United Rail Passenger Alliance

Vol. 2, No. 36 – November 17, 2005

1. Aaarrrggghh! Harrumph. Good grief. Choose whichever you like best to describe the circus that the Railroad Subcommittee of the House Transportation and Infrastructure hearings turned into on Tuesday, November 15th.

   The reason for the hearings was a good one: to finally put to rest questions regarding membership on the Amtrak Board of Directors. The White House and Congress have been at odds over what constitutes a legal board, and what doesn’t. These hearings were designed to be an excellent first step for bringing this question to the front burner and beginning to have some resolution.

   Instead, former Amtrak President and CEO David Gunn and his firing last week from Amtrak by the board became much of the focus of the hearing, giving him yet another forum for crisis mongering. The subcommittee is doing good and important work answering the legal questions about the board. Here’s hoping that good work isn’t bogged down by a disgruntled former employee of Amtrak.

2. United States Secretary of Transportation Norman Mineta made a speech in New York City Thursday morning, making clear the Bush Administration’s stance on the future of Amtrak and the Northeast Corridor. Despite what various disreputable public officials and others have said about their false conspiracy theories (some even more fantastic than movie maker Oliver Stone could come up with), here is what Secretary Mineta said in plain language (edited for relevancy and space):
   

   “… (A) first-hand report on what is going on with Amtrak. I thought that it was important to do so here, because nowhere is intercity passenger rail service a more vital piece of the transportation puzzle than it is in New York City.

   “And I thought that it was important to do so now, because significant changes have been set in motion. And contrary to some assertions by people who have many mixed agendas, I want to tell you what my objectives are with respect to Amtrak – and what they are not.

   “… When I was chair of the major transportation committee in the Congress, I joined with your Senator, Pat Moynihan, and we required the obsolete federal transportation funding system of “freeways first” to become an intermodal system that included public transit – both heavy and light rail.

   “Yet throughout this time, first Conrail and then Amtrak kept successfully operating on a subsidized basis while making one broken promise after another that it would reform itself and become a profitable enterprise.

   “Many Members of Congress would accept these promises knowing that there was nothing behind them. They did that because, if asked, they actually believe that America should have a European-style, state-subsidized system of rail. But, the truth of the matter is, since Congress as a majority and Americans as an electorate would flatly disagree with that approach, they were satisfied with the status quo.

   “The result: in the field of transportation, the passenger rail system in the United States today is an antique.

   “I believe very strongly that there is a viable future for passenger rail transportation in the United States. But the future is not the 1950s model for passenger rail.

   “You might want to lean a little closer for this next part – I had to leave Washington D.C. to be able to say it. The United States is not Europe or Japan.

   “Passenger rail simply cannot compete with air travel in most markets in the United States. The country is simply too large; our population centers are too distant.

   “Unless you are taking the train for the experience of taking the train, you do not ride Amtrak from New York City to Los Angeles… or Denver… or probably even Chicago. Not when you can make the trip by air in hours, rather than days, and in most cases at a lower price.

   “On the other hand, many of us prefer to take the train from New York to Washington, D.C., or Boston. On those routes, Amtrak basically splits the market with the airlines. And a lot more Americans would like to take a fast and efficient train system from Boston to New York – or Sacramento to San Francisco – instead of driving.

   “I have spent the last year traveling the country, looking at the rail system and meeting with community and business leaders. I firmly believe that there are other regions where passenger rail can be a viable transportation business. Some of them already exist. And, as corridor traffic grows, it creates links where longer distance rail travel, that wouldn’t otherwise be viable, is nevertheless available.

   “Strip away all the rhetoric and the histrionics and here is the fundamental difference between the Bush Administration and its critics. We are willing to use taxpayer money to fund passenger rail where it makes sense, but we are not where it does not.

   “Let me say that again. This Administration is willing to invest federal dollars in passenger rail service.

   “We are willing to provide federal funds to build and repair tracks, just as we spend taxpayer money to build and repair highways, runways, and subway lines.

   “We are willing to invest federal funds in train stations and switching equipment, just as we invest in exit ramps, air traffic control towers, and new transit depots every day.

   “And yes, we want to spend federal funds to improve the tracks, tunnels, bridges, and stations along the Northeast Corridor, which we recognize is vital – not just to New York and the other communities along the route, but also to the economic health of this Nation.

   “But we are not willing to continue funding the current system. We are not even willing to continue funding tinkering around the edges.

   “In corporate America, if your failing business wants to attract new capital to keep it afloat, you have to make real changes to your operation – changes that are significant enough to give new investors confidence that your company can turn itself around. That is exactly where we stand with Amtrak.

   “Just two weeks ago, the government’s auditors issued a scathing indictment of the company. They pointed to systemic failures ranging from weak financial reporting and management, to lack of clear mission and strategic plan, to transparency and accountability issues.

   “But most troubling of all was the bottom line. From 2002 to 2004, when Amtrak was supposedly being “stabilized,” its losses actually increased by 7 percent. And the report predicted annual losses would increase by another 40 percent by 2009.

   “If your company were already losing a billion dollars a year, and you received that prognosis, you would take decisive, dramatic action to reverse it. Period.

   “Well, wait a minute. I take that back.

   “You would take decisive action unless you could go back to the Congress and get more money without real reforms. Amtrak management has always been able to do that – and they expected that they could do it this time.

   “And that is precisely what the Amtrak Board and the U.S. Department of Transportation said that it did not want to happen. Tough choices have to be made. There is simply too much at stake to allow one of the worst performing business enterprises in America to deteriorate any further.

   “Sadly, there are those who are erroneously characterizing the Board’s action as the first step toward shutting Amtrak down.

   “Let me suggest that the best indicator of the Board’s true intentions will be their selection of Amtrak’s next chief executive.

   “And Board [Chairman] David Laney made clear, they are looking for a turn-around CEO, not a liquidator. I agree.

   “The Board has shown that it is serious by crafting an ambitious reform proposal and demanding action on it. And on September 22, it began to pave the way for Northeast Corridor improvements by beginning to study how to establish it as a subsidiary, within Amtrak.

   “Board [Chairman] Laney told Congress two days ago that nobody fully understands the complexities of this task. And that is why the Board will study the issue before making any decisions.

   “And there are encouraging signs that the Congress is beginning to accept the Administration’s approach to real reform.

   “Just as we promised in February, we are willing to invest federal funds in Amtrak if the money comes with reforms attached.

   “And I am hoping that next year we will be able to tie even more reforms to a new budget request. It is the only way to put passenger rail service in the United States back on the right track.

   “There are some who have said, “Mineta, what happened? You’re going to stand by while Amtrak is dismantled?” Let me be clear about this. Amtrak is not a public policy issue that you can sit around and debate while nothing gets done. You can’t stall reform just because you can’t get the system that you want.

   “This is an operating transportation system that thousands of people rely on. It needs to be run safely and efficiently.

   “We need a better Amtrak, and I believe that we are beginning to take the actions that will accomplish that. …”

3. What was Secretary Mineta saying? While this speech was written to be presented before a New York City audience, it looks like the short version is that Amtrak is not going anywhere, that much needed reform is coming, and that a national system will stay in place, including long distance trains, which will help connect existing and emerging corridors and provide needed and practical transportation to parts of the country outside urban areas.
4. Here is another view of passenger rail travel, through the eyes of a Southern California travel agency owner:
   

   “The issue that concerns me is that so many continue to use the ‘ridership’ measurement as evidence of a route’s success. As we all know, revenue passenger miles [RPMs] is the valid measurement, and reflects the true nature of Amtrak’s business which is (sorry!) leisure travel. While this is somehow viewed as inferior to ‘business travel,’ the fact of the matter is that Amtrak never did, doesn’t now, and never will meet the travel needs of the average business traveler. It is too undependable, operations driven, and inconvenient, even in the precious NEC. Yes, I know that it is time competitive in some markets with air, given the TSA and other new travel amenities at the airport, but the fact of the matter is, most people in those markets are more likely to drive anyway.

   “- Amtrak’s mandate is and should be a NATIONAL system. Leisure travel is not a social disease. In fact it is the engine that drives the economies of many cities and states. Just ask Nevada and Florida. Business travel is not going to bring New Orleans back to life, leisure travel is. I guess that means that leisure travel really is business travel in disguise!

   “- Until such time as Amtrak stops trying to out ridership NJT or Metro North (or Metrolink for that matter) and recognizes where the money is, any reform, realignment, readjustment or replacement of the CEO is irrelevant. My business is now over 85% groups. We have stopped using the Friendly Skies and the people Who Are Ready When We Are because of the fact that they do not want leisure travel, they want business travel. As a result Jet Blue, that ignorant upstart that concentrates on low fares, on time operations and friendly service (OK, they use French airplanes, but nobody’s perfect) has received 80% of our group business, with that other confused airline, Southwest, picking up most of the rest. Taking a look at the stock market, I would surmise that the ignorant carriers are outdoing the wise old carriers that by and large have operated on the same business model as Amtrak for the past several years.

   “Bottom line (an Econ 101 term for those Amtrak lurkers out there), long distance leisure trips make money, short and medium distance trips are for other modes or other agencies. As the saying goes, follow the money. It’s on a long haul most of the time …”

5. Back in Washington at the epicenter of much noise and intentional confusion, you can’t tell the players without a program, especially these days at Amtrak with all of the competing political and other interests swirling around. Here’s a rundown of the key players as this non-crisis moves forward, and the Amtrak board continues to do the work it was appointed to do.
6. The Democrats are having a field day over the board and the firing of Mr. Gunn. They feel they have been handed another issue of a silver platter with which they can use the platter to bash President Bush over the head with and gain some political points. Listening to each of the Democrats during the subcommittee hearings was like listening to a broken record, each following pretty much the same script, without much original thought other than how they could embarrass the Bush appointees in the room. They seemed to be intentionally promoting the conspiracy theory that Amtrak was on its deathbed and about to be dismantled.
7. The Republicans are split on the issue of Mr. Gunn. Some are voicing support for him, others are allowing the Amtrak board to function as designed. It was obvious watching the hearings that many Republicans have little command of the true facts concerning Amtrak, and they were operating on poor information they have received from Amtrak in the past. The Republicans need to start listening to their colleagues who are embracing real reform instead of reacting to the conspiracy theory of others.
8. David Gunn – referred to by some as St. David – was enjoying all of the attention and the drinking in of his alleged wisdom by the various parties. Most people, upon his firing last week, attempted to handle things in a gentlemanly manner. Mr. Gunn didn’t follow this pattern, and started loudly saying – wrongly – that if the Bush administration and board of directors had their way, that Amtrak would be liquidated. Once a crisis monger, always a crisis monger. It should be noted that Mr. Gunn, the third of the Transit Trio of Tom Downs, George Warrington, and himself, was the second of the Transit Trio to be fired by his board of directors. Mr. Downs was also deselected by his board (consisting of other members, not the current board roster) in the 1990s.
9. The Amtrak Board of Directors, and specifically Chairman David Laney appear to be doing what they are supposed to be doing: corporate governance. Congress seems to want to micro-manage the board and second guess their decisions and experiments so they can pass judgement without full information. If people are serious about the legitimacy of the Amtrak board’s appointments by the White House, perhaps someone should test their theory in a court of law. If Congress chooses to rewrite the law regarding Amtrak board appointments, then that may settle the issue, once and for all. However, at the moment, the Amtrak board is functioning as it is supposed to (even with regrettable vacant seats) and is trying to make Amtrak into a real, working corporation instead of a crippled child of government.

   It should be noted that the White House did appoint almost a full slate of board members more than a year ago, who went through a partial confirmation process before the Senate Commerce Committee. When the nominees were voted out of committee and ready to be presented to the full Senate for confirmation, former Democrat Majority Leader Senator Tom Daschle permanently delayed the vote, and the nominations died at the end of that term of the Senate. The Senate had a chance to do its duty, and failed.

   Among the nominees was Lou Thompson of Maryland, retired from the World Bank as the bank’s leading railroad consultant. Mr. Thompson is probably one of the three most qualified Americans who could sit on the Amtrak board. He lead the Northeast Corridor Improvement Project after the Ford Administration forced the NEC on Amtrak. Mr. Thompson (a Democrat) is not sitting on the board today because a fellow Democrat (Senator Daschle) didn’t like the fact that Mr. Thompson was not Senator Daschle’s Democrat chosen for the nomination. What a waste at the expense of petty politics.

10. Various Amtrak Echo Chamber organizations, such as NARP, have been a player in this crisis mongering, as well. It is vital that organizations that members look to should provide real and factual information for people to act upon, not conspiracy theories that may better suit fund raising or membership drive efforts. It is also notable that NARP, which seems to not approve of the Amtrak Board of Directors, but always supports the Amtrak management staff, has received thousands of dollars from Amtrak to run an Amtrak advisory council. One has to reasonably wonder how any type of decision or stance that may displease Amtrak staff executives can be dispassionately made when that much money is at stake.