Regrettably, Stephen Gardner’s year-end response to the many op-eds appearing this past year in Railway Age (“Amtrak A ‘Failure’? Hardly. Here’s How We See It,” Dec. 20) fails to explicitly answer the factual issues previously raised here. Instead, his retort to the decisive points raised in op-ed and editorial pieces this year reads very hollow, ignoring the salient issues and making excuses for what could not be achieved. Throwing questionable data around these issues prevents concise, acceptable answers.
Frankly, I would expect anybody so positioned at the corporate level and nicely ensconced with the Amtrak Board—obviously so eagerly anticipating the ultimate promotion to CEO—to be fully versed with the facts and how decisions were made, and not rely upon data as an artful subterfuge to obfuscate the problems. From my own perspective, my expressed concerns remain unresolved and unsettling, given how significant the impact continues to be for Amtrak to prove it has the sustainability to exist after stumbling throughout its existence.
To facilitate digesting my concerns and the failure by Amtrak to properly address them, I have broken these issues down by categories that ideally a hands-on Board would certainly have included in its agenda to hold a senior operations officer accountable, including:
PREFACE (to set the table)
1) In respect to Gardner’s participation as a congressional staffer in designing the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), can he explain who in Congress triggered this legislation, why, and for what reason(s)? Or, was it prompted, if not even prepared, by Amtrak?
2) When did Gardner secure his executive position at Amtrak? While drafting PRIIA? If not, how soon after the legislation passed?
3) Was Congress ever informed by Amtrak of its intention to create a full cost allocation methodology that was non-GAAP (Generally Acceptable Accounting Principles), with the clear purpose of diverting those excess funds to subsidize the Northeast Corridor(NEC)?
4) What was the rationale to provide every-30 minute-bi-directional schedules on the NEC at no cost to those states along the NEC, yet, charge fully allocated costs to all state-supported corridors outside the NEC?
1) What is the rationale that Gardner supports for perpetuating an accounting system that throws out so much data that determines if a train/route lives or dies, when it is well documented how Amtrak has overtly avoided adhering to the common accounting doctrine known as GAAP? How does a company make correct decisions when the baseline data is incorrect? Is that negligent and deceitful to its stakeholders?
2) Does Gardner acknowledge the purpose was simply to put “lipstick on a pig” to disguise the deficits of the NEC by inappropriately ascribing NEC infrastructure and corporate overhead costs to the long-distance and state-supported sectors?
3) Is Gardner aware that by accepting the presumption for mis-allocating such non-related costs, why does Amtrak continue to subvert and negate the long-distance sector when even Wick Moorman realized how dependent the NEC was on dumping out its costs? In his very brief role at Amtrak, Moorman stated, “The budget calls for eliminating money-losing long-distance lines on Amtrak’s national network, with funding for that line item to be cut from $1.2 billion to $525 million. While the budget tells Amtrak to focus its efforts on the Northeast Corridor and other routes around the country that are supported by state transportation departments, eliminating the long-distance routes will increase costs for those routes. That’s because Amtrak allocates costs for shared services such as reservations and the legal department among all its lines, and more of those costs would be shifted onto the Northeast Corridor without riders on the long-distance routes sharing the load.” (THE RECORD (NJ) 06/22/17)
4) Given New York Governor Cuomo’s recent rebuke of Amtrak managing the Hudson River tunnels, and shedding light on his concern for Amtrak managing the overall Gateway Project, what assurance can Gardner provide that the proformas by Amtrak to create the Gateway Project are correct? Frankly, given the extent of such projected costs, beyond an external forensic audit, how will the taxpayers not to be ripped off from a significant “plug” in such budgets that benefit the clout-heavy New Jersey and New York politicos, let alone certain Amtrak Board members from that part of the Northeast? Indeed, is there an arrangement between Amtrak’s Board, specifically its Chair, Anthony Coscia, and New York Senator Chuck Schumer, for them to benefit from the significant dollars required to fund Gateway? How much of Gateway is merely a subterfuge to throw off excess dollars for real estate projects for some to benefit from, e.g., Hudson Yards and Sunnyside, etc.?
5) Due to the ignoring of GAAP, and the ensuing “shell games” to manipulate costs and revenues as deigned by Amtrak, does Gardner believe Amtrak could successfully pass an external forensic audit to identify if costs, revenues and funding are properly allocated?
6) Despite ownership of the NEC transferred to Amtrak in 1976, how does Gardner explain why Amtrak failed to collect each year going forward operating fees and infrastructure depreciation costs from the many Northeastern commuter rail lines utilizing the NEC, as stipulated in PRIIA? Why did it require an act of Congress in December 2015 to start collecting these funds? What was the “wink and slap on the back” deal with Northeastern politicos to forgo collecting such fees?
7) To what extent was it known to Gardner that Amtrak’s full-cost methodology that ignored GAAP, and negated incremental costs, served to only discourage states from investing in more frequencies or expanded routes to serve inter-regional routes?
8) Does Gardner acknowledge that offering a sale on roomettes twice in the same year, including peak travel periods, indicates a serious revenue deficiency issue? Does he realize perhaps that the precipitous decline in traffic is a market reaction to Amtrak’s persistent negative PR negating the long-distance trains?
9) What is Gardner’s answer why Congress has not received a proforma to evidence the financial viability of replacing the Superliner fleet, given how much older that equipment is than the soon-to-be replaced Acelas, and how a Superliner sleeper derives more revenue than the equivalent Acela? As well, why has Amtrak elected not to retain data to support funding new Superliners, by evidencing the significant lost revenues due to unavailability of space, let alone to protect increased seasonal demands, capacity to increase frequencies, or even develop new routes?
1) Was Gardner aware, and did he approve of, the revision in Amtrak’s business model to require non-NEC states to now pay for infrastructure improvements, since Amtrak alone has defined whether or not those routes are sustainable, (e.g., Colorado, Kansas, New Mexico)?
2) To what extent was Gardner aware of, and approved, the manipulation of information over the Southwest Chief, including:
a) Reneging on Amtrak’s agreement to contribute $3 million toward the renewed infrastructure along the route in Kansas, Colorado and New Mexico?
b) Proposal to substitute bus service mid-point in the route between Dodge City and Albuquerque, realizing how quickly that would kill traffic and eliminate the route?
c) To propose the false premise that Amtrak could not operate the Southwest Chief on a track segment in New Mexico without PTC, despite knowing, and admitting later, how the FRA had given that segment a variance from requiring PTC? Indeed, what about the other routes Amtrak initially claimed it could not operate on without PTC, just to walk back later?
3) How does Gardner explain the deterioration and failure of a safety culture, epitomized by the 2015 Frankfort Jct., Pa., wreck of Northeast Regional 188, the 2016 collision with track machine at Chester, Pa.; the issue over new route training prior to wreck of a Cascades train in 2017? To what extent can Gardner accept how the damaged safety culture directly reflects upon Amtrak’s own toxic corporate culture?
4) How does Gardner account for how the lack of oversight by Amtrak failed to hold CAF to contractual terms for the significant delay in production of Viewliner II cars? Also, why did this order not include much needed lounges and coaches?
5) Given the expense of each CAF diner, how does Gardner rationalize how these cars for the most part are now stored at Hialeah, Fla., and if Amtrak intends to remove their expensive galley equipment? With a straight face, is Amtrak really expending funds to remove the galley equipment from these stored diners?
6) How does Gardner explain Amtrak’s business model that pays the Rail Passengers Association to run its customer relations program, when this smells more like Exxon contributing to the Sierra Club? (From what I learned, Graham Claytor, tired of RPA predecessor NARP hitting Amtrak in Congress and the press, elected to bring NARP inside the tent by paying a fee to conduct the customer relations).
7) If Amtrak is not merely just going through the motion of pretending to provide viable long-distance service, how does Gardner explain the totally absurd, elongated schedules for the eastbound Lake Shore Limited and Capitol Limited and the southbound City of New Orleans? Were these schedules devised to merely accommodate transferring passengers from late western trains to avoid the costs related to mis-connects? If so (what else could it be?), what happened to the concept of a transportation company developing schedules to serve passengers and induce traffic, instead of just to minimize operational costs? In that case, imagine how much Amtrak would cut costs by not running those trains.
FOOD AND BEVERAGE
1) How does Gardner explain the logic of hitting a speed bump by initiating the “Contemporary Dining Program” to the angst of sleeper passengers on the Capitol Limited and Lake Shore Limited, only after learning of the passengers’ disgust to declare an RFI for food services? Does Gardner realize that in the real business world, this action would be construed as arse backwards, given that if the RFI was properly conducted, it would come first to identify potential options, instead of Amtrak following its mantra of “fire, aim, ready”?
2) If Gardner believes that Amtrak strives toward increasing revenues and maximizing its assets, why are the LSAs (Lead Service Attendants) not trained and skilled as bartenders to craft cocktails, with the equipment and supplies? Also, why has Amtrak refused to work with beer and wine firms en route interested in offering their products as samples, to sell?
3) What is Gardner’s justification for Amtrak historically avoiding the Office of Inspector General’s recommendations and requests of Congress to cut excessive food costs, principally due to theft, waste and poor procurement?
4) Does Gardner accept the relationship that by reducing the number of SAs (Service Attendants) in the diner has prevented a faster turnaround of tables, and an inability to serve cash-paying coach passengers?
5) Does Gardner continue to subscribe to the cost manipulation between sleepers and diners to cover food services, or is it time to start charging all passengers for meals in the diner, perhaps expanding the menu from just high-priced items to offer lower-priced selections?
1) How does Gardner explain why Amtrak encouraged its best managers to take buyouts or be laid off during multiple reorganizations that only paralyzed the organization by depleting vital institutional knowledge, with the best managers replaced by those from the outside now paid top salaries to simply learn the business?
2) How does Gardner believe it is appropriate to almost exclusively focus management on cost-cutting, certainly to tie bonuses to such cuts? Does Gardner think that simply cutting is effective and healthy in an environment that should be building revenues?
3) Does Gardner believe it is ethical to “plug” the budget at the beginning of the fiscal year for management bonuses, as has been past practice? Why has there been no “clawback” of bonuses paid out to managers who failed at carrying out their positions and left?
4) Despite pathetic labor relations already on record impacting its safety culture, how does Gardner explain the parallel issues related to the Riverside (Calif.) Call Center closing after training their outsourced replacements and labor protests over Amtrak’s RFI alluding to the elimination of food/beverage positions?
5) What can Gardner point to as evidence that ghost payrolls and payroll defalcations (e.g., overtime, timecards) have been eliminated?
THE ONCE AND FUTURE CEO
As the potentate CEO, how does Gardner view alternatives to litigation by building relationships with the Class I’s to acknowledge their economic issues with Amtrak in order to improve Amtrak’s OTP and reduce costs, re: late trains, labor overtime, missed connections (e.g, costs for hotels, taxis, food, alternative transportation)?
In essence, given the above unanswered questions, does Gardner stubbornly refuse to believe that the U.S. cannot learn from the experience in Europe re: open access, franchise bids and infrastructure networks; instead, to simply continue to embrace the high cost and low return of Amtrak’s business model? Without significant revamping of Amtrak, how long does Gardner believe it is sustainable before derailing in an economic sinkhole?
M. E. Singer is an observer and commentator on the passenger rail industry, identifying shortfalls and growth opportunities. He is currently Principal at Marketing Rail Ltd. in Chicago, a consultancy to achieve passenger rail customer experience and product branding. Singer has prior corporate experience in turnaround operations management, marketing, and mergers and acquisitions in the healthcare field.