Amtrak
Reform Council
Minutes
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.
