Fixing Amtrak-State Relations Strained by Section 209

By Jim Mathews / President & CEO

Amtrak’s top leadership agreed with nine specific recommendations from the Office of Inspector General (OIG) aimed at repairing broken and mistrustful relationships with state partners on state-supported regional routes, pledging to implement some reforms as soon as the end of next month and to complete all the recommendations by October 31 next year.

Among the more significant moves: Amtrak management says it will work out the extent to which the railroad and the states will share fixed asset and other capital costs and if they can’t do so, they’ll work closely with the State-Amtrak Intercity Passenger Rail Committee (SAIPRC) to get Congress to solve the problem.

Section 209 of the 2008 Passenger Rail Investment and Improvement Act (PRIIA) governs how Amtrak supplies short corridor services to states, defines those services as routes of 750 miles or less, and requires mechanisms to bill states for their share of the costs. Section 209 has been troublesome, to say the least, provoking mistrust and sometimes outright anger among state partners having to pay the bills and advocates looking to launch new and expanded services to and through places which can’t necessarily afford to pay.

In the view of this Association, Section 209 is a fundamentally broken provision, but the accounting complexity at the heart of Section 209 has been an especially enormous obstacle to service and progress.

Wading into this long-simmering dispute between Amtrak and disgruntled state partners, OIG on Wednesday allowed that Amtrak has taken genuine and concrete steps to make the billing process more accurate and transparent. But OIG also noted that, overall, most of the 20 state partners they spoke to still have either low or moderate trust in what they’re getting from Amtrak.

Significantly, the seven partners with the lowest level of trust account for roughly half the revenue and ridership on the state-supported routes.

“Going forward, the company has real time opportunities in its ongoing negotiations to improve relationships with its state partners, enhance its process for implementing the methodology, and better assure state partners that their bills are accurate,” OIG said. “Resolving the remaining challenges and their resulting tensions would help position the company for success in managing relationships with its current and future state partners, especially given its plans to expand passenger rail service to as many as 160 new communities in 16 new states over the next 15 years.”

Driving the OIG’s recommendations were three conclusions from its audit. Fourteen years on, Amtrak and the states still can’t agree on how much control states can and should have on decisions that affect their service and the costs those decisions impose. In addition, 18 of the 20 state partners OIG interviewed as part of their audit believe there is no strong correlation between some of the costs they pay and the level of service they receive. And Amtrak’s customers have unresolved questions about the accuracy of the bills they receive.

Amtrak is putting at least one recommendation in place right away: establishing a policy to ensure that when there are system changes coming that could “materially impact” costs absorbed by the state partners, Amtrak will communicate that quickly and accurately. The railroad says that by March 31 it will issue “control narratives” to its outside auditors detailing this policy and process.

“Today, a control exists where changes to APT that may have an effect on the Section 209 formula are periodically reviewed, with both the State-Supported Business Line and with SAIPRC through the Cost-Sharing Working Group,” Amtrak told the OIG, noting that it is this process that will be “formalized” next month.

APT is the Amtrak Performance Tracking System, which it worked with the U.S. Transportation Dept.’s Volpe Center to develop as a way of implementing the PRIIA’s Section 209 requirements around state-supported routes. The APT system must have a rule for every unique expense transaction so the company can allocate costs using statistics, and these dictate how Amtrak will allocate shared costs. The IG reports that the APT system processes more than 7 million data records per month and uses about 60,000 rules and 47 statistics to allocate costs to the company’s various routes, including its state-supported routes.

By the end of September of this year, Amtrak is saying that as it finalizes its revised cost methodology it will clarify and document:

>Decisions that affect state-supported costs Amtrak must control, when and how it will communicate those decisions, and the level of state control over other decisions;

>The level of support Amtrak will give state partners, and;

>The company’s process, stakeholders, roles and responsibilities, and quality assurance steps involved in implementing the methodology and calculating state partner costs.

Amtrak is working through SAIPRC on these issues.

By October 31 of this year, Amtrak told OIG it would develop a process to track – and to share with state partners – the number, type, and magnitude of billing errors. Billing errors were a huge source of friction between partners and Amtrak, and drove a lot of the “low-trust” findings OIG reported.

A year later, Amtrak tells OIG that management will have settled and documented the extent to which the company will continue to use allocations to determine the state partners’ share of costs and how much Amtrak and state partners will share of fixed asset and other capital costs.

You can download the entire 70-page OIG report by clicking on this link text.