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Amtrak Reform Council

July 17, 2000

The Amtrak Reform Council (the Council) held its business meeting at the Department of Transportation (Nassif Building), 400 Seventh Street, SW, Washington, D.C., in Room 2230 on Monday, July 17, 2000.  The meeting started at 9:30 a.m. and adjourned around 5:45 p.m.

Council Members present: Gil Carmichael, Chair; Paul Weyrich, Vice-Chair; James Coston, Wendell Cox; Lee Kling, Charles Moneypenny, Mayor John Norquist, and Mark Yachmetz and Jack Wells, following seriatim, representing the Secretary of Transportation.

Mr. Carmichael chaired the meeting and Deirdre O’Sullivan served as secretary.

I. Opening Remarks by Gil Carmichael and Executive Director’s Report

Mr. Carmichael called the meeting to order and welcomed new Council member Charles Moneypenny to the Council.  Mr. Moneypenny was appointed by the President as a representative from Rail Labor, filling the position vacated by the resignation of Clarence Monin. He then announced that the first order of business was to approve the minutes from the Council’s meeting in Sacramento on May 18, 2000.  The Council approved the minutes unanimously and without amendments.  Mr. Carmichael then invited the Executive Director, Tom Till, to make his report. 

Mr. Till stated that a letter would be sent to the chiefs of the Railway Labor Organizations inviting them to participate in the next meeting in September.  He gave updates on the various reports that the Council staff was currently working on, reporting that:  (1) an updated version of the Council staff working paper on the Northeast Corridor was in process; (2) drafting had begun on the Options paper that Mr. Chapman had requested; and (3) the summary of principal legislation affecting Amtrak was completed and Ken Kolson would present it to the Council later in the meeting. 

Mr. Till also reported on the office’s filing and financial reporting processes, which have been improved upon since the last meeting in May and were basically up to date.  The last issue that Mr. Till discussed was the Council’s response to the questions Senator Cleland had sent the Council were debated at length at the Council’s May meeting in Sacramento.  Mr. Till indicated that he sent out the final version of the responses to the questions to Senator Cleland without sending them to the Council members first.  This was done in error and he apologized for his mistake.

II. Presentation by Michael Mates regarding the Site Visit to the Maintenance Facilities in Beech Grove, IN

[On June 22, Council members James Coston and Wendell Cox, and the Council’s senior financial analyst, Michael Mates toured Amtrak’s Beech Grove Maintenance Facility near Indianapolis, Indiana.  Mr. Mates’ presentation focused on the information gathered from the tour.]

Mr. Kling asked, when the presentation was completed, what were the overall impressions of the facility.  Mr. Cox stated that though one cannot make a final judgement based on one brief visit, he was impressed with the workers and managers and the work being done, and that it was a credit to the organization.  Mr. Coston agreed and stated that it was working to streamline the locomotives and cars for consistency in order to keep repairs costs down and for the consumer to have consistently a better product.  Mr. Mates stated that he expected to find an old run-down facility, and that was not at all the case; the people were motivated, the buildings were old but very clean, there was evidence of significant capital investment in new equipment, and Amtrak was competing for outside contracts and winning them. 

Mr. Moneypenny stated that he had some concerns that Amtrak was treating its workers as parts rather than as people.  He did not believe Amtrak knows exactly how long it takes

to fix a specific part.  Also, he believes that Amtrak does not trust its workers, and now times workers on everything they do.  He also stated that when workers are not allowed to exercise discretion and are deprived of the ability to use their expertise, productivity drops rather than rises.  He asked them not to implement the time study plan.  He would like Amtrak to speak more on this issue.  Mr. Kling then stated that he would like to know more about the profit/loss of this facility because everything sounds so good.  Mr. Mates explained that it was very difficult to break down exact costs because Beech Grove is not a profit center unit, but is part of the overall operations of the Amtrak Intercity Strategic Business Unit.  Mr. Carmichael then stated that he would like Beech Grove to be treated as a profit center within Amtrak’s organization.  There was general agreement among the Council members that knowing the profit/loss of each facility would be the kind of practice that would be pursued by any successful corporation.

III. Presentation by Michael Mates on Financial Monitoring of Amtrak

Mr. Mates also made a presentation regarding the current financial status of Amtrak.  He stated that although Amtrak was ahead of its budget result early in the year, it was not likely to continue due to program delays, especially Acela revenue delays.  He summarized the situation by stating that Amtrak has a lot of heavy lifting to do to meet the goals of its Strategic Business Plan over the next few years.  Amtrak is behind in its Plan in three of its business units.  The shortfall in the Northeast Corridor Unit Amtrak attributes to the delay of Acela Express.  Mr. Mates also created several charts (prepared by the Council’s staff from publicly available data) comparing Amtrak to Greyhound, Canada's Via Rail, and the airline industry (both collectively and with respect to specific, individual airlines.)  In the course of this presentation, Mr. Mates pointed out several areas of concern for Amtrak including the major difference in load factor between the airline industry and Amtrak.  Mr. Weyrich interjected that Amtrak always has been more concerned with filling the seats on the long haul trains with long distance passengers rather than with those passengers making short hops when, instead, Amtrak should be concentrating on filling the seats period because an empty seat is helping no one.  Mr. Carmichael asked for additional comments and, there being none, then asked Mr. Ken Kolson, Legal Counsel for ARC, to deliver his presentation.

IV. Ken Kolson’s Presentation on Monitoring Amtrak’s Productivity

Mr. Kolson stated that according to the Amtrak Reform and Accountability Act of 1997, the Council is to include in its Annual Report to Congress a breakdown of the labor productivity savings resulting from Amtrak agreements with its contract employees.  Amtrak has reported that the 12% (after inflation) wage increase (from its contracts signed in 1997) has been partially offset by an increase in worker productivity equal to 20% of the wage increase.  However, Amtrak has no means of measuring labor productivity and thus no way to verify the numbers that it is reporting to the Council.  Mr. Till stated that the reason that the Council staff is focusing specific attention on labor productivity per se is because the statute requires it; overall, he stated, the Council staff is focusing on financial performance and not just labor productivity.  Joe McHugh, representing Amtrak, stated that the cost savings estimated by Amtrak business units were subtracted from the Strategic Business Units’ budgets for future periods.  Mr. Moneypenny asked if Amtrak counted the 3-year delay in settling the contract with labor and the interest earned on delayed wage increases as part of Amtrak’s savings.  Mr. Carmichael asked whether the accounting process at Amtrak is able to provide the Council the financial data that it needs.  Mr. Kolson responded that it is not able to provide the data.  Mr. Carmichael stated the problem of getting accurate financial data on productivity is the same problem that makes it difficult to get good financial data on Beech Grove.  Mr. Till stated that he would like to send another letter to Amtrak requesting financial data that has been requested in previous letters.  The Council approved this action without a vote.

V. Presentation by Ken Kolson on the High Speed Rail Investment Act Bills

Mr. Carmichael stated that in the Senate, S.1900, which currently had 49 Senators co-sponsoring it, is designed to fund $10 billion worth of rail infrastructure through tax-free bonds issued by Amtrak.  In his presentation, Mr. Kolson described S.1900 and its companion bill H.R. 3700.  Their principal features are:  Amtrak would be authorized to issue $1 billion of bonds a year for 10 years for projects that generally improve high speed rail; states must contribute a 20% match; Amtrak, and not the federal government, would guarantee the bonds; the 20% match from the states would be put into a trust fund to pay back the bonds in 20 years; and the bondholders would receive tax credits from the federal government in lieu of cash interest.  Mr. Wells stated that the Administration had not taken a position on the bonds.  Mr. Carmichael stated that the proposed bonds are very important to Amtrak because they would ensure Amtrak a guaranteed funding source over the next 10 years.  He then asked if the Council would like to take a position on the bonds.  Mr. Cox then stated that he had great concerns about the proposed bill because the money could be used for almost anything, and he would like to clean up the language in the bill, so that the money could only be used for genuine high-speed rail.  After further discussion, Mr. Kling stated that he believed the Council should not take a position on this issue at this time.  Mr. Weyrich seconded that.  Mr. Carmichael stated that he wanted each of the Council members to study this proposal in depth because it may come up again; he then directed the staff to prepare further analyses of the proposed bonds for the Council. 

VI. Presentations on Private Sector Financing of Rail Passenger Equipment

A presentation was made to the Council by Ms. Mary Bonar, a partner in the United Kingdom law firm of Nabarro Nathanson, who was on a business trip in the U.S.  Ms. Bonar specializes in the area of private financing for rail passenger equipment.  She indicated that the restructuring of the British rail passenger system had created two separate entities: a new private firm, Railtrack, owns and operates the rail infrastructure, and private companies bid to operate the trains over designated routes.  The new industry structure, while exhibiting some growing pains, has resulted in the highest number of passengers traveling by rail since 1947, and a substantial increase in the purchasing/leasing of new rail passenger equipment, mainly financed through private investments.  Mr. Moneypenny asked Ms. Bonar if it was possible that after privatization, taxpayers could actually be paying more than when the system was nationalized.  Ms. Bonar said it was possible.  Mr. John Winner, a partner in the U.S. consulting firm, Harral · Winner ·Thompson · Sharp · Lawrence Inc., discussed international rail passenger developments that could affect the purchasing/leasing of rail passenger equipment in the United States.  Both presentations were generally well received by the Council, and Mr. Carmichael thanked both speakers for educating the Council.

VII. Presentation by Amtrak on their Marketing Strategy

Ms. Barbara Richardson, Executive Vice President of Amtrak along with Steve Scott, Vice President, Marketing, Amtrak, made a presentation on Amtrak’s Marketing Strategy and Service Guaranty.  Ms. Richardson discussed at length the marketing and advertising strategy for the new Acela train as well as the launching of the new corporate symbol.  During the presentation, Council members questioned the timing of the ad campaign for Acela, in view of the delay.  Ms. Richardson replied that much of the time in the movie theaters and the billboard space had already been purchased so the decision was made to launch the campaign to generate anticipation for the new trains.

VIII. Adjournment

The meeting was adjourned at approximately 5:45 p.m.

The ARC is an independent federal commission established under the Amtrak Reform and Accountability Act of 1997 (P.L. 105-134).