[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]






                 A REVIEW OF AMTRAK OPERATIONS, PART I:
                            MISMANAGEMENT OF
                       FOOD AND BEVERAGE SERVICES

=======================================================================

                                (112-97)

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             AUGUST 2, 2012

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure








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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey            Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
RANDY HULTGREN, Illinois             RUSS CARNAHAN, Missouri
LOU BARLETTA, Pennsylvania           GRACE F. NAPOLITANO, California
CHIP CRAVAACK, Minnesota             DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              MAZIE K. HIRONO, Hawaii
LARRY BUCSHON, Indiana               JASON ALTMIRE, Pennsylvania
BILLY LONG, Missouri                 TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio                      HEATH SHULER, North Carolina
PATRICK MEEHAN, Pennsylvania         STEVE COHEN, Tennessee
RICHARD L. HANNA, New York           LAURA RICHARDSON, California
JEFFREY M. LANDRY, Louisiana         ALBIO SIRES, New Jersey
STEVE SOUTHERLAND II, Florida        DONNA F. EDWARDS, Maryland
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
    Tennessee
VACANCY
















                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................     v

                               TESTIMONY

Joseph H. Boardman, President and Chief Executive Officer, Amtrak    24
Ted Alves, Inspector General, Amtrak Office of Inspector General.    24
Patricia Quinn, Executive Director, Northern New England 
  Passenger Rail Authority.......................................    24
Dwayne Bateman, Food and Beverage Worker, Amtrak.................    24

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. Elijah E. Cummings, of Maryland.............................    50
Hon. Nick J. Rahall II, of West Virginia.........................    54

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Joseph H. Boardman...............................................    57
Ted Alves........................................................    70
Patricia Quinn...................................................    91
Dwayne Bateman...................................................    97

                       SUBMISSIONS FOR THE RECORD

Hon. John L. Mica, a Representative in Congress from the State of 
  Florida, request to submit Congressional Research Service memo 
  entitled, ``Analyzing Restrictions on Amtrak Food and Beverage 
  Services,'' from Alissa Dolan, Legislative Attorney, to 
  Committee on Transportation and Infrastructure, July 26, 2012..     3
Hon. Jean Schmidt, a Representative in Congress from the State of 
  Ohio, request to submit written statement of Pete Sepp, 
  Executive Vice President, National Taxpayers Union.............    14
Hon. Corrine Brown, a Representative in Congress from the State 
  of Florida, request to submit letter from Hon. G.K. 
  Butterfield, a Representative in Congress from the State of 
  North Carolina, August 2, 2012.................................    37
Joseph H. Boardman, President and Chief Executive Officer, Amtrak 
  \1\:

        Responses to questions from Democratic members of the 
          Committee on Transportation and Infrastructure.........    62
        Responses to questions from Republican members of the 
          Committee on Transportation and Infrastructure.........    67
Ted Alves, Inspector General, Amtrak Office of Inspector General:

        Responses to questions from Hon. John L. Mica, of Florida    84
        Responses to questions from Hon. Corrine Brown, of 
          Florida................................................    88
Patricia Quinn, Executive Director, Northern New England 
  Passenger Rail Authority, responses to questions from Hon. 
  Corrine Brown, of Florida......................................    95

                        ADDITIONS TO THE RECORD

Hon. Corrine Brown, of Florida:

        Training and Duties of Amtrak Food and Beverage Workers..   105
        Ashley Halsey III, ``Two Planes Taking Off From National 
          Put on Collision Course With Plane Trying To Land,'' 
          Washington Post, Aug. 1, 2012..........................   106
        Sample airline menu......................................   109

----------
\1\ The strategic plan (``Amtrak Strategic Plan FY2011-FY2015'') 
  referenced by Joseph H. Boardman in his responses to questions 
  submitted for the record can be found online at the Government 
  Printing Office's Federal Digital System (FDsys) at http://
  www.gpo.gov/fdsys/pkg/CPRT-112HPRT76324/pdf/CPRT-
  112HPRT76324.pdf.



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                 A REVIEW OF AMTRAK OPERATIONS, PART I:
              MISMANAGEMENT OF FOOD AND BEVERAGE SERVICES

                              ----------                              


                        THURSDAY, AUGUST 2, 2012

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                            Washington, DC.
    The committee met, pursuant to call, at 10:05 a.m., in Room 
2167, Rayburn House Office Building, Hon. John L. Mica 
(Chairman of the committee) presiding.
    Mr. Mica. Good morning. I am Congressman Mica. I am pleased 
to welcome you this morning to the Transportation and 
Infrastructure full committee hearing, and this is the 
beginning of some of the review, investigations, and oversight 
management and practices at Amtrak, and today we are going to 
focus specifically on mismanagement of the issues relating to 
food services and beverages at Amtrak. And we have done 
subsequent--or rather, prior reviews. I was looking at the 
background.
    And before I get into that, the order of business will be 
opening statements by Members, and then we have a panel of 
witnesses who we will hear from. Then we will get into 
questions after we have heard from them. But pleased to work 
with my distinguished colleague and chair of the Rail 
Subcommittee, Mr. Shuster, on trying to look at ways we can 
save taxpayer money, do a better job.
    The Federal Government has poured billions of dollars into 
Amtrak, and some of their activities are--well, have been and 
continue to remain a burden to the taxpayers. And today we are 
going to look at one of those, and again, we have looked at 
this before, some of the history as the committee had reviewed 
Amtrak expenditures for food service in the past.
    In June of 2011, the inspector general issued a report E-
11-03 entitled, ``Food and Beverage Service: Further Actions 
Needed to Address Revenue Losses Due to Control Weaknesses and 
Gaps.'' And we have, we found in that report the inspector 
general identified 903 theft, dishonesty, and policy/procedure 
violations, found that they were inflating first-class meal 
checks, selling complimentary items, selling non-Amtrak items, 
shorting cash register sales, stealing inventory and providing 
items at no cost. They made a number of recommendations from 
some of these reports, and this hearing is a followup to, 
again, some of the previous reports and investigation both by 
our committee staff and also by the inspector general. We will 
hear from him shortly.
    Today, this hearing is being held again to look at the 
incredible cost that is incurred by the taxpayers to provide 
food service on Amtrak. Last year Amtrak lost $84.5 million, 
more than $84 million on providing food service on its trains. 
Every year and during the last 10 years they have lost an 
average of $800 million. In fact, Amtrak--where is our little 
chart here. We will show this chart. They have lost over three-
quarters of a billion dollars. This is the amount they have 
lost, $833 million in the last 10 years serving food and 
beverages on their trains. That is three-quarters of a billion 
dollars.
    The food and service expenses in 2011 were $206 million and 
the revenue from sales was $121 million. That means that Amtrak 
spends a--for every dollar that is spent for food or beverages 
on Amtrak, it costs the taxpayers $1.70. So if you buy this can 
of Coke or Pepsi, excuse me, they use Pepsi products. We also 
brought in some hamburgers here to illustrate. This is the deal 
we put some out. We want to make sure everybody has this. OK. 
But if you buy a can of soda for $2, the loss is $3.40. It is 
underwritten by the taxpayers. Now, this hamburger, they charge 
$9.50 for that hamburger. It costs the taxpayers $16.15. So 
this is another outrageous cost to the taxpayers, and it 
continues, unfortunately, every day.
    The food and beverage service has 1,234 employees and lost 
$84 million last year. If you do the math, it comes out to a 
taxpayer subsidy for every Amtrak food and beverage employee of 
more than $68,000. That is what it is costing us right now. 
What makes this loss more astounding is that Amtrak's food and 
beverage service is legally obligated to operate on a break-
even basis. Congress enacted a law that beginning October 1, 
1982, food and beverage services should be provided on board 
Amtrak trains only if the revenues from such services are equal 
to or greater than the total cost of such services as computed 
on an annual basis.
    The Amtrak witnesses testified before this committee in 
2005 that for the past 24 years of the law there has never been 
an indication that Congress intended the cost to be anything 
other than the cost of food and the cost of commissary 
operations. The committee asked the Congressional Research 
Service for its legal opinion of the statute, and we have a CRS 
memo which I ask unanimous consent to be submitted to the 
record that lays out the case that the language of the statute 
is clear and unambiguous. Without objection, we will put that 
in the record.
    [The CRS memo follows:]


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    Mr. Mica. I am pleased that President Boardman is here to 
respond to some of the concerns I have raised. I think, you 
know, in a time when we are running multitrillion-dollar 
deficits that we have got to look at every activity of 
Government. Our committee has spent some time on GSA waste and 
abuse, TSA, EPA, and now we are focusing, and we are going to 
continue, this is just the first in a series of hearings, to 
focus on some of the taxpayer expenses, which I think are 
outrageous that are incurred every day by hardworking Americans 
underwriting these losses. There has to be a better way. And 
every agency, every operation of Government that we are 
involved with, we have got to do a better job in being a 
responsible stewards of taxpayer dollars.
    So we can't go on, you know, paying a $3.40 subsidy or what 
is it, $16 for a hamburger for folks to have. Even though it 
may be a passenger convenience, I can tell you it is a great 
inconvenience to people back home who are struggling every day 
to make ends meet, pay their bills and then send money to 
Washington and see it abused in this fashion.
    With those comments, I am pleased to recognize Mr. Rahall.
    Mr. Rahall. Thank you, Mr. Chairman.
    As those fortunate enough to have ridden the great 
passenger trains of America at their peak will recall, no part 
of the rail experience survives so vividly in the memory of our 
rail passengers as that of a luxurious meal in the dining car. 
The crisp linens, the polished silver, the attentive service, 
the passing panorama of American life all accompanied by great 
food.
    Unfortunately, over the years, award-winning fillet of sole 
was replaced with microwaveable cheeseburgers. I guess that is 
what we have right here, leading to a former Amtrak CEO to 
lament to Congress in 1991, and I quote, ``In trying to make 
food service cheap, we made some of it inedible.''
    To some extent, these changes were a business response to 
changing transportation economics and public preferences. 
Railroads like airlines must consider the effects of food and 
beverage costs on the bottom line. They must decide the effects 
of particular levels of food service on passenger revenue. 
High-quality service may attract additional passengers while a 
decline in quality may cause a loss of passenger revenue. 
Striking the proper balance, of course, is a difficult business 
decision.
    Unfortunately, Congress has made it even more difficult at 
times for Amtrak to make the best possible decisions. One 
minute we tell Amtrak to provide food and beverage service on a 
break-even basis. The next minute we let it use up to 10 
percent of its revenue to cover food and beverage leases. Then 
we pressure it to contract out its catering service, which 
Amtrak did, but the loss of those jobs wasn't enough. We ended 
up dragging Amtrak back before this committee in 2005 to 
explain that the contract didn't realize enough savings.
    Now the chairman wants to highlight the flawed provisions 
in H.R. 7 that would require the FRA to contract out all Amtrak 
food and beverage service to the lowest bidder. The term 
``lowest bidder,'' by the way, is code for lowest wage, lowest 
benefits.
    As if that was not bad enough, the Republicans then 
proposed giving that bidder the Federal funds that would have 
gone to Amtrak for food and beverage losses, saving zero 
taxpayer dollars but resulting in the immediate elimination of 
1,200 Amtrak jobs, not to mention the jobs of thousands of 
workers that Amtrak relies upon for obtaining their food 
supplies.
    Mr. Chairman, I have had some good-tasting whoppers in my 
time, but this is a whopper of a bad idea if I ever heard one, 
trading good paying jobs with benefits for cheaper 
cheeseburgers. The fact is America's food and beverage expenses 
are not a major cause of Amtrak's financial difficulties. They 
represent about 5 percent, about 5 percent of the railroad's 
total expenditures. I do believe there are some reasonable 
things that Amtrak can and should do to cut their costs, but 
cutting jobs in this economy should not even be under 
consideration, and that is exactly what this proposal would do.
    With that, I yield back and look forward to today's 
witnesses.
    Mr. Mica. I thank the gentleman.
    I recognize the distinguished subcommittee chair, Mr. 
Shuster.
    Mr. Shuster. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. I want to welcome our witnesses 
here today. I look forward to hearing from them.
    Let me start off by saying I support Amtrak. I want Amtrak 
to succeed, but it cannot continue to go down this path that we 
have gone over the last 20 or 30 years. We have got to make 
some changes, and I know there is going to be some here today 
that say this is an attack on labor. This is about, as the 
ranking member said, shedding jobs.
    At the end of the day, if there is a short-term loss, I 
believe there will be a much bigger gain long term. You have 
got to do some tough things to correct the ship of Amtrak, and, 
Mr. Boardman, I have no doubt in my mind, you and I have had 
many conversations, you want to get the ship right and you have 
done some things, some positive things. But this is one area 
that is a glaring example of you shouldn't lose money on a 
service when people on the train, it is a monopoly. Monopolies 
shouldn't lose money, and again, I look forward to hearing from 
all the witnesses today.
    And this is about correcting the problems at Amtrak. This 
is about having a passenger rail service, especially in the 
Northeast Corridor, that should be profitable, highly 
profitable. But as the chairman pointed out, the food and 
beverage service is an issue that has not gone in the right 
direction. And Congress recognized this problem, and in 1981 
included a provision to eliminate the deficit in Amtrak's 
onboard food and beverage operations and requiring Amtrak to at 
least break even. So Amtrak is statutorily required to break 
even.
    Now, I know we are probably going to hear some fuzzy math 
today. At the end of the day, Amtrak loses money. So if you are 
taking revenues from one place to cover up a loss in another 
place, that is not the way accounting works, and we have got to 
get through this.
    In 2005 the committee held a hearing to explore why Amtrak 
continued to lose money on the services, and promises were made 
to look at all the options. However, since 2005 they have 
continued to lose $83 million a year.
    I look forward to the inspector general's comments towed, 
and I also want to welcome Ms. Quinn, who is executive director 
of the Northern New England Passenger Rail Authority which is a 
Maine-based organization that runs the Amtrak Downeaster 
service between Boston and Portland and which will soon be 
extended an additional 30 miles I am told to Brunswick. The 
Downeaster is a State-supported route that has always used 
outside food and beverage contract services since its beginning 
of operations in 2001.
    As my colleagues know, the Passenger Rail Investment and 
Improvement Act of 2008 included a provision requiring States 
to assume the costs--assume the costs of providing Amtrak 
service on State-supported routes beginning October 1, 2013. I 
strongly believe that States need to know all their options as 
they are to assume the full costs of passenger rail routes, 
particularly if these options can reduce the States' cost. 
Therefore, I am really eager to hear from Ms. Quinn.
    And again, we welcome Mr. Bateman. I know that you are here 
representing labor. And this is not an attack on labor. My 
vision of Amtrak is there will be more jobs if we get it right. 
And so all of us, management at Amtrak, the United States 
Congress, labor, all need to sit down at the table and figure 
out a solution. You can't just say, Oh, no, don't touch my 
stuff and get it from somewhere else. These are taxpayer 
dollars. The American people want to see Government work, and 
Amtrak is draining us of those precious dollars.
    So again, all of us need to sit at the table and make these 
corrective actions to see Amtrak succeed into the future, and 
as I said, create more jobs, good-paying jobs for people.
    With that, I yield back.
    Mr. Mica. I thank the gentleman. I am pleased to yield now 
to the distinguished gentlelady from the State of Florida, who 
is the ranking Rail Subcommittee member, Ms. Brown.
    Ms. Brown. Thank you, Mr. Chairman. And this is a full 
committee hearing, isn't it? Not a subcommittee. Good.
    There are a lot of issues that this committee needs to be 
addressing. But Amtrak food and beverage isn't one of them. We 
could be talking about all of the critical real issues that we 
left out of the surface transportation bill pertaining to the 
rail title: Positive train control, the railroad rehabilitation 
improvement finance program, and freight congestion plans. Or 
we could be talking about restructuring Amtrak's debt, saving 
over $500 million.
    If we really want to save money at Amtrak we could even get 
crazy and talk about how we are going to finance future 
transportation bills, or hold a markup on a water resource 
development act that will put people to work.
    Or if we really want to talk about food, we could have a 
hearing on the repeat instance of needles being placed in 
airplane sandwiches. But I guess that would make too much 
sense. You know, common sense is what my grandmamma had and she 
didn't go to college.
    Amtrak food and beverage operation is not a new target for 
this committee. In fact, since Amtrak was created, Congress has 
micromanaged the railroad, often making it more difficult for 
Amtrak to make the best possible business decisions.
    In 1981, Congress mandated that Amtrak provide food and 
beverage service on a break-even basis. This may have been an 
unsound approach. As the airlines have learned, free and 
subsidized food on some routes will attract enough additional 
passengers to make this a good option. In fact, I discussed 
this with the airlines prior to this hearing. Some spent upward 
of $6 or $7 per passenger on food and beverage service because 
it makes sense from a business perspective.
    Congress realized in 1983 just after issuing the break-even 
mandates, the Transportation Appropriations Committee Act 
allowed Amtrak to use up to 10 percent of its revenues to cover 
food and beverage losses. During the 1980s and 1990s, there was 
considerable congressional pressure on Amtrak to contract out 
its food and beverage service. Amtrak finally agreed to 
contract it out to a catering service. That contract was with 
Gate Gourmet as we learned in 2005 and it was not successful. 
It was renegotiated, and now Aramark has the contract.
    About 1,200 dedicated Amtrak workers, however, continue to 
prepare and serve the foods on Amtrak trains. But, as you will 
hear from our witnesses, the extent of their duties goes way 
beyond handing out a Coke, and I have for you as a former 
teacher, I want the duties and responsibilities of the Amtrak 
1,200 jobs, I want to pass that out so you can know something 
about the duties and responsibilities. The duties and 
responsibilities include more than just handing out a Coke. It 
also includes safety, many other duties and responsibilities. 
So would you make sure that the Members get this information.
    You know, the Republican solution to cost saving is always 
privatizing. This time it will eliminate 1,200 jobs. 
Privatizing. Giving that work to minimum wage employees, not to 
mention the immediate elimination of Amtrak jobs. But if you 
want to talk about mismanagement programs and losing 
opportunities to capture revenue, we cannot forget to talk 
about the near $4 million in revenue that we lost for the 
Airport and Airways Trust Fund when the House Republicans 
caused the FAA to shut down for 2 weeks. We need to talk about 
that.
    But we should probably be having a hearing on two planes 
taking off from National put in a collision course with planes 
trying to land. That would be something that this full 
committee should be looking into. But no. We are telling, once 
again, Amtrak, talking, here in the weeds, talking about a 
management decision about Amtrak and their food program.
    But let me just tell you a little secret. I ride the train 
constantly, and I don't think it is enough employees. We do 
things around the food car, and it is a cultural thing, and to 
say that a diabetic can't have hot food on the plane--on the 
train is ludicrous. I guess you want to go back to what the 
train was like when we get peanuts and a drink, and sometimes 
you don't even get the peanuts.
    So I yield back my time. I am happy that you all are here. 
But it is amazing to me how this committee has gotten down to 
the weeds as opposed to doing the big things that we used to do 
on this committee. It is a real disappointment. You need to 
know that.
    Constantly we are talking about how Amtrak needs to operate 
their food service as opposed to talking about a plane that 
nearly collided. Within 12 seconds, three planes went down. 
That is what this committee needs to be doing.
    Mr. Mica. I thank the gentlelady. And let me recognize 
another gentlelady, the gentlelady from Ohio, Ms. Schmidt.
    Mrs. Schmidt. Thank you, Mr. Chairman. Thank you so much 
for bringing attention to this issue because as you well know, 
I introduced a bill a little while ago on this very important 
issue. And before I get started, I would like to put into the 
record the National Taxpayers Union's statement regarding this 
if that is all right.
    Mr. Mica. Without objection, so ordered.
    [The National Taxpayers Union's statement follows:]


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    Mrs. Schmidt. Thank you. You know, I realize that there is 
a cost when you are trying to put food out, but I am a little 
astounded at the whole issue of what the Pepsi costs. It costs 
Amtrak $3.40 to serve a Pepsi that you pay $2 for.
    Each and every week, my husband and I go to the grocery 
store and we buy a 12-pack of either Pepsi or Coke, and it 
costs about $4 for the 12-pack. Now, I don't have a calculator 
but it is about 38 cents a can. And I am paying retail at 
Kroger's for that. And yet it is costing you $3.40 a can.
    My daughter's family is in the food management business. 
She married into a family that owns over 60 restaurants. Your 
model is not working. And it is not working because you are not 
doing it in a pro-business way.
    For one thing, you are required by law to break even for 
your food and beverage services. And yet for over 30 years you 
haven't done this. In an attempt to fix what shouldn't be a 
problem in the first place, I introduced legislation, the 
Amtrak Food and Beverage Service Savings Act, and I encourage 
all of my colleagues to look at it and sign on to it. You know, 
we are trillions of dollars in debt. But you don't pay it off 
all at once. You pay it off at a penny, a nickel, and a dime at 
a time. And when you see the waste that is going on here, this 
is an easy fix. If we did this across the board in Government, 
maybe we wouldn't be in the deficit that we are today. This is 
common sense.
    In my bill Amtrak may compete for the bids, but the winning 
bids must at a minimum break even, and that includes the cost 
of delivering the service because I think that is where the 
problem comes in.
    While other industries and sports and other modes of 
transportation make a profit on food and beverage services, 
Amtrak continues to lose almost $85 million each year, and to 
me that is not chump change. Taxpayers get stuck with this tab 
and yeah, I am a taxpayer, too. But the bitter irony is that 
the riders are getting a bad deal. That hamburger isn't worth 
$10 or $9, whatever it is costs, $9.50. It is worth about $5. 
The taxpayers are getting stuck with a bad deal in both ways. 
Riders pay through the roof just to get common food, and we 
aren't talking about fancy meals. We are talking about 
hamburgers. The last time I checked riders paid $4.50 for a 
hotdog, $4 for cheese and crackers, $2 for a can of soda, and 
$2.25 for fruit juice. And by the way, that hotdog cost you, 
Amtrak, $6.10 to provide that rider.
    We have got to do it better. We have got to have a business 
plan that does it better. If that means privatizing the whole 
thing out, then do it. If that means in the short run having to 
eat a loss with a contractual obligation, then let us eat that 
loss in the short run instead of continuing to eat the loss in 
the long run.
    I believe that the legislation states you have to break 
even on this service. You are not breaking even. You need to do 
things differently. This committee is here to help you do that. 
But ladies and gentlemen, I strongly suggest that you get your 
head out of the sand and look at the right way to deliver 
something like food and beverages in a profitable way. This 
isn't rocket science. This is a very minor list. I yield back 
my time.
    Mr. Mica. I thank the gentlelady.
    I recognize the gentlelady from the district, Ms. Norton.
    Ms. Norton. I want to welcome all of the witnesses today. I 
do want to take a moment to make some points.
    First, Mr. Boardman, I want to thank you for the service 
that your employees give on Amtrak. It is a tribute to that 
service that so many, many passengers in the Northeast are 
leaving airplane travel and deciding to run, to take their on 
Amtrak, on Acela. I think those of us who are used to train 
travel over the years marvel at the fact that one can get the 
same kind of luxury ride on Amtrak now that people used to 
associate with air travel. Air travel has become more like a 
Greyhound bus station where people wait in line and yearn for 
the time to get on the plane and find themselves in a real 
sense in sometimes terrible crowds. The fact that your trains 
are more and more crowded speaks to the service your employees 
are providing, and it speaks to the need for more and more 
trains.
    My second point is to congratulate you on the work you did 
to produce a master plan for Amtrak at Union Station that in 
essence is a master plan for Amtrak for the coming decades. 
That master plan I would ask the chairman of the committee to 
consider holding a hearing on because it is so important for 
the work we do on rail travel.
    For decades now, trains have improved in our country step 
by step. And the tax has improved because people wanted train 
travel. But we have never had a vision for train travel for the 
decades. The master plan that you presented at a recent press 
conference gave us a real vision for what train travel in the 
United States of America will look like if Congress, and I 
think it will, decides to bring train travel into the 21st 
century. And I say that recognizing that every single ally of 
the United States, and many developing countries, are light-
years ahead of our country on train travel, particularly the 
kind of visionary plan that would accommodate high-speed rail 
that sees us as we would hope the world would see us when it 
comes to train travel.
    I must say, Mr. Chairman, it is a source of great 
embarrassment to me as an American that our country is not just 
a little behind, not just somewhat behind, but not even out of 
the starting gate when it comes to train travel in the world 
today.
    You raise my spirits when I heard and saw the presentation 
of what we are capable of and what the plan could be, and I can 
tell you that my head has been down when it came to train 
travel as I see what countries in the world are doing and when 
I saw your master plan I thought I could hold my head up again 
when it came to train travel, and I thank you very much.
    I yield back.
    Mr. Mica. Thank you. I thank the gentlelady.
    Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman. Mr. Chairman, 
everything that needs to be said has been said. Everybody 
hasn't said it yet. So with that in mind, I am going to be very 
brief.
    I am not necessarily pointing an accusatory finger at 
Amtrak. I am pointing a finger at the Federal agencies 
generally. It appears recently, Mr. Chairman, that sound 
responsible fiscal management has been at least cast aside or 
abandoned by many Federal agencies, and if the Amtrak ship is 
aground, let us get it off the bar and back into safe deep 
water. And I think this, I can't emphasize the significance of 
fiscal responsibility any more.
    And having said that, Mr. Chairman, I yield back.
    Mr. Mica. Ms. Johnson.
    Ms. Johnson of Texas. Thank you very much, Mr. Chairman. I 
would like to yield my time to Ms. Brown.
    Ms. Brown. Thank you.
    I want to do a comparison between the airlines and Amtrak. 
Fast food restaurants, comparing Amtrak to a fast food 
restaurant is like comparing apples and oranges. We spoke to 
the airlines prior to this hearing. They spend upward to $6 or 
$7 per passenger for sandwiches on a long haul. I mean, I just 
don't think it is fair to compare Amtrak to a fast food place. 
I mean that is ludicrous.
    I was in a bar last night, a bar, and I got a Coke, a 
regular Coke, that is not in that Pepsi can, in a cup or a 
glass like this. It was over $5 for a regular Coke and ice. 
When you look at the comparison, Pringles, $3 on the airline. 
If you look at M&Ms, $2.99. I mean, how much is it in the 
store? Seventy-five cents.
    So to make these kind of silly comparisons, to even be here 
discussing this when we have major issues is just hard for me 
to understand why we continually, and we want to have a hearing 
on this, why is it that we don't have it at our committee area? 
Why would we take full committee time to have a hearing on 
Amtrak? I know, Mr. Boardman, I know this is very important, 
very important to the committee, very important to the American 
people. But this is something that we should be dealing with in 
the subcommittee. You have a ranking member, and you have a 
chair that is very interested in this. This is very, very 
important. Not, you know, more important than two planes almost 
colliding within 12 seconds that would have killed thousands of 
or hundreds of people.
    But, you know, that is where we are in this committee. We 
are down in the weeds and we have been down in the weeds since 
the beginning of this Congress.
    So I am very happy that you all are here. I am looking 
forward to the testimony from the committee. I have a lot of 
questions for you in comparison fast food to what you all are 
doing. And also, let us throw in the airline and the additional 
money that we spend in the airline based on security. I know 
that Amtrak has to consider a lot more things than how much is 
the cost of a Pepsi.
    So with that, I want to thank Mrs. Johnson, and I yield 
back the balance of my time.
    Mr. Mica. I thank the gentlelady. I am pleased to yield, he 
has been waiting patiently, the gentleman from Pennsylvania, 
Mr. Barletta.
    Mr. Barletta. Thank you, Mr. Chairman, and I want to thank 
everyone for coming today.
    My family is in the restaurant business, and we currently 
have a restaurant right now. And I certainly understand how 
difficult it is in the food and beverage business to make 
money. You really need to, I believe in my estimation, either 
have a very good business model to make money in that business 
or you need to be there all the time, because as I am sure 
Amtrak could attest to, in the food and beverage business many 
times there is a lot of waste, theft, and mismanagement and 
there is such a small profit margin that you are dealing with 
in the restaurant business. But obviously, the business model 
here is not working.
    And Congress, for over 30 years, has asked Amtrak that if 
they wanted to be in the food and beverage business that they 
needed to at least break even, not even make a profit.
    So I think it is fair to have this discussion today. And 
when we are seeing that there is an $800 million loss over the 
last 10 years, obviously this business model is not working, 
and we can give examples where others where it is working.
    So and if we can just momentarily if I could address the 
airline M&M issue. Obviously the cost, what they are charging 
is not what it is costing them. They are making a profit. So 
again, I am interested to hear what ideas you all have to, 
again, not break the law because Congress did make that a law 
that Amtrak did need to break even. So I am curious to hear 
what everyone has to say. Thank you.
    Mr. Mica. Thank you. I am pleased to yield to Mr. Sires.
    Mr. Sires. Thank you, Chairman, for holding this hearing. 
You know, I travel Amtrak just about every week. I come in by 
Amtrak; I go back by Amtrak. And I wanted to come to this 
hearing today because I want to hear what you have to say. But 
I have to tell you, I have met nothing but the nicest people 
that work and treat the passengers on the train.
    I would prefer to concentrate on some of the other issues 
of Amtrak, you know, making the ride more comfortable, more 
pleasant for the passengers. As it is now you can't get a seat 
many days. You know, we need to encourage that because I have 
traveled in some of the places outside the country and it is 
really, I am almost embarrassed, you know I happened to be in 
Spain and I traveled from Madrid to Barcelona on the AVE. I 
mean, I couldn't believe. There is no comparison between that 
ride and the ride that I had, you know, outside this country.
    You know, sure there are probably some things you can do, 
but there are so many other issues that we have to address on 
this with Amtrak. And we should be helping and trying to 
encourage more people to use rail. I don't think this is going 
to help encourage people to take rail. What is going to help is 
make it more comfortable, make it more pleasant, make it, you 
know, and you do a great job in terms of on time. I will never 
take a plane back to Newark. I would shoot myself. I mean, that 
is how bad it gets sometimes, but I will take the train to 
Newark.
    So thank you for the comments, and I yield back the balance 
of my time.
    Mr. Mica. Other Members seek recognition? If not, we will 
turn to our panel of witnesses.
    We have got first the Honorable Joe Boardman, president of 
Amtrak; Ted Alves, inspector general of Amtrak; Patricia Quinn, 
executive director of the Northern New England Passenger Rail 
Authority; and Dwayne Bateman, who is an employee, works with 
Amtrak Food and Beverage Services.
    First, welcome, everyone.
    Mr. Boardman, you can go first or second. If you wanted to 
hear the inspector general first and then respond, or I will 
just give you a choice. Tell me how you want to do it.
    Mr. Boardman. I would just as soon go first.
    Mr. Mica. I am pleased to have you, and welcome, and 
recognize Mr. Boardman.

TESTIMONY OF JOSEPH H. BOARDMAN, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, AMTRAK; TED ALVES, INSPECTOR GENERAL, AMTRAK OFFICE OF 
INSPECTOR GENERAL; PATRICIA QUINN, EXECUTIVE DIRECTOR, NORTHERN 
NEW ENGLAND PASSENGER RAIL AUTHORITY; AND DWAYNE BATEMAN, FOOD 
                  AND BEVERAGE WORKER, AMTRAK

    Mr. Boardman. Thank you, Mr. Chairman, and all. Good 
morning.
    Amtrak's food and beverage record has really been 
continuously improving. Part of that improvement has come from 
the attention that Congress has shown since 1981. No less than 
eight CEOs have focused on the cost and revenues since 1981. 
Part of that improvement is included implementing 
recommendations from Amtrak's IG and U.S. DOT's IG over those 
years. You should note that Ted Alves recognizes that current 
Amtrak leadership has begun to implement changes with the 
ticketing, point-of-sale technologies and operational 
reorganization that will help reduce costs and improve 
accountability. I look forward to his testimony today.
    Part of that improvement comes from having great State 
partners like Patricia Quinn who have innovative ideas that 
Amtrak supports. But most of that improvement comes from 
Amtrak's women and men who feed people on our trains 7 days a 
week and also take care of their needs for 3 days or more, and 
in a time of bad weather or other problems care for their 
customers even longer. We call them OBS, or Onboard Services 
people, and I am pleased to be with here today with one of our 
very best, Dwayne Bateman.
    Ridership has grown by 44 percent since the beginning of 
the 21st century. It will be a century that will appreciate 
rail the way that the 19th century did. In fiscal year 2011 we 
carried over 30 million customers and we set ridership records 
in 8 of the last 9 years. Operating subsidy requests are some 
of the lowest we have had in the 41 years that we have 
connected this Nation together. That has happened while we 
maintain good jobs for our employees, employees who are often 
away from home for a week or more at a time. Our OBS employees 
stay with a long-distance train all the way to its destination, 
unlike our train and engine employees. OBS employees care for 
the personal needs of our customers along with being able to 
care for emergencies if they should arise, and they do arise.
    These are good jobs that Americans can raise their children 
and take care of their family on, jobs that pay $50,000 or 
more, similar to a rural postal carrier. Amtrak and its 
customers depend on our OBS employees to know what they are 
doing, and they do their jobs well.
    We are focused on our customers and on our bottom line. 
That focus has helped us improve our food and beverage cost 
recovery by 20 percent in the past 5 years from 49 percent in 
2006 to 59 percent in 2011. Our goal is to recover 70 percent 
by 2015. We have competitively outsourced commissary 
operations, we have simplified dining car services, onboard 
credit card processing, and introduced at-seat cart service on 
select trains. We are installing point-of-sale systems on board 
and have a new inventory program called WIMS to better making 
sales and inventory automate and eliminate time-consuming paper 
processes. We are realigning the company to get rid of a 
disjointed management structure in food and beverage 
operations. Last year, Amtrak published its first board of 
directors-approved strategic plan from fiscal year 2011 to 
fiscal year 2015 and we are executing that plan.
    Making these food and beverage changes are part of running 
this company like a business. Last year, food and beverage 
accounted for less than 8 percent of our total expenses, and we 
have covered most of those costs with revenues from sales. We 
generate more than $2.7 billion in annual revenue and that, and 
that recovers 85 percent of our operating costs. Food and 
beverage is very important to our customers, our overall 
relationship and sometimes during a severe snowstorm or other 
delay, it is life sustaining.
    Further, it is a very small cost to a much larger business. 
Even so, it has grown more efficient, but not efficient enough 
for us. We are not satisfied. We will continue to improve. We 
are committed to improving this business as evidenced by these 
changes which contributed to reducing our operating subsidy 
need by 17 percent this year over last year, and doing so 
without cutting our service, service that our customers and 
your constituents depend on for their mobility and 
connectivity.
    Thank you.
    Mr. Mica. Thank you. We will hear now from the inspector 
general, Mr. Alves.
    Mr. Alves. Good morning, Chairman Mica, Ranking Member 
Rahall, Ranking Member Brown and members of the committee.
    Thank you for the opportunity to discuss our work on 
Amtrak's food and beverage service activities. As you know, 
losses on food and beverage have been a longstanding issue. In 
fiscal year 2011, the reported loss was almost $85 million with 
long-distance routes accounting for about $74 million, or 87 
percent of the loss.
    Today, I want to address three areas: First, actions Amtrak 
has underway to address our prior recommendations; second, 
preliminary observations from our ongoing audit indicating that 
program management can be further improved; and, third, best 
business practices work we plan to accomplish.
    Before I address the specifics of these area, I want to 
note that over the last several years, Amtrak has taken action 
to reduce food and beverage losses and improve program 
management controls and these efforts have yielded benefits.
    We believe opportunities remain for further improvement, 
particularly relating to implementing cashless sales, improving 
program planning, and identifying and implementing alternative 
business models.
    In June 2011, we reported that Amtrak needed to improve 
internal controls to reduce losses due to theft. In response to 
our recommendations, Amtrak established a loss prevention unit, 
hired four staff for the new unit, plans to provide the staff 
with 3 weeks of training this month, and plans to develop an 
internal control action plan. However, Amtrak currently has no 
plan to implement our recommendation to establish a cashless 
pilot.
    Regarding our ongoing work, Amtrak has made progress 
reducing direct operating losses, increasing cost recovery from 
49 to 59 cents on the dollar between 2006 and 2011. Amtrak also 
has initiatives for 2012 and beyond to further increase cost 
recovery, such as lengthening the selling period on trains and 
reducing check-in, check-out times for onboard service 
personnel.
    We encourage these initiatives but note that they will 
result in relatively small efficiency gains because they are 
being applied to the existing food and beverage service 
business model. Further, food and beverage management 
activities are currently carried out in a fragmented and 
somewhat uncoordinated manner by two Amtrak departments. The 
marketing department manages commissary and support operations, 
while transportation department manages onboard service 
personnel.
    On July 30, the vice president for operations told us that 
the marketing department responsibilities for food and beverage 
activities will be transferred to operations as of October 1, 
2012.
    This new management structure should help address our 
accountability concerns. We also believe that once this 
structure is in place, the vice president of operations should 
develop a 5-year plan to reduce operating losses. The plan 
should include specific initiatives and annual loss, operating 
loss reduction goals.
    Our future work will focus on identifying ways to help 
mitigate food and beverage service losses while continuing to 
provide high-quality service. We will identify and review best 
practices used by other entities such as foreign passenger 
railroads, cruise lines and airlines. Our analysis will focus 
on key factors such as cost and quality of service as well as 
workforce, customer, and revenue impacts.
    In summary, Amtrak deserves credit for taking actions to 
reduce food and beverage losses. Planned actions, especially 
the recently announced organizational change, should lead to 
further improvements. We also believe significant additional 
improvements could be achieved by implementing a cashless 
system, developing a plan for reducing losses, and piloting 
alternative business models.
    Mr. Chairman, in closing I want to thank the committee for 
its support of the Amtrak Office of Inspector General, and I 
would be glad to answer any questions at this time.
    Mr. Mica. Thank you. And we will hold questions. And we 
will go now to Ms. Quinn.
    Ms. Quinn. Thank you, Chairman Mica, Ranking Member Rahall, 
and members of the Transportation and Infrastructure Committee 
for inviting me here today.
    My name is Patricia Quinn, and I am executive director of 
the Northern New England Passenger Rail Authority, which I 
refer to as NNEPRA, and am responsible for the overall 
operation of the Downeaster service. The Amtrak Downeaster 
service began operating between Portland and Boston in December 
15, 2001, in response to a citizens' initiatives led by a group 
by TrainRiders Northeast to reestablish passenger rail service 
after decades of its absence. The vision was to create a 
service which was part of Amtrak's national rail system, but a 
service which was also uniquely Maine.
    NNEPRA was created by the Maine State Legislature to manage 
our passenger rail service to and within Maine and to maximize 
the public benefit.
    The Downeaster has been extremely successful. We have 
carried more than 4 million passengers over 300 million miles 
while maintaining one of the highest customer satisfaction 
scores in the Amtrak system. Our ridership has more than 
doubled since 2005 and will soon be expanding our service 30 
miles north to serve Freeport and Brunswick.
    But in addition to providing transportation the Downeaster 
has stimulated hundreds of millions of dollars in economic and 
private investment along the corridor and has truly been an 
economic engine for our region. Our initial arrangement with 
Amtrak when we started the Downeaster was put into place in 
1996, and it included provisions for NNEPRA to be able to 
procure services for marketing, reservations and ticketing, and 
food service independently. This was done to ensure that the 
Downeaster would continue to have a Maine brand and to provide 
NNEPRA with the ability to manage the finances more closely. 
Because of our geographical location and the fact that we don't 
directly connect with other Amtrak services, we are uniquely 
positioned to pioneer and pilot a number of initiatives, some 
of which have been rolled out nationally. I am here today to 
talk about the food and beverage.
    A company called Epicurean Feast was selected prior to the 
start of Downeaster service to manage the operation of the 
Downeaster Cafe. Amtrak participated in the development of the 
agreements and contracts to be sure that all appropriate 
standards were included and has worked with us all along to 
assure the success.
    Per our agreement with NNEPRA, Epicurean Feast is 
responsible for the overall operation of the food service 
including the hiring and management of employees, purchasing of 
food, and provision of onboard service. Actual revenues and 
expenses are reported to us monthly and a fixed management fee 
is assessed. NNEPRA reimburses Epicurean Feast for the 
difference between those amounts.
    Now our cafe serves light meals, snacks, alcoholic, 
nonalcoholic beverages, and some other sundry items like Boston 
subway tickets. But we also have a lot of input into the menu 
and really encourage the use of Maine products. As a result our 
cafe features sandwiches from a local chain, beers from local 
microbreweries, chocolates and whoopie pies from local 
confectioners and of course fresh Maine lobster rolls in the 
summer. In addition to the sales, that exposure is really 
important to those local merchants.
    The Downeaster achieves the cost and recovery rate of 75 
percent and in our fiscal year, which runs from July through 
June. In our fiscal year 2012, our total cafe sales were about 
$575,000. Cafe expenses were about $770,000, which is a net 
loss of $195,000. Now, based on 509,000 riders, that comes out 
to a net cost of 37 cents per passenger.
    Our onboard labor accounts for about 44 percent of the 
expenses, food and liquor purchases account for about 33 
percent, and general operating expenses account for 17 percent. 
The remaining is the commission and the G&A.
    We monitor the financial performance of the Downeaster Cafe 
very closely. We get daily sales reports, monthly P&L 
statements which detail every transaction made for the 
Downeaster Cafe, we track labor costs, purchases, spoilage, 
comps and many other items. We communicate regularly with 
Epicurean and try to act in a really nimble fashion to make 
changes to improve the service, increase the revenues, and 
control the expenses.
    While the cafe itself is not profitable, its cost is built 
into the price of a passenger ticket and is a key reason to why 
people choose to ride the Downeaster.
    While it might not work for all, the Downeaster Cafe model 
is one in which other States could consider particularly in 
light of the pending implementation of PRIIA 209. It has 
provided us an opportunity to have input into a very important 
part of the service and take responsibility for an element of 
the passenger rail business which has both financial and 
service related impacts. It is a way to contribute to the 
personalization of the service and very literally reflect local 
favor.
    NNEPRA is proud of our cafe. We feel it is a critical 
component of the Downeaster service. The CSI scores that we 
have, the customer service scores for our food service tend to 
be higher than those in the Amtrak system, and that is due to 
Epicurean's dedication, NNEPRA's involvement and our ongoing 
partnership with Amtrak. Together, we constantly strive to set 
goals and achieve a standard of excellence in the best interest 
of our passengers and the public.
    Thank you.
    Mr. Mica. Thank you, and we will now hear from Mr. Bateman.
    Mr. Bateman. Thank you. Chairman Mica, Ranking Member 
Rahall, and members of the Transportation and Infrastructure 
Committee, thank you for the opportunity today to come here and 
talk to you about Amtrak food and beverage service. My name is 
Dwayne Bateman. I am a lead service attendant currently working 
on Amtrak's Northeast Corridor. I am also vice general chairman 
for Unite-HERE Local 43, representing onboard service workers. 
I have worked almost every craft linked to onboard service for 
over 35 years.
    Critics of Amtrak say onboard service workers like me are 
overpaid and our pensions are too generous. They devalue our 
work and ignore our role in safety, security, and customer 
satisfaction. They are wrong, and I am grateful for this 
opportunity to explain why.
    Obviously, we serve food and drinks to our customers, but 
like flight attendants, protecting passengers, not food 
service, is our first priority. In the environment in which we 
work, emergencies can happen in remote locations and we are 
usually the first responders. Unlike restaurant employees, we 
go through mandatory training so we can respond to derailments, 
medical emergencies, security breaches and other problems.
    Here are some of the examples of our required training. 
Emergency preparedness, first aid, onboard passenger safety, 
emergency evacuation, responding to bomb threats and terrorist 
threats and unattended items.
    We also have to know the configuration of all Amtrak cars 
in order to respond to emergencies and to facilitate 
evacuations. Also, when service is disrupted, we are frequently 
an important point of contact for our riders.
    Our critics like to compare us to restaurant workers and 
say we should be working for minimum wage and tips, but that 
ignores the sacrifices and level of commitment we have. These 
jobs are exhausting. The work is grueling. We have to be on our 
feet occasionally up to 10 or 20 hours a day in the Northeast 
Corridor. It is even worse on long-distance routes, which last 
3 or 4 days, where we work an average of 18 hours a day. And 
during service disruptions, we can be on duty for more than 36 
hours straight or more.
    There are some who argue we are overly compensated for the 
skill set required to prepare meals and provide customer 
service. The work we do appears quite simple because you only 
see us passing out a Pepsi-Cola and a burger. That argument 
ignores not only safety but the personal sacrifices for this 
career: mental and physical exhaustion, sleep deprivation, 
stress due to vigorous working conditions, extremely long hours 
with limited breaks. Each contribute to a myriad of medical 
issues we experience. We are not only paid for the work we 
perform, but also the stress to our health, the degradation to 
our bodies, and the pressure in our personal lives caused by 
the necessity to work long hours under arduous conditions while 
maintaining a professional and pleasant demeanor.
    Some people say we make too much, again, but the jobs we 
have pay about $50,000 a year, which is basically a middle-
class salary. All of us have early retirement at Amtrak, which 
is funded solely by employees in the railroad. I am not ashamed 
of that. That it is what is going to allow me to retire with 
dignity.
    But some people want to limit these jobs. When this 
committee marked up H.R. 7, it supported language that could 
outsource the jobs and give corporate welfare subsidies to 
private contractors that get the work. I take that personally, 
and that is an attack on good-paying, middle-class American 
jobs. It is unfair to us, who have dedicated our lives, given 
our blood, sweat, and tears to help our company survive. It is 
unfair to Joe Boardman, who has worked feverishly to change our 
culture and reduce the costs while improving services. And, 
most importantly, it is unfair to our passengers, who pay for, 
expect, and deserve safe and reliable service on their journey. 
They are owed the assurance that employees are well-trained, 
qualified to meet their customer service, safety, and security 
needs.
    I have spent my entire adult life working for Amtrak with 
the promise of earning a fair wage. This job allowed me to 
provide for my family, it helped me send my two girls to 
college and live a decent, middle-class life. Now some people 
want to take away my job and the job of 1,200 other onboard 
service workers. For me it is not a discussion about 1,200 
jobs; it is a discussion about 1,200 people, 1,200 careers, 
1,200 families who can't survive on minimum wage. I urge you to 
stop trying to privatize my job and start fighting to protect 
middle-class jobs.
    Thank you again for the opportunity to speak.
    Mr. Mica. Thank you so much.
    And let me turn to some quick questions.
    First, to the inspector general, it appears the 
hemorrhaging is getting worse in Amtrak food and beverage 
service in just the last 3 years. Is that your observation, the 
losses? Again, it is a $74 million loss in 2009; $82 million, 
rounding it out, in 2010; and $84 million this year. Is that 
correct, we are hemorrhaging worse?
    Mr. Alves. Losses have increased.
    Mr. Mica. Losses have increased.
    Mr. Alves. Losses have increased.
    Mr. Mica. The last 3 years.
    Mr. Alves. And I believe----
    Mr. Mica. And then we have 1,000--what is it? How many 
employees do you have? One thousand two hundred and thirty-
four. The loss last year was $84 million; is that right?
    Mr. Alves. Yes.
    Mr. Mica. If you divide that, we are subsidizing 
$68,000,476 per employee from the loss.
    Mr. Alves. I have not done that calculation.
    Mr. Mica. Well, take out your calculator, and you will see 
that that is the case.
    I mean, we have been here before on this. The losses are 
expanding. And when you are subsidizing this can of Coke that 
costs $2, another $3.40 for the taxpayer--it is $16 for a 
hamburger. The subsidization on top of the cost of--what is 
it--$9, it is absolutely outrageous. I mean, who could, in 
their right mind, say that that is the way we operate?
    No one wants to fire anybody. No one wants to get rid of 
any employees. That is not what this is about. This is about 
losses. I mean, the losses are staggering. In 10 years, it is 
$833 million. Last time I checked, that is over three-quarters 
of a billion dollars. Is that correct? Are our calculations 
correct, or are we fudging the books?
    Mr. Alves. I am sure you are not fudging the books, sir, 
but I haven't done that calculation.
    Mr. Mica. All right. Well, we have the figures that we have 
gotten from you and from Amtrak.
    What is disturbing is, the last report, you recommended 
that they get out of the cash business. They had people that 
were tapping the till, and we went after them. And some people 
lost their jobs, some people were arrested. And we still have a 
cash system. Is that your observation, Inspector General?
    Mr. Alves. Yes, sir. And we do believe that there is an 
opportunity to pilot a cashless system that would help reduce--
--
    Mr. Mica. No, no. ``Pilot,'' here we are again.
    And then you said that four people were going to be trained 
this month for some sort of oversight; is that correct?
    Mr. Alves. Yes, in response to our recommendations.
    Mr. Mica. Yeah, in response. We have been through the 
inspector general report, which now has some yellow aging on 
it, and they still haven't done anything to correct this. A 
cashless system would help stop, again, some of the damage.
    And this isn't even counted into the calculation, is it? I 
mean, the loss is the loss. We don't know how much has been 
stolen or slips through.
    Mr. Alves. No. That is very difficult to estimate.
    Mr. Mica. Well, I tell you, this is extremely frustrating. 
I may be in the weeds, but if you don't get in the weeds, you 
know, the country is going to go down the tubes. And you start 
with taking a--I call it a Soviet-style Amtrak operation and 
converting it to a modern rail system that provides good 
passenger service at the lowest cost to the taxpayer. And we 
are not doing that.
    We could employ twice as many people in this industry if we 
would unleash some of the creativity and initiatives from the 
private sector. So don't give me this stuff, that we are 
attacking labor or anything. No one is talking about lower 
wages. You can still do this, increase employment and keep good 
benefits.
    And there are models that we can adopt--we saw a little bit 
from the Northeast model that is here; there are others here--
where we can cut the losses or find some way to cut back. But 
if we can't cut $100 million a year in Amtrak food service, 
something is wrong.
    Let me have Mr. Shuster take over the chair. We have about 
5 or 6 minutes. Mr. Shuster?
    Did you want to go next, Mr. Rahall?
    Mr. Rahall. Yeah, just a comment, Mr. Chairman. Your 
overdramatization I think is unnecessary. I don't believe the 
food and beverage problems of Amtrak are going to cause our 
country to go down the tubes. As I said in my opening 
statement, what we are talking about here is about 5 percent of 
the railroad's total expenditures. So I think your 
overdramatization of this is totally unnecessary and uncalled 
for.
    Let me ask Mr. Boardman, how many food and beverage workers 
does Amtrak have? And how would they be impacted if the FRA, as 
proposed in H.R. 7, were to contract out its food and beverage 
service to the lowest bidder?
    Mr. Boardman. Mr. Rahall, we have 1,234 onboard service 
food and beverage folks on our trains. Obviously, if there was 
a demand by Congress to contract them out, they would be in a 
very different situation, probably without jobs. And I think 
that would be a very negative situation for Amtrak and for the 
country.
    Mr. Rahall. Mr. Bateman, would you wish to comment further 
on that? I know you did in your testimony, but----
    Mr. Bateman. Well, actually, if we would lose our position, 
I wouldn't be losing----
    Mr. Rahall. Could you turn your microphone on, please?
    Mr. Bateman. I beg your pardon.
    I would just like to say, I don't have a job. This is not 
my job. This job belongs to my family. And if I were to lose 
it, it would be a huge impact on my family because I am 
responsible for a lot of people. And I think a lot of others 
that I work with would be in the same situation. And we would 
probably be stressed to the point where we would have to maybe 
sell our homes or cash in our 401(k)s or cash in our savings or 
whatever we have to do to try to survive this. But it would be 
devastating, sir.
    Mr. Rahall. Mr. Bateman, are States currently able to 
contract out Amtrak's food and beverage service through section 
209 committee work--I am sorry, Mr. Boardman, I was going to 
ask you that question. Have you heard from any States that have 
an interest in contracting out?
    Mr. Boardman. Yes, there are. As a matter of fact, that is 
what Patricia did. We had no commissaries close by, and we 
worked well with them to make that happen.
    There is another example down in North Carolina, where they 
have a run with dedicated equipment. And States will have the 
ability under section 209 to contract out.
    Mr. Rahall. OK.
    Let me ask Ms. Quinn, why did Maine contract out their food 
and beverage service on the Downeaster?
    Ms. Quinn. Well, while 209 is going to be implemented next 
year, the State of Maine has always taken financial 
responsibility for the service and has paid or reimbursed 
Amtrak for the cost of operating the service. So we have tried 
to participate in the service, again, have it really reflect 
the Maine brand, and also have been extremely conscious of the 
finances of the operation. We wanted to be able to manage some 
of the things that we could manage ourselves.
    Mr. Rahall. Were there any workers furloughed because of 
that?
    Ms. Quinn. No, they were not.
    Mr. Rahall. Why not?
    Ms. Quinn. It was a brandnew service. It didn't exist 
before----
    Mr. Rahall. I am sorry, it was what?
    Ms. Quinn. It was a brandnew service that didn't exist 
before.
    Mr. Rahall. Thank you.
    What are your food and beverage workers paid? And what kind 
of benefits do they receive, what sort of training do they 
receive? And do they receive background checks?
    Ms. Quinn. Our food and beverage workers have different job 
descriptions and duties than the Amtrak LSAs do. They generally 
are food service workers, and their role and responsibility is 
to get on the train and manage the cafe. The conductor stays as 
the person who is in charge of the train. They go through a 
regular employment review, not necessarily a background check.
    Mr. Rahall. Training?
    Ms. Quinn. And training is in food service and the 
operation of the cafe, but not in the operation of the train. 
So it is not as extensive as what the Amtrak LSAs receive.
    Mr. Rahall. What are they paid?
    Ms. Quinn. They are paid approximately $10 an hour, and 
then they are allowed to get tips.
    Mr. Rahall. And benefits?
    Ms. Quinn. They have a basic health insurance benefit 
package. Again, that is through the vendor, not through us.
    Mr. Rahall. All right.
    I see we are running out of time. I will yield back.
    Mr. Shuster. [presiding.] Yeah, we have 5 minutes left in 
this vote. I am going to make a statement here. We are going to 
adjourn, figure about 15 to 20 minutes, be back here around 
11:30. We have two votes. This one is going to wrap up here 
probably in the next 10 minutes or so, and then we can vote and 
come on back.
    Before I leave, I just want to again state, this is not an 
attack on jobs. Ms. Quinn just pointed out that you added jobs, 
you created jobs in what you are doing. And I believe in the 
long term that we can do that on Amtrak. But we have to take a 
serious look at this.
    And Mr. Bateman made the statement about ``privatize these 
jobs.'' These are private jobs. Amtrak is supposed to be a 
private company. So we are talking about taking a private 
company and making it efficient, making it work.
    And as I said, if we don't do this, if we don't take the 
short-term pain--and I know Mr. Boardman has done some things 
there that are positive--we are going to, in the long run, we 
are not going to see these jobs. Because right downstairs, we 
have hot food we can get downstairs out of a vending machine. 
You know, these are the kinds of things we have to look at and 
say, is that what we want on our train service? I don't think 
so, but we have to figure out a way to get these numbers down. 
When you have Ms. Quinn saying they are losing 37 cents a 
passenger, my calculation is Amtrak is losing $2.80 a passenger 
on the food car service.
    So, you know, this is a serious--other Members have said 
that we have other serious issues to deal with. Well, the 
Railroad Subcommittee, this is one of the issues we deal with, 
and I believe it is a serious issue. And to make sure that 
Amtrak is here for the long haul, make sure that we have 
passenger rail service in this country that is at least 
breaking even across the board, I think that should be our 
first goal.
    But, with that, again, we will adjourn. And we should be 
back in about 15 minutes to resume the questioning. We stand in 
recess.
    [Recess.]
    Mr. Shuster. We are going to reconvene. Sorry about that. 
It was a little longer than 15 minutes.
    All right, we are back in action. Again, I am going to 
start off the same way I ended up, started twice.
    This hearing is--I want it to be constructive. I want to 
figure out ways that we can, as we move forward, find out what 
has been done, ways we can move forward on this, because there 
is no reason in my mind that you can't have a food service that 
at least is breaking even. Or if we got down to a 37-cent 
subsidy per passenger, I think I would jump for joy at that. 
And now, by my math, if someone wants to correct me, my math is 
about $2.80 is what we subsidize the food service with each 
passenger.
    In fiscal year 2011, Mr. Boardman, can you tell me what was 
the average wage that a food service worker made?
    Mr. Boardman. It is over $50,000 a year. That is what we 
talked about right upfront. That is why we are----
    Mr. Shuster. And then, all in, what are we talking, 
benefits and all that?
    Mr. Boardman. Probably adds another--I don't know exactly 
what the percentage is, but the railroad retirement and the 
health care and so forth, yeah.
    Mr. Shuster. All right. And then Mr. Alves talked about the 
cashless system. What is the situation on a pilot? It seems to 
me it makes a lot of sense.
    Mr. Boardman. I have two answers to that. One is a personal 
one, and it is important to me, and it is something that I know 
I have a ``board of directors'' with 585 Federal and State 
members and a board of directors that sits at the table that 
may change that. But on this $1 bill, to use a prop of my own, 
it says, ``This note is legal tender for all debts public and 
private.'' And I believe that we should continue to accommodate 
people who don't have cashless opportunities.
    And there may be ways to get around some of that, but I 
believe that cash should be allowed in this country and that we 
should not have employees that steal. And we need to find 
ways--and I know the union is totally with me on this--to make 
an end to that. But making an end to it by denying people using 
cash I think is a mistake.
    Mr. Shuster. And your board, you say you think they have 
different feelings than you?
    Mr. Boardman. I don't know. We really haven't gotten to a 
proposal today to actually do this. I think we do have an idea 
that we can do a pilot.
    And it might be different, Congressman, on the Northeast 
Corridor, Acela. But when you start looking at services like 
the Cardinal service, which operates through West Virginia and 
into Cincinnati and on up to the Midwest, a lot of our 
ridership are the Amish and the Mennonites and others who are 
really not into that part of the world at all, and they have 
needs when they are on the train.
    So it is going to be difficult to implement something like 
that fully throughout the system. It may work in some places.
    Mr. Shuster. Right. What about tickets? Now tickets are----
    Mr. Boardman. It is the same way with electronic ticketing, 
which we have rolled out at this point in time. We see that as 
a great benefit. We are still able to sell on the trains, as 
well, if they don't have a station agent.
    Mr. Shuster. Mr. Alves, your view on that? I know you have 
made that recommendation. You know, what are your thoughts to--
well, I guess I should say, I didn't see a figure. What is the 
magnitude of the theft that is going on? What are we talking? 
Do we now have an idea of how much money is being stolen?
    Mr. Alves. It is very difficult to estimate how much is 
lost to theft because you can only identify what you detect. 
You can't identify what you can't detect.
    We think that Amtrak is taking steps that are going to 
address a great deal of the schemes that have been--it is 
really a question of putting controls in place. The point-of-
sale is going to result in significant improvements. When 
point-of-sale is connected to the inventory system, that is an 
improvement.
    But what we see is that if you fly on an airline today, 
they are not taking cash. Anytime you are dealing with cash, 
you are subject to a high vulnerability of taking a loss. The 
other thing that the airlines have found out and others have 
found out is that when people use credit cards they buy more, 
and so that also increases revenue.
    I agree with Joe that, particularly at this time, a 
cashless--onboard cashless may not be appropriate for some of 
Amtrak's routes. I do think that it should be piloted. There 
are places where it can be used and can work. And there are 
alternatives, including at the station you might be able to put 
in your cash and get a card that is valid on the train. So I do 
think it is a serious proposal that should be looked at.
    Mr. Shuster. Ms. Quinn, do you accept cash?
    Ms. Quinn. We do accept cash and credit cards. And we are 
actually in the process of implementing a point-of-sale system, 
as well, which will tie to the inventory. And I think 
``control'' is really the important thing. We have had a manual 
system up until this point because we couldn't find a machine 
that would fit in the space, but we have one now. And I think, 
as long as you watch your inventory and your cash, you 
implement basic business restaurant practices, like blind drops 
and those kinds of things, that you--you have to watch it all 
the time.
    Mr. Shuster. Right.
    Mr. Bateman, your view on the pilot of a cashless system? 
As a worker, does that make your job easier or harder?
    Mr. Bateman. As a worker, we encounter a lot of people that 
are, for lack of a better term, poor.
    Mr. Shuster. That are?
    Mr. Bateman. That are poor, or they don't have credit 
cards. So how do you accommodate them?
    I think Mr. Alves' suggestion is very good as far as maybe 
having a machine somewhere in a station where you could deposit 
money and get a card you can use on the train. But saying that 
people can't use cash on the train, I think we would lose money 
doing that.
    Mr. Shuster. All right. Uh-huh.
    And I just have one more question. To Mr. Boardman, the 
1981 law that was enacted, section 24305(c)(4) of Title 49 of 
the United States Code that states that Amtrak can operate food 
and beverage services only if they bring as much revenue as it 
costs to provide the services; in your testimony, you stated 
you believe Amtrak is within those limits set by the statute.
    However, Amtrak has posted more than, as we have heard, 
$800 million in direct losses and $84.5 million in 2011. So, to 
me--I guess you have a lawyer that says that you are within the 
scope of that law. Do you have a legal opinion?
    Mr. Boardman. Well, I think we are in compliance, 
personally. I mean, I won't say this is a complete surprise 
that this comes up, but for 31 years or whatever it has been 
that it has been around at this point in time, Congress has 
discussed it. And there is other language that has been 
provided, and talked about, I think, by Ms. Brown this morning, 
about the fact that any business, the airline business and any 
business where you are not primarily in the food business, you 
really wind up with attracting customers by offering food at a 
cost that doesn't make a profit and doesn't necessarily break 
even. And part of the discussion that occurred in that whole 
process that you are talking about recognized that.
    Mr. Shuster. My time has expired. We are probably going to 
go around for a second round, but, with that, I will yield to 
Ms. Brown for questions.
    Ms. Brown. Thank you.
    Thank you, Mr. Boardman, and thank the entire panel.
    I want to start out by clearing something up. Yesterday I 
was on--well, Tuesday--on a flight. It was a US Air flight 
that, within minutes, could have been crashed. However, I want 
you to know that they only take cash only. They do not take 
credit cards. And, in fact, I bought some Pringles that was $3, 
and I bought some almonds which was $5. So, I mean, I want you 
to know that some of the airlines, US Air, which is my flight 
that I take all the time, only take cash, they do not take 
credit cards. And it is also confusing, because some of them 
only take credit cards, some of them only take cash. So it just 
depends.
    So the point is, I just want you to know that some of 
them--but I want you, Mr. Inspector General, to talk about the 
long-haul service, because that seems to be where the 
Republicans want to say that we are losing money. But, 
basically, that is not my position. Although their position is 
always to privatize. Well, what is that? What is privatize? It 
is minimum-wage jobs, Mr. Bateman. It is minimum-wage jobs. 
Although you are still doing the service, somebody is making 
the money.
    In their proposal, their proposal, their failed 
transportation bill that came to the House--well, it never did 
come to the House, but passed this committee, basically it was 
you would privatize it, you would bid it out; however, any 
subsidy that we give Amtrak, we would give it to this other 
group, although it would be no savings to the taxpayers.
    So can you talk about the long-distance service, sir? 
Because I personally think it is an advantage in providing, 
making sure that people can purchase with cash--some people, 
that is all they do, cash. And I have a note that I am going to 
submit in the record from one of the Members who was on Amtrak, 
that the tracks went out, and the fact is, they provided food 
and water and other refreshments while they waited 6 hours 
because it was an emergency on the tracks.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Ms. Brown. So would you explain that to the Members? 
Because, basically, it is more than just when you leave and we 
are going to leave on time and we are going to arrive at a 
certain time. Sometimes things come up. Can you explain the 
long-distance service and why it costs more?
    Mr. Alves. I will do my best. And long-distance service is 
very different from the Northeast Corridor or the short-
distance services.
    Ms. Brown. Or Ms. Quinn's services, for that matter.
    Mr. Alves. Yes, yes.
    Ms. Brown. OK. Uh-huh.
    Mr. Alves. And what Mr. Bateman was saying about being on 
the train for 3 or 4 days I think is significant, as well. 
Let's start with the fact that long-distance service accounts 
for the bulk of the loss on food and beverage service, and 
labor costs are a large portion of that loss. But the idea that 
the lead service attendants, the onboard service personnel 
should be paid at a minimum wage at the level of a restaurant I 
believe is not entirely realistic when you are asking people to 
travel 4 or 5 days at a time away from their family, in 
addition to the training and safety that they get. So I think 
it is a different animal. It is not a good comparison.
    But, on the other hand, I think there are opportunities to 
look at different business models, which we plan to do over the 
next several months, and do an analysis. I think we have to be 
very sensitive to the customer and employees, but I think that 
there are alternative models that should be looked at and 
analyzed to see if we can reduce the amount of losses on long-
distance routes. But we have to recognize that it is a very 
different animal.
    Ms. Brown. Uh-huh. You know, recently I was at the baseball 
game between the Democrats and Republicans. I gave my staff 
$20, they came back with a little change, and I had a hotdog, 
fries, and a Coke right out here at the ballpark. So where you 
go at different times depends on the cost.
    I told you last night I was at a bar, and--well, it was a--
yes, but I was at a bar. And I bought a Coke, or maybe it was a 
Pepsi, I don't know. It was watered down. It was $5 for that 
drink.
    Mr. Shuster. That wasn't water in that coke.
    Ms. Brown. No, that is what it was. The actual drink cost 
$10 if you were going to get a mixed drink. But a watered-down 
Coke cost $5. And it was in a glass, it was water and I guess 
some kind of syrup. It cost $5.
    So it just depends on where you are. When you go to the 7-
Eleven, it costs one thing. When you go to the airport, it 
costs one thing. When you are on a flight, it costs one thing. 
And when you are on the train, it costs different things. But 
keep it in mind, overhead costs, various factors. When I go to 
the grocery store, I can get a six-pack, three or four, of Coke 
or Pepsi for $10. It just depends on where you are.
    But I know most of my colleagues don't have this experience 
that I have. Whether I am in the dollar store or whether I am 
in Winn-Dixie, it just depends on where you are, the cost of 
that Coke.
    Mr. Shuster. The gentlelady's time has expired.
    Ms. Brown. Well, we are going to have another round. All 
right.
    And, Mr. Boardman, I will get to you, because I do want to 
know about those tickets that I heard about 3 o'clock this 
morning and what you all are doing as far as modernizing the 
service.
    I yield back the balance of my time until my next round.
    Mr. Shuster. The gentlelady from Ohio, Ms. Schmidt.
    Mrs. Schmidt. Thank you.
    And, quite frankly, I continue to be confused by some of 
the responses to this committee. Mr. Boardman, you stated that 
you wouldn't want a cashless society on your train, and yet, 
when Amtrak briefed the T&I Committee July 24th of this year, 
on page 29, they want to promote a cashless environment aboard 
trains. And just let me quote: ``Cashless sales would increase 
revenue through higher average check amounts and improve 
customer throughput; reduces inventory in cash losses due to 
handling errors, theft, and fraud.''
    And it also--there is a picture of the amount of paperwork 
just two people have. This is your stuff, this isn't mine. And 
that would all be eliminated. So you would know exactly what 
purchases were made and what purchases would be made in the 
future.
    The second part of your nervousness about the Amish and the 
Mennonites, I have both in my district. The Millers are Amish, 
the Klines are Mennonites. And they take credit cards at their 
facility, so it is not like they are adverse to credit cards.
    What we are really trying to do here is to get you to a 
profitable position. I am not against labor. I have taken every 
tough labor vote in this committee. But I want to make sure 
that Amtrak is profitable in the future so that when I want to 
use it, it is there for me to use. And right now we can't 
continue to bail this system out.
    You know, you are proud in your testimony, sir, that you 
improved your financial losses from 49 percent in 2006 to 59 
percent, a 20 percent improvement in 2011. And by 2015, your 
goal is to recover 70 percent of the food and beverage cost. It 
should be 100 percent. This is inexcusable. We are here to help 
you make that happen.
    You know, you are allowed to use up to 10 percent of your 
ticket sales to cover your costs, so you get to use this little 
fuzzy math to get over the 30-year-old piece of legislation 
that says you have to be profitable. But, you know, allowing 
that ticket sale came from an appropriation bill 29 years ago 
in 1982 that I am not sure is legal today.
    Where do you get the authority for something that happened 
in 1982 for today? That is my first question.
    Mr. Boardman. So I would like to go back and say to you--I 
started out by saying my personal belief is that we need to be 
allowed to use cash in this country to pay for debts. I did not 
say it was the company belief. So there is no inconsistency and 
shouldn't be any confusion.
    Mrs. Schmidt. You said you weren't sure what the company 
belief was. I didn't type this.
    Mr. Boardman. What I said was I don't know, in the end, 
what the decision will be. And I still don't. But I don't 
believe it works everywhere in our system. I just don't want 
you confused about that.
    Mrs. Schmidt. Well, the second thing is, I know that you 
are adverse to using vending machines, and you cite two studies 
where on a short-term ridership you would lose, according to 
your study, $91 million and on a long-term another $93 million. 
And yet, when I look at North Carolina, the Piedmont line, on 
their short trip, they use vending machines.
    Mr. Boardman. It may work on----
    Mrs. Schmidt. And, you know, they are actually making--I 
mean, they are not making grand-scheme-of-things money, but I 
think last year they made just about $1,000 on it, which at 
least keeps them in the black.
    So where does your study support this, when we know in 
actuality it is working in North Carolina?
    Mr. Boardman. Well, I think it can probably work in some 
areas. I think there is a possibility. We are looking at it on 
some of the shorter distance routes that it could be used on. 
But it is not going to work on that long-distance trip. And I 
think a large part of what we get talking about is the 
differences between the long distance and the short distance.
    Mrs. Schmidt. Well, sir, let me go back to--you point that 
on a short-distance trip you would lose $91 million, and yet in 
North Carolina they are not losing a dime on it. Would you be 
willing, then, on short-term trips----
    Mr. Boardman. I think you are going to--I am sorry, I will 
let you finish.
    Mrs. Schmidt. You know the train is either going to go 
short- or long-term, correct?
    Mr. Boardman. Pardon me?
    Mrs. Schmidt. You know the route your train is going to 
take, correct?
    Mr. Boardman. We have 21 routes that are short-distance 
that are owned by the States, and the States can decide how 
they want to do that.
    Mrs. Schmidt. OK. So you know on the short trips you can 
have vending machines, and they work, correct?
    Mr. Boardman. I don't know that. We haven't done that.
    Mrs. Schmidt. Apparently it is working in North Carolina.
    Mr. Boardman. Well, it works in North Carolina. And I am 
not trying to argue with you, but I don't know that because we 
haven't done that.
    Mrs. Schmidt. What makes you think it can't work on a long-
term trip?
    Mr. Boardman. I think it has just been the past experience, 
but it is something we are checking into at this point in time 
and looking at to see whether it will work somewhere else. 
North Carolina doesn't have the number of trips that we 
actually have even on our short-distance routes.
    Mrs. Schmidt. I think that my time has expired, and I will 
come back.
    Mr. Shuster. With that, Ms. Johnson?
    Ms. Johnson of Texas. Thank you very much, Mr. Chairman. I 
would like to yield my time to Ms. Brown.
    Ms. Brown. Thank you, Ms. Johnson.
    Would you please clear up the short-distance? Because, 
first of all, States have the option to opt out if they want to 
and provide the services they want. First of all, explain that.
    And I don't know where the gentlelady gets the $98 million 
or $98,000 or whatever she is saying, because the short 
distance that I see that the States supported is $31,000, 
rounding it off. So would you clear that up for us?
    But the first thing, clear up the fact that States have the 
option if they want to. And there are two States that take 
advantage of it. That is the first thing.
    And then the fact is, on the short line--and I don't even 
like the way we are defining this as losing. Because people, 
when they go on the train, I do not want no vending machine on 
no train. So it is the difference in what is it that you want. 
I want a hot cup of coffee, yes. And I want a hotdog, and I 
don't want to spend $20 for it, but I spend it in the park. Or 
$5 for a Coke that I spend it in a bar.
    So would you explain to the committee since we are in the 
weeds and I have to discuss in this full committee, when we 
should be talking about needles or other things in sandwiches, 
would you explain to us the short and the option that the 
States have if they want to?
    Mr. Boardman. Certainly.
    One of the things that has happened, under the section 209 
provision under PRIIA, is that States need to pay all the costs 
of the services that they provide. And Patricia Quinn was one 
of the folks that worked with us to come up with how that 
should happen in each one of the States.
    Right now, the States, other than North Carolina and Maine, 
have not opted to actually begin to implement something like 
that, but they have that opportunity to do in the future. There 
are some States--one of the States of the 21 is Pennsylvania, 
with the Keystone service, they don't have any food service at 
all. They made a decision not to do that. Along with that is 
the service between Albany, New York, and New York City, which 
doesn't have any food service or coffee or anything else.
    That was where Amtrak actually tried to privatize food 
service, and Subway came on board and lasted a very short 
period of time because there weren't enough customers from what 
they expected might actually buy Subway sandwiches to actually 
get a profit for them on the train. And that is part of the 
difficulty. Even on the smaller and the shorter routes today, 
there has to be a really pretty good marketing job going on to 
make that happen.
    And we are targeting, as much as we can, the right kind of 
segments of the market. I think Patricia could probably talk 
about it better in terms of what she targets, since she has, I 
think, a hotel food service background, and really has looked 
at this in a hard fashion. And we are trying to learn some 
lessons from her on those shorter distance trains.
    Ms. Brown. Ms. Quinn, would you like to discuss? I 
understand that you all pay $10 an hour, and talk about the 
benefits. But also that you have a unique--I guess Maine has 
some unique foods and stuff like that. I would love to go up 
and check it out.
    Ms. Quinn. I think that you should. We would love to have 
you.
    I think you have to look at it as a balance. I mean, there 
are two ways to achieve a net cost. One is by controlling your 
expenses, and the other is by increasing revenues. And so we 
look at both of those things. And, again, our route is 
relatively short, it is isolated, and so it is easier to kind 
of manage those things.
    You know, our operation is pretty barebones. There are 
about 15 or 18 employees, food service employees, that are 
there. The supervisor shares an office in our office. We 
actually house a commissary, so we don't have to pay extra rent 
to other places to keep the food.
    But we also work very hard on the sales side. We have one 
attendant onboard, and the attendant is a fixed cost, and the 
train trip lasts a certain amount of time. So if you can't 
reduce expenses sometimes, the opportunity is there to increase 
revenues. This is why we introduced those different products 
and try to sell lobster rolls in the summertime and work with 
employees to do upselling. You know, training in terms of if 
somebody goes up and orders a hotdog, then the next thing that 
would come out of the attendant's mouth would be, ``And would 
you like some chips with that?'' Every few cents that you bring 
in at that point in time matters, once you are selling food. 
The margin--somebody mentioned earlier this is a business of 
margins.
    So it really is a matter of not always cut, cut, cut, but 
how to increase the other side. We have been able to experiment 
with some different things. For instance, we experimented with 
cart service on some of our trains. It really wasn't successful 
for us, so we stopped and said, well, that didn't work.
    But routes all have their different personality, they have 
their different clientele. And I think maybe a one-size-fits-
all solution is not something that is achievable. But working 
in partnership with Amtrak and the States, hopefully there will 
be more creative ideas from different regions that can help 
reduce that net cost, because I think all of us are interested 
in reducing that.
    Ms. Brown. I guess my----
    Mr. Shuster. The gentlelady's time has expired.
    Ms. Brown [continuing]. Last question is, do you----
    Mr. Shuster. The gentlelady's time has expired.
    Ms. Brown [continuing]. Use cash?
    Mr. Shuster. The gentlelady's time has expired. Let me move 
on here. You are going to get a second round. I am going to 
keep things moving here.
    Mr. Boardman, back to you, on the question about whether 
you are in compliance with the law or not. It is in that 1982 
bill, the appropriations bill. And in discussions with the 
Appropriations Committee, they don't believe that that language 
is persuasive enough to have a legal ruling.
    So, again, the question I asked you before, do you have a 
legal ruling by your attorneys, your legal department, that 
says--and can you share that with the committee--that this is 
based on their legal opinion?
    Mr. Boardman. I am sorry, Congressman. I think I already 
answered that. I don't. I didn't, I don't.
    Mr. Shuster. Microphone.
    Mr. Boardman. Thanks. I don't.
    Mr. Shuster. OK. Again, so you are saying that you are in 
compliance with the law and there is no legal background? 
Again, I think----
    Mr. Boardman. I am not saying anything. I just don't have 
it.
    Mr. Shuster. OK. Well, that is, I guess, one of the main 
reasons we are here, is because we believe that Amtrak is 
violating the law by not breaking even on that. So, again, that 
clears up that you don't have a legal opinion on that.
    Mr. Boardman. No.
    Mr. Shuster. Also, I know in 2006 there was an initiative 
to reduce the number of onboard food and passenger personnel 
from five to three per dining car, known as the ``simplified 
dining plan.'' How has that worked?
    Mr. Boardman. Some of it has worked, but some has not.
    Mr. Shuster. Let me ask one more question. The three to 
five--I have been on a number of Amtrak trains, and I don't 
think--there are three people in a dining car?
    Mr. Boardman. Well, you have to--have you been on the long-
distance trains?
    Mr. Shuster. No. That is what we are talking about.
    Mr. Boardman. That is why.
    Mr. Shuster. OK. Can you talk about whether the simplified 
dining initiative--how is that----
    Mr. Boardman. Some of it works when we are in a lower part 
of the season, but when ridership really gets heavy, it gets 
very difficult to do that with three people.
    Mr. Shuster. All right. And I was told that there were 237 
employees furloughed as a result of that. Are those people, are 
they back working, are they furloughed, are they gone, or what 
has happened with that?
    Mr. Boardman. I don't know.
    Mr. Shuster. OK. Is that something we can get, find out on 
that?
    Mr. Boardman. Sure.
    [The information follows:]

        This information is provided in response to question 
        number 3 on page 67.

    Mr. Shuster. And, Mr. Alves, you mentioned, I think, in 
your testimony about the disjointed management of the food 
service and the operations. And can you talk a little bit more 
about that? Did you say Amtrak is in the process of switching 
or joining this to, I guess it would be take it out of the 
marketing department and put it in operations. Can you talk a 
little bit about that and what problems it has created?
    Mr. Alves. Yes. Both departments share responsibility for 
different aspects of food and beverage. So, marketing runs the 
commissaries, establishes the menus, and delivers the food to 
the trains; and transportation provides the food to the 
customers.
    This creates, in our view, a couple of issues. One is that 
nobody is--no single person below Mr. Boardman is responsible 
and accountable for profit and loss. And the second is that it 
has led to a lack of consolidated long-term planning.
    I think that the actions that Amtrak is taking are going to 
address that problem, but I would like----
    Mr. Shuster. They are going to shift it from marketing into 
operations?
    Mr. Alves. Yes. I think that will go a long way to fix the 
accountability----
    Mr. Shuster. Do you think that is the way to go, not the 
other way, take it all and put it into marketing?
    Mr. Alves. No, I think that Amtrak has made the right 
decision. It should be part of operations.
    Mr. Shuster. OK.
    Mr. Alves. But I would like to comment more broadly. I 
think it is important to note that these actions link directly 
to the initiatives that Mr. Boardman was talking about in his 
testimony, and that these--that the direction that the board of 
directors and Mr. Boardman are taking to make Amtrak operate as 
a profitable business, or as a for-profit business--the company 
may never actually make a profit, but it has the opportunity to 
operate much more efficiently and effectively than it has in 
the past.
    And I think that these actions are completely consistent 
with the direction that the board and Mr. Boardman are taking. 
And I would cite the existence of a strategic plan, the 
reorganization along business lines to improve accountability, 
and efforts to implement Lean Six Sigma to improve processes, 
make things more efficient and effective.
    And I would like to comment that if that effort is 
sustained and implemented effectively, that it has the 
potential over a couple of years to really make a difference in 
Amtrak's operations.
    Mr. Shuster. OK. Thank you.
    And, with that, I yield to Ms. Brown for a second round of 
questions.
    Ms. Brown. You know, for me, it is just very clear that the 
Republicans have one agenda, and that is to privatize Amtrak, 
whether it is Amtrak or the food----
    Mr. Shuster. Amtrak is a private company. It is supposed to 
be.
    Ms. Brown. ``Privatize'' meaning take Amtrak and give it 
to, I guess, somebody's friend and you work at a minimum wage 
job and you don't have any benefits. That is what it seems to 
me.
    You know, particularly these jobs, 1,200, they want to take 
them and cut it in half, Mr. Bateman, and I guess privatize 
them out. But, you know, it is just amazing--in their bill that 
they brought before the committee, what they suggested was that 
we are going to privatize it out, but yet any subsidies that we 
are given now, that we are going to give it to the company that 
get it, even though the employees will get low wage, minimum 
wage. I don't quite understand that rationale, but it is the 
rationale that the Republicans have. You can fool some of the 
people some of the time, but you can't fool all of the people 
all of the time.
    Mr. Bateman, if I cut your salary in half, how would you 
manage.
    Mr. Bateman. Well, actually, it would be very difficult to 
take care of all I have to take care of with my salary cut in 
half.
    I think one point we keep forgetting is that, you know, 
historically, it has been very difficult for rail service, you 
know, to operate a profit overall, including the food service 
part of it. And the expectation, to me, is just totally 
unreasonable. The goal is always to improve and do better. But 
if rail service was lucrative and was not a logistical 
nightmare, we wouldn't be here. We can call Chessie or whoever, 
some freight company, and say, ``Well, come on, take it back, 
guys.'' And that is not going to happen. I mean, can we do 
better? Yes. Are we doing better? Yes. Are we going to continue 
to do better? Yes. But for Amtrak or any other food service on 
the train to ever be at 100 percent, it is impossible.
    One issue they don't mention is that, every time the train 
breaks down en route or there is a service delay, we have to 
give away food. Restaurants don't give away food like that. 
Like, when was it, January--excuse me, June 29th, during the 
storm, the hurricane that came through the east coast, we had 
several trains broken down all over the system, and we gave 
complimentary food service to everybody on the train. So this 
whole expectation that we should operate as a restaurant or 
that we are a restaurant is absurd to me. We are not a 
restaurant.
    Ms. Brown. Yes, sir.
    Ms. Quinn, you were rudely interrupted and were not able to 
tell me about how you operate as far as cash is concerned. You 
know, this is America, and we do use cash. I know all of my 
Republican colleagues have credit cards or some kind of gift 
cards or something. Would you tell me about cash? Do you all 
use good old-fashioned money?
    Ms. Quinn. We accept both kinds of payment. We accept cash, 
and we accept credit cards. Obviously, there is a lot more 
control associated with a cashless system, but that doesn't 
mean we exclude cash.
    And, also, going forward, with the point-of-sale system, 
there is new technology where people can just kind of wave 
their card and it just kind of goes right into the system. So 
as technology improves and it can be adapted, I think that is 
something that we all look at, because it makes it a lot easier 
for all of us.
    Ms. Brown. If you have those technology systems, I just 
started using the ATM card, you know, because I didn't trust 
it, but now I am more inclined to do it, but I still like cash 
better.
    Mr. Boardman, would you please expound upon cash? Seems 
like Republicans, I know they like it but they have credit 
cards and they have different means of operations that the 
average person may not have.
    Mr. Boardman. Now, Ms. Brown, Democrats have credit cards, 
too.
    Ms. Brown. Democrats have credit cards too?
    Mr. Boardman. Yes.
    Ms. Brown. Yes, some of them do. Some of them don't.
    Mr. Boardman. Yes. One of the things from my perspective is 
that it is going to be very difficult, and I think everybody 
knows that, I think Ted knows that as well, when there are a 
whole lot of people on our trains that aren't necessarily going 
to have a credit card. They may be young, they may be poor, as 
Mr. Bateman says. They may not want to use credit cards, such 
as myself and maybe a few other folks.
    Ms. Brown. Me.
    Mr. Boardman. And so the reality of denying somebody the 
use of cash to make a purchase is a problem. And technology 
surprisingly fails once in a while. And the ability for our 
lead service agents and others to actually continue to do 
business ends when that technology fails, in terms of payment, 
unless you do have cash. So I think in the end there probably 
will be a need for cash in our operation because of the way it 
operates.
    Ms. Brown. Thank you.
    Mr. Shuster. [presiding.] The gentlelady's time has 
expired. I recognize Mrs. Schmidt.
    Mrs. Schmidt. Thank you. First off, I want to correct a few 
things. Number one, it was in Amtrak's briefing that they 
wanted to go to a cashless program. So it is not a Republican 
position, it is an Amtrak position. Secondly, in what the 
average cost is for your employee, by your own records, sir, 
the average fully loaded compensation for food and beverage 
employees, including all of the benefits, is $94,000 a year, 
which I think is a decent amount of money to make.
    Mr. Boardman, in addition to losing $85 million in 2011, 
Amtrak riders would have to pay a lot more for--they had to pay 
a lot for the food. I mean $9.50 for this hamburger I think is 
too much.
    I would argue that the riders do pay too much for the 
quality that they are getting, but I am curious if you looked 
at charging more to at least cover your costs, and let us say 
and get rid of the $94,000 a year, but you have got to cover 
your costs. So if it costs $16 for the hamburger to break even, 
are you willing to charge $16 for the hamburger to break even?
    Mr. Boardman. It would have to be a hell of a hamburger.
    Mrs. Schmidt. Well, you know, I think it is a heck of a 
hamburger at $9.50.
    Mr. Boardman. I don't think so. I mean, I don't think that 
is realistic.
    Mrs. Schmidt. Well, sir, I am trying to get you to be 
profitable and there are business models out there that I 
believe can get you to that, and yet I am feeling a resistance 
here from you to even look at such business models such as a 
cashless program, which your briefing book suggests that would 
take away the waste, fraud, and abuse, would take away the 
accounting, manual accounting, would allow you to inventory in 
a much better mode so that you know how many hamburgers you 
have to produce because the razor thin cost of profit in food 
service is a very delicate matter.
    Again, I said a couple of hours ago my daughter married 
into a family that has a lot of restaurants, and my son-in-
law's job is to make sure that they make money. So I get the 
profitability, and it seems exclusive of what they pay for 
their servers, this is what it costs for the food.
    And so there are ways to make you profitable, but you have 
to continue to look at those razor thin margins and make sure 
that you are profitable. But I am not seeing that.
    I think on short trips vending machines may be an 
opportunity for you. To lose, to cost $3.40 to serve this Coke, 
I think is appalling when, you know, I just spent 85 cents for 
this Coke in a vending machine downstairs. When I go to the gas 
station in Cincinnati, the BP on Fipe Road, it is 85 cents. If 
I go to the one out in Peebles, it is 55 cents for the same one 
because they have different costs and different profits 
associated with it. It costs you $3.40 for that Coke. That is 
inexcusable. I am just trying to help you here.
    So my question to you is would you be willing to charge 
what it costs for the delivery of the service.
    Mr. Boardman. No. I didn't think that you were being 
serious with charging $16.50 for a hamburger. And so I probably 
should have treated it differently. I didn't realize you were 
serious.
    Mrs. Schmidt. I am trying to get you to be profitable, sir.
    Mr. Boardman. I understand. So what I would say to you is 
businesswise, the elasticity of the demand for that kind of a 
product would drop our sales so significantly that we would 
lose a lot more money to charge that kind of money for a 
hamburger on the train. It would only become inelastic if 
people were actually starving and they couldn't actually do 
anything other than be robbed at $16.50. So using that example, 
I guess I didn't treat it seriously, and I apologize for that.
    Mrs. Schmidt. I am trying to figure out a way for you to 
pay your employees and be profitable. What suggestions can you 
help me deliver that? Because in 2015 to only be at 70 percent 
is not enough. Our Nation is in a serious financial crisis. We 
have to pick up the pennies off the floor. We can't overlook 
them anymore. And losing $85 million in 2011 is inexcusable. 
How are we going to stop the bleed, I ask you?
    Mr. Boardman. So I know that you are looking for details, 
Congresswoman.
    Mrs. Schmidt. I am looking for details, yes.
    Mr. Boardman. I will respond in writing for that question.
    Mrs. Schmidt. Thank you.
    Mr. Shuster. Well, thank you all for being here today. I 
appreciate it greatly.
    Again, I just want to point out again it is not my intent 
to eliminate jobs. And in fact, the last 20 years, Amtrak has 
gone from 29,000 employees to 19,000 or thereabouts. It is 
10,000 people that aren't there. If we don't continue to make 
significant improvements on Amtrak, that is going to continue 
to happen. And that is not going to be because I am up here 
trying to figure out ways to reform the system, to reform a 
company that is private already. Again, my colleague keeps 
saying that it was chartered as a private company. It is 
supposed to be, and it hasn't been able to do that.
    And I notice some of our friends from labor from the 
freight rails in the room today. We saw what we did when we 
took that freight rail system, which was failing, it was in 
disrepair, there were railroad companies had gone bankrupt. And 
now after 30 years of significant reforms to the system, now 
they have a very profitable, self-sustaining, doesn't require 
Government subsidies to operate the freight rails in this 
company. Now, it is the envy of the world. Now, I am not trying 
to say, and I have said this in the beginning and I think I 
have been pretty consistent in my 10, 11 years here in 
Congress, I don't know that the passenger rail can ever make a 
profit. But I think we have got to be moving closer to that 
break even. And then we will talk about above the rail, I think 
they can make a profit. But when you take the whole system in, 
it is going to take the Government having some involvement in 
it.
    But we can't continue to sit here and look at the system we 
have in place and not see that there needs to be significant 
reforms. And I know my colleagues here, they for years have 
tried to move us towards the system that they have in Europe 
which is democratic socialism, and now the Europeans are trying 
to back away from that system. And in fact, I believe it is in 
2014 all European passenger rail systems have to have 
competition on the lines.
    Now, I am not an expert. I think we are going to be holding 
a hearing about it, bringing our European friends over to ask 
them how does that work, how is that going to be effective. 
And, again, they have a different system than we do. But, you 
know, we can listen and learn from them.
    But, again, to just sit here and to continue to say we are 
going to just keep on going the way we are, that everybody 
needs to be at the table, management is here today, labor is 
here today, Congress is here. We have got to sit down and say 
how are we going to do this. And is it going to cause some 
pain? Sure, it is. Sure, it is going to cause some pain. But if 
we continue to go this way, the pain has already been there, 
10,000 jobs, 10,000 jobs gone.
    You can sit here and my colleague can accuse me of wanting 
to get rid of all of these jobs, but 10,000 are already gone, 
and I believe it is going to continue to go down unless we do 
something to seriously reform the system, to take the shackles 
off of management to be able to do the things they need to do, 
labor to do the things they need to do. And this debate is 
going to continue to go on until we really reform it.
    I believe we need passenger rail in this country. I think 
one of the big reasons for passenger rail's the increase over 
the last 10 years is because of 9/11 because look at what we do 
to people in the airports now. I don't fly in an airport or a 
plane to New York City. I get on a train. I don't even drive to 
Philadelphia when I go to Philadelphia. I go to Harrisburg. 
They have upgraded the system, the Keystone system, the 
Keystone line, and that is the way I go to Philadelphia so I 
don't have to deal with the headaches of traffic.
    Passenger rail is something that we need in this country. 
We can sit here and we can continue to debate why there is a 
decline in the passenger rail in this country. It was because 
of the interstate highway system, it was because of the 
aviations, when the aviation came about. That is why people got 
off the trains. They got into their cars and they got into 
airplanes. But now we look at the congestion that is going to 
occur, it is occurring in this country, especially in the 
Northeast Corridor but even around the country. We are in about 
25 or 26 years go from 300 million people, 310 or something 
like that now, to 400 million people, and we need to address 
the situation, especially in our most congested corridors to 
make sure there is passenger rail to get people, and we are not 
going to be able to add another lane to 95 going up the 
Northeast Corridor. It is impossible to do, I think.
    So I am committed to working with labor, with management, 
with my colleagues across the aisle, but I am not willing to 
work in the same old model. We have got to sit down. We have 
got to figure out what we need to do to make sure we have a 
vibrant, break-even passenger, or close to break-even passenger 
rail system in this country.
    I appreciate everybody coming here today.
    Ms. Brown. Excuse me. Do I get a closing?
    Mr. Shuster. No, you don't. I close because I am the 
chairman. That is the way it works.
    Ms. Brown. Yes. We need 218 to change it.
    Mr. Shuster. That is exactly right.
    But I appreciate, Mr. Boardman, you are going to get an 
answer in writing for Mrs. Schmidt. Mr. Alves, Ms. Quinn, and 
Mr. Bateman, thank you all for being here today. I appreciate 
it.
    And the committee is adjourned.
    [Whereupon, at 12:40 p.m., the committee was adjourned.]
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