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Amtrak Reform Council - Members of the Council
Friends of Amtrak - Craig O'Connell
The United States General Accounting Office
- Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty
Controlling Its Costs and Meeting Capital Needs. RCED-00-138.
15 pp. plus 4 appendices (39 pp.) May 31, 2000.
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- 106 - 105
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- However, taken together, today's small railroads, operating in all 50 states,
account for about one-third of all rail route miles, employ 11 percent of all
rail workers and generate about 9 percent of all rail revenue. - Staggers Rail
Act of 1980
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The United States General Accounting Office
- Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty
Controlling Its Costs and Meeting Capital Needs. RCED-00-138.
15 pp. plus 4 appendices (39 pp.) May 31, 2000.
- However, Amtrak does not have measures of labor productivity for its
lines of business (e.g., intercity passenger service, commuter service)
that would allow it to better manage its labor costs.
- The increase in interest costs (which went from about $50
million in 1995 to about $83 million in 1999) ... has been growing at a
faster rate than either Amtrak’s total operating expenses or revenues.
From 1995 to 1999, it grew 5 times faster than total expenses and about
4 times faster than total revenue. The increase in payments by Amtrak to
other railroads (which went from about $92 million to just under $100
million from 1995 to 1999) was mainly due to Amtrak’s signing new agreements
to operate over other railroads’ lines. In some cases this has, or
will, lead to cost increases. For example, under the new agreements,
Amtrak will pay other railroads a higher amount for track maintenance
than it had paid using a different approach contained in the old
agreements.
- Such cost increases will make it critical for Amtrak to achieve the
net revenue growth projected for such things as implementing high-speed
rail on the Northeast Corridor and expanding its express service
program. As a result of these and other actions, Amtrak projects
that its revenues will increase about $166 million over the next 5
years.
- However, beginning in 2001, capital investment requirements will
exceed expected federal capital grants ($521 million per year). This
potential shortfall will require Amtrak to increasingly look to other
funding sources to meet its capital investment needs, including state
and local governments and the commercial debt market.
- Compounding the potential funding shortfall is Amtrak’s current lack
of a multiyear capital plan that identifies critical capital
investment needs and how they will be financed. Such a multiyear plan
has not existed since 1997.
- Amtrak cannot be expected to improve its financial health without
fully identifying what its investment requirements are, their
priority in relation to each other and Amtrak’s strategic goals, and
how these needs will be financed. This can be accomplished only
through the development of a well-thought-out multiyear plan that links
specific benefits to specific investments and that includes the
priorities of these investments.
- Recommendations To ensure Amtrak efficiently manages its
workforce, we recommend that the President of Amtrak
- develop measures of labor productivity for its different lines
of business. These measures should directly measure the resource
inputs of these business lines with the corresponding outputs.
Development of these measures should also include the establishment
of benchmarks against which productivity changes can be assessed. To
better ensure that Amtrak fully identifies and adequately plans for
its capital investment needs, we recommend that the President of
Amtrak
- expeditiously adopt a multiyear capital spending plan that
(1) fully identifies the capital investment needs of the Corporation
over a period of not less than 5 years, (2) prioritizes these needs
according to corporate goals and strategies, (3) establishes
specific measurable benefits to be achieved from these investments,
and (4) identifies the expected funding sources available to finance
the capital investment needs.
- To determine Amtrak’s costs, we reviewed Amtrak’s financial
reports, the Amtrak Reform and Accountability Act of 1997, Amtrak’s
October 1998 strategic business plan, appendixes to Amtrak’s business
plan for 2000 to 2004, and the business plan’s April 2000 update. We
also reviewed Amtrak’s February 2000 report to the Congress on its
market-based network analysis, summaries of Amtrak’s labor agreements
and documents related to labor cost control initiatives, the arbitration
panel’s November 1999 decision on labor protection payments, and
Amtrak documents concerning debt and the payment of interest on
commercial debt.1 We also reviewed copies of selected freight railroad
agreements and interviewed Amtrak’s labor relations, financial, and
contract administration officials and representatives from unions
representing Amtrak employees. In addition, we interviewed
representatives from four freight railroads with which Amtrak has
operating agreements.
- To analyze Amtrak’s labor productivity, we obtained
information such as passenger miles, seat miles, ridership, overhauls
completed, and hours worked from Amtrak and the Surface Transportation
Board. We also discussed the development of labor productivity measures
with Amtrak officials. We obtained commuter railroad data from the
American Public Transportation Association.
- To determine Amtrak’s capital investment needs and how Amtrak
plans to meet these needs, we asked Amtrak managers to identify the
capital investments they believed are needed to maintain current service
levels and improve Amtrak’s service. We used this approach because
Amtrak does not currently have a multiyear capital plan. Instead, its
most recent capital plan (dated December 1999) covers through 2000 only.
As a result, the investment needs identified in this report are not
necessarily those needs or priorities that might be established by
Amtrak’s management in a multiyear plan. Nonetheless, we characterize
the capital investments identified by Amtrak’s managers as capital “needs”
or “requirements” in this report.
- To determine capital investment needs and funding, we also reviewed
Amtrak’s October 1998 strategic business plan, appendixes to Amtrak’s
business plan for 2000 to 2004, the business plan’s April 2000 update,
Amtrak-Federal Railroad Administration reports on the Northeast Corridor’s
capital needs, and the Federal Railroad Administration’s 2001 budget
request for Amtrak. In addition, we reviewed fleet maintenance schedules
and other Amtrak documents pertaining to capital investment needs and
projected sources of capital investment funds. We also interviewed
officials from Amtrak’s finance, planning, high-speed rail, and
mechanical and mail and express departments, in headquarters as well as
in strategic business units, and Federal Railroad Administration
officials. In addition, we interviewed officials in four state
departments of transportation about their departments’ relationships
with Amtrak and capital investments in intercity passenger rail.2
Finally, we interviewed officials from five commuter railroads and four
freight railroads that do business with Amtrak on their companies’
relationships with Amtrak and their cost structures, labor productivity,
and Amtrak-related capital investment needs.3 As part of our work, we
visited Amtrak’s three major maintenance facilities—Beech Grove,
Indiana; Wilmington, Delaware; and Bear, Delaware—and two secondary
maintenance facilities in New York City and Washington, D.C.
Amtrak Reform Council - Members of the Council
Recommendations
for Improvement that the Council has forwarded to Amtrak:
The ARAA requires the Council to evaluate Amtrak’s operations and
to make recommen-dations for improvement to the corporation.
In November 1999, the Council recommended that Amtrak’s Board consider:
1.
Conditional upon receiving confirmation from Amtrak of the profitability
of Mail & Express (M/E) traffic:
(i) augmenting Amtrak’s M/E staff; (ii) adding M/E equipment to its fleet; and
(iii) setting up the M/E business as a separate strategic business unit for
planning and financial reporting purposes, with transparent accounting of its
revenues and expenses.
2.
Setting up the operations of the NEC fixed plant as a profit center within the NEC Business Unit,
with its own clear and accurate income statement, balance sheet, and capital
plan. The NEC fixed plant, which is
critical to the successful operation of the Acela Express service, requires
substantial sums, as much as $5-7 billion according to the Department of
Transportation, to fund deferred maintenance and delayed capital expenditures.
3.
As part of its normal annual strategic business planning processes,
identifying risks of not achieving, along with opportunities to exceed, its
business plan objectives, and develop
contingency plans for corrective actions that would be approved by its
management and Board within its overall business plan.
4.
Implementing a program for annual
cost savings from reductions in Amtrak’s corporate overhead, bench-marking
the size of Amtrak’s corporate overhead compared to its overall business
volume. Lowering costs would assist
Amtrak in retaining and expanding its net revenues from commuter and subsidized
intercity passenger business.
5.
Identifying annually in its Strategic Business Plan readily measurable, minimum
business plan objectives, including service objectives, operating objectives
and financial objectives, and reporting and comparing its actual performance
against its minimum business plan objectives.
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