Destination:Freedom Newsletter
Destination:Freedom
The Newsletter of the National Corridors Initiative, Inc.
Vol. 4 No. 39, October 6, 2003
Copyright © 2003, NCI, Inc.
President and CEO - Jim RePass
Publisher - James Furlong
Editor - Leo King

A weekly North American rail and transit update

 


HHP-8 at Southampton Yard, Boston, Ma

NCI: Leo King

A possible strike by Amtrak employees has been postponed until October 20 following a hearing in a federal court last week. The trains kept running. Conductor Bill Drinkwater and engineer Jack Brady shoved No. 175, with HHP-8 locomotive 653, eastward out of Southampton Street yard in Boston on September 6, 2001 to travel the one mile to South Station for a 3:20 p.m. departure. That engine develops 8,000hp.

 

Strike on hold; dollars remain
biggest topic on Congress’ plate

By Wes Vernon
Washington Bureau Chief

Amtrak President David Gunn says deteriorating infrastructure is a threat to Amtrak service, mainly in the Northeast Corridor (NEC) which Amtrak owns. He also believes an inadequate return on capital for the Class I carriers could cause them problems as well. The end result, in his opinion, could be unfortunate for both freight and passenger railroading. The freight rail industry is less inclined to push the alarm button. The issue in both cases, is money. Meanwhile, a court headed off (for now) a threatened one-day walkout of Amtrak workers. The issue, however, is not dead.

Speaking to the National Press Club on September 30, Gunn cited defective infrastructure to show how Amtrak on the Northeast Corridor was forced to play Russian roulette with a plant that some would say survives on the metaphoric equivalent of band-aid and bailing wire.

Holding up a prime example of what he was talking about, Gunn told his audience that “this particular gadget is a hanger, and from it is an insulator and the catenary. It broke [September 24] between Newark and the tunnel into [New York’s] Penn Station. It took four hours to get it back in place, meanwhile tying up traffic on “probably the busiest double-track railroad in North America.”

That “gadget” dates back to 1935 when the Pennsylvania Railroad electrified its New York-Washington route. The PRR put in three of them, knowing you need “redundancy.” One of them was lost a few years ago. Amtrak was able to splice the cable that broke in late September.

“So you can rest assured now; go back to sleep. We are now running on two 1935 cables – one of which is sick.” Gunn has a fresh exhibit every time he makes a speech.

The Amtrak CEO sees his company as the “bell cow” for what ails the entire industry. As D:F has noted for years, the highways, airways and waterways have dedicated secure subsidies to ensure that their infrastructures are financed – but no such advantage accrues to railroading, including the Class I freight carriers that host Amtrak on much of their track. The freight railroads, said Gunn, are “in very tough shape.”

He declared, “The railroad industry is not generating the capital it needs to maintain itself for the long term. That is a very serious problem for the nation, because they move 40 percent of the [freight] ton-miles – and the highway system is not adequate. We all know that you have deferred maintenance on the highway system…and if the freight railroads dumped all of this stuff on the highway network, it would be an impossible situation.”

In response to a follow-up inquiry from D:F, Association of American Railroads (AAR) spokesman Tom White, speaking for the Class I carriers, said the AAR would not respond directly to Gunn.

“Normally we don’t respond to comments in speeches by our members,” he told us.

However, White disagreed “with the implication that the infrastructure is not receiving needed maintenance.” He pointed out the Class I railroads spend more than $10 billion each year “to maintain and improve their basic infrastructure.” Moreover, train accident rates “have dropped by almost 70 percent over the past two decades [and that] claims for damaged freight… have also dropped by 70 percent.”

White cited the challenges in the nation’s railroad capitol – Chicago – where a special situation exists on an infrastructure owned not just by the Class I railroads, “but also by Metra [commuter] and smaller railroads and the fact that so much of that infrastructure crosses public streets.”

[See D:F June 26, 2003, “Only money is missing in Chicago plan to cure rail, road bottlenecks.”]

“Having said all this,” the AAR spokesman adds, “the fact remains that freight railroads still don’t earn their cost of capital. However, the gap has narrowed significantly in the years since Staggers [deregulation] was passed.”

Gunn spoke the day before a federal judge set October 20 as the date for a preliminary hearing on whether a planned one-day walkout by six Amtrak unions would violate the law.

The walkout had been scheduled for Friday (October 3), and was aimed at pressuring Congress to fully fund Amtrak at Gunn’s $1.8 billion to put the system “in a state of good repair.” Amtrak had argued the action would be illegal. U.S. District Judge James Robertson, a Clinton appointee, said he was not immediately persuaded by Amtrak’s arguments for blocking the strike, and that he needs more time to sort out labor law. Amtrak argued the strike would have disrupted travel for 60,000 of its passengers and 700,000 commuter train riders around the country.

As outlined by NARP in a bulletin to its members, there appear to be three possibilities on October 20:

The Transport Workers Union’s (TWU) railroad division director Charlie Moneypenny, a ringleader of the planned walkout, vowed to use the next few weeks to” furiously” lobby Congress and the White House to fix “the Amtrak crisis.”

In his speech, Gunn described the union intended walkout, which is not supported by all of Amtrak’s unions, as “the least wise move I’ve ever seen… to threaten Congress and the public with a strike at this point in time.” (See D:F last week for in-depth explanation of Gunn’s views.)

Asked if he was prepared to fire anyone who walks out, Gunn replied he would not. As to whether non-union employees would take over operating the trains in such a labor action, the CEO replied, “Would you ride on a train that I was operating?”

The National Press Club audience heard the Amtrak boss refute arguments for privatization of rail passenger service. He said there is not a profitable core at Amtrak.

“In order to privatize, you have to have a profitable business. That’s Economics 101.”

Moreover, Gunn added, when he himself went into railroading, over a million people were employed in the industry. Today, there are 200,000 – of which 20,000 work for Amtrak.

“There is no vast pool of talent outside of existing companies,” he said, also noting the would-be privatizers have no clear transition plan, that none of them has a detailed set of objectives or a clear picture what they’re trying to accomplish in terms of the service Amtrak would run, what it would cost and “what the financing will actually be.”

Moreover, he argued, you need a supply industry, and “the supply industry for passenger rail in particular has nearly collapsed.”

Two days later, members of the Senate Commerce Committee came down hard on the Administration for its plan to turn over much of the passenger train operational responsibility to states or private interests. Federal Railroad Administrator Allan Rutter said in effect-Shut it down? Who? Me? No way!

That did not assure Amtrak supporters, led by Sen. Kay Bailey Hutchison (R-Texas) who said, “I fear this approach will be the end of Amtrak as a national system.” She was joined by most others on the panel, including Sens. Conrad Burns (R-Mont.) and Byron Dorgan (D-N.D.) who fear many of their constituents would be isolated if the Seattle-Chicago Empire Builder were to be discontinued.

Only Committee Chairman John McCain (R-Ariz.) and DOT Inspector General Ken Mead had anything kind to say about the administration plan – and even they had caveats as to the feasibility of parts of it, including the question as to how much it would cost.

When Mead was asked what Amtrak really needed for fiscal year 2004, he cited the Senate Appropriations Committee ($1.346 billion plus deferral of last year’s $100 billion loan), and noted Amtrak begins the new fiscal year (which started October 1) with $200 million in working capital. NARP noted Gunn has said the Senate figure would allow him to continue on with deferred maintenance, although at the Press Club luncheon he was asked what was adequate funding short of his requested $1.8 billion. His response, met by audience laughter, was “One-point-seven, and then we don’t repay the loan.”

He dismissed the administration’s $900 million as a shutdown figure, whereby “you have no money for heavy maintenance; none; zero. I mean, it doesn’t work.”

Gunn’s five-year plan is really “a catalogue of deferred maintenance,” he acknowledged.

Restoring “the existing service, the existing equipment, the existing plant, close to a state of good repair” is what it’s all about, he said, in a stark contrast to repeated grand scenarios of high-speed trains envisioned on paper by others, including Gunn’s immediate predecessor, George Warrington.

[See separate Warrington story below. – Ed.]

The current regime at Amtrak is one that says – as Gunn blurted out to his audience only half in jest – before we talk about “high-speed” rail, there are some cases where “we’d like to [come up to] 100-year old speeds.”

This is an Amtrak administration with a “first things first” attitude. You do things in steps, boosting speeds of trains by improvements here and there. Talk about going for a massive high-speed rail system only leads to “sticker shock” and then you’re unable to accomplish the basics.

You get nowhere by pointing to the high-speed rail systems in Europe and Japan and simply saying, “I want one of those.” The Amtrak president said that’s what happened with the Acela which can only operate for a few miles on the NEC at its potential 150 mph. Gunn has made it clear that had he been in the executive suite a few years ago, he would have put the horse before the cart – emphasize such service when the physical plant is ready for it. Even the Europeans and Japanese achieved their goals on an incremental basis, he reminded the press club attendees.

He cited Chicago-Milwaukee, Portland (Ore.)-Seattle, and Boston-Portland (Maine) lines as candidates for ultimate high-speed service over time, after first going through several incremental stages.

The results of Gunn’s approach to offering good basic service?

Amtrak has about half the air and rail traffic between New York and Washington, and nearly one-third of that ridership between New York and Boston. Acela Express and Metroliner service is holding its own.

No changes are envisioned in the 135-150 mph speed ranges.

Contrary to conventional wisdom, the NEC “is not the strongest part of the system, the Amtrak chief added. The long-distance trains and a lot of the Western Corridors are doing better.”

The much-maligned long-haul trains are showing a significant increase in ridership. For example, the Texas Eagle is up 30 percent. The Sunset Limited – the train that McCain loves to hate (never mind that it passes through Arizona) – is up 20 to 30 percent.

“The trains are full,” he said.

On the West Coast, the highway from L.A. to San Diego is “a parking lot.” Trains buzz by the stuck motorists at 90-110 mph on a frequent schedule, and more motorists there are deciding to give it a try. That example leads to another issue.

Amtrak revenues for August, the latest figures available, were up 4.8 percent from the previous year, and long-distance trains up 7.3 percent. No, Gunn said, it’s not the fallout from “9/11,” other than perhaps the frustration of getting through the cumbersome security measures at airports; but it is not because of a fear of flying, he said. Rather, chalk it up to the fact that “we have a pretty good product,” and because of a realization that “the alternatives are pretty horrendous

No comment from Gunn on the newly nominated members of the Amtrak Board (See D:F-September 22). After all, if they’re confirmed, Gunn will be “working for them.” By the way, the current new chairman of the board, David Laney, was at the head table with Gunn.

Bottom line: no Buck Rogers 25th Century whiz-bang stuff on this railroad. First, let’s take care of the 21st Century by – at the very least –bringing it up to 20th Century standards.

Optimism? Why not?

“We have a lot of support in Congress” and “there’s a lot of people rooting for us. We can demonstrate that we run a tight ship, we are wise stewards of the public funds, we get a good bang for the buck” and “we can put in ties cheaply and rebuild things cheaply and efficiently.”

McCain fears Congress will give Amtrak “enough money to let them limp along.”

Gunn agreed with the first half of that. But pursuing his multi-year plan will, he insisted, restore Amtrak to “good repair” and produce a first-class railroad. That, he said, will take Amtrak well beyond the “limping” stage.


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CBO study faults Warrington

Even as Amtrak president George Warrington assured Congress in 2002 that the rail line was on its way to self-sufficiency, Amtrak was piling on debt to the point where every major asset it owned, including New York’s Penn Station, was mortgaged, according to a Congressional study.

The Congressional Budget Office study stated Warrington, who now heads New Jersey Transit, told Congress last year the rail line would meet its mandate to operate free of federal subsidies, even though its financial condition was quickly deteriorating, Philadelphia Inquirer correspondent Chris Mondics in Washington reported September 27.

“Although Amtrak chief executive George Warrington continued until February 2002 to assure Congress that Amtrak was steadily moving toward self-sufficiency, the company was covering its costs through increasing debt,” the report said.

“By 2002, Amtrak had exhausted its ability to borrow; nearly all of its assets had been used as collateral for loans,” it added.

Warrington, who resigned as head of Amtrak in spring 2002 as it became embroiled in a budget crisis, could not be reached for comment on September 26, the Inquirer stated.

The CBO said that, toward that end, Amtrak invested heavily in new trains and cars and made other improvements, including electrifying 157 miles of double-track New Haven, Conn., to Boston, part of an effort to speed trains along the corridor.

Amtrak failed to make other changes essential for its long-term financial survival, according to the CBO, which stated in its study that Warrington declined to renegotiate labor contracts that guaranteed six years of pay for workers who lose jobs because a route was eliminated. He instead turned the matter over to an arbitrator.

The arbitrator negotiated only minor changes, reducing the job guarantee from six to five years.

By the time Amtrak’s current president, David Gunn, took over last year, the rail line was a financial shambles, the CBO said.

The CBO report offers something for both the Bush administration, which is pushing to privatize big chunks of the rail line, and Amtrak’s management, which wants to nearly double the federal subsidy of $1 billion a year.

Both sides say the system is not working – and the CBO study agrees.

“Current federal policy toward Amtrak is not sustainable,” the report said. “Without increases in subsidies, the condition of both the Northeast Corridor infrastructure and Amtrak’s passenger cars and engines is likely to decline further.”

The study said Congress and the White House had several options, including substantial investments in both the heavily traveled corridors and long-distance lines; a reorganization in which only the most heavily used corridors are maintained; or ending federal financing, which likely would lead to the rail line’s demise.


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In all of 2002:

603 rail-related deaths recorded

U.S. transportation fatalities increased slightly in 2002, according to preliminary figures released October 2 by the National Transportation Safety Board (NTSB). Deaths from transportation accidents in 2002 totaled 45,098, up from the 44,969 fatalities in 2001.

Most of those deaths were on highways.

Total rail fatalities increased in 2002 to 603 from 597, reflecting a rise in pedestrian fatalities associated with intercity rail operations. Seven rail passengers were killed in 2002, compared to 3 in 2001. Fatalities occurring on light rail, heavy rail, and commuter rail increased from 197 to 220.

Highway fatalities, accounting for more than 94 percent of the transportation deaths in 2002, increased from 42,196 in 2001 to 42,815 in 2002.

The number of persons killed in all aviation accidents dropped from 1,171 in 2001 to 618 in 2002. There were no fatalities on scheduled passenger carriers in 2002. Airline fatalities in 2001 accounted for a total of 531 deaths, including the September 11 terrorist attacks and the American Airlines flight 587 crash in November. The number of general aviation fatalities increased slightly from 562 in 2001 to 576 in 2002.

Marine deaths increased from 772 to 793. Recreational boating fatalities, the largest category of marine deaths, increased from 681 to 750. Fatalities declined in marine cargo transportation, commercial fishing and commercial passenger operations.

Pipeline fatalities increased slightly from 7 to 11, 10 of them related to gas pipelines and one to liquid pipeline operations.

The NTSB compiles aviation statistics. Numbers for all other modes are from USDOT, the NTSB stated.


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Amtrak cuts baggage weight limits

Later this month, passengers riding Amtrak won’t be able to check any piece of baggage weighing more than 50 pounds. The former provision allowing baggage up to 75 pounds, with a $10.00 surcharge, will be cut On October 27 when the new weight restrictions begin.

At the same time, the maximum weight per item in regular Amtrak (package) express service will also be 50 pounds (or 23 kilograms), but the carrier stated “Heavy and palletized express limits are not affected.”

Management told employees “If a passenger or express customer brings an item that is over 50 pounds, its weight will have to be reduced by removing some of the contents”

The passenger railroad is “producing some $2.00 shipping boxes and will send them to stations within a few weeks, and those can be used to help reduce the weight of overweight baggage or express.”

Amtrak stated the weight limit is a “safety issue,” and noted “often not every train on a passenger's itinerary handles checked baggage.” It is also complying with “new Occupational Safety & Health Administration (OSHA) regulations regarding the weight a single employee can be expected to lift.”

The carrier advised station agents, “Please be sure that any portion of station signage mentioning overweight baggage with a surcharge is corrected.”


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Amtrak orders $172.4 million in parts

Amtrak is going ahead with a large order for parts and material to rebuild its passenger trains and facilities. The big rebuilding effort is the centerpiece of Amtrak’s $1.8 billion federal funding request, the largest ever sought by the railroad, for its fiscal year that began October 1. The railroad is ordering $ parts, materials and equipment that it considers vital to its rebuilding program, according to the Wall Street Journal of September 30.


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COMMUTER LINES...  Commuter lines...

South Florida looks over FEC

Florida East Coast Railway ran a special train on September 25 from Hialeah, where FEC’s main south-end yard is located, to Palm Beach and return. The trip was intended to showcase the route for elected officials and shippers to demonstrate the railroad’s importance in moving goods and keeping trucks off crowded highways in South Florida. Local officials were also glimpsing what commuter rail passenger service on the FEC might be like. They rode aboard three CSX coaches, including a theatre car.

A rain-slicked morning that snarled commuters driving from Fort Lauderdale to Miami only served to reinforce their vision, the South Florida Sun-Sentinel reported September 30.

Fort Lauderdale Mayor Jim Naugle was among more than 50 elected officials, businesspeople and media representatives from Broward, Palm Beach and Miami-Dade counties who were invited to ride the FEC in a passenger train from Hialeah to West Palm Beach and back.

Naugle said returning passenger rail service to the FEC after 30 years would be a boon to downtowns along the corridor, as well as ease demands on highways at rush hour.

"This would solve a lot of our road problems," he said. In Fort Lauderdale alone, hundreds of high-rise apartments and condominiums are planned or are under construction within walking distance of the tracks.

Naugle said a train station at the FEC's Southwest 17th Street crossing would put riders close to hundreds of jobs at nearby Broward General Medical Center.

State Rep. Mary Brandenburg (D) said the trip was an eye-opener for her, seeing how many businesses depend on the railroad for deliveries and shipping.

Local officials considered using the FEC tracks when Florida Tri-Rail was being developed in the 1980s, but the FEC refused to consider selling the tracks or using them for anything other than freight. Thus, the Tri-Rail system wound up on the CSX Transportation Co. tracks that parallel Interstate 95 in much of the three counties.

Since then, in recent months, FEC has decided otherwise. With new management in place, senior officers say they have an open mind about passenger service from Jupiter to Miami – as long as freight remains the top priority.

"We're interested, but we're a long way from getting there," said the railroad’s attorney, Heidi Eddins, who is also an FEC vice-president. Eddins said it would take up to 10 years for passenger service to be a reality.

FEC President John McPherson said the FEC keeps one million trucks a year off highways such as I-95.

The FEC operates several through freight trains daily between Miami and Jacksonville, including run-through interchange trains like The Hurricane from Atlanta via Norfolk Southern, plus shorter locals. The St. Augustine-based railroad has earnings of more than $160 million a year and employs more than 7,000 people in Florida.

The South Florida Regional Transportation Authority (formerly Florida Tri-Rail), has its eye on buying or leasing FEC’s tracks from Jupiter to Miami and running commuter trains through downtowns along the “Gold Coast,” as local call the Atlantic Ocean coastline in that region of the state. Tri-Rail is working with the FEC to come up with an appraisal of the rail line and work out how much a purchase or lease would cost.


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VRE chief quits after investigation

Pete Sklannik Jr., the head of the Virginia Railway Express, has resigned after the conclusion of a two-month investigation into his financial records and management style, the Washington Post reported on Friday.

Sklannik’s resignation, which takes effect today, was accepted last night during closed-door sessions by the two public commissions that oversee the Virginia Railway Express. VRE is the fast-growing commuter railroad connecting Northern Virginia to Washington, D.C.

Sklannik could not be reached for comment.

He was placed on administrative leave from his job in August while an outside auditor investigated allegations of mismanagement at the agency.

The auditor delivered his findings to the operations board of the VRE in private last Friday. Sources familiar with the report, who spoke on condition that they not be identified, said the review found examples of what the reviewers considered excessive spending by Sklannik.

VRE is operated as a joint venture of the Northern Virginia Transportation Commission and the Potomac and Rappahannock Transportation Commission, both of which are public agencies that make decisions about how to spend federal, state and local transportation funds.

Last night, VRE officials met with the two parent commissions in closed sessions, where they voted to accept Sklannik’s resignation.

“The question was whether to fire him or let him resign,” said one of the officials involved in the discussion.

VRE officials have refused to release the findings of the financial audit, saying the investigation into Sklannik’s expenditure of public money is not a public record.

“He tendered his resignation, we accepted his resignation,” said Fairfax Supervisor Sharon S. Bulova (D), VRE board chair.

“There was no financial payout. Other than that, it’s a personnel matter. There’s nothing further to discuss.”

As chief operating officer of VRE, Sklannik oversaw the 36-person organization and earned $126,000 a year. He joined VRE in 2000 after working for a decade at the Long Island Rail Road.


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VRE may cut holiday trains

Virginia Ry. Express is considering cutting holiday service – but it wants to hear from commuters who ride their trains.

Commuter railroad officials noted local jurisdictional budgets are tight, costs continue to rise, and financial resources have become short.

VRE’s gap between revenue and expenses must be reconciled, and by getting a higher government subsidy, increase fares, or cost-cutting – and sometimes all three ways.

“One area we are reviewing carefully is the cost versus benefit of offering holiday service. Holiday service was instituted in 1999 and includes Columbus Day, Veterans’ Day, the day after Thanksgiving, Martin Luther King Day and Presidents’ Day,” VRE told its online readers.

“We have analyzed the ridership and costs associated with operating service on these select holidays and are considering eliminating the holiday service since it would save up to $140,000 per year in operating costs.”

The state agency noted, “On average, the trains that we operate on these days carry approximately 1,200 people (2,400 trips).” They also operate about half of their trains, and the average ridership “represents an 82percent decline over a normal operating day of approximately 14,000 trips.”

VRE said it would recommend that action to its Operations Board, but before they do so, “We are soliciting riders’ and public comment… either in support or against the idea.”

VRE is online at http://www.vre.org/feedback/holiday_service_elimination.htm.


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Too many trains at South Station?

Massachusetts Bay Transportation Authority commuter trains will probably have trouble getting to a platform when they arrive at South Station after Greenbush Line service begins in 2006, according to the author of a study of the station.

The delays would be the terminal dispatcher’s worst nightmare – trains held out because there is nowhere to put them would also delay trains arriving behind them, and potentially could tie up traffic departing the station for runs to Attleboro, Providence, Franklin and other routes, as well as crews trying to get their equipment down the Dorchester branch to and from Southampton Street Yard where the commuter trains tie up and are made ready.

“I ran the numbers the other day. There’s certainly a need to expand South Station,” said Trevor Hardy of CB Richard Ellis Whittier Partners, who wrote the South Station Capacity Analysis report two years ago.

The study, which predicts South Station trains will increase from 304 daily to 343 by 2005 even without Greenbush, was prepared for the U.S. Postal Service to gauge a plan to cede land to the T if it relocates its adjacent South Postal Annex, the Boston Herald reported on Friday.

Greenbush would compound that, Hardy said, adding he based his work partly on a 1999 study commissioned by the T that found trains already near capacity.

Sierra Club’s Jeremy Marin, a Greenbush backer, said both studies predicted those trains would be delayed.

“When trains are not running on time and we’re not running enough trains, there are going to be a lot of angry commuters,” he said, advocating the much-discussed North-South Rail Link as a way to keep train traffic flowing.

T spokesman Joe Pesaturo discounted Hardy’s interpretation, saying the earlier study concluded the trains could be accommodated.

“Their findings were that South Station does have the ability to handle additional trips,” he said.


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FREIGHT AND BUSINESS LINES...  Freight, business lines...

KCS train AGS 180 in Chattanooga on 9-24-2003

For NCI: N.S. Rayman

Kansas City Southern’s problems with Grupo TMM continue, as TFM notes are downgraded. KCS train AGS 180, from Birmingham, passes by Main Street in Chattanooga on September 24.

 

$773 million:

Fitch downgrades TFM notes

Fitch has downgraded the credit ratings of $773 million of notes issued by Transportacion Ferroviaria Mexicana SA (TFM), partly because of a major hitch in plans for Kansas City Southern to take over the Mexican railroad.

The ratings company said the downgrade reflects both the muddled acquisition situation and TFM’s “weaker than expected financial performance.”

Fitch lowered both “foreign” and “local currency” ratings to B+ from BB- for TFM senior unsecured debt of three maturities. The downgrades affect $150 million of notes due in 2007; $443 million of 2009 notes; and $180 million of 2012 notes.

In a separate but related development, TFM completed the previously announced planned repurchase from KCS of shares representing 51 percent of Mexrail Inc., sole owner of Texas-Mexican Ry., Inc. (Tex-Mex), for $32,680,000. That is the same amount TFM had received for the shares from KCS in May.

In April, Grupo TMM had announced it would sell its 41 percent stake, a controlling interest, in TFM to minority TFM shareholder Kansas City Southern.

Fitch said, “KCS and the Mexican government currently own 39 percent and 20 percent economic stakes in TFM, respectively. Under the proposed structure, TFM and KCS would have been held by a new holding company named NAFTA Rail.” Grupo TMM would have received $200 million cash and a 22 percent stake in NAFTA rail. However, Grupo TMM shareholders turned down the deal August 18. KCS and Grupo TMM are now engaged in a legal battle over the acquisition.

Fitch said:

The acquisition would have been a “mild positive” for TFM’s rating because KCS, though highly leveraged, is stronger financially than the distressed Grupo TMM.

The legal conflict between Grupo TMM and KCS could divert TFM management time and attention.

TFM’s financial performance has deteriorated over the past several quarters, as a result of weak cargo demand from the Mexican auto sector, higher fuel costs and the depreciation of the peso against the dollar.

On the brighter side, Fitch said, TFM doesn’t have “significant financing needs until 2007.” In addition, “TFM has a solid business position as the largest railroad in Mexico, long term growth opportunities in the North American market, and a moderate financial position” five years after being privatized, Fitch said.

Under the April deal, now coming apart, between KCS and Grupo TMM, NAFTA Rail also would have held Mexrail.


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North Dakota land too costly?

Some North Dakota companies that lease rural railroad property say it’s too difficult and costly to buy the land, so a state legislative committee began looking into the issue last week.

A Canadian Pacific Ry. property manager said his railroad isn’t trying to sell land, even if it is next to a working track. David Drach said the CP has a $10,000 minimum price for selling property, according to The AP. Drach said there’s some flexibility in the price, but, he added, the minimum is necessary to make it worth the railroad’s time to sell property.

Some lawmakers said the railroad is demanding a lot more than the market value of the land. State Sen. David Nething (R) said the minimum price can be a deal breaker, and that the railroad probably doesn’t value the land that much for tax purposes.

Drach says people who lease railroad land aren’t getting a right to buy it. He says the railroad should be treated like any other landowner when it comes to its right to sell property.

The minimum price applies to land where there is still railroad service. The property can be sold for much less if the rail service has been abandoned.

The Burlington Northern & Santa Fe Ry. said it usually sells land for ten times the cost of leasing it.

The state legislature’s interim Transportation Committee is looking into the issue. The committee will be studying whether the next legislative session should take up the railroad property question.


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CSX explains zero coupon plans

CSX Corp. disclosed details on October 2 concerning payment form and mechanics for any purchase during October of its zero coupon convertible debentures due 2021. The railroad stated in a press release, “If any such securities are required to be purchased by CSX, they will be purchased for cash, paid promptly following the later of October 30, 2003, or the book-entry transfer of the Debentures to JPMorgan Chase Bank, as trustee for the debentures.”

The procedures that holders must follow in electing to have CSX purchase their debentures are stated in the debentures and will be provided in a notice delivered to holders through The Depository Trust Co. by the trustee.


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Bombardier board declares payouts

The Board of Directors of Bombardier, Inc. has declared dividends on four classes of shares, payable on October 31 to shareholders of record October 17. These are the dividends (comparisons with July 31 quarter in parentheses):

Class A shares: $0.0225 (unchanged)

Class B shares: $0.0225 ($0.0229)

Preferred shares Series 3: $0.34225 (unchanged)

Preferred shares Series 4: $0.390625 (unchanged)


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UP board limits executive severance

Union Pacific Corp. directors last week adopted a new policy that prohibits severance agreements with senior executives that exceed certain limitations unless such agreements are approved by a vote of the corporation’s shareholders.

The new policy, adopted on Friday in Omaha, is a result of a review process that began following the railroad’s annual shareholders meeting in April. At the meeting, a shareholder proposal relating to severance agreements was approved by a majority of shares present and entitled to vote.

Under the new policy, UP will seek shareholder approval for future severance agreements, if any, with senior executive officers that provide specified benefits in an amount exceeding 2.99 times the sum of the executive’s base salary plus bonus.

UP is the largest North American railroad covering 23 states across the western two-thirds of the U.S.

UP’s policy text is online at http://www.up.com/investors/governance.


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Traffic is mixed in September, third quarter

Intermodal traffic was up while carload freight was down slightly on U.S. railroads both in September and during the third quarter of 2003, the Association of American Railroads reported Thursday.

Rail intermodal traffic – the movement of trailers or containers by rail and at least one other mode of transportation, usually trucks – rose 2.5 percent (19,249 trailers and containers) in September and 2.6 percent (63,617 units) in the third quarter of 2003 compared to 2002, while carload traffic fell 0.1 percent (1,679 carloads) in September and 1.2 percent (50,415 carloads) in the third quarter.

“A just-released study by the Texas Transportation Institute indicates that highway congestion costs the U.S. nearly $70 billion in wasted time and fuel,” noted AAR Vice President Craig F. Rockey. “While freight rail in general helps alleviate highway congestion, intermodal is especially helpful in that regard, and it generally saves shippers a substantial amount of money as well. Today, intermodal has overtaken coal as the top source of revenue for major U.S. and Canadian railroads combined, and it is expected to continue to grow steadily in the years ahead.”

U.S. rail carloads of grain rose 13.1 percent (9,901 carloads) in September 2003 compared with September 2002 to lead all commodities. Other categories showing U.S. rail carload gains in September include coke (up 46.4 percent, or 7,001 carloads) and stone, clay and glass products (up 8.0 percent, or 3,171 carloads). Commodities showing declines in U.S. rail carloadings in September 2003 include coal (down 2.5 percent, or 13,630 carloads), metallic ores (down 20.3 percent, or 13,488 carloads), and primary metal products (down 7.3 percent, or 3,934 carloads). U.S. carloads of chemicals were up 1.5 percent (2,005 carloads) in September 2003.

For the third quarter of 2003, U.S. rail carloadings were down 1.2 percent (50,415 carloads), due mainly to declines in metallic ores (down 19.0 percent, or 42,215 carloads), coal (down 2.2 percent, or 38,255 carloads), and motor vehicles and equipment (down 6.9 percent, or 20,040 carloads). U.S. carloads of grain were up 5.1 percent (13,144 carloads) in the third quarter, while carloads of crushed stone, sand and gravel (important to the construction industry, among others) rose 2.9 percent (7,969 carloads).

“In September, 14 of the 19 major commodity categories tracked by the AAR saw U.S. carload gains, compared with 10 in August and July. Excluding coal, U.S. rail carloads in September were up nearly 12,000 carloads, or 1.5 percent,” Rockey noted.

He added, “This could mean that rail carloadings are lending support to the growing belief that we may be on the cusp of a period of more robust economic growth.”

For 2003 through September, U.S. rail intermodal traffic was up 5.1 percent (353,646 units) and U.S. rail carload traffic was down 0.3 percent (35,769 carloads).

Canadian carload traffic was up 1.7 percent (4,397 carloads) in September 2003, paced by gains in carloads of farm products excluding grain (up 85.0 percent, or 6,054 carloads) and grain (up 17.2 percent, or 4,732 carloads). Canadian carloads of metallic ore were down 38.5 percent (4,035 carloads) in September 2003, while carloads of coal were down 8.8 percent (2,709 carloads). For the third quarter of 2003, Canadian carload traffic was down 0.1 percent (762 carloads), while total year-to-date carloadings for Canadian railroads were down 1.2 percent (28,662 carloads).

Canadian intermodal traffic was down 0.5 percent (886 units) in September 2003, up 3.2 percent (17,170 units) in the third quarter of 2003, and up 7.3 percent (109,781 units) in the first nine months of 2003.

Carloads originated on Transportación Ferroviaria Mexicana (TFM), a major Mexican railroad, were down 12.6 percent (4,533 carloads) in September and down 1.1 percent (3,714 carloads) for the year to date. Intermodal originations on TFM were down 8.7 percent (1,248 units) in September and up 18.7 percent (21,343 units) for the year to date.

For just the week ended September 27, the AAR reported the following totals for U.S. railroads: 342,282 carloads, down 1.0 percent from the corresponding week in 2002, with loadings down 1.0 percent in the East and down 0.9 percent in the West; intermodal volume of 210,099 trailers and containers, up 6.8 percent; and total volume of an estimated 30.2 billion ton-miles, up 1.0 percent from the equivalent week last year. Intermodal volume for the week was higher than any other week on record.

For Canadian railroads during the week ended September 27, the AAR reported volume of 68,872 carloads, up 3.7 percent from last year; and 44,788 trailers and containers, up 1.7percent from the corresponding week in 2002.

Combined cumulative volume for the first 39 weeks of 2003 on 15 reporting U.S. and Canadian railroads totaled 15,028,652 carloads, down 0.4 percent (64,431 carloads) from last year; and 8,970,484 trailers and containers, up 5.4 percent (463,427 trailers and containers) from 2002’s first 39 weeks.

The AAR is online at www.aar.org.


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STOCKS...  Selected Friday closing quotes...

Source: Bloomberg.com

  Friday One Week
Earlier
Burlington Northern & Santa Fe(BNI)29.50028.700
Canadian National(CNI)53.31051.250
Canadian Pacific(CP)24.71023.590
CSX(CSX)29.86029.400
Florida East Coast(FLA)30.39029.200
Genessee & Wyoming(GWR)25.45023.240
Kansas City Southern(KSU)11.28010.750
Norfolk Southern(NSC)18.95018.430
Union Pacific(UNP)59.24057.810


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ACROSS THE POND...  Across the pond...

Bombardier Double-Decker in Germany

For NCI: Dave Beale

A Bombardier-built double-decker regional express train operated by Deutsche Bahn (DB) for Niedersachsen (government of the state of Lower Saxony) in Nienburg enroute to Hannover. Most of the time the German double-decker trains are operated in sets of five cars with one electric locomotive in the 4,000-5,000 hp range. There are other similar versions made by Bombardier operated in other countries such as Austria, Greece and Israel with diesel locomotives.

WE GET LETTERS...  We get letters...

Dear Editor:

The article “Ready to roll... just in case” speaks of a platform at the Waldorf Hotel in New York City. The web site “LostNY.com” identifies various rail stations in the city that have been abandoned or are no longer in use. There is reference to President Roosevelt using the Waldorf platform when he visited New York, and also the large elevator.

Peter C. Koch
Chicago

See the page at http://www.columbia.edu/~brennan/abandoned/gct61.html – Ed.


Dear Editor:

You missed a significant historical note regarding NYC Transit’s “Redbirds” (D:F, September 29). The NYCTA non-stainless fleet was repainted in the mid 1980s in conjunction with major reconstruction. Newspapers at the time reported that the “Tuscan Red” color scheme was the personal choice of the TA leader who was responsible for the NYC transit system’s legendary turnaround – David Gunn.

Isaac Brumer


Dear Editor:

How come that Saddam, just like Bush, let his national railway go to hell? (D:F September 29).

Japp van Dorp
Brewster, N.Y.


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THE WAY WE WERE...  The way we were...

Atlantic Coast Line Steam Engine on display

NCI: Leo King

Atlantic Coast Line’s Light Pacific toiled nearly to the end of the steam era.

 

Steamer is silent for 54 years

Atlantic Coast Line engine 1504 was built for the U.S. Railroad Administration “to haul troops during World War I,” but it was not completed until the war ended, in 1919. A plaque near the engine, on permanent display at the Prime Osborne III Convention Center in Jacksonville, Fla., explain the steam engine, a “Light Pacific 4-6-2A, model P-5-A, could exceed 70 mph.” In its heyday, it hauled premier passenger trains in and out of Florida.

In 1960, the engine was placed on display in from of the new ACL building (later CSX) in Jacksonville where it remained until 1986 when CSX presented the engine to the convention center as a symbol of the city’s railroad history and heritage. The convention center itself was formerly Seaboard Railroad’s Jacksonville terminal, and shared the facility with Florida East Coast, Southern and Atlantic Coast Line roads. The engine was completely refurbished in 1989.

Atlantic Logo

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Another plaque, installed in 1990, lists the engine as a “National historic mechanical engineering landmark.”

It states, “During the World War I emergency, American railroads were placed under the control of the USRA to facilitate construction, operation and maintenance. All new steam locomotives ordered during this period were built to one of 12 standard designs developed by a committee composed of USRA, railroad and locomotive builder representatives.”

The blackened plaque contains a history lesson.

“This family of locos, ranging from 0-6-0 to 2-8-8-2 in size, incorporated the best proven features of the day, and was the first successful standardization of American motive power.

“Although the USRA period lasted only three years, locomotives continued to be built around these basic designs for another decade.”

The American Locomotive Co. built the 1504 in its Richmond Works. It was “in service on ACL for more than 30 years and has survived in almost original condition.”


End Notes...

We try to be accurate in the stories we write, but even seasoned pros err occasionally. If you read something you know to be amiss, or if you have a question about a topic, we'd like to hear from you. Please e-mail the crew at leoking@nationalcorridors.org. Please include your name, and the community and state from which you write.

Destination: Freedom is partially funded by the Surdna Foundation, and other contributors.

Journalists and others who wish to receive high quality NCI-originated images that appear in Destination: Freedom may do so at a nominal fee of $10.00 per image. "True color" .jpg images average 1.7MB each, and are 300 dots-per-inch for print publishers.

In an effort to expand the on-line experience at the National Corridors Initiative web site, we have added a page featuring links to other rail travel sites. We hope to provide links to those cities or states that are working on rail transportation initiatives - state DOTs, legislators, governor's offices, and transportation professionals - as well as some links for travelers, enthusiasts, and hobbyists.

If you have a favorite rail link, please send the uniform resource locator address (URL) to the webmaster in care of this web site. An e-mail link appears at the bottom of the NCI web site pages to get in touch with D. M. Kirkpatrick, NCI's webmaster in Boston.


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