UTU News Digest - Wednesday, March 3, 1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Wednesday, March 3, 1999

Texas senator to aid shippers in STB reauthorization

WASHINGTON -- Sen. Kay Bailey Hutchison, R-Texas, pledged Tuesday to introduce legislation reauthorizing the U.S. Surface Transportation Board that also addresses complaints from shippers about a lack of rail competition.

"I am intent on moving a balanced bill that reauthorizes the STB while addressing some of the problems (cited by shippers)," Bailey told the media after chairing a hearing of the Senate Commerce Committee's surface transportation panel on the issue.

"Where there is no (rail) competition, we need to realistically address the concerns of shippers," Hutchison said, reiterating her commitment to taking a balanced approach to promoting rail competition.

Tuesday's hearing featured extensive testimony from shippers complaining that the railroad deregulation Congress enacted in the 1980 Staggers Act didn't go far enough to promote competition among railroad service providers.

"A truly deregulated industry features active competition. The railroad industry is still not a truly deregulated industry," the National Industrial Transportation League told Hutchison's subcommittee.

The rail industry has undergone a massive consolidation in the wake of the Staggers Act, with 40 major railroads converging into the six major railroads operating nationally now, the Rail Customer Coalition told the panel.

The customer coalition, which includes utilities, agricultural, industrial and manufacturing interests, cited a lack of competitive choice among rail service providers. In particular, the group pointed to an STB decision -- upheld by a federal appeals court last month -- that allows railroads to exploit rail bottlenecks, where only one transportation provider is available.

"Railroads have been given the best of both worlds: the benefits of deregulation and the ability to exploit their monopoly facilities," the coalition complained, calling for congressional action to reverse the decision.

The partial deregulation of the rail industry embodied in the Staggers Act has been a "great success," allowing an industry on the verge of bankruptcy to become profitable, said the Transportation Intermediaries Association, a member of the Rail Customer Coalition, in a statement submitted to the subcommittee.

"It is now time to finish the job and further deregulate the industry. The subcommittee has a historic opportunity to review the nation's rail policies and breathe new life into them by fostering increased rail-to-rail competition," the intermediaries said.

But the American Association of Railroads rejected the customers' complaints as a call for "re-regulation" of the rail industry.

Implementing the track access and anti-bottleneck provisions advocated by the shipper groups would undo the gains the industry has made in the wake of the Staggers Act, the rail industry group warned.

Mandated rail competition would threaten the industry's ability to raise capital to make the $162 billion in investments necessary between now and 2020 for the industry to merely maintain its current share of the transportation market, the industry group said.

In the meantime, the industry's return on investment is only 7.5%, well below the nearly 12% cost of capital. The industry's return on equity lags behind most other industries, ranking 30th of 37 industries, the rail industry group testified.

The United Transportation Union supported the industry group's argument. "Opening up railroads to competition and dividing their traffic base will merely lead to the cancellation of the solution, which is adding to (rail) capacity," the union said.

Edward Wytkind, director of the Transportation Trades Department of the AFL-CIO, blasted carriers that insist on power through mergers to break collective bargaining agreements.

"The railroads used those powers as a license to steal," he said. "The STB has been captive to the industry it regulates. We all agree that the status quo is corrupt. There is a simple solution. Change the law as part of re-authorization. Tell the railroads they can't break contracts." The hearing offered a platform for STB Chairman Linda Morgan to defend agency policies by saying, "We have risen to our challenges responsibly and decisively."

STB Chairman Linda Morgan defended her agency's record.

Senate Democrats on the panel, Byron Dorgan of North Dakota and Jay Rockefeller of West Virginia, supported the complaints of shippers and released a study by the U.S. General Accounting Office they said underscored the lack of competitive choices and the inability of shippers to obtain rate relief from the STB.

"This study documents what virtually everybody knows: Railroads have become monopolies in many parts of the country and are over-charging farmers and businesses, and the deck is stacked against them when the try to get some relief," Dorgan said.

Rockefeller called the problems faced by captive shippers in his state "absolutely devastating."

Hutchison said her legislative proposal would address the complaint about bottleneck rail facilities and alleviate the perceived imbalance rail shippers face in seeking rate relief from the STB.

AAR President’s testimony to Senate

WASHINGTON -- Edward R. Hamberger, President and Chief Executive Officer of the Association of American Railroads, on Tuesday outlined the principles that will guide the rail industry into the next century, continuing the record of marketplace success that has characterized the rail industry since passage of the 1980 Staggers Act.

In testimony before the Senate subcommittee on Commerce, Science and Transportation, Hamberger reiterated the industry's commitment to customer service, citing the series of customer outreach meetings held around the country this winter.

"North America's economic future and its ability to compete in world markets is best served by a freight railroad industry that provides excellent service at reasonable rates, as well as a safe working environment for its workers," Hamberger told the subcommittee.

"Investment and reinvestment are fundamental for providing world-class service, and the ability of our industry to attract the capital it needs to maintain and improve service is essential to our continued viability and success."

Citing the industry's progress on lower rates -- down 55% since 1980 -- improved safety and efficiency, Hamberger reiterated that market forces should determine rates.

"The private sector should remain the source of capital for our investment needs," he said, noting that the rail industry has invested more than $230 billion in infrastructure since 1980.

Hamberger's testimony came on the eve of "Destination DC," an unprecedented coming together of all elements of the railroad industry -- railroads, unions and suppliers from around the country -- to meet with members of Congress about the positive results of deregulation and the future of the industry.

Hamberger's testimony is now posted at the AAR's Internet site, http://www.aar.org.

Texas "think tank" blasts light rail and commuter

SAN ANTONIO, Texas -- A San Antonio-based think tank released a scathing report Monday criticizing light rail and commuter rail systems in Texas and across the country.

The Texas Public Policy Foundation said that so-called "historic" commuter rail systems, in New York City, Chicago, Boston, Philadelphia, San Francisco and Washington-Baltimore, carried 97 percent of the nation's commuter rail traffic.

Relatively new systems in Miami, San Diego, Dallas and Los Angeles carried very few passengers and were costly boondoggles for taxpayers, it said.

"It would be cheaper to lease every passenger a brand new BMW or Lexus in perpetuity than it is to operate the commuter rail systems in Los Angeles and San Diego," Foundation President Jeff Judson told a news conference in San Antonio.

State and local officials are considering a commuter rail system between San Antonio and Austin to help relieve overcrowding on the busy Interstate 35 highway.

Light rail systems have also been proposed for local commuter traffic in both cities.

"No one gets out of their car, which averages 30 miles an hour even in peak periods, to get into light rail, which averages about 17 miles an hour," researcher Wendell Cox said.

The report singled out the $1.2 billion Los Angeles commuter rail system for particular criticism.

"The daily ridership of this system is less than a single lane the San Bernardino freeway carries in one hour," Judson said, adding that Los Angeles-area taxpayers subsidized 80 percent of the costs of operating the rail line.

The report concluded that light rail systems in Los Angeles, San Diego, Miami, and Dallas had a negligible impact on easing traffic congestion on the roads.

"Light rail is expensive, it tends to cost much more than planned and is highly ineffective, and it is really not 'rapid' transit, being only marginally faster than buses," Cos said.

The study recommended easing highway congestion by adding lanes, installing High Occupancy Vehicle lanes and switching to "intelligent" transportation systems that monitor delays and vehicle speed and seek to ease bottlenecks.

"There is no city in the world which has a more intensely developed urban rail system than Paris, yet Paris is building 60 miles of highway tunnels under the city to alleviate traffic congestion," Judson said.

The report also suggested that telecommuting would do much more in the coming years to take pressure off the highways than multibillion-dollar light rail systems.

Norfolk Southern recognizes chemical shipper safety

NORFOLK, Va. -- Norfolk Southern Corporation has recognized 23 of its chemical shippers and two chemical plants whose employee efforts contributed to safe rail transport of hazardous chemicals on the NS system in 1998.

This is the third year Norfolk Southern has awarded its "Thoroughbred Chemical Safety Award." To be considered for the award, a company must ship more than 1,000 carloads of hazardous chemicals during a calendar year without a single shipper-related release of a product.

The 1998 winners are Albright & Wilson; Akzo Nobel Chemicals Inc.; Amoco Petroleum Products; BOC Gases; Bordon Chemicals & Plastics; BP Chemicals Inc.; Citgo Asphalt Refining Co.; Eastman Chemical Co.; Equistar Chemical LP; Exxon Chemical Americas; Huron Tech Corp.; Marathon Ashland Petroleum LLC; Marsulex; Mobil Oil Corp.; Noranda; Nova Chemicals Canada Ltd.; PCS Phosphate; PPG Industries Inc.; Praxair Inc.; Rohm & Haas Co.; Shell Canada Ltd.; Shell Chemical Co.; and Shell Oil Co.

In addition to the corporate awards, Norfolk Southern recognized two plants it serves where there were no shipper-related incidents last year. They are Occidental Chemical's plant at Evans City, Ala., and Olin Corp.'s plant at Nixon, Ga.

"We place the highest value on the efforts of our safety-minded customers who work to make every shipment on our system a safe shipment," said David R. Goode, NS chairman, president and chief executive officer. "We congratulate each of this year's Thoroughbred award winners, and we look forward to continuing the close partnerships that make rail the safest means for transporting chemicals and other commodities."

Norfolk Southern handled about 260,000 carloads of hazardous chemicals in 1998.

Coach USA, Inc. announces record fourth quarter results

HOUSTON -- Coach USA, Inc., the leading provider of motorcoach, airport shuttle and taxi services in North America, today announced record results for the quarter ended December 31, 1998.

Revenues increased 49% to $224.0 million for the quarter ended December 31, 1998 from $150.4 million for 1997. Fourth quarter 1998 net income, before extraordinary items, increased 53% to $14.7 million compared to $9.7 million, on a pro forma basis for the similar period in 1997. Diluted earnings per share, before extraordinary items, rose to $0.56 for the period ended December 31, 1998 compared to $0.43, on a pro forma basis for the corresponding 1997 period.

For the year ended December 31, 1998, revenues increased 48% to $803.6 million compared with $542.8 million for 1997. Net income, before extraordinary items, for 1998 increased 52% to $54.4 million from $35.7 million, on a pro forma basis, in 1997. Diluted earnings per share rose to $2.14 in 1998 compared with $1.61, on a pro forma basis in 1997.

Increased revenues for the quarter resulted from continued strong internal growth combined with the effect of acquisitions made by the Company during 1998. Profitability increased at a higher rate than revenues as a result of implementation of the Company's operational and financial synergies.

"Coach USA produced strong growth in both the fourth quarter and full year through healthy internal growth and accretive acquisitions," commented Larry King, Chairman and CEO. "In 1999, we expect to continue our internal growth programs, expanding our presence in the privatization and outsourcing area, further developing the 'Express Shuttle USA' airport shuttle service brand, focusing on new or increased casino service and addressing continued improvements in our charter and tour operations.

"Currently, revenues from privatization and outsourcing activities represent 20% of our total revenue base. During 1998 alone, we added over $100 million in new long-term contracts, as municipalities privatized transit activities and corporations and other organizations outsourced non-core transportation operations. Examples of some of the new contracts in 1998 include employee shuttles for mining operations in Elko, Nevada, an employee shuttle at Newark airport, a transportation contract with the New York State Department of Corrections, and airport customer shuttles for three key rental car companies in Providence, Rhode Island. Several contracts already in place were expanded, such as the LADOT transit work in Los Angeles. Under one of our newest contracts, which began in 1999, Coach USA manages express bus service to residents of San Juan, Puerto Rico. In many cases, we are able to leverage off of existing facilities to service contracts, increasing our ability to be both competitive and profitable. Our expertise and reputation in this area is growing and we expect to add a variety of new contracts in 1999.

"The 'Express Shuttle USA' airport shuttle service, launched in Houston and Las Vegas in 1998, has emerged as another source of incremental revenue available to us through our existing infrastructure," continued Mr. King. "This service has proven itself to be a cost-effective alternative for budget-minded travelers getting to and from airports. Under this service, our vans pick up and drop off passengers at hotels and other key destinations at a fraction of the cost of other types of airport service, while helping passengers avoid airport parking congestion. We currently operate in 10 key cities and plan on developing `Express Shuttle USA' into a national brand.

"Casino-related business has continued to increase, and we expect additional growth in 1999. An example of new growth opportunities is in Biloxi, Mississippi, where last week we completed a small acquisition. The Biloxi area is experiencing heightened popularity as a casino destination with 11 hotel/casinos currently in operation and the Beau Rivage, an 1800-room luxury hotel/casino scheduled to open later this month. Our new presence in Biloxi will provide a platform for other types of services in the future.

"Charter and tour remains the largest component of our business and an area where continued improvements are planned. We are developing operating strategies to more effectively manage our equipment as well as marketing strategies to increase our customer base and manage yields."

Mr. King concluded, "We look forward to implementing these growth strategies in 1999 while exploring appropriate external opportunities through our acquisition program. Our strong balance sheet and substantial credit facilities will enable us to continue to pursue attractive prospects."

Coach USA is the leading provider of motorcoach, airport shuttle and taxi services in North America. Through over 120 cities in 32 states, provinces and territories, Coach USA's services include motorcoach charters, sightseeing and tours, contract services for municipalities and corporations, commuter transportation, airport shuttles and taxis.

Doctors begin to unionize in numbers

WASHINGTON -- Doctors, frustrated by stepped-up HMO control over their practices, are increasingly organizing into labor unions, a tactic that only a few years ago seemed remote for well-heeled healers.

The movement got another boost Monday as groups representing 15,000 doctors joined together under a new National Doctors Alliance, part of the Service Employees International Union, which vowed to spend $1 million over the next year recruiting more physicians and dentists.

"Today marks the beginning of a major initiative to organize doctors nationwide," said Dr. Barry Liebowitz, president of the New York-based, 2,500-member Doctors Council, which joined with the Committee of Interns and Residents and the United Salaried Physicians and Dentists to form the alliance.

Nationwide, an estimated 38,000 to 45,000 doctors belong to unions, up from only about 25,000 two years ago, and experts predict the numbers will continue to grow. Those numbers are roughly 6 percent of the nation's 600,000 practicing doctors.

Liebowitz and others declined to say where they would target organizing efforts first.

The National Labor Relations Board has watched the number of doctors interested in unions grow, said spokesman Dave Parker.

"They find themselves not independent anymore, but working for hospitals or health maintenance organizations without the rights that they're used to," Parker said. "They're working more like the rest of us, as employees who have bosses, and it's an interesting phenomenon to see."

Many unionized doctors are interns and residents. All work full-time for hospitals or health maintenance organizations. Their contracts cover wages and working conditions, much like other workers' contracts.

About half of the nation's doctors now work in these type of salaried positions, with 80 percent of recent graduates taking such jobs. But some independent doctors are also pushing for union representation. The NLRB's Philadelphia office is considering whether a group of New Jersey doctors who contract with HMOs can join together to collectively negotiate contracts. HMOs maintain these doctors are independent contractors and therefore fall outside federal labor law.

In discussing their plans, Liebowitz and other organizers focused on physician frustration with cost-conscious insurance companies.

"Union membership provides doctors with a countervailing force against the denial of medical care for the sake of corporate profits," Liebowitz said, sounding the same complaints that have circulated through Capitol Hill and the White House.

HMOs have successfully controlled skyrocketing health costs by preventing unneeded treatments and closely watching the fees that doctors and hospitals charge.

Organizers were less forceful about other physician complaints: that HMOs drive down their fees, using the power of their massive customer base to force doctors to accept lower payments as well as stricter rules.

The American Medical Association, a trade group that represents about half of the nation's doctors, shares the doctors' complaints but has long rejected traditional labor unions. But it said Monday it was looking for ways to help doctors "collectively address these concerns" without giving details.

Among the AMA's chief objections to labor unions was the threat of a strike, which many doctors say would be irresponsible since it could jeopardize patient care.

Liebowitz said he would never support a strike over economic issues such as higher pay, but would walk out to protest conditions that also threaten patient safety. He noted there have been few doctor strikes.

The Service Employees are not the only union going after doctors. The American Federation of State, County and Municipal Employees includes the 5,000-member Union of American Physicians and Dentists, based in Oakland, Calif. The International Association of Machinists and the United Food and Commercial Workers union have also worked to recruit members.

Unknown man killed in California

SACRAMENTO -- Sacramento County authorities are trying to identify a man who was struck and killed by a train just north of Meadowview Road yesterday afternoon. The Union Pacific engineer told police the man was walking along the tracks and ignored the train's horn. Deputy coroners plan to search state Department of Justice files of unique tattoos in an effort to identify the man, who appeared to be in his 30s.

STB defers action on paper barriers

WASHINGTON -- Surface Transportation Board (Board) Chairman Linda J. Morgan announced today that the Board has deferred action on a petition filed by the Western Coal Traffic League (WCTL) seeking a rulemaking proceeding to eliminate "paper barriers."

Paper barriers are contractual provisions limiting the opportunities for a small railroad to interchange traffic. Historically, they have been imposed in connection with the purchase by a small carrier of a short segment of track from a larger carrier. In exchange for a lower purchase price and/or more favorable financing terms, the smaller carrier would typically agree to incur penalties if it did not interchange all, or substantial portions of, its traffic with the selling larger carrier. Recently, some parties have complained that paper barriers interfere with the ability of smaller carriers to expand the competitive options available to shippers.

Last spring, the Board asked representatives of the railroad industry and the shipping community to meet privately to attempt to address many of the issues that had been raised concerning rail access and competition.

Consistent with the Board's request, the American Short Line and Regional Railroad Association (ASLRRA) and the Association of American Railroads (AAR) entered into a formal Rail Industry Agreement (RIA) intended to provide a framework for improving the ability of smaller (Class II or III) railroads and Class I railroads to work together to fulfill their shared goal of serving the shipping public in the most efficient possible manner.

The RIA addressed a variety of subjects, including rate-related provisions consisting of a series of bilateral commitments with respect to switch charges and interline rates; and non-rate provisions aimed at better meeting the car supply needs of customers served by short line and regional railroads, improving the quality of interline service provided jointly by smaller railroads and Class I carriers, and giving Class III carriers access to new routes and haulage arrangements in certain circumstances in order to develop new business. The non-rate provisions of the agreement do not entirely eliminate paper barriers, but they clearly do reduce the impact of paper barriers in certain respects.

WCTL asked the Board to initiate a rulemaking to adopt specific policies that will be applied when line sale-related paper barriers are brought before the Board for review. Its proposed rules would limit the uses to which paper barriers could be put. AAR and ASLRRA responded in opposition to WCTL's petition, arguing that the RIA already provides a comprehensive set of general principles that will limit new paper barriers to those that are legitimate by disallowing inappropriate restrictions on the short line's ability to develop new traffic; by disallowing excessive per car charges and other penalties; and by providing for arbitration in the event of disputes.

The Board decided not to act on the petition at this time, but rather to hold it in abeyance. The Board noted that WCTL's proposal could affect the process through which many light-density lines used to originate or terminate traffic for many rail-dependent shippers have been spun off by the larger railroads to short line and regional carriers, and that the RIA is intended to advance the way in which this process can maintain and even improve upon the service provided to many shippers located along those light-density lines. The Board also expressed reservations about acting in a way that would quickly overturn a privately negotiated settlement, completed at the Board's direction, noting that such precipitous action would unduly chill the process of privately negotiated settlements that the Board has stated it prefers. It found that a more responsible approach would be to develop a better record with the benefit of experience under the RIA before acting on WCTL's petition. The Board stated:

It may be that no regulations will ultimately be necessary; it may be that the private parties will work out some but not all of the issues that concern WCTL; or it may be that the issues that will arise will be different from those that WCTL now envisions. In any case, it appears to us that the petition is premature, and that the appropriate course of action is to hold the petition for rulemaking in abeyance, and to revisit the matter later based on the experience under the RIA.

The Board's decision was issued today in Review of Rail Access and Competition Issues, STB Ex Parte No. 575. The decision is available on the Board's web site at www.stb.dot.gov.

Mexican railway privatizations a "major success"

MEXICO CITY -- The privatization of the national railway system raised 12 billion pesos for government coffers, part of which was set aside for workers' pensions, was declared a major success, since apart from these earnings it has generated major investment in the sector and relieved the public sector from a burden which cost it four billion pesos a year. At the same time, however, it put 21 thousand 400 people out of work, though 14 thousand of these supposedly took voluntary retirement. Downsizing may have been necessary in business terms, but many of these workers may not find another job for some time.

This March the sale of several short railway lines representing five percent of the network once controlled by the government will be put up for privatization, said the director of National Railways, Ramiro Sosa. If these lines are sold the state department will then be disbanded. All that will remain of the national railway network in public hands will be the Trans-isthmus line, which links Veracruz on the Gulf coast with Salina Cruz on the Pacific cost. The government plans to invest 150 million pesos this year to improve this route.