Joline Malatorez (spelling?): ... this afternoon which is all about moving our goods. The reason we're here today and the reason we're here together all week is to share ideas, successes and maybe impediments to each of us being the kind of success that each of us knows and all of us know we can be.

Um, we, are privileged to co-sponsor this event with the Department of Agriculture and, perhaps, I should introduce myself. I'm Joline Malatorez the Federal Railroad Administrator and on behalf of Secretary Rodney Slater (spelling?), I'd like to extend his warm wishes. He was not able to attend this conference but he is very much involved with Secretary Glickman in visioning what the 21st Century should be like in terms of having the adequate transportation systems we need to move our cargos to their customers efficiently and effectively and certainly at the least possible cost.

One point of interest you might want to know that in 1993 when President Clinton asked me to serve as his Federal Railroad Administrator, I was the first woman ever nominated and confirmed by the Senate for this job and I consider that a privilege and its been a joy because we've had an opportunity over these past five plus years to really think about how we do our business and how the Federal Government and the Federal Railroad Administration in particular can enhance the opportunity for each of you and all Americans to be successful in using the National Transportation System which is so (Inaudible) to the economic vitality that we are now enjoying. We have been most fortunate because the President's economic plan has worked and it has worked phenomenally well. We have the lowest low employment rate in thirty years. We have a Wall Street and a stock market that has been more vigorous and for a longer period than anyone would have forecast and as I listen to the President in China these past days I have been reminded about what he told us when we first came here. We are about being inclusive, not exclusive, and we are about the business of finding the right answers where those answers are best found. Those are not in an office in Washington. Those are at the point of work where men and women in this country do the jobs that really have enabled this economy to be so vigorous.

And, so, the most important part of our time together will be the question and answer period. We have three very expert women who will bring a variety of points of view to you . I am privileged to be the moderator of this event and in that capacity hope that we can exchange ideas and leave here, all of us, with new knowledge, new information and new opportunities ahead.

Although I was not able to listen to the speaker at lunch, if the speaker talked to you about the Small Business Administration, I'm sure that she told you that over the past five years we have increased loans to women by more than 300% and women entrepreneurs have outstripped growth in this country of other categories of entrepreneurs by more than 2 to 1. So, I would say to you that it appears to me that women know that their best freedom and opportunity can lie in their own business in being an entrepreneur providing services to customers who need what you have to sell.

I'm excited about the fact that the President has looked to women throughout the administration to bring a diversity of opinion and point of view to the kind of policies we develop and I think no matter what you read, whether it's corporate American in the private sector, nonprofits or in the government, women bring a point of view and an opportunity to look at new ways of doing business, that is really revolutionizing many businesses.

Recently, and I'm sure Karen read this article, although our other two colleagues here, and you may not have, there was an interesting article by Frank Wilner (spelling?) and Frank started the article by suggesting that since women took over many of the offices that regulate and oversee the Railroad Industry that the time for pounding of tables and loud hollering and other forms of that nature have really past when it comes to problem solving and I think that Maggie Jacobson, who is at the National Mediation Board, and myself, along with many, many other women appointees and leaders in this government, understand that to compete global market place we have to be able to listen as well as we speak, be able to understand different cultures as well as we do our own and as I heard the President in China talking to the university students, talking on the radio and taking questions from Chinese citizens throughout the country, I was really (Inaudible) by the knowledge that the freedom of that message, the power of that message, is more powerful than any other institution that I know of. The President said to them, "Freedom, opportunity, the ability to have free speech is the right of every person in every country."

With regard to transportation, another reason that I enjoy the opportunity to serve in this administration as much as I do, is that transportation really is the spine upon which this entire economy is built. I often talk to students of all ages throughout the country and when I was recently addressing about 365 graduate students and I was trying to ask them what their plans were and how many of their career plans revolved around transportation. Not a lot of them raised their hand and they were shocked to learn that one out of every seven jobs in this country is related to transportation, one out of every seven jobs. We're talking about a trillion dollar industry.

Women have an opportunity today that is unique, exciting and a basis upon which to build a full life for you and your family. The global connections that are represented here in this conference really represent transportation because transportation cannot be viewed either as single mode or even nationally because we are in a global market place and in that sense the opportunity for you to network with entrepreneurs from around the world, share ideas and make connections that will mean business for you in the future is really one of the most important outcomes, I believe, of this very important conference.

The Secretary often says transportation is about more than concrete, asphalt and steel. It's about people. We can never lose the connection to our customer. Customer service, we believe, is one of the key elements, along with safety, efficiency and timeliness in making transportation businessess work. I hope that in our question and answer period we will have an opportunity for you to inquire about what transportation job opportunities there maybe for you. We have a Website at the FRA and the DOT that I hope you will enter and review. There is a nationwide and global Website out of the Small Business Administration that, again, is an opportunity for you to connect with other women in similar or connected businesses and let me say that on the part of the Department and the FRA that the Secretary has made a commitment to reach the 5% goal of procurements for women-owned business. As a matter of fact, last year the Federal Railroad Administration outperformed almost every other government agency that we know of by reaching over 11% in our womenİowned business procurement. We think that's the kind of commitment that you deserve. Women represent over 50% of the population. The growth in all kinds of areas, traditionally and nonİtraditional, has given to us a data base of women entrepreneurs that makes us rich as we look for the very best people to do the jobs we need.

So, I personally invite you (a) to become acquainted with the Department of Transportation, the Federal Railroad Administration and also to make links with us that don't stop at this AgricultureİTransportation Forum because we have 554 days until the year 2000, going into the new millennium, 554 days. Doesn't it sound so near that we could almost touch it? I have a sign in our lobby that counts down the days because if you're like me, I remember thinking, years ago, oh, the next century is so far away. It's only 554 days away. It's time for us. It's time for you and on behalf of the Secretary we are committed, as are all the other leadership teams in this government, to help you get where your dreams are because it's all about making dreams come true and I'm sure that many of you will be able to share with us the dreams that you have already accomplished and the ones that you have yet to accomplish that we'd like to help you with.

It's my pleasure to introduce out first guest speaker. Karen, Karen is a person who has been a women leader in transportation for some years. She began, actually, in the same department as myself İ the United States Department of Transportation. Karen was there from 1977 to 1982 and then from 1982 until 1988 was a professional staff member, the United States Senate, Committee on Commerce, Science and Transportation. From April '88 to November '94 she was a commissioner with the ICC, one of the crucial decision making bodies in transportation and from 1994 until the present has been with the American Associations of Railroads. Karen Phillips (spelling?) is the Senior Vice President, Policy Legislation and Communications for the American Associations of Railroads and I think what you will hear from Karen, and I tried very hard not to steal any of your thunder because there's so much going on in the Rail Industry that's so exciting and I know that she is going to be telling you about the kind of fundamental, comprehensive change that is leading the Railroad Industry into the 21st Century. Let us welcome Karen Phillips.

APPLAUSE

Karen Phillips: Thank you very much. It's a real pleasure to be here and I'm especially honored to serve on this panel with Administrator Malatorez. We have the opportunity to work together very closely, the Association of American Railroads and the FRA on safety and Joline is constantly working with us to make sure that we're doing the right thing to keep this industry as safe and as efficient as it possibly can be and we very much appreciate her leadership and I'm delighted to be here with you today and with our other panelists.

What I"d like to do today is to just to very briefly give you an overview of the U.S. Railroad Industry and kind of where we come from and where we're going and then in the Q & A period we can get more specific in terms of how the railroads can helpful to you all in terms of what your goals would be in getting your products to market and participating in the overall transportation market place.

The entrepreneur has had an honored place in American history and certainly he or she does in the railroad industry and the American economy as well. Going back about 160 years, the people who began the first (inaudible) steps toward railroad construction were ridiculed by some, opposed by others and looked upon as visionaries by still others. But, these people were among the first members of the entrepreneurial class that, over the ensuing decades, would make the U.S. the world's agricultural, industrial and economic leader and the efficient, economical and safe transportation provided by railroads was part of the reason why.

Most of today's railroad industry in the United States was built by entrepreneurs who lived in the 19th Century. Some people would say that the Railroad Industry's entrepreneurial spirit died with them and they would be wrong. One of the fastest growing segments in our industry today, indeed, is that represented by short line and regional railroads and these are drawing a new class of entrepreneurs into the Railroad Industry. More than 300 new railroads have been started by these men and women, usually tracks that larger railroads could no longer operated successfully. But, these men and women have succeeded providing essential services to thousands of communities and businesses throughout the country İ businesses that receive raw materials, feeds, fertilizers and hundreds of other products and ship out grains, food products and manufactured goods all over the country and to the world. The entrepreneurial spirit is, indeed, alive and well in today's Railroad Industry.

Let me tell you a little more about today's Freight Railroad Industry. There are more than 500 individual freight railroads in the United States. Only nine of these railroads are considered Class I Railroads. These are the largest railroads in our economy. They have annual revenues of 255 million dollars or more. Another 32 railroads are classified as Regional Railroads meaning that they operate at least either 350 route miles or have at least 40 million dollars in annual revenues and more than 500 of these railroads are classified as Local Railroads and many of these railroads, particularly the smallest railroads, focus on agricultural transportation.

Now, based on ton miles, railroads provide more freight transportation in the United States than any other mode of transportation and this isn't a figure that people often can relate to. People think of the Railroad Industry as being old and outdated and this type of thing, but we, in fact, provide more freight transportation than any other mode.

Thank you, I'm losing my voice.

We carry about 40% compared with 28% for trucks and 14% for water transportation and the remainder, another small percentage, goes by pipeline. But while railroads provide 40% of the ton mileage, we only receive 12% of the revenues in terms of the transportation marketplace and this highlights one of the Railroad Industry's great strength and that is our efficiency. We move extraordinary volumes of freight at very low average rates İ just 2.35 cents per ton mile and since 1981 our average revenue per ton miles has declined by an astonishing 56% and this is on an inflation adjusted basis. These are real dollars. It is no coincidence that this decline has occurred since railroads were partially deregulated in 1980. Before then, railroads were among the most regulated industries in the United States. We required regulatory approval to raise rates or to lower them. The services we offered were subject to government oversight and I can tell you firsthand, having been an ICC Commissioner, that, that the government was involved a great deal even much less so after the Stagger's (spelling?) Act, but we were certainly very much involved and so was the way that freight equipment was allocated. Contracts between the freight railroads and their customers before 1980 were illegal. Every other business was allowed to do this but the railroads were not and more than 20% of the industry had entered bankruptcy proceedings during the previous decade and among the hardest hit were some of the railroads serving much of the agricultural heartland the Rock Island, the Milwaukee Road, both of which went out of business.

Regulation stifled innovation and raised costs for railroads and their customers. Since deregulation, however, earnings have improved, even as rates have declined by that 56% that I told you about and this has occurred across all commodities, including agricultural commodities. The scope, the magnitude of the decrease has, perhaps, not been quite that great, but we have seen decreases in the costs associated with transporting agricultural products dramatically as well. And this occurred for a number of reasons. First off is that deregulation has meant new freedom to manage the railroad freight cars, locomotives and track. This has produced a doubling in productivity of tracks and equipment. Combined with new labor contracts, deregulation has contributed to a tripling of labor productivity. Another reason is that deregulation gave railroads new marketing opportunities. More than 60% of all rail freight now moves under contracts in which shippers guarantee traffic levels and railroads provide service and/or rate guarantees. Railroads have also developed reservation programs under which shippers of (inaudible) commodities, such as grain, can reserve freight cars in advance of anticipated moves.

The Railroad Industry's fastest growing product line is intermodal freight which is totally exempt from government regulation. Since deregulation, volume has almost tripled from 3.1 million trailers and containers in 1981 to 8.7 million last year. Intermodalism requires partial movement by rail and partial movement by trucking companies and in some cases with imports steamship lines as well and it combines the economy of rail with the flexibility of truck transportation. Now, among agricultural products we find that intermodal is gaining ground in the movement of perishables and now accounts for about 7 or 8% of all perishable transportation or about the same as railroad refrigerated cars. Now, how important is agriculture to the Railroad Industry? Very important. We move fertilizers, feeds and agricultural machineries to farmers and suppliers and we move grain and perishables and other food products to market. Let me put that in perspective here. In 1996 farm products accounted for almost 9% of our tonnage which is about 140 million tons and a little more than 8% of our revenues or 2.8 billion dollars. Food products accounted for another 87 million tons and another 2.4 billion dollars in revenue so you can see the magnitude of farm products and agricultural products overall to the Railroad Industry. Farm products, in fact, rank second only to coal in terms of tonnage and fourth behind coal, chemicals and motor vehicles in terms of revenue

Railroads are also important to agriculture. According to the United States Department of Agriculture railroads account for about 40% of the nation's grain transportation and 38% of the transportation of grain for export market. Railroads also provide for about 15% of the transportation for perishable products with about half of that going in intermodal trailers or containers and half in refrigerated cars. Railroads are also vital links between producer and consumer. By moving processed food products such as flour frozen and canned fruits, vegetables and meats from plants to warehouses.

Now, there are ample opportunities for cooperation between railroads and the agricultural business community. Railroads can provide the safe, efficient and economical transportation services that keep businesses cost down and expand market reach. Railroads industrial development people can also help match entrepreneurs with the ideal site for the new facility.

Today's railroads are growing and they are growing because they are listening to their customers and eager to work with them so that their businesses can succeed and because when our customer succeed the railroad can prosper as well and this is especially important in the agricultural community.

It's been a real pleasure to be with you today. I look forward to the Q & A period and before I do close Joline mentioned the DOT's Website, I just wanted to mention that AAR also has a Website which is www.AAR.org and if you're interested about getting more information about the industry overall or about any of our specific companies, there are links into all of our member carriers' Websites as well and so it's a very great source of information about the U.S. Railroad Industry.

Again, thank you very much and I look forward to taking your questions at the appropriate time. Thank you.

APPLAUSE

Malatorez: Thank you so much, Karen, and thank you for being so respectful of time because I know you could of talked about many, many things.

Our next speaker is Dorothy Vatrono (spelling?). Dorothy has been in transportation for about ten years, but she's done many other things as well. As I look at your career, Dorothy, it seems to me your are the person who markets the products and gets it sold. Today, Dorothy is the Director of Marketing for Tony Vatrono Company, their Fruition (spelling?), Fruition Division , the Fruition Division. I think that's about fruit, right? Um, in fact, when Dorothy and I chatted by phone yesterday we talked about a number of things, but one of them was the fact that people who get into a business often take transportation for granted, like people take safety for granted, they take motherhood and apple pie for granted, but they really take transportation for granted unless there is some catastrophe and, um, the media covers a lot of, puts a lot of pictures on about a crash. They don't put pictures on about the billions of safe miles that transportation puts forward to move your goods to their customer.

Ah, one of the stories that I have always remembered but I heard just this past year really brought home to me just how important transportation is. We do a lot of work trying to assist companies in their effort to get business overseas, to become part of the global marketplace. Sometimes it's intimidating whether it's getting the right contact or getting the right financing or just being able to work with people in other countries and I heard this story about entrepreneurs, not these were Russian entrepreneurs in Russia and when he Soviet Union, ah, disengaged itself and became individual countries and privatization was the watch word, many Russians were trying to develop businesses and this one group that had started as a cooperative farm, a commune, decided to start growing tomatoes and they marketed, Dorothy, their tomatoes to a plant that was going to make ketchup and they had all the numbers down. They knew they were going to be rich. This was fabulous. They worked on their gardens. They put all the Russian version of Miracle Grow. They had fabulous, fabulous product. Wonderful crop. They gathered it up and they took it out to be taken to the manufacturer of the ketchup. One small problem. They hadn't guaranteed transportation. They hadn't made sure that the transportation systems were evolving like they were evolving and the sad truth was by the time the transportation came to take their tomatoes to the manufacturer, they were rotted and they lost everything.

Just a small story to say transportation is key to all of our success, but certainly to those pursuing agricultural businesses.

I think what we're going to hear from Dorothy is someone very excited about her entrepreneurial venture and someone with a lot of success stories to share with us. Please welcome Dorothy Vatrono.

APPLAUSE

Dorothy Vatrono: Thank you for that introduction. It's been said that a presentation given directly after lunch had better be exciting otherwise most of it will be lost to digestion. Joline and Karen have given us a good start on that and I'd like to continue in that beam.

Ah, for a second I'd like you to think about any transportation problems you might have encountered in getting to this conference. Did anyone have any trouble? Go ahead, raise your hand. Think about it, these people, three out of what, twenty, twenty-five people, had trouble and they're people, they can make decisions, they can follow directions, they can make changes in their plans. Think about how those problems multiply when we're dealing with produce or other goods, cotton, wool, because a lot of people here are not only in agriculture for the fresh fruits and vegetables, but for other products. However, since fruit, I am known as the fruit lady, so fruit is the area of expertise I'll talk about. Bear with me as I relate everything to the produce industry. Before I start telling stories about life as a produce receiver I'd like to bring up what I consider the most important tool you can use in business and that's your ability to network. They've both mentioned entrepreneurship as a key factor in the development of our economy and how do you do that and it's truly who you know. They always say it's not what you know, it's who you know and I'd like to give a few examples. I have this book here called by Harvey McKay. It's called "Dig Your Well Before Your Thirsty". My partner sent me this book and I said, dig a well, you know, I've got city water. What do I need to dig a well for, but his point is to make contact with people even if you don't think they're going end up being of use to you in the business. He has an interesting quote here, "In today's economy talent alone will not save you. Genius will not. Experience will not. Guts and hard work will not, although I 'll bet you they help. If you need job, money, advice, help, hope or a means to make a sale, there's only one surefire fail-safe place to find them - your network. But, only if you have one."

I met someone at a business function about a month ago and he is in the business of providing security for high profile business people. He picks them up at the airport and takes them around and makes sure they're safe when they visit our state and I thought, oh, great, a security guy, what in the world could he possibly have to do with produce. So, we chatted for a while. I told him what I did and I said, oh well, wasted those ten minutes. Sad, but true and about a month later I ran into him and I was about to blow him off and he stopped me and he said, hey, did you hear from so and so from Choice Hotels? Now, unfortunately, I had not heard from the lady yet, but he called her up and told her about my new gift fruit business. We do mail order fruits which that are excellent client gifts and corporate gifts. He told her all about it and he said, you need to talk to this lady. If I could get the Choice Hotel Account I think my dad will give me the business. (Laughter)

So, and here I was, I had dismissed him at first and I have a pen here. I went to a food service conference and met somebody who's in the poultry industry. Again, to me, not much connection but I said, well, he's offering us a pen, a cookbook, a pad. I better at least listen to what he has to say. Well, he turns out to have a thriving export business to Russia. We can tie us into the Russian experience here. He's actually doing well. They had somebody that's speak, is multilingual and went over there to work for them and works with the Russian and I haven't gotten all the details, but I have some amazing contact now if I want to get back into exporting to Russia.

I did export about three years ago. We had a hotel supply rep from the United States who went over there to set up a company to cater to Korean Airlines and Aeroflat (spelling?) Excuse me, one second, I know this story. The company was called Aeromar (spelling?) and basically they wanted to sell fruits, vegetables and all the other foods the airlines needed and he told me, he said this is really a shame. I'm in Russia. I'm selling two companies in Russia and there's produce here. I have not way to get it. So, they spent thousands of dollars every week which worked out, well, for me, obviously, on air shipments and then monthly supplements by cargo ship to get their produce. Unfortunately, he spent so much money buying our produce and shipping it over there on British Airlines and those sort of things, the company ultimately went bankrupt so we lost a customer, the man lost his business and there are still Russian farmers over there with no way to get their goods to market. It's a sad situation.

Um, as you can imagine, we use every part of the transportation industry in the United States to get the produce that we need. Time and perishability are the main criteria used to chose the form of transportation which includes trucks, vans, rail cars and air containers. If you take one look at our highways you can tell that, I'm amazed by the figures Karen gave about the percentages because it certainly looks like everyone uses a truck. Um, but, we do that because of the perishability factor, as I mentioned, because we can get it here from the west coast in four to five days. However, and this is a point that she brought up, it is the most economical way to go to use the rail system, so hopefully when we get to the question and answer session you can investigate how to use the rail system.

Basically, we use rail cars for hardier fruits such as lemons and oranges and then vegetables such as onions cause they can withstand a two to three week shipping period and then we use the intermodal vans for apples, pears and carrots. They're still sturdier fruit. They can handle it but it takes about six to eight days to arrive from the west coast. We use air containers for, as you can imagine, the most perishable of fruits İ the raspberries, strawberries. I don't know how many of you were at the luncheon today. We had strawberry sauce on the dessert plate. If they don't get out containers to us in time, that's what they will look like. (Laughter) So, supply, actually also dictates how we pick which mode of transportation. For example, this week, we shipped pallet loads of strawberries by truck. However, if they have a rainstorm in California, the berries won't be able to hold up to four or five day transportation. So, then we would go with an air container to get it there in time for market.

Um, until about five years, to me, I'm mainly going to talk about using a trucks cause we do go through them most of the time, until about five years ago we use to contract for trucks ourselves which was time consuming and frustrating trying to arrange multiple pickups within California, coordinating with drivers who call up and say, "I got a load of produce." It doesn't narrow it down. I got 15 trucks coming from California. I have fruits. I have vegetables. I have the whole ball of wax so we decided, and here's a solution that you could possibly use in your business, is to go with a truck broker. They have a network. There's that word again. You can network with the truck brokers and they will coordinate all the trucks. They'll coordinate the pickups, eliminate the headaches on your end. Basically, we use three primary brokers for our California deals and three for our northwest loads.

I don't, an interesting part is how we get our products to our customers within the area. Basically, we have to worry about getting them to other companies in the market, to food service companies and chain stories in the area and then for our gift service we ship nationally. So, we have several different modes of transportation for that. For the market vendors, it could be as simple as if they're on the same side of the market as us, using pallet jacks and trucking it on down the dock. Trying to get it across the street was quite a challenge because until last week we didn't have a truck of our own. We had to contract with people. We had to beg, borrow and steal favors - could you please run these strawberries across the street or I'm going to lose the order. Um, so I've been saying for years dad, I think we need our own truck. So, eventually, he listened. We got our own truck. I can explain to you quickly how that saved us on Friday. We had our California truck was 14 hours late and we had two chain stores who receive Friday supplies of the packaged Dole salads for the weekend. Well, they needed 'um. Believe me, they needed these salads or I was going to lose the account and the truck got there at four o'clock in the afternoon and there was no, there were no vendors, I mean, excuse me, no haulers within the market to transport the salads. So, we loaded the salads on our brand new truck with out little DOT numbers on the side, threw dad in the truck and said, "Go deliver the salads." (Laughter) We got them there. We saved the account so that's another solution. For years the main resistance to getting our own truck was expense. He didn't want to have to register it. He didn't want to have to pay fuel. He didn't want to have to pay taxes, but imagine the cost, actually this customer is the Department of Defense and they are our largest customer and if we had lost this account because we couldn't get the salad, it wouldn't have, you know, it would not have balanced out in our favor so, thank goodness, my dad finally listened to reason. He never listened when I was a teenager. I don't know what happened. (Laughter)

So, basically, networking everywhere you go, networking within the industry, and I mentioned hooking up with truck brokers, they not only can help ease some of your headaches of transportation problems, they may even be a source of new customers for you because I can think of at least three shippers we're currently dealing with who we didn't know, but somebody who was shipping us grapes screwed up on a deal very badly and we nobody to replace the shipment with and the truck broker said, well, you know, I've been using this guy, you know, for my other customers, why don't you give him a shot and now they've got us as customers, probably for life, until they mess up.

So, ah, those are just some of the solutions and I'd be happy to address questions during the question and answer session. Thank you.

APPLAUSE

Malatorez: Thank you so much, Dorothy.

Before we go to our next speaker I just want to point out that there are some very useful handouts available to you that you should have received and if you have not I hope you will look at them. First of all, from the Department of Transportation a grid which has every region, the regional administrator, the address, the phone number and the fax number. That maybe helpful to you where you live. Again, from the County Commissioners' Association, State Association Executive Directors and I know that we will hear a lot from Kay about how important this tool could be for you and then the final piece is State Department of Transportation Contracts and especially with the Secretary committing to the five percent goal for women, women business owner procurement, I think interaction with the federal Department of Transportation and the state will be very helpful to you.

Our final speaker of the panelists is Kay Broton (spelling?). Kay was the president of the National Association of Counties between 1991 and 1992 and to her leadership she lead 3,107 counties and helped change and create a vision of local government for the new decade. During her presidency she focused the nation's attention on the aging population and the again infrastructure, the theme which provided a format to analyze where we are today, where we want to go and, in this time of fiscal restraint, how do we get there.

She was the first woman to be elected county commissioner in the State of North Dakota in 1972 and she was the fifth woman to hold the title of President of the National Association and that association began in 1935. She has a very rich background of education and experience. For example, she served on the Council for Agriculture, Research, Extension and Teaching for the Land Grant University System - a national council for almost ten years. Three years ago Kay accepted the challenge of serving as a member of North Dakota's Governor Schaefer's (spelling?) Task Force for Pro-Goal, a 261 million dollar corn-fructose plant which enhances the agricultural economy and is located in Wapaton (spelling?) , North Dakota, and all of this was really due to the success she enjoyed as part of this task force.

On the private industry side, Kay's a member of the Board of Directors for Primewood, one of the largest employers in Wapaton. She remains an active participant where she resides, giving her the opportunity to continue to understand the integrated role of individual business and government working together to create a vibrant community.

In 1993 after 20 years as an elected official, Kay chose not to run for re-election to the Richland County Board of Commissioners or any other office. Today she serves as the County Service Representative for the National Association of Counties and in this position works on membership recruitment and retention, corporate affairs, media development and marketing of the association and I think that you're going to hear from Kay many things, but a theme that really has been running through almost all the comments you've heard today and that is one of networking. The network is a power generator for our success and each one of us can help the other.

Kay, welcome. We look forward to your remarks.

APPLAUSE

Kay Broton : Thank you very much, Joline. As you can tell I have to use the mike. You know, I gave a speech a number of years ago and it happened to be on taxes and it was when I first been elected and I really didn't know a lot about what I was going to have to talk about to nine states of tax directors so I went to the individual in our state that had the greatest knowledge of taxes and he helped me put together this absolutely phenomenal presentation and, you know, I practiced it and I practiced it and I got up and I made the presentation. My heart was absolutely palpitating in fear of anyone asking me a question because I knew that I was, perhaps, not going to be able to answer, but I got by fairly easily and got out of the room and I was walking down the hall and this rather nice looking gentlemen came up and he said do you have a copy of your speech or your presentation and I was stunned because I knew that it had been put together fairly well because someone else had done it. However, I didn't think it was really all that hot and I said, well, yes I do and I, you know, I could have it copied for you, but why do you ask for it and he said because it took me the first ten minutes of your presentation to realize that you're really were that all. (Laughter) So, he had missed it and quite often, quite often when I get up to speak and the mike is at the level that it is usually, I end up taking off my high heels or lifting the mike to my vocal chords so that people can hear me.

But, it is indeed a pleasure for me to be here this afternoon and to have the opportunity to talk to you about things that are really near and dear to my heart. You see, I did grow up on a farm and my father was a farmer and a contractor so I not only had the opportunity to of driving the farm equipment, running a caterpillar to plow and disk and drag and all of those sorts of things, knew how to run all of the equipment as a youngster, but also had the opportunity of living with a father who was a contractor and he hauled gravel and he hauled dirt and he had a drag line so we never went to the amusement park to do the rides. Dad would come back and OSHA would die. They would have had us because we used to get in the bucket of that drag line and he would swing us around and then we never wanted to get out of it and so he would shake it until we would fall out and there we would be and we had all sorts of other interesting experiences, but then when I ran for county commissioner in 1972 at the ripe old age of 29 with three young children, can you imagine what happened back there with all the gentlemen and ladies wondering whether or not we were going to have color coordinated culverts and what in the world would this women know about anything that dealt with county government. Let me assure you, I knew very little, but neither did anyone else that got on that particular board and I discovered over the years there are a few key phases one needs to know and you can make it through and all you, the other thing that you have to do is make certain . . .

Talking?: In fact, it's the fastest growing segment of our market, in the railroad industry. It's been a phenomenal growth area for us. It's been one that has been mutually beneficial for both the railroads and the truckers and it helps the environment and congestion and everybody else as well. So, it's a loveİhate kind of relationship because we, we get along very well with them on intermodal, but we, we fight with them on a few other things as well. We're still very fierce competitors also.

Malatorez: Let me just mention for the sake of the tape. I'm supposed to repeat the question and I forgot to do that. The question was - What is the relationship between trucks and railroads in the United States? Did you have any other comments?

Inaudible

Malatorez: Okay. Madam? Your name?

Betty Reynolds: Is there a . . .

Malatorez: And your from where, Betty?

Reynolds: Nebraska. Is there an answer to all the delays we have in the fall getting the corn out of the small towns (Inaudible) into the elevator?

Malatorez : Um, there are some answers. Um, I'm going to let Karen talk about this. Certainly. First of all service to all customers is a crucial issue and actually I think Kay mentioned the issue that rural America faced when the deregulation of the railroads meant that many small railroads were, ah, either eliminated, abandoned or (Inaudible) by larger railroads. In fact, when I was in Ohio where I came from, um, I was Deputy Director of the Department of Transportation and Ohio was terribly affected because agriculture is our biggest segment of the workforce and our biggest product and many communities would have been devastated without a railing to get their product out. We actually had helped start 13 new short-line railroads to take over these crucial segments and establish partnerships with county commissioners and city councils and port authorities around Ohio and I know that occurred in other areas as well.

There's two issues about crops. First of all, there is the glut and the famine, so to speak. In other words, how many rail cars can a, a company own and maintain for a very small period of time and what I think the railroad continued to try and hone is their ability to work with the customer to bring as many cars to a location as possible. This year there was a terrible problem, as you well know, with the Union Pacific. The service problems that were faced by the Union Pacific, and in some areas are still being faced by the Union Pacific, meant a lot of, um, very upsetting business debilitating situations for customers. I know that the Union Pacific is working very hard to eliminate those bottlenecks and I think that what you might observe is that in the, ah, proposed acquisition of Con-Rail by Norfolk Southern and CSX which, ah, the final report will come from the Surface Board in, I guess less than a month now.

Um, we at the Federal Railroad Administration asked that safety implementation plans be put on the books because safety and service are always together. Most people didn't think about it before, but part of what you saw on the Union Pacific was safety problems that begat service problems and vice versa. In addition, there were also issues of intermodal growth up 7%, clogging at ports and many other transportation issues.

I think what it says to all of us at the Department and out there is that nobody can do this alone. We are part of a system and I think that railroads understand that the Union Pacific's problems in the mind of Americans are not relegated just to this one railroad because a railroad is a railroad is a railroad to the person who needs to get the corn out and so, we are working closely with the railroads, the Service Board is working and the AAR is working. Maybe you'd want to talk about some of the things that you are doing.

Phillips: Well, I think, again, just building what, what Joline said, we perennially have this problem in terms of agricultural products and (Inaudible) that comes up about shortages of equipment. One of the things that the Railroad Industry is doing is to buy more equipment. You, you do run into the problem that Joline mentioned of, you know, do you build a church for Easter Sunday and if you have enough rail cars to be able to transport all agricultural commodities at anytime that people want to move them, your going to have a lot of grain clogs and agricultural equipment standing idle for an awful lot of the percentage of the year. Right now, for instance, there is a very large percentage of agricultural equipment that is sitting idle because the prices aren't good. People have a lot of grain and things in storage. They don't want to move them right now but we have a lot of grain cars ready to go. So, it's just, it's basis economics and so there's a problem for us. There's a problem for the agricultural community as well.

Couple of things that are going, though, within the railroads in addition to buying additional equipment to try and help alleviate some of these problems. A lot of the railroads are trying to set up new types of, of mechanisms where they can work with their customers. The Burlington Northern Santa Fe, for instance, recently set up special desks, as they call them, for South Dakota and North Dakota where, these are sort of customer service operations where people in those states can get to their folks at the BNSF more quickly, more expeditiously to get answers, to find out where equipment is, to see how long it's going to take to work out the transportation that's necessary.

The other thing that we're doing at the AAR, and this is something that the Service Transportation Board directed us to do a couple of months ago, is that we're setting up series of formalized dialogues with shippers throughout the United States and one of the sectors of the economy we're going to be looking at is the agricultural sector. We're going to be holding these meetings throughout the country. We're not going to ask people to come to Washington. We're going out to see them, to talk to folks in real America about what's going on in various commodities, agriculture, coal, chemicals, you name it, we're going to be talking to these folks and these meetings, we're in the process of setting up right now. We expect them to be getting started in earnest later this month and running for the next several months and, and we hope that these will be a continuing dialogue that we will take, that we will have between the railroads as a whole and the shippers. Ah, we're going to have real railroad people from all of the railroads in the affected region. We're going to have shippers and sit down and really talk about what are the problems that people are facing and how can we communicate better, how can we make sure that the railroads are more responsive to shippers' needs and certainly, as it comes to no surprise to all of you, one of the areas where this is the biggest problem is in agriculture because of just the nature of the commodities that we're talking about here. So, we've got a problem. We recognize it and we're committed to solving it, but we got to talk more to all of you in order to make that happen and we're committed to making sure that does, in fact, happen.

Malatorez: Thank you Karen. I , I think those forums are going to be really terrific and one of the things that we all are learning is that we have to be about the business of prevention. Too much in the past we would react to a difficulty, a problem, a tragedy. What we want to do is be preventative and so even in the Federal Railroad Administration we're thinking about how can we do our safety job better and our service to our railroad customers. One of the things that we are developing is what we are calling an early warning system which will help use technology, computers, a variety of indicators so that we can have an early warning of any kind of service issue that maybe coming up so that another Union Pacific experience really doesn't happen.

Another question, somewhere in the back?

Pat ?: I just wanted to ask, is this comparable to manufacture of (Inaudible) to solve the problem of (Inaudible) and then you keep, you would keep it somewhere and then ship it?

Malatorez: What is your name Madam?

Pat ?: I'm Pat (Inaudible).

Malatorez: Hi, Pat, and you're from?

Pat ?: (Inaudible)

Malatorez : Hi, welcome. Um, I mean, first of all it's absolutely possible. The question is who pays the rent and, you know, the issue that was so hotly debated was the grain on the ground and you from USDA know in spades, ah, the kinds of calls and upset and, of course Karen knows, I know, ah, . . .

Pat ?: (Inaudible)

Malatorez : Well, I mean, it certainly there. The problem who pays the rent and, ah, with the cars that are not, ah, being used now, maybe that sort of puts you in that mindset, but the other issue is who's going to call first. If a grain car is full of your grain then it can't be used for anybody else and my sense is that the economics would probably make that difficult, Pat, but, you know, I think it's an issue that certainly could be discussed at one of these forums.

Pat ?: (Inaudible)

Malatorez : Well, it could be as long as the economics could work. I know that Union Pacific was moving cars all over the place to try and respond to a variety of hot spots and if they'd been full they couldn't do it. So, you know, the issue of, ah, you sort of renting the vehicle and the car would be one that you'd would have to think about. Is it worth the number dollars it would pay, you would have to pay for rent to wait until the price for your grain is more advantageous.

Pat ?: (Inaudible)

Malatorez: Well, I think it would.

Pat ?: (Inaudible) . . . and could take in some money, the same kind of money that a grain elevator might take in if the conditions were correct or could be correct.

Malatorez: Well, I think it's worth, certainly worth a, a good discussion and a healthy debate. Yes, Madam?

(Inaudible)

Malatorez: Your name please?

?: (Inaudible) . . . of USDA . . . Partnership and, um, (Inaudible)

Malatorez : Trailer.

?: ((Inaudible)

Malatorez: Sure, you use, right.

?: (Inaudible) . . . The other question that I really had on this was how bout scheduling? Can we get a discount to the railroads who schedule ahead. I mean surely we know that ... a more accurate way of coordinating the scheduling so that the cars are ... ?

Malatorez: Well, ah, and Karen, please jump in here, um, the fact is I know that the railroads have really been pursuing contracts that are win-win for everybody. They want the business obviously. I think that the realities of pricing of the product, when is the opportune time for you to sell your product and a variety of weather conditions, other things that, that really make it hard to say this year, okay, next August you're going to need 27 cars. I think that there are some very time sensitive issues, but again, I think that's what the discussion and dialogue has to be about because as far as I'm concerned you never say never. No idea is one that shouldn't be explored until it's fully explored and you know the pluses and minuses. I think that's what Karen is going to be doing out at you meetings, aren't you?

Phillips : Yes, that's, that is a lot of it. I would just add that a couple of the railroads have tried over the years to have programs that kind of get to your point. This, for instance, the Burlington Northern Santa Fe has a Certificate of Transportation Program and Union Pacific had a similar as well and I believe a couple of the other railroads tried some things for a while, too, and they were trying to get it precisely that point that you would, you would plan ahead, you would get a contract basically that the third week in August you could have a hundred rail cars for instance and those, a lot of people, that's another one of those love-hate relationships. A lot of people really love the program. A lot of people didn't really like the program too much and there were concerns on the part of shippers who were not participating in the program about whether too many cars were being allocated to the shippers who were participating and that there might not have been enough cars available on the free running fleet and so this is a problem we continue to have and we're trying to find the answers to. Joline is absolutely right. This is one of the types of issues we want to talk about in our forum. I think another place where this is going to be talked about is in the big Ag Summit that is taking place in July and the railroads are very eager to participate in that. I think there is going to be a lot of good discussion about precisely these types of issues and the type of networking and everything that, that everyone on the panel has been talking about. That's going to happen at that Ag Summit as well and we're delighted that Secretary Glickman has taken that on because I think that's going to be very helpful with Secretary Slater, Joline, with others. I think it's gonna really be something where we can get some excellent dialogue going on some really crucial issues here. We'll do our forums as well, though, we'll be doing just us and the shippers, the railroads and the shippers directly and I think there's going to be a lot of good discussion and some real problem solving going on but, you're right, this is, it's, its one of the things that is the thorniest - how do you make the cars accessible as much as possible and, and part of it is a two-way street, the railroads providing the cars. We also need to make sure that the shippers order the proper number of cars as well. Sometimes shippers will say I need 300 cars. They really only need 50 and then these other cars are tied up and, so, it's, it's a two-way street and we've go to have better communication where the shippers know if the railroad is going to get it there, they really are so I don't need to order too many because they're really going to get what I need there and we need to do our part, shippers need to do their part. So, I think we're going to be able to get a lot of this, these types of issues explored in a way that we've really been needing to do.

Malatorez: Thank you, Karen. Yes, Madam?

?: (Inaudible) ... Canada. I'm really interested in the issue of the railroads in getting our products to market. We market grains, export ... and, um, very appreciative of the comment from the ... because I think we are ... same situation of agriculture products getting to market and having problems with the railroads and I foresee big problems with the railroads in Canada, so I have a question or two, actually, um, about what is going on here in the U.S. Do you, do you have competition on your rail, your railroads, a lot of your, your producers, have to ... but no competition ... Do you have such things as ... on your railroads and then first, first from the county ... experience, we're experiencing big tough time problems with our road system because of railroad cars ... big time and pushing all the grain onto the ... the most efficient way to run ... and it's not there ...

Malatorez: Well, that's a partial load of questions. Ah, let me make just a couple comments and get Kay and, ah, everyone else involved.

In terms of the working relationship between the Canadian roads and the U.S. roads, I think it's a strong one. Certainly the President of NAFTA is really about the whole business of making this one hemisphere working together smoothly. I know Canadian National, Canadian Pacific both have contracts in this country with other railroads. They have some, Canadian National is going to be presenting to the Surface Board a proposal to acquire the Illinois Central. I think the ability for them to work together is improving. Now, there are still issues of safety, different rules and regulations in Canada then there are in this country.

In terms of how our railroads operate, each railroad is a private company. They do have agreements, trackage rights agreements between and among each other that give them certain abilities to use the tracks of another. Um, the other part that's very, very different form Canada is the number of railroads we have because even though at this moment in time we've got nine Class I's, we have over 600, actually it's to 700 now, other railroads, including Class II's and Class III"s. This is a wide variety of experience in terms of what kind of service a particular road can offer and our job and the Association of American Railroad's job is to give us an opportunity in this country for them to all to work together in a productive and efficient and effective way.

Now, I'll have to let Kay talk about this, the railroads are dumping, I, this doesn't sound good.

?: (Inaudible) ... okay, the number of railroads here, does that give competition to your producers to keep the freight rate under control?

Malatorez : Well, this is certainly an issue of debate and I'm sure Karen will want to talk about this. It's called in country open access. Ah, when the railroads deregulated it really gave the railroads an opportunity to be competitive. There are shippers and customers, especially under the pressure of these past months with Union Pacific, who claim they are held hostage and feel that this is an issue that has to be reopened and I think Ed Emmit (spelling?) and his group of shippers are certainly pursuing that. I think Karen will tell you that the whole issue of open access is a great concern to the railroad because they don't want to go back to the days of regulation which really brought many of them close to bankruptcy so our goal as a department is to do the same kind of outreach, to work and listen to the railroads and the customers and see if there isn't a way to solve the customer and shipper problem without reverting to the days of old.

Broton: Dumping was the right word. (Laughter) We were there. We were there, um, but we were also very fortunate, just like you in Ohio, because when the railroads decided that they were going to abandon lines in our county and in our state we did actively pursue short-line railroads and we have one of, I believe, the best in the nation, you know, Red River and Western which provide service for many of the producers in the eastern part of North Dakota and it has been a phenomenal boost to us, but, and I'll, I'll discuss that a little bit further, but the fact is that you hardly find a farm anymore, particularly in eastern North Dakota and the big producers that don't have 18 wheel trucks that can operate in competition with the railroad as much as they can trying to access railroad carriage when at all feasible because we know that is really, you know, the best way of moving it, but, people have got to have the backup system in order to move the competition.

In terms of what the county did and the fact that the roads are going to go to pot because the entire transportation system in your location changes when railroads abandon lines, ah, and we started ending up with unit trains, ah, being, when they talked about doing and did unit trains and we had then two or three locations where they loaded those and we had to do a lot of prioritizing and refiguring about where the county dollars went. The State Highway Department worked closely with the local governments to try to build up those particular areas so that they would be heavy enough, built heavy enough to handle the trucks that would be coming over.

But, again, we have an unusual problem in the northern tiers that many other places don't have and that is the restrictions in the spring and the fact that we end up with the same problems that you do and it is very, very costly. But, we are also dealing with lots of other things in the United States where counties and states are having to prioritize what roads and bridges they're actually going to have and eliminating some of those because they cannot keep them all up. North Dakota we have 104,000 miles of roads, um, the largest number of roads, I believe in the United States and 630,000 people - that remains the same. Since the 1930's we have a permit system there - someone has to die before someone else can give birth. (Laughter) We're into stability, ah, there, but that's not necessarily true. I mean it's really not true. It's a joke. (Laughter) But, ah, there a lot of real, real issues that have to be dealt with and that is prior, prioritizing and picking out what roads and bridges you're going to have in the future and facing the fact that you need to really talk about intermodal methods of moving your product.

Phillips: I'll just take on open access for a moment, although we prefer to call in forced access in the Railroad Industry. Ah, it is true that as a result of the Stagger's Rail Act that there were a number of rail lines abandon, ah, and what happened some shippers who used to have multiple carriers now only have one or maybe two. What also happened was that a lot of the track of the 56,000 or so miles of track that were abandon after the Stagger's Act, about 36,000 miles of that has been picked up by short-line and regional carriers - the hundreds of carriers that Joline was talking about. So, in many cases a shipper might have one Class I railroad, one of the largest, the big nine railroads, but they may also have access to a shortİline carrier or they may have access to, they may have a truck at their facility where they could either have one carrier that comes directly to their facility, another where they might have to truck their commodity a couple of miles.

One of our concerns, and I won't get into a discussion of Railroad Industry pricing here cause it would take far longer then we have. I think we're just about out of time. Um, is that our concept, our regulatory system is based on a concept of differential pricing and if you start to have multiple carriers come onto the track of a carrier that owns its own facility, it basically undermines the whole railroad pricing system and at some point is the government going to come in and actually compensate the railroads of their infrastructure, which right now we pay between 6 and 15 billion dollars to maintain. This is private money. This is not tax money. This is private money or are you going to come up with some other mechanism.

The Service Transportation Board does have the ability, in cases where there is competitive abuse, if a shipper says that, ah, you know, I'm really being hurt by this. The prices I'm getting are way too high. I need to have another carrier. There are mechanisms at the Service Transportation Board for a shipper to bring a case to the Board to see if they can get either more access or get their rates reduced. Our view is that, that is an appropriate mechanism to do this.

Now, I would also add, we're doing a lot of different things in terms of lots of shipper forms and other things. The STB, our regulator, the Service Transportation Board, is also in the process of looking at a an awful lot of aspects of Railroad Industry regulation and one of them is the competitive access rules and so this is very much an open issue, so to speak, in terms of how the STB is viewing competitive access and whether there should be changes to the law. Ah, we're also in the process right now, we have a couple pieces of legislation before us in Congress which are looking at this question as well. So it's very much an open issue.

Ah, we think the current system works well. We clearly need to work more with our customers and we're committed to doing that, but we think overall the fundamentals of the system works. But, it's all very much open as the STB decides how they want to go forward and Congress also decides that as well. So, stayed tuned. Ah, the next couple of months will be interesting on that issue.

?: ... railroads cooperate on, on, um, short-line rails developers. I mean, obviously, a rail ... abandoning ... Do you see that the railroads cooperating on, on the ... picked up by short-line operators?

Phillips: Yes, the railroads, the Class I railroads have been very cooperative with the short-lines and in many cases they have even financed the deals or they've worked out arrangements where they guarantee a certain amount of freight will be transported on the short-lines.

We recognize that we're in a partnership with our short-line and regional railroads. There's a lot, there are a lot of areas where it is just not economical for a large carrier to serve, but it is tremendously economical for a small one and yet both types of carriers can benefit and so we work very closely with the short-line and regional railroads and, in fact, we've been in negotiations recently over the last month with them to even further enhance our working relationship with them to address concerns that they have had and try to make the relationship even stronger nut, it's been a very positive relationship both ways.

Malatorez: Thank you, Karen. Just mention from looking back, maybe ten years, that in the early days of abandonment, the local communities, the commissioners, the council, the chambers were very important because in the early days, ah, maybe there wasn't as much as recognition and if you're going just start in that area in Canada ah, of, of how important that partnership is, I think Karen's right. Today there's a real recognition of how important the relationship is. But, in the 13 cases in Ohio back in the '80s that we worked with local governments on, ah, sometimes we had to do, um, some pretty, take some pretty strong steps to ensure that the short-line carrier would have a chance to be competitive and to have good access and good connections. So, depending on where you are in that process in Canada I think the local governments are very, very important in this process.

We are not only at time but I think beyond time and I want to tell you how, how much I appreciated this audience. First of all, until just recently, we had almost a full house and secondly you've been engaged, you've stuck with us and I think that's very much due to the wonderful opportunity we have all had to meet these three wonderful transportation leaders. Let's give them a hand.