Nov. 14 (Bloomberg) -- Amtrak, the U.S. taxpayer-supported passenger railroad, is losing tens of millions of dollars a year on food and beverage service even after years of cost cutting, its inspector general said.
Almost all of last year’s $72 million in food-service losses were from providing meals on long-distance trains, Inspector General Ted Alves said in testimony at a House Oversight and Government Reform Committee hearing today. Contracting out some functions has the greatest potential to stem losses, he said.
“Amtrak’s operating losses on food and beverage services have been a long-standing issue, and they contribute directly to the need for federal subsidies to support operations,” Alves said.
The hearing highlights the interest of the Government Operations Subcommittee’s chairman, Florida Republican John Mica, in exposing what he says are wasteful practices at Amtrak.
Alves in his testimony outlined a number of ways for the railroad to reduce waste and cut costs, from contracting out operations to reducing theft and food spoilage.
Amtrak’s Auto Train from Virginia to Florida offers passengers complimentary wine and cheese, and three long-distance routes provide complimentary wine and champagne to sleeper-car passengers, Alves said, costing Amtrak $428,000 in 2012.
Amtrak employees traveling on free passes consumed about $260,000 in complimentary meals on the Auto Train, Alves said.
“Somehow some of this has to be revised,” Mica said.
The railroad is continuing to make improvements and expects to break even on food service within the next five years, Thomas Hall, the railroad’s customer service chief, said in his prepared testimony.
Changes have included cashless sales, staffing reductions and supply-chain improvements. Losses have been reduced by 30 percent since 2006, he said. The railroad has found that it would lose more revenue from ticket sales than it would save if it reduced food service on its high-speed Acela trains, he said.
The report’s conclusions are of “dubious value,” Representative Gerald Connolly, a Virginia Democrat, said at the hearing.
Most of the losses are on long-distance trains that Congress requires Amtrak to operate, Connolly said. The café cars on Amtrak’s Northeast corridor between Washington and Boston break even or make money, he said.
The latest audit shows Amtrak’s reported improvements in food and beverage finances are the result of transferring a portion of increased ticket revenue to food service accounts, Mica said in a statement.
“The Amtrak Inspector General has confirmed that Amtrak cooked the books to cover up food service losses that now approach $1 billion,” Mica said.
Amtrak’s long-distance passengers have full menus on their dining cars for trips that can last several days. On the 43-hour Chicago-Los Angeles Southwest Chief, travelers can enjoy a $23.25 Mahi-Mahi dinner with a vegetable medley and three-grain rice pilaf.
Trains run by states in Maine and Alaska using private contractors have significantly lower labor costs than Amtrak does with its dining service employees, Alves said. The states pay $7.75 to $13 an hour with no benefits, compared with $41.19 including benefits for an on-board Amtrak employee.
Paul Worley, director of North Carolina’s rail division, said the state switched from money-losing café cars to snacks and vending machines to reduce unsustainable losses on its intrastate Piedmont service. Even so, vending machines wouldn’t be suitable for long-distance trains, he said.
An Amtrak food service worker, Dwayne Bateman, testified it was unfair to compare his salary to the wages paid to those serving food on state-run trains, some of whom are part-time workers.
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