Capital Metro Terminates Rail Contract with Veolia

December 9, 2009

This morning Doug Allen, interim CEO, authorized the termination of Capital Metro’s rail contract with Veolia Transportation. At the Board meeting later today, we will be asking the Board to approve two new contracts— one with Herzog Transit Services, Inc. for MetroRail operations and rail maintenance, and the other with Watco Companies, Inc., to continue operating the freight line as a direct contractor to Capital Metro.

This change in contractors will not affect our estimated timeline to begin MetroRail service in the first quarter of 2010 and does not affect our other contract with Veolia for fixed route bus services.

With Board approval, the new contractors will be ready to begin work immediately to ensure a seamless transition. Herzog staff will be at the North Operations facility tomorrow, and the ongoing programming work that is necessary to finish the project will continue without interruption. There also will be immediate opportunities for Veolia rail employees to continue employment with the new contractor.

This change was made to finish the remaining work to open the Red Line. We are bringing on a highly qualified passenger rail operator to provide the quality service that is on par with the quality bus and paratransit service we currently run. A copy of the news release is attached.

Thank you for your understanding.

Sincerely,

Gerardo Castillo
Manager, Community Involvement
Capital Metro
(512) 369-6227
gerardo.castillo@capmetro.org

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Austin, Texas – Capital Metro terminated its rail operations and maintenance contract with Veolia Transportation today.

At this afternoon’s Board of Directors Work Session and Board Meeting, staff will present for approval two new contracts:
1) Herzog Transit Services, Inc. for MetroRail operations and rail maintenance
2) Watco Companies, Inc. for freight rail operations

Herzog Transit Services is prepared to begin work immediately to complete the remaining steps in the MetroRail project. This change will not affect the estimated timeline for beginning passenger service in the first quarter of 2010. Capital Metro made this decision to ensure the timely completion of the MetroRail project and a successful launch of the system, and to meet existing freight obligations.

Herzog currently operates passenger rail systems in Dallas-Fort Worth (Trinity Railway Express), Albuquerque, NM (Rail Runner), Stockton, CA (Altamont Commuter Express), and Oceanside, CA (Coaster), and has been in the railroad industry for 40 years.

Watco has been operating Capital Metro’s freight line since October 2007, and runs a total of 22 short line railroads on more than 3,500 miles of track in the United States.

During recent contract negotiations, Veolia demanded changes to the terms of the existing contract as a condition for completing the remaining work. Capital
Metro could not agree to these changes because they would have exposed the Authority and the community to additional costs and risks. Capital Metro immediately took the responsible step of considering other options which included securing agreements with Herzog and Watco.

This action is a responsible business decision in the best interest of not only Capital Metro but the Central Texas community.