White House: Paul MorsePresident Bush last week signed an omnibus spending bill that includes $1.2 billion for Amtrak. Here, he greets members of the West Tennessee Youth Chorus during the National Christmas Tree lighting ceremony on the Ellipse in front of the White House on December 2.
Bush sends Amtrak $1.2 billion
President Bush signed into law a $388 billion legislative package on December 8 that covers the spending of every federal agency including Amtrak and the U.S. Department of Transportation.
Congress passed the package November 20. It covers spending in the fiscal year that began October 1.
White House spokesman Scott McClellan said the President was not troubled by the billions of dollars in special-interest measures added onto the bill by lawmakers.
The fact that members of Congress worked together with us to meet our highest priorities and show spending restraint elsewhere in the budget is an important step in the presidents hopes of reducing the deficit, McClellan said.
Bush had threatened last summer to veto the final measure if it contained more than the $900 million shutdown number for Amtrak.
Transportation issues received overall $59 billion, $1.1 billion over last year and $1 billion more than Bush requested. Amtrak gets $1.2 billion, the same as last year. Highway construction gets $34.7 billion, $1 billion over last year and over Bushs proposal. Federal Aviation Administration gets $10.4 billion, $100 million over last year.
The White House and White House agencies are getting $770 million, $4 million less than Bush wanted and $12 million below last year.
Elsewhere in Washington, The President said last week he will keep U.S. Transportation Secretary Norman Y. Mineta in his post during Bushs second term, but Deputy Transportation Secretary Kirk Van Tine submitted his resignation, effective December 31. Mineta said Van Tine is returning to the private sector. Bush named Van Tine acting deputy secretary last December, then made the appointment permanent in May.
Over the last couple of weeks, speculation abounded that former CSX CEO John Snow, 65, would be leaving the Administration as Treasury secretary.
Not so, says the White House.
CBSMarketWatch.com reported on December 8 Snow will remain in his job, administration officials said Wednesday. The President asked Snow to remain and Snow accepted.
Speculation had run rampant in the past two weeks that Bush would ask Snow to leave after two years on the job. The New York Times, the Washington Post and other news services had quoted senior administration officials as saying Snow would not serve much longer.
Snow has been Bushs main economic spokesman for two years since replacing the outspoken Paul ONeill in early 2003. Snow campaigned hard for Bush in the recent campaign, visiting key battleground states dozens of times to give the message that Bushs tax cuts were working to create a healthy economy.
In the second term, Snow will be expected to lobby for two radical changes in U.S. economic policy partial privatization of Social Security and reform of the income tax.
Transportation Secretary Norm Mineta, named Thursday to serve in President Bushs second-term Cabinet, vowed to press a controversial plan to overhaul Amtrak financing in order to end a drain on the budget.
Mineta, 73, the former Democratic mayor and House member from San Jose, Calif., said in an interview with Hearst Newspapers writer Stewart M. Powell in Washington and reported in the San Francisco Chronicle, that he would work to win congressional approval for the pending plan to reduce federal spending on the government-subsidized rail system by shifting a greater burden to states served by Amtrak on the East and West coasts.
Federal assistance for Amtrak ought to be on the same basis as federal assistance for highways and metropolitan transit systems, with the federal government paying a smaller share of the costs, Mineta said.
There ought to be a local-share component in the financial support of those railroad services, Mineta said.
Mineta said Bush backs the hard-nosed plan requiring states to pay up or lose service.
If a train goes through a state and that state is not willing to pony up the states share, then we would run the train through that state, not stopping and keeping the doors closed, Mineta said.
The transportation chief said he intends to deal with the long-term longevity of Amtrak, which receives $1.2 billion under Bushs latest annual budget, which is about $600 million less than Amtrak requested.
Mineta conceded that he was quite sure well find resistance in Congress to the plan, but he added, We have spent something like $37 billion on Amtrak (since its inception in 1970). It has been a drain on the budget, and we havent really improved services in a major way. I want to make sure that we keep this system safe and provide a good service.
Ross Capon, executive director of the National Association of Railroad Passengers, said states already shoulder a significant portion of Amtraks capital expenditures. Minetas plan would merely take the bill for existing railroad service and dump a greater share on the states when states need more generous federal support to take railroad service to the next level, Capon said.
Of the $417 million Amtrak invested in capital improvements in fiscal 2003, the federal government provided $268 million, leaving the remaining $149 million to be financed by states, localities and borrowing.
The rhetoric the administration is using just doesnt match up to the reality, Capon said. This plan would be the death knell for expansion of railroad service.
Amtrak enjoys wide support in Congress, which created the federally subsidized network after the demise of private passenger rail service in the 1960s. Lawmakers with Amtrak trains running through their states or districts represent a formidable lobby against any attempt to reduce service.
Amtrak operates as many as 265 trains each weekday, serving nearly 66,000 passengers at more than 500 stations in 46 states along more than 22,000 miles of track.
Minetas plan calls for gradually handing over control of Northeast Corridor tracks between Washington and Boston to a coalition of states.
Amtrak, the nations financially troubled passenger railroad, must pay back a $100 million loan it received from the government to avert a shutdown in 2002, Reuters News Service reported on December 8.
After deferring repayment for two years, lawmakers included language in the omnibus appropriations bill signed by President Bush to make Amtrak clear the loan from its books during the next five years.
An Amtrak spokesman said the railroad is ready to repay the debt, which was a key component of the financial rescue package spearheaded by the USDOT in summer 2002.
The bailout triggered tighter DOT oversight of financial matters at Amtrak, which depends on annual federal subsidies to survive. The crisis also accelerated Bush administration efforts to reduce federal support for Amtrak.
For NCI: Kevin AndrusiaThree different Amtrak moves descend upon 18th Street in Chicago simultaneously on November 21. The train on the left is Amtrak No. 348, the Illinois Zephyr, during its short time operating with Superliners. 18th Street is where Amtrak has its locomotive shop, and the car shop is just up the tracks north of the St. Charles Airline going overhead. Chicago Union Station is farther back. The string on the right appeared to be a chartered Indianapolis Colts extra with the Indianapolis 500 on the rear. At the moment the photographer snapped the photo, all three trains were moving toward him, but The one on the right ended up going through the wash rack.
At Amtraks bottom line:
More passengers, but revenues decline
Reflecting evidence of a lagging travel industry, Amtrak ridership totaled 2.1 million passengers and ticket revenue amounted to $103.3 million in October, the first month of the new fiscal year, reports Amtrak Ink for December. The monthly employee publication stated the result is 7,000 passengers more and $4 million less revenue than October 2003.
Amtraks ridership continues to grow in low-yield markets, in many of the Chicago hub routes and in the West Coast corridors, the publication stated.
These improvements in short-distance revenue and ridership figures indicate that travelers are continuing to choose Amtrak over other travel modes. Among the factors that contributed to the trains solid performance are good on-time performance, competitive fares and gasoline prices that are leaving many to prefer rail over highway as the more cost-effective mode of travel but ridership in higher yield segments such as Acela Express and Metroliners in the Northeast and the long-distance trains remains somewhat weak, the paper reported.
The unnamed writer explained, Much of this is attributable to the current economy and its overall impact on the total travel market as well as continuing competition from low-cost airlines.
In the Chicago hub, nearly every route finished the month showing double-digit ridership increases over both budget and last fiscal year. Ticket revenue numbers also reflected improvement, with outstanding performance on the Chicago-St. Louis route at nearly 23 percent ahead of last year and more than 20 percent over budget.
The Pere Marquette finished with ticket revenue of more than 14 percent over last year and more than 12 percent ahead of budget.
On the West Coast, ridership on the Pacific Surfliner was 15 percent ahead of both budget and last year, while the Amtrak Cascades ridership was more than 5 percent over both budget and last year. The San Joaquins were at nearly 4 percent above of budget and nearly 3 percent ahead of last year.
In the Northeast, Regional service produced the best results with 5 percent growth over budget and last year. In the Southwest, the Heartland Flyer posted over 20 percent ridership more than it did last year and more than 14 percent over budget; ticket revenues were 33 percent ahead of last year and more than 24 percent over budget.
The combined Acela Express and Metroliner ridership and ticket revenues were down from last year 10 percent in ridership; 11 percent in ticket revenues and fell short of budget, although Acela ridership and ticket revenues were up from last year.
The weak job market drove much of the waning performance of both services. October unemployment shot up to 5.5 percent; it was the first increase in the unemployment rate in almost eight months.
On whole, long-distance trains ridership and ticket revenues fell short of both last years levels and budget due mostly to what has evolved over the last few months as a relatively slow leisure travel market. Floridas Silver Services, which account for 30 percent of long-distance revenue, are still weak as a result of this past summers extraordinary hurricane season. The Cardinal and the Auto Train did well both in terms of ridership and ticket revenues against last year and budget, but the other trains fell short.
Numbers for November arent in yet, including over the heavy Thanksgiving travel days, for all travel modes.
Amtrak InkNew leather seats are wrapped in protective plastic covering in the business class section of remanufactured Horizon Café car 53000 at Beech Grove. The car was back in service on October 30
Beech Grove rebuilds Horizon cars
The first two remanufactured Horizon café cars rolled out of the Beech Grove, Ind., maintenance facility in October. Another eight Horizon cafés and 18 coaches are scheduled to be done by September 30.
At a cost of $500,000 for each coach and $700,000 per each café car, reports Amtrak Ink in its December edition, the remanufacture program is intended to improve the reliability, availability and look of Amtraks Horizon fleet. Along with the Superliner I sleeping car program at Beech Grove, the work is part of the railroads aggressive initiative to bring plant and equipment to a state of good repair.
Midwestern passengers are most familiar with the cars. Some of the changes they will see include new bathroom modules with fiberglass walls and ceilings, and patented, easy-to-clean non-skid flooring in the restrooms and the café. New carpeting will enable coach cleaners to quickly remove and replace sections of the carpet when necessary.
Mechanics work some 4,500 hours to complete each café, and about 3,900 for each coach. Cafés are being equipped with the latest in environmentally safe refrigeration systems, ovens and microwaves.
New leather first-class seating is installed in the business class section, and Superliner II booth seating is mounted in the café area.
All diaphragms, draft gears and couplers, trucks, door operators, doors, windows, heating, ventilation and air conditioning along with waste treatment systems are being rebuilt and replaced.
The electrical systems and water piping throughout each Horizon car is upgraded, which includes replacement of the freeze protection valves and circuits, designed to keep the piping from freezing and breaking during winter operations.
The coach seats are completely rebuilt at Amtraks Bear Maintenance Facility in Delaware at approximately half the cost of a new coach seat.
After the cars are updated with the new exterior striping and cleaned in the trim shop, they are tested and inspected for reliability and quality before they are released for service.
Mike Milburn contributed to this story.
Sunset, an Acela have tough days
It took 10 hours to get Amtrak train No. 1 the Sunset Limited over the road starting on December 2. The Superliner-equipped train departed Orlando, Fla. okay at 1:45 p.m. that Thursday on CSX, but started running into trouble after it got onto Union Pacific tracks. It lost 44 minutes at a Dona, N. Mex. siding for two UP freight trains because the stressed routes sidings were full.
The train next lost an hour and 20 minutes from Dona to Deming, Ariz., following UP freight train 5150, and then lost two hours and 47 minutes from East Lisbon to Tully, and another hour and 39 minutes from Tully to Tucson, following UP 3302.
An hour and 46 minutes disappeared at Tucson after the crew outlawed, falling under the federal crew hours of service law and waiting for a dogcatch crew from Maricopa.
The premier passenger train lost another 35 minutes to set out sleeping car 32022 at Stockman, west of Tucson, because of two shelled wheels.
The crew, train and passengers crossed into California but the second crew outlawed, so another hour and 17 minutes went by at Glamis, Calif. for another dogcatch crew, this time from Los Angeles.
Losing time is a nightmare for passengers, crews, dispatchers and anyone else who is involved with getting a train over the road. This train, now well into December 3, lost 51 minutes from Banning to Rancho, behind UP 9502.
The train finally arrived at Los Angeles Union Passenger Terminal at 10:35 p.m., 10 hours, 55 minutes late.
On December 6, The Arizona Daily Star told its readers, from a reporter waiting at Benson, Ariz. The sun rises on the weathered aluminum windbreak locally known as the Amshack with the train nowhere in sight.
The article continued, Amtraks tardiest train, the Sunset Limited, was scheduled to arrive in Benson at 7:53 Tuesday night, but will instead pull into town at 6:55 a.m. 11 hours and 2 minutes behind schedule.
The only thing more surprising than learning that 11 hours late is closer to the rule than the exception for the thrice-weekly westbound train is that a dozen passengers on board say Amtraks lack of punctuality wont keep them off the beleaguered companys trains.
Amtrak officials set a punctuality goal of 70 percent for the Sunset Limited this year, the article continued, and fiscal year 2004 ended September 30 with the routes final tally at 0 percentnot a single westbound Sunset Limited train arrived on time.
An excessive delay on the Sunset has become so commonplace that Julie, Amtraks automated telephone assistant, now gives a disclaimer when people call for reservations, Before we go on, I have a special Amtrak announcement about that train. Congestion and construction on the freight railroads over which train No. 1, the Sunset Limited, travels may cause delays for this train. We recommend that you plan for the possibility of this train running late.
Earlier this year, a westbound Sunset was so late by the time it hit El Paso that rather than complete its trek to Los Angeles, the company flew or bused passengers to their destinations.
It was 35 hours late.
In 2002, the Sunset Limiteds on-time rate was 25.8 percent.
The train travels three days a week in each direction between Orlando, Fla., and Los Angeles, and more than 70 percent of the track on that route is one-way. That means a dispatcher is required to duck the Amtrak train into a siding so an oncoming UP freight train headed in the opposite direction and wait for the freight to pass.
In remote areas such as West Texas, New Mexico and Arizona, sidings are few and far between, so trains often wait at a siding an hour or more for an oncoming train to pass. In such remote areas, rough spots of worn or damaged track often warrant much slower speeds than the 75 to 85 miles per hour trains can make on good track.
Grade crossings are common but grade-separating bridges are few and far between in the West, another factor slowing trains.
Add to the mix record levels of freight moving along the Sunsets route, and the result is a train that runs so late its printed schedule is virtually useless.
The train chugged into the historic train depot in Tucson last Wednesday morning, having made up an hour and 15 minutes, largely because it didnt have to pull onto a siding during its leg from Benson.
The freight railroads own most of the tracks Amtrak runs on, and despite an agreement that says Amtrak gets top priority, freight trains win the right of way at nearly every juncture, passengers say.
By policy, Amtrak does have priority, said John Bromley, director of public affairs for Union Pacific, but as a practical matter, its very difficult to do that on that route. Its probably the most congested route on our entire system.
There are other reasons Amtrak trains run lateequipment breakdowns, track work, severe weatherbut the increase in freight traffic and the lack of two-way track through Texas, New Mexico and Arizona are primary factors, said Steven Kulm, FRA director of public affairs.
With the upturn in the economy, the railroads are handling record levels of freight, Kulm said. There is no question that with not a whole lot of new miles of track being laid, and more freight trains on the tracks, congestion is going to continue to be a problem.
Passenger rail service receives less than 1 percent of all federal transportation monies. Highways receive about 43 times the amount Amtrak does; the airline industry about 20 times.
The thing about Amtrak is the entire ball of wax is so visible and conspicuous, because its primarily on one line of the federal budget, said Ross Capon, executive director of the National Association of Railroad Passengers.
The subsidies that the aviation industry and highways get are spread over many different balance sheets.
UPs Bromley said only about 30 percent of the Sunset Limiteds route is double track, a figure the company plans to raise to 60 percent by 2007.
Amtrak would also like to add more grade separations along the route, said spokeswoman Sarah Swain.
Without grade separation, as the train goes through the gates, theyll get much slower, depending on what the track speed is at that particular spot, Swain said.
Freight trains are now so long that dispatchers have no choice but to force an Amtrak train onto a siding to let the freight train through, said Mike Apperson, a dining car attendant who has worked for Amtrak for 24 years.
Quite often the freight trains, which have gotten longer and longer these days, are actually too long for the sidings, Apperson said, adding, Part of the train would actually be on the main track, so were the ones that are forced to pull out, because were shorter.
Sclar describes the federal governments historical financial commitment to Amtrak as a kind of bleeding, holding pattern, a temporary fix that ignores the fact that the railroad infrastructure, or rail bed, needs much more than a Band-Aid. The government expects the company to make a profit and penalizes it for not doing so by not providing the money needed to help it, he said.
As a result, Amtrak lost about $36 per passenger in 2003 -- $413 per Sunset Limited passengereven though many of its trains in the Northeast corridor make good time and good money, Kulm said.
Where the infrastructure is there, Amtrak works great. In the Northeast Corridor, the trains run almost like clockwork, said Dr. Elliott Sclar, a professor of Urban Planning at Columbia University in New York City. He added, Even in the West, where they dont, people still love to ride them.
Unlike Deming, Lordsburg and Benson before it, Tucson is a Sunset stop that allows passengers to climb off the train for some fresh air.
At a little after 7:50 a.m., the temperature still hovered near the freezing point, passengers were riding a train that will reach its final destination in Los Angeles 13 hours and 26 minutes late, and every single one of them seems to share the kind of calm, happy demeanor that rich people spend thousands of dollars to attain at spas like Miraval and Canyon Ranch.
December 7 was not a good day, either.
Amtraks California Zephyr, train No. 6 was about 11 hours late east of Elko, Nev. Its equipment arrived deadhead in Emeryville, Calif. on Monday evening due to HEP problems. Problems occurred in shopping the locomotives, P-42s 137 and 201 and no other units available.
Capitol Corridor Train 533 terminated at Emeryville with bustitution to Oakland, and its engine, P-42 No. 141 was taken off for train No. 6. Union Pacific freight unit 3857 was added as lead power, and the train operated to Sacramento, where Amtrak engine 138 where train No. 5 set it out was added. At Sparks, the UP engine 3857 returned to its owner.
Train 533s consist was given CDTX 2006 for its turn to train 538, which operated on time. Train 6 departed Emeryville 6 hours, 52 minutes late. It lost another hour and 52 minutes when it added engine 138 at Sacramento.
Things get bumpy sometimes back east, too.
Two switchers were required to tow a Washington-bound Acela Express back to Boston on December 6 with the electric trains pantographs down. Those are the current collectors atop the engines. The dark train, No. 2155, departed Boston at 7:20 a.m.
Amtrak spokeswoman Marcie Golgoski told D:F, It was a circuit breaker issue with one of the pans. She added passengers were delayed about two hours, but didnt know how many people were aboard.
The switchers were added at High Street Interlocking, milepost 142.9 in Westerly, R.I.
Other lines around the country sustain significant train delays as well. For example, Californias San Joaquins will be temporarily shut down in January as major trackwork starts late in the month on the San Joaquin route.
Amtrak said the 12-day shutdown, starting on January 23, is To avoid booking passengers and then having their passengers go through schedule changes, so inventory the trains on trains 701-704 and 711-718 is temporarily closed for the period through February 3.
Oklahoma faces the prospect of losing Amtrak service if funding for the Heartland Flyer is not provided by September 2005, according to a state transportation official.
Amtraks train makes daily round-trips between Oklahoma City and Fort Worth, after restarting passenger rail service on June 15, 1999. Oklahoma is paying $3.9 million on its current contract with Amtrak to provide passenger rail service, The AP reported on Friday.
We now have a contract through September of 2005. At that point in time, if we do not identify an additional funding source, we will not be able to fund the train, said Joe Kyle, manager of the rail programs division of the state DOT.
We are at a very critical point, he said.
Passenger rail boosters will be looking to the state legislature and Congress in the coming year for more money.
A bill to earmark some state revenue for passenger rail service passed the state House during the last session earlier this year, but died in a Senate committee.
Amtrak is looking for a waiver of compliance from track safety standards from the FRA.
The passenger carrier made the request on December 3.
The specific request is in reference to the provisions contained in Federal Track Safety Standards (9 CFR 213.333(l), subpart G), regarding the requirement for conducting annual instrumented wheel set (IWS) testing.
Amtrak stated the waiver would grant Amtrak relief by extending its deadline for conducting the 2004 IWS test on its Northeast Corridor.
The railroad explained, This relief provides Amtrak sufficient time to jointly resolve technical issues with FRA and allows Amtrak to better manage the expense and possible service disruptions caused by IWS testing.
Amtrak stated it anticipates that these technical issues will be resolved with FRA in early 2005. It also anticipates that further testing with IWS for 9-inch cant deficiency operation will need to take place once these technical issues are resolved.
The cant deficiency is a reference to how high the outside rail is on a curve, and is particularly critical for its Acela Express high-speed trains.
Amtrak said it want to schedule its annual IWS testing concurrent with 9-inch cant deficiency testing, and is requesting this waiver so that all testing can benefit from one installation of instrumentation for IWS.
The railroad added it wants to reduce costs and minimize service disruption.
Its docket number is FRA-2004-19756.
Southwest Florida almost has enough potential riders to support Amtrak passenger service between Arcadia and Bonita Springs, a rail advocate from Bonita Springs told state legislators last week.
About 10,000 more potential riders are needed to meet threshold of 100,000 potential riders living in the area that Amtrak requires, Alex Grantt told members of the Southwest Florida Legislative Delegation during the groups annual meeting in Fort Myers.
Besides campaigning for passenger rail service, Grantt is a Bonita Springs City Council member. Grantt urged them to have the state begin now to plan for the service and to build a relationship with Amtrak, The News-Press of Fort Myers reported.
Some of the seven legislators attending the session have heard Grantts pitch before. He spoke to them at last years session, too, but none asked him for more information.
Mike Rippe, director of the Florida DOTs Fort Myers office, said he doesnt know where the state would get the money to make Grantts ideas happen.
Providing passenger service would cost about $30 million, Grant said. That number includes improving 75 miles of track between Arcadia and Bonita Springs and the purchase of a train set including four passenger cars and a dining car.
Its a one-time cost. You dont have to raise taxes, said Grantt, who cautioned the lawmakers that his estimates could be wrong.
Im not a civil engineer. Im just an exterminator and a city councilman, Grantt said.
Progressive steps are being made in Bossier City, La. to bring a new mode of transportation between there and Dallas.
City officials along with members of the Bossier Chamber of Commerce, the Shreveport-Bossier Convention and Tourist Bureau and the casinos met with officials from Amtrak in a meeting one week ago to discuss the logistics of bringing an Amtrak station to Bossier City.
The idea (of this meeting) was to be able to say to each other this is what we want to do and kind of lay it all out, said Joe Littlejohn, chairman of the Amtrak committee formed by Bossier City Mayor George Dement.
The committee is currently working on the logistics of conducting a four-day test run in April between Bossier City and Dallas or Fort Worth to test the waters and see what the response may be but before that can happen, there are several kinks that have to be worked out.
Amtrak will have to coordinate schedules with the two railroads that have tracks in Bossier City Kansas City Southern Railroad and Union Pacific. Littlejohn described the Amtrak system as being a tenant of the freight railroads, and said it will be up to them to coordinate with the railroads.
Money for the project is also something the committee has to consider. The city currently has no plans of putting up funding for the train so other options will have to be considered. The cost of the four-day test run, an amount yet to be determined, would lie completely on the shoulders of those wishing to bring in the train.
Amtrak cannot start anything that they would have to pay for, so the funding has to come from other sources, Littlejohn said.
The other sources have yet to be announced.
But even with these challenges lying in their path, Dement said now is the time for this project to happen.
For 16 years we have made attempts to try to get this to be a reality, but this demonstration effort that were talking about is the first time that weve ever been able to get this far along, he said.
With the construction of the Louisiana Boardwalk and the Shreveport convention center, tourism is on the rise in the local area, and Dement said this new mode of transportation would only serve to increase the already growing numbers.
We have all these attractions that make this a tourist destination, he said.
The main attraction that I can see is to bring tourism to Shreveport and Bossier by the train loads.
Dement also said the train would be an attraction all by itself because many people have never ridden on a train.
Passenger train service is not just a way to get there, it is an event in itself, he said. Just to ride in the comfort and safety of a passenger train is an experience all on its own.
Dement said the advantages of Amtrak include relieving congestion on roads, fares that are cheaper than flying, and less pollution because people will not be driving their cars.
The four-day trial-run is what Dement calls an introduction to passenger train service, and the event will be open to the public.
The Amtrak committee will meet again this week to continue their work on the project.
Central Florida Rep. John Mica is pushing a plan that would move some freight train traffic out of major local cities, WESH Orlando reported last week.
The Winter Park Republican said greater Orlando is growing too quickly to keep all of the train traffic running through Orlando, Winter Park, Maitland and other downtowns. There are dozens of railroad crossings in Orlando, and when freight trains of about 100 cars go by, drivers can often be stuck for 10 or 15 minutes.
Twelve to 18 freight trains roll through the metro areas every day. Running the rails through downtowns was smart 100 years ago, but today, its a nuisance to most drivers.
Its terrible. I dont know why they cant schedule the trains to go through the middle of town at night, one driver said.
Its also a public safety hazard because it prevents emergency vehicles from getting across the tracks quickly to answer 911 calls.
Mica said its time for freight traffic to go.
At the Tri-County League of Cities, Mica said Thursday that he and the top brass at CSX are beginning talks with a goal of moving some or all freight service outside metro areas or changing their operating hours or both. That would leave the lines open for faster moving, shorter Amtrak passenger trains and, eventually, commuter rail service.
(If) we get freight out, we get hazardous materials out of Central Florida communities (and) we get the slow downs out, Mica said.
Apopka Mayor John Land is wary of any plan to send more train traffic to bedroom communities like his.
We dont want any of the rail or were going to end up with the same problem Orlando has now, he said.
Any agreement to move freight traffic out of downtown Orlando and other cities will demand approval from city and county governments.
There is no deadline to work out an agreement, but Mica said he wants it done in 2005.
Now that Gov. Jeb Bush has succeeded in getting voters to repeal the high-speed rail project they approved in 2000, he wants the panel overseeing the train venture to close up shop.
Bush made that request in a letter faxed Wednesday to C.C. Doc Dockery, the Lakeland businessman who got the high-speed train measure on the ballot four years ago, the South Florida Sun-Sentinel reported from Tallahassee on December 8.
Dockery is also a member of the Florida High Speed Rail Authority that lawmakers created in 2001 to oversee the train project.
Passage of constitutional amendment 6 on November 2 removed the mandate for developing and operating a high-speed rail system, Bush wrote, Therefore, I ask the Authority to conclude its work and execute agreements to transfer remaining activities to the state DOT.
Not so fast, Dockery said in his response.
Passage of the repeal measure last month doesnt impact the state law that created the authority, Dockery wrote back.
In my humble opinion, it would be a violation of Florida law for us to attempt to comply with your request, Dockery wrote.
The authority was scheduled to meet Thursday. When it met in mid-November, a week after nearly 64 percent of voters supported the repeal measure, authority members said the vote has not killed the project.
Instead, they said, the vote was a cue for freer thinking.
A key lawmaker, state Sen. Jim Sebesta, a St. Petersburg Republican who chairs the Senate Transportation Committee, said he wants the work to continue.
Since the projects initial approval in 2000, no construction had begun but a route and contractor were selected. The systems first leg, Orlando to Tampa, was forecast to cost $2.3 billion.
Greenbrier buys Mexico builder
The Greenbrier Cos. stated on December 7 that it now owns 100 percent of Greenbrier-Concarril, a freight car builder in Sahagun, Mexico.
Greenbrier, headquartered in Oswego, Ore., acquired Bombardiers 50 percent interest in the parties Greenbrier-Concarril freight car manufacturing joint venture in Mexico. Under the terms of the acquisition, which closed this month, Greenbrier will pay Bombardier approximately U.S. $10 million in cash installments over time for Bombardiers 50 percent stake in the Mexico facility.
Greenbrier anticipates the acquisition will be accretive to earnings, starting in the second half of its current fiscal year ending August 31, 2005, and to generate about $125 million in fiscal 2005 revenues. Greenbrier-Concarrils results will be consolidated in Greenbriers financial results. Previously it was accounted for under the equity method.
Greenbrier-Concarril said it would continue to serve the North American freight car marketplace from nearly 500,000 square feet of leased space at Bombardiers Sahagun, Mexico facility. Current capacity is about 4,000 new freight cars annually from two production lines. Both intermodal and conventional railcars are produced at the facility. In addition, Greenbrier-Concarril has a full-service wheel and axle shop.
On December 7 General Electric and Millennium Rail completed an agreement to transition rail car maintenance and repair from GEs Texarkana site to the Millennium Rail facility in Marshall, Texas.
The new long-term railcar repair and maintenance agreement will result in Millennium Rail dedicating its Marshall, Texas facility for exclusive use by GE.
GEs focus can continue to be on its core rail leasing business, the firm stated in a press release.
No fare hike for Metro,
but will spend $1 billion
Riders may not be paying more, but local governments would dig deeper under Metros proposed new budget. For the first time, management of the cash-strapped national capitals transit agency is pitching a spending plan that tops $1 billion.
Metro General Manager Richard White is proposing a two-year budget with no fare hikes. Instead, the jurisdictions that subsidize Metro would see their bills soar, The AP reported on December 9.
White says most of the growth in expenses is due to new programs and increases in payroll, pensions and fuel costs. He's also proposing hiring more than 200 people to improve passenger flow in crowded stations, step up track inspections, install more bus destination signs and speed up responses to customer complaints.
The spending plan includes $10 million in service improvements, including cleaner buses and trains, more track inspectors and additional trashcans in stations. White says money from property sales, health insurance rebates and advertising revenue would fund the improvements through 2010.
In an effort to raise more than $1 billion, New Yorks Metropolitan Transportation Authority wants to sell or lease for commercial use many of its 14,000 properties, including train stations, commuter parking lots and maintenance yards.
Fitch Ratings Service issued MTA an A+ rating last week. (See separate rating details in Business lines. Ed.)
The move to raise money comes as the agency, struggling to deal with a growing fiscal crisis, is expected to vote this week to increase fares. In a separate step to help the authority, state officials are also considering taking up to $1 billion a year in sales tax revenue that goes to New York City and instead giving it to the authority, people briefed on their discussions said yesterday.
As part of its proposal to raise money from its huge portfolio of properties, the authority is looking to hire a real estate consultant and broker to review its landholdings and buildings and draw up a plan for marketing them to developers and business owners. The agency has already solicited proposals to renovate a handful of historic train stations in the suburbs to accommodate retail shops and offices, similar to what it has long done at Grand Central Terminal.
At the Hastings, Pelham, Port Chester, Spring Valley, Tarrytown, Tuckahoe and Yonkers stations on the Metro-North Railroad, for example, the authority wants to retrofit the entire buildings for commercial use, with the exception of space for a ticket booth, rest rooms and a public waiting area. The authority said the distinctive antique stations, some with tile or slate roofs, offer businesses an excellent opportunity to quickly create an acknowledged presence in each community.
Discussion about a railway connecting Denver and Colorado Springs has been renewed thanks to the popularity of a new bus service.
The FrontRange Express, which averaged 300 riders each weekday since beginning October 11, has some business commuters and transportation watchers talking about a railway. Train service between Colorados two largest cities might attract more people because highway traffic jams wouldnt be a concern, they say.
According to the Colorado Springs The Gazette, If they had a rail, then it would take out all the worry of the driver, said Colorado Springs resident Duncan Tenney, who often makes the 70-mile drive to Denver.
A 1994 study found that upgrading freight rails between the cities would cost about $8 million per mile.
El Paso County Commissioner Chuck Brown, a member of the study committee, said the upgrade would be necessary for the trains to travel at the speed of highway traffic. The study determined a rail line would attract few riders and cost between $25 and $40 each way.
A separate study, conducted by the Colorado DOT in 2000, determined a light-rail wouldnt take enough traffic off the highway to make a difference in rush-hour traffic however, a new scenario being considered would build new freight lines along a long-planned toll road bypassing Front Range cities. That would free up current freight lines between Denver and Colorado Springs for passenger trains.
Colorados DOT has completed a study of previous research on Front Range passenger railways. The state DOT completed a study a fortnight ago of previous research on Front Range passenger rail. The study will be released within a few weeks, spokesman Bob Wilson said.
Voters have shown interest in using tax dollars for public transit.
Residents of Denver and its surrounding suburbs approved a sales tax increase last month to fund more bus service and 119 miles of new track for passenger trains.
In El Paso County, residents approved a 1-cent sales tax to pay for transportation projects. Ten percent will fund bus service.
Theres a point in time where rail is going to be the answer to the congestion that we have on the highway system, Brown said.
Plummeting revenues and mounting costs in the states public transportation system are likely to lead to cuts in the Massachusetts Bay Transportation Authoritys operating budget and may result in the curtailing of some services, Michael H. Mulhern, the MBTAs general manager, said December 2.
We have some very difficult financial decisions to make in the coming months, which will require us to make some adjustments, Mulhern said in a phone interview on December 3 with the Boston Globe after addressing the Ts board of directors monthly meeting.
We need to tighten our belts, Mulhern said.
Mulhern has not decided where cuts will be made, but he said the authority has surpassed its fuel budget and is coping with climbing healthcare costs. Diesel fuel for MBTA buses has run $11 million over its $15 million budget for fiscal 2005, and health care costs are now $5 million over budget, he said.
At least in the short run, raising fares and parking fees is off the table, Mulhern said. The board has asked me not to make any fare hikes until new fare equipment is deployed in about 18 months. We need to fix the problem in the operating budget.
The goal, he said, would be to create efficiencies and streamline services on the edge of our mission.
The authority also intends to more aggressively negotiate with its unions and plans to press them to help with the rising costs of health care, a request that has been rejected in the past, he said.
It was a hard ride through opposition, skepticism and a fatal accident, but last December 17 a proposal for a rail link to Kennedy International Airport finally became a reality: A newly built system called the AirTrain began operations, connecting several New York City subway lines and the Long Island Rail Road with the airports terminals.
The average number of people entering or leaving the airport daily on the $1.9 billion AirTrain rose from just under 5,000 in January and February to about 8,000 in each of the last five months, said the spokesman, Pasquale DiFulco.
This is less than the 11,000 daily average the agency had projected by the end of the first year, but DiFulco said that theres no question that ridership will increase, according to The New York Times.
This will occur, he asserted, as more travelers become aware of the link and as airline travel at Kennedy continues its current growth.
Another benefit of the AirTrain, he said, is that more than 20,000 people a day use it for free rides between terminals and other points within the airport.
Some critics said that as many as half the riders going to and from the airport on the AirTrain would be workers at Kennedy, but DiFulco said surveys indicated that fewer than 10 percent were workers.
New Mexicos Sandoval County is helping Gov. Bill Richardson get a commuter rail line between Belen and Santa Fe back on track, reports KASA Albuquerque. County Commissioners have voted to buy a locomotive and two coaches for the line. The commuter rail line between Belen and Bernalillo is set to start up next November with the extension to Santa Fe to follow. Sandoval Countys money is coming from bonds backed by computer chip maker Intel.
For NCI: Joe PuseySurging demand for coal has left railroads serving central Appalachias coal fields scrambling to increase capacity, and some coal producers complaining they are not being served quickly enough. Southbound CSX coal train N163-30 with engine 415 leading approaches a signal bridge near Norfolk Southerns rail plant and Tilford Yard in Atlanta on December 4
King Coal stretches carriers capacity
Surging demand for coal has left railroads serving central Appalachias coal fields scrambling to increase capacity, and some coal producers complaining they are not being served quickly enough.
Railroads transport two-thirds of coal nationwide, and CSX Corp. and Norfolk Southern Corp., the two main railroads serving central Appalachia, have reported significant increases in revenue from coal transportation for the first nine months of the year.
Jacksonville-based CSX has moved 59,000 more loads of coal during the period, and Norfolk-based Norfolk Southern has moved 39,400 more coal cars, The AP reported December 4.
Both companies say they could be moving more if they had the capacity.
Were moving record volumes of coal, but were tight on power, that is, the availability of locomotives to move it, said NS spokesman Robin Chapman.
What youre getting is a more than usual amount of trainloads of coal in our yards waiting for power to move them. This has also created a shortage of empties for our customers, he said.
Increasing capacity is a gradual process, said CSX spokesman Gary Sease.
You dont build the church for Easter Sunday, he said.
You build a railroad to meet capacity for normal demand. For periods of abnormal demand, sometimes that capacity is stretched, he offered.
The current shortage may stem from conservative forecasting in the industry, said Tom White, spokesman for the Association of American Railroads.
One of the things that threw us a curve ball is that most of our customers last year did not forecast the volume that we ended up having, he said.
CSX had up to 2,000 coal cars sitting in storage not that long ago, Sease said. Its now trying to refurbish 3,600 open top hopper cars at its Raceland, Ky., repair shop by the end of the year. The company owns 20,000 coal cars, and runs an additional 12,000 cars owned by the utilities.
Railcar manufacturers are reporting an increase in orders for all types of cars, but backlogs are at their highest level since 1998.
Rail problems have contributed to reduced sales numbers for West Virginias largest coal producer, Massey Energy Co., according to the companys most recent quarterly filing.
As we have coal piled up in one location, they may not have a train there when they need to be, said Massey spokeswoman Katharine Kenny. It disrupts the system.
The disruptions have caught the attention of NS chairman David Goode. In a recent quarterly conference call, Goode said the companys objective is to get the coal to market as rapidly as possible.
Ive learned over the years you have to take the coal business as it comes and just be prepared to handle it, he said. Thats all we can do.
The issue hasnt caused shortages at coal-fired power plants, said Bill Brier, vice president for policy with the Edison Electric Institution in Washington, D.C. Increased energy costs are forcing utilities to keep stockpiles low.
Were in regular contact with (the railroads). They know what our demand is, Brier said. The return of the economy has strained the demand for rail cars.
Canadian Pacific Ry. has installed smart technology that can predict failure in wheel bearings based on distinct sounds emitted by distressed bearings. The new technology, which is capable of reading the acoustic signatures of different defects, will contribute to safer operations and greater fluidity in Canadas busiest rail corridor, says the carrier.
The railroad spent about $450,000 in U.S. dollars to buy and install the unit, the carrier stated on December 6.
Installed at trackside about 40 miles east of Vancouver, it is the first of its kind in Canada and only the ninth in the world. It uses acoustic monitoring devices and intelligent analytical software to filter out background noise and identify the subtlest bearing sounds that signal a defect.
Defective bearings emit warning sounds well before they begin to overheat, the final stage leading to bearing failure.
Currently, the most widely used warning system called a hot-box detector is tripped by heat emitted from a defective bearing as the train rolls by, but hot-box detectors cannot measure a bearings level of distress nor can they generate the data needed to predict how long a defective bearing is likely to last before failing and possibly causing a derailment. Without this predictive ability, a train must be stopped and the defective bearing inspected at every hotbox alarm.
The new smart technology, called Trackside Acoustic Detection System (TADS), detects defects in their earliest stages, well before the risk of bearing failure. These early warning sounds are analyzed to determine how far a train with a defective bearing can safely proceed. This predictive ability eliminates unnecessary and costly train stoppages, leading to improved fluidity of rail operations and higher productivity.
We are very excited about the promise this smart technology holds for making rail operations safer and for generating higher train productivity in Canadas busiest freight corridor, said Neal Foot, CPRs Senior Vice-President of Operations.
The Transportation Technology Center, Inc., of Colorado, developed TADS a unit of the Assn. of American Railroads. Researchers isolated the acoustic signatures of different defects and programmed them into the detector. By reading these signatures, TADS can identify multiple defects in a single bearing and its data can be used to determine the severity of each of the flaws. Researchers expect the database of acoustic signatures will expand as use of the detector grows, further improving the systems predictive ability.
The TADS is located in an area where CPR and CN share each others track through a directional running agreement. Under this agreement, CPR and CN run westbound trains over the CN line and run eastbound trains over CPRs line.
In a trade arrangement, CN will use CPRs TADS in return for CPRs use of a new CN image-mapping device that takes digital images of wheels in passing trains and analyzes their condition. They will be located in the same area.
In the marketplace, CPR and CN are intense competitors, but when it comes to safety, we are ready to put down the competitive swords, Foot said.
Union Pacific, still struggling to keep its wheels on the tracks, recently hired a new safety director in San Antonio and this week will face frightened residents demanding improvements.
The San Antonio Express-News reported last week the safety position was created to ensure that a one-year agreement with the FRA would be followed. It calls for reinstructing managers and monitoring field-testing of crews.
The changes should make things better, said UP spokesman John Bromley.
Michael Mitchell, 54, a railroader since 1968, started the job last week. His oversight of safety covers more than 1,300 employees handling 60 trains a day rolling through San Antonio, a crossroads for the companys Texas network.
UP also recently replaced the superintendent in charge of San Antonio operations with Shane Keller, 35, who has a sterling safety record with the company. Other measures in the Texas city include adding workers, increasing training, and opening a safety command center.
The agreement with FRA was signed last month after a series of major train crashes this year, including two that killed five people and sparked a federal investigation.
Several minor wrecks, mostly in yards, have helped feed community fears. UP has reported at least 21 mishaps, big and small, in Bexar County this year, and it averaged two dozen a year from 2001 to 2003.
The latest was Thursday when a boxcar hit another car in a yard near KellyUSA, causing a pair of wheels to slip off the tracks, Bromley said. Nobody was hurt and damages were less than $100, but the accident was due to human error.
Its kind of mind-blowing, a little bit, that these type of incidents continue to occur, said Genaro Rendon of the Southwest Workers Union, which is helping residents organize and push for action.
With those numbers, its just a matter of time before the next fatal wreck occurs, Rendon said.
UP plants flowers trackside
to discourage trespassers
Steffen Hauser; The TablesBarberry-Berberis edgeworthiana (left) and a JensMunka rugosa rose
While it appears to be a simple task, implementing it was no easy matter.
Officials spent months consulting with botanists and railroad officials to pick the right shrub and the best places to plant them.
Ultimately, officials chose barberries and the white, pink and purple flowering rugosa rose bushes for their hardiness, height and most importantly, dense thorny branches that should be a menace to trespassers.
You can feel it even through the pants, said Chip Pew, rail safety specialist for the FRA, who experienced the shrubs prickly wrath while counting them. Not only do they scratch you, but some of the needles come off and get in your clothes.
These things almost look like a hairy branch, there are so many little spines, he said.
The plantings will cap a year of several high-profile incidents of trains striking and killing pedestrians, including several children. While one of those incidents was a suicide and another happened at a train station, they were enough to prompt Metra to launch an educational campaign last spring and spend tens of thousands more this fall to try to keep children from crossing tracks in illegal places.
They also sparked discussions between the FRA, Metra, UP and Burlington Northern and Santa Fe to determine what else could be done about trespassing, a common occurrence when people try to save time.
In the past, agencies have tried to deter behavior by working with law enforcement to ticket trespassers. In some cases, Metra has erected fences.
Installing metal fencing along 11,000 miles of track in Illinois is not only cost prohibitive, its not effective because people will quickly cut holes through it, said Pew, who also is state coordinator for Illinois Operation Lifesaver, a rail safety program.
So officials came up with another idea: thorny bushes.
Its not the first time shrubs have been planted along tracks to stop crossings. UP did a similar program in the Milwaukee area in the late 1970s, according to railroad spokesman Gene Hinkle, but it appears to be a first in the Chicago region, which has a high concentration of grade crossings.
Pew consulted with plant experts at the Chicago Botanic Garden to choose the right shrubs, which needed to grow in wind-blown, dirt-poor, rocky areas around tracks that receive only natural water.
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CSX reported last week Dubai Ports International, one of the worlds leading port operators, is buying the international terminal business conducted by CSX World Terminals and other related interests for $1.15 billion.
CSX said on December 8 the transaction will be financed from a committed facility arranged and underwritten by Deutsche Bank. Completion of the transaction is expected to take place in the first quarter of 2005
CSX World Terminals is an international container terminal developer and operator with operations in Asia, Europe, Australia and Latin America. The company owns interests in nine terminals with 24 berths, and combined future capacity of 14.6 million teus, Dubais currency.
Key existing port operations include CT3 and CT8 in Hong Kong, Tianjin and Yantai in China and operations in Australia, Germany, Dominican Republic and Venezuela. In addition, CSX World Terminals has interests in logistics businesses in Hong Kong and China, notably ATL the market leading logistics operator based at Kwai Chung.
RailAmerica (RRA) last week sold its Arizona Eastern Ry. and West Texas and Lubbock Railroad for $4.5 million. The buyer is Permian Basin Railways, Inc., which has operated the WT&L since May 2002.
RailAmerica received $2.75 million for AE, and $1.75 million and a note in the amount of $3.55 million for the sale of its shares in the WT&L.
AE owns and operates 135 track miles between Miami and Bowie, Ariz. WT&L owns and operates 104 track miles between Seagraves, Lubbock, and Whiteface, Texas.
GATX Rail said last week it bought the remaining interest in Locomotive Leasing Partners (LLP) from the Electro-Motive Division (EMD) of General Motors (GM). GATX Rail has held a 50 percent interest in LLP since its inception in 1995. Now GATX owns all of it a fleet of 486 locomotives. Terms of the transaction were not disclosed.
Peering down the tracks
Fitch expects economy to fuel rails
Following a record year for freight volumes and revenues in 2004, Fitch Ratings reported last week it expects another strong showing for the U.S. railroad industry in 2005.
Fitchs economic forecast of December 7 predicts a 3.3 percent increase in the U.S. gross domestic product in 2005, which should translate into continued growth in rail volumes and revenues. At the same time, efforts currently under way to improve operational efficiency should result in improved margins and, in turn, modest increases in free cash flow.
However, it is not expected that the railroads will use this increased free cash flow to make significant reductions to their debt loads in 2005. Recent activity suggests that the major class I railroads currently place a higher priority on returning excess cash flow to shareholders than they do on reducing debt. This, combined with the capital markets' continued appetite for railroad debt, suggests that, in general, the railroads do not feel pressure to substantially reduce their debt levels. Although the railroads will likely pay some debt maturities with cash on hand in 2005, as they did at times in 2004, Fitch believes that they will continue to focus primarily on finding ways to return cash to shareholders.
Macroeconomic forecasts for 2005 suggest that strong freight demand patterns will continue and that some modest rate hikes, likely in the 2 percent to 4 percent range, can be supported. Fitchs forecast of 3.3 percent growth in the U.S. gross domestic product is one percentage point lower than its full-year forecast of 4.3 percent for 2004. As the U.S. economy begins to throttle back somewhat from the relatively high growth level seen in 2004, rail demand should remain relatively strong. However, year-over-year carload and revenue growth figures will likely be lower than those seen in 2004.
Shipments of raw materials and finished goods are expected to remain strong as U.S. manufacturing output continues to grow. Coal volumes, which are responsible for approximately 21 percent of the revenue at the top four class I railroads, are expected to be robust. Coal demand from electric utilities, in particular, will remain strong due to a growing need for electrical power in the U.S., combined with a preference for using coal while natural gas prices remain high.
If foreign demand for U.S. coal remains strong, CSX and Norfolk Southern, two class I railroads that operate predominately in the coal-rich eastern U.S., should continue to see strong export coal volumes, as well. Intermodal volumes, which lately have driven about 18 percent of revenues at the largest class I railroads, will also continue to increase, largely due to strong U.S. demand for imported goods and foreign demand for U.S. exports.
The one significant line of business in which Fitch expects potential revenue weakness in 2005 is auto shipments. With questions surrounding inventory levels at the domestic Big Three auto manufacturers, Fitch expects North American auto production will be flat or slightly down in 2005 versus 2004, depressing railroad revenues in that area. Among the top four U.S. class I railroads, Norfolk Southern has the most exposure to the domestic auto industry, with 13 percent of its operating revenue in the first three quarters of 2004 generated by auto shipments. Union Pacific, at 10 percent, has the second highest exposure.
Although the railroads have been adding capacity in 2004 to improve operational efficiency and customer service, Fitch expects capacity will continue to remain fairly tight relative to demand in 2005. The railroads have learned from their past mistakes and are now taking a measured approach to capacity growth, adding just enough capacity to improve their operational integrity. In particular, they are being especially careful to avoid the possibility that overcapacity will occur if U.S. economic growth suddenly slows or reverses. They are also keenly aware of the revenue benefits from limitations on capacity and, in some cases, are showing a willingness to turn away business that does not meet their profit objectives. Thus, the relatively favorable supply-demand relationship will continue and should provide some pricing power to the railroads in 2005.
Though fuel surcharges have been responsible for a portion of the overall increases in revenue per carload seen in 2004, tight supply of capacity relative to demand has allowed the railroads to increase their spot rates and to negotiate more favorable pricing terms when contracts are renewed.
It is unclear how much of the 2004 price increase has been due to surcharges, as most railroads will not disclose that information for competitive reasons. However, in their 2005 planning, the major carriers are looking at opportunities to further increase their rates, as well as to incorporate fuel surcharges into many of the contracts that have not had them in the past.
As with all parts of the transportation sector, oil prices will continue to be a concern of the railroads in 2005. Oil prices are generally forecast to remain relatively high in 2005, which will continue to negatively impact operating costs, as diesel fuel accounts for roughly 12 percent of the average class I railroads operating expenses.
However, three of the top four class I railroads have significant portions of their expected 2005 fuel requirements hedged, the exception being Union Pacific. Combined with fuel surcharges, hedging should significantly mitigate the pressure of high fuel prices in 2005.
However, the biggest concern of high oil prices is not the effect that diesel fuel costs have on operating expenses but, rather, the potentially negative consequences that sustained high prices could have on the U.S. economy. Should high oil prices begin to slow growth in the economy beyond what is currently forecast, the railroads are concerned that transportation demand will wane and revenues will suffer.
High fuel prices do have some positive effects in that they magnify the cost differential between railroads and trucks, as trains are relatively more fuel-efficient than trucks. The railroads generally view the trucking industry as their primary competition, and as fuel prices remain relatively high in 2005, the railroads' competitive position will be strengthened. In some ways, this can be viewed as a natural hedge against high fuel costs. It is likely, in fact, that the trucking industry will contribute directly to higher rail revenue as it finds intermodal trains an increasingly cost effective way to move trailers and containers over long distances.
One of the biggest issues facing a number of U.S. old-line industries is the significant level of underfunding in many defined benefit pension plans. Although the major U.S.-based class I railroads maintain defined benefit pension plans for non-operational employees, the majority of railroad employees are covered by the federal Railroad Retirement Board plan. As such, although several of the largest U.S. railroads have defined benefit plans that are significantly underfunded, the size of the plans and required contributions are relatively small. Although it is likely that the railroads will make contributions to their defined benefit pension plans in 2005, Fitch does not expect that the amounts contributed will be enough to significantly constrain free cash flow generation.
With solid economic growth in the U.S., 2004 has been a banner year for U.S. railroad industry volumes and revenues. Following a drop in demand that began during the most recent recession, business began picking up for the rail industry in the latter part of 2003. By early 2004, with the economic recovery in full swing, growth in manufacturing output and increased import and export volumes supported demand for rail transportation at record levels.
Demand was also high for other railroad staples such as coal, chemicals, and agricultural products. Adding to railroad demand was a shortage of truck drivers that led to capacity constraints in the trucking industry. Through the end of the third quarter of 2004, year-to-date operating revenues at the top four class I railroad companies were up 8.3 percent from the same period in 2003. Collectively, the same four companies posted a 5.9 percent increase in transported carloads and, importantly, a 3.0 percent increase in revenue per carload.
Against this backdrop of increased demand was a relatively constrained supply of rail capacity. During the recession, the railroads cut back on spending and non-essential investments in track and equipment. They also took steps to reduce employee headcount. However, subsequent to these cutbacks, the relatively brisk recovery in the U.S. economy, combined with the trucking shortage, meant that rail demand quickly exceeded available capacity. Although this supply-demand scenario helped boost railroad revenues, the sudden increase in demand also quickly revealed the weaknesses in railroad networks. While revenues were up, profitability was challenged as some major rail carriers, most notably Union Pacific and CSX, saw the fluidity of their networks decline. Average train velocities at these carriers fell, and their cars spent increasing amounts of time parked in rail yards. The percentage of on-time departures and arrivals was down sharply, while labor costs were pressured as increasing numbers of standby crews were needed to operate trains when scheduled crews were out of position.
Reacting to this decline in performance, the major railroads have begun focusing on correcting operational problems and are taking steps to add capacity where necessary to improve the flow of their networks. They are growing capacity through a combination of adding locomotives and rail cars, hiring train and engineer employees, and reworking their networks to improve operational fluidity.
Union Pacific is in the process of adding more than 700 locomotives to its system and hiring 5,400 train and engine employees. CSX is also adding a significant number of locomotives and employees, and has launched an initiative it calls the ONE Plan that aims to improve network flow and available capacity by optimizing car routings.
The railroads focus on improving network efficiency should begin to yield results in 2005. Although the additional capacity will result in some higher costs, particularly in the areas of labor and equipment leases, and may also drive marginally higher levels of capital spending, savings related to better network utilization should offset these increases. This should translate into lower costs per carload and improved operating margins.
As the railroads financial position has begun to improve, returning cash to shareholders has become a key priority. As share prices have risen, this has generally been accomplished through dividend increases, rather than share repurchases. Currently, BNSF is the only U.S.-based class I railroad with a share repurchase program in place.
However, three of the four class I railroads have significantly increased their quarterly dividend payouts since early 2003.
Between the first quarter of 2003 and the third quarter of 2004, Norfolk Southern increased its quarterly dividend by 43 percent, BNSF by 42 percent, and Union Pacific by 30 percent. However, CSX kept its quarterly dividend constant. Over the past 12 months, Union Pacific used $291 million in cash for dividend payments, while cash used for dividends was $224 million at BNSF, $133 million at Norfolk Southern, and $86 million at CSX. Fitch expects that higher levels of pre-dividend free cash flow will lead the railroads to consider further dividend increases or share repurchases in 2005. However, with relatively high stock prices, the railroads are likely to favor increasing their dividends over repurchasing shares.
Fitch Ratings assigned an A+ rating to the approximately $120 million Metropolitan Transportation Authority of New York City dedicated tax fund bonds, series 2004C.
The bonds are expected to sell through negotiation by a Lehman Brothers-led syndicate on or about December 14. Bond proceeds will be used to finance a portion of the MTAs 2000-2004 capital program and to pay the cost of issuance. In addition, Fitch affirmed the A+ rating on $2.9 billion in outstanding DTF bonds. Fitchs rating outlook on the DTF bonds is stable.
Fitch said the A+ rating is based on the amount and diversity of pledged revenues to the DTF, which are subject to annual appropriation by the state legislature, for debt service on its bonds. It also reflects an expectation that the MTA will continue to maintain sufficient financial flexibility within the DTF to cover debt service amply on the DTF bonds, as well as provide sizable transfers to the authority that are primarily used to support transit and commuter rail operating needs.
The bonds are secured by a trust estate primarily consisting of the pledged amounts account, which includes the MTAs entire portion of Dedicated Mass Transportation Trust Fund (MTTF) receipts and the MTAs entire portion of Metropolitan Mass Transportation Operating Assistance Account (MMTOA) receipts. Although tax revenues allocated to the DTF are subject to annual appropriation by the state legislature, this risk is hedged, since the state has in place a two-year appropriation mechanism for a portion of the DTF revenue stream.
DTF tax revenues are sensitive to economic cycles and affected from time to time by legislative actions that add exemptions to the tax base and/or lower certain tax rates. However, the states track record has been to provide a generally reliable stream of revenues, as demonstrated by increasing allocations of existing revenue sources and providing new sources to help offset the effects of tax base and rate changes and to meet growing operating and capital needs.
The monthly debt service requirement is first met by all MTTF receipts, which are derived from an allocation of statewide petroleum business and motor fuels taxes and motor vehicle fees. To the extent MTTF receipts are not sufficient, MMTOA receipts, which are derived from regional sales and franchise taxes and statewide franchise and petroleum business taxes, are then applied to debt service. Surplus MTTF and MMTOA receipts are available for any subordinated DTF debt service, then to the MTA for operating and capital needs of the transit and commuter rail systems, including debt service on the MTAs transportation revenue bonds (rated A by Fitch), which are also secured by the authoritys operating receipts and other sources.
Between 1998 and 2003, debt service coverage against MTTF receipts and against both MTTF and MMTOA receipts was at least 3.2 times (x) and 8.5x, and is expected to be 3.4x and 7.8x in 2004, respectively. With the issuance of the series 2004C bonds and $280 million series 2004D variable rate demand bonds expected later this month, debt service coverage next year is projected to decline, but still be strong at 2.6x against MTTF receipts and 6.6x against both MTTF and MMTOA receipts. Although additional DTF bonds are expected to finance the MTAs capital program, Fitch expects the authority will maintain high coverages based on its need to sustain operating subsidies, which are paid after debt service. This necessity provides practical limits to the amount of debt issued in the future.
Greater than expected real estate tax collections, lower debt service costs, and deferral of certain expenses to 2005 are projected to provide the MTA with a 2004 ending balance of $639 million, substantially higher than initially projected. Although the MTA is expected to end 2004 in a better position, it is projecting cash deficits before gap-closing actions of $116 million in 2005, growing to $1.9 billion in 2008. The MTA attributes these projected deficits to the combined effects of growing debt service expense, additional pension contributions, growing health and welfare benefit costs, and depletion of non-recurring resources. The MTA expects to balance the 2005 budget by utilizing most of the surplus funds, raising transit, commuter rail and toll rates, and implementing certain expense reductions.
Although these gap-closing actions are expected to balance the 2005 budget, these measures along with additional 2006-2008 revenue and expense strategies address about one half of the out-year gaps. Without additional subsidy support, the MTA may implement further fare and toll increases and service- and non-service-related expense reductions to close the projected 2006-2008 budget gaps.
The MTAs 2005-2009 capital program identifies $27.8 billion in needs, to replace and maintain existing assets and to provide additional capacity and new services. Similar to prior years, Fitch expects the MTA to work with its funding partners over the next several months to develop a funding and financing strategy for the capital program and gap-closing measures to address the projected financial plan deficits.
The MTA is responsible for North Americas largest transit network, serving 2.3 billion riders annually. The authoritys network is essential to the economic well-being of the region, handling 80% of all daily trips to Manhattans business district.
In the trucking industry, business is booming, but thats creating a shortage of drivers.
A combination of government regulation and economic pressure has reduced earnings, making the once-lucrative profession less attractive, Medill News Service reported on December 5.
Freight transportation has grown by more than 50 percent since 1990 and now accounts for about 10 percent of U.S. gross domestic product, according to USDOT. Freight tonnage is expected to increase 70 percent by 2020 with the industry facing a shortage of at least 40,000 drivers, mainly for long-haul business, lasting through 2010.
You see a problem, you figure out a way to solve it, said Bill Carpenter, founder of PTO Services, Inc., a truck-driver leasing firm in Oak Brook, Ill.
One solution is moving more freight by rail. As a result, freight car manufacturers are experiencing a backlog of more than 60,000 car orders, the largest since 1999.
A lot of truckload carriers are putting long-haul freight on the railroads, said Bob Costello, chief economist for the American Trucking Assn., a trucking trade organization. He added, Were one of the biggest customers of the railroad industry, and theyre trying to accommodate us by putting even more freight on the rails.
Some trucking firms that pay per-mile have switched to a late-night schedule so their drivers can avoid traffic and get in more mileage per shift.
Some carriers are paying more, Carpenter said, noting, The unions have become more active and most of us are not fighting the unions. These guys deserve a good wage, good health plan, good pension plan, and good vacation. Employers are becoming a little more realistic in their outlook and trying to make the industry a little more attractive.
The root of the driver shortage arose in the 1980s when the government deregulated the trucking industry and in turn imposed a number of stricter laws, Carpenter said.
The government cracked down on drug and alcohol abusers and restricted employment of people with disabilities. It also cut the drivers maximum number of hours on the road to 11 per day and 70 per seven consecutive days, and mandated that drivers be at least 21 to drive interstate freight.
Long-haul truckload companies usually keep drivers on the road for three weeks at a time, and with regulations limiting the number of hours on the road per day, many drivers have shied away from such a system because of the time away from home.
You can earn a good living, Costello said.
No college degree required, and the average driver makes $43,000 a year with that forecasted to rise but on the other side, there are a lot of those drivers who are out on the road for a significant amount of time before they get home. That makes the job less attractive, especially for people who are away from their families.
At the same time, however, the short-haul portion of the trucking industry has hardly felt the driver shortage.
Chicago-based USF Corp., for instance, continues to grow as drivers find the shorter trips it specializes in much more appealing, said spokesman Jim Hyland. Its an attractive position for a driver, so they can be home with their families.
Shares of Union Pacific Corp (UNP) fell 1.7 percent to $61.98 on Thursday after Merrill Lynch downgraded the railway company as part of a broader update of the industry.
CBS MarketWatch reported analyst Ken Hoexter cut his rating to neutral from buy, saying the 15 percent gain in the companys share price since August leaves a slim 3 percent upside to his price objective. In addition, UP is suffering from congestion issues, which have lingered for longer than expected, and could indicate more capital expenditure on the horizon.
Hoexter was more upbeat on the rail industry as a whole, saying it should sustain earnings growth of 9 to 10 percent in 2005, well above the 4 percent growth forecast for the S&P 500 Index. As a result, Hoexter raised his price target on four other railway companies. Burlington Northern Santa Fe (BNSF) saw its price target lifted by $6 to $56, Canadian National (CN) also got a $6 lift to $66, while CSXs (CSX) price target was upped by $5 to $47 and Norfolk Southerns (NSC) by $7 to $43.
|Burlington Northern & Santa Fe||(BNI)||45.66||46.40|
|Florida East Coast||(FLA)||43.17||43.89|
|Genessee & Wyoming||(GWR)||25.62||27.43|
|Kansas City Southern||(KSU)||16.58||17.48|
|Providence & Worcester||(PWX)||12.26||12.25|
Intermodal volume tops
10 million for first time
For the first time ever, intermodal volume on U.S. railroads has topped 10 million trailers and containers in a single year, the Association of American Railroads (AAR) reported on Thursday.
During the week ended December 4, railroads moved 232,798 trailers and containers, up 14.9 percent from last year. This brought the total for the year to 10,196,913 trailers and containers, up 10 percent from the first 48 weeks last year when the previous annual record of 9,943,362 was set.
Also for the week ended December 4, carload freight, which doesnt include the intermodal data, totaled 349,727 cars, up 0.6 percent from a year ago with loadings up 3.7 percent in the East and down 1.9 percent in the West. Total volume was estimated at 32.8 billion ton-miles, up 0.6 percent from last year.
Eleven of 19 carload commodities registered gains from last year, with metallic ores up 20.1 percent; lumber and wood products up 16.4 percent; and metals up 16.4 percent. Among commodities reporting declines were grain, down 16.2 percent; other farm products, down 23.5 percent; and coke, down 10.8 percent.
The AAR also reported the following cumulative totals for U.S. railroads during the first 48 weeks of 2004: 16,184,086 carloads, up 2.9 percent from last year; and total volume of an estimated 1.491 trillion ton-miles, up 5.0 percent from last years first 48 weeks.
On Canadian railroads, during the week ended December 4 carload traffic totaled 71,163 cars, up 1.3 percent from last year while intermodal volume totaled 44,248 trailers or containers, up 4.8 percent from last year.
Cumulative originations for the first 48 weeks of 2004 on the Canadian railroads totaled 3,238,834 carloads, up 6.9 percent from last year, and 2,023,461 trailers and containers, up 0.3 percent from last year.
Combined cumulative volume for the first 48 weeks of 2004 on 15 reporting U.S. and Canadian railroads totaled 19,422,920 carloads, up 3.5 percent from last year and 12,220,374 trailers and containers, up 8.2 percent from last year.
The AAR also reported that originated carload freight on the Mexican railroad Transportacion Ferroviaria Mexicana (TFM) during the week ended December 4 totaled 7,314 cars, down 15.8 percent from last year. TFM reported intermodal volume of 3,218 originated trailers or containers, down 9.5 percent from the 48th week of 2003. For the first 48 weeks of 2004, TFM reported cumulative originated volume of 417,918 cars, up 3.2 percent from last year, and 181,774 trailers or containers, up 8.0 percent.
Railroads reporting to AAR account for 88 percent of U.S. carload freight and 95 percent of rail intermodal volume. When the U.S. operations of Canadian railroads are included, the figures increase to 95 percent and 100 percent. The Canadian railroads reporting to the AAR account for 90 percent of Canadian rail traffic. Railroads provide more than 40 percent of U.S. intercity freight transportation, more than any other mode, and rail traffic figures are regarded as an important economic indicator.
The AAR is online at www.aar.org.
Regarding your reference (D:F December 6) to the MTA Its Metropolitan Transportation Authority.
(Its the one without Charlie riding it all day).
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