Amtrak Caltrain "Low Ball" Bid?
Letter from Amtrak Reform Council Member Wendell Cox to 28 October 2001
Honorable Kenneth M. Mead,
Subject: Possible Amtrak Caltrain Revenue Reduction Dear Mr. Mead: I know that you are completing your latest annual report on Amtrak self sufficiency. I have just been provided with information of potential relevance to your analysis. The November 1, 2001 meeting, the Peninsula Corridor Joint Powers Board (Caltrain) contains an agenda item to award a contract to Amtrak to operate commuter rail services for the period of November 11, 2001 through June 30, 2006. There are indications that Amtrak may have bid a lower unit cost rate than is in its current contract. This could make it more difficult to achieve self-sufficiency. This provisional analysis below (Table) suggests that the new Caltrain contract would reimburse Amtrak at an annual inflation adjusted and service level adjusted rate 13.2 percent ($5.4 million) less than the 2001 reimbursement. This would reduce Amtrak revenues by nearly $25 million over the contract period. Depending upon the details of Amtrak's strategic plan with respect to this contract, there might be an even larger net negative impact. There is no indication that Amtrak has obtained improved labor productivity, labor concessions or "give-backs" that would justify such a cost reduction.
Further, such a unit cost reduction could be reflective of a federal taxpayer subsidy by Amtrak to this local commuter rail service. While this is of no relevance to self-sufficiency, it could raise public policy or even legal issues. It is possible that there is an explanation that is consistent with an Amtrak self-sufficiency scenario. Moreover, as labeled, the analysis above is provisional, and has been completed under a short time constraint. I felt it appropriate to bring these issues to your immediate attention, given their potential impact on self-sufficiency and your statutory responsibility to analyze Amtrak's financial performance Sincerely,
Wendell Cox,
cc:
Enclosures:
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