Thursday, April 24

The LIRR Celebrates its 180th Anniversary

180 years ago today the Long Island Rail Road Company was chartered to provide rail service from Brooklyn to Greenport. Brooklyn and Jamaica railroad engineer Major D. B. Douglass received a charter for the LIRR Company on April 24, 1834 for:
"...the right to construct, and during its existence to maintain and continue a rail-road or rail-roads, with a single or double track, and with such appendages as may be deemed necessary for the convenient use of the same, commencing at any eligible point adjoining Southold Bay, in or near the village of Greenport, in the county of Suffolk, and extending from thence, on the most practicable route, through or near the middle of Long-Island, to a point on the water's edge in the village of Brooklyn, in the county of Kings, to be designated by the trustees of that village, and to a point on the water's edge in the village of Williamsburgh, in the said county of Kings, to be designated by the trustees of that village, and in like manner to construct, maintain and continue a branch rail-road from the said main road to Sag Harbor. It was also authorized to unite with the Brooklyn and Jamaica with the consent of that company."
The Long Island Rail Road is currently the oldest commuter railroad that is still operating under its original name.  The railroad has evolved a lot over the last 180 years, and will continue to evolve a lot more, with a number of major project nearing completion.

The LIRR celelbrated the 180th Anniversary of the railroad earlier this morning at Mineola.  Some photos from the LIRR's Instagram page are included below:

Here's to 180 years more!

The Emphasis on On-Time Performance

On-time performance (OTP) is a very well talked about statistic. It measures what percentage of trains arrive their final destination on-time (and on-time is defined, by federal standard, as arriving at the train's final destination within 5 minutes and 59 seconds of its scheduled arrival time).

There is an awful lot of attention paid to OTP. The higher the OTP the better, and the railroads would do anything to keep those OTP numbers high.

But just how far will they go?

We saw in Monday's post that the LIRR will often switch crews around at terminals (commonly referred to as "swaps") or press yard crews into passenger service (second class of service) if the normally scheduled crew is unable to get to their next train on-time. This makes sure that the next train does not depart late, thus making sure that the train does not impact on-time performance numbers.

This is nice, but it comes at a cost. And that cost is often paid out in the form of penalty payments for the violation of different work rules (like second class of service or outside of normal assignment) which I have discussed in several posts here. The financial impact of these penalty payments are not insignificant, and they do not bode well for the bottom line.

Then there is the whole safety versus on-time nonsense. In our reactionary, knee-jerk way of dealing with problems these days, input from people who don't have a clue about how the railroad works (i.e. politicians) have caused all sorts of problems. Because whatever safety improvements they were told were needed have to be put in now, right this instant, and without delay, the infrastructure and the running times have not been able to adapt as they normally would be when things like signal system improvements are phased in gradually and with great care (did we have reliability issues for months after they installed 261 on the Montauk Branch out to Speonk in 2006? No, we hardly even noticed it.)

I seriously doubt that at any point in recent history either the LIRR or Metro-North negligently sacrificed safety over OTP. I do think, however, that, once upon a time, when it came time to balance the checkbook, the money wasn't there, and as a result certain parts of the operating budget were given less attention than others. After all, you get what you don't pay for.

So there has been a significant emphasis placed on OTP in recent years. But has it been too much?

However, my dear fellow riders, the railroads only care about OTP as much as their passengers, er, valued customers do. And many riders seem to care a lot about OTP. Now, don't get me wrong, I don't like it when my train is late, but then again, you won't see me on the floor throwing a temper tantrum or cursing out people who have no control over the situation, like I have seen people do.

I hate to pull the "you should try driving to work" card, but it's necessary. When you think of how far you are traveling and how many other people, trains, and obstacles are in your trains way, I can't understand people who expect trains to arrive to the exact minute. I have friends who drive to the places they work from Long Island (I don't know why, but they do). One thing they always complain about is how unreliable the travel times are. It can take him 55 minutes to get there one day, and then 2 hours and 10 the next.

The point is, you could drive to work everyday in May and calculate your on-time performance, with a 6 minute grace-period, and you wouldn't come anywhere close to 93%.

Late trains stink, I know, but we are making far much more of an issue out of them than they really are. Late trains have bigger implications than just making someone who can't budget their time properly late for work. They cause late turns of equipment, crew "swaps" which results in penalty payments, more late trains which therefore cause more late turns and more swaps and more penalty payments, et. cetera.

We can sit here and debate the causes which make trains late in the first place; those usually stem from the chronic capacity constraints the railroad has to deal with, and there's little the railroad can do about those when they have to deal with the ineptitude of the politicians who underfund public transportation or the NIMBYs who line the right-of-way, but unfortunately there's very little you, I, or the railroad can do about that.

So, to conclude, on-time performance is a good metric for judging the railroads' performance, but we shouldn't take it too seriously.  It is not difficult to see that the MTA's railroads have put an awful lot of emphasis on OTP, but it's also very easy to see why.  Everyone wants to get to their destination exactly on-time, seated in their own row in a car that is exactly 72° and with 50 other perfectly well behaved, quiet, and respectful adults, and in the Valued Customer-era of railroading the MTA will bend over backwards to make the VC's happy, but unfortunately it is very often impossible given the constraints and circumstances, and expecting the MTA to do that day in and day out is unreasonable.

Wednesday, April 23

Arch Street Yard

The LIRR's Arch Street Yard and Shop is a little-known facility for the LIRR in Long Island City, Queens.  The facility was constructed between 2003 and 2005 as par to the East Side Access project as it will eventually be used to conduct maintenance on trains that are coming from Grand Central between rush hours (much like the facility at West Side Yard does).  Arch Street will be connected to the new Midday Yard, and they will be able to cycle trains in and out of the shop in that way.

The Arch Street Yard Facility under construction in
2003. (Photo credit: Alan Burden/Trains Are
The Arch Street Yard facility today.
(Google Maps image)
The facility was largely built before much of the ESA Construction kicked into high gear.  The facility was built "early" on in the ESA process since the LIRR needed a facility to let Bombardier do warranty work on the M7's.  After new equipment arrives, it is always under a warranty period for a certain amount of time, during which time the vendor is responsible for most repairs or adjustments that need to be made.   Most of the time, the vendors want the warranty work to be done by their employees, and not the railroads.  Each time this has come up, the LIRR Unions that represent the workers at the railroad's existing maintenance facilities throw a fit and they will refuse to let outside employes do work at an LIRR shop.

So, to solve this problem, the LIRR advanced the construction of Arch Street Yard and that facility was designated for the M7 acceptance and warranty work.  Something like this is not unheard of with big fleet procurements.  Back in the 1960's when the M1 equipment arrived, Budd conducted warranty work at Shea yard because they weren't allowed to do it in any of the LIRR's existing facilities.

A Metro-North M7A by the signal at
BLISS on its way to Arch Street Yard
(Photo credit: Bernard Ente/TarinsAreFun)
So for the first few years of its life, the Arch Street Shop was home to Bombardier forces constructing M7 acceptance and warranty work for both LIRR M7's and Metro-North M7A's.

Now that the warranties on all the M7's are up, Bombardier is no longer found in Arch Street and the facility has been turned back over to the LIRR.  These days, the railroad doesn't have an incredible amount of use for the facility, but it still gets use.  If you pass by there now, you'll see a set of M3's that have been sitting there for what seems like forever lately. 

Arch Street Yard and Shop currently has no direct connection to any of the LIRR's current territory.  With East Side Access, the 'Yard Lead" tunnel will essentially loop around like the Sunnyside Yard loop does and both the yard (the Midday Yard) and the Maintenance facility (Arch Street) will be set up essentially backwards so trains can come in and out of the area using the loop.

Most things that go to or from the Arch Street Yard today are taken down the Lower Montauk, up and over the Montauk Cutoff (a post for another day), and reversed into Arch Street Yard.  You can sort of make out the routing in the following diagram:

There are other ways of getting down into Arch Street, but none of them are direct.  To go down the Lower Montauk and in that way, the LIRR now needs an NY&AR pilot to go with them.

There is a long high-level platform at the facility, which is pretty much due north of Hunterspoint Avenue, but since there is no easy way to get from that platform to anywhere else on the LIRR, and there probably never will, it wouldn't be used for anything more than maintenance.

The Arch Street Facility isn't that busy these days, but it will become much more useful again once East Side Access is completed and trains are running to this spot from Grand Central.  Kawasaki might do some acceptance work on the M9's here, but that is unlikely considering they have a facility of their own in Yonkers which is more than capable of handling the work if need be.

Other than that, there is not much else to say about the Arch Street Yard facility.  We'll revisit it late on down the line during posts about other things in this area, and this won't be the last we hear from it, so stay tuned!

Tuesday, April 22

Painful LIRR Overtime Practices

In yesterday's post, I discussed many of the painful impacts of the penalty payments that result from a number of archaic union work rules.   The February 2006 report by the MTA Office of the Inspector General focused quite a bit on LIRR penalty payments, but also called into question a number of questionable overtime practices on the LIRR.

When we think of train crews taking advantage of overtime on the LIRR, we primarily think of passenger crews getting shifted around and falling out of place during service disruptions or during severe weather, but some of the worst offenders on the railroad are not passenger crews, rather they are yard crews.  Passenger crews are train crews that operate revenue or equipment trains, on a set schedule as laid out in a book called the Crew Book.  Yard crews are train crews that work within the confines of a particular yard.  They typically have the same qualifications as passenger crews, but they don't stray outside the confines of a yard.

Right from the get-go, the Inspector General's report goes right after the yard crews, and the questionable practices the LIRR often employs:
"LIRR has a policy to keep yard crews on overtime after their shifts end to supplement staffing in the yards. We found, however, that there are no records that document the work activity in the yards. Consequently, many crews assigned to the yards are receiving 4 hours of overtime each day  without any record of the trains they moved, if any, while on overtime. LIRR managers explained that these crews are kept on assignment to provide coverage in the event there is an equipment problem that requires  an extra crew and that providing back up coverage is critical to maintaining service. LIRR does not know if this is the most cost-effective  way to provide coverage because there are no records indicating how often these crews are actually needed or for how long they are needed."
If a passenger crew falls out of place, the LIRR can sometimes pull a yard crew out of the yard to operate a train.  This is a double-whammy often times, as these crews are frequently on overtime, and yard crews working passenger trains outside their schedule is a violation of yet another work rule, and that nets them even more penalty payments.

As we get into the main section of the report, the Inspector General's office gives some background:
"Largely because of the work rules cited above, LIRR’s engineers and conductors are among the highest paid represented workers in the MTA. During 2004, the railroad’s 355 engineers earned an average of $97,408 and its 976 conductors earned an average of $79,408.1 The average overtime earned by all 1,331 engineers and conductors was $18,798. On an aggregate basis, as shown in Table 1, their total earnings included 21 percent in overtime as well as an additional 5 percent in penalty payments. These penalties, which are payments of up to an additional day’s pay for violations of highly technical work rules, provided 9 percent of all earnings for engineers."
And overtime payments on the LIRR are not always what they seem.  When most people think of overtime, they think of a regularly scheduled shift of eight hours, but at the end of their shift when they would normally go home, something comes up and they are asked to stay, on overtime.  Then for every hour after that, they earn overtime pay.

However, due to the complexities of scheduling hundreds of trains per day to all different parts of Long Island, crew shifts are rarely exactly eight hours long.  Sometimes they are scheduled to run short, and the crews wait around until its time to punch-out, but often times train crews are scheduled to work longer than eight hours, thus guaranteeing them a certain number of overtime hours everyday, just for holding that job.  This is called "crew book overtime," which is overtime that is planned into crews schedules in the crew book:
"Approximately $11 million of overtime earned by engineers and conductors in 2004 was planned, that is, it was built into the crew schedule or was paid out at time and one-half for working on a holiday. Another $13 million of overtime in 2004 was essentially unplanned, that is, it was spent paying engineers and conductors to work on their days off, for unplanned assignments, or for hours that exceeded their normal work day."
The latter form of overtime, ("essentially unplanned" overtime) is what many commonly think of when they think of overtime, but almost 45% of the LIRR's overtime payments in 2004 were of the intentional variety.

Crew book overtime is unfortunately often unavoidable and can sometimes be quite significant, especially in diesel territory where the headways are long.  The crew book planner can either have a crew run three round-trips and work for 9 hours and 10 minutes per day, thus guaranteeing them an hour and 10 minutes of overtime per day, or they can only run two-round trips per day, which would only take them 6 hours and 30 minutes, and then just water the plants for the rest of their shift.  This wouldn't guarantee the crew overtime like the former scenario would, but not only do you have a crew standing around watching the grass grow in Port Jefferson for 90 minutes, you now need to get another crew to run that third round-trip.  So, for this 90 minutes the railroad is paying two crews instead of paying one crew the overtime for when they go over eight hours.

It would be impossible to find a way to efficiently schedule each and every one of the LIRR's crews to get exactly 8 hours from punch-in to punch-out, and sometimes letting the crew stray past the eight hour mark can be cheaper than benching them for the last round-trip and getting another crew to run the train in its place.  But then again, there are occasions where it could very well be cheaper to let the crew water the plants for the last round-trip and send another crew out instead.  It's a complex balancing act that has to be evaluated on a case-by-case basis.  Hopefully the LIRR is paying close attention to this with each timetable revision.  As service gets added a couple trains at a time here and there, the crews are haphazardly thrown in to the mix to run those trains.  Making sure that these inefficiencies are kept to a minimum is critical.  It is uncertain weather this is happening actively or not, as the above mentioned indifference about not managing penalty payments adds an element of doubt.

Now the Federal Railroad Administration actively regulates crew work hours and rest cycles under its Hours of Service Regulations, so none of this can get too out of hand and none of these crews can become too overworked, intentionally or unintentionally.  The FRA's Hours of Service regulations are very effective, and they were recently tightened for many railroads, so this is pretty much a manner of the financials and its impact, and not really the impact of this on the safe operation trains.

The report then turns into the hidden cost of overtime.  While awarding a crews overtime pay is painful enough, there are a number of lesser-thought of impacts these penalty payments have on the financial well-being of the railroad.  Again, an importance of on-time performance over many other things is noted by the Inspector General:
"Penalties and overtime also present significant costs in terms of managerial time and effort expended to verify and approve claims. Management should be aware of the external cost impacts and should consider the total costs, not solely the direct costs to the Transportation Department, when establishing crew book assignments and longer term overtime and penalty claim arrangements."
Later on in the report, the Investigator General's report shifts back to overtime, and the fact that much of the Transportation Department's overtime is built into the LIRR's operating structure.  I discussed this in some detail just above, and I have plans to discuss this in even greater detail in another post in the coming weeks.  Crew book overtime (intentional overtime) is second only to relief overtime in terms of cost to the railroad in 2004.

As per collective bargaining agreements, work by an employee that exceeds 8 hours in a day must be paid at time and a half. For engineers and conductors, there are six major categories of overtime: crew book, extra assignment, pure, relief, short swing, and holiday overtime. The types and the approximate cost to LIRR in 2004 were defined in the Inspector General's report:

Crew Book Overtime (Cost $6.1 million in 2004)
Crew Book overtime is the built-in overtime included in the daily crew schedules that the LIRR has set up so it can meet its service requirements. The LIRR’s labor agreements with the BLE and UTU do not allow the use of split shifts with compensated rest time between them as does MTA Metro-North’s (MNR) labor agreements. As a result, one crew cannot be used to fully cover both the morning and afternoon rush hours. Because the LIRR never obtained from the UTU and BLE the same agreement that MNR has, LIRR has set up 273 passenger and yard crews in its crew book withtours that range from 5 hours and 2 minutes to 11 hours and 24 minutes. Crews working above 8 hours are paid at time and one-half, which is considered crew book overtime. Crews working under 8 hours, however, are not paid a pro rata share of 8 hours. They are paid for a full day despite not working a full 8 hour day.

Extra Assignment Overtime (Cost: $1.9 million in 2004)
Extra Assignment Overtime is scheduled for any of the various daily extra assignments that are not in the crew book. It includes the payment for any hours scheduled into an extra assignment beyond 8 hours.

Pure Overtime (Cost: $5.4 million in 2004)
Pure overtime is the unplanned overtime, paid at time and one-half, that occurs each day as a result of train delays, emergencies, accidents, and other unscheduled events that will occur on a railroad.

Relief Overtime (Cost $6.8 million in 2004)
Relief overtime is the pay at time and one-half that engineers and conductors earn when they work on their assigned days off. Transportation officials told us that relief overtime costs were driven primarily by a shortage of engineers. This shortage occurred because of an unanticipated surge in retirements in the years 2000 to 2003. Relief overtime also includes $1.4 million in flagging overtime by conductors.

Short Swing Overtime (Cost $1.2 million in 2004)
Per the BLE Work Agreement, engineers are paid at time and one-half rate for all tours started within 22.5 hours of the beginning of a previous tour. These tours are referred to as Short Swing tours. Conductors are paid at time and one-half for the second tour they start in a day.

Holiday Overtime (Cost $3.1 million in 2004)
Holiday overtime is the pay for all hours worked by engineers and conductors on a holiday at the time and one-half rate.

The report finishes this section by noting that this is overtime, and independent from penalty payments:
"While overtime costs certainly need to be controlled, it should be understood that all overtime costs are not in the same category as penalty payments. Some overtime, like crew book overtime, is essentially a cost containment measure to reduce the total number of engineers needed by the LIRR. In short, it is less costly to extend the tour of one crew and pay a few hours of overtime each day rather than hire another crew--with all the added fringe benefits--to work a tour that may be only a few hours long. Holiday overtime also is fixed by labor agreements and would be difficult to reduce other than by eliminating some train service on holidays. The overtime that can be controlled through better management appears to be pure overtime and some types of relief overtime."
Furthermore, overtime has a hidden cost that is beyond the day where the crew worked over eight hours, just like penalty payments.  In 2004, the LIRR paid over $30 million in overtime and penalty payments to engineers and conductors, but not included in that figure is the adjustments to the payments that the LIRR has to make into train crew retirement funds, as these penalty payments are considered when calculating the crew member's final average salary:
"LIRR employees hired before January 1, 1988 are members of the LIRR Pension Plan and Plan for Additional Pensions. This plan is a relatively generous pension plan that allows employees to retire at age 50 with 20 years of service. Under the plan, all overtime and penalty payments earned in the 5 years prior to retirement, as well as vacation buyouts, are included in the calculation of the employee’s final average salary. The employee’s pension benefit is calculated using the final average salary multiplied by a percent based on years of service.

"We found that penalty and overtime payments to engineers and conductors retiring under the plan boosted pensions to levels higher than base salary for many of these employees. Specifically, 76 engineers and conductors retired in 2004, at an average age of 52, with an average annual pension of $61,603...  13 of the 76 retirees left with a pension greater than $75,000 including one with a pension of $99,872 earned by a conductor with a base pay of $64,092. In addition, the 13 received an average vacation and sick leave buyout of $62,176 each when they retired.

"These annual pension benefits--that are well in excess of the retirees’ base salaries--are largely the result of a seniority-based crew assignment system that enables senior engineers and conductors to select assignments that generate the largest amount of overtime and penalty payments in the five years before they retire--the base period that is used to establish pension benefits."
The report continues by mentioning that overtime payments also impact payments for vacations and to the BLE Welfare Fund.  For many LIRR train crews, the amount they are paid when they are on vacation amounts to 1/52nd of their prior year's total earnings.  So every dollar of overtime and penalty payments, the crew member gets paid about two cents more while they are on vacation the following week.  And this does not only affect only the next year, as the increase is carried over for many more years afterwards:
"...[F]or every $239 penalty payment received in 2004, an engineer with 15 years of service and entitled to 26 vacation days a year (25 vacation days + 1 birthday holiday), will also receive an additional $23.93 in vacation pay in 2005, another $2.39 in 2006, and $ .24 in 2007--a total of $26.57. This rule enabled one engineer to receive almost $20,000 in vacation pay in 2004 whereas he would have received only $6,000 in vacation pay if he was paid at his base salary rate--the vacation benefit received by all other LIRR represented and non-represented employees. The engineer actually received $798 for each vacation day taken in 2004 (instead of his base $239) because he earned $201,490 in 2003 that included $51,656 in overtime payments and $65,699 in penalty payments."
And all of this overtime has a big impact on vacation costs:
"As indicated previously, the added vacation costs in the next three years due to the penalty will be $27 and, finally the LIRR will have to contribute another $14 to the BLE welfare fund. Thus, every time a penalty is paid to a worker within five years of retirement, the true cost of the penalty is about $566 consisting of $239 for the penalty, $286 for additional pension costs, $27 for added vacation costs, and $14 for the BLE Welfare Fund. Similarly, the cost for an hour of overtime is about $45, but when the overtime is earned by a retirement eligible engineer or conductor its real cost is $106."
 Once you calculate in these hidden costs, the $25,020,522 the LIRR paid out in 2004 ended up costing the railroad $37,281,608 in real costs.

Many of the points discussed in yesterday's post about late equipment trains and swaps in Penn Station also often apply to the shaky overtime practices often employed by the LIRR.

Following this, the report turns its focus back to yard crews, and how that overtime is not adequately justified and controlled:
"The LIRR has established 36 yard crew assignments to facilitate the movement of trains at its train yards that include the West Side yard outside Penn Station, the Jamaica terminal yard, the Flatbush yard in Brooklyn, the Hillside and Holban yards, the Morris Park yard, the Long Island City yard, and the Babylon yard. All but one are staffed 5 to 7 days each week by engineers and/or conductors. During 2004, these yard crews earned $1.8 million in overtime. Of this amount, $1.2 million or 65 percent was earned by engineers and conductors assigned to 11 specific yard crew assignments. These 11 assignments, usually “picked” by the more senior engineers andconductors, enabled 36 engineers and conductors to earn $851,000 or 46 percent of all yard overtime. Each earned between $11,000 and $41,000 in overtime during 2004."
On most days, many of the crews working 11 of these assignments were given 2 to 4 hours of overtime (4 hours being the maximum allowed under FRA Hours of Service regulations). When the Office of the Inspector General asked about the often excessive overtime with yard crews, LIRR management maintained that yard crew overtime is needed to ensure adequate coverage:
"LIRR Transportation officials told us that yard overtime is assigned each day essentially to “protect” and provide coverage for the yards. In effect, a second crew on overtime is held in the yard in case a train needs to be moved while the scheduled crew is busy. They explained that if a move needs to be made while the scheduled crew is busy and an overtime crew is not available, the Yardmaster would have to use a passenger crew to perform the move. This would require a penalty payment of a day’s pay to the passenger crew  which would be more expensive than providing overtime to the yard crew. LIRR management maintains that no documentation of the overtime crew’s activity is needed because they are not held on overtime to work continuously. In fact, it is LIRR management’s hope that they will not have to make any moves during overtime hours, since that would mean that the railroad is operating smoothly. However, the LIRR did not provide us with any analysis or documentation that supports the level of investment in extra coverage indicating how often the crews are actually used to operate trains and why they are usually assigned 4 hours per day rather than two or three hours."
The report also calls into question the lack of checks and controls for these yard crews.  These yard crews are often just given overtime and, at the time, there was little documentation justifying why these yard crews needed to be kept around and paid overtime.  The report cites that several improvements were made from the time of the OIG's investigation to the time the report was published, but it notes that there is still more that can be done.

If the LIRR had been keeping up many of the things the Inspector General's report mentioned, they should have been able to bring the overtime down in recent years.

For the last main section of the report, the Office of the Inspector General focuses on the antiquated and time-consuming claims process:
"The system that the Transportation Department uses to verify penalty and overtime claims submitted by its engineers and conductors has been in place for many years. It is a labor intensive, paper system that relies on exception time cards as the primary source of data for the penalty payments and overtime earned by train crews."
In 2004, the process by which an employee could claim overtime involved the employee preparing a time card which is approved and then deposited in a box located at a terminal.  Each day approximately 350 time cards are submitted to the Crew Management office:
"[The time cards] are processed by the department’s seven payroll coordinators, who review the time cards for proper authorization and to verify that the penalties and overtime reported by the employee are accurate and in accord with the engineer and conductor labor agreements. The verification of these claims is done by ensuring properapproval and/or by checking individual claims against various reports and logs that are forwarded each day to crew management. If overtime is claimed, the actual amount of time claimed is manually calculated by the payroll coordinator. The reports and logs submitted include the Engine Service Markup sheet, Penn Station swap sheets, the Morris Park Hostler Work Report, the Transportation Crew Board Report, the Terminal Minutes Report, as well as several other records. This voluminous supporting formation is maintained by crew management to support the payments they authorize each day."
The time cards require a supervisor's signature to ensure that the information reported on the cars is accurate.  However, a decent chunk of timecards are submitted without supervisor's signatures.  In certain cases, the payroll office considers a time card approved if the claim can be substantiated by one of the various logs that are forwarded to the payroll coordinator.  Other times, the payroll coordinator can go back after the supervisor to verify the time card.

The Office of the Inspector General reviewed all second class of service claims paid to engineers in December 2004.  Of the 306 claims, 178 (58%) were appropriately signed and approved by a supervisor, 29 (9%) were not signed, but were verified by logged data submitted to the Crew Management office, 53 (17%) were not signed, but were later approved by a supervisor after they were contacted by the Payroll Management office, and 46 claims (15%) were considered to be "valid" by the Director of Crew Management after review of documentation in these cases either did not support the claims or data was not maintained in the files for these incidents.

The last group of claims, 15% of the 306 in December 2004, are questionable since there was otherwise insufficient data to verify a claim.  The LIRR should have the ability to maintain data to verify each and every one of these claims as they are submitted.  Furthermore:
"In addition to the lack of documentation, we are also concerned that operations managers and supervisors are required to spend an inordinate amount of time responding to verification requests from payroll coordinators. Each month payroll coordinators contact various managers and supervisors to verify overtime, commingling, outside normal assignment and 2nd class of service claims. For example, payroll coordinators e-mailed Penn Station managers 74 times in January 2005 regarding overtime and outside normal assignment claims. In Jamaica, two lead managers review and approve all claims generated by crews assigned to Jamaica area yards. If they cannot verify a claim based on their own knowledge or see the claim on a log or assignment sheet, they will check with the field personnel who ordered the move. The excessive time consuming nature of such interaction is compounded by the questionable approach of asking managers to verify a series of events that happened days or weeks before."
And as if the lack of documentation to support nearly 15% of the claims made wasn't bad enough, the Office of the Inspector General calls into question the veracity of some of the records the railroad does keep:
"We also found that the new Assignment Sheets instituted were neither accurate nor complete. OIG examined the December 2004 “Yard Crew Assignment Sheets” for the West Side and Brooklyn yards that were intended to record all overtime and penalty payments at the yards."
The examination of those new assignment sheets showed that 59 engineer and conductor penalty overtime claims were not fully substantiated by them.  In some cases, the amount of hours claimed by the crew and the amount of hours on the assignment sheet differed, but the exact number could not be verified because the assignment sheets did not detail the exact release time.  Furthermore, five second class of service claims (each a full day's pay) was paid to West Side Yard and Brooklyn crews in December 2004 while the Assignment Sheet log showed no authorization for those claims.

There were also documented cases where "Work Exception Sheets" for the Jamaica Storage Yard were missing for an entire day or a certain hour.  In other cases, the exception sheet listed one penalty, but the employee claimed and received two.

A total of 206 penalties were paid to Jamaica Storage Yard crews during January 2005 for Second Class of Service violations, Sheridan Shop, and Comingling claims.  Of these, 53 claims were not listed on the exception sheets, and on 14 days in January 2005, at least one tour did not turn in an exception sheet.
"In our opinion, the new logs initiated in 2004 are not accurate and are not adequately providing management with the required backup to verify employee claims."
The report indicates that an automated system to monitor and control assignments is needed:
"We believe that the penalty payment and overtime claim processing system needs to be automated. Managers should be electronically recording and authorizing these claims when they make the decisions to incur the costs. Control and accountability for the payments would clearly be enhanced by restructuring the system in this way. Engineers and conductors should continue to have the capability to initiate a claim if they believe one has been overlooked, but this should be the exception and not the rule. Ironically, Transportation was heading in this direction a few years ago when they commissioned a new crew management and payroll processing system. Unfortunately, as will be described below, a decision was made not to implement all of the system components. Certain features of the system would have likely gone a long way to addressing the problems described in this report."
In 1999, the LIRR's Information Services awarded a $1.4 million contract to PS Technology, Inc. for the design and development of a new crew management and payroll processing system (RCPS):
"...The contract specified that RPCS would provide Transportation with the capability to track, analyze, and manage the assignment of train crews and to know where its trains and crews are at all times. RPCS was designed to replace LIRR’s existing Crew Dispatching System, the Train and Engine Exception Payroll system, and Transportation’s Manpower Department Absence Control System..."
The system was under development, but the Inspector General's report indicates that the LIRR halted the installation of certain components of this system bases solely on the cost of the system.  It's uncertain if the system has been fully implemented in the eight years since this report came out.

The report finishes out by saying that the LIRR's Transportation Department has not developed a "Payroll Manual:"
"The BLE and UTU Work Agreements contain provisions and work rules that cover all aspects of employment including how, when, and why overtime and penalty payments are earned. The rules vary based on location, time off in between assignments, class of service of the work, and various other conditions. It was not surprising then when the Director of Crew Management told us that each day payroll coordinators set aside 10-20 questionable claims for review by the Director and union representatives to determine if work rules were interpreted properly on the claims. What was surprising was that given these constraints, the Transportation Department has not developed a manual for its payroll coordinators that clearly describes and interprets the myriad work rules that generate penalty and overtime claims. We found that payroll coordinators in the Crew Management Department did an effective job of processing claims without the benefit of a manual. While that claims approval process was inconsistent and not always properly documented, we found no claims that, clearly, should not have been paid.

Nevertheless, sound internal controls systems have a policy and procedures manual for payroll functions. If Transportation does fully automate their payroll system as we are recommending, it seems practical to prepare a manual at the same time. The manual would describe the varied circumstances when penalties and overtime are earned, and would be beneficial not only to the payroll coordinators--especially any new payroll coordinators--but also to the Transportation managers who would be approving penalty and overtime payments."
The report finally comes to an end after 30 pages of rough news for the railroad:
"Overtime and penalty claims are very costly, in terms of compensation to the train crews as well as the administrative costs of processing the claims. LIRR management has reduced these costs when made aware of the reasons and conditions that lead to the claims. Commingling has been reduced and equipment trains schedules have been adjusted to reduce Outside Normal Assignment penalties. However, more savings could be achieved if management had the data and information to understand the causes of other overtime and penalty claims. An automated claim authorization system would allow management to immediately see where, why, and how overtime and penalty payments are occurring. With this information, management could more fully recognize the costs of actions that generate penalties and  look for ways to avoid them. Finally, an automated system will provide top management with much needed control and accountability tools so that managers, supervisors, and employees from all departments can more readily be held accountable for the extra payments."
The Office of the Inspector General finishes withe eight recommendations for the LIRR as a result of the investigation's findings:
  1. LIRR should implement a fully electronic payroll system for engineers and conductors that provide controls and accountability for penalty payments and overtime and eliminates much of the time consuming daily payroll verification.
  2. The system should collect data on the specific reasons for each penalty payment or overtime assignment.
  3. The data collected must be routinely reviewed and analyzed for ways to identify and reduce wherever possible causes of penalty payments and overtime.
  4. Once an electronic system has been implemented, the LIRR should pursue additional savings through reductions in the payroll processing positions, made possible by limiting the need to personally verify large numbers of claims.
  5. Given the fact that the real cost of overtime and penalty payments is at least doubled for employees eligible for or near retirement, management should consider these extra costs when evaluating crew needs and crew book assignments.
  6. Given the fact that the real costs of overtime and penalty payments is at least doubled for employees eligible for or near retirement, management should consider these extra costs to help establish the optimum number of engineers and conductors that are needed by the LIRR. In addition, they should be considered when setting up longer term crew assignments such as the need for regular yard overtime each day and the routine assignment of penalty payments to the same crew.
  7. LIRR should maintain records of work being performed by yard crews while on overtime to analyze how much overtime is in fact necessary on any given day.
  8. Equipment train performance reports should be generated by TIMACS, using the time needed by an arriving crew to make its next assigned train, as performance measurement criteria.
In response to recommendations 1 through 4, the LIRR said it supports the concept of a fully electronic payroll system, and that it would work to get funding to get the system started in its 2007 budget.   In response to recommendation 5, the Transportation Department agreed that there should be an assessment of real costs when evaluating crew needs and crew book assignments. 

In its response to recommendation 7, the LIRR said that because yard crews are assigned for "inter-departmental support and protection of operations," it is not necessary to maintain records of exact work being performed (I don't see why not, though).   Finally, in response to Recommendation 8, the LIRR says that creating a relationship between the lateness of any equipment  train, and the crew's availability to make their next scheduled train cannot be accomplished within the existing TIMACS framework, since TIMACS does not have crew information as part of its design.  I would imagine it would not be that difficult to get something in Excel going to give you a general idea of what is happening (I will see if I can quantify some rough figures, but from what I see during my travels, equipment trains still arrive late pretty frequently today).

The LIRR's way of doing things is antiquated in so many ways.  From letting archaic work rules ruin their financials, to keeping track of overtime claims on paper timecards that are subject to errors, to dozens of other out-of-date things in normal everyday operations, the LIRR needs to overhaul they way it does much of its work.

Luckily, with East Side Access coming up, the LIRR will have a way to overhaul much of its operating profile, and it looks like they are gearing up to do just that.  It is critical that the LIRR work to become as efficient as possible while not skimping out on service to those who will still need it.  The current LIRR management has the opportunity to set the railroad up in such a way that it can be very successful in the coming decades.  They also have the opportunity to ruin it for generations.  Let's see how it all turns out.

Monday, April 21

Painful LIRR Work Rule Penalty Payments

It has been no secret that the MTA and several of the LIRR's unions have been at odds a lot recently after contract negotiations hit a dead end back in October.  We're currently making our way quickly towards the end of a federally-mandated 270-day "cooling off period."  Several of the LIRR's unions could walk out on strike as early as July 15, 2014, so the clock is certainly ticking.

At noon today, both sides will present their best and final offers to the second Presidential Emergency Board.  Rather than suggest what they think is a fair deal like last time, the second PEB will only choose what they think is the better of the two offers.  However, just like last time, the PEB's decision is non-binding, and neither side has to listen to it if they don't like it.

Wage increases (or lack thereof) among other things are significant sore spots in the contract talks, but another significant talking points in the contract talks are the union work rules.  As I described back in October, there are currently a number of work rules on the books that restrict what the LIRR can and can't have the crews do.  And if those rules are violated, the employees are compensated, usually financially, in the form of "penalty payments."  These penalty payments can often amount up to an entire day's pay in addition to what they would have normally earned, and sometimes even more.

The post back from October details several of the work rules, but I didn't speak much on the impact of those work rules on the LIRR, both operationally and financially.

In February 2006, the MTA's Office of the Inspector General issued a report on Penalties and Overtime Payments in the LIRR's Transportation Department.  The investigation did not paint a pleasant picture of the penalty payments.  I remember reading it back at the time it came out in 2006, but then I haven't thought about it since.  Last week, Sunny Zheng reminded me of the report's existence, and after re-reading it, I figured dusting it off might be appropriate at the current time with the impending contract implosion.

The report, which was delivered to then-president James Dermody, examines the situations that give rise to penalty payments as well as situations that drive overtime among engineers and conductors.  It also examines the hidden costs of these payments, and how it effects the LIRR's pension system and how the railroad has to structure its pension contributions.

The report spends time on issues with both the penalty payments and the overtime structure at the Long Island Rail Road.  For the sake of brevity, I will discuss the portions related to penalty payments today,  and I will discuss issues with overtime in a separate post tomorrow.

Right from the Executive Summary, it doesn't look like the report will contain much good news for the railroad:
"Many LIRR collective bargaining agreements have restrictive work rules that result in extra payments to employees if they are violated. Within the Transportation Department, such extra payments are referred to as “penalty payments.” In 2004, the highest paid 77 LIRR engineers and conductors doubled or tripled their annual base salaries, earning anywhere from $125,000 to $210,000 on base salaries of approximately $64,000. Our analysis showed that penalty payments were a contributing factor to these greatly inflated earnings. Thus, because of operational imperatives and negotiated work rules, LIRR engineers and conductors can work a single 8-hour shift, but get paid for two, three, or even four days’ work, exclusive of overtime."
The Inspector General's office then called attention to the focus on on-time percentage, something we know the MTA and the passengers care an awful lot about.  With the railroad in a dire capacity crunch as it is, it is difficult enough to maintain high OTP numbers.

Because there aren't large rail yards all across Long Island, the LIRR often has to send non-revenue or equipment trains from here to there at all times during the day to get the equipment where it needs to be.  Because these trains do not carry passengers, they do not factor into the OTP numbers, and as a result, they are given less attention than normal LIRR revenue trains get.  When even the smallest hiccup occurs, non-revenue trains can find themselves pushed to the side so the OTP-counting trains are not impacted as much.  This results in equipment trains arriving their intended terminals late.  When this happens, the LIRR can either delay whatever train that equipment run is turning for (hurting OTP) or find another crew to send out on that run.

This "swapping" of assignments is usually chosen, since the OTP numbers printed in TrainTalk don't care weather or not the usual crew ran the train or not.  As long as the train got there on-time, the most important job is accomplished:
"...As a result of work rules, however, this can result in increased costs if equipment train crews miss their next scheduled runs and get “swapped” out of assignment. “Swapping,”  working outside one’s normal assignment, is a violation of the engineer work agreement. Because affected employees receive penalty payments for this, late equipment trains have a sizeable impact on labor costs..."
In all, the report paints a picture of a railroad that doesn't really seem to inclined to minimize these penalty payments, and figure out ways of working around them that are more cost-effective:
"We also found that penalty payments are not being adequately monitored as evidenced by the LIRR’s failure to be aware that one crew earned 158 penalty claims in 2004--most of them for moving a single equipment train each night from Brooklyn to Hillside."
At the time this report was released, there was no clear and logical way for the LIRR to keep track of penalty payments, and as a result, there was no clear and logical way for the LIRR to chip away at some of the worst offenders, like the crew mentioned just above.

The system for doling out penalty payments appears to be rather flawed, as the the railroad doesn't really have a way to track, verify, and keep track of penalty payments:
"We are also concerned about the lack of a sufficient audit trail to assess the veracity of penalties and justify the need for so much overtime. Without a sufficient audit trail, Transportation management is unable to appropriately verify these claims. We also identified weak administrative controls and a time lag between the submission and approval of overtime and penalty payment claims."
The report then turns into the hidden cost of penalty payments.  While awarding a crew an extra day's pay for free is painful enough, there are a number of lesser-thought of impacts these penalty payments have on the financial well-being of the railroad.  Again, an importance of on-time performance over many other things is noted by the Inspector General:
"The secondary cost of penalties and overtime is rarely considered by LIRR managers making on-time-performance based decisions. Because these extra payments represent pensionable time, current overtime and penalty payments reverberate in increased LIRR contributions to pension plans and the costs of employee vacation pay. For example, a $239 penalty payment to an employee eligible to retire, or who may become eligible to retire within several years, actually costs the LIRR about $566 when the additional pension and vacation impact is considered. Penalties and overtime also present significant costs in terms of managerial time and effort expended to verify and approve claims. Management should be aware of the external cost impacts and should consider the total costs, not solely the direct costs to the Transportation Department, when establishing crew book assignments and longer term overtime and penalty claim arrangements."
The executive summary finishes out by mentioning that an electronic system to keep track of penalty payments is necessary.  The Inspector General was concerned by the fact that in 2004 the LIRR failed to fully implement its Resource Processes  and Control System (RCPS).  This system was designed to greatly improve controls, limit abuse, and reduce cost in crew management and payroll processing systems.  The report cites that the full installation of the system was held up due to what appears like an "incomplete understanding of the benefits of the system as a whole" and that only the expense, and some of the benefits, were considered during this project's implementation. 

So just at the end of the executive summary it is clear that the investigation is not going to end too well for the railroad.  While the blame of these nasty work rules and penalty payments has often be thrown off onto the union, it becomes clear that the railroad isn't really doing its part to manage these penalty payments effectively.

Once you add on penalty payments, those paychecks can become even more inflated:
"Penalty payments are not overtime. Rather, they are distinct, additional payments “earned” when work assignments violate contract work rules. We will discuss penalty payments in greater detail below. As an illustration of the concept, however, the following are some conditions that lead to penalty payments:
  • An engineer operating a diesel and electric engine on the same day
  • Working as a “passenger” train crew engineer or conductor and then as a “yard” crew engineer or conductor for any period during the course of a tour; and
  • An engineer operating a train other than the train he or she was scheduled to operate.
Penalty payments have a cost not only in the actual dollars paid to the workers, but in the creation of administrative burdens as well. For example, LIRR managers must closely monitor train operations, not only with an eye to getting trains to their destinations on time, but also in a way that minimizes “violations” of the work rules and the subsequent claims for overtime and penalty payments. The LIRR maintains a crew management system to process these claims. Transportation’s payroll coordinators review over 100,000 hard copy time cards every year to determine if overtime and penalty payments are justified. If there is a question about a payment, information often has to be pieced together from various administrative sources. We estimate that just one of these administrative burdens, the verification of time cards within Transportation, costs over $400,000 per year."
At this point, the Inspector General turns to the fact that penalty payments are a significant component of payroll costs.  It points out that these work rules are not necessarily unique to the LIRR, and they can be found throughout the rail industry:
"A U.S. General Accounting Office (GAO) report issued over 20 years ago stated: “Rail industry observers, Federal agencies, and others have discussed extensively the fact that work rules...have the effect of increasing operating cost. In addition, work rules have the effect of restricting productivity. Much has been written about the need to revise some work rules, but change seems to come slowly, when it comes at all.”"
And it is important to stress that these penalty payments are not a result of violations of health, saftey, FRA, or other federal or state regulations.  They derive exclusively form work rules that were arranged in previous collective bargaining agreements over the course of many years.  Many of these work rules go back many years to as early as the 1920's, if not earlier, but the origination of these work rules is a familair one:
"According to the Vice President of Labor Relations they were negotiated into the agreements by unions essentially to save jobs and maintain union membership."
The report continues by pointing out that over the past several decades, the role, functionality, and operational profile of the railroad has changed substantially over the past several decades, but "there has been little corresponding modification of many work rules to make them more reflective of, and responsive to, current operational and financial realities."

Next, the report indicates many of the major work rules and their costs in the year 2004.  I mentioned many of these back in October, but here is a more detailed explanation of many of them:

Second Class of Service (Cost: $1.8 million in 2004)
Per article 2(b) of the BLE Agreement, an engineer will be paid an additional day’s pay, in addition to the earnings of his scheduled assignment, when after reporting for duty he is assigned to another class of service. For example, if an engineer reports to his regular passenger assignment and then is later assigned to yard or freight service, he will receive an additional day’s pay. Conductors have a similar work rule in article 2 of their Trainmen Agreement, however, they are paid a half day’s pay for each penalty.According to the Vice President of Labor Relations, this rule can be traced back to at least March 1924 where it was a part of the agreement between the LIRR and the BLE.

Co-mingling (Cost $1 million in 2004) 
The work Agreement between the BLE and the LIRR provides in article 2(l) that engineers may not operate diesel engines and electrically powered multiple-unit equipment, that is M-1s, M-7s and dual mode engines, during the same assignment. This practice is referred to as “commingling” for which engineers receive an additional day’s pay. Conductors assigned to the engineer’s crew do not get the penalty because their work agreement does not contain a commingling work rule.

The LIRR’s purchase of dual mode engines in recent years provides a good example of how an old work rule can have an unintended impact on costs. According to LIRR Labor Relation’s officials, the commingling rule dates back to the 1960s when the LIRR acquired a prototype dual mode engine and reached agreement with the BLE to essentially classify a dual mode engine as an electric powered engine. Specifically, article 2(l) was added to the BLE work agreement and it stated that “multiple energy source equipment will not be considered diesel equipment.” At the time, the new article had little impact--diesel engines operated only in non-electric territory, multiple-unit engines operated in electrified areas, and commingling violations were rare.

In 1999, however, the LIRR began to take delivery of 23 new dual mode engines to replace half of its diesel fleet. The major reason for acquiring the dual mode engines was to upgrade service to customers from eastern Long Island and provide them with more “one seat service” into Penn Station. In accord with article 2(l), the new engines were classified as electric and provided the LIRR with a fleet of 23 diesel engines and 23 dual modes to service its non-electric territory. However, the application of the commingling work rule established in the 1960s, had an unintended and arguably “windfall” impact for some LIRR engineers. Specifically, given the even split between dual mode and diesel engines capable ofoperating in non-electric territory, the engineers working the Port Jefferson, Oyster Bay, Greenport, and Montauk branches became much more likely to be assigned diesel and dual mode engines on the same day and thus incur a commingling penalty. Consequently, from 2001 through 2004, total commingling claims for engineers averaged $95,000 per month.

In November 2004, Transportation management decided to use only dual mode engines on its Oyster Bay branch and initiated other controls over commingling. As a result, monthly commingling costs have decreased from $98,625 for the period January to October 2004 to $28,687 from December 2004 through the 1st half of 2005.

To this day, the idea of keeping DM's on the Oyster Bay Branch and the dedicated DM runs, then DE's everywhere else has prevailed.  It helps slightly, but it comingles can still happen.

Outside of Normal Assignment (Cost: $618,000 in 2004)
Per article 2(a) of the BLE Agreement, an engineer assigned to operate any train other than his scheduled train runs in the crew book, will be paid the actual time for the additional service at the straight time rate in addition to the earnings of his scheduled assignment which he was unable to complete. In effect, the engineer is paid at double time for any period during his normal tour when he is operating a train other than his scheduled train runs for the day. Conductors on the same crew will not receive any benefit, unless the additional service goes beyond their scheduled release time. They would then be paid at the overtime rate. This penalty typically occurs when the crew of a late arriving train cannot make its next scheduled train and another crew is substituted away from its scheduled assignment (referred to as “swapping”) to operate the scheduled train of the late arriving crew.

Sheridan Shop (Cost $260,000 in 2004)
Per a labor agreement made in 1984, only engineers are allowed to move engines into the Sheridan Shop at Richmond Hill for servicing. Sheridan Shop claims are actually a type of 2nd class of service claim, but the costs are separately coded for tracking purposes.

The Sheridan claims are mainly earned by Yard Passenger Diesel (YPD) crews when they move an engine into the Sheridan Car Shop for service. The Sheridan move actually takes about one hour, but it generates a day’s pay for the engineer and a half day’s pay each for the conductor and assistant conductor on the YPD crew. In contrast, at the Richmond Hill Locomotive Shop located right next to the Sheridan Car Shop, Maintenance of Equipment department electricians move engines with no additional expense to the LIRR.
This rule was particularly problematic back in the late 1990's when the DE's and DM's arrived.  These locomotives had terrible teething problems and Richmond Hill was inundated with malfunctioning locomotives, so they had to increase their use of the Sheridan shop, thus increasing the amount of penalty payments.

In recent years, the LIRR has expanded the shops around Richmond Hill so more work can be accommodated there and the Sheridan Shop could be used less.

Meal Payments (Cost $1.6 million in 2004)
All passenger and yard crews are entitled to a meal period of [35] minutes at some point between their 3rd and 6th hour on duty. If a meal period is not provided during those exact hours, the employee is paid for an additional [35] minutes at the time and one-half rate.

As a result of these meal payments, another operational efficiency often arises.  At terminals where turns are tight (i.e. less than 35 minutes) the LIRR has to decide weather to keep the crew moving and not give them a meal period, or have them miss an entire headway so they can take their meal period.  Again, they're placed between a rock and a hard place again here.  Is it cheaper to just pay the penalty payment to the crew for the missed meal period, or to they let the crew miss a headway so they can have their 35 minutes and avoid the penalty payments.  But, as a result of this, they now need to find and pay another crew to run that train while the crew is eating lunch.

And with all of these different work rules, it would not be difficult for an engineer to "mix and match" and take advantage of multiple work rules and penalty payments.  There is no cap as to how much someone can earn, and some engineers can earn up to three or four additional days worth of pay for just one days worth of work:
"During 2004, we identified 30 instances where engineers earned three penalty payments in one day. When combined with their normal day’s pay, they earned four days of pay for one 8-hour shift. The number of times two additional penalty payments were earned was much more extensive. During 2004, we found 662 instances where engineers (514 times), and conductors (148 times), earned two penalty payments and received three days pay for one day’s work."
And getting these insane penalty payments is not just luck of the draw.  There are certain jobs that pre-dispose you to potential penalty payments and overtime.

Crewing on the LIRR is determined very much by seniority, with the most senior crew picking whatever job they want first, then the second most-senior crew going, then the third, and so on (the actual process is far less orderly, but its generally how it works).  As a result, the most senior engineers get the ability to pick the jobs they want, and if they're looking to retire soon, jobs that involve lots of overtime and the highest potential for penalty payments:
"We also found that it was a relatively small group of senior engineers who were benefiting from the “three penalty payments in one day” scenario. In fact, one engineer accounted for 8 of the 30 occasions where an engineer received three penalty payments plus straight time. Given that a day’s pay for an engineer is $239, this engineer earned $956 in a single 8-hour tour eight times in 2004. How the engineer, referred to as engineer A.B., “earned” four day’s pay during a single work day, in addition to overtime is described below:

Four Days’ Pay in One Day
On June 15, 2004, A.B. was the engineer for yard crew YPD403. The crew operates diesel engines in Jamaica Storage yard and its normal tour is 10 p.m. to 6 a.m. At 11:45 p.m., A.B. was directed to leave the yard and take a passenger train powered by a dual mode engine to Oyster Bay. He received two penalty payments for making this move.
  • A.B. “earned” one penalty payment--a 2nd class of service claim--for operating in passenger service on the run to Oyster Bay when he was assigned originally to yard service as part of a diesel yard crew.
  • A.B. “earned” a second penalty payment for “commingling” because the engine he operated to Oyster Bay was a dual mode engine and he operated diesels in the yard. A.B. returned from Oyster Bay and was back in the Jamaica Storage yard by 1:53 a.m.
  • A.B. “earned” a third penalty payment at 2:00 a.m.--a “Sheridan Shop” claim for moving an engine into the Sheridan shop. This move was completed in 45 minutes.
Thus, on this one day A.B. “earned” three penalty payments for a total of $718, while being paid his regular compensation of $247 for working his usual shift. A.B. also earned $157 for 3½ hours of overtime. Including other smaller payments, A.B.’s gross pay for one day at work was $1,177."
And these are just a couple of the worst cases.  The number of incidents of crews just getting just one penalty payment (which is expensive enough) is substantial.

The report continues by stressing the importance of controlling penalty payment costs.  It begins by reminding us of how engineer pay used to be determined.  Once upon a time, train crews used to be paid on a mileage plus time basis, where they received a small base pay for their time, but then received a the bulk of their pay form a mileage-based rate.

So back then when the concept of penalty payments, and the idea of awarding "an extra day's pay," was introduced, it was difficult for either side to pinpoint exactly how much of a financial impact these penalty payments would have.  However, these days, engineers and conductors are paid based on time alone, so the set rate of $239 per day back in 2004 was fixed.

When the pay structure for engineers was changed however many years ago, the way the work rule penalty payments were figured out did not change along with it.  As a result, the LIRR has significantly increased its operating expenses without a corresponding increase in what those extra expenses actually buy.

It would be like your local cable company going from charging you per-hour you are watching television to charging you a flat rate for the entire day.  However, under the old pricing scheme, watching a premium channel resulted in you paying a double rate for that day.  It would be fine to manage those costs as long as you didn't keep the TV running 24 hours a day, but now that there is a flat rate for an entire day's worth of TV service, watching the premium channel for just a couple minutes doubles your cable bill for that entire day, and that cost is significantly higher.

This further reinforces the archaic nature of these rules, and the dire need for either substantial revisions as to how they are structured, or to discard them entirely:
"Under these outdated work rules, employees get paid extra for doing ordinary, foreseeable and necessary job activities, which they are trained and ready to do, but were not necessarily scheduled to perform. These work rules severely limit LIRR’s ability to make the necessary moves to maintain ontime- performance in response to weather and other challenges without incurring sometimes significant additional costs. Our real concern is not just the additional cost, per se. Rather, such a pay structure is arbitrary because it lacks a rational relationship between the additional pay and effort or experience given in return. When salary structures are irrational, they no longer act as incentives to better performance."
Furthermore, these penalty payments have a hidden cost that is beyond the day where the work rules are violated.  In 2004, the LIRR paid over $30 million in overtime and penalty payments to engineers and conductors, but not included in that figure is the adjustments to the payments that the LIRR has to make into train crew retirement funds, as these penalty payments are considered when calculating the crew member's final average salary:
"LIRR employees hired before January 1, 1988 are members of the LIRR Pension Plan and Plan for Additional Pensions. This plan is a relatively generous pension plan that allows employees to retire at age 50 with 20 years of service. Under the plan, all overtime and penalty payments earned in the 5 years prior to retirement, as well as vacation buyouts, are included in the calculation of the employee’s final average salary. The employee’s pension benefit is calculated using the final average salary multiplied by a percent based on years of service.

"We found that penalty and overtime payments to engineers and conductors retiring under the plan boosted pensions to levels higher than base salary for many of these employees. Specifically, 76 engineers and conductors retired in 2004, at an average age of 52, with an average annual pension of $61,603...  13 of the 76 retirees left with a pension greater than $75,000 including one with a pension of $99,872 earned by a conductor with a base pay of $64,092. In addition, the 13 received an average vacation and sick leave buyout of $62,176 each when they retired.

"These annual pension benefits--that are well in excess of the retirees’ base salaries--are largely the result of a seniority-based crew assignment system that enables senior engineers and conductors to select assignments that generate the largest amount of overtime and penalty payments in the five years before they retire--the base period that is used to establish pension benefits."
For every $239 penalty payment, the LIRR, which by the BLE Work Agreement pays 6% of all earnings into the BLE Welfare Fund, has to pay an additional $14 into the fund, for each penalty payment.  $14 a go can amount to quite a lot pretty quickly. 

And while the work rules and penalty payments are painful enough, the Inspector General's report indicates that the LIRR Management is not really doing an effective job of managing these costs:
"The LIRR managers we spoke with told us that their primary focus is on customer needs and meeting on-time-performance goals. They are not as concerned with the financial or budgetary impact especially when the costs--such as pension and fringe benefits--are “externalities,” costs not charged to their immediate department, but absorbed later by the LIRR. We believe  management should be aware of these external costs and should consider allthe costs, not solely the direct costs to the Transportation Department, when establishing crew book assignments and other longer term staffing arrangements."
The issue of the "hidden costs" related to overtime and penalty payments comes up yet again, as the LIRR doesn't really seem to be keeping these factors in mind:
"We estimated the real cost of penalties and overtime by identifying engineers and conductors who are eligible to retire or will be eligible to retire in the next five years and then calculated the added cost their penalties and overtime generated. For example, when a penalty payment is made to a retirement eligible engineer or conductor, the penalty is included in the final average salary formula used to calculate the worker’s pension benefit. The average annual increase in the pension benefit due to a single day penalty of $239 to anyone of the 76 LIRR engineer and conductor retirees in 2004, was $26 per year. Using data from the National Center for Health Statistics, wefound that the life expectancy of a 52 year old male (again using the average age of the 76 engineers and conductors who retired in 2004), is 26 years. Thus, the additional $239 penalty payment will cost the LIRR another $684 in pension payments over 26 years.13 Using a present value formula, we estimated that the amount of money the LIRR needs now to fund this liability is about $286.14."
So, once you calculate in these hidden costs, the $5.339,337 in penalty payments the LIRR paid out in 2004 actually amounts to an expense of $8,833,443 to the railroad.

The report then turns to opportunities for greater control and accountability of these penalty payments:
"Penalty payments and much of the overtime incurred by LIRR are the result of operational decisions made by Transportation managers during the course of each day as they try to maintain schedules and meet on-time-performance standards. Sometimes payments can also be a result of decisions made by managers in other LIRR departments. The current LIRR systems and controls do not adequately capture the reasons for the decisions driving penalty and overtime costs similar to the information captured by LIRR’s Train Information Monitoring and Control System (TIMACS) for train delays. Because of the overwhelming institutional value placed on on-time performance, TIMACS provides managers with the cause of every train delay, which they can use to mitigate such events in the future."
Many of the LIRR's penalty payment payouts are the results of "swaps" that occour when a crew is not there or not ready to take their next scheduled move.  In 2004, there were about 20 to 50 swaps made every afternoon at New York Penn.  These swaps were routinely made to ensure that trains leave New York on-time, and thus have a better chance of not impacting on-time performance standards.

Each swap results in a minimum of one penalty payment.  However, one late crew can often have cascading effects throughout the whole rush hour as one crew swaps for another and so on down the line to the point where one late train arriving New York in the afternoon can result in several penalty payments and extensive overtime for multiple crews.

Much of the trouble centers around late-arriving equipment trains.  If a westbound equipment train is held someplace to allow a revenue train to pass, the revenue train can arrive on-time, and thus there is no impact on OTP, but the equipment train arrives late.  If the equipment train arrives late, there is no impact on OTP, but there is a decent chance the crew will miss their next outbound run, thus resulting in penalty payments:
"Late equipment trains do not carry passengers and thus do not inconvenience LIRR customers. However, the crews operating equipment trains are frequently scheduled to take out other passenger trains within 10-20 minutes of arriving at Penn Station. Thus, if an equipment train crew arrives too late to take out their next (passenger) train on time, Penn Station dispatchers must bring on a substitute crew for the outgoing passenger train. The dispatcher has a few options: he or she can call in a “protect” (standby) crew, a crew from a later scheduled train, or a crew just finishing up its normal tour to operate the train. If a protect crew is used, no penalty will apply. In the other two cases, however, the engineer of the substitute crew is entitled to a penalty payment and possibly overtime. The conductors also may get overtime if they work beyond their scheduled release time. But the cascade effect continues: the crew from the late equipment train, having missed their next passenger run may be then assigned to other trains. In that event they too will receive outside normal assignment penalties and/or overtime. (Alternatively, if the late arriving crew is not re-assigned, they will sit idle and be paid). The effect continues as other crews are swapped to replace those swapped earlier. Every swap costs the LIRR penalties and potential overtime, and every penalty and overtime payment costs the LIRR additional pension expenses and/or vacation and BLE welfare fund payments."

The LIRR does not have an automated system to keep track of penalties, so at the time of the report there was no data available that reflected the actual cost of outside normal train assignment penalties.

The lack of keeping close tabs on late equipment trains was also lacking at the time of this 2006 report:
"One reason why the Superintendent was unaware of all the late equipment trains is that the TIMACS system does not report on the performance of equipment trains. While equipment trains are properly not included in ontime-performance passenger service data, equipment train performance is clearly a factor in causing penalty and overtime payments. Thus, we feel that management is obligated to more closely monitor it. We asked LIRR Information Service officials if TIMACs could generate reports on equipment train performance. We were assured that TIMACs currently records the arrival times of equipment trains, although it is not used in generating ontime-performance for passenger service."

These archaic work rules, and the expensive penalty payments they require, cost the railroad a fortune year in and year out.  While it is important to stress that these rules came about as a result of collective bargaining at some point in a contract that both the LIRR and the unions agreed to, it is clear which side is not letting go of them.  And while these rules are archaic themselves, the LIRR's handling of these work rules is also quite archaic.

In tomorrow's post, I will continue with thoughts on the investigation's findings in regard to the LIRR's shaky overtime practices, and the archaic and cumbersome system by which the LIRR processes these overtime and penalty payment claims.

From what I have read, it appears the blame can be placed on both sides in this work rule matter.  The unions are obviously not letting go to rules that net their members increased salaries, but the LIRR, while wanting to get rid of the rules, wasn't really doing a good job to manage them at the time this investigation was  conducted in 2004.  From what I can see, it looks like the LIRR has gotten much better with its penalty payments, but concerns still exist.  The railroad would very much like to get rid of many of these rules entirely, and I certainly wouldn't be opposed to that.

Like I said on Thursday after the TWU contract came out, the LIRR has a limited amount of time to get their financial house in order before East Side Access hits.  Busting up as many of these archaic working rules and union regulations as possible is going to be critical for a railroad which is going to see so many changes in the coming decade.  They have the opportunity to act now, but will they take advantage of it?
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