Version VIII - This Was The Week That Was
June 29, 2001
Another astounding week for Amtrak.
- The last news to arrive is the first item: President Bush announced Friday he will appoint Transportation Secretary Mineta to the Amtrak Reform Board (board of directors). Secretary Mineta will replace former DOT secretary Rodney Slater of the Clinton Administration.
The board seat vacated by HHS and former governor Tommy Thompson still has not been filled. That seat is also a White House direct appointment.
- Previously, Secretary Mineta in the last few weeks has made strong statements that Amtrak’s finances are in a mess, and he doesn’t believe the company can reach self-sufficiency by FY 2003. This same opinion is expressed by Kenneth Mead of the OIG office in the Department of Transportation, and has also been expressed by ranking members of the GAO.
Here’s the score: The U.S. Secretary of Transportation, the OIG and the GAO, three independent examiners of Amtrak’s books and finances, all say that Amtrak is in terrible financial shape and is struggling to keep its corporate head above water. Also, the Amtrak Reform Council (ARC) also openly says that Amtrak is not gaining on its financial problems. They all cite study after study by trained and respected professionals. They all cite extensive analysis. They all come to the same conclusion: Amtrak is not financially viable as it is operated today, and it is not likely to reach self-sufficiency by FY 2003.
A number of members of the United States Senate express this view, along with some Congressmen.
The only ones saying the opposite: The Amtrak board and Amtrak senior management are in unison denying this hard, cold, fact and continuing to say to anyone who will listen, “We are on the glide path to self-sufficiency.” The other simultaneous message coming from Amtrak senior management is that America must make up its collective mind whether or not we want a truly national passenger rail system so Amtrak can be funded correctly.
Final score: The collective wisdom of the financial arm of the United States Government versus Amtrak senior management, who, in complete and utter desperation, last week closed on a $300 million mortgage of Penn Station in New York to cover three months of railroad operations and payroll.
So, the big question is: Who do we believe?
Do we believe the DOT, OIG, GAO and the United States Senate, or do we believe a group of unelected bureaucrats, the authors of a failed business plan?
How much can we believe that comes from Amtrak? Is Amtrak senior management only trying to save itself, or do they really believe in their business plan?
Do we believe that mail and express will be the Amtrak miracle? No one even knows if the program is breaking even, making money, or losing money.
The only hard information we have about the program is that Amtrak acquired much more new rolling stock for mail and express for Amtrak Intercity than the railroad acquired for passengers.
As of April 1st of this year, Amtrak Intercity had 2,481 passenger vehicles (excluding motive power), and had 1,682 vehicles for mail and express including Roadrailers, baggage cars, and Material Handling Cars.
With the exception of the baggage cars, while the Roadrailers and Material Handling Cars were being acquired, NO long distance/non corridor cars were acquired.
No exact figures have been divulged about expenses versus revenues. The only demonstrative information we have is that the mail and express program has significantly slowed town terminal to terminal times for trains that are hauling mail and express, and passengers have suffered numerous inconveniences and been placed in a secondary position to freight.
Amtrak is claiming to be ahead of its business plan projections on Acela service. Those projections must have been tragically low, because hard information made available has said some Acela frequencies have carried less than a 20% load factor, with most days the service falling below a 40% load factor.
Amtrak has run out of operating cash during the third quarter of the fiscal year. Accounts payable are at record levels, cash tills are nearly empty, and summer bookings are so light, the company has a full summer long 30% discount on Intercity travel. All of this has been blamed on the late arrival of a full complement of Acela trainsets.
The reality is that Amtrak senior management rushed ahead with an Acela business plan when there was not a firm date on Acela trainsets for delivery. The company squandered tens of millions of dollars on advertising for a train that did not yet exist, made rash promises to riders about when trains would begin service (and then were delayed for months), and made promise after promise that could not be kept.
Now that Acela’s are running (and sometimes not running because of nagging, continuing mechanical problems), the public’s response has been lukewarm to what many have branded mediocre service at extraordinarily high prices. Also, the riders that were supposed to hastily migrate from air travel to Acela travel has not materialized.
Much of Acela’s ridership is former Metroliner ridership, thus only moving from one statistical group to another. All of this is allegedly to blame for Amtrak running out of cash. Does anyone recall the $200 million overpayment to Balfour Beatty for NEC infrastructure upgrading? Could this have something to do with the problem?
- The OIG issued another report, mostly echoing what has been previously said: Amtrak finances are a mess. Senator John McCain, the ranking Republican member of the Senate Commerce, Science, and Transportation Committee had another opportunity this week to follow-up on the OIG report and grill Amtrak senior management in committee hearings about Amtrak’s viability. No new ground was broken by either side; everyone held their current positions. George Warrington was quoted in the press as saying the company was solvent through 2002.
- One fascinating turn of events this week as reported on the All-Aboard list is the plea of UTU local chairmen and legislative officials to union members to quit complaining about Amtrak and its many failures and problems to their senators and congressmen.
From the outside, it appears that the union is fearful that if the truth is known, and told by the employees, then anti-Amtrak legislators will have further ammunition to shut the railroad down.
This creates a huge problem: be truthful and tell what is really going on so Amtrak can be fixed properly once and for all, or keep quiet and hope the status quo continues to protect jobs and union members.
How many of us were taught as very young children that telling the truth is the only course of action to take? Remember the old saying, “the truth shall set you free?” Union members have some tough and difficult personal decisions to make.
The best guess is that these problems, in a Republican administration, will be fixed without the help of union support anyway. Everyone, except Amtrak senior management, has expressed opinions that Amtrak cannot continue to operate the way it is today.
It is not likely it will be allowed to languish and then die.
Secretary Mineta and other have expressed a desire to keep a rail system in place. The question will be, how large of a system? Many different groups will be working diligently to make sure the system is as large as possible, with today’s size as the absolute minimum benchmark.
- Some good news from Down East: The Federal Railroad Administration has said that the new Maine service will be able to operate at 79 MPH on tracks owned by Guilford Transportation. Guilford favors a speed of 59 MPH. The matter will be resolved by the Surface Transportation Board in the next month. The new service from Boston to Portland, Maine is scheduled to begin this fall.
- This week we learned that the Penn Station mortgage of $300 million has a higher price tag than anticipated. The payback, over a 17 year period, will total $600 million. This high and protracted payback and length of time to cover 90 days worth of operating costs and payroll will amount to a sum that equals 200 brand new Superliner dining cars.
While no one outside of Amtrak senior management has had the privilege of viewing the mortgage documents (Even though two senior members of the United States Senate have requested these documents, Amtrak management has refused, saying the mortgage is a private matter. Another example of Amtrak flipping back and forth between the desire to be private and the desire to be public at feeding time.). The best information available is that the money came from out of the country.
Do these lenders know that Amtrak loans are NOT guaranteed by the federal government, unless specifically designated? A congressional staff attorney this week reminded some listeners that there have been previous rulings that commercial loans to Amtrak do not enjoy the benefits of an automatic government guarantee. Here’s hoping the Penn Station lenders did adequate due diligence and learned this in advance. A 17 year payback is a long time.
- You really have to wonder if anyone is minding the store. Amtrak, which sometimes considers itself a part of the federal government when free money is handed out, has signed an agreement to spend $1.4 million because the company cannot live up to government standards on clean water.
Amtrak, the Environmental Protection Agency, and the U.S. Department of Justice came to an agreement for Amtrak to pay a $500,000 fine (Again, how many cars sitting idle in Beech Grove in need of minor repairs to make them revenue producing and road worthy assets could this amount cover?) and spend an estimated $900,000 to make environmental improvements at nine shop facilities in New England. Just in case Amtrak has been environmentally naughty in other areas, Amtrak is being required to conduct environmental audits at facilities nationwide and voluntarily disclose and fix any problems.
Amtrak was cited for violations of the Clean Water Act’s storm water provisions and other infractions, including a failure to have required storm water permits, pollution prevention, and spill prevention plans.
At the moment, Amtrak senior management seems to place much of the blame for the company’s financial problems on the late arrival of Acela trainsets. Does the abject failure of company officials to obtain known necessary government permits and have spill prevention plans in place also relate to Acela’s late arrival?
Of the 25,000 Amtrak employees, was no one paying attention to business? Amtrak could have averted spending $1.4 million just by paying attention to publicly published regulations. Is anyone minding the store?
- Track work begins July 2nd on CSX tracks in the southeast to rehab almost 400 miles of right of way in just five days. Normally, this would be at least a three month project.
The relationship of this to Amtrak is that this is the week the Sunset Limited will be annulled at New Orleans, with no onward alternate transportation provided to Florida. A-A list members may remember this spring’s dismay over the initial decision of Southwest Business Group and Sunset product line management to run the train only between Los Angeles and San Antonio. Only after a public outcry and the intercession of Amtrak Intercity President Ed Walker did some sense of sanity return, and the train was at least extended to New Orleans.
There are no rumors du jour to comment on this week; most things seem to be holding status quo.
Amtrak goes on another week. How many more?
Bruce Richardson
Jacksonville, Florida