development of the current Strategic Reform
Initiatives, Amtrak is on its second CEO and its Board has three new
members. The Board and current management seem committed to reform.
However, the real test of that commitment will come shortly as Amtrak
moves from implementing relatively easy reforms to more challenging
ones.
In fiscal year 2006 Amtrak realized $61.3 million in savings from
operating reforms by reducing the cost of its food and beverage
service, improving the productivity of its train operations, reducing
corporate overhead, and increasing revenues through variable fares on
the Northeast Corridor (NEC) and enhanced service on the Empire
Builder. Amtrak has committed to saving an additional $61 million in
fiscal year 2007 and $82 million in fiscal year 2008 from reforms.
Regarding Amtrak's continuing efforts to improve its financial
condition, we are concerned that Amtrak: (1) may miss its reform
savings target in fiscal year 2007 because some planned reforms are on
hold while their potential to generate actual savings is being
reevaluated; (2) has limited detail on its planned fiscal year 2008
reforms; (3) has only high-level long-term implementation plans for its
planned reforms, where it has any long-term plans at all; and (4) may
be overemphasizing revenue enhancements instead of cost reductions.
Management's goal of ``instilling a culture of continuous improvement
throughout the organization'' is the right one. Achieving it should be
a necessary precondition for significant new State or Federal
investment in intercity passenger rail service.
More work needs to be done to eliminate the losses on food and
beverage and, in particular, first class sleeper service. Any subsidy
of first-class passengers remains unacceptable. In July 2005, we
reported that Amtrak could save between $75 million and $158 million in
annual operating costs by eliminating sleeper car service, outsourcing
food and beverage service, and eliminating other amenities on long
distance trains. In fiscal year 2006, the operating loss on long-
distance trains was almost $600 million with a per passenger operating
subsidy of over $200 on three of the routes. A significant amount of
work needs to be done to finalize and implement Amtrak's proposed route
restructuring, state services, and labor reform initiatives, all three
of which are critical components of Amtrak's long-term financial plan.
Reauthorization Holds the Key to Amtrak's Long-Term Outlook.--As we
testified previously, our proposal for financing intercity passenger
rail service would focus on three key goals: (1) continuous
improvements in the cost-effectiveness of services provided, (2)
devolution of the power to determine those services to the States, and
(3) adequate and stable sources of Federal and State funding. Our
proposal requires a reauthorization for Amtrak.
These goals can be achieved through six programmatic changes:
formula grants to States for capital and operating costs of intercity
passenger services, restoration of the forward-going system to a state-
of-good repair, capital matching grants to States for corridor
development, establishment of adequate Federal and State funding,
resolution of the legacy debt issues, and resolution of NEC ownership
and control.
Other alternatives for financing intercity passenger rail service
include: (1) permitting States to issue tax exempt bonds for rail
infrastructure development and (2) turning the NEC over to private
investors with the support of a Federal loan. Permitting States to
issue tax exempt bonds for rail infrastructure would address a goal we
support of providing States with greater access to capital funds.
Regarding whether tax exempt bonds is the preferred way to make these
capital funds available, I would note that the Congressional Budget
Office has concluded that when tax credit bonds are used in lieu of
Federal appropriations, the cost to the Federal Government is greater
than it would be through conventional financing through the Department
of the Treasury. However, carefully designed tax credit bonds could
cost the Federal Government less per dollar of assistance provided to
State and local governments than the Federal tax exemption accorded
``municipal'' bonds issued by those governments.
Turning the NEC over to private investors has some attractive
features, particularly adding private investment through rail-dependent
development and proposed service improvements. However, we raised in
the past concerns regarding proposals to separate the NEC
infrastructure management and operations into two independent
companies. In addition, we would have to see a more detailed financing
proposal to determine its soundness.
Absent a fundamental restructuring of the company through
reauthorization, it will again fall to the Appropriations committees to
maintain fiscal discipline at Amtrak, specifically by limiting the
funds made available to subsidize operating losses and by making
Federal support conditional upon further operational restructuring.
I will now discuss these issues in greater detail.
despite improvements, amtrak's financial condition remains precarious
The current model for providing intercity passenger service
continues to produce financial instability and poor service quality. We
have seen some improvement in Amtrak's financial and operating
performance recently, but there are limits as to how much can be done
within the current framework.
Operating Losses.--Amtrak continues to incur substantial operating
losses. It ended fiscal year 2006 with a net operating loss of $1.1
billion. On the positive side, Amtrak's net operating loss was $65
million less than last year and its cash operating loss, excluding
interest and depreciation, was $17 million less than the same period
last year. Operating losses on long-distance trains, excluding interest
and depreciation, were $440 million in fiscal year 2006. Over the last
5 years, annual cash losses, excluding interest and depreciation, have
fallen only modestly--a little more than 3 percent a year.
Debt Burden.--Amtrak continues to carry a large debt burden. Its
total debt peaked at $4.8 billion in fiscal year 2002 and has declined
to $4.2 billion in fiscal year 2006. For the foreseeable future,
Amtrak's annual debt service will approach $300 million, eating into
the amount of funds potentially available for critical capital
investments.
Revenue and Ridership.--Passenger revenues increased to a peak
level of $1.426 billion in fiscal year 2006, primarily as a result of
Amtrak's systemwide general fare increases and revenue management of
the NEC Regional and Acela Express services (Amtrak's premier service).
Despite the fare increases, ridership increased to 24.3 million in
fiscal year 2006. For the first 3 months of fiscal year 2007, passenger
revenues were $36 million higher than the same period in fiscal year
2006, mainly due to fare increases. Ridership growth during this period
rose 3.9 percent.
On-Time Performance.--Systemwide, on-time performance has been
declining steadily since fiscal year 2002, from 77 percent to 68
percent in fiscal year 2006. While Amtrak's Acela Express service
achieved on-time performance of nearly 85 percent, long-distance trains
averaged 30 percent last year. The poorest performing train, the Coast
Starlight had an on-time performance of only 3.9 percent. Systemwide,
on-time performance in the first quarter of fiscal year 2007 increased
to 69.1 percent, compared to 65.3 percent for the first quarter of
fiscal year 2006.
THE APPROPRIATIONS PROCESS CAN PROVIDE NEEDED FISCAL DISCIPLINE OVER
AMTRAK'S OPERATING LOSSES WHILE AMTRAK CONTINUES TO ADDRESS CRITICAL
CAPITAL NEEDS
The delivery of intercity passenger rail service needs to be
fundamentally restructured through a reauthorization. However, as we
have seen in the past year, meaningful, but incremental, operational
reforms are still possible in the absence of a reauthorization. The
process established by the Appropriations Committee in fiscal year
2006, which specifically directed Amtrak to achieve savings through
operating efficiencies, achieved $61 million in savings in the first
year. This process is not a substitute for reauthorization, but it is
of considerable value nonetheless, and we strongly encourage Congress
to continue it in fiscal year 2008. As we stated in our March 16, 2006
testimony, a critical component is funding Amtrak at a level that
maintains the impetus for reform. This would require that the operating
subsidy be appropriated separately from the capital and debt service
appropriations.
Our recommendation of an operating grant of $465 million in fiscal
year 2008 reflects the need to keep the process of continual
improvement at Amtrak moving forward. It also takes into consideration
Amtrak's better-than-expected fiscal year 2006 headcount, lower fiscal
year 2006 expenses, and our concerns regarding the methodology Amtrak
uses in developing its budget estimates, which we previously reported
on. These factors led us to conclude in our January 2007 Quarterly
Report on Amtrak's Savings from Operational Reforms that Amtrak needed
a fiscal year 2007 operating subsidy of $470 million. (This recommended
fiscal year 2007 operating subsidy was an increase of $37 million above
Amtrak's actual cash operating loss in fiscal year 2006 of $433
million.) Our lower starting point for fiscal year 2007, recent
increases in revenue, and lower personnel costs lead us to our
recommendation of a $465 million fiscal year 2008 operating subsidy.
A significant unknown at this point is whether there will be labor
settlements this year and, if they occur, what the associated costs and
possible work rule changes may be. Agreement labor costs, including
benefits, account for more than half of Amtrak's current cost
structure. The net effect of a final settlement would need to be
reflected in our recommended fiscal year 2008 operating subsidy
recommendation.
Amtrak estimates a backlog of approximately $5 billion in capital
projects. Our recommendation to provide an increase in fiscal year 2008
for capital to $600 million reflects a need to address this backlog to
continue progress towards achieving a state-of-good repair balanced
with practical considerations regarding how many additional capital
projects Amtrak can take on in 1 year.
INCREASED INVESTMENT IN INTERCITY PASSENGER RAIL MUST GO HAND-IN-HAND
WITH IMPROVED OPERATING EFFICIENCIES
Amtrak achieved $61.3 million in savings from operational reforms
in fiscal year 2006, exceeding its original savings estimate by $37.7
million or more than 60 percent. Well over half these savings came from
reforms that increased revenues, not reduced costs. Amtrak saved $14
million from food and beverage service reforms, $7.6 million from
improved train operations, $5.6 million from reduced corporate
overhead, $5.2 million from enhanced revenue generated on long-distance
trains, and $28.9 million from revenue enhancements and operating
efficiencies on the NEC. This is a good start, but, in part, reflects
reforms that were easier to implement.
Amtrak has also taken steps to improve its oversight and management
of reform initiatives. This includes developing a standardized project
management approach in an effort to provide a more reliable measurement
of cost savings, better internal oversight, and enhanced tracking and
reporting capabilities. In addition, Amtrak is working to develop the
appropriate links between its planning and financial systems for more
reliable estimating and reporting of cost savings and better
integration of these savings into the budget process.
In fiscal year 2007 and beyond, Amtrak plans to implement
operational reforms in eight areas: (1) improving service quality on
long-distance trains and reducing the cost of providing food and
beverage service; (2) improving the efficiency of Amtrak's major ticket
sales, distribution channels, and related pricing enhancements; (3)
improving the reliability and efficiency of Amtrak's Mechanical
Department and materials management; (4) increasing business
efficiencies through the development of improved Management Information
Systems and the reduction of overhead costs; (5) improving the cost-
effectiveness of train operations; (6) network restructuring, corridor
development, and improved fleet and infrastructure utilization; (7)
improved cost recovery from States for corridor services and from
commuters on the NEC; and (8) reducing unit costs and increasing job
flexibility by negotiating new labor agreements that will eliminate
certain work rule and outsourcing restrictions.
Amtrak estimates that these initiatives will save at least $320
million in fiscal year 2012. Almost three-quarters of these savings are
expected to come from three initiatives: food and beverage reform and
service quality improvements, mechanical service efficiencies, and
network restructuring and asset utilization improvement.
There is considerable uncertainty as to whether these savings will
be achieved. First, the savings estimates that do exist are preliminary
and the proposals lack detailed annual program plans. Projected fiscal
year 2012 savings have not yet been developed for the State payments
and labor reform initiatives.
Second, the lack of detail makes it impossible for us to assess the
accuracy of these cost estimates. As we have seen recently with the
sleeper car initiative, once substance is added to the proposal, the
savings can evaporate. This proposal was originally targeted to save
almost $20 million in fiscal year 2007. However, it is currently on
hold as Amtrak reevaluates whether the costs saved by removing some
sleeper cars outweighs the associated foregone revenue. It is unlikely
that any savings will be derived from this reform in fiscal year 2007,
if any savings are derived from it at all.
Third, reliance on revenue enhancements to achieve savings raises
concerns regarding their reliability over the long run. Several
initiatives are aimed to increase ridership and ticket revenues,
including service quality improvement, on-time performance, enhanced
long-distance service, and market-based pricing initiatives. While we
believe Amtrak should pursue initiatives to increase revenues, the
long-term sustainability is subject to factors beyond their control,
such as changing market demand, the relative cost of different travel
modes, and competition from new air service. As such, it is more
difficult for Amtrak to count on these savings in the long run.
Amtrak needs to define the reform initiatives it plans to implement
in fiscal year 2008 to achieve its stated goal of $82 million in
savings. In addition, it needs to settle on which initiatives it is
willing to commit to over the long run, develop detailed implementation
plans for those initiatives, and incorporate them into its upcoming
multi-year strategic plan.
CRITICAL DECISIONS ARE NEEDED BEFORE IMPLEMENTING A STATE CAPITAL GRANT
PROGRAM
Amtrak's vision for the future is based on passenger rail growth
through State-led corridor service development, supported by a Federal
program of State capital matching grants. We have long believed that
corridor service, that is, routes of between 100 and 500 miles,
represent the greatest potential for ridership growth. An obstacle to
realizing this potential has been the significant capital investment
needed to improve the freight-owned infrastructure to accommodate this
expanded service. The administration's proposed $100 million State
capital matching grant program would be an important start to new
corridor development. A robust program that would support a reasonable
level of new service in the long run could ultimately require this
program to be funded at annual levels of $1.3 billion to $1.6 billion.
Several critical issues need to be addressed before this program is
implemented. First, the purpose of this new Federal investment must be
to leverage an increase in total investment in rail service and
infrastructure. There is little point to this new program if it simply
results in supplanting existing State investments.
Second, this program is premised on States assuming funding
responsibility for any new service that does not cover its costs. If a
significant Federal capital investment is going to be made to initiate
a new service, consideration must be given to a State's commitment and
capacity to support the operation of this service over the long run.
Third, we believe an 80/20 matching rate, instead of the
administration's proposed 50/50 matching rate, would provide an
incentive for a State to take an ``ownership'' role in developing rail
corridors on a more comparable basis with other transportation modes
(historically, highways have used an 80/20 match). A higher match rate
for rail infrastructure would require a State to invest more of its own
money to obtain the same amount of Federal funds in return. As such,
this may cause States to favor highways over rail to maximize the
``return'' on their State investments.
REAUTHORIZATION IS A BETTER COURSE FOR REFORMING INTERCITY PASSENGER
RAIL SERVICE
Incremental operating savings over the next 5 or 6 years will not
be sufficient to fund the significant increases in capital investment
required to return the system to a state-of-good-repair and promote
corridor development. This mismatch of funding sources and needs
requires a long-term solution that can be achieved only by changing the
model for intercity passenger rail.
To create a new model for intercity passenger rail, a comprehensive
reauthorization that provides new direction and adequate funding is
needed. The problem with the current model extends beyond funding--
there are inadequate incentives for Amtrak to provide cost-effective
service; state-of-good-repair needs are not being adequately addressed;
and States have insufficient leverage in determining service delivery
options, in part because Amtrak receives Federal rail funds, not the
States.
Reauthorization should establish meaningful reforms that ensure
greater cost-effectiveness, responsiveness, and reliability in the
delivery of passenger rail transportation. Three central themes will
drive successful reform:
--Improvements in Cost-Effectiveness.--Amtrak, as the sole provider
of intercity passenger rail service has few incentives, other
than the threat of budget cuts or elimination, for cost control
or delivery of services in a cost-effective way. Amtrak has not
achieved significant costs savings since its last
reauthorization.
--States Need a Larger Voice in Determining Service Requirements.--
The current model for providing intercity passenger service
does not put States in a position to decide upon the best mix
of service for their needs--what cities are served, schedules
and frequency of service, and what amenities should be
provided. Those decisions are made by Amtrak, and the choices
Amtrak makes are not always the same as the ones the States
would make. Intercity passenger rail would be better served
with State-led initiatives as to where and how intercity
passenger rail service is developed. States are best able to
determine the level of passenger rail service required to meet
their strategic transportation needs and State sponsorship will
become increasingly important as they will be asked to provide
increased operating and investment support. Capital funding
decisions, as with mass transit, should ultimately reside with
the Department of Transportation, based on congressional
direction and in partnership with the States.
--Adequate and Stable Federal Funding is Essential.--None of the
corridors around the country, including the NEC, can provide
the type of mobility needed without significant capital
investment. In the NEC, this means bringing the existing
facilities to a state-of-good-repair with no match requirement.
In other corridors around the country, it means creating the
infrastructure for high-frequency services in partnership with
freight railroads and commuter authorities. A robust Federal
program of capital matching grants will be essential if these
corridors are to be developed. In addition, long-distance
services that provide connections between corridors require
recapitalization if they are to be run efficiently and are to
provide the high quality services their passengers deserve.
None of this, however, implies giving more money directly to
Amtrak, especially under the current model.
In our view, a framework for reauthorization requires the
incorporation of six core elements:
--Capital Matching Grants to States for Development of Corridor
Services.--This program would give States the ability to
improve and expand routes and service on their supported
corridor routes through a Federal capital funding program with
a reasonable state match requirement.
--Formula Grants to States for Capital and Operating Costs.--This
program would address the needs of areas served by long-
distance routes that have little corridor development
potential, while simultaneously creating incentives for States
to encourage operating efficiencies from the service operator.
Formula funds can be used for operating expenses, capital
maintenance, and/or capital improvements at the discretion of
the States and have no match requirement.
--Restoration of the Forward-Going System to a State-of-Good-
Repair.--This program would provide Federal funds, with no
match required, to address the accumulated backlog of deferred
investment and maintenance on the NEC and in fleet and
facilities outside the NEC. After a state-of-good-repair has
been achieved, capital funds with a reasonable State match
would be available for capital maintenance.
--Setting Federal and State Funding of These Programs at Adequate
Levels.--Federal funding levels, along with State contributions
have not been sufficient to subsidize operations, address
deferred capital needs, and significantly improve service along
the existing rail network.
--Resolution of the Legacy Debt Issue.--This element would give the
Secretary the authority to evaluate Amtrak's debt and to take
action in the best interest of intercity passenger rail that is
economically advantageous to the United States Government.
--Resolution of Northeast Corridor Ownership.--The NEC is of
considerable interest in reauthorization. Unlike the rest of
the passenger rail system, Amtrak owns the infrastructure
between Boston and Washington, DC. The Federal Government may
decide to take on the responsibility of restoring the NEC to a
state-of-good-repair, and its debt--if it is determined to be
in the public's interest to do so. Once the NEC is returned to
a state-of-good-repair, the States can take a larger
responsibility in directing and managing ongoing operations and
maintenance. In return for fully funding the corridor, the
Federal Government may decide to take title to Amtrak's assets.
Although Amtrak may very likely remain the operator for the
NEC, we will be in a better position to decide what is the best
use and ownership structure of the NEC assets by the end of the
reauthorization period.
This framework would require cost efficiencies as Federal funds
available to cover operating losses would decline over the 5-year
reauthorization period. Specifically, it would give States greater
responsibility for passenger rail investments with oversight of capital
investment vested in the department. Additionally, it would focus
Federal funding on stable and robust capital investment programs that
would bring the system to a state-of-good-repair, maintain it in that
condition, and provide for the development of corridors throughout the
country.
Madame Chairman, this concludes my statement. I would be happy to
answer any questions at this time.
Senator Murray. Thank you, Mr. Tornquist. We're going to
turn to Senator Spector for a short quick statement. He has to
return to another committee.
STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Thank you, Madame Chairperson.
I wanted to comment, very briefly, about my support for a
much larger allocation than the appropriation than the
administration has requested. I think we will work it through
in the Congress, as we have in prior years.
I regret that I can not stay for the hearing. The Judiciary
Committee, where I'm ranking, is conducting hearings on
immigration, and I have to be there. But, my staff will be
present and we'll examine the transcript, and submit some
questions to you gentlemen, but you have my support for a very
substantial increase above what the administration is asking
for.
Thank you very much for permitting the interjection.
Senator Murray. Thank you, Senator Specter.
Senator Murray. Mr. Wytkind.
NONDEPARTMENTAL WITNESSES
STATEMENT OF EDWARD WYTKIND, PRESIDENT, TRANSPORTATION
TRADES DEPARTMENT, AFL-CIO
Mr. Wytkind. Madame Chair, thank you for inviting
Transportation and Labor, on behalf of our 32 member unions, to
participate in today's hearing.
I think a lot has been said this morning about Amtrak and
its financial needs, but obviously the 20,000 workers--that we
represent a substantial majority of--have a vested interest in
the outcome of this debate. Amtrak workers know, better than
anyone, how difficult it is to operate and maintain the
national Amtrak network without sufficient resources. These
workers have seen and felt the effects of neglect and
underfunding for too many years. They've been forced to do more
with less, due to the Federal Government's lack of attention to
the severe financial needs of Amtrak, and the needs of the
cities and the States, who--under the administration's
proposal--would be really forced to fend for themselves.
Amtrak workers constantly read about Amtrak teetering on
the edge of financial insolvency. Not because Americans do not
want passenger rail service and Amtrak service, but because of
an administration that has refused to support funding for a
first-class national passenger railroad.
Fortunately, in the absence of administration leadership
the Congress and especially key members of this subcommittee
has stepped in to provide funding that has averted a financial
collapse, year in and year out. A collapse, I might add, that
would have occurred had the administration--over the last few
years--had its way during debates over appropriations.
It is extremely disappointing to appear before you, and
again have to comment on a Bush proposal, Bush administration
proposal that frankly we view as a shut-down budget for 2008. A
budget that leaves States, again, to fend for themselves, and a
budget that leaves an already teetering system on the edge of
probably insolvency, leaving 20,000 workers potentially out of
work.
It is also disturbing that the administration has recycled
old ideas that may sound different from past renditions, but in
the end, amount to the privatization and breakup as Amtrak as
we know it. It seems to us that the administration's learned
nothing from the British rail privatization debacle, that we
all read so much about in the late 1990s.
The fact is that our national approach to Amtrak must
change. Forcing Amtrak to limp from one financial crisis to the
next, with no long-term funding plan, is a recipe for failure.
Deferred maintenance, unmet security needs since 9/11, outdated
cars and equipment, poor training, and unfairly treated and
unfairly compensated workers, whose morale has reached an all
time low, are now the norm. And we must break this cycle.
Amtrak is a part of a vast network of publicly supported
transportation services. No mode of transport in America can
succeed without some form of public subsidy. This is the
standard world-wide. As economic powers and emerging nations--
as Senator Lautenberg alluded to, including Germany--spent
literally billions to rebuild and expand their passenger rail
systems. And yet, there are those who believe Amtrak should be
a profitable enterprise.
This is pure fantasy, no matter Wall Street financiers and
lawyers will tell you. Some believe Amtrak is better off if we
sever it into pieces, and possibly spin off the Northeast
Corridor into a separate entity controlled by private
interests. Interestingly, the advocates of this approach want
the Federal Government to back a $17.5 billion loan, permit
payback of the loan, interest-free over 50 years.
Now, I can't speak for Amtrak's CEO, or anyone of that
company, but maybe we should ask Amtrak if it could use such
favorable financing tools to build and rebuild its system and
infrastructure, before we venture into any sort of breakup
Amtrak plans.
Finally, it is no secret that labor/management relations at
Amtrak have eroded significantly. Most Amtrak workers are now
in their eighth year without a general wage increase. I believe
this is simply outrageous. Working people in this country can
not live and make the ends meet under an 8-year wage freeze,
which is what they've faced over the past decade. Amtrak's
negotiators have used one delay tactic after another, have used
the appropriations battles on Capital Hill, have used every
possible excuse to deny workers what the new CEO of Amtrak--
which we're pleased to hear--has referred to as a need for
reasonable wage increases.
The result is that Amtrak workers are rated the lowest-paid
in the industry, continue to fall further behind freight and
commuter rail workers who earn up to 20 percent more in similar
jobs. It is obviously unfair for Amtrak to continue to solve
its financial shortfalls on the backs of its employees.
Ultimately, should this trend continue, it will lead to more
and more experienced Amtrak workers leaving their jobs for
better paying, more stable opportunities with the freights and
commuters.
We are heartened by the comments of Mr. Kummant, who has
formally declared settlement of these long overdue contracts
one of the company's seven objectives. Obviously, Mr. Kummant
has inherited badly ruptured labor management relations that
didn't occur on his watch. A product of poor management
decisions by the Amtrak Board and poor decisions by previous
managements. And while Mr. Kummant's public position is a
welcome departure from past Amtrak leaders, it is time to move
beyond the rhetoric and finally resolve a bargaining stalemate
that is making it impossible for labor and management to work
together to solve problems at Amtrak, to rebuild the system and
to make it the finest transportation system in the world.
PREPARED STATEMENT
In closing, it is time for Amtrak to receive the resources
it needs, not merely enough to survive. The political games
that have repeatedly put Amtrak on the brink of collapse must
end. And the much needed long-term investment must recognize
that the cost of doing business as our national passenger
railroad includes treating, and compensating, the employees
fairly.
I appreciate the opportunity to testify and thank you for
letting us participate in today's hearing.
[The statement follows:]
Prepared Statement of Edward Wytkind
On behalf of the 32 member unions of the Transportation Trades
Department, AFL-CIO (TTD) and specifically the 10 unions that make-up
our Rail Labor Division (RLD), thank you for inviting us to testify
this morning on Amtrak's financial needs for fiscal year 2008.\1\ I
must point out that we would not be talking today about Amtrak's
financial needs for 2008 without this subcommittee--we wouldn't be
talking about it because without your work Madame Chair, and the work
and support of the other members of this subcommittee, Amtrak would be
on the brink of collapse.
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\1\ Attached is a list of TTD member unions.
---------------------------------------------------------------------------
While its proposals have taken various forms, year after year the
administration has sought to shut down Amtrak or subject the company to
reckless privatization initiatives. By offering a zero budget for
Amtrak in fiscal year 2006, the White House demonstrated its gross lack
of understanding of Amtrak's importance to our transportation system
and our economy. By attempting to dismantle Amtrak as a national system
and downsize or eliminate its long distance service, the administration
demonstrated it does not understand the importance of Amtrak to the
cities and States that are clamoring for more, not less, transportation
choices for its citizens. And by shortchanging Amtrak every fiscal
year, the administration has forced the company to defer much needed
security and safety upgrades because it simply does not have the
resources.
Fortunately, Congress--and specifically this subcommittee--has
rejected the administration's various plans and for this Americans owe
you a debt of gratitude. This subcommittee, without the benefit of an
authorization since 2002, has come forward and funded our national
passenger railroad each and every year at levels adequate to avoid the
catastrophe of bankruptcy and done so under extremely tight budget
conditions. So on behalf of the men and women we represent, and the
millions of passengers that use this vital service, I want to again
thank you for your leadership and acknowledge the hard work that you
have done on behalf of Amtrak.
For fiscal year 2008, the administration has once again submitted a
budget request, at $800 million, that is nothing more than a shut down
number. As members of this committee have already observed, this is
asking the carrier to do the impossible and should be rejected.
Furthermore, the administration has again attached destructive and
disingenuous conditions to this meager request. For example, the budget
request states that ``within 30 days of the enactment of this Act, the
Corporation shall produce a comprehensive corporate-wide competition
plan that will identify multiple opportunities for public and private
entities to perform core Corporation functions, including the operation
of trains.'' Let's be clear--the administration would expect Amtrak to
find others, including private entities, to provide the service that
Amtrak is currently charged with providing. This isn't a funding plan--
it's a path to privatization and ultimately destruction of Amtrak as we
know it.
The fact is we need to change the way we look at and fund Amtrak.
Forcing the carrier to limp from one financial crisis to the next with
no long-term funding plan is simply a recipe for failure that can no
longer be tolerated. Deferred maintenance, unmet security needs,
outdated cars and equipment and unfairly treated and compensated
employees whose morale has reached an all-time low are now the norm.
First-class rail service that needs to be customer-sensitive cannot
succeed in this environment. And we would submit that a portion of
Amtrak's security needs should be borne by the Department of Homeland
Security. Americans expect leaders of government responsible for our
homeland security to ensure that our passenger rail system receives the
Federal resources it needs to address security threats and
vulnerabilities. A cash-starved Amtrak cannot meet these important
homeland security objectives without adequate Federal assistance.
Labor-management relations at Amtrak have eroded significantly.
Most of Amtrak's employees are now entering their eighth year without a
general wage increase and have seen their employer, especially its
Board of Directors, turn on them repeatedly. Meanwhile, because of the
processes under the Railway Labor Act (RLA), collective bargaining
agreements do not expire but become amendable at a certain date. In
other words, if no new agreement is entered into by labor and
management, the current contract remains in place interminably. That is
exactly what has happened at Amtrak and, frankly, the company's
negotiators have stonewalled and refused to engage in any meaningful
negotiations. The result is that Amtrak workers, already the lowest
paid in the industry, continue to fall further behind their
counterparts in the freight and commuter railroads who make up to 20
percent more in comparable jobs.\2\ Members of the committee, I am
concerned that if this trend continues we will see more and more Amtrak
employees leave their positions for more attractive jobs with the
freight and commuter carriers.
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\2\ In 2003, the rail unions released a study on Amtrak wage data
prepared by expert labor economist Thomas Roth. It definitively showed
that labor costs at Amtrak, including wages and benefits, have remained
constant over 21 years and have actually declined in real dollars;
wages have also been well below the prevailing rates of those working
in the freight and commuter rail industry.
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I am heartened by the public comments of the new Amtrak President
and CEO who has formally declared (in Amtrak's budget submission to
Congress) that the settlement of collective bargaining agreements is
one of his seven priorities for the coming year. Hopefully, Mr. Kummant
will repair the badly ruptured labor-management relations he inherited
last year when he accepted the CEO position. While Mr. Kummant's public
position is a welcome departure from past Amtrak management teams, it
is time to move beyond the rhetoric and finally resolve the bargaining
stalemate that is making it nearly impossible for labor and management
to work together towards making Amtrak the world's finest passenger
rail system. We hope this committee will insist that new contracts get
settled and that Amtrak stop this cycle of securing Federal funding but
refusing to provide its workforce with--as Mr. Kummant wrote--
``reasonable wage increases.''
There have also been attempts over the years to contract-out jobs
at Amtrak to the lowest-bidder with little regard for the impact such a
move would have on delivery of vital services. There are also safety
and security questions raised when on-board positions and maintenance
posts are targeted by the drive to outsource. And history is replete
with examples of badly botched contracting out plans that paint a sad
picture of incompetence, mismanagement and shabby service. In last
year's committee passed bill, Senators Murray and Byrd inserted
language that would have prevented Amtrak from using Federal money to
outsource work overseas. We supported this language but more broadly
would urge the committee to monitor closely any attempts by Amtrak to
pursue reckless outsourcing initiatives that jeopardize service,
security, safety and jobs.
Of course, there are those that still believe Amtrak should somehow
``turn a profit'' or only offer service that is ``commercially
responsible.'' Others believe private companies should be permitted to
cherry-pick the most lucrative parts of Amtrak's national system such
as its Northeast Corridor, jettison the rest and leave the States to
fend for themselves. Great Britain tried this approach and failed
miserably. We reject these propositions and fortunately, so do a
substantial majority in Congress.
As public transportation privatization scholar Elliot Sclar wrote:
Proposals to privatize Amtrak rest on hopes that its deficits can
be eliminated. But privatization will not cut the operating deficit
unless it shrinks passenger rail service. And far from yielding more
efficient operation, privatization will make Amtrak more cumbersome.
That is the primary lesson of Great Britain's recent experience with
privatization and reorganization.\3\
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\3\ Amtrak Privatization: The Route to Failure. Elliot D. Sclar.
2003. Economic Policy Institute.
---------------------------------------------------------------------------
Amtrak is part of our vast network of publicly supported
transportation services. No mode of transport in America can succeed
without some form of public subsidy. This is the standard worldwide.
Economic powers and emerging nations around the globe spend billions on
passenger rail because they know that a strong economy is dependent on
a strong transportation system and infrastructure. There is no
substitute for a transportation system that can move our people and
goods safely and efficiently.
Amtrak should be efficient, it should recover as much as possible
from the fare-box (which it does), and it should offer the best service
at the most reasonable price. But in the end, Amtrak will always need
substantial public support--as does our aviation and air traffic
control system, our mass transit and commuter rail systems, our ports
and our highways, and America's entire public infrastructure.
It is time for Amtrak to receive the resources it needs to succeed.
And that investment must recognize that the cost of doing business as
America's national passenger railroad includes paying fair wages to
Amtrak's 20,000 workers.
Thank you for the opportunity to testify this morning. TTD and our
members unions look forward to working with you throughout the fiscal
year 2008 appropriations process. I would be happy to answer any
questions the committee may have.
ATTACHMENT--TTD MEMBER UNIONS
The following labor organizations are members of and represented by
the TTD:
Air Line Pilots Association (ALPA); Amalgamated Transit Union
(ATU); American Federation of State, County and Municipal Employees
(AFSCME); American Federation of Teachers (AFT); Association of Flight
Attendants-CWA (AFA-CWA); American Train Dispatchers Association
(ATDA); Brotherhood of Railroad Signalmen (BRS); Communications Workers
of America (CWA); International Association of Fire Fighters (IAFF);
International Association of Machinists and Aerospace Workers (IAM);
International Brotherhood of Boilermakers, Blacksmiths, Forgers and
Helpers (IBB); International Brotherhood of Electrical Workers (IBEW);
International Federation of Professional and Technical Engineers
(IFPTE); International Longshoremen's Association (ILA); International
Longshore and Warehouse Union (ILWU); International Organization of
Masters, Mates & Pilots, ILA (MM&P); International Union of Operating
Engineers (IUOE); Laborers' International Union of North America
(LIUNA); Marine Engineers' Beneficial Association (MEBA); National Air
Traffic Controllers Association (NATCA); National Association of Letter
Carriers (NALC); National Conference of Firemen and Oilers, SEIU (NCFO,
SEIU); National Federation of Public and Private Employees (NFOPAPE);
Office and Professional Employees International Union (OPEIU);
Professional Airways Systems Specialists (PASS); Sailors' Union of the
Pacific (SUP); Sheet Metal Workers International Association (SMWIA);
Transportation-Communications International Union (TCU); Transport
Workers Union of America (TWU); United Mine Workers of America (UMWA);
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union (USW); United
Transportation Union (UTU).
Senator Murray. Thank you.
Mr. Serlin.
STATEMENT OF ROBERT SERLIN, PRESIDENT, RAIL
INFRASTRUCTURE MANAGEMENT, LLC
Mr. Serlin. Thank you.
Madame Chairman, Ranking Member Bond, distinguished
committee members. Thank you for inviting me to testify.
Recently the IMO plan, the Infrastructure Management
Organization Plan, received a wonderful criticism. I was told
the plan sounds too good to be true. I'm here today to tell you
the plan is good, and that it is true. I'm also here to free up
for you, and your committee, more than $1 billion, this year,
and for each of the next 50 years.
Instead of Amtrak requiring appropriations for its own
infrastructure, the private sector is willing to fund it.
Bridges and tunnels will be constructed, tracks will be laid,
14 new stations and parking will be built.
Under the IMO Plan, Amtrak's owned infrastructures will be
spun off into a federally owned company. The right to manage
that company for a 50-year period will be granted to a private
entity through an open, transparent, public solicitation, run
by the Surface Transportation Board.
The IMO Plan is a win, win, win solution. The Federal
Government, taxpayers, Amtrak, the States, labor, and--most
importantly--the traveling public, will all come out ahead.
Your subcommittee and the taxpayers will come out ahead, being
relieved of the obligations to fund Amtrak's own
infrastructure. And Amtrak's required ongoing subsidy should
only be around $500 million.
Amtrak comes out ahead. Amtrak is a minority user of its
own corridor, yet it is funding all of the corridor's
infrastructure costs. This allows other users to pay only the
avoidable costs. Under the IMO Plan, Amtrak would have no
infrastructure cost and would simply pay, as it already does on
98 percent of its route miles, a track usage fee. By
implementing the IMO Plan, Amtrak can focus on providing rail
passengers transportation services.
The Northeast Corridor States come out ahead. For the first
time ever, infrastructure investment is guaranteed at a minimum
level of $600 million per year, or more than 2.5 times what is
currently being invested. And this entire amount from the $17.5
billion RRIF loan--the repayment of which is fully secured--
therefore, to the Federal Government, it's a risk-free
undertaking.
The Northeast Corridor commuter carriers are protected,
because all preexisting contracts and agreements are
transferred to--and must be honored by--the IMO. Additionally,
as in the Lautenberg-Lott bill, the Northeast Corridor States
will gain a stronger voice and role through the reconstituted
Northeast Corridor Coordination Board and Northeast Corridor
Safety Committee.
The non-Northeast Corridor States come out ahead, because
Amtrak's Northeast Corridor infrastructure costs will no longer
show up in the financial accounts of trains going through their
States. This makes the operating costs of the Empire Builder--
serving Senator Murray's Washington or Kansas City Mule going
through Senator Bond's Missouri--more transparent, because it
will no longer reflect the Northeast Corridor-infrastructure
incurred costs.
Labor comes out ahead. Under the IMO Plan, the IMO is
required to offer employment to all Amtrak employees performing
infrastructure work. The IMO is also required to honor existing
collective bargaining agreements and rights, and it is
obligated to fund the back pay requirement for all Amtrak
employees. If RIM, my company, is awarded the right to be the
IMO, we intend to immediately negotiate higher rates of pay for
those employees agreeing to work with us.
As Senator Murray said, we can not pay significantly less
than the regional and commuter carriers, and still retain the
quality workforce we require. We will also offer employees
signing bonuses and back pay effective to the year 2000. This
translates into a payment ranging from $10,000 to $25,000 per
employee. In addition, RIM will contribute sufficient monies to
a trust fund to settle Amtrak's full back pay obligation to
those employees remaining with Amtrak. RIM believes that in the
long run, paying more will cost less.
And finally, the traveling public comes out ahead. Under
the IMO plan, train riders will enjoy more frequent service,
increased travel options, new city pairs, and very likely lower
prices, which is exactly the vision Senator Lautenberg
expressed yesterday at his hearing.
Reliability and security redundancy will be increased,
while trip times will be reduced, as the IMO addresses deferred
maintenance, and makes major new capital investments.
Washington-New York trip times will be reduced from roughly 3
hours to roughly 2 hours as Acela trains finally achieve their
150-mile-per-hour top speeds.
Senator Murray. Mr. Serlin, if you can summarize quickly
that would be great.
PREPARED STATEMENT
Mr. Serlin. Sure.
Ultimately, the IMO Plan is about growth. This means
providing an infrastructure base that allows more reliable
service at higher speeds and lower prices. We are convinced
this plan will work. We're willing to bet our own money on it.
The business model is simple. The more riders, equal more
trains, equal success for the IMO, and this is what attracts
investors, and what will attract Wall Street.
[The statement follows:]
Prepared Statement of Robert Serlin
Madame Chairman, Ranking Member Bond, and distinguished committee
members, my name is Robert Serlin. I have, for over 20 years, developed
business solutions to revitalize capital-intensive transportation and
basic commodity companies. I am President of RIM Services, LLC.
Thank you for inviting me to comment on Amtrak's financial
condition, efforts Amtrak has made to improve its financial condition,
and Amtrak funding options. I will limit my comments to--
--exploring a new Amtrak funding option that can revitalize Amtrak's
owned rail properties in the Northeast and Midwest;
--eliminating much of Amtrak's private-sector debt; and
--giving this subcommittee a means to reallocate limited
transportation budget dollars to other priorities, including
enhanced rail passenger service.
In 1997, JP Morgan--currently the third largest bank in the United
States--invited me to assemble a group of experienced rail industry
professionals and companies to develop a plan to address Amtrak's
recurrent funding problem. Ultimately, using techniques from existing
legislation and Federal programs, a method to inject significant non-
appropriated funds into Amtrak and its owned infrastructure was
identified. The solution was embodied in the Infrastructure Management
Organization (``IMO'') Plan.
The IMO Plan, developed as a direct result of numerous meetings
with stakeholders interested in better intercity rail service--
--preserves Amtrak as our country's single national passenger rail
carrier;
--keeps all of Amtrak's assets under Federal ownership and oversight;
--frees monies to this subcommittee to appropriate as the Federal
share under Lautenberg-Lott; and, most importantly,
--provides a platform to grow train services and rail industry
employment.
BACKGROUND
Amtrak is active in two different businesses: furnishing rail
transportation services, and owning and operating rail infrastructure.
--The rail transportation services business is a variable cost
business. New train services can be added and existing train
services dropped or modified on short notice with few drastic
or unforeseeable financial consequences.
--The rail infrastructure business, in contrast, is a fixed cost
business. Infrastructure projects take years, sometimes
decades, to implement. During the implementation period, there
is very little to show other than large front-loaded outlays.
Furthermore, once completed, those formerly new infrastructures
must be repaired, maintained and upgraded--invisible tasks, for
which the public has little appreciation, and consequently, for
which it has proven not possible to appropriate funds.
Amtrak's owned rail infrastructure is the overwhelming problem.
Though it has been recognized for decades as the part of Amtrak that
singularly requires the most funds, this is a truth no one dares to
speak. Amtrak cannot live without using its owned infrastructure, but
it also cannot afford to keep it.
While Amtrak operates passenger trains over roughly 23,000 route-
miles, it owns and is responsible for only about 2 percent or 600
route-miles (about 500 route-miles in the Northeast and about 100
route-miles primarily in Michigan).
Former Amtrak President David Gunn stated in a Railway Age article
that it is a myth that Amtrak's long-distance trains are the primary
source of Amtrak's losses. ``Out of our current year Federal subsidy of
$1.05 billion, only $300 million will go to covering the operating loss
of long-distance trains.'' \1\ Kenneth Mead, former Inspector General,
U.S. Department of Transportation, found that eliminating long distance
trains would only reduce operating losses by $300 million.\2\ In 2003,
Amtrak lost approximately $1.3 billion.\3\ Consequently, losses of
about $1 billion must be attributable primarily to Amtrak's owned
infrastructure.
---------------------------------------------------------------------------
\1\ David Gunn, Separating Fact from Fiction, Railway Age (May
2003).
\2\ Hearing Before the Subcomm. on Railroads, Transp., H. Comm. on
Trans. And Infrastructure, 109th Cong., 1st Sess., Dep't of Transp.
Doc. No. CC-2005-070, at 8 (2005) (statement of Kenneth M. Mead,
Inspector General, Department of Transportation) [hereinafter IG
Testimony].
\3\ See Nat'l R.R. Passenger Corp., 2003 Consolidated Financial
Statement, Consolidated Statement Of Operations (2004).
---------------------------------------------------------------------------
A previous Amtrak President, W. Graham Claytor, Jr., once said
Amtrak would be unfundable were the country to recognize that the great
majority of Amtrak's annual appropriations went into Amtrak-owned rail
infrastructure in just a few Northeastern States. On a route-mile
basis, two States alone account for over 50 percent of Amtrak's owned
Northeast Corridor infrastructure.
Even without political considerations, it is inherently harder to
secure public support for infrastructure projects than for
transportation services. Infrastructure investment benefits are not
immediately, publicly apparent and can easily be delayed with few
immediately visible consequences. Yet, infrastructures must be funded.
Without continuous funding, infrastructure will deteriorate to the
point of being unusable.
Since 1997, the Department of Transportation's Inspector General,
the Government Accountability Office and, most recently, numerous
members of Congress have reached the conclusion: the status quo is not
sustainable and change is necessary.
Ken Mead, the former Department of Transportation Inspector General
put it most succinctly on September 21, 2005 when, before the House
Committee on Transportation and Infrastructure, Railroads Subcommittee
he stated: ``We have testified numerous times since Amtrak's
authorization expired in 2002 that the current model is broken. Amtrak
continues to incur unsustainably large operating losses, provide poor
on-time performance, and bear increasing levels of deferred
infrastructure and fleet investment on its system.'' \4\ Infrastructure
degradation reduces service reliability, and jeopardizes all of Amtrak
and its national rail system.
---------------------------------------------------------------------------
\4\ IG Testimony at 1.
---------------------------------------------------------------------------
The IMO Plan offers a solution both to Amtrak's short-term funding
requirements and the two-pronged challenge of Amtrak's infrastructure
needs--injecting new current maintenance funds annually into Amtrak's
owned Midwest and Northeast infrastructures, and addressing Amtrak's
looming $9 billion deferred maintenance liability.
Under the IMO Plan, the IMO--
--makes a one-time payment of about $2.0 billion to Amtrak;
--assumes from Amtrak almost $750 million in infrastructure-secured
debt;
--funds the back pay for Amtrak employees (estimated by Amtrak to be
about $200 million); and
--invests not less than $600 million annually in Amtrak's owned
Midwest and Northeast infrastructures.
THE IMO PLAN
The IMO Plan separates Amtrak into two federally-owned entities.
The first Federal entity, Amtrak, continues its primary
responsibility as a transportation service provider. It retains the
reservations system, locomotives, passenger cars, maintenance of
equipment workshops, and operating rights on the Nation's rail network.
It continues to operate all of its current intercity, Northeast
Corridor and contract commuter trains.
By separating Amtrak's train operating functions from its owned
infrastructure, William Crosbie, Amtrak's Senior Vice President of
Operations estimated that the current 46-State network can be sustained
on an annual appropriation of under $500 million \5\--significantly
less than the $1.5 billion that Amtrak is requesting for fiscal year
2008.
---------------------------------------------------------------------------
\5\ William Crosbie, Senior Vice President of Operations, National
Rail Passenger Corporation, Remarks at Railway Age Conference (October
17, 2006).
---------------------------------------------------------------------------
The second Federal entity owns the 600 route-miles of Amtrak
infrastructure, passenger stations on that infrastructure, and overhead
wires that power the trains. The Surface Transportation Board (STB), in
a process similar to its existing ``directed service'' authority, would
conduct a public solicitation and select a private sector IMO from
among the qualified applicants.
The IMO, for a period of 50 years, is responsible for managing and
funding all rail infrastructure operations and improvements. This time
period is necessary due to the very high level of front-end loaded
investments--it is projected that the IMO will require about 15 years
to generate enough revenue to break even. Each improvement becomes the
property of the Federal Government as it is made. At the end of the 50
years, the Federal Government can either re-bid the management
concession or operate the infrastructure itself. At any time during the
concession, the designation of the IMO is revocable for cause.
FUNDING STRUCTURE
The IMO is financed using the existing Railroad Rehabilitation
Infrastructure Financing (``RRIF'') loan program. Under the Safe,
Accountable, Flexible, and Efficient Transportation Equity Act of 2005
(SAFETEA-LU), RRIF program authorization was increased to $35 billion.
The IMO would be allowed to borrow up to $17.5 billion under the
RRIF program, after having given the United States Treasury a repayment
guarantee issued by an investment-grade third party in the amount of
the full $17.5 billion.
As interest on the loan, the IMO is required to invest a minimum
average of $600 million annually in the Federal Government's owned
infrastructure. This ``payment-in-kind'' has been successfully used in
other Federal Government initiatives in defense and power generation.
On average, this statutory minimum investment exceeds by more than 200
percent the amount Amtrak currently spends annually on its owned
infrastructure.\6\ If my company--RIM--is designated the IMO by the
STB, we foresee laying out in excess of $1 billion annually.
---------------------------------------------------------------------------
\6\ Right-of-way and Other Properties and Leasehold Improvements
increased just $254.4 million in 2005. See Nat'L R.R. Passenger Corp.,
2004-2005 Consolidated Financial Statements, Consolidated Balance
Sheets (2006).
---------------------------------------------------------------------------
The IMO Plan does more than just shift the financial burden of
Amtrak's owned infrastructure from Congress to the private sector; it
provides natural incentives to increase capacity, services, reliability
and safety. It is the IMO's responding to these incentives that
translate into an increase in the number of passengers carried by all
transportation service providers and, in turn, into new revenues for
the IMO. Revenue increases come from new train services that pay track-
mileage fees to the IMO and from which the IMO pays for infrastructure
improvements.
STAKEHOLDER BENEFITS
The IMO Plan creates a platform upon which new and exciting rail
services can be launched by Amtrak, existing commuter operators, or new
transportation service providers, while the IMO, which is prohibited
from operating trains, focuses on infrastructure management and
improvements. The result will be more service options with greater
access to both the Northeastern and Midwestern rail networks, allowing
more passengers to enjoy the efficiencies and benefits of rail travel.
The Plan forces the IMO to innovate by developing new opportunities
for transportation service providers. To meet these goals, the IMO must
be a truly neutral party. This is achieved by not permitting the IMO to
operate its own trains. The IMO may not compete with its customers--the
users of the infrastructure it manages. The only way the IMO should
succeed is if its customers succeed.
This vision of rail passenger service can be reached. The IMO Plan
is the route:
--High-speed train trip-times between New York and Washington will be
reduced from close to 3 hours to roughly 2 hours through
capital expenditures that eliminate choke points and provide
infrastructure redundancy.
--Commuter carriers will be able to integrate their services by
operating new run-through trains, as the IMO adds
infrastructure capacity, instead of being confined to historic
geographic areas. For example, New Jersey Transit and SEPTA
will each be able to save millions of dollars and be able to
offer faster and more attractive travel options by instituting
a pooled New York-Philadelphia service, instead of forcing all
passengers to change trains at Trenton, NJ.
--New city pair combinations will be encouraged to permit rail
passenger traffic to expand meaningfully. For example,
Princeton Junction, NJ has sufficient population and business
activity to support multiple direct trains daily to Baltimore
and Washington. New riders will be attracted by convenient and
faster direct trains offering expanded travel options.
--Building 14 new stations in the first 20 years at rail/highway
intersections will attract more travelers though more
convenient access.
--Dedicated airport express train services will help speed travelers
to airline check-in while reducing airport overcrowding.
--Redundancy of infrastructure will provide more security and
reliability.
--More employment will be created to build and maintain the enhanced
infrastructure.
--Further employment will be created to staff and operate added train
services.
--Carbon emissions will be reduced by seamlessly shifting travelers
from automobiles to electrically powered trains.
STAKEHOLDER PROTECTIONS
Addressing the needs of principal stakeholders is a key element of
the IMO Plan's win-win solution.
Federal Government
The RRIF loan principal is never at risk because it is fully
secured by an investment-grade third-party guarantee in the full amount
of the RRIF loan.
The Inspector General of the Department of Transportation is vested
with the authority to certify compliance with the terms of the
legislation. The IMO is also required to file with the Secretary of
Transportation and Congress annual reports both of its audited
financial results and its operations, thus ensuring accountability to
the public and to Congress.
To align the long-term interests of the owners of the IMO to those
of the Federal Government, ownership of the IMO is non-transferable for
the full 50-year management concession term.
Under the IMO Plan, Congress continues to maintain oversight over
both Amtrak and Amtrak's owned infrastructure, yet is relieved of the
burden of funding Amtrak's owned infrastructure since the IMO, using
non-appropriate funds, is now responsible. It frees Congress to focus
more on transportation services that constituents demand, and that
States and other governmental entities desire.
States
The States will gain a stronger voice and role in infrastructure
investment through the reconstituted Northeast Corridor Coordination
Board and the Northeast Corridor Safety Committee.
Multi-State compacts are not required and States are not obligated
to fund the maintenance of or capital expenditures in the Government's
owned infrastructure. Under the IMO Plan, State-requested projects may
be expedited either by the IMO advancing funds to a State or the
Department of Transportation providing funds to a State under a grant
program.
Amtrak
The IMO Plan improves Amtrak's financial statements by--
--transferring $2 billion to Amtrak;
--assuming from Amtrak up to $750 million in infrastructure-secured
debt; and
--relieving Amtrak of its responsibility for the roughly $1 billion
in annual losses attributable to Amtrak's owned infrastructure,
most of which are incurred in just 5 Northeastern States.
Commuter Carriers and Freight Railroads
Vested commuter carriers and freight railroads with operating
rights must also be protected. All pre-existing contracts and
agreements are transferred to and honored by the IMO, including the
commuter carriers' ``avoidable cost'' access fee structure codified in
Title 49, United States Code.\7\
---------------------------------------------------------------------------
\7\ See 49 U.S.C. 10904.
---------------------------------------------------------------------------
This furnishes Amtrak the means and allows it the time to address
the needs of its entire 46-State system, including the need to acquire
new passenger cars and locomotives.
Labor
The existing Amtrak employees are a great and irreplaceable
resource. Labor must be treated fairly and equitably in order to assure
the success of the IMO. Wages must be increased to be competitive in
the region.
Under the IMO Plan, the IMO is required to offer employment in
seniority order to all Amtrak employees performing infrastructure work
to be performed by the IMO. The IMO is also required to honor existing
collective bargaining agreements. If RIM is awarded the right to be the
IMO, it intends to negotiate Northeast-competitive rates of pay and
working conditions for those employees to whom it offers employment.
Many of Amtrak's employees have been working for over 7 years
without contract base rate increases. As a result, there is pressure on
many of these highly qualified workers to join commuter carriers or
retire early. This potential loss of experience would be highly
detrimental to the development of improved passenger services.
To assure the future integrity of both Amtrak and its owned
infrastructure, I personally believe that a fair wage settlement,
including full back pay for the IMO's employees must be implemented
quickly. To encourage Amtrak employees to accept employment with RIM,
RIM will also offer signing bonuses. This translates into payments
(signing bonuses and back pay) in amounts ranging from $10,000 to
$25,000 per employee. In addition, RIM is prepared to contribute
sufficient monies to a trust fund to settle Amtrak's full back pay
obligation to those employees remaining with Amtrak.
If RIM is awarded the right to be the IMO, with regard to the IMO's
employees, it intends to--
--resolve outstanding proposed contract changes by offering rate
increases to make wages competitive with the commuter carriers
in the area and by paying full back wages from January 1, 2000;
--withdraw Amtrak's proposed concessionary contract changes,
including Amtrak's proposal that employees pay a portion of
their health and welfare premiums; and
--negotiate for working conditions that provide quality of life
improvements without adversely effecting productivity.
In a more general vein, the IMO Plan--
--furnishes incentives to resolve the outstanding section 6 contract
notices;
--preserves collective bargaining agreements and rights, including
labor representation for IMO employees;
--makes the IMO subject to the Railway Labor Act, the Railroad
Retirement and Unemployment Insurance Acts, FELA, and all rail
safety legislation and FRA regulations; and
--protects employees affected by the transfer.
The Traveling Public
For the traveling public, reliability and security redundancy will
increase, while trip-times will be reduced by the IMO's addressing
deferred maintenance through aggressive engineering and construction,
and major new capital investments. Train riders will also enjoy more
frequent service, increased travel options, new city pairs, and--very
likely--lower prices.
The traveling public is looking for transportation options. RIM
believes that rail can offer such options, but it requires a new
vision. In 1974, at the high of the first energy crisis, Amtrak
reported carrying approximately 10.9 million Northeast Corridor riders,
compared to approximately 11 million riders in 2005. Despite the fact
that the number of I-95 automobile trips more than doubled over the
same period of time, \8\ Amtrak's ridership remained flat. The
following graph shows this long-term divergence.
---------------------------------------------------------------------------
\8\ Amtrak--1972: ICC freight railroad filings; 1973: Nat'l R.R.
Passenger Corp., 1973 Consolidated Financial Statement (1974)
extrapolated; 1974, 1976-1978, 1980-1986: former Amtrak personnel;
1975, 1979, 1986-2000: Nat'l R.R. Passenger Corp., 1975, 1979, 1986-
2000 Consolidated Financial Statements (1976, 1980, 1987-2001); 2001,
2002: extrapolated; 2003-2005: 2003-2005 Consolidated Financial
Statements (2004-2006). Highway--Maryland Department of Transportation,
State Highway Administration.
RIM believes that Amtrak, unburdened by infrastructure ownership,
can fulfill the new vision.
THE STATUS QUO HAS FAILED--AMTRAK'S HIDDEN LIABILITY
Amtrak's owned infrastructure, particularly its Northeast Corridor,
suffers from many years of deferred maintenance and depreciated assets.
Major infrastructure components, renewed in the early 1980's, are now
approaching the end of their useful and reliable lives, and will soon
have to be replaced.
According to Kenneth Mead, former Inspector General, U.S.
Department of Transportation, ``Amtrak [had in 2002] an estimated $5
billion backlog of state-of-good-repair investments, and
underinvestment is becoming increasingly visible in its effects on
service quality and reliability.'' \9\ Due to the continued inability
of Amtrak to maintain its infrastructure and construction project
inflation over the last 5 years, RIM estimates this liability today to
be around $9 billion.
---------------------------------------------------------------------------
\9\ IG Testimony at 7.
---------------------------------------------------------------------------
If Amtrak's deferred maintenance is not addressed in a timely
manner, the integrity of the Federal Government's owned infrastructure
will be in jeopardy. Trip-times will be increased. Service will be
degraded. Safety could be compromised.
The General Accounting Office (now Government Accountability
Office) defines ``state-of-good-repair'' to be a condition requiring
only cyclical maintenance. The last time the Northeast Corridor was in
a state of good repair, was in 1981 at the conclusion of the Northeast
Corridor Improvement Project.\10\
---------------------------------------------------------------------------
\10\ Briefing Report to the Chairman, Subcomm. on Surface Transp.
and Merchant Marine of the S. Comm. on Commerce, Science and Transp.,
104th Cong. 1st Sess., Gen. Accounting Office Doc. No. RCED-95-151BR,
at 47 (1995).
---------------------------------------------------------------------------
If all we do today is desire to bring the corridor up to a state-
of-good-repair, we are aspiring to return it to its state in 1981. Is
that our goal in 2007, to return the corridor to its condition in 1981?
RIM's answer is: No! RIM believes that the Northeast Corridor
should move into the 21st century and is prepared to make the
investments to bring it there.
Through enactment of the IMO Plan, the repair, operations, and
improvement of Amtrak's owned infrastructure is fully funded using non-
appropriated funds.
The following graph shows the positive effects of transferring the
Federal Government's infrastructure liability to the private sector and
of reducing--by about two-thirds--Amtrak's required annual
appropriations.
APPROPRIATION CHALLENGES
The Federal Government is able to fund Amtrak's annual operating
budget. Amtrak's transportation services-related commitments (whether
capitalized or expensed) tend to be completed in less than 1 year--a
time period that corresponds to an appropriation cycle. Those outlays
are expended throughout the 46 States through which Amtrak operates.
The Federal Government has been unsuccessful at funding all of
Amtrak's capital improvements and infrastructure investments.
Infrastructure undertakings tend to be multi-year in nature and, to be
implemented efficiently and cost-effectively, require multi-year
funding commitments. They, by their very nature, do not conform to the
appropriations process. This has resulted in the massive and increasing
deferred maintenance liability shown above.
On January 16, 2007, Senators Lautenberg and Lott, joined by other
members of this subcommittee, introduced S. 294--the Passenger Rail
Investment and Improvement Act of 2007 (PRIIA). The IMO Plan is highly
complementary with PRIIA.
SOLUTION AT HAND
By increasing the RRIF loan authority in 2005, Congress expanded a
loan program that enables the private sector to fund our Nation's rail
infrastructure multi-year investments. The vehicle to achieve this is
the IMO Plan--a Plan that benefits labor, the Federal Government,
States, the commuter carriers, and Amtrak.
By passing the IMO Plan, Amtrak's infrastructure improvements and
debt repayment appropriation-requirements will be reduced by over $1
billion annually. And, that $1 billion will be available to this
subcommittee to allow Federal funds to focus on providing enhanced
passenger rail service to the United States.
The IMO Plan is a win-win opportunity for the Nation's rail
passenger stakeholders--labor, the States, rail passengers,
transportation service providers, Amtrak. It provides a solid base upon
which to build the modern rail passenger network that government
leaders and travel advocates have championed for the past 30 years.
Thank you for providing me the opportunity to testify, and I
welcome questions you might have.
Supplemental Statement
Under the Infrastructure Management Organization (``IMO'') Plan,
the Federal Government continues to own all of Amtrak and all of the
real property Amtrak owns today, including all of Amtrak's owned rail
infrastructure (``AOI''). The IMO, an entity selected by the Surface
Transportation Board from a pool of competing applicants, will upgrade
and maintain AOI on behalf of the Federal Government for a period of 50
years. During this period, neither the States nor the Federal
Government is obligated to fund the maintenance of or capital
expenditures on Amtrak's owned infrastructure. If selected, my
company--RIM--anticipates spending more than $1 billion annually on AOI
for each of the 50 years that it will be the IMO.
The IMO Plan provides a zero scoring funding mechanism to maintain
and expand Amtrak's owned infrastructure, while providing Amtrak with a
one-time payment of $2 billion of non-appropriated funds and relieving
it of almost $750 million in infrastructure-secured debt.
Under the IMO Plan, labor is protected: the mechanism is
established to settle all section 6 notices; back pay to all Amtrak
employees, including those who remain with Amtrak, is paid in full from
funds furnished by the IMO; and the IMO offers employment--in seniority
order, under existing contracts and representation--to all current
Amtrak infrastructure employees. The IMO will be subject to the Railway
Labor Act, FELA, the Railroad Unemployment Insurance Act and Railroad
Retirement. The enabling legislation will also provide for expedited
claim settlements for infrastructure employees.
The IMO Plan allows Amtrak to improve its balance sheet, so that it
can operate its entire existing 46 State national passenger rail system
on a subsidy of about $500 million annually. Amtrak receives more
money, more quickly than any other plan being discussed.
Senator Murray. Thank you very much.
AMTRAK'S OPERATING COSTS
Mr. Boardman, the Bush administration's budget that you
sent us is, again, proposing a drastic funding cut to Amtrak.
And once you set aside that $100 million that you're proposing
for State grants for our new passenger corridors, your budget
request cuts direct support for Amtrak by almost 40 percent.
In your written testimony you said, ``The request for
operating subsidies is sufficient to avoid a bankruptcy
provided Amtrak acts to cut costs by focusing on core
services.'' So, Mr. Kummant, I wanted to ask you, can your
railroad avoid bankruptcy if we accept the administration's
proposal to cut funding by 40 percent, and limit your operating
support to $300 million?
Mr. Kummant. Well, we would have to go through and
drastically reduce services overall. We certainly haven't run
scenarios on that. There are also a lot of payments that go to
employees if the work is terminated. So, in other words, legacy
costs continue for some time if, in the extreme case, for
example, if you would shut down today, in total there'd be a
whole stream of costs associated with existing contracts, as
well as honoring labor commitments. So it would be very, very
difficult.
Let me say this though, I guess I take the administration's
statement as, in a sense, a philosophical challenge or
statement for us to continue work on reduction, on continuous
improvement, and really change the culture of the organization
to be far more motivated in that direction. I take that as a
philosophical challenge, and I think that's what our newly
constituted management team is about.
The specific number is obviously very difficult to achieve,
but again on a philosophical point, I would say that we embrace
the challenge.
Senator Murray. So it's a nice talking point, but you
expect us to provide the dollars--otherwise, bankruptcy.
Mr. Kummant. Perhaps your words not mine, but I think it
would be very, very difficult to function under that specific
financial scenario.
Senator Murray. Mr. Tornquist, let me ask you. The
Inspector General's office has consistently advocated efforts
by Amtrak to reduce its operating costs. Do you see a way that
Amtrak could avoid bankruptcy if we enacted the President's
proposed budget?
Mr. Tornquist. No, we don't believe that Amtrak would
remain viable at the President's request level. We have
recommended ways that they could save money, but it seems a bit
aggressive to assume they're going to save all that money in 1
year.
Senator Murray. So, you don't see any way they can cut
their budget that dramatically?
Mr. Tornquist. I don't see how they could cut their staff
and their budget quickly enough to live within the President's
request.
Senator Murray. Mr. Boardman, I think if I heard you
correctly, you said the GAO and IG have endorsed your proposal
to cut Amtrak operating figures to $300 million--maybe I should
ask Mr. Tornquist--have you endorsed that proposal?
Mr. Tornquist. We haven't endorsed it, if I remember Mr.
Boardman's statement, he said that we had suggested ways that
Amtrak could save money and GAO might have suggested similar
ways, and we have suggested ways, but not in the amounts in the
time frame that the administration is talking.
Senator Murray. Mr. Boardman, did I hear you?
Mr. Boardman. No, I didn't say they endorsed, Madame
Chairman. What I said was that the Government Accountability
Office, the IGA, and others have recently presented options for
achieving savings.
Senator Murray. Okay, I thought I heard you say endorsed
and I wanted to find out where the GAO had endorsed that, as
well. So, you're telling me that's not what you said.
Mr. Boardman. If I used the word, it was inappropriate, I
didn't mean it.
Senator Murray. Okay, Mr. Wytkind, there is a footnote in
your testimony that states that wages at Amtrak are now well
below the prevailing rates and the freight and commuter
railroads. Mr. Kummant, do you agree with that observation?
Mr. Kummant. Yes, we have big gaps that certainly have
opened up, and many of the proposals we have on the table have
closed those gaps, but the way the current status is, that is
true.
Senator Murray. What impact do those wage differences have
on your ability to retain skilled craft people?
Mr. Kummant. Oh, it's certainly a problem, particularly in
the high skilled areas. We're very challenged with
electricians, for example, who can command good wages
elsewhere, and a number of skilled positions. So it's certainly
a core issue for us.
Senator Murray. Mr. Wytkind do you want to comment on that?
Mr. Wytkind. Yes, it's really quite astounding that we're
in the position we're in, having employees have to wait 8
years--and potentially more--to have general wage increases,
ends up creating this mass exodus environment. I can't give you
specific data today, but it's very clear that, you know,
American workers are smart. If they see better opportunities in
other employment venues, they will pursue them. So this
shortage that Mr. Kummant refers to, I believe, becomes
exacerbated over the next several months and years if we don't
resolve these issues. We have workers that are making as much
as 20 percent less than their counterparts in the commuters and
the freights. And in the event the freight collective
bargaining agreements get achieved in the coming weeks or
months, that will again further bump those workers even further
ahead of Amtrak workers. So, it's a real problem that needs to
be resolved.
Senator Murray. You talked in your testimony about getting
a contract nailed down affecting morale and other things. Do
you see any other ways in which Amtrak's Board of Directors or,
and the labor force might work together more cooperatively?
Mr. Wytkind. Well, I think it's very clear that the
employees of this company during these very difficult years
have really been at the front line of keeping this company
operating. Mr. Kummant has, you know, in various ways basically
said that, without these employees this company would have a
very difficult time succeeding. And, yeah, we could cooperate
more. We could work up here on Capitol Hill to find real sound
reforms, and maybe we could work together to adopt many of the
reform planks that you've articulated today in your opening
comments, which I wholeheartedly embrace.
I think there is a way to work on it, but we will not get
to that point if Amtrak continues to ignore the needs of its
employees. Because our employees morale is as low as it's ever
been, and more importantly, they're not going to continue to
support and work with a company that continues to turn on them.
Senator Murray. Mr. Kummant, you want to make a comment?
Mr. Kummant. I don't have that much issue really with Mr.
Wytkind's words. In fact, we spent a lot of time together, and
are on the phone a lot. I have probably, personally, along with
my VP of Labor Relations, done more personal outreach in the
last 6 months than my predecessors have in the last several
years. It's a thorny issue, it's a tough issue. One of the
first objectives is to build trust, and to build an environment
where dialogue is possible.
I do think going forward if the freight railroads do settle
here shortly that will, in a sense, clear out some of the
underbrush. It will likely set a pattern of sorts in a number
of the areas that I think may give us another basis for going
forward.
Senator Murray. Okay, thank you very much.
And Senator Bond I will turn to you.
MULTI-YEAR CAPITAL INVESTMENT PLAN AND THE NORTHEAST CORRIDOR
Senator Bond. Thank you, Madame Chair.
I have asked year after year for a detailed multi-year
capital investment plan from Amtrak, and to my knowledge we've
not seen it in Congress. I note on page 2 of your testimony and
your statement that you will send to Congress a multi-year
strategic plan on which we can base our decisions. When do you
expect to send that to us?
Mr. Kummant. First, let me say I think we could give you
very specific numbers on the Northeast Corridor over--in terms
of capital needs over the coming years--we could deliver that
to you in short order. We expect to have a broader strategic
plan relative to expenditures across the country, probably in
the April timeframe.
Senator Bond. Speaking of the Northeast Corridor, I have a
chart here that shows State payments to Amtrak for train
operations. It says that it's incomplete, but I note that
Washington contributes $11.2 million, Missouri contributes $6.6
million for our humble little operations, but when I look down
the list I see New York contributing $3.8 million, but I don't
see any numbers for Maryland, New Jersey, Connecticut,
Massachusetts--what are their contributions?
Mr. Kummant. Yes, I was just handed a chart. First, let me
make the general point that we are really working through a
process, top to bottom, to address all those issues. There are
system trains where States don't pay. There are variable
payment structures in terms of the history of the services. And
as we rotate the whole organization to face the States and
build that organization that's fundamentally an issue we need
to clarify and, in fact, create an equity across. We need to
have a very clear funding structure, almost a menu approach on
services.
So, I don't have the numbers at my fingertips to respond to
the specific question, other than that equity and clarity of
those structures is one of the key goals of one of the
executives, in fact, we recently brought in.
Senator Bond. Mr. Tornquist, have you looked into that?
Mr. Tornquist. We haven't specifically looked at it, but
Mr. Kummant is right, that there is an equity issue across
States. Some of the States don't pay for their service, some
States do, some pay operating costs, some pay capital, some pay
a combination. One of their reforms is to have a new State
pricing policy. One of the issues that we've raised is the need
to move ahead, some definition on that policy and get an
implementation plan that is accepted by the stakeholders.
Senator Bond. We look forward to seeing it. Mr. Kummant,
your discussion about the pay--and the inadequacy of pay--are
there work rule changes which could enable Amtrak to operate
safely and more efficiently, and be able to pay your skilled
employees more?
Mr. Kummant. Sure, let me be very direct. Clearly, moving
forward, the two fundamental issues on the table will be some
sort of upfront bonus payment or back pay in Mr. Wytkind's
terms, as well as workplace flexibility. We do need, in
Amtrak's view, a more flexible workforce to build the
groundwork for a 21st century operation.
I still believe that that's possible for us to jointly work
on. I think we can get there, but it's thorny, it's tough, it
clearly runs into the craft tradition, which is the cornerstone
of the union structure. But yes, we do need to reform workplace
flexibility issues, some of which date back many, many years.
Senator Bond. Mr. Wytkind, you probably have a comment on
that.
Mr. Wytkind. Well, I would say, I'm not going to comment
specifically on each craft in the railroad industry because I'm
certainly not the chief negotiator for each union. But, I've
always viewed this workplace reform issue in the context of the
Washington debate on what we do with Amtrak and its future
funding needs as a bit of a red herring. The reality is that
the employees of Amtrak over the years have gone through
numerous renditions of a reform. Many of the reforms that the
company insisted on in the 1980s and 1990s, they then came back
to the bargaining table and said, ``Oops, those didn't work
very well, we want to retrieve those.'' And I could give you
all kinds of good examples that have been submitted to the
authorizing committee, which I could send you copies of, that
explain some of the various reforms that have been tried, say
on on-board service employees.
The history is filled with attempts to deal with
``reforms,'' and at the end of the day reforming the workplace
is not going to save this company from getting 40, 50 percent
less than it needs from year in and year out, other than the
fact that this committee has saved Amtrak from those funding
crisis.
What's going to solve it is, labor and management working
together and trying to find a way to cooperate on issues that
modernize this company in a way that makes it effective and
successful. But to just deal with these workplace issues as if
they're going to solve Amtrak's problems, I think, is really
frankly not going to work and is going to be disingenuous in
terms of getting into this debate.
Senator Bond. Mr. Wytkind, I am disappointed in that
because we are going to provide more money for Amtrak, we are
demanding from Amtrak a comprehensive plan for the future. We
have heard in many instances--Mr. Kummant said that there must
be flexibility which would enable paying the workers more, and
I would hope in--your negotiating posture, I understand--but we
expect to see results because there are many areas in which we
need not only to provide more money for Amtrak, but see reforms
and see a clear vision for how it's going to work in the
future.
Thank you, Madame Chairman.
Senator Murray. Senator Lautenberg.
Senator Lautenberg. I listen with great attention to the
testimony of the witnesses, and I thank each one of you for
your participation. I don't understand, I must tell you, why it
is that we don't lay out the urgency of doing something about
this, instead of lame reviews of what didn't take place in the
past.
And I ask you, Mr. Boardman, and I quote from your
statement yesterday in front of my other committee. ``Amtrak is
an outdated monopoly that is on a flawed business model,''--I
take it Mr. Serlin would like to become the monopoly, you
didn't say that, I said it--``it does not provide an acceptable
level of service, nor has it been able to control the
finances.''
How long have you been on the board of the company?
Mr. Boardman. Three months now, sir.
Senator Lautenberg. Three months. But you've represented,
you're representing the interests and the views of the
administration, are you not?
Mr. Boardman. Yes, sir.
Senator Lautenberg. Did you fight back when they offered
this budgetary plan for 2008?
Mr. Boardman. We had discussions, they were lively
discussions----
Senator Lautenberg. No, no, no.
Mr. Boardman [continuing]. About what it is.
Senator Lautenberg. But the lively discussions, I had
those. I used to run a very large company. The company has
46,000 employees today; a company I started called ADP with two
other guys. So I know something about the corporate world.
Lively discussions had to have a termination point, just like
the railroad has. Are you satisfied with what you've presented
here today?
Mr. Boardman. We believe that it continues to provide the
incentive for Amtrak to improve, and to reduce its costs. We
believe that--when combined with the $2 billion that Amtrak has
now in terms of revenue--the probably $200 million of cash
reserves at the end of last year, that it continues to provide
some difficult decisions that would have to be made to operate
Amtrak next year.
Senator Lautenberg. I'm glad I'm not the patient and you're
my doctor telling me what my condition is, Mr. Boardman.
What amazes me is that the Secretary of Transportation
never went to a board meeting. Do you know whether Mr. Sosa has
yet taken a ride on an Amtrak train?
Mr. Boardman. You would have to ask Mr. Sosa that. I do not
know, sir.
Senator Lautenberg. Has he?
Mr. Kummant. Yes.
Senator Lautenberg. You know when, and how often?
Mr. Kummant. I can't give you the details, but he
certainly----
Senator Lautenberg. Because when he was being promoted for
membership he had never been on an Amtrak train, and I think
it's a worthwhile experience. And I submit to my friend from
Missouri that New Jersey put $1.6 billion over the last decade
in Amtrak for capital improvements. And a bill that Senator
Lott and I have proposed, would require all Northeast Corridor
States and Amtrak to revise the funding formula for those
States just as the non-Northeast Corridor States are doing. So
we're paying pretty much as we go. I'm sorry?
Senator Bond. I asked a question about how much the other
States were providing?
Senator Lautenberg. How much are we providing? We're
providing--the question is opening, we're talking about a
formula, developing a formula for these States. So that, we
know that we have to make contributions. As a matter of fact,
we do make significant contributions, because the value of the
travel that comes to the Northeast Corridor is manifested in
every part of the county, every State of the country, to the
world's financial center, and we provide the skills and the
persons to do this. And they typically use Amtrak tracks to get
from New Jersey to New York, and it's a very high level of use
that is required.
And when we look back at the experience that we had not too
many years ago, 9/11, a building in which I had an office and
saw 50,000 people come to work everyday like one city, and
Amtrak was the only thing that was able to transport people.
Aviation was shut down, the highways were jammed and I don't
understand, honestly, why it is that we argue about whether or
not this cow that has never been fed properly doesn't give
enough milk.
It just doesn't work, Mr. Boardman. And the request, I am
shocked to hear what you say about this, about the condition of
things, without acknowledging that there was total lack of
interest by the President, and the administration, in having
that board functioning in a way--because they were the ones on
the job during this period of terrible performance that you
talk about. Where was the Board of Directors as this failure,
that you call it, was taking place? I don't get it.
So you voted to approve the funding that's presented here,
in the President's budget?
Mr. Boardman. In the President's budget we--I support the
decision that was made.
Senator Lautenberg. So you don't believe this, these things
about the inevitability of bankruptcy at this funding level?
Mr. Boardman. I did not believe in bankruptcy when David
Gunn said it. I think there are decisions that have to be
made--difficult ones. And you have to make them early not to
have a bankruptcy.
But I do understand your point. And if I could just add,
for your benefit and the effort that went on, on the access
fees last year, Senator Bond, that we determined at that time--
and I was in the middle of that--that the States on the
Northeast Corridor were contributing, and in fact, were
contributing more than what was necessary.
Where Mr. Gunn again, I guess--and again I was in New York
State--said that some States had a free ride. The State he was
talking about at the time was New York State. New York State
has the system trains that Mr. Kummant's talking about. New
York should be paying between $20 and $30 million a year for
those system trains. And I think that's the frustration and
difficulty that comes from--whether it's Washington or Missouri
and others. But in the middle of that we were negotiating with
an Amtrak that could not complete our Turbo Program and we did
not agree to the kind of things they needed.
And I think that's important for this debate, that we are,
in fact, and have received the kinds of investments in the
Northeast Corridor from the States in the Northeast Corridor
that I think you're relating to.
And I thank you for that opportunity.
Senator Lautenberg. Thank you.
SEPARATION PROPOSAL
And Madame Chairman, forgive me for just a couple of
seconds more, maybe a minute or so, if it's all right.
I listen with interest to Mr. Serlin's proposal, and I'm
determined to be here when that loan is paid off that you want,
that $17 billion. It means I have to run 6.5 more times.
We've seen the results of what happened in the United
Kingdom, which is held out as an example of what you're
proposing. Separating the infrastructure from the operating
structure is quite a deal, because if you have the
infrastructure available, you can build buildings, sell papers,
do all kinds of things with those installations and take money
in, but that doesn't mean that the railroad operates any more
efficiently. You are going to call on rail professionals to run
it, but it's quite a revelation when we see that this--
Secretary Grayling said we think that--he's British
Conservative Party--admits flawed rail privatization. ``We
think the separation has helped push up the cost of running the
railroad, hence fares, have slowed decisions about capacity
improvement. Too many people in organizations are now involved
in getting things done so nothing happens.''
Mr. Serlin, it's, I'm not sure that your proposal adds much
to the debate here, because it ain't going to happen. That's
the way it's going to be. This railroad is like all other
railroads in other countries. It needs subsidy. It operates, it
makes money during 2, 3 hours a day and the rest of the day you
can't get by. So maybe we can send the workers home and have
them come back for a couple of hours every day, Mr. Serlin.
Thank you. Otherwise that doesn't bother me.
Senator Murray. Senator Lautenberg, thank you so much for
you passion on this issue. We all appreciate it.
AMTRAK'S ON-TIME PERFORMANCE
As I talked about in my opening statement the on-time
performance of many of Amtrak's trains really is disappointing.
And sometimes the fault lies with Amtrak itself, but most of
the time it really relates to the congestion with the freight
traffic.
And Mr. Boardman, I wanted to ask you what measures have
you taken, as the administration's top railroad official, to
try and improve Amtrak's on-time performance over freight on
track?
Mr. Boardman. Thank you, Senator. I think on-time
performance is probably my--one of my top priorities outside of
safety itself, which I think Alex has figured out in the board
meetings that I have attended. And, one of the things I
understood as you gave your opening statement is that there
wasn't necessarily an understanding at this point in time, that
the capital program that we would propose wouldn't benefit
existing corridors. Rather than putting in an entirely new
corridor online, what we're really looking for is for States to
start planning all of their transportation--whether it's
highways, or rail, or whether it's aviation, or whatever it
is--as a transportation plan in their States. And part of that
would be to improve that corridor, the I-5 corridor.
And the way that you would do that--and one of the things I
began to understand is--that a lot of times you get caught
behind a freight train because the freights never intended to
pass each other, they intended to be able to get by each other
when they meet, rather than to have the ability to pass. So
some of the improvements that could be made for the future
using that capital program, could be passing sidings to allow
an Amtrak train to get by instead of caught behind it.
I meet with every major class I railroad every year to talk
about safety, but one of the things on the agenda is the
importance for on-time performance that I expect them to have.
Senator Murray. Well, let me ask you, do you think the
freight railroads are uniformly complying with both the letter
and spirit of the law, in granting Amtrak trains preference?
Mr. Boardman. I don't think there's uniformity in terms of
the importance of this among the class 1 railroads. I think
there has been difficulty explaining the importance of how we
see that work for the future.
And I took a particular case example of the Southeast
Corridor where there are the Silver Services, the Palmetto, the
AutoTrain, and I know that Amtrak has as well. And even if you
look on our website today, you'll find a linkage to the
Southeast Corridor, where we're really trying to make a change
in how we would manage that particular service. And the reason
is--and I don't want to take up too much time--but the reason
is because CSX operates on that corridor. Their main interest
is their juice train and their UPS train. They don't have coal
on that corridor, like so many of the difficulties we have
across the country.
I think there's a new model that we can work out. I guess
my point is, that we're trying to apply both the grant
pressure, we're trying to--I'm trying to work with Amtrak
itself, and with the freight railroads, to improve on-time
performance.
Senator Murray. Under the law, freight railroads can apply
to DOT for an exception from the requirement to provide
preference to Amtrak trains. Has this administration ever
received any applications from freight railroads for an
exception?
Mr. Boardman. I don't have an answer to that, I'll get you
an answer to that. They haven't spoken to me since I've been
here.
Senator Murray. Okay, I'd like to know that.
[The information follows:]
No, FRA has not received any applications under 49 U.S.C. 24308(c)
from freight railroads seeking a Secretarial determination that the
passenger preference should not be granted at a specific location.
STATE MATCHING GRANTS
Senator Murray. You talked a minute ago about the $100
million for State matching grants for the development of new
passenger corridors and let me go into that a little bit more.
Before we grant new money to leverage more State contributions
I do think we have to look at the service the States are
getting for their current contributions. You heard several
times up here my State gets $11 million and Senator Bond's
State gets about $6.5 million.
I'd like to ask, Mr. Boardman and Mr. Kummant, if you
believe new money is part of the solution to easing freight
congestion, shouldn't we focus some of our new dollars on
improving current services before we try to launch new
services? Maybe Mr. Kummant, if I could start with you.
Mr. Kummant. I don't disagree with that. I mean these
problems are very thorny, and they are really grinding things
out day by day. And as Mr. Boardman suggested, even looking at
small projects; a siding, a signaling change, a crossover, to
really opening things up. I do think we need to tie those
expenditures to very specific gains to be made, and in some
cases on existing services.
I would like to see some of those dollars, if possible,
float toward equipment, as well, because I think that could
have a fairly dramatic effect on the overall service, and
perception of the service. But, again, the whole on-time
question is as much about investment. I do think there are
gains to be made in dispatching, and again it's a gut feel
number, but perhaps 5 to 10 points of on-time performance, but
not 30 or 40. And so it really in the end is about capital.
And--if I may say--it's almost a personal mission of mine
to really build a different relationship between Amtrak and the
freight railroads. And I've just completed a cycle of meeting
all the U.S. CEOs, I'll meet the Canadians. And I think part of
it is really just sitting down and getting everybody to agree
that we are living in a different world than we did 10 years
ago, and it has to be some commitment on their part at just a
very personal level.
Senator Murray. Mr. Boardman.
Mr. Boardman. I think I agree with you. I think we need to
improve the existing corridors first. I think we would be
looking at that from terms of, a priority as they would come to
the FRA. When they had to put their projects on the STIP in the
States I think they would have to evaluate that.
I think a more difficult problem, you almost related to it,
is a lot of the States such as yourself that have made major
investments, could be somewhat frustrated by the fact that,
``Hey, we've gone ahead and made these investments and now
we're being asked to put money on the table to make future
investments.'' And I wondered about that myself.
If you look back at the interstate system, one of the
things that New York always felt bad about was that they made
this major investment in the New York State thruway and then,
along comes the interstate highway system, which was providing
the money necessary for the future. And my thought was that one
of the ways that that got treated at the time was that there
were credits given for the thruway that you could use as part
of the matching requirement.
So, I don't think we've gone in far enough to understand
that, how we would do that for the future, but certainly we're
open to discussing that kind of thing.
Senator Murray. Okay. Well let me ask you one other
question. Your proposed State-matching grant program only funds
projects when the host freight railroad commits itself to 80
percent on-time performance for new train service. It makes
sense to have a minimum on-time performance for new Amtrak
services. Why hasn't the administration pushed for minimum on-
time for current State-subsidized Amtrak services?
Mr. Boardman. I don't have an off-the-top answer for that,
but I'll get you one. I think we've tried to use different
methodology and this just kind of tightens it up tighter.
[The information follows:]
This is a complex issue that the administration has been trying to
tackle for some time. As the chairman noted in her opening remarks, the
solution to this problem lies not only with Amtrak, but also with the
host freight railroads whose track Amtrak operates over. The
administration, through the FRA, has been trying for some time to
influence the debate and push for safer and more reliable service for
all railroads. In many instances, however, extensive capital investment
is required in order to make the infrastructure improvements required
to expand capacity, increase reliability and ensure safer operations.
Host freight railroads have not always been willing or able to make
those improvements. The $100 million grant program included in the
administration's fiscal year 2008 Budget Proposal would help facilitate
those infrastructure improvements.
VOLUME: AMTRAK VS. FREIGHT RAILROADS
Senator Murray. Okay, well when you look at Amtrak's on-
time performance report, you see some extraordinary differences
in the way different freight railroads treat Amtrak trains. We
have two major freight railroads serving the western United
States. We've got UP and BNSF. Somehow looking at this, Amtrak
trains running over the Union Pacific are encountering twice
the volume of delays for the same amount of train miles that
are encountered by BNSF. What do you think explains that
differing treatment?
Mr. Boardman. I think there are probably various reasons.
Certainly the Coast Starlighter, I don't have all the reasons
to that. The most recent ones, though, were some rebuilding of
track, and perhaps Alex can supplement what I'm about to say
here, I don't have as good an understanding of that.
I know that it's extremely difficult to run trains through
the coal chute--which I call the coal chute--through Nebraska
and out on the California Zephyr has been a real difficulty.
That's a UP. And when you see the Empire Builder, which is at
about 74 percent, and Southwest Chief, I think, which is also
run by the BNSF, you have much better numbers. I don't know
Alex whether you might add to that for me.
Senator Murray. I think you used to work for UP.
Mr. Kummant. Yes, I guess I have to not sound not like an
apologist in that sense, but let me make a couple of comments.
BNSF does do a very nice job. Take, for example, when they run
on their major Transcon route. There's some mix, but a very
large amount of that traffic is inter-modal traffic that itself
moves at 60 or 70 miles an hour. So it is easier for us to mix
into that than in other traffic. Senator Bond and I chatted a
little before the hearing--I used to actually run the River
Sub, which is between Kansas City and Missouri and a tremendous
amount of UP coal traffic goes across there and it's just a
brutal thing to run. Some of it's single tracked, ice storms in
the winter, mud slides in the spring, floods in the summer, and
the operational performance there is just incredibly difficult.
So, in the end you have to go back and look at what
commitment did we really make, but it's really a hand-over-hand
climb on taking slow orders off, on undercutting, on adding
those sidings. UP also has a very, very difficult time,
obviously on the Sunset route, which is not fully double-
tracked yet. And on the north-south Coast Starlight, a
tremendous amount of slow orders. That being said, they have a
huge capital program going forward, and we expect, for example,
that we may be--in a sense from a marketing point of view--
relaunching the Coast Starlight at the end of this summer when
they're through with that work.
On the long distance trains there is some good news,
although the absolute numbers are still low, we are actually
up, year-over-year in 13 of the 15 long distance trains. Where
we really need to focus, though, is on the State corridors,
because on those shorter routes the on-time performance is all
the more critical. So we're up only in 9 out of 15 and we're
down in 6 out of 15. So there are no easy answers, except for
grinding it out and UP still has tremendous amount of slow
orders out there, and catch-up maintenance work that they're
doing this year.
Senator Murray. Okay.
AMTRAK SERVICE TERMINATIONS
There are no other members present. I have a couple more
questions, and appreciate all of your patience. Mr. Kummant, I
wanted to ask you. Your formal grant request for the coming
year for you long distance services, you say you may be
implementing selected route adjustments? I wanted to ask you if
those selected route adjustments are another name for service
terminations?
Mr. Kummant. No, I think what we'll look at, there may be
one long-distance route that we look at converting into a
series of State corridors and have a multi-year plan to do
that. We have absolutely no plans for wholesale service
terminations, but the strategy that we're developing--and we'll
be speaking about in April/May timeframe--will be looking at
long term. Where do the State corridors really grow, and where
are they dominant, and particularly where they overlay long
distance routes. We ask ourselves, does it make sense perhaps
to find some ways to focus on those segments and to grow those
segments and perhaps then adjust the service into a series of
State corridors, rather than a long distance piece?
Senator Murray. Do you anticipating any communities in
this, in the rail service?
Mr. Kummant. Any communities?
Senator Murray. Are you going to eliminate any communities
from your rail service?
Mr. Kummant. It could be. We may have to face some of that.
We do know, for example, that we haven't run the eastern
portion of the Sunset since Katrina. It is an example of what
we're working through. It was not a great service to start
with. It hit a number of communities late at night only three
times a week. However, we'd like to look at some State corridor
alternatives in that area. That decision hasn't been made, but
that's an example. So selectively, yes, if those decisions are
made there may be some communities affected.
Senator Murray. Mr. Tornquist, would you like to comment on
Amtrak's need to implement route cuts?
Mr. Tornquist. Sure.
There is little secret that there are several routes in
Amtrak's system that lose substantial amounts of money both in
total and on a per person, per rider basis. There's only a
limited amount that Amtrak can do to make those operations more
efficient. They have a long-term goal, which we would agree to,
of running an efficient system. Amtrak needs to look at its
routes in light of the issues Mr. Kummant mentioned. This is
something the Board has been looking at for the last year.
Specifically, where does the service make sense, both in terms
of the transportation standpoint and an economic standpoint?
Amtrak then should determine where they can augment the service
cost effectively through corridor route development and where
they can make a net savings to the company by altering the
service.
They have gone through a very deliberative process. We've
met with their consultants who have done some modeling for
them. We don't have any problems with the methodology they're
looking at, and we're eager to see what they come up with.
Right now we're waiting for Amtrak to figure out what their
final proposal is going to be and what criteria they are going
to apply to each route.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Well, thank you very much.
And I appreciate all of your testimony. Obviously, our
committee will be waiting to get our allocation and once again
looking at the administration's request and trying to figure
out how we can balance the incredible needs to make sure we
keep this service running.
[The following questions were not asked at the hearing, but
were submitted to the agencies subsequent to the hearing:]
Questions Submitted to Alexander Kummant
Questions Submitted by Senator Patty Murray
Question. Can Amtrak really grow ridership over congested
corridors?
Mr. Kummant, you have stated that, through the initiation of a
Federal-State capital grant program, Amtrak will be able to double its
ridership in the next 15-20 years.
Realistically, will you be able to achieve that goal if the
Government and freight railroads don't take a more aggressive posture
on delivering Amtrak trains on time?
Answer. Ideally, capital investment and more aggressive on-time
performance (OTP) measures should go hand-in-hand, in order to improve
reliability for current and future services. Host railroads are
responsible for most delays to Amtrak trains--75 percent of minutes-of-
delay in fiscal 2006, compared to 18.7 percent from Amtrak-related
causes (mechanical issues, connections, etc.) and 6.3 percent from
other causes (weather, trespassers, etc.).
Traffic congestion accounts for just over half of all host-railroad
delays, i.e., 38.6 percent of all delays to Amtrak trains. While some
of that could be improved by better dispatching practices, we believe
most of it arises from too much traffic using too little rail capacity.
According to the Association of American Railroads, from the time that
the freight rail industry was deregulated in 1980 through 2005, track-
miles among the Class I (major) freight railroads decreased 39 percent,
but traffic (ton-miles) increased by 85 percent and is expected to keep
growing. In other words, compared to years past, there now is
significantly more traffic competing for space on fewer miles of track.
Another 16.9 percent of all delays to Amtrak trains results from track-
related speed restrictions on host railroads. Targeted infrastructure
investment will go a long way toward reducing delays due to host
railroad congestion and track condition.
While we want to retain and improve the quality of today's long-
distance train network, the greatest potential for ridership growth
lies in corridor development. Already, corridors make up a large
majority of Amtrak's ridership. In fiscal 2006, the Northeast Corridor
spine accounted for 38.8 percent of the total ridership of 24.3
million; other short-distance services accounted for 45.8 percent of
the total, and long-distance services accounted for 15.4 percent.
Generally, OTP is a greater issue for long-distance trains than it
is for corridors. In fiscal 2006, where systemwide OTP was 67.8
percent, it was just 30.0 percent on long-distance trains, with a
couple, individual services below 10.0 percent. Aside from Northeast
Corridor services, where OTP was in the 78-86 percent range, OTP on
short-distance services averaged 67.3 percent. However, there was a
wide range of results for those services, from 17.0 percent for the
Carolinian (a 704-mile ``short-distance'' route with a long run on a
congested CSX line) to 89.7 percent for the Hiawathas (at 86 miles from
Chicago to Milwaukee, the shortest route).
As we have said, corridor development will depend on a Federal-
State partnership for infrastructure. This partnership will lead to
investment aimed at rolling stock acquisition, station improvements or
development, signal improvements, track improvements, and track
capacity expansion, where needed to meet the development objectives of
each individual corridor. Of those items, the ones involving signals
and track should be designed and implemented in such a way as to not
only allow for higher speeds and frequencies, but also to minimize
conflict with anticipated freight traffic levels. The freight railroads
will have to be part of this process, so that infrastructure
improvements meet the needs of all parties involved. If this is done
successfully, the resulting service should be reliable and attract
ridership with the aim of doubling our systemwide ridership in the next
15-20 years.
Question. Mr. Tornquist included in his testimony a chart
indicating that Amtrak carried over a cash balance of $215 million into
2007. That level was well above its cash balance of $75 million carried
over into 2006, but well below the $247 million it carried into 2005.
Some people have argued that Amtrak can endure a cut in its subsidy
because of this $250 million cash balance.
Mr. Kummant, does this cash balance represent excess funds that the
corporation does not need? What is the rational for maintaining this
cash balance?
Answer. We suggest that a company of the size of Amtrak, with over
$3 billion per year of cash outlays, and with extraordinary funding
uncertainties, prudently requires cash working capital of at least $200
million, the approximate amount in place at the end of fiscal year
2006. Unlike other companies, Amtrak cannot obtain a short term line of
credit on which to draw in the event that its operating cash balance is
insufficient to continue operations. Amtrak's only alternatives are to
rely on its cash working capital, obtain emergency Federal funding, or
become insolvent.
Amtrak's Federal funding requirement has been averaging slightly
more than $100 million per month. But Amtrak's actual cash usage varies
widely because of structural reasons like seasonality in revenue,
capital expenditures, and debt service payments. For example, this past
January, Amtrak used $177 million of its cash balance because of
seasonally low revenue and high principal and interest payments.
Therefore, with a cash balance of $200 million, the Company should be
able to meet its cash requirements for at least a month; at $100
million, the Company has 2 to 4 weeks of cash remaining; and lesser
amounts become critical.
The risk to Amtrak's cash is increased further by the uncertainties
in amount and timing of Continuing Resolutions and appropriations as
well as an unexpected service interruption, economic event, or security
issue affecting ridership and revenue. These factors are among the few
events affecting cash flow management that we cannot predict in our
annual financial planning cycle, though delays to the appropriations
process are most likely to affect us in the early months of a given
fiscal year.
______
Question Submitted by Senator Arlen Specter
Question. Amtrak and the Commonwealth of Pennsylvania recently made
$145 million worth of improvements to the Keystone Corridor from
Harrisburg to Philadelphia. Has this investment translated into service
and revenue improvements?
If so, in what other corridors might similar investments also
benefit the corporation?
Answer. The heart of our Keystone Corridor is the Harrisburg-
Lancaster-Philadelphia segment. Some Keystone trains also extend beyond
Philadelphia to New York. At Philadelphia, Keystone passengers also may
connect to other north-south Amtrak services and to SEPTA and New
Jersey Transit commuter services.
Investments in the line that were made jointly by Amtrak and the
Commonwealth from 2004 through 2006 included conversion of 57 miles of
track from wood to concrete ties, renewal of 75 miles of track with new
wood ties, installation of 28 new wayside concrete turnout switches,
installation of 5 miles of new signal cable, installation of 43
instrument houses, installation of 26 new breakers, brush and tree
cutting along 90 miles of track, and improved drainage. Some track work
has continued into 2007.
The Keystone Corridor schedules that took effect with our general
timetable change of October 30, 2006, reflect the improvements that
were made possible by the joint investment. At that time, Amtrak
increased weekday train service west of Philadelphia from 11 to 14
trains each way. We reduced express train travel times from
Philadelphia to Harrisburg from 120 to 95 minutes. We restored all-
electric operation of these trains, where we had been running diesel
service west of Philadelphia for a number of years. Top speeds west of
Philadelphia were increased from 90 to 110 mph.
Even with shorter schedules, on-time performance (OTP) has
improved. For all of fiscal 2006, 83.1 percent of Keystone trains were
on-time (within 10 minutes). While we had initial delay challenges
after the new schedule took effect, with Keystone OTP dropping to 65.2
percent in November 2006, it has since recovered, increasing to 87.2
percent in April 2007 and 92.3 percent in May 2007.
Keystone ridership in the first 7 months of fiscal 2007 (October
2006 through April 2007) was 552,674, an increase of 17.1 percent over
the same period in fiscal 2006. Ridership in all of fiscal 2006 was
823,097, but in the current year, at the current rate of growth, could
surpass 950,000. Revenues so far in fiscal 2007 are $11.5 million, an
increase of 23.4 percent over the same period in fiscal 2006.
Comparisons of the Keystone Corridor to others that await
development can be only approximate due to the unique history of this
route. Because of infrastructure investments made by the Pennsylvania
Railroad through the 1930's, the Keystone Corridor was second only to
the Northeast Corridor in terms of track capacity, electric propulsion,
top speeds, and other factors. That gave Amtrak and the Commonwealth a
good base for the improvements that were made after 2002.
That said, other corridor partnerships under discussion include
Raleigh-Charlotte ($189 million to double frequencies and cut travel
time by 15 percent); Chicago-Milwaukee-Madison ($351 million to
increase Chicago-Milwaukee service and start Milwaukee-Madison
service); Chicago-St. Louis ($164 million to cut travel time by 15
percent); Eugene-Portland ($60 million to increase frequencies by 50
percent); Seattle-Portland ($552 million to increase frequencies by 67
percent and cut travel time by 5 percent); San Diego-Los Angeles-San
Luis Obispo ($756 million to reduce travel times by 21 percent); San
Jose-Oakland-Sacramento ($89 million to reduce travel times by 8
percent); and Bakersfield-Oakland/Sacramento ($203 million to reduce
travel times by 11 percent). (Figures from appendix A-21 of Amtrak
Strategic Plan Fiscal Year 2005-09.)
______
Question Submitted by Senator Pete V. Domenici
Question. Passenger rail service is important to New Mexico,
especially to the communities along the Southwest Chief and the Sunset
Limited lines that depend on its services. For example, the Philmont
Boy Scout Ranch hosts over 20,000 scouts per year and many arrive via
Amtrak's Raton stop. Like many other policy makers, I am concerned
about the continued service to New Mexico and other regions of the
country. It is my understanding that Amtrak has cut its expenses and
trimmed its workforce, while achieving increased rider numbers.
How do we keep Amtrak viable and still have Amtrak provide service
to rural areas like New Mexico?
Answer. Though we believe that the greatest potential for growth
and for Federal-State partnerships lies in expanded corridor services,
we are committed to retaining a network of long-distance train services
that connect the corridors and regions of the country. We believe that
there are opportunities to make further efficiencies and improvements
to the long-distance services, and at the direction of our Board of
Directors, we are in the process of evaluating the entire long-distance
network to look for such opportunities. We will keep all stakeholders,
including Members of Congress, informed of our findings. However,
though the make-up of the long-distance network may change somewhat as
a result of this work, in the end there still will be a long-distance
network.
That said, our goal of maintaining a nationwide system of trains
rests on our ability to provide our services and make various strategic
changes within the scope of the revenues we earn and the funding we are
provided. Our funding request for fiscal 2008 will allow us to move
forward in these areas. We look forward to working both with
appropriators and authorizers on issues of funding and overall policy.
______
Question Submitted to Hon. Joseph H. Boardman
Question Submitted by Senator Patty Murray
Question. Can Amtrak Really Grow Ridership Over Congested
Corridors?
Mr. Kummant has stated that, through the initiation of a Federal-
State capital grant program, Amtrak will be able to double its
ridership in the next 15-20 years. I am concerned that Amtrak will not
be able to achieve that goal if the Government and the freight
railroads don't take a more aggressive posture on delivering Amtrak
trains on time.
Mr. Boardman, do you have view on that question?
Answer. Ridership growth is possible. It is all about providing a
high quality and reliable service that meets the traveler's needs and
expectations. A high level of on-time performance is an important part
of that equation. That is why the administration's proposed grant
program would permit States to fund the elimination of bottlenecks on
freight railroads that create on-time performance problems for
passenger trains and capacity constraints for freight trains if the
freight railroad commits to an enforceable passenger train on-time
performance of 80 percent or higher.
______
Questions Submitted by Senator Arlen Specter
Question. What level of funding remains necessary to bring the
Northeast Corridor to a state of good repair, and when can this be
accomplished?
Answer. There are multiple estimates of the cost of returning the
Northeast Corridor to a state of good repair. That is why I directed
Amtrak, as a condition of its fiscal year 2006 grant, to undertake a
comprehensive assessment of NEC capital investment needs in cooperation
with the States and other users of the rail line. While that effort has
not moved as quickly as I would have liked, I hope that more reliable
estimates will be available within the next 12 months.
Question. Can the development of passenger rail service contribute
to reducing our Nation's dependency on foreign oil, a goal that was
emphasized in the President's State of the Union address?
Answer. Some Amtrak services certainly can contribute to reducing
our Nation's dependency on foreign oil. The Northeast Corridor, which
has high load factors and is powered by electricity, is the best
example. However, this is not true of all of Amtrak's routes. Indeed
services that involve two locomotives and six cars but have an average
patronage of 100 passengers or fewer do not represent a particularly
effective use of petroleum based fuel.
Question. Similarly, can increased rail service significantly
reduce highway congestion and automobile emissions?
Answer. Well-patronized passenger services in relatively short
intercity rail corridors can contribute to lessening highway
congestion, but the impact of long distance trains on highway
congestion and automobile emissions is negligible.
______
Question Submitted to David Tornquist
Question Submitted by Senator Patty Murray
Question. What is the appropriate working capital level Amtrak
should have?
Mr. Tornquist, in your testimony you included a chart indicating
that Amtrak carried over a cash balance of $215 million into 2007. That
level was well above its cash balance of $75 million carried over into
2006, but well below the $247 million it carried into 2005. Some people
have argued that Amtrak can endure a cut in its subsidy because of this
$250 million cash balance.
Mr. Tornquist, what do you think is the appropriate level of cash
that the company should have on hand at any given time?
Answer. We believe that Amtrak's fiscal year 2008 appropriation
could be reduced to create a start of year cash balance of $75 million.
Amtrak has previously argued that it required a cash balance or working
capital fund of $250 million. However, Amtrak was willing to increase
its spending and live with in an end-of-year cash balance of $103.9
million, an amount not materially different than $75 million. We take
Amtrak's actions to spend down its cash balance as a better indicator
than its rhetoric of what constitutes an acceptable cash balance. The
risk associated with this lower cash balance is minimized by the
approximately $60 million in unspent Efficiency Grants which can
provide a further cushion against unforeseen cash flow problems.
However, in deciding whether to offset Amtrak's subsidy with a portion
of its cash balance, Congress should consider the likelihood of a labor
settlement in the near-term and how the associated increased costs
should be funded.
______
Questions Submitted by Senator Arlen Specter
Question. Can food and beverage service on Amtrak play a role in
attracting passengers, thereby offsetting its costs?
Answer. We believe that intercity rail passengers expect access to
food service, particularly on long-distance trips. Ridership and
revenues would undoubtedly drop dramatically if passengers were
expected to spend 10-12 hours on a train without food. In that context,
it could be argued that Amtrak's food and beverage service would likely
attract enough passenger revenue to offset its costs. The same argument
could be made for other basic services, such as restrooms and running
water. Few people would ride intercity trains without them, therefore,
it could be argued that the same passenger revenues are attributable to
these basic services.
We are unaware of any proposals to run long distance service
without providing access to some level of food service. Therefore, the
comparison of trains with food service to those with no food service
does not appear to be relevant or meaningful at this time.
A more relevant, but more difficult question, is whether the cost
of providing an enhanced food service above a basic level generates
sufficient revenues from sales and additional ticket revenue to offset
its fully-allocated costs. Determining whether this was the case would
require very complex modeling attempt to isolate the revenues derived
from food and beverage service. We have seen studies that purport to
address this issue, but have not seen any such studies supported by the
analysis that would be required to properly answer the question.
Rather than trying to isolate the revenues related to food service,
we have recommended previously that Amtrak pilot different levels of
amenities on its trains, including different food service options, to
determine which option maximizes net revenues for the train as a whole.
At the same time, the net revenues from food sales is a reasonable
measure for Amtrak managers to use to measure the day-to-day
performance of Amtrak's food and beverage service. It would be
impractical to try to use models of marginal revenue changes to manage
food service on a day-to-day basis.
Question. By granting more decisionmaking authority to States with
regard to rail service, do we run the risk of developing a patchwork
system of routes that do not promote connectivity across state borders
and transportation corridors?
Answer. The risk of developing a patchwork system of routes that do
not promote connectivity across State borders and transportation
corridors by granting more decisionmaking authority to States with
regard to rail service is minimal. If given the authority to do so,
States could conceivably choose different operators or service levels
on segments of multi-State routes, thereby curtailing connectivity.
However, this presumes a State would actively decide to inconvenience
its own citizens, which we believe is not likely to happen. States
already have experience working together through the Federal-aid
highway program on multi-State surface transportation issues. In the
near term, Congress is considering proposals that would provide States
capital grants for corridor development, i.e., routes of up to 500
miles. These grants would be awarded by the Secretary of Transportation
based on applications from one State or a group of States. We would
expect the Secretary to take connectivity into consideration when
awarding these grants.
______
Question Submitted to Edward Wytkind
Question Submitted by Senator Arlen Spector
Question. What are your unions seeking in their contract
negotiations with Amtrak?
Answer. The Transportation Trades Department, AFL-CIO (TTD)
represents 10 of the 14 unions at Amtrak and a majority of Amtrak's
nearly 20,000 employees. However, let me clarify that TTD is not the
collective bargaining representative for these unions nor is it
directly involved in contract negotiations. Amtrak and its workgroups
have 24 separate collective bargaining agreements. Some unions
represent more than one bargaining unit and some unions bargain
jointly. As you are aware, the collective bargaining process at Amtrak
is governed by the Railway Labor Act under which contracts do not
expire, but rather become amendable. A large number of Amtrak's
employees are working under contracts that have not been updated in
nearly 8 years.
With a few exceptions, most bargaining units have been at impasse
for years. In short, the process for all practical purposes has
stopped. Employee representatives have been frustrated that Amtrak,
when it does come to the table, is simply unwilling to negotiate. For
one union, the Brotherhood of Railroad Signalmen, for example, Amtrak
has placed the same proposal on the table since negotiations started in
2000. The company's negotiators have made no meaningful effort to
engage in good faith bargaining. As a result, the vast majority of
Amtrak's employees have gone more than 7 years without a general wage
increase. Meanwhile, Amtrak has found the resources to institute,
effective June 4, 2007, a 10 percent Premium Pay Plan for managers in
certain geographic areas and in ``hard-to-fill'' positions. This
program represents a slap in the face to the rank-and-file employees
whose needs are being ignored as management employees prosper.
Other unions have been in mediation for years with no prospects for
either resolution or release by the National Mediation Board. In
summary, negotiations are hopelessly deadlocked due mostly to Amtrak
management's refusal to enter into serious negotiations and its
tactical decision to use the uncertainty of Federal funding as a
strategic ploy to evade its obligations to the employees. And
meanwhile, there is no serious mediation taking place as the NMB
majority has refused to carry out its duties responsibly.
As you know, Amtrak employees have played a major role in keeping
Amtrak running despite anemic Federal investment and continuous
attempts by this administration to grossly under-fund Amtrak. Amtrak
CEO Alexander Kummant has conceded that Amtrak workers are paid
significantly less than their counterparts in the freight and commuter
industries and that this reality is making it difficult for Amtrak to
remain competitive in retaining its workforce. In sum, Amtrak workers
are expecting equity for the years they have put in supporting our
national passenger railroad without being compensated fairly. Employees
also are opposed to changes in benefits to the health and welfare
system. Amtrak's workers intimately understand the budgetary
constraints under which Amtrak operates and, indeed, it is the driving
force behind rail labor's collective efforts in favor of Amtrak funding
year after year. However, Amtrak workers are having a difficult time
making ends meet. Amtrak workers are highly-skilled and dedicated
employees who are responsible for the safe transportation of millions
of Americans nationwide. It is unconscionable that Amtrak refuses to
negotiate collective bargaining agreements with these workers.
If you have specific questions about the status of bargaining by
individual union, please don't hesitate to contact me and I will be
pleased to put you in contact with the appropriate union officer or
representative. We greatly appreciate your interest in this area and
are thankful for your forceful voice in support of Amtrak employees.
______
Questions Submitted to Robert Serlin
Questions Submitted by Senator Arlen Specter
Question. Can you explain the accountability measures that would be
put in place for the Infrastructure Management Organization under your
proposal?
Answer. Under the IMO Plan numerous accountability measures would
be put in place.
Safety is first and foremost. The IMO would be a statutory railroad
subject to all present and future Federal safety laws and regulations.
The IMO would be subject to enforcement by the Federal Railroad
Administration.
The IMO would be required to report annually its financial and
operating performance to Congress and the Executive Branch in the same
manner and timeframe as is statutorily required of Amtrak. The IMO's
and Amtrak's parallel reporting would permit the Government to review
concurrently and overlay the performance of Amtrak and the IMO. The
IMO's financial reports would be required to be GAAP compliant and
audited by an independent certified public accountant.
To assure Congress and the administration that the IMO is
fulfilling its annual investment in AOI requirement, the Department of
Transportation's Inspector General would be designated to oversee and
certify lease compliance by the IMO. The DOT IG would also have the
authority to review the IMO's use of Federal funds and compliance with
Federal laws and regulations.
The Secretary of Transportation would be required to review and
approve the IMO's disposal of AOI fixed assets above $500,000 as well
as approve IMO related-party transactions.
The IMO's investment plan would be reviewed by the reconstituted
Northeast Corridor Coordination Board--a body composed of AOI States
and rail carrier user representatives. The IMO would be obligated to
publish annually a rolling five-year capital plan that incorporated not
only the IMO's planned capital expenditures, but also those requested
by AOI States and users. The Northeast Corridor Coordination Board
would review and determine that capital expenditure projects are
integrated and consistent with the balanced transportation needs of the
region.
The IMO Plan is fully accountable to labor--both infrastructure and
non-infrastructure labor.
Under the IMO plan, the IMO would be required to offer employment
in seniority order to all Amtrak employees performing infrastructure
work to be performed by the IMO. The IMO would also be required to
honor existing collective bargaining agreements for the Amtrak
employees it hires. Were RIM awarded the right to be the IMO, it would
resolve infrastructure employees pending section 6 notices by
withdrawing both Amtrak's health and welfare contribution demand and
its concessionary rule-change demands, and by negotiating Northeast-
competitive wage rates and working conditions for those employees to
whom it offers employment. RIM would pay full back pay and signing
bonuses (between $10,000 and $25,000 per employee).
Non-infrastructure labor's pending section 6 notices would be
partially resolved through mandated arbitration of back pay disputes
were such disputes not resolved within 6 months of the IMO becoming the
IMO. Non-infrastructure back pay payments would be funded by the IMO
escrowing the funds from which Amtrak would meet its back pay
obligations.
The IMO Plan would do much to help Amtrak's non-infrastructure
employees by strengthening Amtrak as the sole national passenger rail
carrier. Employment at Amtrak would be more secure since Amtrak would
be more fundable, having been relieved of AOI operating losses.
Expanded employment opportunities on the IMO and on Amtrak would
generate more operating, clerical and shop craft employment as
transportation demand over AOI grew. New jobs would be filled very
quickly from union training facilities and union operated hiring halls.
Finally, the IMO Plan is a corridor development model, which can
increase rail employment throughout country.
The IMO would also be held fully accountable to repay any
Government funds made available to it. Prior to the IMO being eligible
to draw upon a Government loan (``RRIF loan''), the IMO would have to
furnish an investment grade, third-party, irrevocable full principal
repayment guarantee that would also function as a risk premium payment.
The private sector owners of the IMO would be obligated to guarantee
jointly and severally payment of the RRIF loan interest. The IMO's
owners would also be required to consolidate fully the financial
results of the IMO into their public disclosures. Publicly traded
owners of the IMO would be subject to oversight by the Securities and
Exchange Commission. Full accountability is ultimately derived from the
estimated $2 billion in equity the owners of the IMO would be required
to invest in the IMO and the non-transferability of IMO ownership for
the full 50-year concession-term. The IMO's investors and owners will
have to believe in the long-term competitiveness of the rail mode.
The IMO, as a railroad, would be subject to Surface Transportation
Board jurisdiction and be required to deal fairly with the carriers
operating over AOI. In the event of an operating or compensation
dispute, the IMO would be subject to orders issued by the Board.
Question. Would service under your proposal be consistent with the
level of service we see today?
Answer. The IMO Plan leaves the transportation service provider
(``TSP'') component of Amtrak untouched and, as a result of the
transfer of $2 billion to it and assumption of up to $750 million in
debt from it, significantly better capitalized than today. Amtrak's
train service levels would remain as they were prior to the adoption of
the IMO Plan. Amtrak would continue to operate its Northeast Corridor
and national network of intercity trains, subject only to existing
agreements and contracts.
TSPs operating over AOI when the IMO Plan takes effect would be
granted ``vested carrier'' status. This would entitle each of them to
current service pattern protections on AOI. Amtrak and commuter
carriers would be encouraged to improve service levels by offering more
``one-seat'' rides. Commuter carriers could do this by combining
operations and operating outside their historic service areas. An
example of this would be SEPTA and New Jersey Transit pooling their
equipment and operating New York/Philadelphia without requiring
passengers to change trains at Trenton.
Amtrak's operating rights over the freight carrier network are not
altered, and are subject to existing and future contracts that Amtrak
may negotiate.
Key to the success of the IMO Plan is improving the Northeast
Corridor (``NEC'') and increasing its capacity through investments of,
were RIM to be selected the IMO, more than $1 billion annually. These
investments would enable Amtrak, the commuter carriers and new
intercity TSPs to expand transportation offerings and increase service
levels. This can only be achieved by an independent infrastructure
manager actively promoting new options. With an upgraded infrastructure
and reduced travel times, the railroad mode will be able to increase
its market share as new services are created, which are time-
competitive with highway and aviation.
The NEC is the most densely populated, most affluent corridor in
the world--bar none. RIM believes that the only way that the NEC can be
made to prosper is by increasing the level of service.
SUBCOMMITTEE RECESS
Senator Murray. So, thank you to all of you. This
subcommittee will stand in recess until Thursday, March 8, when
we will take in testimony on the administration's recent
announced plans for cross-border trucking with Mexico.
[Whereupon, at 12:05 p.m., Wednesday, February 28, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]