This Week at Amtrak 2006-04-19
Volume 3 Number 18
- This is the third in a series of special editions of This Week at Amtrak concerning a report by a bi-partisan forum of congressmen known as the Amtrak Working Group, led by Congressman Richard Baker of Louisiana. In March, this group has issued the most important government document regarding Amtrak since the final report of the Amtrak Reform Council was issued in December of 2002 by Chairman Gil Carmichael and his blue ribbon panel. The title of the AWG report is “Amtrak in the 21st Century.”There are a number of important topics which will be covered in a series of This Week at Amtrak special editions. The topics will not necessarily be in the order as presented in the group’s report.
For the expediency of electronic mail reading, all footnotes and other notations have been removed from text excerpted from the report presented here. The full text, with all information and notations is available on the URPA web site at http://www.unitedrail.org. Every reader is urged to review the full contents of the report in its original context for complete clarity.
- As Amtrak moves to solve these problems, it is important to know and appreciate the history, and what the next generation of Amtrak managers face on a daily basis, trying to save a crippled passenger railroad. This report provides a vast insight into what Amtrak senior officials are facing as they work to correct the mistakes of the past.
- Here is an excerpt from the Amtrak Working Group report.
RECOMMENDATIONS
Important decisions must be made in tailoring our intercity passenger rail service to complement the other modes in our transportation mix. It must be made more efficient and financial resources must be allocated in a responsible fashion. A first step is to make sure Amtrak is put on the right track. This report does not attempt to answer all of the questions that are raised concerning the management of Amtrak or the solutions to the intercity passenger rail crisis we are facing. However, it is intent on highlighting the questions which must be addressed in the near term for the Congress to provide meaningful and objective oversight.
Management Initiatives
Amtrak needs to develop the management structure and use its resources to initiate major reforms that will improve passenger services, on-time operations, and operational upgrades. What’s more, the GAO and Amtrak IG reports indicate that Amtrak can take these steps by using better business practices and saving millions of dollars that are currently being wasted. The savings generated from such reforms could then be properly channeled into those maintenance, repair, and replacement activities that upgrade the system and make operations safer and more efficient.
Congress and the Administration should work closely together over the next year to monitor Amtrak progress in adopting measures that will streamline its operations and make service more reliable and passenger friendly. To that end, adequate funding, which is tied directly to improved performance, must be provided to advance those goals. It is no longer credible to claim that Amtrak’s woes are simply tied to lack of financial support. It is apparent that Amtrak for years has been used to essentially pass through money without serious attention to how that money is actually being spent. However, Amtrak was not set up to be a grant agency.
Financial Reforms
Reforms that have been instituted at Amtrak in recent years should not go unacknowledged. But no organization could survive with the lack of business controls and fiscal restraint Amtrak has exhibited over the years. With Amtrak’s record, even the new assortment of reforms, instituted since Chairman Young initiated the GAO request, must be monitored closely to make sure there is bedrock change rather than window dressing. It is important to note that reforms have tended to come when and where oversight has been initiated rather than systemically. What is needed is a system change. Increased federal subsidies alone will not solve the problems currently facing intercity passenger rail service. It must be coupled with a new sense of corporate responsibility and service to the ridership. New tools to enhance fiscal responsibility, appropriate funding, continued Congressional oversight, and operational reform, will provide the prerequisites to improve passenger rail service in America.
To address the financial weakness at Amtrak, steps must be taken to initiate serious independent oversight. Amtrak is not a public company in the sense that it does not issue securities through a public offering nor is it traded in an open market. Amtrak is not a public-sector agency, though it was created through federal government action. It is, however, reasonable to consider it “public” as it is heavily subsidized and almost entirely sustained by the U.S. taxpayer.
Because it is not a publicly traded company, the corporation is not subject to broad scrutiny by shareholders nor does it have a typically enforceable accounting regime. Similarly, there is limited oversight that can be exerted by the Amtrak Inspector General and the Department of Transportation Inspector General based on the scope of their responsibilities. While the FRA, in theory requires Amtrak to provide a myriad of reports, budgets, and forecasts the GAO found that FRA has exercised inadequate oversight. In response, the Secretary of Transportation, Norman Y. Mineta directed the FRA to require Amtrak to submit plans to improve financial reporting and management practices. The Secretary said he agreed with the GAO’s findings and added “for the past several years, I have been urging Amtrak to clean up its act and become more accountable to taxpayers and the traveling public.” Time will tell how effective the new FRA initiative is at bringing additional fiscal accountability to Amtrak operations. The AWG certainly encourages FRA to take a broader and more proactive role concerning Amtrak.
Amtrak is not currently under the jurisdiction of a federal financial regulator and therefore outside the realm of explicit financial regulation. In contrast, there are government-sponsored enterprises, established by the Congress for specific purposes, which enjoy unique taxpayer benefits and which are in many ways more closely regulated in their financial affairs. Such entities include, or have included, Fannie Mae, Freddie Mac, Sallie Mae, the Federal Home Loan Bank System, the Tennessee Valley Authority, and Farmer Mac to name a few. Each of these organizations must submit to regular financial scrutiny to ensure that their public benefit is used in accordance with the enterprise’s mission, and to hold the entity financially accountable to protect the taxpayer from unreasonable economic risk or financial harm.
The AWG recommends that the GAO conduct a review of private and public accountability standards and report to the Committee by June 30, 2006, which standards could best apply to Amtrak. We recommend that the Committee use the information from GAO to craft legislation that requires Amtrak to prepare monthly, quarterly and annual financial statements, compliant with Generally Accepted Accounting Principles, which the chief executive officer and the board of directors must certify as to their accuracy and which must be filed with a public agency. Under such legislation Amtrak should be subject to regular accounting scrutiny by an independent auditor with federal enforcement powers, either via the Securities Exchange Commission or an empowered regulator with such specific authority. If GAO is unable to conduct such a study by June 30, 2006, we recommend that immediate steps be undertaken to enact legislation by the end of fiscal year 2006 which is consistent with the disclosure and audit provisions outlined above.
Along with the observations expressed above, the AWG also notes that future financial commitments need to be tied to a clear vision of where America’s intercity passenger should be headed for the future. Over the years, deep cuts in Amtrak funding have been rejected by Congress. On the other hand, Amtrak cannot attain operational efficiency, repair the backlog of inherited capital investment shortfalls, and provide improved passengers service unless adequate funding is provided and properly spent. The task over the next 5 years should be for Congress to work with the Administration to ensure that real reforms are implemented in conjunction with fair and adequate funding. We also strongly urge the Committee to require Amtrak to be subject to the stringent requirements of Sarbanes-Oxley - so Amtrak’s executives are held to the same standards as other American executives. Congress must have a clear and honest picture of Amtrak’s financial situation in order to ensure responsible use of taxpayer grant dollars.
Broader Intercity Passenger Rail Goals
As we develop a 21st century approach to intercity passenger rail, we must look to the synergistic benefits that will address other pressing transportation needs. One of the most direct impacts is on the freight rail system. Developing a more efficient and synchronized approach to train schedule management will be another step toward shifting part of the bulk goods transportation burden off overcrowded highway corridors and onto rail.
Better management would also encourage more passenger traffic on selected Amtrak routes. This has three benefits: increased revenue to Amtrak; reduced traffic on certain congested highway corridors; and faster travel for passengers currently traveling on some midrange air routes.
Ongoing oversight of Amtrak should also evaluate both sides of the security issues involving passenger rail service. The assessment needs to look at both how Amtrak is impacted by Homeland Security questions and how Amtrak can increase our overall national security by providing alternate transportation opportunities when other modes of travel are compromised.
Future Issues to Address
As the Committee continues its oversight of Amtrak, the following issues should be addressed. Some of them are in the purview of the Amtrak board and management; others must be addressed by Congress and the Administration.
The AWG notes that the GAO experienced substantial delays and lack of cooperation in the delivery of documents and information by Amtrak. This lack of cooperation with the GAO by Amtrak substantially undermines its credibility. By impeding GAO’s delivery of the October 2005 report to Congress by several months, Amtrak showed unacceptable disregard for the Congressional oversight process that must be addressed in future proceedings.
Although future issues may be also arise, it is clear that the following questions concerning Amtrak operations, policies, and executive performance are of concern to the AWG:
- Why has the Amtrak board not been fully populated with qualified board members?
- Why doesn’t Amtrak have a comprehensive mission statement and a strategic plan relating to its role in the transportation sector, to guide the corporation?
- Why are financial reports so faulty that they take months to correct, certify, and release to the public?
- Why is Amtrak’s financial accounting system so ambiguous that only a small percentage of its costs can be allocate directly - requiring the rest to be guesstimated?
- Why hasn’t Amtrak implemented either a Sarbanes-Oxley or government style of financial disclosure program to make its operations transparent to the Congress, its creditors, and the public?
- Why are Amtrak’s internal data management and retrieval systems so weak that routine inquiries regularly take weeks or months to address?
- Why doesn’t Amtrak have a comprehensive cost control strategy when it is losing over $1 billion annually?
- When Amtrak is losing more than $80 million/year on its food and beverage service, why was/is it so difficult for the corporation to provide basic cost and expense data concerning those operations, as promised at the June 9, 2005 Rail Subcommittee hearing?
- Why does Amtrak fail to prioritize spending, allowing a bridge on its premier line to fall into serious disrepair while at the same time continuing to lose two dollars for every one it earns on its food and beverage service?
- Why does Amtrak award so many of its service contracts without competitive bidding? And why are those contracts inadequately overseen?
- Why does Amtrak lack the data collection and management systems to base its fleet repairs on operational efficiency and reliability?
- Why has Amtrak made so few adjustments to its route system since 1997, and what routing/frequency changes could be undertaken to manage its resources more effectively?
- Why does Amtrak’s in-house legal office consistently fail to follow its own billing guidelines?
- Why are Amtrak executives paid bonuses even when the corporation is poorly managed and employees are asked to sacrifice for the good of the institution?
- Why are Amtrak overhead expenses so high?
- Why hasn’t the Amtrak board retained independent counsel to protect the corporation and ensure board members are fully and independently aware of their fiduciary obligations?
- Why is on-time performance so low and what should be done to correct it?
- What can be done to improve customer service at Amtrak?
- How can Amtrak improve its scheduling and operational management to increase reliability and reduce track conflicts with freight and commuter users?
- What mechanism can be undertaken to assure intercity passenger rail receives an adequate portion of the federal transportation, as a viable portion of the transportation mix?
We recommend that future Amtrak oversight continue to be conducted by the full Transportation and Infrastructure Committee to encourage all Committee members with appropriate expertise and interest to remain engaged. This will ensure that all resources are brought to bear in addressing Congress’ oversight responsibilities. With the continuing cooperation of the Rail Subcommittee, many of the issues below can be addressed.
- Naturally, if you followed the rather incongruous reasoning of most of Amtrak’s True Believer supporters (including the leadership of the National Association of Railroad Passengers), all of what has been mentioned above and in the past two issues of TWA is George W. Bush’s fault. Time and again, we hear the worn out whine, “Bush is trying to kill Amtrak.” Really? Why would anyone with an inkling of reality say that?Reading this report, it is clear for most of Amtrak’s existence, it has been out of control from both a financial and management standpoint. It’s been a bankrupt company from the day it was formed, and the constant, incorrect solution to Amtrak’s problems, as espoused by NARP and others of its sad ilk, is to throw more good money after bad in the form of free federal monies and state supported monies.
During the Bush Administration most of these problems have finally come to light in official Washington, and a combination of Bush appointed officials at the United States Department of Transportation and elected Republicans in the House and Senate have set out to fix these problems instead of ignoring them as has been painfully done in the past.
The national press quickly points out the four members of the Amtrak Board of Directors are all Bush appointees. Yes, they are, simply because all of the terms of previous board members appointed during the Clinton Administration have expired. What is not pointed out is that this board has more business acumen than any previous board, and has thanklessly engaged in the critically needed task of fixing Amtrak so these problems will be only a bad memory. No other board has addressed the many issues of Amtrak the way this board has addressed them.
What we are seeing now is what the Bush Administration saw from the first day: Amtrak needs to be fixed before it can go forward. While there have been some gross public relations missteps on the part of the administration dealing with Amtrak, there has been no lack of interest in fixing the problems and bringing Amtrak to a point of accountability. Even though it remains a mystery why the board is not fully populated, it has not held the current members back from performing their duties.
We still see hyperbole that former Amtrak President and CEO David Gunn was the best leader Amtrak ever had. We know he had a full plate of problems to fix, but we also know, reading this report, he focused on all of the wrong issues, and ignored the complex and important issues that would have helped guarantee the future of the company. In 2025, when historians write about the agonies Amtrak is going through today, many of them will only speak of David Gunn as a footnote, not as a saint of the railroad.
Anyone with even a modicum of business sense cannot help but read this report and have their head spinning over the grievous handling of the company by the officers entrusted to run the railroad on behalf of the American taxpayer and traveling public. Amtrak has a chance in the future, not by throwing more money at it, but by running it like a real business in a competitive atmosphere. Amtrak has the ability to succeed, but before now, nobody has run the company in a way to give it a fighting chance.
- Dr. Dan Monaghan passed away earlier this month. An original member of URPA, Dr. Monaghan was revered by many for his lengthy contributions to the causes of passenger rail in our country. URPA Vice President William Lindley writes of his memories of the man who was referred to simply as “Dr. Dan.”
“A Memory of Dr. Marvin Daniel (”Dan”) Monaghan, O.D.
“In the 1990s, I visited Dallas several times each year on business, usually taking the train from Phoenix. Through the All-Aboard e-mail list I met Dr. Dan Monaghan, who lived in Garland, and we visited regularly on my trips. ‘Dr. Dan’ passed away recently and I’d like to recall what I learned from him.
“When we met, I had only recently joined the Arizona Rail Passenger Association. I was in my late 20s and had never been involved in politics or civics. Dr. Monaghan was even then ‘no spring chicken’ as he put it, and had been a rail advocate since before I was in grade school.
“His father had been a manager for the Katy railroad that passed right through Garland, and Dan had seen the decline and fall of private passenger trains first-hand, and indeed from the inside out. From my first visit, I was in awe of the HO scale and tinplate models that crammed the ‘train room’ and full attic above his oversize double garage, along with the original letter-boards from one car of the ‘Texas Special.’ But the real treasure was in the good Doctor’s memory and understanding of not only what makes a passenger train tick, but the corporate and political structure necessary to have good trains, or indeed any trains at all.
“Dan helped make the Dallas Area Rapid Transit (DART) lines what they are today. He was a member of their Board in later years, and a citizen activist long before that. Through his efforts with the Texas Association of Rail Passengers, and especially his quick communications with U.S. Senator Kay Bailey Hutchison when Amtrak’s Texas Eagle was threatened in 1996, he will be remembered as having sparked today’s rail passenger renaissance in the Lone Star State.
“Dan remembered his few defeats but used them as ammunition for every new challenge. I remember him telling me, ‘When Dallas Union Station was being redesigned by the city, they asked Amtrak how many tracks and platforms they would need in twenty years. Amtrak replied, ‘three at most’ and although we knew that was a huge mistake, what could we do? It was far too pessimistic a view — we really need five or more — and it cripples Union Station’s operations to this day, but the city had to believe what Amtrak told them. So we learned to do our own computations, instead of asking Amtrak.’
“And thank you, Dan, for showing me a bit of how politics works; how people who disagree on many things can be brought together for a common goal. How to work with people on opposite sides of an issue to make things happen. And how to go home every day with a smile and a laugh.
“Dr. Monaghan was a good friend and a great rail advocate. He will be missed.
“William Lindley; Scottsdale, Arizona”
- In last week’s issue of TWA, the statement “Despite the best efforts by the National Association of Railroad Passengers, its Executive Director Ross Capon, and the state level organizations associated with NARP to help mask the true problems at Amtrak and continually cry for only more free federal monies and not true reform, we now see Amtrak entering into a new era of problem solving” was made. Mark Weitenbeck, speaking as Treasurer of the Wisconsin Association of Railroad Passengers took exception to that statement, decrying that not all state associations submit to the alleged threats, insinuations, and demands for conformity to the not always agreeable national positions by NARP and its Executive Director, Ross Capon.Mr. Weitenbeck said,
“I joined NARP in 1972 and was a charter member of WisARP [in 1977]. [A]pproximately 50% of Wisconsin NARP member are in WisARP and 50% of WisARP members are in NARP. … the association between NARP and WisARP remains quite loose. … Because WisARP needs to represent its membership and our state priorities, the view from Wisconsin here is different than the view from Washington.
“… WisARP supports a national network of intercity passenger trains. Without a national network, and a federal program, or entity, to oversee the development and maintenance of it, corridors will be impossible to develop. All one has to do is look at what happened between Illinois and Wisconsin with regard to Hiawatha service to realize what folly it is to think the states can provide intercity passenger service on their own. Traditionally, Wisconsin provided 75% of the state monies and Illinois 25%. Last year, Illinois found itself in a bit of a fiscal jam when Amtrak wanted more money for the various Illinois services. Illinois, of course, looking out for their intrastate routes first, determined that the Hiawatha service benefited only Wisconsin and proceeded to tell Wisconsin that if they wanted the Hiawatha service continued, they would have to fund it, all of it. … This caused a great deal of consternation in Wisconsin, but eventually differences were patched and a new formula devised.
“… WisARP supports the development of the Midwest Regional Rail System that was originally proposed in the late 1990’s. WisARP has become increasingly dissatisfied with what is happening at the national level. It has become clear to us that the NEC is a distraction preventing Amtrak from taking a national view and from doing a good job at anything. It is quite apparent that Amtrak can’t even get a good hold on NEC. Thirty years after getting [the] NEC, the Acela trains between New York and Washington are carded at 2 hours 50 minutes. The Amtrak timetable says the distance is 225 miles, for a blazing average speed of 79.5 mph. Hardly high speed. Yet despite this, Amtrak has embarked on projects like the Atlantic City extension, which they justified by calling it a NEC extension, and the Boston electrification project. Where is Amtrak’s detailed plan for turning New York - Washington into true HSR? …
“With Amtrak’s 30 year record on NEC, how can we ever expect anything decent in the Midwest from them? In Wisconsin, we can’t. The simple truth is that NEC and its funding needs to be separated from Amtrak and for Amtrak to revert to the operating company it was intended to be. A new federal program with a long term source of funding needs to be set up. The program would provide capital monies from Washington, to be matched by state funds needs, to assist in passenger rail development. This needs to be a program that all states can participate in. Currently, the NEC states pay nothing, no matching dollars, for all federal capital investment being done there. They are getting the proverbial free ride. Wisconsin stands ready with state money to bring Milwaukee - Madison 110 mph service online. But there is no federal money for us and we are fed up.
“Despite the fact that there are 25 states are in the States for Rail Passenger Coalition (currently chaired by WisDOT secretary Frank Busalacchi), which since 2000 has been asking for a federal funding program for passenger rail, the Bush administration has done nothing and Congress has been unable to pass anything. The will of the people is being thwarted as usual. … In Wisconsin, we are fed up with inaction. We are fed up with an Amtrak that is wrongly configured and which has no long term goals, plans or funding. …”