August 31, 1999
Reform Council (ARC or the Council) held its business
meeting at the Port of Seattle Commission Chambers, at
2711 Alaskan Way, Seattle, WA, on Tuesday, August 31,
present: Gil Carmichael, Chair; Paul Weyrich, Vice-chair;
Bruce Chapman; Wendell Cox; S. Lee Kling; Federal Railroad
Administrator, Jolene Molitoris; Clarence Monin. Participating
via conference call: John Norquist and Joseph Vranich.
chaired the meeting and Deirdre O’Sullivan served as secretary.
Remarks by Gil Carmichael & Approval of the Minutes
a welcome by Seattle host Mr. Chapman, the Council noted
several informational items before taking up the official
agenda. The Council extended its thanks to Bill Loftus,
as he leaves his position as the Part-time Director of
Administration for the Council. Mr. Monin also noted
that while he is no longer the president of the Brotherhood
of Locomotive Engineers, he remains a consultant to them
and continues on the Council.
called the meeting to order and asked for a motion to
approve the minutes. Mr. Chapman so moved and was seconded
by Ms. Molitoris. The minutes of June 29, 1999 were approved
unanimously as submitted.
Approval of FY2001 Budget
Till, Executive Director, stated that the staff had prepared
the FY2001 budget proposal request (Budget), and it was
informally reviewed by the Chair and Vice-Chair. He further
stated that while the Council has the authority to submit
its Budget directly to the Congress, it is acting at this
time so the Budget can be considered by the Administration
as it begins the FY200l budget preparation review cycle.
The Budget is for $1.4 million and the breakdown is as
follows: the increased request is primarily for staff
($860,000 an increase from the previous $710,000 request)
for an additional professional staffer and other salary
increases; small increase in staff travel; technical/consultants
support for $500,000, and expenses for 12 Council meetings.
Mr. Till also stated that this Budget is prepared for
the year beginning October 2001. In addition he stated
that action on the FY2000 request of $1.3 million was
still pending. The House had approved a budget of $450,000,
but the Senate included $950,000 in its appropriations
bill as it goes to the floor for action.
on the Budget, members raised a number of concerns: the
extent of Council meetings and travel, the need for expert
consultants outside the expertise of Council members and
ARC staff, and a request so much greater than is being
considered by the Congress for FY2000. Mr. Till noted
that the proposed increase is minor over the original
FY2000 budget request. In addition, he stated that the
requirements for meetings and related expenses are difficult
to specify since they are approximately 13 months in the
future. Mr. Carmichael stated that it is important for
Council members to have personal experience with the emerging
corridors, that Amtrak operates in different cultures
across the nation, and that state governments and the
railroads are being asked to invest more in the nation’s
intercity passenger rail system. Mr. Monin stated that
his position is that each member of the Council was appointed
for their expertise, and therefore, the ARC does not have
a need for outside consultants. Ms. Molitoris noted that
she cannot comment on the Budget since the Administration
has not set its FY200l budget.
to the Budget, Mr. Chapman noted that the ARC is charged
to address Amtrak reform; if Congress does not want Amtrak
reform, it can reduce the budget. The Council should
move forward; if the Council performs, millions of taxpayer
dollars will be saved. While the Council has expertise
in its members and staff, it does not have the capability
to analyze the massive amounts of sometimes conflicting
data. Mr. Chapman then moved to vote and approve the
Budget. Mr. Weyrich concurred with Mr. Chapman’s sentiments
and seconded the motion.
Mr. Chapman, Mr. Cox, Mr. Kling, Mr. Norquist, Mr. Vranich
and Mr. Weyrich all voted in the affirmative. Mr. Monin
voted in the negative, and Ms. Molitoris abstained from
asked Mr. Till to bring to the next meeting additional
detail on meeting activities for both FY2000 and FY2001.
Mr. Till then noted that the Budget would be submitted
to the Secretary by September 14th for inclusion
in the US DOT budget submittal.
This was the
only action item that the Council voted on at this meeting.
Presentations from Washington and Oregon State
Dept. of Transportation
Manager of the Rail Program spoke on behalf of Washington
State Department of Transportation, while Ed Immel of
the Oregon Department of Transportation spoke of the unique
aspects of corridor service in Oregon. Their written
remarks are attached to the minutes.
members asked several questions about Amtrak costs and
how they are charged back to the states and corridors.
Mr. Uznanski noted that Amtrak overhead costs are now
almost 50 percent of their bill from Amtrak; but it is
difficult to get adequate line-item detail which will
allow them to explain to their state legislature what
these costs are, and why they keep increasing. Mr. Chapman
noted the significance of this problem — that passing
on increasing costs to states without adequate explanation
could jeopardize the state partnership. He further stated
that states could begin to look outside the Amtrak system
for a service provider and that, if the states, which
are also sensitive to the bottom line, feel they are being
expected to carry a national responsibility, they may
become less supportive of the partnerships which contribute
to improved passenger rail.
asked the states to further explain their remarks that
Labor needed to be more realistic about how costs are
determined and allocated. He asked the states for some
specific examples of this problem. Mr. Uznanski stated
an example of this was that Talgo trains are currently
maintained by Amtrak employees but older versions of the
Talgo trains were maintained by the Talgo company and
that equipment never missed a day of service in almost
five years. Once Amtrak employees took over the maintenance,
the states paid a much higher cost for the same kind of
maintenance. The states recognize this need for Amtrak
to handle maintenance, but expect the same level of reliability
experienced with Talgo maintenance.
members’ overall discussion noted that Amtrak will have
to reduce its overhead costs if it is to be competitive.
Mr. Cox asked to states to provide any existing reports
they have on plans, operations and costs to the Council,
and Mr. Kling asked Amtrak to respond to the information
provided by the states regarding Amtrak’s cost allocation
system. Amtrak responded that it will do so. Mr. Uznanski
ended the discussion by noting that the states had looked
at other service provider options, but, on the whole,
Amtrak has more positives than negatives, while still
having areas for improvement.
Mail and Express Service
discussion that followed Amtrak Vice President, Ed Ellis’presentation
on Mail and Express (M/E), Council members brought up
several issues, including the concern that passenger service
not be sacrificed to M/E. Mr. Ellis stated Amtrak is
working on this; noting that for cross-country trains,
delays at a specific interim stop (e.g., Chicago) do not
necessarily mean that the train is late at its destination.
Amtrak is instead adjusting schedules of these trains
(which are not high-speed service). Mr. Kling then asked
how long will it take before M/E will make a profit.
Mr. Ellis stated that M/E will run a profit this year,
and M/E will contribute to Amtrak’s bottom line.
Financial Performance for FY1998 as Reported by the Inspector
General and GAO
ARC’s senior financial analyst, provided a brief overview
of the two reports, noting that the GAO report looks at
activity to date while the IG’s report focuses on the
future. He concluded that overall, progress has been
made towards self-sufficiency but significant improvement
is still needed, and the trend of improvements must be
greatly accelerated. He also stated that Amtrak has promised
to have additional improvements in its new business plan
which is scheduled for release this fall.
to a question by Mr. Monin on what goes into Amtrak s
labor costs, Mr. Mates noted that the reports look at
total operating expenses, not individual elements.
of the IG’s office provided additional insights on the
IG’s report, including its comments on TRA funds and use
of capital. He noted that Amtrak’s use of TRA monies
is legal, including “borrowing” and then paying back those
funds or applying these funds to certain eligible repair
expenditures such as Progressive Overhauls and thus “repaying”
the funds against another internal account. (This internal
borrowing was undertaken in light of Amtrak’s commitment
to Congress to only receive capital funds.) He also noted
that the IG has been a critic on the overhead costs issues.
Amtrak contends it has minimum staffing and that these
overhead costs are fixed -- if it can increase passenger
ridership and revenues, then the per-passenger cost of
overhead would be reduced in theory. He further added
that the IG’s staff has not looked in detail at overhead,
but it also has not found “deep” departments in the overhead
categories; so major savings in these areas are not assured.
It is clear that Amtrak is looking at other partnerships
as the federal government pulls back, but it has not yet
been determined whether these partnerships are for direct
operations, capital or overhead.
also provided some context for Amtrak’s high operating
costs and losses. He pointed to the low level of capital
appropriations in the 1980s which has contributed to higher
operating costs. He also noted that, as a result, Amtrak
has financed $800 million in high-speed rail costs, contributing
approximately $100 million annually in additional interest
costs over the next four years. Without such costs associated
with financing recently acquired equipment, Amtrak would
be $400 million ahead -- which is almost the budget gap
to be closed. When Mr. Carmichael noted that Amtrak received
a very low interest rate for its high speed rail program,
Mr. Dayton concurred that Amtrak’s high-speed rail financing
arrangement is a very fine financial arrangement.
to a question about Amtrak needing an overhead rate as
good as Southwest Airlines, Mr. Dayton noted that the
IG is looking at Amtrak’s strategic plans, forecasts of
revenues and operating costs, capital and requirements,
and the general economic outlook. This is a major effort
by itself; so the IG has not taken a management-consulting
role with Amtrak on what it could do to reduce costs.
In response to a question from Mr. Carmichael about whether
the IG could “benchmark” Amtrak to a comparable entity,
Mr. Dayton noted that the IG had the capability but had
not seen it as its role. Ms. Molitoris noted that this
is a good opportunity, and she would talk with the IG
about undertaking such a benchmark assessment and the
to a question about Amtrak’s progress in implementing
recent labor agreements and their implications, Mr. Dayton
noted that the Amtrak labor agreement was approximately
90 percent of the freight rail labor agreement; and Amtrak
projected that productivity would offset approximately
20 percent of the increased costs of the 1997 to 1999
labor agreement settlements. These agreements are almost
completed and the IG is evaluating them and will make
its findings of such agreements in its 2000 assessment.
If the IG believes that these productivity savings will
not materialize, it will alert Amtrak, but it understands
that Amtrak and labor have a cooperative understanding
that these productivity savings must be achieved. Mr.
Monin concurred that Amtrak and labor have a good relationship
Analysis of Lengthening Trip-Times on Selected Services
Provided by Amtrak
provided an analysis that was distributed to the Council
members concerning Amtrak’s lengthening schedules on selected
routes. In the general discussion that followed, the
Council discussed reasons for the schedule extension,
including the possiblities that delays might be due to
increasing M/E operations or to congestion due to increasing
freight traffic. Mr. Weyrich stated that he had spoken
to Mr. Ellis, who indicated that the schedule extensions
were not due to M/E operations. Ms. Molitoris indicated
that traffic congestion due to the mergers of freight
railroads was almost certainly a contributing factor in
the delays, and Mr. Carmichael agreed with that assessment.
Ms. Molitoris said that she would raise the issue with
Amtrak and report back to the Council.
from Northwest NARP and Adjournment
Felm of the Northwest National Association of Railroad
Passengers spoke about the success of the Cascadia Service
contributing to crowded trains on weekends, and about
his concern regarding privatization due to its implications
for rail’s future in light of the short-term focus of
the investment community.
As there was
no further business, the meeting adjourned.