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TD Ameritrade founder Joe Ricketts predicts Schwab will increase jobs in Omaha

TD Ameritrade’s founder is predicting that Omaha may well come out ahead on jobs after the firm’s planned merger with Schwab.

“I’m going to give you a guess: that there are going to be more people working at Ameritrade here in Omaha five years from now than there are now,” Joe Ricketts said recently.

Ricketts said he was basing his prediction on the quality of TD Ameritrade’s workforce and the low cost of operating in Omaha, two things he believes Schwab’s leaders will recognize, too.

Ricketts’ first public comments since the November announcement that Schwab is acquiring the Omaha-based brokerage came in an unusual place — a podcast hosted by his son, Nebraska Gov. Pete Ricketts.

The governor releases an occasional podcast called “The Nebraska Way” where he sits down to interview Nebraskans.

In the latest podcast, released Monday, Pete Ricketts asked his father to talk about growing up in Nebraska City, the founding of his discount brokerage in Omaha in 1975, how it grew into the nation’s largest online stock trader, and the planned merger with Schwab.

The announcement of the mega-brokerage merger spurred fears of job loss among the 2,300 people who work at TD Ameritrade’s green-tinted headquarters tower and surrounding operational facilities, highly visible in Omaha just off Interstate 680 and West Dodge Road.

Joe Ricketts long ago gave up the CEO job at Ameritrade, and he has no direct say in how Schwab will restructure the two firms’ workforces as it establishes a new headquarters for the combined company in the Dallas metro area.

But the man who remains TD Ameritrade’s largest individual shareholder called it “foolishness” to think “everybody at TD Ameritrade is going to lose their jobs and they’re all going to Texas.”

He said the success of Ameritrade was largely built on the “cream of the crop” workforce it has in Omaha, workers he described as well-educated, hard-working and “very, very valuable.”

“The secret sauce of the success of Ameritrade is the great people we have,” he said.

Ricketts also lauded Omaha as a place to do business, much more cost-effective than Schwab’s current headquarters city of San Francisco, New York or most other places.

“This is a gem of a place for a company to have an office,” Ricketts said. “I don’t think that Schwab is going to lose that.”

Ricketts did acknowledge that the merger will mean change, with some people losing jobs or seeing their job functions change. But he thinks the potential is “quite high” that TD Ameritrade’s current Omaha operations will get through the merger, adjust and continue to grow.

“People here really underestimate themselves when they think things are going to another part of the country,” he said. “Trust me, they are better off here than anywhere else.”

The merger of TD Ameritrade and Schwab is not expected to close until later this year, with total integration of the companies then to proceed over as many as 36 months.

Joe Ricketts didn’t address it in the podcast, but The World-Herald reported last month that TD Ameritrade’s founder got Schwab to include language in the merger agreement intended to help preserve jobs in Omaha.

On its face, the wording gives Schwab much leeway to reduce the acquired firm’s workforce in Omaha, and the agreement sunsets after two years. But a person close to Ricketts has said it accomplished his goal of requiring Schwab to be deliberate as it considers how to integrate TD Ameritrade’s Omaha operations into its own.

The planned merger has left Pete Ricketts, himself a former TD Ameritrade executive and board member, in the position of seeking to persuade Schwab executives to preserve jobs at his former firm. He has said he’s already spoken to Schwab’s founder and chairman, Charles “Chuck” Schwab, and the firm’s current CEO.

At the end of the podcast, Pete Ricketts gave his father the opportunity to pitch his just-released autobiography, titled “The Harder You Work, the Luckier You Get,” and to promote his personal website, joericketts.com.

Joe Ricketts has at times been a controversial figure. The billionaire is a major donor to Republican candidates and one of the nation’s largest funders of conservative causes and libertarian thought. A year ago, he issued an apology after a website published a series of emails he’d sent containing racist jokes and anti-Muslim conspiracy theories.

“There’s no secrets about me,” Joe Ricketts said in asking people to go to his website. “My opponents like to spread rumors I have horns and a tail. I really don’t.”


How Omaha and Nebraska’s Fortune 1000 list has changed since 2015

How Omaha and Nebraska's Fortune 1000 list has changed since 2015

Articles
Livelihoods of thousands derailed; stocks go full steam
RAILROADS

ROANOKE, Va. — Jeff Hollandsworth was told to do something recently that he had never done before in his many years working for Norfolk Southern Railway: Empty lockers.

Norfolk Southern has let more than 3,500 employees go in the past year, including 175 in Roanoke, part of an aggressive push across the railroad industry to slash costs.

As Hollandsworth cut the locks and removed his former co-workers's coats, hats, power tools and hefty company rule books, he couldn't shake the feeling that the layoffs were different this time. Unlike in the past, his colleagues probably won't be coming back.

"When you go to work now, it's like going into a funeral home," Hollandsworth said. "What three people used to do, one person is doing now."

While the U.S. economy overall is growing moderately, the railroad industry is a cautionary sign of the ongoing pain in the industrial sector and the deep structural changes underway in the economy that are eliminating middle-class jobs.

President Donald Trump's trade war has hit agricultural and manufacturing hard, causing lower demand for companies that move freight. But railroad stocks soared in 2019 after rail executives embraced automation and cost cutting to remain profitable, doubling down on the idea that rail's future entails longer, faster trains and fewer workers.

Over 20,000 rail workers have lost their jobs in the past year, the biggest layoffs in rail since the Great Recession and a nearly 10% decline in rail employment, according to Labor Department data through November.

The World-Herald reported in October that Omaha-based Union Pacific had cut its nationwide employee numbers by 5,700 to about 36,700 — a reduction of more than 13%— in the previous year.

Volumes are down so much on major American railways in the past year that some economists say the nation is in the midst of a "freight recession."

Freight declines have typically foreshadowed trouble for the broader economy since they're a barometer of how much stuff is heading to market. Every economic downturn since World War II has been precipitated by nose-diving freight traffic. But there have also been periods, such as 2015-16, when manufacturing, trucking and rail suffer, but the rest of the economy keeps growing.

Today's rail slump is partly fallout from the trade war and partly the result of longterm trends like the United States becoming less reliant on coal, experts say. But the employment losses are being exacerbated by the industry's embrace of new technology and an efficient technique of directing rail traffic known as precision scheduled railroading, or PSR, that is transforming the economics of the business.

"I've never seen conditions like this in my 45-year career," said Jim Blaze, a railroad economist. "I'm calling this a freight recession for the railroads and trucking companies, but there's this uncertainty from trade. This cloud. This fog. It's hard to predict if we'll slide into an overall economic recession."

November marked the 10th straight month that rail freight decreased from the previous year's stellar traffic levels. The volume decline is similar to what occurred at the end of 2015, although the job losses are worse.

But now, rail industry leaders are cautiously optimistic. They foresee a rebound once Trump finalizes the trade deals with China, Mexico and Canada and if he subdues his pro-tariff instincts in an election year.

"For our industry, trade has become just a huge part of what we do. Probably in the range of 35 to 45 percent of our business," said John Gray, senior vice president of policy and economics at AAR, the industry's main trade group.

But even if Trump's trade war ebbs, many of the $70,000-a-year conductor and maintenance jobs are unlikely to return.

The rail industry, which once employed more than 1 million Americans, fell below 200,000 employees in 2019, the first time that has happened since the Labor Department started keeping track of railroad employment in the 1940s.

"We fundamentally changed the way we operate over the last 2½ years," said Bryan Tucker, vice president of communications at CSX. "It's a different way of running a railroad."

A Norfolk Southern spokeswoman said that the company was focused on increasing efficiency and profitable growth and that "as our business changes, so, too, do our personnel needs."

Union Pacific stressed the environmental benefits of moving goods by rail instead of truck.

Even if business bounces back, the industry embrace of PSR promises to hold down the need for more workers. Freight railroads used to run trains carrying just one type of good, and the trains could sit in yards for hours or days until they had enough of a load to justify departing.

Now, with PSR, railroads are running more trains with mixed goods and on a set schedule that leaves no matter what. The goal now is to minimize stoppage and use the same locomotive and crew as much as possible.

Rail executives say these changes are delivering more reliable service that can better compete against trucks.

PSR is also causing railroads to turn away some business that isn't profitable enough, says Peter Swan, associate professor of logistics at Penn State Harrisburg. Some routes are now gone or downsized.

"Shareholders at railroads are looking at the financial success of PSR, and now every single big railroad is trying to adopt some form of this," Swan said. "If you're trying to save money, you cut people like crazy."

The strategy has taken hold among major U.S. freight railroads since 2017, as executives hunted for a way to increase profits to make up for shrinking coal traffic and the recent downturn in the industrial economy.

Wall Street has applauded the changes, signaling that this could be a model for other industries that encounter rough times. Norfolk Southern and Union Pacific stocks were up 30% last year, and Kansas City Southern's shares were up more than 60%.

Roanoke looked like a parking lot for locomotives just before Thanksgiving, a period that is typically the peak shipping season. Workers say the peak never came in 2019.

The seven major freight railroads have idled nearly 30% of locomotives in the past year, according to the economist Blaze, as they aim to run fewer — but longer — trains.

Rail executives say PSR improves on-time delivery for customers.

"What they (customers) are getting in terms of service quality today is off the chart," James Foote, president of CSX told investors at a November investment conference in Tennessee. He pointed to "dramatic" improvement in on-time delivery to about 90% , up from around 50% before PSR.

Multiple rail executives took the stage at the Stephens Nashville Investment Conference last month to stress that while rail volumes were down, employee head count and other costs were down even more, ensuring that the companies remained highly profitable.

Norfolk Southern saw a 6% volume decline, but crew costs were down by 13% , said Alan Shaw, the company's chief marketing officer. He said the company was "accelerating" this strategy.

Another key part of the efficiency push is running longer trains. The average train length has increased 25% since 2008 to about 1.4 miles, according to a Government Accountability Office report published inMay.

Workers across the country report an increase in hitching two trains together on their routes. A Union Pacific spokeswoman said its average train length is about 1.5 miles.

"We're seeing trains that are 2.5 miles long on a daily basis," said Jeremy Ferguson, president of the SMART Union (short for International Association of Sheet Metal, Air, Rail and Transportation Workers). "It's a huge issue. It's very difficult for the operating crews and the towns and cities we operate through. It's unsafe to have rail crossings blocked so long."

Some freight carriers would like to cut down the typical personnel on a freight train from two (a conductor and engineer) to one.

"I've been one of the fortunate few who have never been laid off," Hollandsworth said. "Now I go in every day wondering if this is it."

World-Herald staff writer Henry J. Cordes contributed to this report.


Plus
'An unprecedented event': Nebraska's losses from 2019 flooding, blizzard exceed $3.4 billion

Nebraska’s disastrous weather in 2019 caused more than $3.4 billion in losses, according to a recently released federal report.

The bomb cyclone that ravaged the state in March was responsible for most of that damage, or $2.6 billion, said the report by the National Centers for Environmental Information, a division of the National Oceanic and Atmospheric Administration.

The bomb cyclone triggered a torrent of runoff from rain and snowmelt, resulting in one of the nation’s costliest inland floods on record, according to the report. In Nebraska, it was also accompanied by one of the worst blizzards in decades.

The storm caused an estimated $10.8 billion in damage, primarily in Nebraska, Iowa, Missouri, South Dakota, Minnesota, North Dakota, Wisconsin and Michigan.

Iowa sustained about $1.9 billion in damage last year.

Nationwide, the U.S. sustained $45 billion in weather-related losses last year, according to the report.

Billion-dollar disasters are on the increase because there are more people and infrastructure in harm’s way and because climate change is increasing the frequency of some types of extreme weather, the report notes.

The report said that the flash drought of 2012, Nebraska’s hottest, driest year on record, was the state’s costliest on record. It caused an estimated $4 billion in losses. However, those losses developed over months in mostly rural areas. There was not the extensive damage to communities and roads and bridges that occurred in 2019 in Nebraska.

PAPIO-MISSOURI RIVER NATURAL RESOURCES DISTRICT 

Ice jams in the Platte River contributed to the March 2019 flooding.

Iowa’s costliest year was 1993, when the state sustained more than $11 billion in losses, largely the result of widespread flooding.

The bomb cyclone “was an unprecedented event, in scope and size and impact on the state of Nebraska,” said Bryan Tuma, assistant director of the Nebraska Emergency Management Agency. “I don’t think we’ve ever quite experienced anything like this before.”

Four people died in the flooding in Nebraska in March.

The flooding left levees across eastern Nebraska shattered. Even though some have been repaired, many levees haven’t been fixed or remain weak, exposing the land behind them to possible renewed flooding this year.

Gov. Pete Ricketts on Tuesday described helping Nebraskans recover from last year’s disastrous weather as a priority this legislative session. “The state … has to do its share to fully repair our infrastructure,” Ricketts said.

He will address flood recovery in his State of the State speech today.

It’s impossible to know the full cost of Nebraska’s losses because no one fully tracks damage to the private sector, be it losses in agriculture or among households and businesses. What is known is that various governmental agencies are spending more than $1.4 billion on recovery in Nebraska, based on readily available but incomplete figures.

The single most expensive loss to infrastructure was the damage inflicted on Offutt Air Force base, where losses from flooding have been documented at $790 million. Military officials have said they believe the final damage figure will exceed $1 billion.

Otherwise, roads and bridges took the biggest hit in 2019, largely because of the power of the ice jam flooding as water and massive blocks of ice tore through roadways and blew out bridges. More than $236 million is being spent repairing roads and bridges in Nebraska.

On the agricultural side, figures on losses aren’t readily available.

“A loose estimation is that there’s probably a billion-dollar impact to agriculture,” Tuma said.

Losses included livestock deaths and fields destroyed by flooding. The highest crop losses probably came after the bomb cyclone, when flooded fields and continued rain kept farmers from getting into fields to plant, said Tyler Williams, an extension educator specializing in agriculture, climate and weather at the University of Nebraska-Lincoln. More than 420,000 acres in Nebraska went unplanted last year, according to a UNL CropWatch report.

The Nebraska Farm Bureau has nearly finished distributing $3.35 million in disaster donations that it received, said Vice President Craig Head. But that paled in comparison to the $35 million in applications it received for that money.

Many costs can’t be calculated, Tuma said.

“How do you put a number on things like loss of productivity, loss of work hours, extra commuting distances? How much personal property was lost, those kinds of things,” he said. “It would be difficult to affix a real number to all that.”

A federal disaster declaration by President Donald Trump is helping the Nebraska recovery effort. Tuma said that losses covered through the disaster declaration total about $404 million. Under such a declaration, the federal government typically foots 75% of the bill, with state and local governments usually covering 12.5% apiece.

The disaster declaration is for losses during the period of March 9 through July 14.

Nearly every corner of the state was affected by the bomb cyclone and the domino effect of ongoing rainy weather. Of Nebraska’s 93 counties, 84 qualified for federal disaster assistance.

More than 7,000 homes were damaged in the severe weather, Tuma said, based on figures gathered by the U.S. Department of Housing and Urban Development.

Likewise, about 7,000 Nebraska families registered for, and received, outright grants to help them get back on their feet.

Many Nebraskans suffered uninsured losses because they didn’t have flood insurance. But about 1,000 households received a total payout of nearly $40 million from flood insurance.

Photos: Major flooding hit Nebraska and Iowa towns in March 2019

Entertainment
Eric Church, Elton John, Terence Crawford help MECA post $4.6 million profit for 2018-19

Downtown Omaha’s arena and convention center marked another profitable year, earning $4.6 million from concerts, conventions, boxing and Creighton men’s basketball.

The Metropolitan Convention and Entertainment Authority reported its financial performance for 2018-19 on Tuesday for the CHI Health Center. It also manages TD Ameritrade Park, but those profits are handled separately.

MECA turned a bigger $5.7 million profit on the arena in 2017-18, because club seat and luxury suite holders paid for their seats in advance for several years to take advantage of the final year of a tax break that expired in 2017.

MECA has recorded at least $2.75 million in profit every year since 2011, clearing an average of nearly $4 million a year, records show. It has made a profit every year since the arena opened in 2003.

Several major concerts powered a strong year for the arena, officials said, including Eric Church, Elton John and Pink. A title fight involving boxing champ Terence “Bud” Crawford helped, too.

KEVIN COFFEY/THE WORLD-HERALD 

Elton John performs at his Farewell Yellow Brick Road concert stop at CHI Health Center Omaha on Feb. 12, 2019.

TD Ameritrade Park turned a $7 million profit in 2018-19, but its profit is split up, with most of the money sent to the NCAA and some to the city and MECA.

One reason for the ballpark’s success last year was a boost from the city hosting its first Major League Baseball game, said Diane Mills, MECA’s new chief financial officer. That game drew 25,000 fans.

Another factor was Nebraska’s run to the championship game of the 2019 Big Ten baseball tournament, which MECA hosted at the downtown ballpark. Creighton also plays its home baseball games at the ballpark.

MECA reported $58.4 million in revenue in 2018-19 from the CHI Health Center and TD Ameritrade Park. That revenue total includes funding for the renovation of Omaha’s three riverfront parks. MECA is managing the construction work, which is being paid for by private donors and the city.

Some of MECA’s revenue was used to pay its 80 full-time employees and 735 part-time workers. Much of the rest went to pay down the public’s debt from building the facilities and to cover operating costs. MECA’s fiscal year covered the period from July 1, 2018, through June 30, 2019.

Last year, MECA also began overseeing the renovation of downtown Omaha’s recreation areas at Gene Leahy Mall, Heartland of America Park and Lewis & Clark Landing.

MECA is overseeing construction and will handle maintenance of the new parks when they reopen, in stages, by 2024. All but $50 million of the parks’ $300 million cost is being privately raised.

In 2018-19, MECA spent $2.4 million on improvements to the arena, convention center and ballpark, including a new sound system, a new roof for the arena and repairs to a concrete terrace.

Crews at TD Ameritrade Park installed artificial turf in the bullpens, which didn’t have enough sunlight to grow grass, officials said, and they finished work on a new natural grass playing surface for the ballpark.

A key reason that private donors wanted MECA, and not the city, to run the arena and convention center was to make sure profits made by the facilities were invested in upkeep, officials said.

MECA considers its profit any money left over after paying debt, maintenance and routine costs for running the public facilities it manages. Those profits fund major improvements and fixes.

Diane Duren, MECA board chairwoman, said the CHI Health Center has been open for 17 years, and “people come in and think it’s brand-new.”

This year and next, people are going to notice outdoor construction near the arena, convention center and ballpark as new permanent security barriers are put in to protect pedestrians.

The U.S. Homeland Security Department worked with MECA to identify the locations that need the protections, officials said. The barriers, many of which will be decorated and disguised, will cost $10 million or more.

The goal is to have the first barriers in place by Berkshire Hathaway’s annual gathering on May 2, said Roger Dixon, MECA’s president and CEO. The rest should be installed later in 2020.

MECA may seek more funds from private donors to help offset some of the barriers’ costs. The city is contributing from ballpark-related capital improvement funds, Dixon said.


How Omaha and Nebraska’s Fortune 1000 list has changed since 2015

How Omaha and Nebraska's Fortune 1000 list has changed since 2015