Image via WikipediaThis Week at Amtrak; June 15, 2009
A weekly digest of events, opinions, and forecasts from
United Rail Passenger Alliance, Inc.
America’s foremost passenger rail policy institute
1526 University Boulevard, West, PMB 203 • Jacksonville, Florida 32217-2006 USA
Telephone 904-636-7739, Electronic Mail email@example.com • http://www.unitedrail.org
Volume 6, Number 17
Founded over three decades ago in 1976, URPA is a nationally known policy institute which focuses on solutions and plans for passenger rail systems in North America. Headquartered in Jacksonville, Florida, URPA has professional associates in Minnesota, California, Arizona, New Mexico, the District of Columbia, Texas, New York, and other cities. For more detailed information, along with a variety of position papers and other documents, visit the URPA web site at http://www.unitedrail.org.
URPA is not a membership organization, and does not accept funding from any outside sources.
1) Are you a fan of failure? You may be, if you believe the following things to be true:
• The reasons freight railroads exited the passenger business in 1971 are the same reasons anyone but Amtrak should not be in the passenger rail business today.
• Railroads in 2009 are just like the railroads of the middle of the 20th Century and later until deregulation in 1980.
• There is no hope rail passenger service in North America can every make money under any circumstances.
• You believe everything you see and hear from many of your state or national rail fan organizations concerning Amtrak, and you refuse to do any independent thinking on your own.
2) Look at each of the four issues above, and think clearly about things in the first decade of the 21st Century.
Joe Boardman, Interim President and CEO of Amtrak is telegraphing to the world he doesn’t want to be the head of a company which embraces failure. While there are still miles and miles to go, and there still is an overall lack of vision, there are some isolated signs Amtrak is slowly shaking off its constant culture of failure and has stopped saying no to anything because it’s more convenient to do nothing versus working to make money for the company.
And, some state membership organizations, like RailPAC in California, are not happy to be part of a culture of failure, and are demanding in no uncertain terms things be improved at Amtrak.
As said in this space countless times before, when railroads cheerfully exited the passenger business and left it all to Amtrak, things in the world of railroading were far different from today. Railroading on every level was still highly regulated by the government, and railroads were fighting for their corporate lives. State and local governments were taxing railroads practically out of existence, with every two streaks of rust being treated as mainline track and therefore being levied in the highest categories.
When the idea of Amtrak was first floated during the early days of the Nixon Administration, it was embraced as a way of helping the railroads – many of which had already slipped into bankruptcy or were on the very brink of bankruptcy – be relieved of a part of their business which was either running in the red or was not making back the cost of capital required to keep the passenger rail system operating with modern equipment and suitable station infrastructure. At the time of Amtrak’s beginning, there was no clue the relief of the Staggers Rail Act of 1980 would ever be considered by Congress.
In the late 1960s, the vast majority of locomotive and rolling stock was nearing the end of its supposed useful life, and would cost hundreds of millions of dollars to replace.
Much of the station and terminal infrastructure in place all over the country consisted of huge buildings built as monuments to the gilded age of railroading and corporate egos. The smaller, more practical stations were okay, but most were built prior to either of the world wars, and needed help to be made modern.
The best and the brightest of the Nixon Administration thought by combining most passenger service into one, non-competing company with a single management structure and all of the alleged savings of said structure would turn around the onslaught of the Boeing 707 jetliners and the Eisenhower Interstate Highway system populated by the latest offerings of Detroit zipping along in air conditioned comfort with power steering and power brakes and enjoying the hospitality of that new, upstart chain of moderately priced roadside hotels, Holiday Inn.
Passenger trains, after all, had no glamour, had no glory, were often old and creaky, and were considered passe, if you were being kind about the whole thing.
Actually, what hurt the passenger business the most was the strangulation of oppressive government regulation, where a struggling railroad couldn’t even get rid of a now-useless branch line milk train without spending thousands of dollars bucking the Interstate Commerce Commission and begging and pleading to be relieved of the burden of an expensive, non-necessary, non-revenue generating train.
The sad part is, many good railroaders intentionally sabotaged their once-glorious passenger trains to run off passengers so they could cook the financial books and be rid of what they thought of as the nuisance and vast expense of passengers.
By the Kennedy Administration in 1961, America had already become a too litigious society, with the beginnings of exorbitant jury awards to plaintiffs for the least problem or inconvenience, and railroads – particularly passenger railroads – were in the gun sights of prowling, money-grubbing plaintiff attorneys.
If you were a president of a near-bankrupt, struggling railroad, trying to do everything you could in the face of stiff competition from trucks which were practically unregulated compared to your operation, and trying to keep Wall Street happy so your stock price didn’t go through the floor and your ability to sell bonds didn’t evaporate, wouldn’t you look at your passenger operations and say to yourself, “why not give this business to anyone else to wants it, as long as I don’t have to fund it, anymore?”
And, so, they did.
And, the railroad industry struggle for survival continued for a couple of more decades.
In the process, far too much of what was then considered surplus and duplicate main line track was ripped up to keep the tax man poor. Business was at best staying steady, if not shrinking in alarming amounts, so why pay to maintain too much track?
That, of course, is the biggest regret of the era of creating mega-railroads and merger mania. Infrastructure we need today is gone, and if the environmental left has its way, will probably never come back, no matter how much our economy will suffer because of lack of adequate trackage. Just because some infrastructure was “rail banked,” that doesn’t mean it’s now available for reuse by the railroads. Incredibly, even where there was once a railroad, to put a railroad back you have to go through the lunacy and outrageous costs in time and money of worthless environmental impact statements so the latest poster animal or plant or creature for the tree huggers can be “saved” in place of necessity for mankind.
The Staggers Rail Act of 1980, signed into law by Jimmy Carter before he left office the next year, got rid of the worst of government regulation of the railroads. It allowed the railroads to act more like businesses than regulated public utilities, and most will agree it’s what saved the freight railroad industry from following Amtrak into the horrors and nightmares of public ownership (See: General Motors and Chrysler for modern applications of this type of fiasco.).
By the time Congressman Harley O. Staggers, Democrat of West Virginia, could get this extraordinary piece of legislation signed into law, there were also other changes in the transportation industry under the Carter Administration, including the deregulation of the airline industry in 1978, and the Motor Carrier Act of 1980. Both the abolishment of the Civil Aeronautics Board and the freeing of the trucking industry, along with the Staggers railroad legislation helped move the country into an era of prosperity under the Reagan Administration, and a welcome realignment of the transportation industry.
Perhaps during all of this the most comical instance was when the Nixon Administration – with a completely straight face – told the world the American passenger train would again reach prosperity within three years of the creation of Amtrak and an initial free federal monies infusion of $140 million from the public treasury. Little did the Nixonites know of the power of the road to ruin by an industry feeding from the federal trough and not having the responsibility of proving to a professional board of directors or shareholders the company is either solvent or on the road to being solvent.
All of this brings us to today, where the sons and daughters of the railroaders of the 1960s and 70s are now, complete with their MBAs, running the few remaining mega-railroads and short lines. Gone are the railroaders who made the tough decisions to rip up track and shrink available mileage. Gone are the railroaders who initially looked at trucks hurtling down new, four lane Interstate highways and sniffed and said, “nothing can replace the power of the train.”
Today’s railroaders are no longer in the ultimate struggle for survival, but are captains of a mature industry which is both discovering its roots, and overall rediscovering itself and its many capabilities as an essential – and permanent part – of American surface transportation.
Here’s a laugh every railroader can have: There is no other type of commercial transportation that has vehicles made – be it ships, space ships, jet and rotary engine aircraft, pipelines, and even trucks – which do not have much of the components for those vehicles shipped to the final assembly point by rail. Rail is the only carrier capable of routinely hauling just about anything, from booster rockets to ship propellers to airplane fuselages to truck transmission parts.
The difficult, messy decisions of 20th Century history for railroads went away thanks to Congressman Staggers and President Carter. Today’s railroads, while still subject to the same rules of economic cycles as every other industry, are overall in a healthy position, and all of the support industry, such as car and locomotive builders are overall healthy, too.
Which means, the first thought in the morning for railroad presidents, CEOs, CFOs, and chairmen is not whether or not something is going to happen today to put the company into bankruptcy, but, how to swipe a nice chunk of business from a competing railroad or a trucking company, along with how to make the company more efficient.
Which also means, railroaders today, while having some limits to their patience, are more than willing to sit down and discuss passenger rail with serious people.
It has often been Amtrak through the years, not the host freight railroads, which has been hesitant to talk about system expansion. While many railroaders have moaned and groaned about their systems bursting at the seams for capacity prior to the recent recession, somehow, when someone really wanted to do something and the price was right, one more train could always be squeezed into the system.
Amtrak, using any excuse from the dog ate its homework to “no operating money” to “no equipment,” has historically embraced a culture of failure. For years, independent studies conducted by United Rail Passenger Alliance and others have shown Amtrak’s long distance trains to be profitable “above the rail.” What this means is the actual operating cost of the train, to get it from terminal to terminal, including all costs of running the train, have been cash-positive, or, to use that supposedly nasty “P” word amongst Amtrak’s alleged friends – profitable.
Today, Amtrak itself says the Auto Train makes 121% of the its operating costs, but it doesn’t use the “profit” word, probably because it was intentionally struck from the Amtrak corporate lexicon decades ago.
The Palmetto, according to Amtrak’s byzantine accounting system, makes nearly 100% of its operating costs through the sale of tickets and onboard services.
Most of the other daily long distance trains do as well, but to slightly different degrees. So, what is holding these trains back, through Amtrak’s accounting system, from bursting through the ceiling to complete profitability?
The burden on of excessive corporate overhead, a bloated reservations system which runs up costs quicker than a drunken sailor, and the intentional throwing off of costs directly and solely associated with the Northeast Corridor onto the national system of long distance trains so the NEC can claim to be operating in the black. (Keep in mind Amtrak’s other favorite accounting hocus pocus, the incorrect charging of NEC operations costs to capital costs, to disguise the real costs of owning and operating the NEC.)
If Amtrak keeps on its current path of promoting irresponsible short distance and corridor trains over cash cow long distance trains, it will forever be a ward of the government treasury and a failure.
Look at New York’s Empire Corridor, formerly the domain of current Amtrak Interim President and CEO Joe Boardman when he headed the New York State DOT before taking on the Amtrak assignment.
Mr. Boardman’s trains, totaling 18 departures a day (nine roundtrips), solely serve residents of New York State. These trains offer coach and business class service, and some trains have cafe/food service, too. Most of the departures are clustered around morning and evening rush hour in and out of New York City, and cover much of the same stations as Metro North commuter trains. For FY 2008, Empire Service trains had an average failing load factor of 35%, carried just 105 passengers per mile, and had an average length of trip of 124 miles per passenger. Empire Service trains carried 994,300 passengers, each paying an average of 33 cents per revenue passenger mile for total revenue of $41,058,400.
This is relatively wonderful if you are a resident of New York State and want to commute to work everyday in style. However, if you live anywhere else in the country, you have to be wondering why you have one train (or less) a day, while the New Yorkers along the Hudson River have nine roundtrips a day, plus many also have Metro North passenger train commuter service, and New York contributes zero dollars to this operation.
Yes, Mr. Boardman’s former home and employer get a free ride, 365 days a year, while just to the south the Commonwealth of Pennsylvania pays heavily for its Keystone Service (New York does help pay for the Adirondack route of one train a day), and Vermont, Virginia (starting this year), North Carolina, Michigan, Illinois, Missouri, Wisconsin, Oklahoma, Oregon, Washington State, and California all pay for their short distance regional and corridor trains.
Mr. Boardman, are you going to correct this grievous and unfair situation? Why should New York get a free ride while all other states have to pay?
This is the type of failure mode Amtrak has been in for too long. It’s irresponsible on one hand, and wants public treasuries in several states to make up for that by paying for what others are getting for free. If the Empire Service trains had a better load factor, then there would be room for debate about the credibility of keeping these trains running. But, since we’re looking at a whopping 35% load factor, one can’t help but wonder how much longer this is going to continue?
The saviors of Amtrak are the long distance trains. Amtrak in the past few years did a bang-up job, along with the unhelpful assistance of its various Amen Corner organizations, of selling a bill of goods to the government and public that long distance trains are evil, and short distance and regional trains are good.
The people doing this – from Amtrak managers to state and national rail fan organizations – did nothing short of defrauding the public with such nonsense and junk science.
Since there has been no legitimate scrutiny of Amtrak by outside sources beyond URPA, and the respected Amtrak Reform Council, Amtrak has been allowed to remain in a state of failure with no accountability and scrutiny. When some members of Congress or White House Office of Management and Budget officials have demanded Amtrak be held accountable, they have been either roundly shouted down, ridiculed, or ignored in favor of continued bad behavior by Amtrak for all of the wrong reasons.
So, what are you going to do about it?
The railroads of today are not the failed or near-failed railroads of 40 years ago. There is enough empirical evidence to show long distance trains are not only the wave of the future, but have the financial clout to liberate Amtrak from constant government interference and financial guardianship.
There are legitimate reports and corporate information available to anyone who can read from the Internet there are profitable passenger train services in Japan, Germany, the Netherlands, and elsewhere. If passenger trains can be profitable there, why not here?
The only people thinking and saying Amtrak must remain a failure are those who either don’t want to work cleverly or hard enough to make it a success, or those who have a vested interest in keeping things the way they are so they can retain what power they have (at other people’s expense).
So, what are you going to do about it?
Are you going to continue to accept whatever drivel Amtrak hands out to the public and politicians for unquestioned consumption, or are you going to ask questions? Are you going to demand your congressional representative and senators stop blindly accepting whatever Amtrak says, and ask Amtrak to do more?
Are you going to demand the White House, so enamored with passenger trains, makes sure whatever money is spent is done so in the most judicious manner?
Are you going to join the several activist state organizations around the country no longer accepting Amtrak’s the dog ate its homework excuses and say “do better!”?
Are you going to stop apologizing for Amtrak, claiming it just can’t do better because of the very lame excuse of “no money” and realize whatever Amtrak has done with the $30 billion it has received in free federal monies during its corporate life, have not been the right choices that have benefitted the greatest number of Americans?
Are you going to realize you, as an American citizen, have the same right to ask your government to provide you with passenger rail (as the only current provider of passenger rail in the country) as do people living in the Northeast Corridor who presume the blessings of passenger rail are a “given” and their passenger rail needs are more important than your passenger rail needs?
It’s really up to you to choose what to believe, and choose how to believe. You can believe passenger rail will always be a failing proposition, or you can choose to believe passenger rail can stand on its own and be part of a growing proposition that is market driven and a positive part of our capitalist system.
3) A number of times in the past this space has featured the writing of Ken Orski of Innovation News Briefs writing about transportation and infrastructure issues. Here is Mr. Orski’s latest issue of his publication, Volume 20, Number 8, dated June 11, 2009. For more information visit the web site www.innobriefs.com .
This issue contains a good roundup of developments in surface transportation policy, among other issues.
June 11, 2009
The Surface Transportation Bill — Closing the Gap Between Rhetoric and Reality
As the debate over the surface transportation program revs up and as Chairman James Oberstar prepares to release his thoughts on the "principles" of the proposed authorization bill, efforts to influence the legislative process are multiplying. The American Association of State Highway and Transportation Officials led with its new, well-documented "Bottom Line Report" that estimates future needs for highway improvements at $132-166 billion annually. The American Road and Transportation Builders Association, one of the most seasoned and influential advocates for transportation on Capitol Hill, has chosen to focus its efforts on promoting a proposal to establish "Critical Commerce Corridors" and to increase capital investment in transportation infrastructure through public-private partnerships.
Ad hoc coalitions also are weighing in. The "Building America’s Future" coalition led by Governors Ed Rendel and Arnold Schwarzenegger and Mayor Michael Bloomberg has issued a new appeal to Congress and the Obama Administration to make "transformative changes" and chart a new transportation vision for the 21st century. The liberal-leaning "Transportation for America" (T4 America) coalition has published a report, The Route to Reform, calling for "a bold new vision" for a 21st century transportation system and a restructured federal surface transportation program with specific goals. The Freight Stakeholders Coalition, a 17-member organization that includes public and private freight carriers, has released a 10-point platform calling for development of a comprehensive national freight program and a "National Multimodal Freight Strategic Plan." A cryptically named "Combined Infrastructure Working Group" has drafted a set of policy recommendations focused on expanding the opportunities for private investment in U.S. infrastructure (the Group has not revealed the identity of its sponsors).
The latest to be heard from is the Bipartisan Policy Center’s National Transportation Policy Project (NTPP). Before a large gathering of Beltway insiders on June 9, the Project sponsors unveiled their report entitled Performance Driven: A New Vision for U.S. Transportation Policy. (The Project co-chairs include former Detroit Mayor Dennis Archer (D), former Senator Slade Gordon (R-WA) and former Congressmen Martin Sabo (D-MN) and Sherwood Boehlert (R-NY)) The report recommends "bold and comprehensive reform founded on a relatively simple proposition: U.S. transportation policy needs to be more performance-driven, more directly linked to a set of clearly articulated goals, and more accountable for results." The sweeping proposal also recommends consolidation of all current transportation programs into two categories: formula-based system preservation programs (75% of all funds) and discretionary capacity expansion programs (25% of all funds). The latter would award grants for new infrastructure on a competitive basis. (the full report and executive summary are available at http://www.bpcntpp.org )
In the meantime, a group of private sponsors, including former Vermont Governor Howard Dean, former Indianapolis Mayor Stephen Goldsmith, and the law firm McKenna Long & Aldridge, have joined forces to launch a Council of Project Finance Advisors (CPFA). The aim of this initiative is "to provide recommendations and advocate for a center of excellence on public-private partnerships" modeled after similar organizations in Canada’s British Columbia and the United Kingdom. The CPFA, in the words of its prospectus, will assist the public and private sectors by providing greater transparency and credibility for public-private partnerships, serving as a repository of best practices on financing options, improving public trust in the P3 process and addressing public sector concerns.
A New Policy Consensus
Despite their diverse backgrounds, the various stakeholder groups have reached a remarkable measure of agreement—at least at the rhetorical level — about the future nature and direction of the federal transportation program. Every constituency agrees that the existing program has lost direction and lacks a clear sense of purpose. A composite version of the stakeholders’ conclusions and recommendations would read something like this (phrases in quotation marks are verbatim quotes from their reports):
Simply reauthorizing the existing program is not a solution. Rather, there is a need to "bring new approaches and fresh thinking." The new bill must articulate "a compelling new vision" and the nation’s transportation policy and program must be fundamentally "reformed," "restructured," "reinvented" or "transformed." (Indeed, calling for "transformative change" has become the mantra of many of the policy statements). Individual program categories must be reduced in number, consolidated and refocused to reflect more closely the national objectives. The future program must be "performance-driven," and "outcome-oriented." State and local transportation agencies must be held accountable for demonstrable progress toward achieving clearly defined goals. Tolling, private capital and public-private partnerships should be among the potential sources of revenue "but are not a silver bullet." The project review and approval process must be streamlined with a goal of getting projects completed in far less time than is the case today. Congress must elevate freight transportation as a new national priority and establish a national freight program, perhaps with its own dedicated source of funding.
On funding, the concensus conclusions would read as follows: The fuel tax will remain the principal source of revenue for the federal surface transportation program for many years to come but the tax revenue currently collected is not sufficient to maintain existing infrastructure, let alone provide the funds needed to expand and modernize the transportation system. Increased vehicle fuel economy standards and a possible leveling of future travel demand is likely to lead to steadily declining receipts from fuel taxes. Moreover, the gas tax provides weak and somewhat inaccurate price signals and needs to be supplemented, and eventually replaced, with a more "sustainable" revenue mechanism that relies on direct user charges. In other words, the days of the fuel tax are numbered — but not just yet.
Closing the Gap Between Rhetoric and Reality
Assuming, as we do, that these statements reflect accurately the collective mindset of the transportation community, the challenge for the congressional leadership and the Administration will be to translate the lofty rhetoric and generalities into an implementable program. However, not all the rhetoric lends itself to implementation. For example, the NTTP report speaks of a "performance-driven" program and recommends eight "performance metrics" by which to evaluate the progress towards achieving the national goals (these goals include economic growth, national connectivity, metropolitan accessibility, safety, energy security and environmental protection). At a panel discussion celebrating the release of the NTPP report, skepticism about the feasibility of implementing such a complex performance-based system was much in evidence. "I am a seasoned enough observer to know that such an approach will not be adopted," remarked one panelist. "Measuring performance and assessing outcomes requires a robust national data base and data collection capability that we simply do not possess," another participant who follows the federal highway program closely told us.
The recommendations of the Transportation for America (T4 America) coalition suffer from a similar excess of rhetoric. Its Blueprint: The Route to Reform report recommends a series of performance targets that include reducing per capita vehicle-miles traveled by 16 percent, and tripling walking, biking and public transportation usage by 2030. However, the report is silent on how these targets are to be achieved— if, indeed, they are achievable. Similarly, the T4 America report talks about the need to create a mode-neutral "unified transportation trust fund" that would allow for greater integration of surface transportation systems and for cross-subsidization between the modes. However, the authors fail to consider the realities of congressional committee jurisdictions and modal self-interests, both of which have proved to be serious obstacles to integrating the surface transportation program along mode-neutral lines. What is more, as the Reason Foundation’s Bob Poole points out in his latest newsletter (June 2009), opening the fuel tax-funded pot of money to all forms of transportation would be the coup de grace for the user-pays/user-benefits principle advocated by the National Transportation Infrastructure Financing Commission and endorsed by scores of transportation professionals in and out of government.
Funding Remains the Big Unresolved Issue
Nowhere is the gap between rhetoric and reality wider than on the question of future funding. The American Society of Civil Engineers (ASCE) estimates that $2.2 trillion is needed over a five-year period to repair the nation’s aging infrastructure. AASHTO recommends an annual investment of $166 billion for highways and bridges and $46 billion for public transportation to improve system conditions and performance. Rep. James Oberstar speaks bravely about the need to double the current federal transportation program to $450 billion over the next six years. But the reality is less obliging.
The Obama Administration in its Fiscal Year 2010 budget has proposed to continue most transportation programs at a one percent baseline increase. It has noted that this proposal is subject to an upward revision as provided for in the upcoming surface transportation authorization. However, Congress has given no indication where any such additional money might come from. What we do know is that the Administration is categorically opposed to any immediate gas tax increase ("we are not going to propose any kind of an increase in the gas tax while our economy is in a state of recession and so many people are at work," Secretary LaHood testified). Secretary LaHood also would "absolutely not" consider a transfer of general fund money into the Highway Trust Fund — thus closing the door on two of the most obvious and straightforward solutions to the funding shortfall. Instead, the Secretary has vaguely suggested that extra funds could be raised through a National Infrastructure Bank and private investors. However, so far the Administration has not spelled out its ideas on how to attract private capital and implement a meaningful program of public-private partnerships.
In the meantime, concern about the near-term solvency of the Highway Trust Fund tends to overshadow the issue of long-term infrastructure funding. The Highway Trust Fund will need $5 to $7 billion just to maintain current spending rates through the end of FY 2009 according to U.S. DOT and OMB officials. An additional $8 to $10 billion would be necessary to ensure the solvency of the Highway Trust Fund through the end of FY 2010 in the event the reauthorization schedule slips and Congress is obliged to pass an extension of the current law. (passing the bill by September 30 of this year would be truly "a triumph of hope over experience," former Sen. Slade Gorton observed at the June 9 NTPP press conference).
A House Ways and Means subcommittee on Select Revenue Measures is expected to hold a hearing in late June or early July on alternative approaches to fund the multi-year surface transportation program. Until Congress has settled on a specific long-term funding strategy, until Rep. James Oberstar has unveiled his legislative proposal, and until the interface between the transportation bill and the energy and climate bill (H.R. 2454) has been clarified, the shape of the future federal transportation program will remain shrouded in uncertainty.
4) Keeping up with things on the South Florida Tri-Rail front as it battles for its existence in a political world that doesn’t know the difference between a subway and a commuter train: The South Florida Business Journal, a weekly business newspaper with a daily Internet news service which conducts unofficial polls came up with a fascinating tidbit of information.
The Business Journal asked its online readers – mostly executives and wannabe executives – the question, “How important is continued funding for Tri-Rail?”
The poll response was illuminating. Among all of the responses – again, mostly from people who probably don’t use the service, but know their employees do – 72% said Tri-Rail needs full funding, 8% said service cutbacks are acceptable, and 21% said they didn’t care about Tri-Rail or disapprove of it altogether.
That 72% is a pretty big, whopping number in favor of spending tax dollars on an alternate form of transportation. What do the taxpayers and voters of Palm Beach, Broward, and Miami-Dade counties in South Florida know that their elected representatives of both major parties don’t know?
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J. Bruce Richardson
United Rail Passenger Alliance, Inc.
1526 University Boulevard, West, PMB 203
Jacksonville, Florida 32217-2006 USA