[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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available online at: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=transportation
_____
U.S. GOVERNMENT PRINTING OFFICE
75-420 PDF WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.]