SPEAKERS CONTENTS INSERTS Tables
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DEPARTMENT OF TRANSPORTATION AND RELATED AGENCIES APPROPRIATIONS FOR 1999
Wednesday, March 11, 1998.
FEDERAL RAILROAD ADMINISTRATION
WITNESSES
JOLENE M. MOLITORIS, ADMINISTRATOR
DONALD M. ITZKOFF, DEPUTY ADMINISTRATOR
KATHRYN B. MURPHY, DIRECTOR, OFFICE OF BUDGET
S. MARK LINDSEY, CHIEF COUNSEL
JAMES T. McQUEEN, ASSOCIATE ADMINISTRATOR FOR RAILROAD DEVELOPMENT
GEORGE A. GAVALLA, ACTING ASSOCIATE ADMINISTRATOR FOR SAFETY
CHARLES H. WHITE, JR., ASSOCIATE ADMINISTRATOR FOR POLICY AND PROGRAMS DEVELOPMENT (DESIGNATE)
NATIONAL RAILROAD PASSENGER CORPORATION (Amtrak)
WITNESSES
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GEORGE D. WARRINGTON, ACTING PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL RAILROAD PASSENGER CORPORATION
SYLVIA deLEON, AMTRAK BOARD MEMBER
AMY ROSEN, AMTRAK BOARD MEMBER
ALFRED S. ALTSCHUL, VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER, AMTRAK
Opening Remarks
Mr. WOLF. The House is in session and we are going to have a couple votes during the middle of this hearing. I also have an amendment up in about 20 or 30 minutes, so we are going to try to get somebody else to briefly chair.
I welcome you to the committee. Perhaps it may be a better idea to just summarize your statement. But before you do, let me just begin with a statement.
Introduction
Today, we will hear from Ms. Molitoris, Administrator of the Federal Railroad Administration, and from George Warrington, Acting President of Amtrak. We have also invited two of Amtrak's board members, Ms. deLeon and Ms. Rosen, to testify on the Brotherhood of Maintenance-of-Way agreement they negotiated for the Corporation.
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AMTRAK'S FINANCIAL FUTURE
Last year, former President Tom Downs outlined for the Subcommittee what needed to be done for Amtrak to avoid bankruptcy. This approach included a restructuring of Amtrak to reduce the Corporation's deficit, decreasing operating costs by making investment in the Corporation's infrastructure, and reducing costs through legislative reforms.
By the end of 1997, all three of these actions had occurred. Amtrak had been able to restructure the company and its route system, thereby reducing its annual costs by approximately $400 million. Congress enacted a reform and reauthorization bill that provided statutory relief from some of its most onerous labor provisions, made various legislative reforms, and freed up $2.2 billion in tax credits for Amtrak to spend on various capital needs.
In fiscal year 1999, the administration and Amtrak are requesting $621 million in capital funds and are seeking permission to use the capital appropriations for preventive maintenance. This recourse is quite different from prior years, when Congress provided a grant for operating and capital, as well as funding for the Northeast Corridor Improvement Program.
With all of these changes, you would think that I would be optimistic about Amtrak's future. However, I must say that I am concerned. I have heard from a variety of experts about the precarious position Amtrak is in. For example, GAO testified last month that Amtrak is still in ''dire financial straits.''
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Other knowledgeable sources have said that the administration's 1999 request would simply be shifting costs from operating expenses to capital expenses, in essence, moving the pea from under one shell to under another shell and causing Amtrak to spend down its needed capital appropriations on the daily operation of the system instead of on long-term investments, ultimately, perhaps, bringing about the bankruptcy of the Corporation in the year 2000.
Secretary Slater was more optimistic about Amtrak's future when he testified last week. However, he noted that Amtrak will continue to need Federal support well after the year 2002 in the form of a capital appropriation.
During this hearing, I would like to get to the bottom of Amtrak's financial conditions and hope to have the following questions answered. Does Amtrak continue to operate in a fragile state, as many have testified, or have these recent legislative actions placed the Corporation on a more stable footing? Will adopting this new structure for Federal appropriations be robbing Peter to pay for Paul, diverting the TRA and capital appropriations to pay for traditional operating expenses?
I personally, and I am sure most members, would like to see or want to see Amtrak survive. It actually serves my Congressional district to a certain degree and many people in the Washington metropolitan area use it. I believe America needs a cost-effective and efficient national rail passenger system. Preserving a national rail system is vital for a balanced transportation network, but we really have to get the answers to all of these questions.
We welcome you and your staff and we will, as I said earlier, insert your full statements in the record. You can summarize them.
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Let me recognize Mr. Sabo first.
Mr. SABO. Thank you, Mr. Chairman. I look forward to hearing our witnesses testify, both as to the future of Amtrak and also the Federal Railroad Administration continuing on rail safety. Thank you, and welcome.
Ms. MOLITORIS. Thank you.
FRA Opening Statement
Mr. WOLF. Ms. Molitoris.
Ms. MOLITORIS. Thank you, Mr. Chairman. Thank you for the opportunity to testify today in defense of our budget request for 1999. Mr. Chairman, I will focus on two subjects in my oral statement: rail safety and Amtrak.
RAIL SAFETY
Mr. Chairman, safety is and has always been a priority of President Clinton and the Department of Transportation. In fact, Secretary Slater calls safety his north star. We are focused on safety results and I am going to highlight today those results which I believe have flowed from the investments requested by the President and approved by Congress in the last couple of years.
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The railroad industry today is changing dramatically and quickly. Freight traffic has increased by more than a third since 1990, to the highest level in history, while rail employment has decreased to the lowest level in a century. The evolution of mega-railroads, large Class I railroads, poses challenges to our safety oversight never contemplated by FRA history or our regulations. Mega-railroads impose a huge distance between corporate decisionmaking and the men and women on the front lines who are most at risk for their lives in the pursuit of their work.
SAFETY AND COMPLIANCE PROGRAM
Traditional inspection techniques alone cannot reach the root of safety hazards quickly enough to prevent tragedy in this new rail structure. Consequently, FRA has evolved its safety program through a coalition of labor, management, and FRA to attack safety hazards at their roots.
If we look at Union Pacific in 1997, I think we have a good example. In 1995 and 1996, Union Pacific safety statistics were all going in the right direction. The safety issues, both service and safety, that occurred in 1997 could not have been foretold by the traditional site inspection method alone. Only because of the new SACP program could we respond as quickly as we did to uncover safety hazards such as insufficient employee and supervisory levels; training, fatigue, and crew management issues that were really at the heart of both safety and service problems. Traditional inspections alone will not enable us to make safety gains in a timely fashion to get preventive rather than just a reactive mode.
We also should mention that SACP has leveraged a lot of dollars right to the safety issues that men and women on the front lines face. For example, Union Pacific has focused on training, in hiring of new dispatcher personnel, train and engine crews, and track specialists, and initiated a new fatigue countermeasures program. Fatigue is one of the biggest issues in transportation and Union Pacific has already, since our impact in the late summer, invested $4 million in a fatigue countermeasures program. They have also invested very significant dollars in training, a three- to four-fold increase in hiring from the previous year, and tripled the number of dispatching supervisors.
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The SACP work of labor, management, and FRA brought the 1997 series of collisions and yard tragedies to a halt. It has brought management, labor, and FRA into a partnership for safety that goes well beyond issues involved in collective bargaining. It is only through this intense and continuing SACP activity that FRA can adequately carry out its safety oversight.
One more example, the Conrail acquisition proposed by CSX and Norfolk Southern. With the experience of the UP-SP merger results so vivid for all of us, we proposed to the STB that it was extremely important that safety implementation plans be presented as part of the railroad submissions. They required that, and as a matter of fact, we are now developing a rule which will mean that these safety implementation plans must be a part of any future major reorganization or transaction.
RESULTS AND STATISTICS
We have achieved safety results. Since 1993, with the new comprehensive approach, we have achieved a 19 percent decrease in railroad-related fatalities, a 42 percent decrease in on-the-job casualties, a 17 percent decrease in accident rates, and a 16 percent decrease in grade crossing incident rates. These indicators mean safety is increasing. They are important signs that the program is working, but we have lots more to do.
Our request includes $62 million for railroad safety, which includes 32 additional rail safety employees and related costs to support all of these programs. In addition, safety research and development focused on safety initiatives is also included. Our request will enable us to carry out our safety mission and advance it to help reach the zero goal that we have.
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FRA'S AMTRAK REQUEST
On the issue of Amtrak, Mr. Chairman, 1997 was a critical year for Amtrak. Labor agreements were reached. Service issues were resolved. Reform legislation that you mentioned was so critical was enacted. And the Taxpayer Relief Act, which provided much-needed investment funding, was also passed. The Clinton administration continues to have the same focus as it has all through the first term, that we continue to further transform Amtrak into a cost-effective provider of high-quality transportation service.
Our five-year goal remains that Amtrak only come to the Federal Government for the investment necessary to undertake capital projects to assure safety, improve service, reduce cost, and protect the public's interest in Amtrak. To accomplish this, we are proposing the minimum funding necessary to implement Amtrak's September 1997 strategic plan to move the Corporation to financial viability within the next five years. To ensure the prudent and effective use of these funds, our proposal calls for the release of all funds, including TRA, to be contingent upon Amtrak's creation of a thorough and thoughtful capital plan.
This administration considers passenger rail service to be a critical element of the nation's transportation network and we propose $621 million in capital in addition to the $2.2 billion through the Taxpayer Relief Act.
I look forward to working with you, answering your questions and those of the subcommittee today. I believe that we have many opportunities to talk about what we can do in safety and in passenger service throughout this country. I look forward to working with you, Mr. Chairman.
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Mr. WOLF. I thank you much.
[The prepared statement and biography of Jolene Molitoris and the biographies of James McQueen and Kathryn Murphy follow:]
"The Official Committee record contains additional material here."
Amtrak's Opening Remarks
Mr. WOLF. Mr Warrington.
Mr. WARRINGTON. Thank you, Mr. Chairman. Mr. Chairman, I have been Acting President of Amtrak since this past December. Over the past three-and-a-half years, I have served as President of Amtrak's Northeast Corridor operations, headquartered in Philadelphia, Pennsylvania, and frankly, I am very proud of all of our accomplishments over the past three years. While I served as President of the Northeast Corridor, I was also a member of Amtrak's management committee, and in that capacity I have had a voice in virtually all of the important changes we have made at Amtrak over the last three or four years.
My experience is based primarily in operating and running a railroad. Testifying before Congress is not a part of my normal routine. My instincts, however, tell me that in either of these capacities it is best to be direct and straightforward and that is what I intend to do here today, Mr. Chairman.
AMTRAK FROM 1994 TO 1998
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While we finished one of the most difficult years in Amtrak's history, I feel very confident—very confident—that we at Amtrak are in a much more stable position, both commercially, financially, and operationally, than we have been in a very long time, certainly in my three-and-a-half years at Amtrak. In the past three years, we have significantly improved the bottom line by over $300 million through very aggressive revenue development and cost-cutting actions.
The bottom-line improvements include redeployment of our fleet assets, very aggressive passenger and commercial revenue development, maximizing real estate assets, and elimination of poorly performing routes, about 17 to 20 percent of our route miles. Though a significant amount of savings has been and will continue to flow from much better business practices internal to the company, we have also been turning our attention to strengthening and creating new lines of business, such as expanding high-speed rail, commuter business, the mail business, and express services. All of this has been done within the context of reductions in Federal operating support by about 50 percent.
INVESTMENTS AND RIDERSHIP
Although we have reduced the number of system miles we run every day, we have retained our customer base and we have begun to see increases in both ridership and passenger revenue. Between fiscal years 1995 and 1997, revenues have climbed from $851 million to $970 million. This year, our plan calls for a further increase in passenger revenues, which will carry us over the $1 billion mark for the first time in the company's 27-year history.
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Our strategic investments, for example, in new locomotives and Viewliner sleeping cars have reduced our operating expenses and measurably increased customer satisfaction. We are less than two years away from inaugurating high-speed service on the Northeast Corridor. We have just ordered new equipment for our San Diego to Los Angeles service in California.
Ridership has increased over this past year by 2.6 percent, with the highest increases actually occurring in the West Coast operations. Based on our first quarter results, this trend continues with a seven percent increase in the first quarter of this fiscal year over the first quarter of last year, and, in fact, last month, in February, our Northeast Corridor ridership and our Northeast Direct ridership was up by 9.5 percent over February last year, and that is a very positive, continuing trend.
MAXIMIZING OPERATING EFFICIENCY COMMERCIAL REVENUE DEVELOPMENT
While our business plans are forward-looking and aggressive in terms of operating efficiency and commercial revenue development, one of our priorities over the next six to 12 months will be to develop a long-term vision for maximizing the core business potential in the marketplace; that is growing market share. We have to better understand all the forces that affect our market. It is not enough to know who our customers are. Rather, we need to know where they want to go, what we need to do to get them there, and how we can get them to buy our service again once they try us. In other words, we need to know how we can be relevant, not relevant based upon a system that operated in 1958 but relevant in today's economy and in today's marketplace.
In the last few years, we have tried to reduce costs through the elimination of service. Of all the actions we have taken, this one, as you know, has been very emotionally charged. Some said we cut too much service. Others felt we should have cut far deeper and eliminated virtually all of our long-distance trains.
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Last year, in fact, a blue ribbon panel advocated that we, Amtrak, should be privatized and be reborn in a fashion analogous to the British Rail model. We now know from recent reports in the London Times that the British experience has resulted in fewer trains, poor reliability, customer satisfaction at an all-time low, while public subsidies have actually doubled. A study published in Britain last year estimated that the entire cost of privatizing British Rail will be 5.6 billion British pounds, or $9.4 billion U.S. So far, this has yielded mostly promises of future improvements. Finally, there are those in this country who believe that we should only operate short-haul trains in highly-populated corridors.
I suggest, Mr. Chairman, we lay aside for the moment whatever ideological feelings we all have about Amtrak, intercity passenger rail service, subsidies or privatization. Last year, as I mentioned, Congress told us it wanted a national system, but it also wanted Amtrak to operate like a business. That is a real challenge, and frankly, it is often a very real conflict.
Yet, as I have said, we need to know much more about the travel demand market and our role in the marketplace. There is a world of difference in the expectations of our Metroliner passengers and those who travel on our long-distance trains. We need to know more about those differences, what it will take to make customers in different markets use our service again, and what we can do to expand and grow market share. Understanding those differences and understanding our financial and operating capability to satisfy them is the key to long-term stability and growth. In my view, knowing the answers to these questions is the difference between providing a public service and truly running a relevant business with a market-driven plan and an economic objective.
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FISCAL YEAR 1999 BUDGET REQUEST
As you know, last year, as part of the Taxpayer Relief Act, Congress granted Amtrak what essentially was a tax refund of $2.2 billion to be used for capital investments. This is about half of the amount our planning assumes if we are to reduce operating expenses through high-yield capital investment. This balance of the required $4 billion in Federal capital support would be requested through the annual appropriations process.
The administration's budget for fiscal year 1999 recommends, as the Administrator said, $621 million of capital for Amtrak, all of it flowing from the Highway Trust Fund. When this budget was first proposed, frankly, it was met with some skepticism at Amtrak. After much thought and much discussion and much working together with the administration, we have offered and crafted a modification that enables the proposal to work well for Amtrak, not only this year but over the next several years.
CAPITAL FOR MAINTENANCE OF EQUIPMENT AND FACILITIES
Last year, this subcommittee added language, originally contained in the administration and Senate ISTEA bills, to the FTA section of your funding bill. This language gives transit agencies greater flexibility in how they may spend their capital dollars. With this definitional change, the transit community can now spend its capital dollars on maintenance of equipment and facilities that heretofore had been considered or defined as operating expenses. This makes good business sense and it has the effect of taking great pressure off of operating costs.
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This year, in addition to requesting full funding of the administration's budget, the $621 million, we and the administration support applying the transit capital maintenance definition to Amtrak, consistent with all, not just transit, but all Federal transportation programs, thereby enabling Amtrak to technically eliminate immediately the entire requirement for operating subsidies.
USE OF TAXPAYER RELIEF ACT FUNDS
It is critical to Amtrak that the $2.2 billion in TRA funds be used only for projects which provide a high rate of return, leverage other external private and public funds, or significantly improve the bottom line. We want to reserve that fund for those purposes. In fact, our capital investment strategy will contribute approximately $1 billion in bottom-line improvements over the plan period. Without these investments, the financial performance of the Corporation will worsen, we will lose revenue opportunities and incur additional costs that would otherwise be avoided.
As I believe you know, we originally anticipated submitting a funding request for fiscal year 1999 with clearly delineated lines of operating and capital support, as we have traditionally done in the past. The administration's proposal, as you know, contained no request for operating support and recommended that we use our TRA funds to cover these operating needs. While we differed with the administration over the use of TRA, we do believe that using the newly-appropriated capital for maintenance of equipment and facilities as the transit industry does will work very well for us and for the committee.
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Specifically, the approach will give us equity with other modes, all Federal transportation programs; will require no operating subsidy; it will create a very low, 40 percent, outlay rate for this committee; it will allow us to make better business decisions and not gold-plate our capital programs; and frankly, we believe it will permit easier tracking of the appropriation that is given to Amtrak by the committee and by the Congress.
LABOR ISSUES
With respect to labor, Mr. Chairman, I would like to say a few words. One of the critical needs any business faces revolves around investing in its human assets. Amtrak is no different. Recruiting, training, and employing a skilled, qualified, and productive workforce in a very competitive environment, particularly in our urban centers, is a very serious challenge for us every day. New agreements we hope to be reaching with our unions will help us in this regard.
Our ability to recruit and retain employees is highly dependent on competitive wages. Amtrak's craft wages have generally lagged behind the commuter and freight railroad industries. For instance, an Amtrak electrician is paid $16.10 an hour compared to the Long Island Railroad or Metro North, where an electrician is paid $23.10 or $21.49 per hour, respectively. An Amtrak catenary lineman earns $16.93 an hour, compared to a Metro North lineman who earns $21.91 an hour. As a matter of fact, Con Edison pays $29 an hour for an electric traction lineman. An Amtrak train dispatcher in our joint Amtrak/Long Island control center in Manhattan is paid nearly $10 less an hour than his Long Island Railroad counterpart.
Needless to say, Amtrak's efficiency erodes when it hires and trains its workforce to perform specific and highly-skilled technical functions, only to lose that investment to a competitor's wages. Some positions require considerable investment in training. In direct costs alone, today, Amtrak spends nearly $77,000 and nine months to train a new locomotive engineer, nearly $99,000 and two years to train an electric traction catenary lineman, and $89,000 and two years to train a signal maintainer. I have to look at all sides of this issue, not just the impact of wage hikes on the bottom line but also what it costs to retain our investment in training.
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We are currently in negotiations with 12 of our 13 labor organizations. With the exception of the nearly 2,500 BMWE members, most Amtrak contract employees have been without a new agreement since 1995. Other than COLA, cost-of-living payments, these employees have seen no wage increases. If Amtrak is expected to act like a business, we cannot ignore the wage issues which impact our workers. Yet we also must demand that wage improvements be coupled directly with productivity improvements and work rule reform by our labor organizations.
Last year, it became clear that Amtrak was faced with making a decision about entering into new contracts which could potentially extend to all 13 labor organizations in Amtrak if we were to avoid a disrupting and damaging work stoppage in the Northeast, which would have impacted 600,000 daily commuters. PEB, Presidential Emergency Board 234, which specifically dealt with the BMWE dispute, determined that Amtrak employees deserved wage increases consistent with the full national settlement on the freight railroads, but it did not address any productivity, efficiency, or work rule improvements.
Amtrak was not in a position to voluntarily agree to wage increases without significant productivity and work rule changes. Had the PEB simply been imposed on the parties, Amtrak would have had to pay wage increases and not receive the benefit of productivity improvements. The agreement we reached with the BMWE not only provided for wages less costly than the national settlement, but also provided Amtrak with significant work rule changes unique to our own operating needs. I might add, quite frankly, that we have among the best work rules and productivity opportunities in the country, particularly when stacked up against virtually, if not all, commuter and freight railroads in the entire nation.
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Mr. Chairman, if we reached no agreements with any of our unions, our obligations, primarily cost-of-living payments, under existing contracts would have amounted to $182 million during the current five-year contract period. With the BMWE agreement as the pattern, we project a five-year incremental cost for all agreements across the entire operation of approximately $248 million. With cost-saving productivity and work rules changes, again along the lines of the BMWE settlement, we estimate savings or cost offsets of more than $56 million during this same period. In other words, with these negotiated savings, the actual cash costs to Amtrak over five years will be less than $200 million, or on an annualized basis, about $38 million a year.
Given the critical need to retain skilled workers, secure work rule and productivity gains, improve morale, which is vital in a customer service business, and avoid a very costly strike to Amtrak and the Northeast region, an annual increment of $38 million in the context of a $1 billion annual payroll is not only defensible, but I believe personally, the right thing to do.
SEPARATE ACCOUNTING SYSTEM FOR WAGE INCREASES
Given the sensitivity of this issue, however, Mr. Chairman, I want you to know that I have instructed Amtrak's Chief Financial Officer to establish a separate accounting system for any wage increase, including the BMWE agreement and future agreements, which would assure that all new increments would be funded through and by passenger revenues. Under this mechanism, this committee would not be financially responsible for any negotiated wage increases and would have the ability to better track all Federal dollars appropriated to Amtrak.
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In addition, paying for new wage increases out of Amtrak passenger revenues imposes a discipline on Amtrak that encourages the company to drive toward productive outcomes. This makes sense for Amtrak and, we believe, it makes sense for this committee. It also encourages Amtrak management and labor to maximize revenues, passenger revenues, so that the source of future wage increases will be secure.
Along the lines of productivity, you know we have been reengineering our railroad and we have implemented and invested in a wide range of efficient fleet, facility, production, maintenance, business management, and engineering processes and procedures as a way of reducing costs and increasing productivity.
Several examples include better utilization of rolling stock by creating run-through operations across the nation on several long-distance trains which has cut maintenance costs and provided additional flexibility in the deployment of our equipment. Uniform consisting of all single-level trains again gives us greater flexibility in our fleet deployment and allows us to reduce the number of our maintenance facilities and costs.
NORTHEAST CORRIDOR
On the Northeast Corridor, Amtrak maintains the most dense railroad in North America and maintains it to the highest FRA Class VII standards ever established. Yet our capital cost per mile is the lowest among the major commuter railroads in North America. Amtrak invests $39,600 on average annually of capital per mile, compared to SEPTA in Philadelphia, which spends $259,000, METRA in Chicago, which averages $126,000, and New Jersey Transit, which invests about $123,000 on an average annual basis.
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Through better management of our track and switch renewal programs, we have reduced delays resulting from maintenance of way work by 51.5 percent between 1994 and 1997. Our practices and techniques for repairing large segments of aging infrastructure, such as 1900s vintage bridges, has saved the company tens of millions of dollars in new construction costs and, from a Research and Development point of view, has led the railroad industry. Between 1994 and 1997, we have increased our measurable engineering field productivity and efficiency by 106 percent.
HIGH SPEED RAIL UPDATE
With respect to high-speed rail, I know there were several questions about the status of the program. I assure you that the project is on budget and on schedule. We expect to have all of the Northend, New Haven to Boston, electrification work completed by next summer, on schedule. Twelve of the 24 electrical substations are well underway. Approximately 9,000 of the 14,000 catenary pole foundations have been installed, along with 4,000 poles and about 120 of the 1,500 miles of overhead wire is up.
Trackside, we built the required sidings in the Northeast Corridor, installed 138 of 140 miles of continuous welded rail and 330,000 of 332,000 required concrete ties. We have modified 119 of the 127 curves, and of the 146 bridges that need to be undercut, raised, or eliminated, 95 have been completed. It has all been done on schedule and on budget by those same employees who we negotiated with last fall.
With respect to trainsets, we have 18 on order. Five will be in the house and ready for service by late 1999, with the balance of 13 delivered by July of 2000.
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I want to reiterate, Mr. Chairman, that I believe the future looks better for Amtrak, frankly, than it did a year ago, and certainly much better than it has over the last several years. The monies released to us by way of the Taxpayer Relief Act have given us the opportunity for the first time in our history to genuinely plan our capital needs over time.
SUMMARY OF AMTRAK COMMENTS
In summary, the administration's budget as modified can and will work for Amtrak and this committee if it does not depend on using TRA for maintenance of equipment but instead preserves it for high-return capital investments; it enables Amtrak to use the same rules used by other recipients of Federal appropriations; it allows Amtrak to make better, wiser business decisions about how to invest and use capital; it eliminates, technically, Federal operating subsidies; it reduces outlays for the committee; and it allows the committee to better track where funds appropriated to Amtrak are spent.
It is critical, though, that we receive full funding of the President's request, the $620 million, and it is vital that we also be permitted to spend our capital with the type of flexibility now enjoyed by the transit industry. We are encouraging the administration and the Congress to undo the language, as well, with respect to the $199 million that was reversed last fall.
I will tell you, Mr. Chairman, I am genuinely excited about the business challenges and opportunities we face. Ridership and revenues are steadily growing across the country. We have a very good product which honestly and genuinely is getting better, and we have a future which looks much more stable over the next several years than we have been accustomed to in many, many years, frankly, thanks to the TRA, thanks to a lot of hard work by a lot of employees at Amtrak, and thanks to a long-range proposed funding plan with flexibility that enables us to achieve the kind of stability that we have not seen in a long, long time in the company.
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Thank you, Mr. Chairman.
Mr. WOLF. Thank you, Mr. Warrington.
[The prepared statement and biography of George Warrington and biographies of Amy Rosen, Sylvia deLeon and Alfred Altschul follow:]
"The Official Committee record contains additional material here."
Mr. WOLFE. I will have a large number of questons. Mr. Regula has to go to another meeting. I will yield my time to him and then we will go to Mr. Sabo. Mr. Regula.
CONRAIL ACQUISITION
Mr. REGULA. Thank you, Mr. Chairman.
I want to say that the Federal Railroad Administration has been very helpful to us on questions on the Conrail merger issue in Ohio and I would have some questions about that. Ms. Molitoris, you are familiar with the merger I am talking about. What other States are impacted as much as Ohio by this proposed Conrail acquisition?
Ms. MOLITORIS. Mr. Regula, Ohio is impacted very heavily by the merger. Certainly, the State of New York is also impacted, and certainly other States. However, I think when you look at the State of Ohio, you see the presence of the so-called ''X'', which is where the two railroads almost intersect leading to an opportunity, if not handled correctly, for congestion problems to arise. That is why we have been very focused as an administration on the whole safety impact of this merger proposal.
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We have submitted to the Surface Transportation Board our information about the potential safety impacts and the Surface Transportation Board did respond quickly and required the submission of Safety Integration plans of both the proposed railroads who would be involved in the acquisition.
I think that it is important to say to you that just the plans are not enough. We are committed to working consistently with the railroad companies to enhance these plans and to be very close to them to assure that implementation continues throughout any approval process that may go on.
Mr. REGULA. Do you look at competitive access, also, as part of your overview?
Ms. MOLITORIS. The submission by the Department of Transportation includes both competitive issues and safety issues, and we submitted a fairly comprehensive filing to the Department. Of course, all competitive issues are related to the public interest and so our focus has emphasized both competitive issues and safety issues.
Mr. REGULA. As you know, the Governor and also many of the Members of Congress from Ohio have raised issues about this merger and the impact that it would have. Have any of the other States become involved in opposition to the Conrail acquisition?
Ms. MOLITORIS. Mr. Regula, several other States are parties of record and they have certainly proposed issues of concern with regard to safety and service and competitive issues and we have tried to work diligently with each of them to provide technical assistance and to incorporate their concerns into the Department's filing.
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Mr. REGULA. The last question, you do, in responding to this, take a position on the competitive situation and try to keep the options available to shippers, particularly the small shippers on the regional or short-line railroads?
Ms. MOLITORIS. Our filing, which was submitted February 23, says that there are a fairly long laundry list, Mr. Regula, of issues that we feel require mitigation before this proposal would be in the public interest.
Mr. REGULA. Do you monitor the negotiations that are going on among the interested parties?
Ms. MOLITORIS. We try to be available to support these talks, but the negotiations really are between companies and cities or locales, States in some cases. We try to be responsive to all the citizens' issues that are raised as we have with some of your concerns, and provide technical assistance. Thank you.
Mr. WOLF. Mr. Sabo.
AMTRAK'S FUNDING REQUEST AND OUTLAY SAVINGS PROPOSAL
Mr. SABO. Thank you, Mr. Chairman.
Let me understand the Amtrak request. Your request is about $620 million in capital funds with the change of definition of how you could use it, rather than a significant operating appropriation. That means less outlays for us, but it also means less cash flow for you in the first year. Where are you going to get the additional cash flow in the first year of this change?
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Mr. WARRINGTON. Our assumption, Mr. Sabo, is that we have established an outlay rate of 40 percent, which is about $248 million, the first of the fiscal year. To cover the balance of that fund, we would short-term borrow through the TRA.
Mr. SABO. So you would escalate your borrowing during the first year to make up for that cash flow shortage?
Mr. WARRINGTON. Short-term, internal TRA borrowing, and then when the——
Mr. SABO. What is TRA?
Mr. WARRINGTON. Taxpayer Relief Act. As I was saying, short-term borrowing for cash purposes through the fiscal year for qualified expenses, replenished with the balance of the appropriation at the end of the fiscal year when the 60 percent share is provided.
Mr. SABO. What you are suggesting may make sense long term. It clearly is a budget gimmick for the first year to lower our outlay pressures, and we have lots of them. I expect before the year is over, there will be other gimmicks that will offend me much more than this proposal. [Laughter.]
But it really is an outlay savings for us for only one year, because by the second year, by the year 2000, we have the obligation for the balance of 1999 and the 40 percent of 2000. So in the second year of the biennium, there is no outlay savings for us.
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What does concern me is that this is one of many proposals that when combined put this subcommittee in a difficult position in this and future years. As another example, I think the Federal Railroad Administration has certain fees proposed that are not likely to be adopted, as do several other agencies. Your Amtrak adjustment helps us with those kinds of problems. I also see substantially increasing contract authority for other transportation purposes, which will have some impact this year and will have major impact by the year 2000.
So the gimmicks will soon lose their effectiveness. We have the full burden on our table by the year 2000, plus we have a huge increase in outlays from increased contract authority for surface transportation. And by the year 2001 and 2002, we have discretionary spending limits going down. That gives me pause. I do not know the answer, and I do not know that I should expect you to have it, but we are headed for a major crunch. Then whether we can continue to accommodate requests, in future years, it frankly gets more difficult.
Mr. WARRINGTON. I suppose the short-term alternative to that, Mr. Sabo, is operating money, which is scored at a much higher rate during the first year.
Mr. SABO. Yes. And whatever year we make this switch, it saves us, temporarily, money in one year.
Mr. WARRINGTON. Right. That is correct.
Mr. SABO. Then the crunch comes back, and we are building a whole series of other crunches. Unless this Committee has a huge increase in outlay allocation from some other subcommittee, we are going to have immense problems.
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Mr. WARRINGTON. Mr. Chairman, it is still less than the outlay rate——
Mr. SABO. In the first year.
Mr. WARRINGTON. In the first year, yes, that is right.
Mr. SABO. But it is a one-year savings for us in outlays, basically.
Mr. WARRINGTON. Yes.
USER FEE PROPOSAL
Mr. SABO. The Federal Railroad Administration, how much in user fees do you propose in your budget?
Ms. MOLITORIS. Eighty-two million dollars.
Mr. SABO. Out of how big a budget?
Ms. MOLITORIS. Seven-hundred-and-sixty-three million.
Mr. SABO. And those are $82 million of new fees.
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Ms. MOLITORIS. These are user fees recommended for the Office of Safety as well as——
Mr. SABO. Eighty-two million of new user fees?
Ms. MOLITORIS. User fees have not been in effect since 1995.
Mr. SABO. So that is over ten percent of the budget. I am not sure if the fee proposals do or do not make sense. My observation is that I have seen these recommendations year in and year out and somehow they do not get passed. If we do not pass them, can your budget accommodate a reduction of that amount?
Ms. MOLITORIS. As I mentioned in my opening statement and certainly in the oral, the money that we are requesting for safety is essential for us to carry forward the increases in safety which I believe are a priority for everybody.
Mr. SABO. Thank you.
Mr. Chairman, I guess the only thing I hope as I look down on your side of the table, is that I hope Mr. Regula and Mr. Packard and Mr. Callahan will be very generous to our subcommittee when it comes to 602(b) allocations.
Mr. WOLF. Well, Mr. Callahan does not like foreign aid. I think he will give us half of it, so we are going to be in good shape. [Laughter.]
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I think Mr. Sabo is exactly right, though. Before I recognize Mr. Callahan, I must say that the Coast Guard user fee is not going to take place. The FAA user fee has been thrown out by the courts. I think what OMB and what the administration have done is to put these user fees in the budget to fill it out and they know the fees are not going to stay. I think Mr. Sabo makes a very good point.
Mr. Callahan.
Mr. CALLAHAN. Thank you, Mr. Chairman.
FLOOD DAMAGE TO SHORTLINE RAILROADS
Let me just ask a couple of quick questions, Madam Administrator. We just recently had some severe flooding in South Alabama, and as a result we had some short-line railroads that have severe damage to their track. I know that the LRFA has not been funded. Do you have a working relationship with FEMA whereby you can join with them when we request disaster aid resulting in washed-out short-line railroads?
Ms. MOLITORIS. Mr. Callahan, we work closely with FEMA and try to provide technical assistance. Of course, we in many cases know these railroads from previous relationships and just from our safety work. You point out a very important problem. Short-line railroads move just under 20 percent of the commerce by rail in this country, so they are very crucial for rural areas and other areas. We work closely with the association, but there is no specific fund for that right now.
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Mr. CALLAHAN. Do you have any unobligated funds from the 1996 supplemental appropriations?
Ms. MOLITORIS. No, there is not.
Mr. CALLAHAN. Is there any way you can contact Mr. Witt, who is the head of FEMA, and explain to him your concern from a safety standpoint for these short lines, because they are going to need some immediate relief in Conecuh County, Alabama, and Escambia County, Alabama. I would appreciate you contacting him. I think he is down there in Alabama. But I do not know if he will have the opportunity to look at the short-line railroad.
Ms. MOLITORIS. Mr. Callahan, we have, in fact, in the past, when there have been emergencies of this nature, actually administered the monies that were identified for railroads.
Mr. CALLAHAN. It is not necessary for us to pass a supplemental bill assign money to you? Can you work through FEMA with the supplemental?
Ms. MOLITORIS. Yes, we did. Yes, we did, and we will——
Mr. CALLAHAN. So you worked through FEMA?
Ms. MOLITORIS. Yes.
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Mr. CALLAHAN. You actually can get money through FEMA for this type of relief?
Ms. MOLITORIS. Well, this is FEMA's money that is identified as emergency funds. We work as their partner on the technical side and try to help the small railroads.
HIGHWAY TRUST FUNDS USED FOR AMTRAK
Mr. CALLAHAN. Briefly, let me just make a couple of comments to Mr. Warrington. Mr. Warrington, you want the Highway Trust Fund to fund the $621 million you are requesting. Do you know what funds the Highway Trust Fund? I am sure you do. Do you know where the money comes from?
Mr. WARRINGTON. Motor fuel taxes.
Mr. CALLAHAN. Do you know where most of that money comes from, what industry?
Mr. WARRINGTON. No, I do not, Mr. Callahan.
Mr. CALLAHAN. The trucking industry. So what you are saying is that you think the trucking industry ought to pay taxes and continue to pay highway use taxes so we can fund Amtrak or other railroad needs. Do you think that is fair?
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Mr. WARRINGTON. Mr. Callahan, if we had our druthers, we would prefer to be funded out of the general fund. Frankly, we are small potatoes when stacked up against the highway interests in this country and we would rather not be squeezed in that position.
Mr. CALLAHAN. I appreciate that, and I am not going to squeeze you too badly today, either. But let me just ask another rather mundane question. Do you have a telephone in your car for when you need to talk to someone? Do you have one of those?
Mr. WARRINGTON. Yes, I do.
Mr. CALLAHAN. Do you know how to use it?
Mr. WARRINGTON. Yes, I do.
Mr. CALLAHAN. Well, your predecessor was not good at it, and sometimes when some of the Members of this Subcommittee would call him, he would never return our calls. I would encourage you to use that cellular phone in the back of your car. When a Member of this Subcommittee calls you, I hope you would be kind enough to return our telephone calls. By doing so, you might have a little bit more cooperation with some of the members of the committee.
But we are going to give you the benefit of the doubt at this point. You are new on the job and we are going to try to cooperate with you. That does not mean I am not going to try to cut $621 million for Amtrak, because I am going to try to cut it. But it does mean that common courtesy by returning phone calls might aid you better in the future.
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Mr. WARRINGTON. I understand that, Mr. Callahan. I assure you that you and all members will receive prompt responses to any phone calls, number one, and for the record, I do not ride in a limousine. [Laughter.]
Mr. CALLAHAN. I guess you came over here by train. [Laughter.]
Thank you. Thank you, Mr. Chairman.
Mr. WOLF. Mr. Olver.
MONTANA RAIL-SCHOOL BUS ACCIDENT
Mr. OLVER. Thank you, Mr. Chairman.
Ms. Molitoris, I do not know, maybe this is an unfair question, but do you have any sense of what happened in the accident out in South Dakota or North Dakota, the rail-bus collision? As it is such a short period of time, if you do not——
Ms. MOLITORIS. Mr. Olver, let me just say that it is certainly preliminary, but we have people that are there. We do know—we were concerned at first that maybe there was perhaps a blizzard condition and that there was some sight problem. But what we know at this point, and again, it is preliminary, that it was a clear day and, at least from our preliminary information, the school bus stopped at the crossing and then for some reason proceeded. We do not know what that is.
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As I think you know, Mr. Olver, we have through the whole administration focused on school bus safety at crossings with a major initiative of working with school bus owners and drivers. We are going to reemphasize this—we have a larger database of these people through NHTSA—to again highlight for them how crucial these behaviors are in operating a school bus at a crossing.
Mr. OLVER. I have just been handed from the Subcommittee staff a pretty good, but probably still preliminary, set of details, so I will leave where I was on that for the moment.
Ms. MOLITORIS. Okay.
CONRAIL ACQUISITION TIMETABLE AND PROCESS
Mr. OLVER. Let me ask you a couple of other questions. I am curious about the Conrail takeover. More directly, what is the timetable? What is exactly the FRA's role in these negotiations? Are you just a bystander or are you an arbitrator or what is the role of FRA in this proposal?
Ms. MOLITORIS. Mr. Olver, we are a party of record. The independent institution which will make the final decision about the character or approval of such a proposal is the Surface Transportation Board. However, as I have mentioned, especially because of our experience with the results of two other mega-mergers, BN–SF and Union Pacific-Southern Pacific, we realized the huge safety implications of this kind of transaction. This would be the largest kind of transaction the East has ever known, and——
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Mr. OLVER. Is the Surface Transportation Board entirely independent of the Federal Railroad Administration?
Ms. MOLITORIS. Yes, it is. It is an independent agency, although located within the structure of an organizational——
Mr. OLVER. In the structure of the FRA?
Ms. MOLITORIS. Of the Department of Transportation.
Mr. OLVER. The Department of Transportation.
Ms. MOLITORIS. But totally independent. We filed, as I mentioned, for the first time in history, focusing on safety as part of the surface transportation environmental impact statement. Safety was included and our comments identified the potential safety hazards that had to be mitigated and addressed individually and in detail——
Mr. OLVER. So as a party of record, you get to comment and recommend at various stages in what the STB is doing?
Ms. MOLITORIS. That is correct.
Mr. OLVER. Okay. And what is the route to which they take into account? Are they required to take into account, or do they look at it and say, well, yes, we do it, or no, we do not, or what do they do there?
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Ms. MOLITORIS. The STB makes an administrative decision, of course. They make a judgment about all of the filings, but in relation to our submission which talked about safety, they reacted very quickly and then required the railroads to submit safety implementation plans. And I should mention, as I did to Mr. Regula, that the implementation of these safety plans will be our bailiwick to be very involved at every step along the way, now and into the future, that those safety implementation plans are done and done in a very detailed and accurate way.
Mr. OLVER. I have very little further time here. Let me just say I was particularly curious about your comment on the safety aspect that there are at least four major route segments of the planned merger with projected safety risk increases of greater than 50 percent. That is a little hard for me to conceptualize, why that would be the case. Maybe you can give me something on that.
And the other thing, I am wondering whether you have a kind of a sense of the timetable in which this is going to function. I can see some substantial benefits as one gets up to my part of the country in this process. Maybe there are some serious detriments, too, that I am not quite so clear on what the cost-benefit analysis may be. But would you give me some sense of what the timing is, and also, could you explain how those specific route segments where the risk increases greater than 50 percent occur?
[The information follows:]
During the course of FRA's 1997 formal safety assessment of the Consolidated Rail Corporation (Conrail) acquisition by CSX Transportation (CSXT)/Norfolk Southern Corporation (NS), an analytical model was constructed for FRA by Zeta Tech Associates, Inc., Consultants. The model quantifies the safety impacts on the acquiring carriers, based on projected changes in rail traffic. FRA's safety assessment was filed with the Surface Transportation Board (STB) on October 21, 1997 (FRA Safety Assessment of CSX/NS Proposed Acquisition of Conrail).
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The model includes 61 line segments covering all Conrail mainlines, plus certain lines of CSX and NS on which traffic flows would increase as a result of the proposed acquisition. The model incorporates train volume, track characteristics, operating speed, and historical differences in accident rates among three carriers. The model measures the impact on safety, in terms of dollars of accident cost, for each segment in the analysis both in a base year (1995) and the projected year 2000.
Certain segments with large projected traffic increases also sustained large increases in risk (cost). There are four line segments with risk increases greater than 50 percent. These are: NS 7—Ft. Wayne to Kansas—54.5 percent; NS 3—Buffalo to Cleveland—54.4 percent; NS 1—Hagerstown to Roanoke—56.6 percent; and CSX 6—Greenwich to Chicago—62.2 percent.
FRA's model and projections assume that Conrail will be assimilated into CSXT and NS by the end of Year 2000. If the merger is approved by the STB, the pace of the absorption of Conrail will be guided by how quickly CSXT and NS can integrate Conrail's resources and complete other regional and local requirements. Realistically, FRA believes that most merger-related operating and safety action items identified by CSXT and NS in their STB filings and Safety Integration Plans (SIPs) will be completed within a 3–5 year post-merger time frame.
Ms. MOLITORIS. First of all, there is a July timetable for a decision by the STB on the proposal. We filed our comments on February 23.
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The particular segments you mentioned, one was in Ohio, as brought up by Mr. Regula. There is a shared asset area, for example, in northern New Jersey, which serves the New York area. There is one in southern New Jersey, which in part serves Pennsylvania.
The kinds of changes that we have identified have to do with things like a high percentage of increase in trains. Obviously, an efficient operation and a safe operation can accommodate these changes. What we said in our filing was that you cannot presume or assume that these kinds of changes can just somehow magically happen.
Mr. OLVER. Are these all instances where there is a shared segment——
Ms. MOLITORIS. No, they are not.
Mr. OLVER [continuing]. That most of them will be traveling, or is it just because of the way that they are put back together, the traffic on each of the segments just becomes much greater? Are any of the segments where both are going to be traveling, both are going to be running?
Ms. MOLITORIS. There are. There are. What I would like to do, Mr. Olver, is to respond in detail to this question for the record. But let me just say now that those particular areas are ones that we identified, because for the first time in history, FRA did a pre-proposal safety audit in depth on all three of the parties who would be involved, Conrail, Norfolk Southern, and CSX, and we reviewed in detail the potential areas for increased risk.
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We knew that we had to do something different from the past because of what we experienced at the Union Pacific and at the Burlington Northern-Santa Fe, that these mega-railroads can produce safety hazards that we have to get ahead of time to prevent tragedy. But I will be very happy to elaborate on each of those elements that you requested.
Mr. OLVER. Thank you, Mr. Chairman.
[The information follows:]
The model's risk projections are based upon traffic projections, information supplied by CSX and NS in their initial filings with the STB, as well as other follow-up data requested by FRA. The line segments analyzed were those with existing Conrail, CSX or NS desginations. The traffic projections for the year 2000 represent the total traffic (CSX and/or NS) projected for any given line segment. The increases in traffic on some line segments are as a result of traffic pattern changes (rerouting of trains to consolidate and expedite) and expected new business growth.
WEATHER-RELATED ACCIDENTS
Mr. WOLF. Mr. Packard.
Mr. PACKARD. Thank you, Mr. Chairman and thank you for being here all of you.
I will be rather parochial and very short on my questions. A lot of damage and floods and mudslides on the west coast. How does that impact your ridership, your performance, your revenues? Has that been analyzed at this point?
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Ms. MOLITORIS. Well, are you talking both about passenger and freight, Mr. Packard?
Mr. PACKARD. Yes.
Ms. MOLITORIS. Let me comment on the freight side and perhaps Mr. Warrington would be more appropriate to give details on the passenger side, although we are certainly close to both of these.
In some of the areas, some rail service had to shut down. I would say that, it is—and I could report in writing on all of the impacts in detail for your review. The railroads have in general gotten back into service within a few days and sometimes within one day. Some of the mudslides have been extremely damaging. I know that some of the commuter service was impacted as well.
So, any time that these very horrendous natural disasters occur, our regional office, which would be Region 7 in California was very focused on how they can help. Of course, the FEMA involvement was very important. I have to commend the actions of the private freight railroads, because they had a very good emergency plan. They reacted very quickly and they do invest private dollars in the main, especially the major Class I railroads. They do fix their own right of way. I think this is one advantage of our system as compared to some of the other systems around the world and the railroads deserve credit for their prompt response.
Mr. PACKARD. Some of those main lines go right along the bluffs and the coastal areas that have been somewhat undermined. In some instances, there has actually been sloughing away of some of the bluffs at the coastline. Has that jeopardized any significant portion of your lines?
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Ms. MOLITORIS. We are working closely with the railroads, of course, but our inspectors are looking at things like bridges and track, but so are the railroads. They are very focused on safety. In fact, they have some—especially with flood-related and slide-related damage, there are special rules, operating rules in place to require very slow speeds in the neighborhood of any potential impact on a bridge. It has actually saved lives on a number of occasions, because a damaged area was able to be identified ahead of time.
[The information follows:]
From the standpoint of train accidents, FRA has had seven reported through the National Response Center since October 1, 1997 that were related to severe weather. Other less serious train accidents have probably occurred, but these are reported through the normal reporting channels and FRA does not have the information compiled until several months later.
Of these seven accidents, two involved passenger trains, in which no persons were injured. Five involved freight trains, with 4 train crew members having received minor injuries for which they were treated and released.
Of the five freight train accidents, four resulted in a release of diesel fuel from the locomotive fuel tanks, and one caused a release of hazardous material from three cars, with no injuries or evacuation. The accidents occurred in seven different states, as follows: Arkansas, 1; Oregon, 1; Kansas, 1; Virginia, 1; California, 1; Missouri, 1; and South Carolina, 1.
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All accidents are preventable, but this rate of train accidents from weather-related causes is not unusual during this time of year. The railroad industry has been diligently following the recommendations of FRA in Safety Advisory 97–1 related to protection of operations during flood warnings, and these precautions have been effective. In a passenger train accident at Crescent Lake, Oregon, on January 2, 1998, the train was operating at reduced speed during severe weather conditions, in accordance with the Safety Advisory. The derailment was limited to the leading wheels of the locomotive, damage was slight and no persons were injured.
Train accidents reported thru NRC as weather-related include:
Dec 29, 1997 UP Chetopa, KS—Soft track on account of heavy rain; also train handling. Freight train, 49 mph, derailed 1 locomotive, 13 cars. No hazmat, no injuries.
Jan 2, 1998, ATK/UP Crescent Lake, OR—Rock slide. Passenger train, no injuries, no hazmat. Lead truck of locomotive derailed and lodged on rock.
Jan 26, 1998 Kiamichi RR Hope, AR—Soft track on account of heavy rain. Freight train, 1 locomotive derailed at 5 mph. Minor injuries to locomotive engineer, diesel fuel spill, no other hazmat.
Feb 5, 1998 NS Emil, VA—Washout. Freight train, 23 mph, derailed 3 locomotives, 2 cars. Diesel fuel spill, no other hazmat, no injuries.
Feb 20, 1998 ATK/UP Montecito, CA—Tree across tracks, weather related. Passenger, no injuries. Train operating at reduced speed on account of weather per FRA Safety Advisory 97–1. One set of wheels derailed.
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Mar 13, 1998 UP Kirkwood, MO—Debris on track. Freight. Diesel fuel spill, no other hazmat, 3 minor injuries to train crew members.
Mar 18, 1998 CSX Cheraw SC—Washout caused by failure of farm pond dam. Freight train, derailed 2 locomotives, 15 cars, speed not reported. Diesel fuel and 3 hazmat cars (1 Caprolactam, 2 Adipic acid powder) no evacuation, no injuries.
WEATHER-RELATED COSTS TO AMTRAK
Mr. PACKARD. Thank you and Mr. Warrington, would you——
Mr. WARRINGTON. Yes, Mr. Packard, El Nino today has cost us about $1.7 million net on the west coast. Most of that has affected the Coast Starlight, our premium train. As of about two weeks ago, there was a major bridge washout north of Los Angeles which has affected service north of LA.
On the other hand, El Nino has also saved us a few dollars in the northeast, where the winter has been mild and we have not had to engage in as much snow removal, weather protection or over-time. So, on balance, hopefully, we will come out ahead. It has had a disruptive effect, a significant disruptive effect on our passenger operations and some of our mid-distance operations in addition to the Coast Starlight in California.
COMMUTER SERVICE UPDATE
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Mr. PACKARD. As you have articulated with some of the local services, passenger services, Metrolink and some of your commuter systems that are operated by our local entities and agencies, has that worked out well? Are there any problems that exist as you articulate with your Amtrak services and those local commuter services?
Mr. WARRINGTON. No. As a matter of fact, Mr. Packard, we are the dominant operator under contract of virtually all of those services. It is a little known fact that Amtrak is the largest contract operator of commuter services around this nation. It is one of the things of which we are actually very proud. On those commuters which we operate, we tend to average, across the entire country, a 97 percent on time performance. We have about a $300 million annual business on that front. We are the major operator in California. We are the operator in Boston and we operate service right here in Virginia for the VRE and for the State of Maryland.
We are an operator which runs a very competitive and effective service across the country and our relationships with local commuter agencies and states around those contracts, in my experience, have been very, very good and very positive.
Mr. PACKARD. Thank you very much. Thank you, Mr. Chairman.
Mr. WOLF. Thank you, Mr. Packard.
Mr. Cramer.
MAXIMIZING POTENTIAL AMTRAK RIDERSHIP
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Mr. CRAMER. Thank you, Mr. Chairman.
Mr. Warrington, welcome aboard. I know you are no stranger to Amtrak and you have served well under different titles. I would like to have the benefit—and you may have had an opportunity to go into this in your original statement—of some information from you about your vision for maximizing the potential for Amtrak in the marketplace. What do you see under the circumstances that Amtrak is doing right, and what has not worked so well.
Your west coast ridership has increased somewhat significantly and tell me a little bit why you think that is and how we can help here on the east coast as well.
Mr. WARRINGTON. Let me maybe work backwards. On the west coast, we have an organization that focuses intensively on customer service and customer quality. We have a lot of travel demand. There has not been a historical railroad orientation there and when you introduce it for the first time, provide good quality, and focus on customer service, what we find is, people come. You have to have sufficient amounts of demand to make it work economically. California, Oregon and Washington have clearly been success stories.
In the northeast, what we have done over the past three years is thoroughly assess what the market wants, what the market needs. As a result we have tailored and designed our high speed program around what the marketplace wants and needs. We have a 12 percent market share today in the northeast. We have a 50 percent air/rail market share between New York and Washington and with the introduction of high speed rail in the northeast, based upon extensive modeling and planning work around what the market wants and needs, that market share will grow in the year 2000 by three or four points, which is very significant.
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I would say that we need to do the same type of market research around the rest of the system, particularly around long distance inter-city services; the same kind of thorough, market-based, business-like, customer-driven research around what people want and what people need if the system needs is be relevant. Our route system needs to be relevant from a business point of view. It needs to be relevant from an economic point of view.
Frankly, we operate services today over routes and in frequencies that tend to be driven by either historical travel patterns, going back, frankly, to the 1950s or based upon various cost cutting initiatives. What we have not done is thoroughly assess what the market wants, what the market needs and what we have to do—what we can do—economically and financially in order to grow market share.
If you do not do that, you will stagnate and you will tend to spin your wheels around a growing market. We have to be relevant in the marketplace. We have to be competitive in the marketplace. We have to go places and deliver service in a way that people will come once and come again.
We have not conducted that kind of research, good business-like research in the 27-year history of this company. We have done quite a bit of it around the west coast. We have done a lot of it around the northeast operation, which is why we feel so confident about the commercial and cash flow that will come from the high speed program in the year 2000.
We need to do the same kind of analytics and the same kind of business-like planning around what people want and what people need for the rest of the system.
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HIGH SPEED RAIL SERVICE
Mr. CRAMER. That is a challenge and you need to be encouraged to keep meeting that challenge. Are you, in fact, within two years of the high speed service in the northeast.
Mr. WARRINGTON. As a matter of fact, it is a $2.6 billion program. I will tell you that the program is on schedule and on budget. We will be extraordinary leaders in late 1999 and the year 2000, frankly, for the country and for the world around delivering an on schedule, on budget, quality high speed operation that we can all be very proud of. It is all on schedule and on budget.
Mr. CRAMER. Good luck. Thank you, Mr. Chairman.
ADMINISTRATION'S REQUEST FOR AMTRAK
Mr. WOLF. Thank you, Mr. Cramer.
With regard to the President's budget for fiscal year 1999 of $621 million in capital funds for Amtrak, the request is quite different, as you mentioned, from prior years when you requested an operating grant, a capital grant and funding for the northeast corridor. If you can tell us, why has the administration request proposed such a radical departure from the past years?
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Ms. MOLITORIS. Mr. Chairman, the administration sees Amtrak as it always has said in the times we have been here before, as a crucial part of the 21st century. Amtrak's strategic plan called for $5 billion to enable them to meet the operating self-sufficiency goal that we jointly, the administration and Congress had set for them. The administration proposes over the next five years to fund such a plan.
I know that you and others have identified it with a variety of words. I think it is a significant amount of money. I think you have heard Amtrak say that they feel that this will work. It gives Amtrak the flexibility to operate as a business, something that we all want. Amtrak——
Mr. WOLF. Excuse me.
Ms. MOLITORIS. Sure, go ahead.
Mr. WOLF. No, you go ahead.
Ms. MOLITORIS. We believe that this plan can work. We agree actually with Mr. Sabo, that the first year is a hard year, but I am encouraged—and perhaps Mr. Warrington will go into more detail—about some of the ways that Amtrak is trying to improve revenues, which will serve them well. For instance, express service, wheeling power on the northeast, the same kind of business initiatives that other passenger services around the world are doing to get better.
Mr. WOLF. We have heard them over the years and you have heard them over the years. I would put myself in the forefront of the supporters in the Congress for Amtrak. I was raised in Philadelphia, a block away from the tracks, if you will, as it goes by John Bartrom High School.
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We have heard the stories over and over and we do not want to do a shell game whereby we are moving funding around and then they come back and they say, well, we did not understand. I think we have a moral obligation to the American people to make sure that what we are doing is appropriate.
CAPITAL FUNDS FOR PREVENTIVE MAINTENANCE
You are asking that Congress allow Amtrak to use its capital funds for preventive maintenance. Why, in your opinion, is it necessary?
Ms. MOLITORIS. Well, Mr. Chairman, this definition is one that the Congress approved last year for FTA. It is a way that maximizes Amtrak's ability to flexibly use this money to get the best bang for the buck, quite frankly. We believe that since not only are we proposing a fairly unique option as compared to the past budget proposals, but it also includes a requirement that none of the funds be released without a very thoughtful and comprehensive capital plan.
I think this requirement is a governing measure to assure both you and us that this money is used in the very best way possible. I would agree with you on your comments in this regard.
I think we are making this proposal and we are living with some of the things of the past that make people a little skeptical about whether it can work.
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Mr. WOLF. You know, Amtrak came up here for years and said things were fine, when the system was beginning to decay from within.
Ms. MOLITORIS. I know that, Mr. Chairman. If you recall, in the first few times I appeared before you, I talked about the difficulty we had, as a new administration, coming in and trying to find out what things really cost. When you run a business, you have to be able to identify what things cost. Costs were so bundled that we could never really sort it out. We spent a lot of time and invested money to get systems to track costs and to be able to give you correct answers and to give ourselves correct answers.
Also, I think, we ought to give Amtrak credit for the improvements that they have made in the last four years. They have a strategic plan now which gives them goals that they must meet. They are increasing ridership. They are pursuing business initiatives like express business, wheeling power, doing those kinds of things which are netting them a real bottom line improvement.
In fact, I would be happy to submit for the record a whole sheet of the financial, operational and, I think as you heard, business relationships with their customers and labor that are much better than they have every been.
Mr. WOLF. Please do.
[The information follows:]
"The Official Committee record contains additional material here."
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CAPITAL USED FOR PREVENTIVE MAINTENANCE
It is my understanding that, should Congress permit Amtrak to use its capital appropriation for preventive maintenance, approximately $520 million of the $621 million request or more than 80 percent could be spent on these items. In the past, Amtrak funded these funds from its operating grant. Isn't the administration and Amtrak simply shifting costs from operating expenses to capital expenses, in essence, moving a pea from one shell to the other shell?
Ms. MOLITORIS. Mr. Chairman, I believe that this new proposal gives us an opportunity to give Amtrak the challenge to use this money in the very best way. It is a definition that was approved by Congress for transit last year and, I think, for a good reason.
Mr. WOLF. Does it concern you that Amtrak will use more of their capital fund for traditional operating expenses and less for traditional capital investment, like new cars? Does this bother you a little bit?
Ms. MOLITORIS. Well, the first year, Mr. Chairman——
Mr. WOLF. You are an expert.
Ms. MOLITORIS. In the first year, we are going to have a very—we will be pressed in all of these areas. I think the role of the Federal Railroad Administration, the department and the board is, to hold Amtrak to a very high standard. I think that Mr. Warrington is doing a very commendable job. He is very—as with you, he is very direct with us at the board.
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AMTRAK PRESIDENT
Mr. WOLF. Let me just say this is the second time I have met Mr. Warrington. I was impressed when he came by my office. He seemed to be no nonsense. I understand Mr. Warrington asked not to have the job. [Laughter.]
I understand that, several of you hope to be reappointed to the board and you will be on the board.
Ms. MOLITORIS. I represent Secretary Slater.
Mr. WOLF. Secretaries never attend, except for the one meeting. I used to work for a cabinet officer. You will be there probably most of the time.
I think it is important that you appoint someone with railroad experience and not a political person. I think if you come out with some of the names—and I have heard you rolling out political people—I think you are going to begin to raise questions in this Congress and, frankly, in the minds of a lot of people. So, the person who is appointed—and if Mr. Warrington is not the person, fine—it ought to be someone who really understands this and is not just another political face who is coming along. I think the credibility here in Congress will just drop dramatically.
USE OF TAXPAYER RELIEF ACT FUNDS
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During fiscal years 1998 and 1999, Amtrak will have $1.1 billion (per year) in Taxpayer Relief Act funds available for traditional capital investment. Are we not setting Amtrak up for failure in the year 2000 where there are no supplemental TRA funds?
Ms. MOLITORIS. Well, Mr. Chairman——
Mr. WOLF. Wouldn't we be setting them up for failure?
Ms. MOLITORIS. This administration wants to set Amtrak up for success.
Mr. WOLF. They will be gone after 2001.
Ms. MOLITORIS. I think the work that we do from now until the year 2000 is critical. I think the strategic plan that was agreed to by the board of Amtrak and the staff of Amtrak is a very challenging but a strong plan that can lead them to operational self-sufficiency.
I also believe that the high speed service and the new business initiatives are really going to contribute to the bottom line of Amtrak. We believe it can work. Until we continue this track record of success, which has been real in the last couple of years, the only way we can prove it to you is by each of our actions, each day of each year and to come back and talk to you about the success that Amtrak has reached.
Mr. Warrington mentioned some and I am going to submit several pages for you.
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Mr. WOLF. Excuse me.
Ms. MOLITORIS. Mr. Chairman, could I just mentioned, too that I appreciated your comments about Mr. Warrington, because I too think that he is doing a very good service for us. The Deputy Secretary, Mortimer Downey and members of the board, are developing a very business-like outreach and search to really look for very highly qualified and experienced people to work with the new board. So, there will be a basis of information for them.
Mr. WOLF. TRA allows Amtrak to use some of its funds for preventive maintenance, specifically maintenance of equipment, which costs Amtrak roughly $340 million per year. Why should Congress expands Amtrak's eligible use of its capital appropriations to include maintenance of facilities and equipment as requested, since Amtrak already has flexibility with the TRA funds?
Ms. MOLITORIS. Well, we believe and the administration believes that—the definition is one that applies throughout the transportation industry. It is important.
For example, Mr. Chairman, you recall in the transit industry, for example, often because there was more of an incentive to buy new, the maintenance area was not given its full potential. I believe the judgment of management at Amtrak can make good decisions on what the best use is. That is what we are trying to do, give them accountability on how they use the money.
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AVAILABILITY OF FUNDS
Mr. WOLF. Of the total appropriation of $621 million in the administration's budget, you are seeking $200 million to be available on October 1, 1998, for the northeast corridor-related expenses and the remainder of the funding to be available July 1, 1999. Why are you seeking this split in the availability of the funds?
Ms. MOLITORIS. This method of use by Amtrak is one that seems to respond to their needs and their use.
Ms. MURPHY. Mr. Chairman, traditionally we have always asked for capital outlays beginning in the fourth quarter. Part of that has been a scoring issue, but the administration is open to revisiting that as long as both the administration, Amtrak and the committees agree that, Amtrak will not draw down more than 40 percent in the first year. That is for the total capital fund. That is $621 million.
So, regardless of how much of the funds they obligate, during fiscal year 1999, Amtrak and the administration has agreed that not more than 40 percent of the $621 million will be drawn down in fiscal year 1999.
Mr. WOLF. For the scoring now?
Ms. MURPHY. Correct.
Mr. WOLF. If Congress were to adopt this proposal, the general capital appropriations would not be available to Amtrak until July 1. In the interim, would Amtrak use funds provided under the Taxpayer Relief Act for maintenance of equipment, infrastructure and facilities and then subsequently repay these costs from the capital appropriation?
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[The information follows:]
If the fourth quarter restriction on Amtrak's capital grant is maintained in the FY 1999 appropriation language, then Amtrak would ''borrow'' funds from the Taxpayer Relief Act (TRA), for this purpose, then ''repay'' its TRA account when the capital grant is made. It should be noted that Amtrak has requested the elimination of the fourth quarter restriction and the Administration has no objections to this request.
Mr. WOLF. That is not a great way to run a railroad though, in the sense that you have to do that. I do understand what you are saying.
If Congress were to adopt the administration's budget request for Amtrak, including the preventive maintenance definition, can you assure us that Amtrak will not go bankrupt in the year 1999 or in the year 2000?
Ms. MOLITORIS. Well——
Mr. WOLF. This is, I think, what some people are saying.
Ms. MOLITORIS. I believe, Mr. Chairman, that this gives Amtrak a good foundation. I think Amtrak's business plan shows that, even in the difficult first year, which we all acknowledge is difficult, that as in many capital-intensive transportation businesses, some borrowing may be necessary. That, in fact, Amtrak can get through the first year successfully and then increase the success of their operation as the years go forward.
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I think it is a good and workable plan. It is not without challenge.
AMTRAK REFORM COUNCIL
Mr. WOLF. Challenge.
How does the ARC work? After several years, does it have to make a statement that Amtrak will or will not be successful? Help us; walk me through that.
Ms. MOLITORIS. Well, the ARC, I believe, is a method Congress has identified to support and advise Amtrak.
Mr. WOLF. We have an amendment coming up briefly. So, I am just going to go through a few more of these questions and then we can break.
Ms. MOLITORIS. Mr. Chairman, their primary goal after a couple of years is to advise Congress on what they observe and what they evaluate.
AMTRAK REFORM COUNCIL MISSION
Mr. WOLF. Is it set up in such a way that says if they will make it or they will not make it? If they will not make it, then do they have to submit a plan to shut down?
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Mr. WARRINGTON. Mr. Chairman, the ARC will regularly review our financial plan. We have a financial plan that the board officially adopted last September which, in fact, we updated yesterday to bring us as much in the way of up to date market and other information and cost information to the table. We will work off of the fiscal year 1998 baseline about where we start.
What the ARC needs to do, working with us quarterly over the next two years, is determine if by the year 2000 Amtrak is on a path toward self-sufficiency and not requiring operating support. We will be working with them closely on a quarterly basis in order to make that determination.
Right now, we have a plan in place that gets us to 2002 and 2003. There are lots of events that will occur between now and then against which we need to regularly update.
I will tell you, in response to your question to the administrator, I personally feel comfortable and confident that, with the proposed budget, not only for this year, but for the five-year period that the administration has recommended, we can make it. We will need the flexibility provisions—they are critical—and the proposed level of support is absolutely critical. With that combination, on a five-year basis, I can tell you confidently that this organization is not going to go bankrupt and is not going to liquidate.
We have a stable environment in order to conduct the right kind of market-based, business-like research and planning around the national network. So, together we can, as a public policy matter, decide over the next several years, within the context of a stable environment, what the national system needs to look like and what is economically defensible in 2002 and for the long haul, rather than on a year-to-year basis where it appears like we are always on the edge.
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Mr. WOLF. Okay, I am going to give these questions to Mr. Aderholt and then if Mr. Aderholt has to leave, if Mr. Olver can do it. This amendment should be over in about 5 minutes. So, I will be right back.
Just to move on, so you do not break the pace, as a part of the request, the administration is seeking $500,000 for secretarial expenses and expenses related to the Amtrak Reform Council. Do you believe that Amtrak should pay for its own oversight? Would that not be a conflict of interest?
Ms. MOLITORIS. Mr. Chairman, I am glad you brought that up, because I wanted to mention to the members of the committee that, our request, we believe, is appropriate because it is the FRA's responsibility to support and provide support staff and services for the ARC. We have already received calls from members who have been appointed to the ARC, talking about some of their ideas and some of the needs that they see for us to support them.
So, we will be working with them closely and this kind of support is important so that they can do their job and we can pay for the things that they are going to ask us to do.
AMTRAK FUNDING FROM HIGHWAY TRUST FUND
Mr. ADERHOLT [presiding]. Why do you believe it is appropriate that Amtrak funding be derived from the highway trust fund, as you have proposed in the budget request?
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Ms. MOLITORIS. Mr. Aderholt, we believe that Amtrak is part of a national transportation system. It has been the administration's position for some time that, it is appropriate for all of the surface modes to be together in the budget that is offered to Congress. In fact, I think it was Mr. Callahan who mentioned the relationship to trucks. There actually is a very identifiable benefit to Amtrak.
For example, in the northeast and other congested areas, the ability for Amtrak to take cars off the road actually gives trucks more opportunity to pursue their business. There certainly is, I think, a reasonable debate and discussion that could go on about why we want to have a unified system. That is really what ISTEA is all about, for us to look at transportation as a system and how each element affects each other because, in fact, they all do. In fact, there are so many more interrelationships today than there ever were ten or 20 years ago.
In fact, there are tremendous contracts for freight movements between trucks and railroads. So, the whole concept of one national transportation system is really the thrust behind this concept.
TAXPAYER RELIEF ACT FUNDS FOR WAGE INCREASES
Mr. ADERHOLT. If the Committee included bill language to prohibit TRA or the 1999 capital appropriations from being used to pay for union wage increases, wage increases that Amtrak says it can ill afford, would you support this?
Ms. MOLITORIS. Mr. Aderholt, I think you have already heard or perhaps this was before you came in that, Amtrak and Mr. Warrington has already directed his fiscal officer to set up a separate account so that all of the dollars that might need to be paid out of the agreement, the BMWE agreement and any future agreements would come out of revenues.
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Mr. ADERHOLT. Mr. Olver, do you have some questions?
Mr. OLVER. I can always fill time with questions? [Laughter]
Mr. ADERHOLT. I am at the bottom of the page here, so let me just turn it over to you for a few minutes.
NORTHEAST CORRIDOR CAPITAL NEEDS
Mr. OLVER. Thank you, Mr. Chairman, for passing the baton on here for a moment.
Since you stopped at that particular point, I would like to examine a couple of things. I notice, Mr. Warrington, that you had mentioned—I think it is on page 10 of your testimony—the comparisons of capital expenditure for a group of railroads on a per mile basis, including SEPTA and down through Amtrak. Amtrak was by far the lowest capital expenditure. One-sixth of SEPTA's and others go down the line between SEPTA and Amtrak. Is there a proportionality there in some way to growth of trackage to the development of new trackage that would put some of those numbers like SEPTA's and others up to very high numbers? Are they in capital campaigns that are far more extensive, new lines and so forth, where Amtrak is not in the mode of establishing new lines, but it is rather in the mode of trying to figure out which ones to triage essentially?
Mr. WARRINGTON. I think there are a couple of factors, Mr. Olver. One is, we tend to be more productive and we get more out of every dollar that we invest. We run a Class 7 railroad. It is the highest class of railroad operation in the country. We have a very skilled workforce and we are very productive. As a matter of fact, prior to going into this BMWE agreement last fall, we had among the best work rules in the country.
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We are the only railroad in the country that can establish gang sizes that we want. We can make starts any seven days of the week, including Saturdays, Sundays and evenings, 24 hours a day and not pay overtime. There is no other railroad in this country that can organize its work and execute it as productively as Amtrak can. I can tell you that with confidence.
In addition, we tend historically to have been under-capitalized around a very aging infrastructure, an electric traction system that is 1920s vintage, a Baltimore tunnel complex that is 1900s vintage, Susquehanna River Bridge which is 1920s' vintage. It is an old, antiquated plant and frankly, we have not been able to invest the amount of money necessary in that plant for reliability over the long haul. The TRA will get us a long way there over the next several years, to both make up for some state of good repair that we need to deal with and, at the same time, provide us with the kind of reliability we need for high speed rail service and reducing our travel times between New York and Boston to under three hours and between New York and Washington to two hours and forty-five minutes from today's three hours.
At the end of the day, it is a combination of productivity, which is good and lack of capital, which is not good.
There may be a handful of major capital investments that are included in those commuter agency numbers. I suspect that the SEPTA number includes their massive railworks project, which may tend to drive their numbers a bit. But over time, on average, the amount of capital which has been invested in this infrastructure pales in comparison with the amount of federal and local money which has been invested in the plant of all those commuter agencies.
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Mr. OLVER. Well, that is an interesting answer that covers a lot of ground, but I am trying to devise for myself some way of comparing these railroads to see how they fit. I do not know whether we are talking about apples and oranges as we look at them. I would have thought there would be, if one wanted to make comparisons, that one might add columns like the passengers per mile of the amount of the subsidy, the percentage which is a subsidy that goes into each one of those. I think every one of them is subsidized and we are, at this point, pushing Amtrak into a position essentially of reducing the subsidy, although the creative financing here for a period of time is at least a form of subsidy along the way.
My guess is, maybe the percentage of subsidy covers this. I will not think of other columns to put in that. I think I could devise a few if I thought about it a little bit longer.
I went about that a little bit obliquely and you have come back to me with some comments about productivity and so on. Your comment about your using old capital means we have not been putting capital in here at the rate—I guess, this is the age of the system. You addressed that maybe there is an age factor that one ought to throw in here to better understand what it is that is going on. I am curious.
Are we keeping up with the safety in these age factors and some of the items like you mentioned, like the bridge, the big bridge that you mentioned across the Susquehanna? Are we in any danger on that? I trust we are not.
Mr. WARRINGTON. Absolutely not, we are in no danger at all. As a matter of fact, I will tell you that we are fixated. We are fixated as operating people on safety. We have a responsibility to our employees and to our customers. I will tell you, it is a fixation in our operation. It always has been and always will be. It is a track record of which we are very, very proud.
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What we have been forced to do, Mr. Olver, is invest wisely and invest efficiently. Let me give you a good example of what you can do with capital.
Right now, I will pick an interlocking in New Jersey, County Interlocking which is a complex array of tracks and crossovers that you have to operate over, at 125 miles an hour. Due to the lack of capital over the years, what we have done is have a 15-man gang go into that interlocking once a week and do what we call resurface, which is bring the railroad into proper alignment and cross elevation. You should not go into a railroad and do resurfacing more than once every two and a half to three years. We were into that interlocking once a week.
What we decided to do was, take scarce capital, $200,000 and rebuild that interlocking. We did it last July and we have not been back there to resurface since last July, six, seven months. That 15-man gang can now be used for much more productive results. That is the kind of benefit you get from wisely investing capital and the organization has been forced to over the last several years, given its small amount of capital availability, to make those kinds of wise investments. I will tell you, it is entirely driven number one as a priority by safety.
LABOR AGREEMENT AND AMTRAK PRODUCTIVITY
Mr. OLVER. Okay, well, I guess I, from the data you have given, I can accept that you are under-capitalized. So, the TRA is a fine thing to move us along.
Mr. WARRINGTON. Yes.
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Mr. OLVER. Now, there are no measures of productivity showing here that I can particularly see in the testimony. You asserted very strongly that the productivity was the best Class 7 railroad and so forth and the best of the railroads. I suppose it must bear some comparison with these others that are better capitalized than Amtrak is capitalized.
If we are so productive, how can we justify—the business of the use of the capital appropriations, any of the TRA monies might be used for pay of union wage increases that Amtrak can ill afford. Certainly Amtrak can ill afford the pay increases in a global kind of a way. On the other hand, if we are so productive as you assert that we are—and in your testimony, on page 6, you give at least one instance, the only instance I see is one of an Amtrak electrician paid $16 an hour compared with LIRR, 23 or $21 an hour and then the catenary lineman, where it is $16.93 versus Metro North, where the earnings are $21.91.
I mean, this is very tantalizing to me. It is sort of an appetizer, in essence, to see how your analysis of productivity fits with the pay scales that are being afforded for our Amtrak personnel. If, in fact, you are correct on the assertion of high productivity and other kinds of comparisons, which you have only given me two very scattered on point sources here.
There must be a lot of different categories in all these different railroads that would be part of a matrix that one could see on the different railroads and on the measures that would allow me to better compare apples with apples in these rail systems. The other kinds of columns that ought to be in there would help a lot in understanding where we are in these discussions about Amtrak to have a much better matrix to look at to make comparisons on.
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If the productivity was so great, I would have thought that the proper question ought to be, how under those circumstances of productivity can we not pay for pay increases that would get people closer to what is being paid in all these other rail systems?
Mr. WARRINGTON. Mr. Olver, the thrust and the spirit of my testimony and what I believe is that, the most important thing for us to do is to be competitive on the wage front, because we invest a lot in our people and in how we train them. The issue really is not—and should not be—what wages are.
What is most important is, coming to grips with what the real labor costs are in a competitive environment, and assuring that that labor force is paid fairly and equitably, but also working productively and efficiently.
This agreement with the BMWE and our prospective agreements with the other crafts really enable us to move in that direction, to begin to assure competitiveness, in an urban environment, but at the same time stress not what we are paying people, but if we are paying them appropriately given their level of productivity. Are we getting a fair day's work for a fair level of pay? I will tell you, going into the BMWE agreement, Amtrak had, in this industry, among the best work rules in the country and we emerged with significant improvements to those work rules that make us feel good about the way we carry out our business from a management and workforce point of view.
I can feel very good and very proud about the efficiency with which we dispatch our work on the northeast corridor around our maintenance of way activities. I would stack it up against all other railroads. Mr. Olver, I would be happy to furnish you and the committee with the matrix that details and documents those kinds of productivity improvements we have secured, but also ways of doing business around productivity and efficiency which enables us to declare that we are among the leaders in this industry around the way our workforce does its work in the field.
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Mr. OLVER. Are you the only Class 7 railroad?
Mr. WARRINGTON. Yes.
Mr. OLVER. How many Class 6s are there in passenger rail?
Mr. WARRINGTON. There is a—the Long Island Railroad is Class 5. MBTA is Class 4. Metro North is Class 5. New Jersey Transit is Class 4 and Class 5.
Mr. OLVER. Are there any 6s?
Mr. WARRINGTON. I do not have any on the list here.
Mr. OLVER. If you do not have any on the list——
Ms. MOLITORIS. No, sir, no 6s.
Mr. OLVER [continuing]. That is of some significance. There are no 6s?
Ms. MOLITORIS. No, sir.
Ms. ROSEN. Mr. Olver, if I may. I serve on the board of directors at Amtrak, but statutorily as the representative for commuter agencies that operate over Amtrak property. I have served on the board of New Jersey Transit as well for over ten years and currently serve as Vice Chairman.
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The matrix that you talk about is something that I think we should provide this committee.
Mr. OLVER. I certainly hope to see it.
Ms. ROSEN. It is readily available and the American Public Transit Association actually tracks it very well.
If you look at the last ten year of the history in terms of the levels of capital, it is astonishing that when you look at the properties on the northeast corridor, how much larger the commuter agencies' capital programs are than Amtrak.
What I think that you are addressing in Mr. Warrington's comments was the establishment of the Productivity Council within the BMWE agreement. All of us who represent commuter agencies are hoping that this Council will be something we will be able to model in our future agreements.
[The information from Amtrak follows:]
OFFSET FOLIOS 147 TO 148 INSERT HERE
RIDERSHIP AND REVENUE INCREASES
Mr. OLVER. Mr. Chairman, if you do not want to take over, I will ask one more, if you would allow. Let me go into one other piece of your testimony that has been mentioned earlier. I notice, Mr. Warrington, you point out that, between fiscal '95 and '97, passenger revenues have climbed from $850 million to $970 million. A substantial part of that must be rate increases, I take it. What portion of that represents rate increases?
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Mr. WARRINGTON. I do not have that off the top of my head, Mr. Olver, but I can certainly furnish that to you for the record. I would speculate that about 60 percent of that is probably fare increases, 40 percent ridership. The rate increases occurred during the early years and the ridership increases have occurred during the latter part of that period.
Mr. OLVER. Please, you had better go back and answer that for the record, because it could not be 40 percent. Let me just say, your passenger revenues between '95 and '97—well, if we are talking about three fiscal years, that would be a little bit more—you have made a big thing about the ridership increase in 1997. Was there a ridership increase in 1996 or 1995?
Mr. WARRINGTON. It began turning around in late '96 and through '97 and has continued into '98.
Mr. OLVER. That was when we were also closing down some lines——
Mr. WARRINGTON. That is right.
Mr. OLVER [continuing]. To reduce some ridership. It would be very difficult to come up with a set of calculations when there is only 2.6 percent ridership increase in fiscal '97 when you are turning things around in '96 that could produce a 14 percent increase in the actual revenues in a three-year period if a very large portion of that were not related to the actual increase in rates rather than in anything related to the ridership. I will let you answer that one. Maybe that is another matrix, a different matrix with ridership increases year by year.
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Mr. WARRINGTON. Sure.
[The information from Amtrak follows:]
AMTRAK GRANT REQUESTS
Mr. WOLF [presiding]. Mr. Warrington, Amtrak has submitted two grant requests which you call option A and option B. Option A seeks $621 million in capital grants, similar to the administration's request. Option B asks for a status quo, although there are no numbers in it, as you know. First, let's discuss option B. What funds are you requesting under option B? Can you answer in the total and then specify for operating capital in the northeast corridor in option B?
Mr. WARRINGTON. Yes. The option B proposal, as I recall is——
Mr. WOLF. Can you just use a couple of sentences?
Mr. WARRINGTON. Yes, $376 million for operating, which includes $145 million for railroad retirement, $200 million for NECIP and $129 million for Amtrak general capital.
Mr. WOLF. For a total of?
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Mr. WARRINGTON. $705 million is my recollection.
Mr. WOLF. $705 million to $621 million?
Mr. WARRINGTON. Yes, we prefer $705 million. [Laughter.]
Mr. WOLF. If Congress provides Amtrak with funding in the usual structure, operating capital northeast corridor, will you still seek to prevent a maintenance definition?
Mr. WARRINGTON. Yes. We believe that the flexibility provisions are useful for all general capital appropriations. So, the answer is yes, Mr. Chairman.
AMTRAK GRANT REQUEST—DIFFERENCES WITH ADMINISTRATION
Mr. WOLF. How does your grant request $621 million differ from the administration's request?
Mr. WARRINGTON. Initially, we had differences on several fronts. I think over the past four to six weeks, we have come together and I believe Amtrak and the administration are on the same page. I think initially the administration proposal did not include the transit definition. The administration proposal assumed from the beginning use of the TRA for capital maintenance. Also, the administration proposal did not assume an October 1 release date of at least a portion of the funds. Over the past four to six weeks, we have worked closely with the administration.
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Frankly, initially there was some anxiety around the original provisions and I think we have very successfully gotten on the same page. That level of effort, $621 million, coupled with flexibility, works for us. I believe the administration and we agree with that.
SENATE REACTION TO BUDGET REQUEST
Mr. WOLF. I saw that several senators were upset with this, I think including Senator Roth. Where are they now? Have you been in communication with them?
Mr. WARRINGTON. We had heard from Senator Roth. We had heard from Senator Lautenberg. We have communicated to both of those senators and others that, this provision, with flexibility, actually works for us, not just this year, but when tied to the five-year proposal that OMB has put forward. We believe it gives us the kind of stability we need to assure that we are not on a precipice in '99 or 2000 or 2001. So, I cannot assure you exactly where they are, but I believe they understand that we believe this is a workable solution.
FUNDING OPTIONS
Mr. WOLF. If Congress were to enact option A and include bill language making $421 billion available as of July 1, 1999. Will this create any short term funding shortfalls?
Mr. WARRINGTON. Frankly, off the top of my head, Mr. Chairman, I cannot answer that. I would have to refer to staff. I would like to ask the staff to review that from a cash flow point of view.
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Option A would not work for Amtrak on a cash basis. The current NECIP grant agreement does not allow for a 100% draw on October 1st. Draws are made as reimbursement of actual expenses. Therefore, on October 1st no funding would be available to Amtrak. With a 9-month delay of funding, Amtrak would require borrowings which would exceed the amount available to Amtrak under short-term borrowing facilities.
NORTHEAST CORRIDOR
Mr. WARRINGTON. I do know that the proposal, the administration proposal included a $200 million earmark for NECIP. That earmark is not received on the first day of the fiscal year. Historically NECIP comes through a grant agreement and we receive it only when we are reimbursed for the actual expenses. So, what we know works best is a $621 million level of effort, with 40 percent of that being actually made available to us on day one and the balance being made at the end of the fiscal year. We would prefer that, frankly, without the NECIP earmark, but we could probably live with it with the NECIP earmark.
Mr. WOLF. Would you need to borrow funds from the Taxpayer Relief Act in order to meet your operating expenses or are there other ways to address this type of shortfall?
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