HomeMy WebLinkAboutMINUTES - 07202004 - C.16 TO: Board of Supervisors
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FROM: Transportation, Water and Infrastructure Committee Co to
(Supervisor Millie Greenberg, Chair)
CountyDATE: July 12, 20304 e j
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SUBJECT: Support for Amtrak's federal funding request for Federal Fiscal Year 200/5
SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
ADOPT a resolution supporting Amtrak's $1.8 billion funding request for Federal FY 2005
as recommended by the Transportation, Water and Infrastructure Committee.
FISCAL IMPACT
NONE to the County.
BACKGROUND/REASONS FOR RECOMMENDATIONS
Amtrak seeks support from local governments and other interested parties for its funding
request for the Federal Fiscal Year 2005 budget. Amtrak has requested $1.8 billion, an
amount Amtrak believes is necessary to keep its trains and facilities in working order and
perform necessary maintenance and rehabilitation of aging facilities around the country.
Amtrak requested the same amount for the current year but received only $1.2 billion,
which forced them to defer some capital projects.
The Transportation, Water and Infrastructure Committee on July 12 reviewed Amtrak's
budget request,which was brought to them at the recommendation of the County's Ad Hoc
Intercity Rail Advisory Committee. The Transportation, Water and Infrastructure
Committee recommends the Board of Supervisors support the budget request.
CONTINUED ON ATTACHMENT: X YES
RECOMMENDATION OF COUNTY ADMINISTRATOR X RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE (S): Supervisor Millie Greenberg u ervisur Gayle B. Uilkema
ACTION OF BOARD ON k S APPROVED AS RECOMMENDED 2!f��
VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS (ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN
AND ENTERED ON THE MINUTES OF THE
AYES: NOES:
ABSENT: ABSTAIN: BOARD OF SUPERVISORS ON THE DATE
SHOWN.
Contact: John Greitzer(925/335-1201)
cc: Community Development Department (CDD) ATTESTED °. V
J. Bueren, PWD N ZMEETEN, CLERK OF
S. Hoffman, CAL} E BOARD OF SUPERVISORS
Congressional delegation AND COUNTY ADMINISTRATOR
Alcalde & Fay
BY �'�'
GATransportationlTWICIBoard Orders120041TWIC Board Oder 7_20_04 Amtrak.doc
AMTRAK BUDGET REQUEST FY 05
JULY 12, 2004
Page 2
BACKGROUND/REASONS FOR RECOMMENDATIONS (Continued)
Contra Costa County is served by 17 passenger trains each day, all involving Amtrak.
They are the Capitol Corridor(11 round trips daily),the San Joaquin(four round trips each
day), the Coast Starlight from Los Angeles to Seattle (once a day), and the California
Zephyr from the Bay Area to Chicago (once a day).
lmgacts of Amtrak budget request on Contra Costa passenger service
The Capitol Corridor and San Joaquin trains in particular help reduce the number of
vehicles that would otherwise be on Interstate 80 and State Route 4 each day. Therefore
there could be significant traffic impacts if Amtrak receives substantially less funding than it
is requesting and has to reduce its services. The following information provided by Amtrak
outlines the possible negative impacts on Contra Costa intercity rail service.
Subsidy impacts far Capitols and San Joaguins. Amtrak jointly shares in funding the
operating loss of the Capitols and the San Joaquins with the State of California. Reduced
funding for Amtrak may reduce its ability to help cover the operating losses for these
routes. This in turn would increase the State's portion of the operating subsidy,which the
state may not be able to absorb. Should this occur, service cuts may be needed.
lmpacts on long-distance trains. Amtrak fully funds the long-distance trains that serve
Martinez-the Coast Starlight and the California Zephyr. Reduced funding may result in a
loss of service or deterioration of service. Staffing on the trains, train servicing and
customer amenities could be reduced.
Operation of Amtrak's Oakland Maintenance Facility. Capital funding included in the FY05
request will go to the Oakland Maintenance facility,where the Capitols, San Joaquins,and
the California Zephyr trains all are serviced. Decreased funding may negatively affect
Amtrak's ability to service trains at the Oakland Maintenance Facility. The FY05 request
includes$350,000 for operations of the facility, and $10 million for expansion of the facility
to keep up with maintenance needs.
Impacts on other rail capital proiects. There are a number of state- and freight-funded
capital projects in the works that increase the system's capacity and improve reliability near
or in Contra Costa County that will affect the Amtrak services. While Amtrak does not plan
to contribute monetarily to all of these projects, it often provides services that include
actually doing the work, such as acting as project manager, for example. Any shortfall in
funding that affects Amtrak's ability to perform these functions could in turn affect service
levels in Centra Costa County.
Impacts on marketing. Reduced funding may result in a cut to Amtrak's marketing and
sales budget,which may affect ridership and revenue. Benefits to Contra Costa County of
Amtrak ridership include taking cars off of the roads and bringing dollars into downtown
centers at Martinez and Richmond.
Attached is the draft resolution of support, followed by the full text of Amtrak's funding
request to Congress for Federal Fiscal Year 2005, which begins on October 1, 2004.
THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA
Adopted this Resolution on July 20, 2004 by the following vote:
,AYE$:SUERVISORS GIOIA, UILKEMA, GREENBERG, BESAULNIER AND y
1
GLOVER ,++�
NOES: NONE
ABSENT: NONE
ABSTAIN: NONE
RESOLUTION NO. 20041399
SUBJECT:
SUPPORT FOR AMTRAK'S BUDGET REQUEST }
FOR FEDERAL FISCAL YEAR 2005 )
WHEREAS, Contra Costa County has some of the Bay Area's most congested
highways in Interstate 80, Interstate 680 and State Route 4; and
WHEREAS, the Contra Costa County Board of Supervisors supports the development
and expansion of alternative modes of travel wherever feasible to provide relief from
highway congestion and vehicle-borne emissions; and
WHEREAS, Amtrak provides passenger rail services with 17 daily round trips serving
Contra Costa County, through its own routes and its partnership with state rail services
and the Capitol Corridor Joint Powers Authority; and
WHEREAS, these passenger rail services provide an important alternative to the
automobile on the County's congested freeways; and
WHEREAS, Amtrak has survived on less-than-adequate funding in recent years to
provide the necessary degree of service, maintenance and rehabilitation of its facilities;
and
WHEREAS, Amtrak has had to defer numerous capital improvement projects in recent
years due to inadequate funding levels; and
WHEREAS, Contra Costa jurisdictions have made substantial investments in their
passenger rail facilities through construction of the Martinez Intermodal Station,
improvements to the Richmond and Antioch stations, and a planned new station in
Hercules;
NOW, THEREFORE, BE IT RESOLVED that the Contra Costa County Board of
Supervisors supports Amtrak's request for$1.8 billion in funding for Federal Fiscal Year
2005.
i hereby certify that this is a true and correct
copy of an action taken and entered on the
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FEBRUARY 10 , 2004
FY05 Grant and Legislative request
I. Introduction........................................................................................................................1
11. FYO5 Grant Request.........................................................................................................6
111. Legislative Issues ............................................................................................................8
Copies of this report are available online at www.amtrak.com.
Cover photos: The top photo shows Amtrak's track laying machine in action replacing wood ties
with new concrete ties along the Northeast Corridor. The bottom photo shows workers overhauling
rail cars at the Amtrak heavy maintenance facility in Beech Grove, Indiana.
February 10,2004 —Page I
FY05 Grant and l=egislative Request
I. Introduction
Amtrak enters 2004 in its strangest financial position in years. The Corporation
made progress in many areas during a successful 2003 and continued to
implement corporate reforms that have improved fiscal controls, led to more
efficient use of resources, and stabilized operations. In addition, Amtrak initiated a
major capital program and transported a record 24 million passengers in 2003.
Amtrak expects to build upon this success in 2004, which should be the second
year in a row without a financial crisis, providing much needed stability to the
company, its customers, and its employees. This will be a significant change from
2002 when years of excess borrowing and deferred maintenance finally began to
catch up with the railroad. While progress has been made in the past 18 months,
there is much yet to do and Amtrak will continue to operate on the edge of a
precipice until Congress develops a clear national rail policy with an adequate
long-term funding mechanism.
Continued progress depends upon full funding of Amtrak's FY05 grant request of
$1.798 billion. The first section of this document provides background on the
progress Amtrak has made over the past 18 months. The second section outlines
the FY05 grant request and the implications of the federal funding shortfall in
FY04. Finally, the third section summarizes the legislative issues facing the
railroad and the need for a secure source of federal capital funding for rail.
Background
Amtrak's brush with insolvency in 2001 and 2002 was a turning point for the
Corporation in many respects. The downward spiral had been hastened in 1998
when Amtrak was mandated to achieve self-sufficiency at the same time that its
federal appropriation was reduced. The result was excessive borrowing, including
the mortgaging of New York's Penn Station in order to make payroll, deferred
maintenance in plant and equipment, and a series of decisions aimed at the short-
term goal of self-sufficiency, without regard for the long-term consequences to the
railroad's state-of-good-repair. Fiscal controls collapsed and the management
structure suffered from confused lines of responsibility and a lack of accountability.
By the summer of 2002, the problems at Amtrak culminated in a near shutdown. A
new management team was brought in and, with the support of its Board of
Directors, developed a plan to get the company's finances under control, opened
its books, reformed its management structure, and instituted a back-to-basics
approach to running the railroad. Amtrak's new leadership has been candid about
the challenges facing the Corporation and the poor state of the railroad's finances,
equipment, and infrastructure.
February 10, 2004 —Page 1
FY05 Grant and Legislative Request
Management Reforms
Over the past 18 months Amtrak has returned to a traditional, functional railroad
organization and abolished the strategic business units, which now allows the
company to hold its managers accountable for clearly defined performance goals.
In this process, duplicate layers of management have been eliminated and the
overall number of active employees has been reduced by 3,417, from 23,393 in
May 2002 to 19,976 at the end of 2003. The goal is to create an organization that
can focus on its core mission -..day-to-day operations and maintenance of the
nation's passenger rail system.
Financial Reforms
The first priority of the new management team was to bring the finances under
control, including a return to basic Generally Accepted Accounting Principles
(GAAP). In order to control spending and eliminate waste, Amtrak implemented
significant financial reforms over the past 18 months. Four examples of these
reforms include,
- Strengthened internal budget controls including-- (a) zero-based budgeting
complete with monthly performance reports containing income statements,
balance sheets, and departmental reports all using GAAP and available
within weeks of the end of each month, and (b) detailed capital budgeting
by account and function at the project level along with substantial
improvements to the recording and classification of capital expenditures.
- Streamlined and restructured the Finance department to facilitate;the
assignment of responsibility and accountability along functional lines.
- Restructured more than 50 insurance policies with inconsistent coverage
and deductibles, established guidelines and eliminated duplicative and
unnecessary insurance policies, saving approximately$7.2 million per year.
- Implemented strict headcount controls with no new hires permitted unless
authorized and approved within the budget.
February 10, 2004 —Page 2
FY05 Grant and Legislative Request
Sank to Basics Approach
The new management, along with the Board of Directors, has adopted a back-to-
basics approach over the past 18 months that focused on returning Amtrak's
equipment and infrastructure to a state-of-good-repair, stabilizing the company
after years of crisis, and improving the reliability of existing operations. Amtrak
has suspended all plans to expand service if the result would be an increase in the
operating deficit and has, in a couple of instances, reduced and consolidated
existing service. For example, Amtrak decided to exit certain aspects of the mail
and express business in an effort to focus on its basic mission of providing safe,
reliable passenger service. This decision allowed Amtrak to reduce trip times on
long-distance trains, remove 30 road locomotives and nine switch engines from
service, improve on-time performance, and reduce fuel and maintenance costs. In
addition, this decision allowed Amtrak to eliminate the poorly performing Kentucky
Cardinal route and to truncate the Pennsylvanian route at Pittsburgh, saving 500
miles of trip length and allowing the train to run at more convenient times. The
result has been a doubling of ridership on that route between New York and
Pittsburgh.
Amtrak has also refocused its efforts to implement a comprehensive capital
program designed to bring its plant and equipment to a state-ofi good-repair and
improve the reliability of train service. Nearly 60 percent of Amtrak's basic funding
needs for FY05 represents critically important capital investments of lasting value
to the railroad.' By focusing its resources on the state-of=good-repair goal, Amtrak
was able to implement this major initiative at the same time that it reduced the
overall size of its workforce. The capital program is described in detail in the
railroad's five-year strategic plan.
Five-Yeah Strategic Plan
Last April, after a thorough assessment of its equipment and infrastructure and
with the approval of its Board of Directors,Amtrak released its Five-Year Strategic
Plan. The plan is based on a detailed, project-by-project inventory of requirements
to return plant and equipment to a state-ot good-repair. Successful
implementation will brine significant improvement to Amtrak's operational reliability
and efficiency. The goal is to move resources from unplanned breakdown repair
to production lines where greater efficiencies in both material and personnel can
be achieved. With sufficient federal funding to fully implement the five-year plan,
all of Amtrak's fleet and much of its infrastructure will be in a state-ofgood-repair
by the end of FY08.
A key element of the five-year pian is a capital program detailing infrastructure
improvements, including the installation of 428,000 concrete ties supporting 162
miles of track, replacement of 270 miles of rail, refurbishment of 200 miles of
' Excluding loan repayment, working capital and debt service, the $791 million capital grant request
represents 58 percent of the overall grant request. (See section 11, FY05 Grant Request),
February 10,2004—Page 3
FY05 grant and Legislative Request
catenary (including the replacement of some catenary poles over 90 years old),
replacement of 284 miles of ballast, which supports ties and rails, and the
replacement of 40,000 switch ties and 26 interlockings along the Northeast
Corridor. The plan also includes the replacement of outdated equipment at
dispatching centers in Boston, Philadelphia, and New York, replacement of seven
signal houses and updating 30 miles of electric cable with fiber optic cable. Other
aspects of the program include the replacement of two movable bridge spans in
Connecticut (over the Thames and Niantic rivers), improvements to eight other
moveable bridges, and completion of a new maintenance facility in Oakland, CA
(scheduled for Fall 2004).
The strategic plan also details a four-part fleet rehabilitation program emphasizing
the retirement of very old cars, the repair of wreck-damaged cars, overhauls to
achieve intended asset lifespan, and remanufacturing to extend lifespan beyond
original design. High out-of-service car counts reduces revenue by limiting the
railroad's ability to add cars to sold-out trains. As an example, Amtrak has been
unable to supply a sleeper car for the overnight Boston-Washington Federal
service since October due to chronic single-level sleeper car shortages.
Accumulated deferred maintenance also increases operating and maintenance
casts and reduces reliability as a result of more frequent en-route equipment
failures. With the implementation of the five-year plan, Amtrak will substantially
increase the reliability and availability of passenger cars and locomotives and
return the fleet to regular maintenance cycles.
Amtrak's backlog of equipment and infrastructure repairs has a real impact on
daily operations and it is essential that the work specified in the five-year plan be
completed. Deferred maintenance has already led to mounting reliability
problems, some slower trip times on the Northeast Corridor, and costly service
failures across the national system. The result is late trains, slower train
schedules, and reduced revenues.
Amtrak will release an update of the five-year plan for the period from FY05
through FY09 in the spring. The new plan will continue to focus on returning the
existing system to a state-of-good-repair and improving reliability. Amtrak expects
to continue to make progress on the plan despite receiving a lower funding amount
than requested for FY04. As a result of funding shortfalls, not all activities planned
for FY04 will be undertaken and the result will regrettably be a deferral of these
projects into future years.
Progress in 2003
Despite many challenges, FY03 was an excellent year for Amtrak. Ridership
surpassed a record 24 million passengers and the railroad finished the year with a
$147.7 million invested cash balance despite lower-than-forecasted revenues.
This surplus was in part the result of tight financial controls that led to a reduction
in core expenses (less depreciation) of$103 million below budget.
February 10, 2004 —Page 4
FY05 Grant and Legislative Request
Most important, Amtrak firefly began the process of ramping up a capital program
in order to work through the backlog of capital projects that had accumulated over
the years. Among the notable achievements, the Northeast Corridor Track Laying
System was deployed in May for the first time since 1999. Between May and
December, 56 track miles were renewed with 147,600 concrete ties, replacing old
and worn wooden ties. Table 1 highlights some of the infrastructure work
completed in calendar year 2003.
Table 1. 2003 Infrastructure Progress
Concrete ties installed 147,600
Wood ties replaced 45,800
Continuous welded track installed 21.6 track miles
Undercutting 29.0 track miles
Turnouts installed 18
Bridges re-timbered 22 bridges
Signal cable replaced 33 miles
Electric catenary hardware renewed 37 miles
Bridges converted to ballasted deck 14
Significant progress was also made on equipment. Twenty-one wrecked and
damaged Amfleet and Superliner cars budgeted for repairs in 2003 were repaired
and returned to revenge service. Long-overdue repairs and overhauls were
completed or initiated on hundreds of other cars and locomotives as well. Table 2
highlights progress on equipment in calendar year 2003.
Table 2. 2003 Equipment Progress
Wrecks rebuilt 21
Food service cars remanufactured 23
Total car heavy overhauls 29
AEK7 (electric engines) rebuilt 5
Diesel locomotive heavy overhauls 146
The capital work accomplished in 2003 was an important first step in the multi-year
process of addressing the backlog of long-deferred capital projects. However,
much work remains and Amtrak will continue to ramp up its capital program in
2004 and 2005 in order to bring the system to a state-of-good-repair and enhance
the reliability of operations.
February 10,2004 —Page 5
FY05 Grant and Legislative Request
11. FY05 Graaf Request
Amtrak's FY05 grant request is $1.798 billion. The request includes.
- Capital funding of$791 million;
- Operating funding of$570 million, a decline from FY04 of 2 percent;
- Debt service (principal and interest) of$262 million; and
- Working capital and loan repayment of$175 million.
Table 3 summarizes the request by category.
Table 3. Amtrak's FY05 Grant Request
($ millions)
Capital
Infrastructure 352
Fleet 349
Subtcstal Ca�ital 791
t� eratin 57fl
Debt Service mµ � 262
Other
DOT Loan Repayment 100
Workin Ca ital 75
Subtotal Other 175
Total Federal Grant 1,798
(a)Environmental oompliance,information technology,real
estate,procurement and safety
Context for Request
Since 1997, federal funding for Amtrak has averaged about $1.1 billion per year, a
level insufficient to keep up with the capital needs of the railroad.2 Moreover, the
funding levels have swung substantially from year to year, with appropriation
amounts often uncertain until after the fiscal years have begun— making planning
for multi-year capital projects extremely challenging.
2 Federal funding levels from Appropriations, including FY02 Supplementais, and Taxpayer Relief
Act funds, averaged $1.09 billion In nominal dollars.
February 10, 2004 —Page 6
FY05 Grant and Legislative Request
Amtrak's FY04 appropriation of$1.218 billion is substantially below the $1.812
billion requested. The Corporation expects to make it through the year without a
financial crisis, but will have to defer some capital projects. The ability to get
through FY04 on the lower funding level is possible only because: (1) the company
carried forward $147.7 million in cash from FY03 as well as$48.6 million in capital
grant funds, resulting in a total of about$1.4 billion available for operating and
capital; and, (2) materials, labor and procurement constraints have slowed the
start of some major capital work.
By FY05, Amtrak expects that initial delays in hiring and procurement of design
services and materials will be resolved. The pace of capital work is projected to
increase substantially as; (1) production work, such as rolling stock overhauls and
rail replacement, ramps-up; and, (2) major projects move from procurement and
design to construction.
The FY05 grant request of$1.798 is slightly higher than the original FY05 amount
identified in the five-year plan. The increase reflects the deferral of some
expenditures from FY04, Offset by refinements over the past year to cost estimates
and project schedules.3 The updated Strategic Plan to be released this spring will
recommend some additional out-year funding needs above le\els identified in last
year's version to further address the FY04 federal funding shortfall.
3 Project budget refinements reflect lower unit casts from productivity gains as well as scheduling
adjustments designed to minimize service disruption from work outages can Amtrak-owned
infrastructure.
February 10,2004 —Page 7
FY05 Gant and Legislative Request
Ill. Legislative issues
Unlike railroads, our nation's other primary modes of transportation— highways,
transit, and aviation— all have special budgetary protections with secure long-term
sources of federal funding. State policy-makers cannot make optimal decisions
about transportation investments because rail is not on a comparable footing with
other modes of transportation. If a state chooses to pursue a highway or transit
project, there is generally federal funding available at an 80-20 federal-state
matching ratio. However, if a state wants to invest in a rail project, even if it
provides greater benefits and efficiencies at lower costs than an alternative
highway project, there is no federal source of matching funds. As a result, our
nation has invested heavily to build up the infrastructure of other modes of
transportation, while neglecting passenger rail where it makes the most sense.
With highway and airport congestion projected to continue to worsen under any
funding scenario, and with rising demand for rail alternatives, many cities and
states have recognized the potential for rail to provide a viable and complementary
transportation option for business as well as leisure travelers. To this end, many
states are in various stages of planning and implementing upgrades to selected
rail corridors in order to improve passenger rail service and make it a competitive
transportation option. In many cases, the cost of upgrading rail infrastructure is
less than adding new highway or runway capacity, with shorter project-delivery
times and with fewer adverse environmental consequences. Investment in rail
also helps establish multiple intercity travel options, with positive national security
and economic implications.
Unfortunately, many worthwhile passenger rail projects are stalled due to the lack
of a national rail policy and the absence of any established federal matching fund
program for state rail corridor development. While this grant request does not
contain specific funds for new corridor development initiatives, Amtrak is currently
evaluating state proposals to develop higher-speed rail corridors using multiple
criteria, including state/local commitment, host railroad support, and market
viability. Once these evaluations are complete, Amtrak will issue a report on its
initial findings. The Administration and several Members of Congress have
advocated a new federal/state capital funding partnership and Amtrak hopes that
this study will facilitate and encourage such a relationship. Amtrak believes that a
secure source of federal funding for passenger rail is the only way that rail will
attain its full potential to spur economic growth, increase the efficiency of our
transportation systems, and conserve energy.
Amtrak's authorization expired in 2002 and several reauthorization bills are
pending in Congress. How and when this will be resolved is unclear, but Amtrak
will continue to work with Congress and the Administration as these measures are
considered. In the meantime, Amtrak will continue to rebuild the railroad and
improve operations because this has to be done regardless of what is eventually
decided by lawmakers.
February 10, 2004—Page 8
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