[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
UNDERSTANDING THE COST DRIVERS OF PASSENGER RAIL
=======================================================================
(113-17)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS, PIPELINES, AND
HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2013
__________
Printed for the use of the
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
VACANCY
------
Subcommittee on Railroads, Pipelines, and Hazardous Materials
JEFF DENHAM, California, Chairman
JOHN J. DUNCAN, Jr., Tennessee CORRINE BROWN, Florida
JOHN L. MICA, Florida DANIEL LIPINSKI, Illinois
GARY G. MILLER, California JERROLD NADLER, New York
SAM GRAVES, Missouri ELIJAH E. CUMMINGS, Maryland
SHELLEY MOORE CAPITO, West Virginia MICHAEL H. MICHAUD, Maine
CANDICE S. MILLER, Michigan GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana ALBIO SIRES, New Jersey
BOB GIBBS, Ohio ELIZABETH H. ESTY, Connecticut
PATRICK MEEHAN, Pennsylvania PETER A. DeFAZIO, Oregon
RICHARD L. HANNA, New York, Vice MICHAEL E. CAPUANO, Massachusetts
Chair STEVE COHEN, Tennessee
DANIEL WEBSTER, Florida DINA TITUS, Nevada
THOMAS MASSIE, Kentucky NICK J. RAHALL, II, West Virginia
ROGER WILLIAMS, Texas (Ex Officio)
TREY RADEL, Florida
SCOTT PERRY, Pennsylvania
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Robert Puentes, Senior Fellow and Director of the Metropolitan
Policy Program, Brookings Institution.......................... 4
Hon. Joseph H. Boardman, President and Chief Executive Officer,
Amtrak......................................................... 4
David B. Kutrosky, Managing Director, Capitol Corridor Joint
Powers Authority............................................... 4
Ross B. Capon, President and Chief Executive Officer, National
Association of Railroad Passengers............................. 4
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Robert Puentes:
Prepared statement........................................... 30
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 43-44
Hon. Corrine Brown, of Florida........................... 43-44
Hon. Joseph H. Boardman:
Prepared statement........................................... 46
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 58
Hon. John L. Mica, of Florida............................ 59
Hon. Michael H. Michaud, of Maine........................ 61
Hon. Corrine Brown, of Florida........................... 62
David B. Kutrosky:
Prepared statement........................................... 66
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 74
Hon. Michael H. Michaud, of Maine........................ 74
Hon. Corrine Brown, of Florida........................... 75
Ross B. Capon:
Prepared statement........................................... 78
Answers to questions from the following Representatives:
Hon. Jeff Denham, of California.......................... 88
Hon. Corrine Brown, of Florida........................... 92
Supplementary information................................ 95
SUBMISSION FOR THE RECORD
Hon. Richard L. Hanna, a Representative in Congress from the
State of New York, submission of chart that lists long-distance
transportation costs per passenger and auto train losses....... 25
ADDITION TO THE RECORD
Hon. Michael H. Michaud, a Representative in Congress from the
State of Maine, submission of letter and supporting documents
from Patricia Quinn, Chair, States for Passenger Rail
Coalition, regarding the Passenger Rail Investment and
Improvement Act, Section 209, April 25, 2013................... 105
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UNDERSTANDING THE COST DRIVERS OF PASSENGER RAIL
----------
TUESDAY, MAY 21, 2013
House of Representatives,
Subcommittee on Railroads, Pipelines, and Hazardous
Materials,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:17 p.m., in
Room 2167, Rayburn House Office Building, Hon. Jeff Denham
(Chairman of the subcommittee) presiding.
Mr. Denham. The subcommittee will come to order. First let
me welcome our distinguished witnesses and thank them for their
testimony today. Some frequent attendees.
This hearing is another step towards the committee's
bipartisan efforts to complete a Rail Reauthorization bill this
year.
One of the key goals of the current Passenger Rail
Investment and Improvement Act was to seek cost efficiencies
and savings in Amtrak's operations. Since the enactment of
PRIIA in 2008, Amtrak has achieved notable improvements in its
financial condition.
On the Northeast Corridor, Amtrak earns a substantial
``above the rail'' operating profit, and with the introduction
of the Acela, Amtrak has captured 75 percent of the Washington
to New York rail to air market. Amtrak has also seen
significant ridership increases on its State-supported routes,
which connect metropolitan areas less than 750 miles apart. In
many ways, these are the routes where rail makes sense--
connecting densely populated areas where rail trip times are
competitive with air and automobile options.
PRIIA included an important change to this part of Amtrak's
business by requiring the States to contribute more to maintain
services. We look forward to hearing how that process is going
with our witnesses today.
The one area that PRIIA, and indeed multiple rail bills,
have not seen success is improving the financial performance of
the long-distance routes. Year after year these routes lose
money. In 2012, they lost a combined $600 million. We simply
cannot afford to continue these levels of subsidized losses
year after year.
PRIIA requires Amtrak to develop and post on its Web site
performance improvement plans for its long-distance passenger
routes and implement those plans for its worst performing
routes. This all was supposed to be done by 2012. However, as
we all know, long distance has been losing more and more since
PRIIA became law.
To illustrate, since PRIIA became law the NEC has increased
its profits by 143 percent, State-supported routes have reduced
their losses by 24 percent, while long-distance routes have
increased their losses by 11 percent. It is clear that FRA and
Amtrak did not follow PRIIA's intent to reduce long-distance
costs, so it is up to us on this committee to find better
solutions.
Finally, Amtrak's labor force is by far the largest
component of the company's overall cost, and Amtrak is
currently negotiating collective bargaining agreements through
2015. It is important for this committee to understand how
Amtrak management and personnel decisions affect the full cost
of rail service and if any efficiencies can be found to reduce
the overall cost for providing passenger rail service across
the country.
Again, I want to thank the witnesses for being here today.
We are open to all suggestions, and look forward to hearing
from your testimony today.
I would now like to recognize the ranking member, Corinne
Brown from Florida, for 5 minutes to make any opening statement
she may have.
Ms. Brown. Well, thank you, Mr. Chairman, for holding this
hearing. As the committee prepares for reauthorization of the
Passenger Rail Investment and Improvement Act, I think it is
important that we take time to better understand Amtrak and how
it operates.
As our Nation's transportation infrastructure falls further
and further into disrepair, we are focused on terminating our
country's national rail system while cutting off the only
public transportation system available to many Americans.
Without Amtrak's long-distance service, 23 States and 223
communities--that is about 4.7 million people, including some
in my home State of Florida--would have no access to intercity
passenger rail, many of which are not served by air or bus
service as we speak. As some Members advocate for dismantling
long-distance rail service, I think it is critical that we put
Amtrak service and the subsidies it receives into perspective.
Amtrak, like many companies, has room for improvement. But
it has made great progress in improving its business model and
service. For example, Amtrak has:
Increased ridership in 9 of the last 10 years;
Reduced its requests for Federal operating subsidies;
Reduced its debt to less than 1.7 in 2012; increased its
revenue by 42 percent, from $1.9 billion to $2.7 billion in
2012, including an operating profit in the Northeast Corridor
of $288 million;
Increased its shares in the travel market in the Northeast
Corridor by 77 percent, Washington, DC, and New York by 54
percent, and between New York City and Boston;
Improved--this is really interesting--its credit rating in
the last 2 years to the equivalent of A-plus, the highest
rating by Moody's in the history of the company--that is an A;
Received clear audit opinions in each of the past 10 years;
Began procurement of new cars and locomotives, which are
being built--built--in America by American workers in New York,
California, Georgia, and Ohio. I wish it was Florida.
The Federal Government subsidizes all forms of
transportation. Let me just say this again. The Federal
Government subsidizes all forms of transportation. But our
Transportation and Infrastructure Committee only wants to focus
and criticize Amtrak.
If not for the strong support of the Federal Government,
the airline industry would not be making a profit. Repeat:
Airports and air control towers are subsidized. TSA service--
subsidized. Essential air service--subsidized. And airlines are
paying for part of the Reserve Air Fleet. Moreover, all Federal
travel must be on U.S. airlines, and airlines are protected
from all foreign competition, while Amtrak bears subsidized
foreign competition regularly.
Even the Highway Trust Fund has been subsidized by $54
billion in general revenue over the last several years, and no
new funding sources have been identified as we begin to look at
reauthorization.
I will make additional comments during my questioning
period. But I think every American taxpayer should be concerned
about the fact that we spent $60 billion in reconstructing Iraq
alone. It is just inconceivable that we do not want to invest
our tax dollars, American tax dollars, into making sure that we
can move our people, goods, and services so we can be
competitive with the rest of the world.
With that, Mr. Chairman, I yield back the balance of my
time.
Mr. Denham. Thank you. I now recognize the previous full
committee chairman, Mr. Mica, for a brief opening statement.
Mr. Mica. Thank you so much.
Ms. Brown. Mr. Chairman? Mr. Chairman, I object.
Mr. Mica. Thank you.
Mr. Denham. Mr. Mica.
Mr. Mica. Thank you so much. Mr. Chairman----
Ms. Brown. Mr. Chairman? Are we operating on different
rules? My understanding of Rule 6 of this committee is that
unless you have the concurrence of the ranking member, no
Member can speak unless prior approval, based on Rule 6. Has
something changed? Why is the Transportation Committee----
Mr. Mica. To the point, Mr. Chairman, it has been the
custom afforded in this committee that always extended to the
previous chairman when the previous chairman attended a
hearing, whether it was Mr. Oberstar or Mr. Young, we always
extended the courtesy to that former chair to have, if they
wished, the courtesy of allowing them a statement.
Ms. Brown. On the point, Mr. Chairman, this rule was
adopted in this Congress as a request of the chairman, Mr.
Shuster. There was lengthy discussions between Chairman Shuster
and Ranking Member Rahall and the staff.
At no time did anyone indicate that this committee would
act any different from the rest of the subcommittees. At my
understanding, and maybe you had better call in one of your
attorneys, unless I concur, it cannot happen.
Mr. Denham. Thank you, Ms. Brown. I do not think we will be
going to court over this issue. But point well taken. We will
address Mr. Mica during the full committee statements.
Ms. Brown. Thank you, Mr. Chairman.
Mr. Denham. I would like to again thank our witnesses for
being here today. First on our panel, Mr. Robert Puentes,
senior fellow at the Brookings Institution; the Honorable
Joseph Boardman, president and CEO of Amtrak; David Kutrosky,
managing director of the Capital Corridor; and Ross Capon,
president and chief executive officer of the National
Association of Railroad Passengers.
I ask unanimous consent that our witnesses' full statements
be included in the record. Without objection, so ordered.
Since your written testimony has been made part of the
record, the subcommittee would request your oral testimony
limited to 5 minutes. Mr. Puentes, you may proceed.
TESTIMONY OF ROBERT PUENTES, SENIOR FELLOW AND DIRECTOR OF THE
METROPOLITAN POLICY PROGRAM, BROOKINGS INSTITUTION; HON. JOSEPH
H. BOARDMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMTRAK;
DAVID B. KUTROSKY, MANAGING DIRECTOR, CAPITOL CORRIDOR JOINT
POWERS AUTHORITY; AND ROSS B. CAPON, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF RAILROAD PASSENGERS
Mr. Puentes. Thank you very much. Good afternoon, Chairman
Denham, Ranking Member Brown, and members of the committee. I
appreciate the invitation to appear before you this afternoon.
The purpose of my testimony is to discuss Amtrak's
financial and operational performance. I am going to underscore
the new and emerging partnerships that are emerging between the
Federal Government, Amtrak, and the States, and describe an
approach for sharing operating costs for the long-distance
routes.
As you know, it is an opportune time for this hearing,
given the expiration of the Passenger Rail Investment and
Improvement Act this September. Among other things, that law
laid out a bold new vision for passenger rail that emphasized
better performance, both financial and operational, and set the
framework for a new kind of commitment for Amtrak's State
partners.
States now share operating costs for most short-distance
rail corridors which stretch 750 miles from end to end. Today
these routes are Amtrak's high performers, carrying about 85
percent of travelers, the vast of which between our Nation's
largest 100 largest metropolitan areas, the engines of our
national economy.
Spurred on by Federal action and recognizing the value that
passenger rail provides in supporting these major metros,
States have stepped up and identified their own solutions to
support Amtrak both within and beyond their borders.
For example, New York State recently assigned $44 million
in its current budget to support its obligation for the Empire
Corridor. Virginia's new transportation package includes over
$50 million in dedicated revenue for capital and operating
costs.
Pennsylvania recently agreed to contribute $4 million per
year to support the Pennsylvanian, keeping service
uninterrupted in the western part of that State. Vermont is
budgeting an additional $3 million for its share of the
Vermonter, and California's revised budget proposal now
includes an additional $19 million to cover the operating
requirements for the Pacific Surfliner.
Other States like Michigan support passenger rail through
nondedicated allocation of revenue from their transportation
fund, or in the case of Wisconsin and Missouri, its general
fund. Oregon uses a dedicated portion of revenue from their
personal license plate fees to support its service; and
Washington State taps motor vehicle sales taxes and car rental
fees.
My point here is that a new 21st-century federalism model
is emerging that challenges our States and metropolitan areas
to develop deep and innovative approaches to solve the Nation's
most pressing transportation problems.
However, we think more needs to be done. Ensuring an
efficient and effective passenger rail network in a constrained
fiscal environment will require building on the Federal/State
partnership initiated by PRIIA and applying it broadly across
the transportation network. In this way it should be a top
priority to expand the requirement for State operating support
to include the long-distance routes.
The 15 long-distance routes carry a small share of national
ridership, 15 percent, and largely responsible for the ongoing
operating deficit. They do, however, provide extensive service
to isolated rural areas and support national connectivity.
The goal of expanding the requirement for State support
should not be to eliminate the routes or to simply offload
responsibility from the Federal Government to the States, but
to strengthen the partnership, to build off the innovation, and
reaffirm the commitment of States to long-distance routes over
time.
State and Federal stakeholders have undertaken a rigorous
and complicated exercise to establish standard pricing policies
and cost methodology for short-distance routes in accordance
with Federal law. It is reasonable to apply the lessons from
this exercise to long-distance routes as well through careful
and collaborative work with State leaders and the freight rail
companies.
Of course, I recognize that the long-distance routes are
much more complex for several reasons, including their length
and the fact that they operate in more than one State.
Therefore, a negotiated approach should recognize that long-
distance routes do not provide the same service to all States
along their route, nor do they serve the same function as
short-distance routes.
For example, the Lakeshore Limited between Boston and
Chicago only travels through Ohio during low ridership
overnight hours, but it serves other States during typical
travel times.
Now, in exchange for greater responsibility from
Washington, States should have added flexibility to design and
allocate what are likely to be shrinking levels of resources.
As you know, current Federal law allows States to use
Congestion Mitigation and Air Quality program dollars for rail
operations, but it is limited to only 3 years.
As AASHTO and others have encouraged, that cap should be
removed. Doing so does not change the distribution of funds,
nor does it mandate the use of CMAQ funds for passenger rail.
It simply gives States and groups of States the flexibility
envisioned in Federal law, and empowers them to devise their
own solutions.
Mr. Chairman, I firmly believe that scrutiny should be
applied evenly to the entire transportation network and not
just to Amtrak alone. Much attention is given to the fact that
other nonprivate transportation passenger modes are not
profitable, nor do they concern themselves with being so.
Yet while Amtrak has done a lot to remake itself in recent
years, States need to continue to reaffirm their commitment for
the model to be sustainable. The upcoming reauthorization and
the finalization of the National Rail Plan, coupled with
increased attention on the role of passenger rail in States,
make this the right time to focus on the future of Amtrak
despite these fiscally constrained times.
Thank you again for the invitation to appear before you
this afternoon.
Mr. Denham. Thank you, Mr. Puentes.
Mr. Boardman, you may proceed.
Mr. Boardman. Mr. Chairman, Ms. Brown, and Members, over
the last 10 years our ridership has been rising consistently,
particularly on our national system, which is also known as the
long-distance trains. We are, on average, as full at peak as
our Acela trains on the Northeast Corridor. This has helped us
raise revenues, which have improved our recovery to nearly 88
percent.
The operation of the national system is a core Federal
responsibility since 1971, and if we are going to offer train
service, a Federal-funded national system is the best way to
keep costs low, provide the customer choices that build
ridership, and develop economies of scale.
I spent the last week and a half riding the Zephyr to and
from the west coast to celebrate both the National Train Day
and the unveiling of the 70 new Siemens locomotives built in
California. I think the Zephyr is a good case study in some of
the challenges along the long-distance trains.
Each train can carry and accommodate 365 passengers at a
time. The average number of passengers carried per trip in 2012
was 512. And while the peak load is lower, we come close to
filing each seat twice during the course of the 2,438-mile
trip.
We can have up to six separate trains labeled the
California Zephyr out on the road simultaneously. And we have
six different crew bases because of the mandated Hours of
Service Act, and we have got onboard staff that stays with the
train for the whole trip, providing customer service. So it
takes 254 crewmembers to maintain a daily schedule for the
Zephyr.
We have invested approximately $54 million in stations and
facilities on the Zephyr route since 2006. That pales, though,
in comparison to the $6.5 billion investment being made in
Denver that will include commuter rail, bus rapid transit,
light rail service with major investment from the FTA, an
investment that would likely have happened if Congress had not
required a national system to be preserved.
We cannot ignore the economic development that is being
supported in every city, village, or town that Amtrak operates
in the 35 stations on this route. Even Salt Lake City--5 years
ago, Utah started the FrontRunner Commuter Rail, and is
investing in a comprehensive network of public transit options
for their residents, again with major Federal investment from
the FTA. Amtrak ridership at Salt Lake City has grown over 50
percent in the last 5 years, and that is in the middle of the
night.
Seventeen of the thirty-five stations on the Zephyr route
provide mass transit connectivity to the communities we serve.
Forty-three percent of the riders who come into Chicago connect
with another Amtrak train. And while I was in California, I was
at Sacramento for the National Train Day. Sacramento, our
seventh busiest station on the Amtrak national system with over
a million riders, is making major investments for connectivity
that will soon drive ridership, mobility, and economic
development even higher.
Amtrak's labor cost is not unique to the service industry.
Some service industries can consume 70 percent of their
operating expenses on labor cost. It is our largest single
cost. Labor is the primary cost driver for most American
businesses today. According to KPMG, labor is typically 30
percent of total manufacturing cost in developing markets, and
it is 55 percent of the manufacturing expenses in New York, and
one of the reasons that offshoring has occurred with
manufacturing.
The numbers are correct in the above table, which came from
the memo that the committee put out. They are correct, but they
are not complete. The total, if added, would be $3,184,000,000,
and would show labor at 63 percent of the cost. Instead, the
number from the financial audit that Amtrak has is
$4,035,000,000. Amtrak spent 50 percent on labor in fiscal year
2012. It is a number that is comparable to mfg.
Long-distance trains are a core public service provided by
the United States for national connectivity and mobility, and
it is clear they are doing more than that. These trains cross
State lines in interstate commerce, clearly a Federal
responsibility.
Amtrak has a clear Federal mandate to run these services.
Between 1971 and 1997, we were required to operate a DOT-
designated basic system that included long-distance routes.
Today the Rail Passenger Services Act, as amended by PRIIA,
requires us to operate a national passenger rail system that
includes long-distance routes. That legislation included a
``sense of Congress'' statement asserting that, ``Long-distance
passenger rail is a vital and necessary part of our national
transportation system and economy.''
Should Congress again decide in the next reauthorization to
continue a national system, Amtrak is dedicated to ensuring
that long-distance trains are sustained and that they are run
as efficiently and effectively as possible.
Thank you.
Mr. Denham. Thank you, Mr. Boardman.
Mr. Kutrosky?
Mr. Kutrosky. Thank you, Chair Denham and Ranking Member
Brown and committee members. I am here to provide insight on
the tools that States can use to manage their State-supported
services.
On the Capitol Corridor, for which I am the managing
director, it is the third-busiest corridor in the Amtrak
system, connecting Sacramento, San Francisco Bay area, and San
Jose/Silicon Valley. Throughout its inception, the State of
California has provided 100 percent of the operating support
for these trains.
Over the last 3 years, we have noticed the main cost
drivers for the service include fuel, which is rising at about
6 percent per year; direct route costs, approximately 2 percent
a year; and shared costs, approximately 2.3 percent a year.
Over the last 15 years, the Capitol Corridor Joint Powers
Authority has been working with its local Amtrak team to
control operating expenses while maximizing revenues, yet
making sure we employ those amenities which will improve the
customer's experience.
With fuel as a cost driver, what we do with Amtrak as they
purchase the fuel is to develop conservative cost estimates to
make sure that fuel spikes do not negatively impact our budget.
And we also opt into the fuel hedging program. And while
hedging does not guarantee a reduction in costs, it does help
provide a moderating factor. It levels out the potential for
large spikes in fuel prices.
One of the other areas that we use to control operating
costs is to optimize the service performance. We recently did
that in August 2012, and we were able to drop our operating
expense by $2\1/2\ million, approximately 4 percent of our
operating budget.
So as you can see, the ability to control operating costs
while maintaining a solid, consistent performance and keeping
the passengers happy, requires that strong relationship between
the manager and the operator of these State-supported trains.
I would like to transition to PRIIA Section 209 policy,
where States now begin to have a better idea and better way of
understanding and controlling their operating costs. Section
209 provides a policy for which States will now be able to
engage with Amtrak on the allocation of operating costs and
equipment capital costs with a policy that is fair, equitable,
and transparent.
States have been working cooperatively with Amtrak over the
last 2 years, and we have seen significant progress in the
policy. We have developed a menu of 15 items from which States
can select those services for Amtrak to provide these services,
and also help develop cost-effective budgets.
Most recently, on April 18, the States received their
fiscal year 2014 projections, and we have been working with the
27 routes. We pulled them all together and made one worksheet
so that we can do a comparison. We met with Amtrak yesterday in
an all-day meeting. It was a very productive meeting, where we
are lining up those costs to make sure they adhere to the
Section 209 policy. And we will be continuing to meet with
Amtrak over the next 2 months.
Just to give you an example of what we are seeing as
States, in fiscal year 2013 the estimated contribution by
States for these State-supported routes is $193 million. That
number increases to $317 million in fiscal year 2014. That is
an increase of $119 million, or 60-percent increase, a lump sum
payment.
Now, having said that, the States have been working with
their legislative houses and Governors' offices to increase
their share of support for these services. And now, as I said,
we are doing this side-by-side comparison with Amtrak. We are
making sure that these forecasts can line up with the policy,
and also that these States can absorb these costs in their
fiscal year 2014 budgets.
So upon closer evaluation, we are starting to see that the
States and Amtrak will have to form a stronger, more
transparent bonding together to make sure that these costs are
transparent, equitable, and fair. We have a menu of items from
which States to select Amtrak for those particular services in
that menu.
We are all driven to make sure the service performance and
ridership and revenue meet the goals of each State budget. And
one of the things we were working as well besides costs is also
revenues. So we want to make sure that we maximize revenues as
best as possible.
So in closing, the Section 209 policy allows State
intercity passenger rail agencies to acquire the tools to
understand and control those cost drivers in their State-
supported services. These tools can help States make business-
based decisions in the delivery of their intercity passenger
rail services that meet the needs of the traveling public while
also ensuring these services are cost-effective and efficient.
Thank you for the opportunity to present my testimony.
Mr. Denham. Thank you.
Mr. Capon?
Mr. Capon. Thank you, Mr. Chairman.
Broadly speaking, the major drivers of net costs of Amtrak
service are Northeast Corridor capital costs and long-distance
train operations. The Northeast Corridor requires considerable
capital just to maintain its current condition.
Our two major concerns about the Northeast Corridor are:
Because it is at or near capacity, fares continually rise, and
the proportion of the population that can afford to ride falls;
and public discourse has overemphasized the difference between
capital and operating costs.
The latter point has caused many people to believe that the
Northeast Corridor is profitable in a private sector sense. The
reality, of course, is that without Federal capital support,
the Northeast Corridor's downward drift would become a death
spiral. And without the rest of the system, a sizable chunk of
the fully allocated costs of the long-distance trains would not
go away, but would be reassigned to the Northeast Corridor.
Amtrak's individual routes are part of an interactive and
interdependent system. The impact of eliminating any route or
group of routes involves assumptions about what would happen to
revenues from passengers connecting with surviving trains, and
distinguishing between costs that would be eliminated and those
that would be shifted to surviving trains. Fully allocated cost
figures vastly overstate what could be saved by eliminating any
one service.
The long-distance trains are heavily used by people who get
on and off at intermediate points, and accounted in fiscal year
2012 for 43 percent of all Amtrak intercity passenger-miles,
and provided the only Amtrak service in 23 States.
Our view is that we should be increasing the service,
lengthening trains; filing gaps in the national network; making
track, signal, and station improvements, many of which are
going forward, and procuring high-performance modern equipment.
Amtrak's network is so skeletal that attempts to eliminate
individual routes would seriously weaken the system's
credibility, and also likely lead to wasting a lot of energy,
Amtrak staff time, Capitol Hill staff time, and a lot of
others. There is scant evidence that elimination of routes in
the past has resulted in meaningful improvements to Amtrak's
bottom line.
The report that Rob Puentes authored well outlines how
growth on Amtrak has outstripped the population growth, the
real GDP, and growth in use of other modes of travel. At the
same time, airline and intercity bus services have been
reducing their service to small markets to focus on larger
markets.
A study released this month by MIT found that in the past 6
years, there was a 14-percent decline in yearly scheduled
domestic flights from the U.S. air transportation system, with
small hub and medium hub airports disproportionately affected.
There has been some discussion about shifting cost of the
long-distance trains to the States. PRIIA, the 2008 law,
reaffirmed the long-distance trains as a logical Federal
responsibility. These trains could not survive a mandate that
they get State support.
For a route to survive, every State along it would have to
agree to fund the service and agree on schedules, service
amenities, and cost allocations. That means funding service in
the middle of the night in most of Nebraska because of the
crucial marketing importance of hitting Chicago, Denver, and
Bay Area markets at attractive hours.
Any single State not cooperating could torpedo an entire
route, and any route dropped from the system would shift some
costs to surviving routes. And the revenue impact on surviving
routes would mainly be negative due to loss of connecting
revenue.
Our members are bemused by the intense focus inside the
beltway on subsidies to passenger trains in contrast with
highways and aviation. Starting in 2008, $53 billion in general
funds have been transferred to the Highway Trust Fund. That is
about three times what the Federal Government has spent on
Amtrak operating grants over 42 years.
What is worse, once this money is transferred to the
Highway Trust Fund, it takes on the same restrictions as if it
had been paid by highway users. In general, railroads need not
apply. This is but one example of transportation policy out of
touch with demand trends, and one reason why we frequently hear
that the public is ahead of the politicians. For aviation and
highways, subsidies are scattered over many different balance
sheets, less concentrated, and less obvious than Amtrak's.
We support the budget requests of the administration and
Amtrak, and would point out that Amtrak does reduce costs in
other areas by removing passengers from highways, encouraging
denser development around many of its stations, adding to the
attractiveness and cost-effectiveness of transit systems by
serving passengers making connections and by sharing
facilities, and running electric locomotives on the Northeast
Corridor and fuel-efficient diesels elsewhere.
Thank you very much for your time.
Mr. Denham. Mr. Puentes, your report states that top
priority of this upcoming reauthorization should be to expand
the Federal and State cost-share partnership to Amtrak's long-
distance routes to improve their financial performance.
Can you explain what is the justification for why you
believe that?
Mr. Puentes. Thank you, Mr. Chairman. To clarify, it is not
just to improve their financial performance, although we think
that that is certainly a big piece of this. The analysis that
we conducted looking at the short-distance routes, we included
the State revenue sources that were coming in as revenue for
these routes in our calculation. We found much more positive
balances on the operating side when you include these there. So
there is a financial piece to it, as you mentioned.
But in a lot of the work that we are doing, not just for
Amtrak but across transportation and other areas in general,
when the States have a role to play in this, when the States
have skin in the game, and when they participate with the
Federal entities for things like Amtrak service, we are seeing
much better-run service. We are seeing new innovations, new
ideas. And we are seeing better integration of passenger rail
within the existing network that they are operating.
Mr. Boardman and others talked already today about some of
the interesting things that are happening in I guess it was the
California Zephyr, in Colorado, and in Salt Lake City. We are
seeing in North Carolina and Maine and a bunch of other places
a very different type of service that is much more attuned to
the unique traditions and the cultures and just the preferences
of these individual States.
So a big piece of it, as you mentioned, is about the
financial performance. But we think that having the States be
committed to having these services, putting skin in the game,
not just results in better financial balances but also results
in better service overall.
Mr. Denham. Thank you.
Mr. Kutrosky, while we are talking about Section 209,
Amtrak recently released its projections for fiscal year 2014
and under 209, which is significantly higher than amounts that
were estimated using 2011 and 2012 data.
How confident are you in their estimates? And have they
provided you backup that you need to plan your business in the
estimates?
Mr. Kutrosky. Chair Denham, that was exactly what we were
talking about in yesterday's meeting. So we are starting to get
that information provided to us. We are finding one of the
larger increases is the equipment capital charge; it was based
on a formula that has changed, and that has caused an increase
in the equipment capital charge.
That is the most obvious one that we have seen so far. But
we need to get into further details there and find exactly what
you are asking.
Mr. Denham. In your 15 years of experience with Section 209
State-supported routes, what policies would you change? What is
working well? And what are some of the cost drivers that make
it a challenge for you to control your business?
Mr. Kutrosky. Sure. Exactly. Thank you. I would say the
cost drivers, as I mentioned, are fuel and direct costs; and
the shared costs, most importantly is fuel. As we have all seen
when we go to go fill up at the gas pump, that seems to be--or
I know that is for us. I'm not sure about the other States, but
that seems to be the largest driver.
So hedging helps, and developing an optimized service plan
that reduces fuel as best as possible. As far as the labor
costs, as Mr. Boardman, President Boardman brought up, those
are matters of their national agreements.
But I will say one of the areas that we are looking at, and
this has been part of the Section 209, is the menu of services.
So some States can opt to another provider. For example, on the
Capitol Corridor, our call center goes to the local transit
agency. Those operators who answer the phones are cross-trained
so they can handle not only transit-type questions but also
questions on the Capitol Corridor.
On the Downeaster, they outsource their food and beverage
service to a catering company. And in North Carolina, their
State-supported Piedmont route, they have a third party
maintain their equipment, which is owned by the State of North
Carolina.
So those are just some examples of what is available to
help control costs. We still have a very strong partnership on
the Capitol Corridor with Amtrak. They provide a safe, reliable
product for our passengers, and our passengers have some of the
higher customer satisfaction scores thanks to those crews.
Mr. Denham. Thank you.
And Mr. Capon, every time we have one of these hearings, a
fact always gets thrown out about subsidies for aviation and
buses and highway bills and everything else.
Would you want to take the same subsidy as aviation? Would
that be an equitable solution?
Mr. Capon. Well, I think the goal should be to have an
efficient system that serves the public. So I think that the
financial performance of the long-distance trains and the
State-supported transactions are roughly similar if you are
just comparing costs and passenger revenues and take out the
State payments.
For example, the Essential Air Service program is a $200
million-a-year program, but the nature of the service is very
different from a train. Essentially, you serve a particular
airport in rural Montana. Say they may have a flight from St.
Paul or wherever.
You can decide that that particular airport does not need
service and take out that flight, and it does not have a
dramatic effect on the rest of the system; whereas if you
decide that, say, Grand Junction or Denver is not going to be
served on the California Zephyr, you essentially have to take
out the entire route because the California Zephyr would not be
viable without the ability to serve Denver.
So I would say----
Mr. Denham. I will come back to that because I am out of
time.
Mr. Capon. Yes.
Mr. Denham. But I just wanted to make the point that
aviation per-passenger receives a subsidy of about $4.28, mass
transit about 95 cents per passenger, Amtrak $46.33 per
passenger. So there is definitely a big discrepancy.
But that is one of the issues that we are going to try to
get to in this whole PRIIA reauthorization, is how much subsidy
is fair for the American taxpayer? How much should we be
subsidizing every ticket? And are there more efficient ways to
run this?
Mr. Capon. Right. Thank you.
Mr. Denham. But I will come back to that. I am out of time.
I now yield 5 minutes to the ranking member, Corinne Brown.
Ms. Brown. Mr. Boardman, first of all I want to thank you
for your leadership. You know, I serve in the people's House,
and it is just very interesting that the people--I don't know
what they think about cost-shifting because basically, the
States, they are out of money, and it is whether or not we
think it is important to invest in a comprehensive system.
I want to thank you for participating in Train Day. I also
have supported Train Day. But the point is, you mentioned Salt
Lake City, Utah. You know, they have money that came from
Florida. And they developed the system, and the routes are
developed, and they are moving their people, goods, and
services. Money that was slated for Florida went to Salt Lake
City. I rode the train. It goes all up in the mountains, moving
the students. And everywhere they built a station, it was
economic development.
So as we move forward--and I am so sorry that the House--
really, it used to be the leader in coming up a bill that was
comprehensive, and the Senate would kind of just take our work.
Now we have just got to take the Senate's work because we are
not able to do our work.
Can you talk about the importance of having an integrated,
comprehensive system? And when you talk about California--I
have got to say it--I recently was out there. I am on VA, and I
went there, and we have 400 units that were built with Federal
Government money that are standing idle because the State of
California doesn't have money for operation.
So we are looking at an economic system that we need to
kick start. But it has to be a partnership between the State,
local, and Federal Government. And I do not know. It is all the
same taxpayers' dollars whether it is coming from the Federal
Government or whether it is local government. It is not foreign
sources.
Would you respond to that?
Mr. Boardman. Yes, I will. And I think you have hit an
absolute point, the need for connectivity and network. I think
that Brookings identifies that as well. They have a different
idea on how that might really work. And my expectation is that
the committee really does want to see that happen, have that
connectivity and that network.
I was hoping that what you would say is that you would
provide the assistance, Mr. Chairman, that is provided to
aviation in the 50,000 employees of DOT that provide the air
traffic control system, which I do not know if it is included
in that subsidy number that you really talked about. But with
DOT being a 60,000-person agency and 50,000 of the people being
at FAA, that is a pretty significant subsidy, I guess you would
call it.
Mr. Denham. Mr. Boardman, I would just add that it is
included in that number.
Mr. Boardman. Good. Then we have a lot of passengers that
it is being applied to.
The idea, though, that you could have a railroad system
that operated around this country without having it being
connected together of course does not make sense to anybody. It
absolutely would be dangling pieces all over the country, and
it really would not work.
When Denver had the opportunity to grow its service, the
only reason that you really had a station there was because
Amtrak had been coming in and out of that location. And there
was a lot of stress at that period of time about whether you
would maintain a connection further to the west, to the Front
Range, because they wanted to build a new sports arena.
And Amtrak and FRA at that time really were able to work
together with the transit system out there to make a new system
really work. And that is where that $6\1/2\ billion investment
really came from.
Ms. Brown. One last thing. You know the Sunset Limited. I
want that reinstated. But I have talked to the mayors in all of
those cities, from New Orleans to Orlando, and there is energy
there. But of course, it was not profit-making.
So a lot of the system is not profit-making. When I think
about New Orleans and Katrina, I think we need to think out of
the box. We need a system in place that when we have natural
disasters or we are being attacked, we can move people out of
harm's way.
We have got to think out of the box. I mean, we have got to
figure out how we can make sure that we are moving--we used to
be the leaders in rail, and now we are the caboose, and we do
not use cabooses any more.
Thank you again.
Mr. Boardman. You are welcome.
Ms. Brown. I yield back the balance of my time.
Mr. Denham. Thank you.
Mr. Mica?
Mr. Mica. Thank you, Mr. Chairman. First off, some comments
and then one or two questions, since I did not have an
opportunity to make them at the beginning.
You have heard a fairly rosy picture painted by some of the
current operators and advocates of Amtrak. And let me just take
parts of this apart here.
First, the Northeast Corridor--and no one is a bigger fan
of coming up with out-of-the-box thinking. In fact, if we
privatized the Northeast Corridor, opened it to competition--we
will just say opened it to private competition--Amtrak would be
put out of business in a nanosecond because it is still a
Soviet-style train operation, and as long as you have that,
people will not be thinking out of the box till. We truly open
competition, that is going to take place.
And then the--I call it ``Fantasyland finances'' of Amtrak.
I will tell you the Northeast Corridor is making money, and
only in that Fantasyland financing do you not even amortize
over some period of time some of the capital costs because we
have been pouring billions into the Northeast Corridor, which
is the only stretch of track that they really own of any
consequence.
First, the Northeast Corridor lack of progress will
continue. It does not make money no matter how you cook the
books.
Let's go next quickly to--I worked hard on PRIIA. We passed
it, Mr. Oberstar and I, the first reauthorization in 11 years.
We came up with performance improvement plans for each of these
long-distance money-losing propositions. And we wanted to
improve the service.
Mr. Capon and others, are you aware that we are actually
losing ground from last year? And I had the staff produce this.
Mr. Boardman highlighted the Zephyr. We have gone from the loss
per passenger of $165.80 to $182 in a year, from 2011 to 2012.
The Southwest Chief, the Chicago to Los Angeles, $177 was
the loss. It is now $183.40. And then the whopper of all the
losers, which is the Sunset Limited, and I pointed out a year
ago that again--the loss was $375 a ticket, per passenger.
And we looked online, and you could order a limousine from
anywhere in New Orleans to the airport, buy the ticket, and go
in a few hours to Los Angeles, and then deliver someone to the
Los Angeles area, and it would cost less than it costs for
Amtrak to operate. We would actually save money. And the loss
with the Sunset Limited has increased from $375.10 to $400.
This is a great concern because we have tried to do better.
So the losses continue. They are pooh-poohed. It is over a
half a billion dollars, as the chairman of the committee has
pointed out. And again, $46 and some cents for every ticket.
It's so off the charts.
I might remind folks--and when we pass these out, we also
have the bus routes which can get you there faster and at lower
cost in almost every instance. So there is plenty of service,
and you can stem some of the loss and bleeding, and people can
get where they want to.
By the way, too, the surface carriers--the Greyhounds, the
Megabus, all the dozens of surface carriers--are the largest
carriers in the United States, more than aviation, far more
than 31 million, which is almost a joke in rail terms in world
rail passenger service. But they all make money. They pay
taxes. And they are not subsidized. I know that is shocking to
folks.
So Amtrak again comes forward with losses. Anything they
touch seems to turn to--I will not say it here because it is a
public audience, but look at Auto Train losses to Florida. They
have grown in a year from $108.90 to $122.60. So we are going
south rather than making progress forward.
My final question, Mr. Boardman: How much are the losses--I
asked you last time; you were going to provide the committee--
on food service to Amtrak, which were in the $80-plus million?
I do not have that for 2012. Could you inform the committee
today?
Mr. Boardman. Mr. Mica, our food and beverage revenue is
about 6 percent of our total revenue, and our costs are
typically about 5 percent of that.
Mr. Mica. What was your loss? It was $84 million, $83
million?
Mr. Boardman. I am looking here right this minute. The
total revenue is 132. Our net loss was $72 million.
Mr. Mica. $72 million. Thank you.
Mr. Denham. Thank you.
Ms. Esty.
Ms. Esty. Thank you, Mr. Chairman.
Last Friday as I was heading home and looking at the
committee's schedule for this week, I was thinking about this
hearing, and then I got news about a trail derailment in my
State. Worst and with children who ride that line all the time,
we were all just incredibly grateful that no one was killed.
You know, it appears now that an eastbound Metro North
train on the New Haven line derailed, struck a westbound train
causing it to derail, over 70 people injured, several critical,
and many are crediting our relatively new railcars, which we
have been investing in, for saving lives in that accident, and
while the NTSB is continuing to investigate the accident, it is
worth noting that the NTSB reports that the eastbound engineer
noted a broken rail just the time of the incident.
We are continuing to rebuild the affected track, and it is
my understanding at the time of the derailment there were only
two operational tracks on the Northeast Corridor at that
location, and with the other two lines out of service for major
update work.
This work eliminated critical capacity, and on a Friday,
the Northeast Corridor was closed. I will note also this is
also on a graduation weekend. Considerable traffic,
considerable disruption to hundreds of thousands of people, and
I have heard from folks across Connecticut that the upgrade
work on the line and on these additional operational tracks
cannot be accelerated due in part to the fact that Connecticut
does not receive funding for this portion of the Northeast
Corridor from the funds appropriated to Amtrak for the
corridor.
Now, Mr. Puentes, the Brookings Institute in your proposal
has been discussed with my folks at the DOT in Connecticut, and
they have pointed out to me that in your plan to turn
responsibility over to the States, you assume that States would
be able to draw on the Highway Trust Fund.
However, we are all very well aware that the Highway Trust
Fund with its current obligations and funded by the current gas
tax is not sustainable in its present state.
Does the Brookings Institution support raising the gas tax
while suggesting that the Trust Fund take on passenger rail
infrastructure?
Mr. Puentes. Thank you very much.
So, first of all, we do not advocate just turning over the
routes to the States. We have tried to go to great pains to
make the point that we are really talking about a partnership
that is not just a Federal operation, particularly for the
long-distance routes in certain places, but we are so
encouraged and so optimistic by these great examples of
partnerships that we are seeing all across the country. And so
that is the kind of thing that we are trying to see proliferate
around the U.S.
Now, that said, not being naive or ridiculous about it, we
certainly know that the States are facing tremendous budgetary
challenges all across the board, transportation being one of
the key ones. A lot of that is because of challenges with the
Federal Highway Trust Fund. We certainly know that, and we do
not see that increasing, you know, anytime soon.
But to your question, we do think that it is the
flexibility that we should be providing, that the Federal
Government should be providing to the States if there is going
to be then this deal where the States are picking up more of
the responsibility in this greater partnership. That to be
coupled with additional flexibility, again, not just for
Amtrak, not just transportation, but as we are starting to
experiment with these new models for federalism, you know, that
has got to be kind of part of it. That has got to be this
flexibility.
Ms. Esty. But no additional money, just greater flexibility
in deploying the money from the highways that are falling apart
in Connecticut to the rails that are falling apart?
Mr. Puentes. That is a big piece of it. We certainly think
that additional money would be tremendous. I mean, we think the
Federal gasoline tax has not be raised in 20-plus years. We all
know that. We all know the current condition of the Federal
Highway Trust Fund. A gasoline tax is long overdue in this
country. I personally would support that.
I think that there is a need to do that. I think that we
have seen that we can spend that money much better, and we
certainly know that the maintenance needs all across the
transportation network are in terrible shape. So we certainly
need to do that.
That being said, I just do not see it happening any time
soon. If there is not going to be additional money there needs
to be flexibility.
Ms. Esty. I would agree with that.
It is well documented the Northeast Corridor, like much of
our infrastructure, has a huge backlog of capital needs. It is
estimated under the Master Plan this is a backlog of $8
billion. Very quickly from each one of you, yes or no, do you
believe that this backlog in the Northeast Corridor is a
Federal responsibility on capital needs?
Mr. Boardman. Yes.
Mr. Capon. Yes.
Mr. Kutrosky. Yes.
Mr. Puentes. Partly.
Ms. Esty. Partly. All right.
In closing, I would like to note that according to the
Connecticut DOD--we like these answers--Connecticut has already
spent $5 billion of its own money on the New Haven line, but it
is estimated that it is going to take another $4.6 billion on
this line for a major part of the Northeast Corridor just to
get to the general state of good repair and modernization.
So as we look at these different models, partner States are
going to have to rely on each other and deal with the Federal
Government to travel on this most used line, and we do need to
take into account these capital costs which are significant,
and in light of super storm Sandy, where we had the New Haven
rail line under water during that storm. So we cannot take into
account just operating systems, but the capital costs.
I want to thank the chairman for the hearing and yield back
my time.
Mr. Denham. Thank you.
Mr. Hanna.
Mr. Hanna. Thank you, Chairman.
Mr. Capon, you mentioned that in some way this Congress or
our policies are out of touch with demand. Yet in your own
statement--and there is all kinds of demand for all kinds of
things--but you say that key stations and overall fleets are
near capacity. Fares are continually rising, and the proportion
of population who can afford to ride Amtrak continually falls,
yet demand goes up.
So I mean it could be possible, but how are both possible?
What is wrong with letting supply and demand work when
apparently ridership is relatively inflexible to the price? And
as you say in your own statement, the demand is easily
outstripping the supply and continues to go up.
What is a case for continuing to subsidize ridership that
has such inflexibility in its demand?
Mr. Capon. Well, the ridership, it is a strong market. A
lot of people are turning away from highways and from aviation,
and Amtrak is compelled to have the highest revenues that they
can consistent with reasonable load factors because they are
under pressure to keep their operating grant requirement low.
When facilities are at capacity, I mean, the most obvious
issue would be the two tracks under the Hudson River, one of
which is out of service all weekend for maintenance.
Mr. Hanna. But we are talking about two different types of
demand here. I am talking about the apparent inflexibility of
demand for the product, for the ride, wherever someone is
going.
I guess directly why do we keep fares low when that X/Y
axis which one would use if it were a business, you would raise
the price to a point where you saw ridership decline?
What is the justification for having it that way?
Mr. Capon. Well, first of all, we have a taxpayer supported
railroad that a lot of people cannot afford to ride on because
the fares are so high. It provides----
Mr. Hanna. That is conjecture though. I mean, how do you
know that? Do you have studies that can show that fares are so
high that a lot of people just choose to go nowhere?
Mr. Capon. Well, a lot of people are riding BoltBus and
Greyhound and crowding the highways, a higher rate of pollution
than on the train. There is a lot of anecdotal evidence that--
--
Mr. Hanna. But that does not speak to your statement which
says that they will not use the train; that on the margin,
people would continue to decline to use the train if you raise
the price.
Clearly, that is not true because you say in your own
statement ridership continues to go up regardless of the price,
yet you object to the raising of the price.
Mr. Capon. Well, the biggest percentage growth in Amtrak
has actually been outside the Northeast Corridor, partly
because of the very aggressive fares that they are forcing----
Mr. Hanna. But they are still at capacity.
Mr. Capon. It is at capacity, but it is at a ridiculously
constrained capacity.
Mr. Hanna. Mr. Boardman?
Mr. Boardman. We have used the same method that the
airlines do in terms of managing our prices, and especially on
the Northeast Corridor, where we can price higher, and we try
to price to an elasticity where we would have the maximum
amount of revenue.
Mr. Hanna. And you feel like you're continually doing that,
or is there something, as Mr. Capon said, there is some public
service involved beyond that justifies the public paying for
these subsidies?
Mr. Boardman. We are not seeing that. We do not see it that
way as a provider of service. We are trying to maximize the
amount of revenue we receive per ticket.
If you really looked at the cost per ticket and you really
applied even the service especially on the Northeast Corridor
that Member Esty was talking about in terms of the connectivity
of the Connecticut service, the tracks that we own, everything
along the corridor, you are looking at a subsidy for Amtrak of
about $5 per ticket nationwide by applying everything.
Mr. Hanna. Have you done studies to prove Mr. Capon's point
that people drop out of the system at some marginal point?
Mr. Boardman. We are looking all the time. We keep an eye
on Megabus, for example. What is the profile of the rider? How
many riders do they have? What do we potentially think their
revenues are?
We look to see that we are maximizing our revenues and
filling our trains. So we are really managing the buckets on a
regular basis.
Mr. Hanna. You can kind of see the irony though that
ridership goes up; the price goes up. Ridership continues to go
up.
Mr. Boardman. Yes.
Mr. Hanna. If you and I were in business together, we would
look at that and say this is a source of unrealized revenue
because demand is so high.
Mr. Boardman. But you can only raise it at certain times.
For example, starting at noon on Wednesday, our Acelas at about
11 o'clock in the morning to noon become full going back to New
York Wednesday, Thursday and Friday.
Mr. Hanna. Thank you. Thank you both. My time has expired.
Mr. Denham. Thank you, Mr. Hanna.
Mr. Webster.
Mr. Webster. Thank you, Mr. Chairman.
I only have one question, and it came from a previous
question where four of you were asked would you be for taking
the Transportation Trust Fund using that money to subsidize the
lack of maintenance on the Northeast Corridor railroads, and
three of you answered yes.
My question is: would you still answer yes if you were from
a heavy donor State?
Mr. Boardman. I did not answer yes to that question.
Mr. Webster. OK. What did you answer?
Mr. Boardman. I answered yes to the question, sir, that do
I think it is a Federal responsibility to fund the backlog, not
to where it comes from out of the Federal Government.
Mr. Webster. OK. Thank you.
I yield back.
Mr. Denham. Mr. Radel.
Ms. Brown is being very generous in allowing us to ask all
of our questions. We are going to try to get through here. We
are expecting votes any minute now, and rather than call all of
you back again, I would prefer to try to see if we cannot
manage our time.
So thank you. Mr. Radel.
Mr. Radel. Thank you.
Mr. Boardman, you come here and you put up with quite a bit
with maybe this side drilling with some questions here. I am a
freshman so maybe I have no idea what I am talking about, but
here is what I do know.
Just having owned a business in the real world and worked
in the private sector all my life, I am just trying to wrap my
head around where we are at right now in terms of spending and
subsidizing, but also what we do forward. And I will tell you I
do believe that I would work with our colleague from Florida in
understanding that there is a role that the Federal Government
plays in our infrastructure, and yes, it can be right here
right now, but just a few kind of real world questions if I
may.
We know that we are losing about $400 million, $400
million--even when you just say that number out loud--a year in
operations. That is what is subsidized. Are we negotiating pay
raises right now with employees?
Mr. Boardman. We have labor contracts that we have on a
regular basis, yes.
Mr. Radel. OK. How do I explain that to people at home who
do not have Amtrak in south Florida?
Mr. Boardman. I think certainly it is a very fair question.
I think what you have is you have engineers and conductors,
maintenance people all that do the same work whether they do it
for freights or whether they do it for commuters or whether
they do it for Amtrak.
If you look at a long-distance train, for example, the
recovery ratio of what we cover in terms of our costs are
pretty close to what commuters do. So Amtrak gets dealt with
many ways in a sense of a loss rather than a purchase of the
services that really are out there for mobility, for
connectivity.
If you looked at another model like Britain, it is not that
they are losing money the way they are talking about it. It
actually is costing the British Government more money now that
they have privatized than it used to cost them when they did
British Rail, and the way they get around that is they put it
out for bid, and then the British Government pays the cost of
that bid, and we get rid of this idea of a subsidy because that
is the provision of the cost.
It is the same thing that is happening here with 209. They
are----
Mr. Radel. That is OK. How do I justify a pay raise when we
are just shelling out money? It is your money, your money, you
when you pay taxes.
Mr. Boardman. It is the same for a highway contractor in
the States when the Federal Government provides $4 billion to
New York State to reconstruct the highway. They pay the
contractors because the work is done.
Mr. Radel. All right. Long-distance routes losing $575
million a year, that is it. We can talk about the semantics of
subsidizing and funding, et cetera, but where I think that we
as Democrats and Republicans can work together and work with
you is what are we doing to reform these. What are we doing to
do everything that we can to maximize our dollar and stop
bleeding money?
Mr. Boardman. I do not think you are going to be able to
cut the cost a substantial amount if you continue to provide a
connected system across this country.
Mr. Radel. Are we looking to ways to even do that?
Mr. Boardman. Actually, you have been taking the excess
funds from the Northeast Corridor and putting them into the
long-distance trains to reduce the Federal subsidy to the long-
distance trains.
Mr. Radel. In terms of practically speaking, technically
speaking, which is way beyond me, but that is why we are here
today, are we looking at any other areas physically to reform
to make the rail more efficient or more cost effective besides
just taking money from one place and putting it into another?
Mr. Boardman. Well, we certainly look to try to provide a
better service on a regular basis and keep our costs down, but
what you really look at here is that the labor is the labor.
The fuel, as David talked about is something that is much more
difficult to identify.
The major drivers of cost to provide this service is the
same for all of us.
Mr. Radel. All right. Good. Well, look. I hope moving
forward if there is anywhere where we can be of assistance,
again, in finding areas that we can cut costs and quit bleeding
money, I think that in the most bipartisan way we all will do
everything that we can to move forward with that.
Thank you. I appreciate your time. I appreciate you putting
up with us.
Mr. Boardman. Yes, sir.
Mr. Denham. Thank you.
Mr. Williams.
Mr. Williams. Yes, thank you, Mr. Chair.
I appreciate you all coming by, and I got here late. I got
here late. So I am going to ask a pretty simple question.
I am a business guy. I have been in business in the private
sector for 42 years. I have fought every Government regulation
you can throw at me, and I am a big private sector guy, and I
have been riding on the trains since my mother took me to
California on Super Chief in 1953.
But anyway, here is my question, and I sit here as a
taxpayer and somebody in Congress. Can you guys ever be
profitable? Do you think about profits? Do you think about
surplus?
I mean, I know you have got contracts. You have got this
and that, but I am going to tell you the private sector has
been able to do things they never thought they could do before
with the economy we have had since 2009, and they have been
able to make it.
You know, basically, we, and you are included, we are your
banker, and if you are a banker, I want to know how you are
going to get profitable, I mean, because you are talking to a
bank that does not have any money.
So when is Amtrak going to start thinking in terms of
getting costs in line, giving good service, being competitive?
And the question is: could the private sector do it better than
you can?
Mr. Boardman. We are the private sector. We operate like
the private sector. Our costs are in line when you really look
at what our costs are. They are in line.
Mr. Williams. But in line to whom?
Mr. Boardman. They are in line to what a similar service
would be provided by anybody who operated rail.
When you look at what, Congressman, we provide out there
today, we provided in 1971 for Congress the ability for the
railroads to get rid of a money losing operation, which was
passenger rail. Congress decided it was important to have
passenger rail in the United States across the country.
It is a lot less expensive today in terms of subsidy to
provide that passenger service with Amtrak the way we operate
than it was back then. The decision to make that ability for
the railroads, which are now considered freight railroads, and
they were not freight railroads in 1971; they were railroads.
They provided passenger service. They provided freight service.
Now they provide freight, but they were not yet profitable
even in 1971. It took the Staggers Act in 1980 to allow them to
get rid of some expenses that allowed them then now to become
the profit of the world or the envy of the world for the
provision of freight movement that they provide.
Mr. Williams. Do you foresee any time soon being
profitable?
Mr. Boardman. Not on the long-distance trains. When you
look at covering our operating costs, if you were driving a bus
up our railroad and did not have to pay for what is underneath,
you would make a profit, and that is how we are talking about
we are making a profit on the Northeast Corridor.
Mr. Williams. Well, I appreciate you being here, but in the
private sector world and the business world, if your expenses
are more than your income, you are not making a profit. I
appreciate your being here.
Mr. Boardman. Yes, sir.
Mr. Williams. I yield back.
Mr. Denham. Thank you.
Ms. Brown.
Ms. Brown. Thank you.
First of all, Mr. Chairman, I want to thank you for having
this hearing, and I am looking forward to the Transportation
Committee going on the road to hear from our stakeholders.
Our freight rail is number one in the world, and everywhere
I go, people are asking us about the freight rail, but I am
asking them about their passenger rail because they move their
people, goods and services, and they do not have the congestion
that we have on the road. They do not have the pollution that
we have, and as I said over and over again, we started the
train systems in the world, and now we are the caboose, and
they do not use cabooses anymore.
And I would like for you all to respond because constantly
we are talking about the long-distance services, and I keep
saying we have got to think out of the box. When we had Katrina
over 3,000 people died, and the buses went underwater because
we were not able to move people.
So it is not just profits. Government is just not in there
for the profit. We are in there for service, service, service,
and I would like for you to respond to how we can have service
because there is no form of public transportation or rail that
is not freight that makes a profit in the world, and their
freight does not make a profit.
Whether I am in Russia or wherever I am, they are asking me
about the freight, but the reason why it does not make a profit
is because it is separated, and I would like for you to respond
to it because there is a lot of education that needs to go into
making sure people in this committee understand what we are
talking about.
Mr. Boardman. Well, if I could start, Congresswoman.
Ms. Brown. Yes.
Mr. Boardman. I would tell you that we have had many
foreign railroad executives and others come look at our
Northeast Corridor and our vision on the Northeast Corridor,
and we stand behind nobody in provision of services and
revenues that we generate and the profile of our riders.
Since 2000, the ability for us to really provide more
service than any of the airlines put together in the Northeast
Corridor was a major turnaround, and when the British and when
SNCF and others came over here to look at, and even the
Japanese, to look at what we were doing to increase revenues,
they were, in fact, saying that our estimates for what we could
really provide for the future were probably very conservative,
and we were trying to be very conservative in how we would do
this for the future.
But the Northeast Corridor with 40 million people living
within 40 miles of the corridor is probably a service that does
not exist anywhere else just like it in the world because it
supports the economy of the Northeast, more so than anybody in
Europe could understand. Seventy percent of our ridership are
business people on the Acela, and about 40 percent on the
regional services. In Europe it is about 40 percent for
business people.
Ms. Brown. And the part that really gets me is Members
think that we can go into the Northeast Corridor and say we are
going to do it this way, not understanding that there are many
communities, many States that have come together, and that is
the Northeast Corridor.
I know we think we are the big dog, but we are not the only
one in the room.
Mr. Boardman. That is exactly right, and you know, I was
going to say earlier we lost $5 million over this weekend in
revenue and fares because of this shutdown in Connecticut for
service. So just the service between New York and Boston was
about $5 million.
Ms. Brown. Yes, and the others? Anyone else want to
respond?
Mr. Kutrosky. Yes, if I may, Ranking Member Brown.
On the Capitol Corridor, we have developed, talking about
service----
Ms. Brown. Are you talking about California now?
Mr. Kutrosky. In California, we have developed a public-
private partnership with our host railroad, Union Pacific, and
what we do is we jointly develop our schedules with theirs.
They have----
Ms. Brown. That is taking the freight off, right, so you
all can jointly use it.
Mr. Kutrosky. Exactly. We use it together with them, and
their needs are getting shipments in and out of the Port of
Oakland, which our trains just happen to have a station nearby
there so there is a lot of joint use and shared use of these
tracks.
And through our partnership working with them, we have been
able to invest jointly in capitalized maintenance programs, as
well as keep our service as one of the highest as far as on-
time performance.
Ms. Brown. How about this positive train control? How is it
affecting you all?
Mr. Kutrosky. It has not affected us yet. There in
California the focus right now is in the L.A. Basin, but
working with Union Pacific, they said the second they are gone
after L.A. is up on the Capitol Corridor because, once again,
we have about 30 to 40 freight trains a day mixed in with our
30 trains a day. So it is a positive performance.
The other thing I would like to just hit on really briefly
is when we talk about the communities in the Capitol Corridor,
our $60 million annual investment comes to the equivalent of
about $170 million in economic positive impacts for the
communities up and down our corridor. So you have the private
sector and then you also have your communities, and we feel as
though we are, as President Boardman was talking about, the
conductivity, we help to provide that through Northern
California.
So thank you very much for allowing me that opportunity.
Ms. Brown. The last person.
Mr. Capon. Yes, a couple of points. One is that on the
Northeast Corridor, also to Mr. Hanna's point, I believe that
one is transit Amtrak operates eight or nine cars, and by
European standards that would be short. So I think, you know,
Amtrak has put out a vision of a much higher capacity railroad,
and that would be the basis, and it would probably have a lower
operating loss as well with a much higher volume of passengers.
Also to elaborate on the point about one of the benefits of
the long-distance trains keeping the infrastructure in place,
Virginia Railway Express, the Tri-Rail commuter rail in Miami,
and the Washington-Richmond service that Amtrak operates, all
of those are possible because the New York-Florida trains never
stopped running. When Amtrak was created, none of those three
services I named existed, and the Architect of the Capitol had
his eyes on the First Street tunnel to take it away from the
railroad.
So one of the benefits of the long-distance trains is
keeping that infrastructure in place, and I would also like to
emphasize in terms of States and cities working to support
long-distance trains, there is a lot that is happening not in
terms of the operating cost, but in terms of developing modern
intermodal stations. The most famous one is probably in
Meridian, Mississippi, which Mayor John Robert Smith
championed, but there are many other examples, Champaign,
Illinois, of wonderful intermodal stations that have improved
the economics of the long-distance trains even though they are
not in the sense of Section 209.
Ms. Brown. Thank you.
Mr. Capon. Thank you.
Mr. Denham. Thank you.
And Mr. Hanna has entered information for the record.
Without objection, so ordered.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] 81149.007
Mr. Denham. Just a couple of followup questions.
Mr. Boardman, following up on Mr. Radel's question about
the union negotiations, my understanding, the majority of the
unions have entered into an agreement with a 15 percent
increase in salary, and there are two unions that are still
holding out for a higher increase than that 15 percent. Can you
explain if these final two unions are settled at a higher rate
what happens to the other agreements?
Mr. Boardman. Sure. What we are really talking about here
is a 5-year contract. This is not a 1-year, 15 percent.
Mr. Denham. Right.
Mr. Boardman. We have under the Railway Labor Act a
situation where we have to continue to allow the National
Mediation Board to mediate with these unions until they release
them. If they release them, then the decision for this goes to
a Presidential Emergency Board so that a decision is not
reached if it is not reached by us. It actually gets decided
upon by a President's Emergency Board, which is the way much of
the past has happened for Amtrak.
Mr. Denham. My concern specifically is about the ``me,
too'' provisions. You continuously talk about running as a
business and more like a privatized business, but yet this is
one of those costs that are outside of your control. If the
``me, too'' provision goes through, if this is a higher
negotiated contract than what the others have already agreed
to----
Mr. Boardman. It is a pretty typical thing with all of the
unions. We have got 13 different unions, 24 different
contracts. They all want that kind of provision. So it kind of
goes up all the way through the process. It took a long time to
finish off the negotiation with the most recent one that we
finished because of that provision.
But that provision then does cost us a substantial amount
of money. I do not have what that is right this minute, but
that would be decided also by the President's Emergency Board.
Mr. Denham. Can you provide this committee the different
scenarios that you are look at? I think you have concerns from
members of this committee I would say on both sides of the
aisle that a 15-percent increase at the time that we are doing
furloughs and layoffs and sequestration and cuts, 15 percent is
probably----
Mr. Boardman. Well, it has already occurred for all of
these unions.
Mr. Denham. No, no, no. I understand, over a 5-year period.
Mr. Boardman. Yes, sir.
Mr. Denham. But if the two remaining, as I understand it,
if the two remaining unions are able to negotiate a much higher
level----
Mr. Boardman. They are not going to be able to negotiate a
higher level. It will be at the PEB.
Mr. Denham. So you are not concerned right now that your
costs will go up because of something that is outside your
control?
Mr. Boardman. Well, because it is in mediation already. So
it is mediation at this point in time. The mediators are
working with us on this. If they cannot get this worked out in
a way that is acceptable to us and acceptable to the unions,
then it goes to the President's Emergency Board.
Mr. Denham. But the ``me, too'' provision does allow that
if it goes to the President, if it does----
Mr. Boardman. They can make that decision as well,
President's Emergency Board. I am sorry. I do not mean to step
ahead of you.
Mr. Denham. So there is the potential with the ``me, too''
provision. Say the President and his administration agrees to a
higher amount. That also gets translated to everybody else that
has already negotiated terms.
Mr. Boardman. Yes, but it is not just that. They can decide
a higher rate on anything or everything or they can decide a
lower rate as well.
Mr. Denham. OK. Thank you.
We are about out of time. We have called votes already, but
I did want to get to a couple of brief final points.
Mr. Boardman, last hearing I know we asked a lot of you. I
know that you have come in here several times. It is always
good to see you, and we have a number of different issues that
we want to address in the future. We will try to do the
majority of that through correspondence, but one issue that is
still hanging out there, the April 11th hearing that we had we
asked you for a number of different questions. We are still
waiting to get that information back. That will help us to
alleviate future hearings, as well.
Mr. Boardman. I thought they were back. I will check on
that immediately.
Mr. Denham. Thank you.
And just one final question briefly to each one of you.
This kind of gets to the crux of our overall questioning. How
big of a subsidy is enough?
So we have got to look at the entire rail passenger network
and whether we go to a 209 type process for the long-haul
routes. We need to come up with a what is fair for the American
public. And so I would ask each one of you: what type of
subsidy per passenger would be, in your minds, fair for the
American public to absorb to keep these long-distance routes in
place?
Mr. Puentes.
Mr. Puentes. It is tough in the abstract, I think, to come
up with a precise number. I would say though that I would love
to see the States and the Federal Government work together and
decide between them in a negotiated manner how much the States
would want to pick up. I think on the Federal level it would
probably have to be pretty uniform, but then it is up to the
individual States to decide from their own resources how much
of the system that they like to subsidize that way.
Mr. Denham. Thank you.
Mr. Boardman.
Mr. Boardman. I think that it is difficult to figure that
out. I think that is one of the things Congress does really
need to help us with. What does Congress want to invest in this
connectivity across the country? Because I think it is largely
you are talking about the long-distance trains more than
anything else, and it is a very tough business model, depending
on how many people get carried in that train and a different
part of the season.
So I do not have a number for you, but I do understand what
you are trying to get at.
Mr. Denham. I am trying to get at your biggest cost
drivers, the places that are outside of your control that cost
you the greatest amount of expense or headache.
Mr. Kutrosky.
Mr. Kutrosky. Yes, Chair Denham. For us in California, our
money is given to us through the Governor's allocation to us,
and it has performance standards. So we have to meet those
performance standards, and our subsidy is 50 percent.
Having said that, I believe I concur with President
Boardman. I think it is up to Congress to help us look at it
from a systemwide perspective, maybe on a passenger-mile basis,
and I am talking about all modes, to figure out how to level
the playing field, so to speak. So I think that is something
that everyone can understand if you look at it on a passenger-
mile because you are looking at the metric of the person
traveling, be it either mode, but I believe that would help
understand what the true costs are for each model.
Mr. Denham. Mr. Capon.
Mr. Capon. In terms of total costs, I would say that the
Revenue and Policy Study Commission that President Bush
appointed came up with a recommendation in the order of $8
billion to $9 billion a year.
In terms of net cost per passenger-mile I would say
probably should be less than 40 cents. I would like to have the
opportunity to submit some comments for the record in response
to some of these statements made today, particularly about the
Sunset Limited.
Mr. Denham. Thank you.
And I just want to state my personal goal in this is not to
eliminate the long-distance routes. It is just to make them
more efficient, to lose less money and make sure that we have
got a national rail network, but do not do it as an expense.
Let us make good decisions. Do we need to make a stop at 2 in
the morning somewhere where nobody is getting on? Do we need to
subsidize some of these routes $404 per passenger? Should the
rest of the people around the Nation have to subsidize that?
Or even in my home State, $182 per passenger for the Zephyr
route, and I mean it goes on and on. There are some huge
expenses with those subsidies. We have big challenges with
infrastructure, with upgrading infrastructure, especially on
the Northeast Corridor.
If we are forcing you, if Congress is forcing you to take
all of your profits off of the Northeast Corridor and then
subsidize the rest of the Nation and do that on top of the
subsidy that is coming from Congress, you will never get an
opportunity to repair the rail and the bridges that you need to
put into.
So we want to work as a partner with you to not only get
this new passenger reauthorization bill done, but get it done
right and more efficiently, especially in today's huge deficits
we are seeing from the Federal Government.
Any final words, Ms. Brown?
Ms. Brown. Yes. Mr. Chairman, I think you asked a good
question. What are fair subsidies? And I would ask what is fair
for highway, what is fair for aviation, what is fair, period?
But, Mr. Chairman, I would like to definitely make a
written statement concerning long-distance transportation costs
per passenger, and I want to make sure I put that in the record
because Mr. Mica made comments about the auto train losses and
talked about Sanford, which is one of the most profitable
routes that we have, moving people off of the highway and
providing services.
But I think I got a positive recommendation. I would
recommend, as we have done in the past, to have a round table
discussion with labor and call them in to discuss the issue
that you raised today about, you know, the negotiation, and I
think that we could call them in and talk to them about where
we are. I mean, I think that sounds like a bipartisan
recommendation.
Mr. Denham. It sounds bipartisan to me.
The votes have been called. We are going to have to cut
today's hearing a little short.
I would ask unanimous consent that the record of today's
hearing remain open until such time as our witnesses have
provided answers to any questions that have been submitted to
them in writing and unanimous consent that the record remain
open for 15 days for additional comments and information
submitted by Members or witnesses to be included in the record
of today's hearing.
Without objection, so ordered.
I would like to thank our witnesses again today for their
testimony. If no other Members have anything to add, the
subcommittee stands adjourned.
[Whereupon, at 2:43 p.m., the subcommittee was adjourned.]