[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.]