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August 2007



Rail News: Amtrak

Amtrak - Off The Front Page ... And Into The Future



— by Angela Cotey, Associate Editor

On Feb. 15, President Bush signed a continuing resolution to fund Amtrak at its fiscal-year 2006 level of $1.3 billion in FY2007. The funding level was several hundred million dollars less than what the national intercity passenger railroad had requested, but consistent with the appropriations it had received the past several years.

The resolution didn't only apply to Amtrak. When the 109th Congress adjourned in December 2006, they had yet to pass a working federal budget for FY2007, which had begun Oct. 1. The resolution funded most federal programs at FY2006 levels through Sept. 30. But the fact that Amtrak's FY2007 budget was resolved without the controversy and heated debates that had surrounded the Amtrak appropriation process for most of the decade was definitely worth noting.

For awhile there, in the late 1990s and early 2000s, it seemed as though Amtrak headlines were coming one right after another, each one more jaw-dropping than the one before:

  • "Congress mandates that Amtrak achieves operational self-sufficiency"
  • "Amtrak mortgages Penn Station to make up revenue shortfall"
  • "Gunn threatens shut-down if additional funding is not approved"
  • "Bush Administration proposes zero funding for Amtrak in FY2006"
  • "Amtrak board fires Gunn"

But in the past couple of years, Amtrak's front-page news has given way to far less headline-grabbing tales of debt reduction, ridership and ticket revenue records, and Northeast Corridor improvements. As the drama swirling around Amtrak has waned, the railroad's quietly been making progress on many fronts. And Congress has approved consistent, albeit lower-than-requested, funding levels for five straight years.

Could it be that there's been progress on the compromise and consensus-building fronts? Maybe passenger rail in general is becoming more attractive as gas prices and congestion reach the point of unbearable. Perhaps the new Democratic-controlled Congress has and will continue to work in Amtrak's favor.

Or, is Congress coming to the conclusion that Amtrak is worth funding? That the railroad's requests are appropriately aligned with its needs?

Whatever the reason for the increased support, Amtrak is taking advantage of it. The railroad is using the additional funding to resolve some of its financial and operational issues. And, with a new management team in place, Amtrak is focusing on the future. Railroad officials are busy developing plans to grow ridership and revenue, determining how and where to invest capital funds and working with freight-rail partners to improve congestion- related on-time performance issues. The agenda might sound simple, but for a railroad whose very existence has constantly been called into question, looking ahead is a big deal.

"There are a lot of great things that are happening and have happened," said Amtrak President and Chief Executive Office Alex Kummant during a mid-May interview at the railroad's Washington, D.C. headquarters. "We're really looking forward to the coming years and to a decade of growth going forward."

One-Track Mind

But it wasn't so long ago that looking a decade ahead — or even a year ahead, for that matter — was far from officials' minds. They were too busy trying to keep the railroad running from day to day.

Following years of debate over whether Amtrak could — or should — become self supporting, Congress in 1997 passed the Amtrak Reform and Accountability Act, which mandated that the railroad achieve operational self-sufficiency within five years. The act also created the Amtrak Reform Council, an 11-member committee charged with making recommendations to Amtrak to help the railroad reach self sufficiency. If the council found that Amtrak couldn't become self sufficient by Dec. 2, 2002, the committee would have to submit to Congress a plan for a restructured national passenger-rail system; Amtrak officials would have to submit a plan for the railroad's liquidation.

Under former Amtrak President George Warrington, who held the top post from 1998 to 2002, the railroad worked to reach the self-sufficiency goal by expanding service in hopes of generating more revenue. But the plan had the opposite effect — the rise in costs further exacerbated Amtrak's financial woes.

Amtrak's financial issues came to a head in the early 2000s, as the railroad's expenses continued to grow faster than revenue and debt exploded from $1.7 billion in 1997 to $4.6 billion in 2001. In summer 2001, the railroad mortgaged New York's Penn Station so it would have enough funds to make ends meet through the fiscal year, which ended Sept. 30. Then in November 2001, the Amtrak Reform Council announced that the railroad would not be self sufficient by the December 2002 deadline.

After Warrington resigned in March 2002, rail veteran David Gunn came out of retirement to take on the Amtrak challenge. By June, the railroad had depleted its $521 million FY2002 federal subsidy; Gunn said Amtrak would have to shut down operations by the Fourth of July if it didn't obtain additional funding.

Just before the holiday, Amtrak received a $100 million loan through the Railroad Rehabilitation and Improvement Financing program — typically reserved for freight-rail infrastructure projects — which averted a shutdown. Congress then approved an additional $200 million for Amtrak to make it through the fiscal year.

But Gunn made it clear the railroad wouldn't be begging for any more money under his watch. He streamlined management, cut hundreds of jobs and trimmed expenses. He also told Congress that Amtrak wouldn't survive if it received much less than the $1.2 billion requested in FY2003.

Amtrak ended up receiving just over $1 billion in FY2003 and Congress deferred repayment of the loan the railroad received the previous year. The result? Amtrak ended the fiscal year on budget for the first time in almost a decade. That same year, Amtrak implemented a five-year strategic plan to repair infrastructure and rolling stock. And, the railroad posted record ridership of more than 24 million passengers.

... and the drama continues

But the improvements did little to squelch the Amtrak drama. The Bush Administration continued to call for Amtrak reform, going so far in early 2005 as to propose zero funding for the railroad in FY2006. In November 2005, the Government Accountability Office issued a report stating the railroad needed to strengthen its basic business procedures in order to achieve financial stability and meet future operating challenges. And just a few days after that, Amtrak's board fired Gunn.

Things have quieted considerably since Gunn, who was never afraid to speak his mind, left the railroad. But Amtrak officials point to FY2003, the beginning of Gunn's tenure, as the turning point for the railroad, which operationally and financially has come a long way during the past five years. Amtrak has invested its increased annual appropriations wisely, officials believe.

In FY2006, ridership hit an all-time-high 24.4 million passengers (after data was adjusted for Amtrak's 2005 elimination of its Philadelphia-to-New York "Clocker" service). And the railroad's on track for another record-breaking year in FY2007. Through May, Amtrak's ridership was up by about 1 million passengers, or 5.5 percent, compared with FY2006's October-to-May period. Ticket revenue also hit a record high in FY2006 at almost $1.4 billion.

And on the Amtrak-owned Northeast Corridor, the railroad's busiest line, Amtrak has invested millions during the past four years to improve track, and upgrade signals and catenary power. As a result, on-time performance is up (reaching about 90 percent for the Acela high-speed service) and delays are down.

Not coincidentally, the turnaround corresponds with a steady flow of federal funding. Amtrak received federal appropriations of $1.2 billion in FY2004 and FY2005, and $1.3 billion in FY2006 and FY2007.

Why the consistent flow of federal funds?

"As our credibility improves with Congress, we know there's a certain funding level everyone's going to agree to," says Amtrak Senior Vice President of Operations William Crosbie. "As we invest in the track infrastructure, we're starting to see the benefits. It links directly with federal funding ... it's been consistent and that's what we've been telling people all along. We didn't squander the money; it went into the infrastructure."

Promising Proposals

Officials hope they can continue to invest in infrastructure projects in the coming years. Amtrak has requested $1.5 billion for FY2008 and, as of press time, the House had approved $1.4 billion for the railroad; the Senate was expected to consider the Senate Appropriations Committee proposal, which included $1.37 billion for Amtrak, plus $100 million for state matching grants.

"We share our five-year plan with everyone, so there's no real surprise," says Crosbie. "[Congress] knows if they give us a little more this year, the plan gets pushed forward. If they give us a little less, it pushes it out."

And the longer Amtrak continues to receive consistent funding, the longer Amtrak officials can continue to focus their efforts and resources on running the railroad.

"Much of what we're doing here today is about basic execution," says Kummant. "It's about productivity, product quality and good management from top to bottom."

Management is something Amtrak can focus on even more nowadays. Kummant's settled into his role as president and CEO, a position he assumed last September from former Amtrak Chief Engineer David Hughes, who held the job on an interim basis for almost a year. Since taking over, Kummant's crafted his own management team — executives he describes as "nuts and bolts people who will pack a lunchbox and come to work and roll up their sleeves."

Among those Kummant's brought on board: Chief Financial Officer William Campbell; VP of Strategic Partnerships and Business Development Anne Witt; VP, General Counsel and Corporate Secretary Eleanor Acheson; VP of Planning and Analysis Roy Johanson; VP and Chief Risk Officer James McDonnell; and Chief Information Officer Ed Trainor.

Kummant also retained several execs, including Crosbie, Chief Mechanical Officer Vincent Nesci, VP of Labor Relations Joseph Bress and VP of Government Affairs Joe McHugh.

As for Kummant himself, the 46-year-old Ohio native began his professional career in 1982 as an engineer for Standard Oil Co. Following stints at the Carnegie Group Inc. and The Timken Co., Kummant in 1992 joined Emerson Electric as a strategic planner. While at Emerson, he worked for Ike Evans, who joined Union Pacific Railroad as president and CEO in 1998 and recruited Kummant to the Class I the following year. During a four-year stint at UP, Kummant held various executive positions, including VP and general manager responsible for industrial products, VP of premium operations and regional VP.

After leaving UP in 2003, Kummant was "a little bit in a state of flux," he says. In a matter of three years, he served as president of road construction equipment manufacturer BOMAG, EVP and chief marketing officer for mining and excavation equipment manufacturer Komatsu America Corp., and VP and GM of the Controls America division of Invensys Controls.

Kummant's background initially raised a few eyebrows in Amtrak circles.

"People aren't used to someone having diverse backgrounds like that, but my feeling about Kummant is that those various jobs might be very important experience for him," says Gil Carmichael, former chairman of the Amtrak Reform Council. "Being president of Amtrak is one big, tough job."

And almost a year into the job, Carmichael believes Kummant's proven himself to be a worthy leader in a position that requires a combination of management, administrative and political skills.

"A year ago, some people couldn't believe he'd been chosen as president and today they are aware they misjudged him," he says.

Sense Of Style

Only time will tell how Kummant — who's as straightforward but more circumspect than his predecessor — will handle the duties that come with running the nation's intercity passenger-rail system.

"I don't believe in table-pounding. I believe in putting a strong team in place and then giving them the freedom to do their jobs," says Kummant. "I believe in a strong sense of urgency, a strong sense of mission and bringing intellectual content to the work. I don't think you can sustain complex businesses on emotion and cheerleading."

Kummant will rely on his team, as well as his own management skills, to help the railroad overcome several upcoming challenges while continuing to post progress during the decade of growth.

Near the top of the priority list: resolving some "substantial" labor issues, Kummant says. Many of the railroad's labor contracts expired in 1999 or 2000, and Amtrak currently is in negotiations with 12 unions, including the Transportation Communications Union (TCU), Transport Workers Union, United Transportation Union, International Brotherhood of Electrical Workers and Brotherhood of Maintenance of Way Employes.

Last month, the Amtrak Police Department ratified an agreement with the Fraternal Order of Police and the railroad reached a tentative agreement with the Brotherhood of Locomotive Engineers and Trainmen covering 1,300 locomotive engineers.

Amtrak officials hope to resolve additional contracts in the coming months — hopefully before a union strikes. In a June 7 letter to Kummant, TCU International President Robert Scardelletti said Amtrak "has not budged from its demand for radical work rule concessions" and that the union will not "voluntarily agree to a contract that does not fairly address retroactive pay." The union threatened to strike if an agreement is not reached soon. Amtrak declined to comment on the letter. However, Kummant says there are "constructive conversations" taking place between Amtrak and the union.

"Notwithstanding some of the public rhetoric, I think there's a lot of progress being made," he says.

Class I Headaches

Amtrak's also making progress with its Class I host railroads, whose capacity constraints are causing on-time performance problems for the passenger railroad. As of mid-May, on-time performance for Amtrak's long-distance routes was only about 40 percent, well below the railroad's goal of 70 percent. However, that's actually quite an improvement from the same 2006 period, when on-time performance was only about 24 percent, says Crosbie.

Amtrak officials cite the railroad's renewed efforts to work with Class Is on transit times as the primary performance driver. Crosbie has personally met with Class I chief operating officers to develop action plans to improve on-time performance. As a result, Amtrak has added an hour to the schedule for the Auto Train, which runs over CSX Transportation tracks, but in return Amtrak will have more dispatching priority. And in June, Amtrak and UP announced they reached an agreement under which UP will limit slow order delays caused by trackwork and track conditions on several routes.

"I think the freight railroads have to understand and are understanding the urgency and public nature of this, particularly as passenger rail becomes more visible," says Kummant.

And, of course, obtaining adequate funding to meet operational and capital needs from year to year is an ongoing challenge. Amtrak might have received more adequate funding in recent years, but it's something officials need to lobby for on an annual basis — and getting Congress to sign off on the railroad's requested amount (or close to it) is never a guarantee.

Just last month, Rep. Michele Bachmann (R-Minn.) introduced an amendment proposing to transfer more than $100,000 in Amtrak operating grants to the Housing and Urban Development Homeless Assistance program. Rep. Jeff Flake (R-Ariz.) proposed two amendments — one that would cut $475 million in Amtrak operating funds and another that would reduce the railroad's capital and debt service grants by $425 million. In addition, Rep. Pete Sessions (R-Texas) proposed an amendment to eliminate funding for Amtrak's Sunset Limited route.

However, none of the amendments had attracted co-sponsors and none were passed by the House.

That could be because Amtrak has one big factor working in its favor these days: With gas prices spiking to record levels, congestion in many cities becoming unbearable and short-distance air travel options diminishing, intercity passenger rail is becoming a much more attractive alternative. And that will be key in helping Amtrak meet its long-term ridership and service expansion goals.

"For us, the next level is to be able to talk about significant growth, and that growth will be in the 100- to 500-mile corridors and it will be state oriented," says Kummant.

And he means significant growth. Kummant believes Amtrak can grow ridership by 50 percent in the next 10 to 15 years, provided it maintains annual growth of 3 percent to 5 percent.

Focusing on short-distance corridors between city pairs will be key. Kummant's top examples? Washington, D.C. to Richmond, Va.; Richmond to Charlotte, N.C.; Atlanta to various cities in Florida; Houston to Dallas to Fort Worth, Texas; Chicago to Milwaukee; and Chicago to St. Louis.

"These are major population centers and they're all growing and they all have tremendous demand in travel," he says. "That's precisely the target we want to hit and we can have a lot of growth in the next 10 years simply by adding frequencies to those existing corridors."

An Incremental Approach

The railroad's already working with several state DOTs to increase service. Last fall, the state of Illinois more than doubled state-funded Amtrak service in the southern part of the state, adding trips between Chicago and Carbondale, Chicago and St. Louis, and Chicago and Quincy.

This fall, Amtrak expects to add a fifth round trip on the Boston-to-Portland, Maine Downeaster, and the railroad currently is working with Illinois and Wisconsin to add an eighth and ninth round trip on the Chicago-to-Milwaukee Hiawatha service.

"These aren't great leaps forward where they're going from 79 mph to 110 mph and 20 round trips," says Crosbie. "It's an incremental approach."

Getting more states to jump on the service-expansion bandwagon will be, too. Ultimately, Amtrak officials would like to see more states follow California's intercity passenger-rail program. In 1976, the state began providing financial assistance to Amtrak, and the railroad and California Department of Transportation since have partnered to expand service. Caltrans and Amtrak now operate three intercity routes throughout the state and Caltrans provides capital grants for station and track improvements, locomotives and cars.

"We're looking for partnerships with the states," says Crosbie. "States have a choice — they can build two more lanes on a highway or they can put money into rail, and I think rail is very much a viable alternative."

Getting states more involved with intercity passenger-rail expansion would be much easier if there were a federal/state capital matching program available — a concept that's been proposed in many Amtrak funding bills and that Amtrak officials support.

Last month, the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies proposed $100 million for a new grant program that would match state contributions for intercity passenger-rail operations.

Or, a capital matching program could go hand-in-hand with an Amtrak reauthorization bill. In January, Sens. Frank Lautenberg (D-N.J.) and Trent Lott (R-Miss.) introduced the Passenger Rail Investment and Improvement Act of 2007 (S. 294), a six-year bill that would provide $19.2 billion for Amtrak, including an average of $300 million in capital grants to be allocated to states annually.

"Congress is long overdue in acting on a bill requiring Amtrak to meet realistic goals in return for a funding stream," said Lott in a prepared statement. "We can't keep asking Amtrak to operate like a business while we string along the company from year to year."

Amtrak officials couldn't agree more. And Kummant, for one, believes Congress will approve multi-year Amtrak funding during the next few years.

So does Carmichael.

"The cards are falling in Amtrak's favor right now. The country's got to have it, and we're waking up to that fact," he says. "I would say in the next couple of years, Congress will have a new Amtrak plan, reauthorization will finally occur and very possibly a whole new concept for intercity passenger rail will occur. The politicians are beginning to study and understand intercity passenger trains and the role they play."

Role Searching

That's not to say Amtrak won't encounter some more turbulence in the coming years. Questions surrounding intercity passenger rail's role in the nation's transportation policy and what the country wants and/or needs from its intercity passenger-rail program can't go unanswered forever.

"We live at this strange intersection of private enterprise and public policy, so at some point there's still a fundamental public policy question of, 'Does one want to drive ridership or does one want to generate more margin?'" says Kummant. "And I think that's a legitimate debate and a legitimate dialogue to be had, particularly when one looks at ... everything that rail can bring relative to other [transportation] modes today."

In the meantime, Amtrak will continue to cruise along the progress path. And when the day comes for the rail policy debate to be had, Amtrak officials hope they'll be standing on solid ground.

"I think at the end of the day, everybody wants to see us succeed," says Kummant. "I don't think anybody could rationally make the argument, 'You guys should fold up your tent and go away,' given the transportation profile we have today with 25 million-plus riders."



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