February 23, 2000 Oversight on Activities of Amtrak
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Oversight on Activities of Amtrak
Our non-partisan organization has worked since 1967 in support of more and better passenger trains of all types in the U.S. We appreciate the opportunity to offer these comments for the record.
I. The Test for Self-Sufficiency
We share the widely held view that Congress did not contemplate including depreciation costs, "certain employee benefit related expenses” which also are non-cash, and progressive overhaul costs as part of the "test for self-sufficiency" in the Amtrak Reform and Accountability Act. (Amtrak generally has replaced "heavy overhauls" -- which always have been capitalized -- with "progressive overhauls" that extend the life of the equipment by way of a series of smaller tasks at a time rather than doing all the work at once. Amtrak believes the progressive approach is more cost-effective.)
Even in 1997, anyone familiar with the company's economics would have known that including those cost elements would have made it impossible to meet the test for self-sufficiency. The record does not indicate that legislators believed the law was Amtrak's death warrant. Indeed, ARC Chairman Gil Carmichael states near the beginning of the cover letter transmitting the Council's first annual report: "The Council understands that improving Amtrak and rail passenger service in America is the principal aim of the Amtrak Reform and Accountability Act."
The Foreword of that report states: "The Council believes that the Act's intent is for the Council to carry out its responsibilities with the goal of maintaining a national system of intercity rail passenger services now and in the future. It is clear, in the Council's view, that the fundamental purpose of the Act is to improve intercity rail passenger service in America, which includes both the quality of the service provided to the public and the economic and financial efficiency with which the service is delivered. The direct charge for implementing these goals falls on Amtrak."
The section of the law which refers to "general accepted accounting principles" does not deal with the test for self-sufficiency. Amtrak has never covered depreciation or progressive overhauls from operating grants. Therefore, it does not seem logical to suggest "de-funding" something that operating grants never covered, though that is what the ARC report suggests.
We were pleased to see that Chairman Carmichael's comments January 24 indicated an open mind on this subject. Also, Vice-chairman Weyrich advocated a one-year postponement of Amtrak's deadline in order to put it well after Acela Express is fully in service, since Amtrak has stated that its financial performance is heavily dependent on Acela Express. Since the most optimistic expectations of Acela still would not get Amtrak to self-sufficiency if the test includes depreciation and progressive overhauls, it appears that Mr. Weyrich also has an open mind on how to define the test.
The ARC notes that Congress specifically excluded "excess" Railroad Retirement payments from the "test," but Amtrak has pointed out that this specific exclusion was needed because operating grants were used to cover such payments when the law was passed.
Amtrak has been very open about its definition of the test, highlighting it in a packet on the company's Strategic Business Plan which was released to the media October 19, 1998. The table distributed then shows that -- based on Amtrak's projections -- including depreciation and progressive overhauls in the "test" would "raise the bar" by $561 million in FY 2002 ($487 million for depreciation et al; $80 million for progressive equipment overhauls).
We believe that the intent of the 1997 law was to assure that Amtrak is operating efficiently. When Senator Lott chaired this subcommittee, he said "if they [Amtrak] get 80% of the way there [to self-sufficiency], we're not going to shut them down." NARP obviously agrees that Amtrak should be run efficiently -- and we obviously would oppose any attempt to shut Amtrak down.
Amtrak is important to the nation for many reasons. One worth citing the week after oil prices surpassed $30.50 a barrel is that most energy experts -- including those at the International Energy Agency -- believe that our supply of "cheap" oil is good only for maybe 10-15 more years. That short timeframe makes it even more important to continue developing a quality passenger rail system, since passenger rail is far less energy intensive than aviation or highway transport.
II. Travel on Amtrak
Amtrak correctly notes that FY 1999 marks the first time that ridership has risen three consecutive years since the company started operating May 1, 1971. On the other hand, the small increase (2%) and the fact that the total is 3% below the peak (22.2 million in 1990), require comment.
Using the more standard measure of intercity travel, the passenger-mile (one passenger traveling one mile), the FY 1999 level of 5.330 billion also was up for the third straight year. This was up 0.5% from 1998, but 15% below the peak year (1992), primarily reflecting a decline in the size of the long-distance network -- a decline which we oppose and want to see reversed.
The following factors have weighed negatively on Amtrak travel volumes.
- Pressure to improve the bottom-line often conflicts with pressure to grow ridership. Amtrak managers are convinced, for example, that the tough fare increases imposed in the Northeast Corridor in 1995-96 reduced cash losses even though they also forced ridership down significantly. Big fare increases at about the same time -- along with service cuts and service confusion -- also hurt Amtrak ridership nationally.
- Looking specifically at 1999, the Boston-New Haven electrification project that ultimately should lead to big ridership increases had its greatest negative impact on service. There is a limit to what can be offered while undertaking such a big improvement program.
- In the past decade, commuter rail services have developed along the Los Angeles-San Diego route, resulting in the shift of some traffic off Amtrak trains to commuter trains. This improves the efficiency of the overall operation and also means that total rail ridership (intercity and commuter) in the corridor is up. [By the same token, the 1980s saw the efficient, planned diversion -- coordinated with transit authorities -- of many daily commuters from Amtrak trains in the Northeast to the expanded services of those authorities. This means that Amtrak’s true intercity ridership has grown more over the past 20 years than Amtrak ridership counts indicate.]
- The route structure of 1999, by our calculations, was 6% smaller than in 1990 (22,510 route miles vs. 23,951) and 21% below the 1978 level of 28,410 route miles. [However, the route structure was slightly bigger in 1999 than in 1998, and has grown again this fiscal year with the restoration of service to the Louisville area for the first time since 1979.]
- Many trains have been hurt by terrible on-time performance associated with the CSX/Norfolk Southern acquisition of Conrail. In this regard, NARP filed a complaint with the Surface Transportation Board on December 9. In addition, ridership doubtless continued to suffer from the longer-time effects of terrible on-time performance in 1998 on Union Pacific/Southern Pacific lines. We are hopeful that on-time performance will continue to improve on all of these railroads.
- The long-distance trains in particular were hurt by Amtrak’s aggressive reduction in travel agency commissions. Fortunately, Amtrak recognized this and has reversed course with for most routes. We were pleased to see the report in the February 14 Travel Weekly, that Amtrak and the American Society of Travel Agents joined forces in a promotion that gives consumers a 10% discount on long-distance and select (excluding Northeast Corridor) short-distance train travel when they redeem a special coupon at an agency. Amtrak and ASTA officials said that the promotion is designed to drive business into agencies, which in turn will earn 10% commission on the bookings, up from Amtrak’s standard 8% pay for such bookings. Amtrak slashed commissions for all travel from 10% to 5% effective November 1, 1998. The selective reversal -- to 8% -- took effect July 26, 1999, but, just as passengers driven off by absurdly late trains do not return immediately after on-time performance improves, so also does it take time to regain the loyalty of travel agents turned off by 5% commissions.
Reflecting the growth in Amtrak/state partnerships on shorter-distance corridors, the percent of Amtrak route-miles with three or more daily round-trip frequencies grew from 10.3% in 1987 to 16.7% in 1999.
One statistical note: The "historical measures" table on page 19 in the ARC report includes as "measures of productivity" the number of passengers and passenger miles per employee. In counting passengers and passenger-miles, the table uses only those on Amtrak intercity trains. However, Note A to this table makes clear that the employee count used to develop this measure includes all Amtrak employees, including those "involved in Amtrak capital projects, contract commuter passenger service, contract equipment repair and overhaul, and contract roadway maintenance." Contract work has expanded since 1989, so the resulting figures do not measure anything, as they compare the output of employees involved in one specific task (transporting intercity passengers) with the total number of Amtrak employees, including those not involved in transporting intercity passengers.