Sunday, December 19, 2010

Containing Caltrain's Costs


BAY AREA -- The average salary for a Caltrain employee went up nearly $20,000 in just the past three years. This comes just as the agency has been planning fare hikes.

The average salary for a Caltrain worker during the fiscal year that ended in September was just over $68,000. It was slightly under $49,000 in 2007.

The number of workers making at least $90,000 also went up, from 15 to 80. The Mercury News says the raises came because Caltrain has to pay whatever wages are negotiated between contractor Amtrak and its unions.

Meanwhile, Caltrain plans to cut service and raise fares starting January 1st.


Caltrain. Before anything is done to help them, they have to get their house in order. They are mismanaged. The executive team takes home huge salaries and they are seriously over-staffed. They need an operator contract that is far more parsimonious than that with Amtrak. Like in many cities, the Caltrain staff-benefits package and the Amtrak benefits-package are runaway.

However, Rosenberg's article (below) neglects to point out that the blame does not only belong to Amtrak and it's Union-driven salary scales; it also belongs to Caltrain management itself. In the case of Amtrak, fortunately Caltrain is now finally seeking other service providers to operate the trains at lower cost.

There is a mounting effort, in the form of a Peninsula group called 'Friends of Caltrain,' that are seeking to generate permanent subsidy funding for Caltrain operations. These funds would derive, most likely, from some form of taxation. Unfortunately, there appears to be no interest so far among this group's promoters to consider the various confounding issues connected with Caltrain's ostensible fiscal dilemma.

So, I'll jump to the bottom line of our discussion of Caltrain, with our conclusions first, and explain it after:

Before we give them one additional dime of our tax dollars,

1.We want an independent audit from Caltrain; a complete examination of their books.

2. We also want an independent management consulting firm to analyze and assess their organization and management structure, with recommendations for updating, especially for their financing.

3. We want to see a revised strategic plan from them conceived without high-speed rail participation. Also, especially under the current circumstances, we want a termination of the MOU agreement between Caltrain and the authority.

4. We need them to drop their electrification obsession. DEMUs (see Wikipedia) will do the same job as electrification and EMUs, but for a great deal less capital development investment. It's our money and we want it spent wisely.

5. We want a complete restructuring of the non-functional, rubber stamp JPB. We want elected representation from each and every city on the Caltrain corridor on such an expanded Board. And we want this Board empowered with greater decision-making, accountability and oversight authority.

6. We want a break-up of the several layers and overlapping organizations led by a single CEO, Mike Scanlon, heads. Too many pies, with only one and the same finger in them all. It reeks of conflicts of interest.

7. We want an airtight Caltrain agreement that they will not admit any other rail operators (besides UPRR and themselves) on the rail corridor without the concurrence of ALL the corridor cities.

Please understand that the CEO of Caltrain, Mike Scanlon, is making $400,000. annually while he is publicly wringing his hands about an impending "bankruptcy." He expects a $30 million shortfall this coming fiscal year.

The issue of Caltrain's financial problems keeps re-surfacing and therefore it is necessary to draw a set of clear distinctions and issues, especially now, when we learn that HSR won't be coming to the Caltrain corridor for at least ten years.

What do we want?

The residents and people who work on the Bay Area Peninsula rightfully want a well managed and effective commuter rail service on the Caltrain corridor. The current service, although in deep financial difficulties, needs to be improved in a variety of ways. Just providing new, reliable subsidy funds won't cut it. And neither will their much desired electrification.

Let's offer a description here of what Caltrain ought to be. It already is a mass-transit utility; a public service operated by a government agency dependent on tax subsidies. It's effectiveness ought to be measured by its ability to carry the greatest number of people at the lowest possible cost. It is intended to be a deficit operation, not a profitable one. Therefore it ought to be an economically parsimonious service, operated optimally without excessive overhead.

Caltrain's operation should be convenient and interconnected/integrated with all the other multi-modal transit operators around the Bay. Connectivity is central to their effectiveness. Indeed, a single umbrella organization (certainly not the MTC!) that coordinates the dozen or more transit operators would be a giant step in increasing transit productivity, and would benefit from various economies of scale.

Caltrain is heavy rail only for historical reasons, having been preceded by a freight carrier (that also provided passenger service) who still operates on these tracks. Given the short distance, heavy rail is not necessary or desirable; newer, lighter rail service can do the job at lower cost. Hence, reference to DEMUs is appropriate.

Caltrain's structural deficit and how they got there.

Caltrain has been running annual deficits for years, including those years when the economy was thriving. Because this agency relies on subsidy funding, which it has been receiving erratically from the three major transit agencies in the three counties on the Peninsula, it never had a reliable and predictable source of these essential supplemental funds.

As the state reduced its contributions to Caltrain's operating budget, the several transit agencies also reduced theirs. Mike Scanlon, who is also the head of SamTrans, one of the subsidy sources for Caltrain, cut off a large portion of the funding for Caltrain. Then, he complained about Caltrain's revenue losses, which he himself imposed.

Shouldn't Caltrain's highest priority have been to establish secure and reliable subsidy funding over the past ten years? Instead, they have been pursuing capital development upgrades as their highest priority. As we all know, buying new shiny trains and ribbon cutting are much sexier than negotiating additional funds to keep operating.

Caltrain has envisioned the advent of high-speed rail on their rail corridor for years. They anticipated that HSR would, with its massive funding for capital development on the corridor, provide Caltrain with electrification, total grade separation of all cross-streets, and further funding for safety and signalling systems. They even argued that this electrification cum EMUs would result in cutting their deficit in half. (Also, HSR would build two additional tracks on an expanded corridor. The expansion of Empire!) That was their vision.

The wrong vision.

Caltrain, the offspring of Southern Pacific and then Union Pacific railroad companies, has always believed that they were in the railroad business, when they should have understood that they are in the commuter mass transit business. The point is that Caltrain erroneously obsesses about capital development hardware upgrades with new trains and other bells and whistles. At the same time, they have neglected their single most pressing problem, the subsidy funding that keeps them operating.

To be sure, the economy has not helped. Urban transit revenue reduction has not affected Caltrain alone. Most transit operators in the US have found themselves in similar deficient circumstances. The problem has not been loss of ridership. To the contrary. But, since farebox revenues constitute only 40% of the operating costs, Caltrain's operating fund losses became a structural deficit.

Would they be better off financially with more riders? No, and that's the wrong, or at least incomplete, question. The issue is how to optimize the service to encourage more riders, which is their job, and serve them optimally, with fully occupied passenger cars. That maximizes cost-effectiveness. Running half (or worse) empty trains is wasteful. (A full or empty train cost the same to operate.) So is not running enough trains during high demand periods. Shorter, lower operating cost train sets run more frequently is a good step, as is greater flexibility to accommodate demand changes.

Caltrain's salaries are too high. Their headcount is too large. They added personnel, especially during those times when Caltrain made large capital development expenditures. And kept them after the work was completed. There have been both consequential salary increases and ever more generous retirement packages. Caltrain's management team has been very generous with itself, as Rosenberg's article describes.

One of Caltrain's first efforts to rectify it's gloomy financial picture should be a draconian re-structuring of it's personnel.

The High-Speed Rail problem

In it's eagerness to obtain major corridor upgrades on someone else's dime, they signed an MOU (memorandum of understanding) with the CHSRA. A kind of marriage contract. Caltrain would receive all those corridor upgrades in exchange for the rail authority utilizing the rail corridor for its inter-city trains.

Not a good bargain. They gave away the store. Most tenant rail operators pay lease fees to the owners of the ROW. It's standard practice. Once occupying the Caltrain corridor, HSR will be there in perpetuity.

Never mind that they don't even have the legally required permission from Union Pacific. So, here is cash-poor Caltrain, facing possible bankruptcy, but unwilling to endanger their "marriage" with HSR by asking for appropriate annual fees from a rail-line that promises large profits for itself. Such a bad deal!!!

What we are proposing, as we began this discussion, is that Caltrain "divorce" HSR, which won't do squat for it over at least the next decade, if ever, and consider a marriage with us, the three counties that are the actual "owners" and users of the Caltrain corridor. Indeed, our three counties invest considerable sums annually into Caltrain operations.

We are their customers; they are there to serve us. We are agreeable to paying for this service just so long as they impose no harm upon the Peninsula. That's what would happen if they admitted HSR on the corridor, and that's something we simply do not want.

The ball is in your court, Caltrain.


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Employees cost Caltrain by cashing big raises during tumultuous time

By Mike Rosenberg

Posted: 12/17/2010 07:57:14 PM PST

Updated: 12/18/2010 09:12:34 AM PST

The engineers, conductors and other employees who keep Caltrain running cashed raises totaling nearly 40 percent in the past three years, even as the commuter rail line has been speeding down a path toward fiscal ruin.

The average rank-and-file employee who works for Caltrain earned $68,307 in the fiscal year that ended in September, up from $49,862 three years prior, according to salary data provided by Amtrak, which supplies the workers.

The raises were not the result of extravagance by Caltrain. Rather, they came because Caltrain, under its contract with Amtrak, must pay whatever wages are negotiated between the national railroad and its unions. The negotiations raise Caltrain's budget even though local officials have no seat at the bargaining table.

The pay hikes are virtually across-the-board, and 80 staffers earned at least $90,000 in the most recent year, up from 15 three years earlier.

In all, Caltrain has paid its work force an additional $5.9 million since 2007 -- enough money to keep service running on weekends and during off-peak hours on weekdays.

Facing a growing deficit, Caltrain leaders are drafting plans to halt all trains during those periods, leaving only commute-time service as early as late 2011, having recently trimmed the schedule by 12 percent and raised fares.

Some of Caltrain's 38,000 daily riders between San Francisco and San Jose who were interviewed at the San Mateo station Friday morning said news of the raises was startling as they deal with paying more for less service and combat their own precarious employment situations.

Their most common response: "Are they hiring?"

"I think this is a big sham," said San Mateo resident Robert Mendez, 45, who depends on Caltrain because a spinal injury prevents him from driving. "That's a pretty good raise, especially for what they do."

Unions representing the 400-plus employees -- who include everyone from electricians to coach cleaners and maintenance workers -- argue they deserved the pay increases and had gone years without salary bumps earlier in the decade.

Amtrak officials said their hands are tied by national labor agreements, and they have virtually no wiggle room to help Caltrain or any individual agency during trying times. And Caltrain defends the contract as an affordable way of doing business.

While their pay has increased much more sharply than their counterparts' in the Bay Area, their new salaries are not atypical.

Salary increases for line-level employees in the past three years totaled 8 percent at BART and 7 percent at the Santa Clara Valley Transportation Authority. The average BART worker now makes $67,000, while the typical operator at VTA -- usually some of the agency's highest-paid employees -- earns $65,000.

How did it happen?

Caltrain administrators in San Carlos oversee the rail line but have contracted the railroad's operation and maintenance to Amtrak, the nation's largest such company, since it took over commuter service in 1992.

Caltrain thus bears the brunt of whatever salary deals are struck between Amtrak and its unions. In fact, Caltrain administrators -- who have seen their own payroll rise 14 percent in three years -- have long said they don't know what their rank-and-file employees make.

The recent wage increases were almost entirely the result of a new contract reached between powerful, centuries-old U.S. rail unions and Amtrak's management, based in Washington, D.C.

The unions threatened to strike in 2007 -- thereby shutting down the nation's Amtrak-operated rail lines, including Caltrain -- if the employees did not get big pay hikes. But an emergency mediation board appointed by President George W. Bush helped the parties reach an agreement based largely on the government's recommendation to hand out salary increases similar to what freight railroad workers had already received.

The deal Amtrak and 19 union groups struck in 2008 not only included pay hikes for that year and the next, but also built-in retroactive wage bumps dating back as far as 2002. The Brotherhood of Locomotive Engineers and Trainmen, one of the larger unions, received a 33 percent total hourly wage boost, for instance.

"It really doesn't matter that it's Caltrain or Metrolink (in Southern California) or even state-sponsored trains," they all got the same raises, said Pat Merrill, Amtrak's western assistant vice president for policy and development. In all, 16,000 employees received salary increases in a contract that cost Amtrak $436 million.

The salary increases for staffers assigned to Caltrain were also due in part to cost-of-living adjustments, changes in work hours and overtime.

Efforts fall short

Merrill said Amtrak has tried to decrease Caltrain's costs by moving some workers to day shifts and fueling trains in Santa Clara County instead of costlier San Francisco.

"We're working very closely with (Caltrain) to reduce the contract every time they indicate they need to restructure something," Merrill said.

But the effort has not done much good. Caltrain's contract with Amtrak has jumped from $49.3 million in 2007 to $57.9 million in the recently completed fiscal year, even though the amount of work and staff has dropped as the agency has cut service. Employee pay makes up about half the contract and one-third of Caltrain's total spending.

Defending their pay

The employees and some local union representatives said they are not authorized to talk to reporters, and their bosses at labor headquarters did not return repeated calls for comment. But those who agreed to speak on the condition of anonymity defended the pay hike.

"We're still (in the) lower tier as far as various railroads across the country, as far as pay rate goes," one veteran Caltrain conductor said. "When (increased) medical expenses are factored into it, our raise was extremely minimal."

Union officials blamed Caltrain's financial problems on other factors, such as state and local cuts -- which, along with falling ridership and the salary increases, have led to the budget woes.

"If you go without a wage increase for (a while) and finally get one, it's going to be a big one. That's the bottom line," a local union rep said. "I didn't get a pay increase for the entire Bush administration."

Another union official, when asked if the employees deserved the wage hike, said: "Everybody deserves a pay increase, don't they?"

Future unknown

Caltrain public affairs chief Mark Simon said contracting is common practice for train lines -- Amtrak provides service for three other U.S. commuter agencies -- particularly because the work is highly specialized.

"It certainly is cheaper than hiring an entire railroad operation staff, I think we can safely say," Simon said.

Still, the current contract, signed in November 2001, will expire at the end of June. Amtrak has applied to keep control of the service, and Caltrain said it has received "multiple" competing offers.

"We think Amtrak's worked out well as our contractor, but we're happy to be going to the market," Simon said.

Mike Rosenberg covers San Mateo, Burlingame, Belmont and transportation. Contact him at 650-348-4324.