Amtrak Presentation to the California Transportation Commission

1. AmtrakPresentation to the California Transportation Commission February 19, 2009 Anne Witt, Vice President Amtrak Strategic Partnerships

2. Today’s Discussion • Amtrak’s California Partnership • New Federal Mandates • Implications of Success / Issues Moving Forward

3. Amtrak’s National System Amtrak’s national system spans 21,000 route miles and serves 527 stations in 46 states

4. Amtrak Short Distance CorridorsIncludes 19* State-Supported and 8* System Corridors *3 Corridors are partially state funded

5. FY08 Ticket Revenue & Ridership Actuals

6. California: Amtrak’s Premier Partner • Approximately 70 daily intercity trains • Three State Sponsored Corridors • Four Long Distance Trains • Two Major Maintenance facilities • Los Angeles • Oakland • In Fiscal Year 08: • More than 1 in 5 Amtrak riders in California • Corridors equal 19.3% of Amtrak system ridership • 11,866,636 total boardings/alightings • 2,740 CA residents employed • $127,700,783 spent for goods and services Capitol Corridor San Joaquins Pacific Surfliner

7. Top Ten Corridors by Ridership, FY 08 Corridor Ridership Length Change from FY07 Frequencies NEC 10,897,852 457 mi +8.6% 158 Surfliner 2,898,859 128 mi +7.1% 25 (SD-SLO) Capitol 1,693,580 133 mi +16.8% 32 (SJ-Sacramento) Keystone 1,183,821 104 mi +19.8% 29 Empire 994,391 141 mi +3.8% 24 San Joaquin 949,611 315 mi +18.0% 12 Cascades 760,323 467 mi +12.8% 12 Hiawatha 749,659 86 mi +25.9% 14 Chicago-St. Louis 476,427 284 mi +16.5% 8 Downeaster 474,492 116 mi +31.2% 10 #2 #3 #6 Green highlight indicates corridor is also one of the ten fastest-growing corridors

8. Ten Fastest Growing Corridors, FY 08 Corridor Ridership Length Change from FY07 Frequencies Downeaster 474,492 116 mi +31.2% 10 Piedmont 65,941 173 mi +30.4% 2 Kansas City- 151,690 283 mi +30.2% 4 St. Louis Hiawatha 749,659 86 mi +25.9% 14 Albany-Toronto 354,492 403 mi +22.9% 2 Hoosier State 31,774 196 mi +20.6% 2 Keystone 1,183,821 104 mi +19.8% 29 Chicago-Quincy 202,814 86 mi +19.8% 4 Chicago-Carbondale 271,082 284 mi +18.5% 4 Heartland Flyer 80,892 116 mi +18.5% 2 This is a healthy cross-section of service types, frequencies, regions, and services

9. Amtrak State Supported Services – Revenue From States • Legislation authorizes States to buy service from Amtrak • States Pay Amtrak through combination of: • State Supported Train Passenger Revenue • Ticket sales • Food • Baggage charges • State Support Payments • Gap between Direct Costs and Revenue • FY 08 • Total State Supported Passenger Ticket Revenue: $233.8 million* • Total State Support Payments: $165 million • Average Fare Box Recovery Ratio for States in FY 08: 57%** *Includes fully and/or partially state supported routes **Measured as Passenger Related Revenue/Direct Costs

10. Amtrak California Corridors – FY 08

11. State Supported Services – Costs Billed to States • Direct Costs billed: • Direct Incremental Costs • Eliminated if trains eliminated • e.g. host railroad payments, T&E and OBS crews, fuel, most mechanical cost, dedicated route stations • Other Direct Costs • Costs shared with other trains/routes • “directly shared” e.g. shared stations, mechanical overhead, insurance, yard ops, marketing and advertising, • “indirectly shared” e.g. police and security, environmental and safety, crew management • Costs not currently billed to States: • Amtrak owned infrastructure fixed maintenance (capital) • Capital charges for equipment • System overhead (indirect office rent, data center, etc.) • Interest • Depreciation

12. Major Drivers of Operating Expenses • Labor • Presidential Emergency Board Ruling • Average 28% wage increase • 7 years’ back pay • Fuel • Expired Hedging Agreements • Market volatility versus demand-based variations • Security • New concerns and requirements • Initial growth versus steady-state operations • On-Time Performance • Affects costs: fuel, overtime, accommodations • Affects revenue & ridership

13. Workforce: Continued Productivity Focus Employee headcount Fiscal Year • Double-digit ridership growth absorbed within current workforce • - Controlled Management Ratio • - Technology Applications • Internet Sales • Point of Sale/Fare Collection • - Work Methods • Reliability Centered Maintenance

14. Amtrak Financial Transparency:Long-term and Growing Issue • Financial systems are complete and accurate • But designed for other applications/purposes • Required to capture all costs in “zero-sum” manner • Change in one place affects all other numbers • Not policy-driven • Financial systems do not meet State pricing needs • Backward-looking: FY 07 results just completed • Based on national network and then allocated to routes • Unsuited for forecasting, multi-year contracts, future service scenarios • Requires protracted, iterative (frustrating) negotiations

15. 2008 PASSENGER RAIL INVESTMENT & IMPROVEMENT ACT Recognized Need for Improved Model: • TITLE II – AMTRAK REFORM AND OPERATIONAL IMPROVEMENTS • Sec. 201 National Railroad Passenger Transportation System. (a) The national system is defined as: the segment of the continuous NEC between Boston and Washington DC; other high-speed corridors designated by the Secretary but only after regularly scheduled intercity service has been established; long distance routes for more than 750 miles operated by Amtrak on the date of enactment hereof; short distance corridors of not more than 750 miles operated by Amtrak or another rail carrier that receives funds under Sec. 301 (State Capital Grants). • (b) and (d) Amtrak is authorized to contract with a State, regional or local authority, or another person to operate a route not included in the national system, and to discontinue it on the failure of financial support from such entity. • (c) Amtrak is also authorized to continue to develop non-high-speed intercity service. • (e) Amtrak’s mission shall be to provide high quality service that is trip-time competitive with other intercity travel options, and its goals shall include providing complementary intercity transportation in times of national disaster. • Sec. 209 State-Supported Routes. Within two years of the date of enactment, Amtrak shall, in consultation with the Secretary and Governors of affected States, establish a standardized methodology for allocating capital and operating costs between Amtrak and the States supporting Amtrak services. • If such a methodology is not adopted and implemented within 5 years of date of enactment, the STB shall determine and require the implementation of same.

16. New State Pricing Tool

17. New Federal Mandates: Passenger Rail Investment and Improvement Act (PRIIA) • Gives “lead” on passenger rail growth to States • State Matching Capital Grant Programs (Total FY09-13 Authorizations) • Capital Assistance For Intercity Passenger Rail ($1.9 Billion) • High-speed Rail Corridors ($1.5 Billion) • Rail Corridor Congestion Grants ($325 Million) • Requirements • State rail plans • Standardized methodology for allocating capital and operating costs of all corridor trains among states and Amtrak • (adopt by Oct 2010 and implement by Oct 2013 or STB does)

18. New Federal Mandates: Passenger Rail Investment and Improvement Act • “Next Generation Corridor Equipment Pool Committee” ($5 million FY10) • Includes states, Amtrak and FRA, other stakeholders • Standardized/Interoperable types of corridor equipment • (California Surfliner III as bi-level standard) • Determine specifications, procurement, ownership, etc. • Other miscellaneous requirements • New Metrics and Measures • OTP enforceable by Surface Transportation Board • Studies re service restoration including Pioneer, Sunset, North Coast Hiawatha

19. A New Federal Mandate: Economic Recovery Act (Stimulus) • $8 billion appropriation for three new Capital Grant Programs • Capital Assistance For Intercity Passenger Rail • High-speed Rail Corridors • Rail Corridor Congestion Grants • 100% Grant – no match • Specific Priority to High Speed Rail • State Rail Plans waived • Federal DOT Schedule: • 60 days: Submit plan to Congress • 120 days: Issue draft regulations for each program • Grants “remain available” through September 30, 2012

20. Financial Implications for Amtrak California Partnership • FY2010 numbers provided with more understandable transparency • Support services linked to direct benefits • Line-item costs enumerated and explainable • Cannot subsidize or absorb “caps” • Quarterly reconciliations • Forecasts dependent on fuel price assumptions/economic realities • Define contingencies and/or pass-though of actuals where necessary • Final Amtrak pricing policies subject to national process • Potentially complicates individual state schedules • Costs will not go down commensurate with PEB labor rate increases • Costs will likely increase as additional components charged re PRIIA • e.g. Equipment capital charge • Concurrent with state matching fund availability

21. Implications for Amtrak California Partnership • All tools to reduce net costs will require examination • Efficiencies • Mechanical services/equipment availability • Point of sale • Automated fare collection • New food service vendor/options • Fare structures • Rail 2 Rail Impacts/Revisions • Revenue Management potential • Connection to call center/Amtrak support system • Non-passenger Revenues • e.g. Advertising • Service configurations • Schedule, consists, load factors, etc.

22. Success Implications for Amtrak California Partnership • “The best of times in the worst of times” • Expanded expectations out of line with State/Amtrak resource and staffing capabilities • New funding is capital, not operating • Requires increased revenue, ridership, and/or state support • Waiver of state rail plans opens competition for new federal funds • Current financial systems/budgeting processes currently inadequate • Equipment Capacity : • Improved maintenance, availability, reliability • Surfliner III’s status: • Utilization and load factors • in relationship to Next Generation Corridor Equipment effort in PRIIA • per State bonding issues

23. Amtrak: Committed to a Successful California Partnership • Proud of Heritage and Success • Committed to addressing Shortcomings • Financial Systems • Mechanical Operations • Open-minded in Emerging New Environment • Offering Important and Unique Advantages to State

24. California Corridor Growth: Amtrak’s Unique Added Value • Access to railroad expertise • Operations/transportation • Engineering • Mechanical • Institutional/Legal • Access to equipment/expertise/interoperability • Access to host railroads at incremental cost • Access to insurance/liability coverage • Access to IT systems support (reservations, train status, ticketing) • National visibility and voice in support of passenger rail

25. Amtrak Ridership: All-Time Highs • FY 08 ridership was 28.7 million • Up 11.1% from FY 07 • Fuel Volatility • Improved On-Time Performance • Improved Customer Service/Satisfaction

26. Amtrak Revenue – Exceeding Ridership Growth • FY 08 ticket revenues were $1.734 billion • Up 14.2% from FY 07 • Grew 21.8% faster than ridership • - Market pricing actions • - Revenue management Revenue Yield Per Passenger Mile*

27. Safety: Primary Focus – now combined with Security Injuries per 200,000 hours worked Fiscal Year NOTE: Based on the FRA standard of reportable injuries per 200,000 hours worked.

28. Corporate Debt: Managing within our Means Fiscal Year

29. Federal Support for Operations – Responsible Stewardship Fiscal Year FY 09 funded at a “continuing resolution” level through March • Federal government spent $400 million to support Amtrak operations in FY 08 • -About $1.31 per American • -Covers about 14 percent of Amtrak’s operating expense NOTE: Financial adjustments in FY01 included losses which should have been included in FY00.